B.

Com (Honours) Programme

Faculty of Commerce
The Maharaja Sayajirao University of Baroda

S.Y. B.Com (Honours) Semester III Management Information System (MIS)

Prepared: Dr. Sushil Parmar

Unit II: Business Information System

There are variety of types of information systems that support business function of
accounting (finance), marketing, human resource, production and purchase.

Following are the types of Business Information System

• Human Resource Information System

• Marketing Information System
• Manufacturing (Production) Information System
• Accounting (Financial) Information System

ACCOUNTING INFORMATION SYSTEM

❖ Accounting Information System (AIS):

AIS is use of computer application and software for the collection, storage and processing of
financial and accounting data used by internal users to report the information to investors,
creditors, tax authorities and Government departments. AIS is the computer based method
for tacking accounting activity.

Accounting information system deals with data pertaining to revenue, expenses, salary,
inventory, sales, purchases, cash receipt and cash payment etc.

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❖ Components of Accounting Information System:

Following are the major components of Accounting Information System

Componets of AIS

Procedure & Internal

Data People Software Hardware
Instruction Control

a. Data: Data are basic inputs which affect company’s finances. (i.e.) financial and
accounting data. Following are the sources of data
• Sales Order (Billing): Account receivable, cash receipt
• Purchase Order / Requisition: Account payable and cash payment
• Vendor Invoices: Account payable and cash payment
• Vouchers: Expenses Accounts and cash payment
• Inventory data
• Payroll
• Tax information
The data collected from these sources are processed sent to concerned ledgers on the
basis of which financial reports, statements and accounts are prepared.

b. People: People are the users of Accounting Information system who are accountants,
financial manager, internal auditors, CFO (Chief Financial Officer), financial
analysts, consultants etc. These are the people who use the information generated
through AIS for financial reporting and making strategic and tactical decisions of
financial matters.

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c. Procedure and Instructions: Procedure and instructions are the methods for
collecting, storing, retrieving and processing of data. These methods are manual and
automated. Procedure and instructions are coded into AIS software and hence they
should be coded into employees through documentation and training.

d. Software: Software is the computer program which is used for storing, retrieving,
processing and analyzing of company’s financial data. AIS software programs can be
customized to meet the unique needs of different types of businesses. Even, software
can be developed in-house or the system could be outsourced to a specialized
company. For instance:
• Tally
• SAP’s Business One
• Munimji
• Intuit’s Quickbook
• Sage Peachtree Accounting
• Microsoft’s Small Business Accounting
• Microsoft’s Dynamics GP
• Sage Group’s MAS 90 or MAS 200
• Oracle’s Peoplesoft or Epicor Financial Management

e. Information Technology Infrastructure: Information technology infrastructure is

nothing but the hardware on which data are stored and processed.
Computer, server, printer, surge protectors, routers, storage media are the examples of
hardware.

f. Internal controls: Internal controls are the security measures that protect the
sensitive financial data and prevent their wider and easy accessibility. Internal control
can be as simple as pass word or as complex as biometric identification. It protects
against unauthorized computer access.

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 MARKETING INFORMATION SYSTEM
❖ What is Marketing?

Marketing means the identification of needs of consumers and delivering the desired
satisfactions better than the competitors.
Marketing includes following main activities
• Marketing Research
• Branding
• Pricing
• Advertising
• Publicity
• Sales Promotion
• Physical Distribution
• Customer Relationship Management

❖ MARKETING INFORMATION SYSTEM

Marketing information system is a permanent arrangement for provision of regular

availability of relevant, reliable, adequate and timely information for making marketing
decisions.

According to Philip Kotler, “ A marketing information system consists of people, equipments

and procedures to gather, sort, analyze, evaluate and distribute the needed timely and accurate
information to marketing decision makers.

