Information Systems and Decision making

Decision making
n

Laudon & Laudon Chapters 2 and 13

Which segment of market and in which geographic territory should I target to get my initial business? What is the hit rate how many people should my sales persons visit to sell one policy?

MIST 2001-03/02

MIST 2001-03/02

Decision making (contd.)

n

Decision making (contd.)

n

What is a decision and how does information help?

n n

How do I improve my performance?

n n n

a selection among many courses of action Information helps reduce uncertainty Information Systems improve the effectiveness of decision making, by providing decision makers with information related to the decision for which they are responsible
MIST 2001-03/02

What is the role of IS in decision making?

n

. I am a sales person I am a Sales manager . I am the General manager, sales .. for appropriate persons at different levels
n

Appropriate information
n

for making decisions of different kind

MIST 2001-03/02

Levels of management decision

Strategic decisions Tactical decisions Setting policies and goals Implementing policies

Lets look at some decisions

n

Operational decisions

We will identify the under insured and sell our products to them We will target the rural population and get at least 30% of our business by value from them

Day to day

MIST 2001-03/02

MIST 2001-03/02

Lets look at some figures

Rural Business of LIC Year
based on LIC annual reports

Lets look at some decisions (contd.)

n n n n n n

1994-95 1995-96 1996-97 1997-98 1998-99 1999-00

#Policies Sum assured (lakhs) (Rs. Crores) 49.02 21,571 52.57 60.33 68.40 81.23 97.04 21,263 24,278 27,550 35,372 44,168

Rural / Rural / total total (policies) (Sum assured) 45.1% 39.1% 47.7% 49.2% 51.4% 54.7% 57.5% 41.0% 42.8% 43.3% 47.0% 48.7%
MIST 2001-03/02

How often do I make this decision? How long will this decision be effective? Where do I get the required information for making this decision? To what degree of detail should this information be? Can I employ a formula or a procedure to make this decision? At which level of management do I make this decision?
MIST 2001-03/02

Let us look at some more decisions

n

Characteristics of management decisions

Characteristic
Time horizon affected Frequency Structure Source of information Degree of detail Operational decision
Short term Frequent Structured

We shall provide free personal accident cover of Rs 1 Lakh for one year, for all women who buy policy from us with sum assured above Rs 2 Lakhs during Jan-Mar, as women are under insured How many more persons should I meet to achieve my target for this month? We shall place ATMs to facilitate policy holders to pay their premium
MIST 2001-03/02

Tactical decision
Intermediate term Semi Frequent

Strategic decision
Long term Infrequent Unstructured Mostly external

Semi structured Mostly internal Internal & external Detailed

Summarized More summarized

MIST 2001-03/02

Structure of MIS
Strategic level managers Tactical level managers Operational level managers

IS in the enterprise
n MIS SW MIS DB n n
External data

MIS TPS
Users & TPSs TPS software TPS database
MIST 2001-03/02

Systems from a functional perspective Integrating functions and business processes Enterprise systems Extended enterprises

MIST 2001-03/02

Forecasting future demand of new Individual Life insurance premiums adapted from The ET knowledge Let us consider some issues
n
series

Take pricing of insurance products

n

Method 1
n

Factors affecting this:

n n n

Computation of gross domestic savings

n

Future interest rates Mortality rates Operating expenses Forecasting, mathematical modeling, statistical analysis
n

Factors: Indias real GDP; inflation rate; total gross domestic savings; household savings rate; projected shift from physical savings to financial savings

Allocation of gross domestic savings over various financial instruments

n

Some methods employed

n

Factors: motives of providers and users of savings instruments; age,income and risk factors

Method 2
n

Extrapolation of past growth trends assuming the same Compounded annualized growth rate (CAGR)
MIST 2001-03/02

MIST 2001-03/02

Decision Support Systems

n n n

DSS structure

Analyze the data from a database and provide results of analysis to the manager Best suited for Strategic level and Tactical level Statistical calculation is manipulated to determine characteristics of the data, or to draw conclusions from the data Mathematical modeling
MIST 2001-03/02

DSS database

Users

DSS Software

DSS model base

Ex: a mathematical model that determines the effect of advertising on sales

MIST 2001-03/02

Decision support systems (contd.)

n

Geographic information systems

n

n n n n

Suitable for situations in which decisions are unstructured or semi structured Involves trying different approaches What if questions Goal seeking Sensitivity analysis

Provides information for decision making based on a geographic location

n n n

Demographic data Summarized data Data organized by geographic location

MIST 2001-03/02

MIST 2001-03/02

Executive Support Systems (ESS / EIS)

Caters to the needs of strategic analysis
MIS database
Users: Strategic managers

Collaborative applications
Types of work group apps
Electronic messaging

Time of Place of collaboration collaboration

Same Diff X Same Diff X

Form of communication
Document X Audio Video

ESS software

External database Special database

Economic trend Consumer trend

(Novell Groupwise) Information sharing (Lotus Notes) Document conferencing (MS Net meeting) X X X X X X

Personal database
MIST 2001-03/02

MIST 2001-03/02

Collaborative applications (contd.)

Types of work group apps Audio conf. (Vocaltec Internet phn) Videoconf. (Intel proshare) Electronic conf. (SGIs Inperson) Time of Place of collaboration collaboration
Same Diff Same Diff

Collaborative applications (contd.)

Types of work group apps
Ele.meeting support (Ventana GRP systems) Group calendaring & scheduling (Open Text on time) Work flow (Filenet Visual workflow)
MIST 2001-03/02

Form of communication
Document Audio Video

Time of Place of collaboration collaboration

Same X Diff Same X Diff X

Form of communication
Document X Audio Video

MIST 2001-03/02

Quiz 2: IS in the enterprise

n

Owens-Cornings enterprise system struggle

Refer Case given on Page 64-65 of Laudon & Laudon n email a 250 word write-up commenting on whether installing the enterprise system was the right solution for Owens-Corning. Refer Question 4 on Page 65. Prefix your Roll number to the file name
n
MIST 2001-03/02