❖ COMPONENTS OF MARKETING INFORMATION SYSTEM

Marketing Information System is made of parts, subparts or subsystems which are known as
components. According Philip Kotler, a marketing information system consists of four
interrelated components which are as follows

• i Internal Reporting System

• Marketing Research System
• Marketing Intelligence System
• Marketing Decision Supports System

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 Model of Marketing Information System

Internal Reporting Marketing Research

System System

Components of
Marketing Information
System

Marketing Intelligence Marketing Decision

System Support System

A. Internal Reporting System (Internal Records System):

Internal records system is a major and easily accessible source of data. It consists of all
records of marketing operations available within organization. Internal records system
keeps regular circulation of the information throughout the organization without much
expenses and efforts. Managers can get the up-to-date information about marketing
operation. Internal Records system collects data pertaining to sales (product wise,
salesman wise, regional wise, weekly and monthly sales reports), inventory levels,
receivables, expenses incurred related to sales, advertising and promotion etc.
To manage the internal record system, internal committee is formed by some companies
to deal with all aspects of internal informatm ion.

B. Marketing Intelligence System:

Marketing Intelligence system supplies data as to what is happening (i.e.) happening data.
In other words, it provides data about external happenings or external environment. The
manager tries to obtain day to day information regularly about pertinent development in
the marketing environment such as entry of new products, substitutes, competitors, arise
of new need, change in fashion and trend, government legislation etc.

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A manager can get information by following methods

• Reading newspapers, books and other publications

• Watching TV, listening to radio or internet surfing
• Talking to customers, dealers, suppliers and other relevant parties
• Maintaining live contacts with other officials and agencies
• Purchasing useful information from professional sources

Effective marketing intelligence system can facilitate managers to take immediate actions
like reacting to competitors, meeting changing needs of customers, solving dealer’s problems
etc.

C. Marketing Research System:

Unlike Marketing Intelligence System, Marketing Research System collects need based data.
It is a powerful and independent branch of marketing information system. According to
Philip Kotler, marketing research is the systematic design for collection, analysis and
reporting of data and findings relevant to specific marketing situations facing the company. In
certain cases, managers need detailed information on the specific problem of specific
marketing area such as consumer, advertising, sales, product, distribution, market etc. In fact,
marketing research is carried out for solving the specific problem. Marketing research is the
part of routine activity. In marketing research, primary and secondary data are collected and
analysed with the help of statistical tools. It is carried out by internal expert staffs as well as
external professionals.

D. Marketing Decision Support System (MDSS):

The above discussed three components (input sub-systems) provide relevant data, the
marketing decision support system concerns more with processing and analysing the
available data. This component can improve the efficiency and utility of the whole marketing
information system. According to John D.C Little, A MDSS is co-ordinated collection of
data, systems, tools and techniques with supporting software and hardware by which an
organisation gathers and interprets relevant information form environment and turns it into a
basis for making decisions.

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MDSS includes following

• Data Collection
• Data Analysis
• Interpreting results
• Supporting managerial decisions
• Use of statistical tools for analysis such as descriptive statistics (mean, median,
mode), correlation and regression analysis, factor analysis, multidimensional scaling
etc

MDSS includes both system and application software. System software is nothing but an
operating system like Windows. While there are widely used readymade application
software such as Sales CTR, CALLPAN, BRANDID, ACCESSOR and other self-made
application software.

Moreover, output generated through MDSS is in the form of reports such as….

• Commpetition Analysis Report

• Sales Analysis Report
• Customer Complaints Report
• Market Analysing Report
• Sales Forecasting Report

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 HUMAN RESOURCE INFORMATION SYSTEM:
❖ What is Human Resource Management?
HRM is the process of acquiring, developing, motivating and maintaining human resources in
order to achieve individual and organizational objectives.
❖ Main functions of HRM
• Acquisition: Human Resource Planning, Recruitment, Selection, Placement
• Development: Training and Human Resource Development
• Performance Appraisal and Compensation
• Maintenance: Mobility (Promotion, transfer, demotion), safety and health
• Industrial Relation: Discipline, Redressing Grievances and managing disputes
❖ Model of Human Resource Information System (HRIS)

Input Subsystem Output Subsystem

HR Acquisition
System

HR Research

Subsystem HR Development
System

Appraisal and Users

Data Base
Compensation
System

Maintenance
HR Intelligence System

Subsystem
Industrial
Relation
System

Data Flow

Information Flow

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(A) Input subsystem:

There are two types of internal subsystems namely HR Research System and HR Intelligence
system. Input subsystem collects both qualitative and quantitative data.

a. HR Research System: HR Research System gathers data from the internal

environment such as wages / salary, benefits, absenteeism, labour turnover, job
analysis / evaluation, skills and number of employees, organizational policies. HR
Research System generates knowledge to overcome HRM policies. The Data
processing system of HRIS captures data of HR research, processes and sends to the
relevant HR output subsystem.
b. HR Intelligence system: It collects data from the external environment for which
sources are government, suppliers of prospective employees, labour unions, informal
means (networks of friends and associates), competitors and relevant publication.

(B) Data:

HRIS deals with following data pertaining to HRs

• Attendance
• Accidents
• Manpower Inventory
• Skill Inventory
• Production data
• Leave
• Salary/Wages and Benefits
• Statutory Tax Deduction
• Data related to performance of employees
• Loans and Deduction (ESIC, PF and other)

Sources of Data:
• Personnel Application Form
• Appointment Letter
• Attendance and Leave Record
• Appraisal Form

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 • Wage and Salary Agreements
• Record of Sources of Recruitment

(C) People:
Following are people who make use of HRIS
• Top level manager
• HR Manager
• HRD Manager
• Industrial Relation Manager
• HR Expert
• HR Planner
• System Analyst
• Data Entry Operator
• Programmer
• Administrative Staffs
• PF Authority
• ESIC (Employee State Insurance Corporation) Authority
• Income Tax Dept

(D) Hardware: Hardware is nothing but the physical and tangible components of HRIS
used for recording and storage of data. Hardware includes computer system and printer,
scanner and storage devices.

(E) Software: Software refers to a computer program which enables in creating

comprehensive data base and processing data into the desired information form. System
software is an operating system viz. Windows, Unix, Linux. The examples of readymade
application software are

• Factohr
• Zoho.people
• SAP-HCM
• Mentis HRM
• BambooHR

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 • Gusto
• Zenefits
• Sonata (for personnel inventory and records)
• Mantec (personnel inventory)
• Mecon (Skill Inventory and Manpower Planning)

(F) Output System:

(1) HR Acquisition System:

g. Human Resource Planning: It determines as to what type of employees and how
many employees would be required in future. For HR planning data pertaining
existing employees, their skills, future plans (Sales, Production, Technology),
Absenteeism, work load, labour turnover etc are required which are supplied by HR
research subsystem while data related to external supply of HRs are provided by HR
Intelligence subsystem.
h. Recruitment: Recruitment is the process of stimulating or encouraging potential
employees to apply for the vacant post in the organisation. HR Research subsystem
collects data about description about job so that job specification can be prepared.
Moreover, data about past recruitment, cost of recruitment, number of applications
received, number of rejected candidates, number of selected candidates, and number
of employees left the job within short time, past source of recruitment. HR
Intelligence Subsystem collects data about the suitable external sources of
recruitment.
i. Selection: Selection means the process of choosing the suitable candidate from the
pool of candidates. Selection includes different steps which are performed by taking
the help of information and technology. Following are done through IT.
• Employment Test
• Interview
• Background and reference checking

Moreover, HR Research subsystem collects data on score obtained by the candidate in

Employment test and details of interview while HR Intelligence subsystem externally
gathers data at the time of background and reference checking.

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 j. Placement: In placement stage, the selected employee is placed at the right place and
offered the job letter. Placement also includes the orientation which means
introduction of newly appointed employee to his/her job, co-workers, immediate boss,
department to develop the sort of familiarity with the organization. Similarly, he/she
is oriented about organizational policies, history, culture, rules and regulations for
which necessary data are supplied by HR Research Subsystem. The orientation can
be done with the help of IT.
(2) HR Development System: Development includes training and human resource
development. Training means the process of increasing knowledge (acquiring skills)
required to perform the present job while HRD prepares the employees for the future
roles. Development needs are identified through job analysis (skills and knowledge
required), organization analysis (future plans) and employee analysis (strength and
weakness). HR research subsystem provides necessary data pertaining to for the analysis
as discussed above. While due to technological factor, development need arises for
which relevant data are collected by HR Intelligence subsystem.
(3) Appraisal System: Performance Appraisal is the process of systematic evaluation of the
performance of an employee by those who are aware of it. It also refers as identifying
strength and weakness possessed by an employee. On the basis of the result of
performance appraisal, various decisions are made like transfer, promotion, demotion,
training, offering a permanent job and salary increment. These are the semi structured and
structured type of decisions. HR research subsystem collects data regarding the
performance of each employee.
(4) Compensation System: Compensation means rewarding an employee for the work done
by him/her. To formulate compensation strategy, a manager is required to study the
present wage / salary structure of his / her organization which is available through HR
research subsystem. Moreover, such information is not enough so the data pertaining to
cost of living, wage/salary structure of other organizations, legal framework for
compensation management are acquired through HR Intelligence Subsystem.
(5) Maintenance System: HR Maintenance system deals with mobility (transfer, promotion
and demotion), safety and health of human resources. For mobility, information
regarding organizational policy with respect to transfer, promotion and demotion and
absenteeism, labour turnover, disciplinary records are collected through HR Research
system. Further, for safety and health of human resources, information about accident
rates and other health issues are too obtained through HR Research subsystem while data
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 regarding legal framework and provision for safety and health is collected through HR
Intelligence subsystem.
(6) Industrial Relation System: Industrial relation means the relationship between
employer and employees which is expected to be harmonious, cordial and healthy. Due
to employee unrest, conflict and dispute, the industrial relation becomes bitter and sour.
Industrial relation can better be maintained through discipline, redressing grievances and
settling disputes.
(a) Discipline: Discipline is the code of conduct which creates soothing working
environment. To formulate strategy for discipline, records of all offence and
disciplinary actions taken should be maintained; causes of indiscipline are to be
analyzed which helps in designing a disciplinary strategy. These data are
available internally through HR research subsystem.
(b) Grievance Management: Grievance means complaints arise due to unfair
wage/salary, unsatisfactory working conditions, mal-adjustment, pattern of
supervision and management policies and procedures. All records of grievances
(causes and remedial actions) should be analyzed.
(c) Managing Industrial Dispute: To rightly and timely settle industrial dispute,
legal frame work and procedure with respect to collective bargaining, conciliation,
arbitration and adjudication are to be analyzed with the help of HR Intelligence
subsystem. Records of previous industrial disputes can be of an immense help
which are internally available through HR research subsystem.

(G) Output:
HRIS generates the following reports
• Report on Forecast of Manpower Requirement
• Standing Report submitted to Government agencies such as Income Tax, PF and
ESIC
• Performance Appraisal Form
• Provident Fund Report
• Report on Training and Development programme conducted, their success and
failure

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PRODUCTION (MANUFACTURING) INFORMATION SYSTEM

❖ What is Production?
Production means transformation of raw materials into the finished products/goods. It also
refers to the creation of goods with the help of men, machine, material, money and method.
Production adds value and utility.

❖ What is Production Management?

Production Management refers to the application of principles and concepts of management
into the manufacturing (production) activity. It deals with planning and controlling of
production.

❖ Production Information System deals with following areas

• Manufacturing
• Inventory control and management:
• Quality
• Cost

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❖ Model of Production (Manufacturing) Information System:

Input Subsystem Output Subsystem

Manufacturing
❖ System
❖ Industrial
Engineering
❖
Subsystem
❖
Inventory
System Users

Data Base

Quality System

Production
Intelligence Cost
Subsystem System

Data Flow

Information Flow

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(A) Input Subsystem:
Input subsystem includes following subsystem
a. Industrial Engineering Subsystem: It is concerned with analysis of the entire
production system and makes recommendations. It also deals with the setting
of production standards (standard time, standard quantity, standard quality)
which are stored and compared with the actual. It collects the data from the
organization so it is the internal mechanism.
b. Production Intelligence Subsystem: It focuses on various inputs that go into
manufacturing system such as raw materials, labour, machine and energy
(electricity, fuel and oil). Production Intelligence system provides data about
usage of these inputs which are used for planning, control, acquisition and
usages of them (inputs).
(B) Data:
PIS deals with following data
• Labour Hours
• Labour Rate
• Material Consumed
• Energy Consumed
• Produced Data
• Material Wastage
• Product rejected at intermediate and final stage
• Data pertaining to actual quality

(C) People:
Following are people who make use of PIS
• Top level manager
• Production manager
• Material manager
• Plant manager
• Shift manager
• Foremen like shop floor, shift and dept.
• Clerk
• Quality Controller

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 • Quality Assurer
• Production and Material expert
• Data entry operator

(D) Hardware and Software:

Hardware is a machine on which data are stored and recorded such as computer and other
computer peripherals. Software is a computer program which includes system software
and application software. Software helps in developing database and processing of data.

Following are the examples of PIS Software

• CORAL DRAW,
• MAYA, MRP (Material Resource Planning),
• AUTOCADE,
• E2 Shop System,
• Arena PLM, Enterprise IQ MES
• Fishbowl Manufacturing Software
• QT9 Quality Management
• Abas ERP

(E) Output Subsystem:

a. Manufacturing system: Manufacturing system deals with process, methods and
techniques of production. Manufacturing system determines the production schedule
and sees whether the conversion of raw material into finished products has been done
at right time or not. (i.e.) how much time taken for the completion of each process, at
what time process started and got over? Here, planned (standard) time is compared
with actual time taken for the completion of the process. If any delay or deviation is
found, corrective / remedial actions are taken.
b. Inventory system: Production Information system assists in inventory control and
management. [Inventory control means exercising control over purchasing, storage,
handling, inspection and accounting of inventory. The primary objectives of
inventory control are to reduce the wastage of inventory, to minimize the material cost
and to maintain desired level of inventory.

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 Operation of Inventory Information System

Supplier Supply
Order

Requisition
Production
Requisition
Purchasing Warehouse (Manufacturing)
Supply

In order to be effective inventory information system, warehouse’s computer is linked

to the computers used at production and purchasing department. The production
system sends requisition for raw materials showing date, time, item code and quantity
required. The computer at warehouse uses these details as inputs and prepared
documents showing the items to be supplied. At the same time, it updates inventory
item file to show the current status. The moment stock level of an item reaches to
reordering level, the computer sends the requisition to purchasing computer to procure
the item in economic order quantity. If purchasing system’s computer is linked to the
concerned supplier’s computer, the order is placed immediately. In alternative case
when the supplier is not linked on-line, the purchasing system’s computer prepares
order for procuring the item concerned.
On receiving the item that has been procured, the inventory system verifies the item
according to the specifications prescribed in the order. If everything is in order, the
inventory system issues clearance note and its copies are forwarded to purchasing as
well as finance department. The item received is recorded in concerned file to show
the current status.
c. Quality System: Quality system tries to ensure that the organization produces
products of desirable quality. Quality is decided by production personnel in
consultation with engineers and technical experts keeping in mind the quality
parameters expected by the customers. In Quality information system, quality
standards are compared with actual quality. Industrial engineering subsystem enables

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 in determining quality standards. The comparison is done with help of the software
which uses graphical tools or statistical tools.
• Graphical software converts the data captured into desired graphics such as
check sheet, histogram, scatter diagram, control chart, cause-effect diagaram
etc
• Statistical Software: Statistical quality control (SQC) is the application of
statistical tools to determine whether the raw materials and processes are in
accordance to quality guidelines. It measures and suggests improvement in
final inspection of the finished products. SQC measures the product quality
by taking sample for inspection during the production process.
d. Cost System: Cost system of production information system tries to ensure that
products and services are produced at the lowest possible costs. Cost Information
system is related to production costs. These can be classified as direct costs and
indirect costs. Direct costs are material cost, labour cost and power & fuel cost. In
fact, direct costs vary in proportion of volume of production. Indirect costs include
factory rent, factory maintenance, plant/machinery repair-maintenance and insurance
etc.
Cost information system uses standard costing and historical costing to keep control
over costs. Standard costing is a technique whereby costs are pre-determined, known
as standard costs before the actual operations take place. Standards cost of material,
labour, power and fuel and indirect cost.
When the actual operations take place, all the costs on actual basis are known as
historical costs. In cost information system, actual costs for different components are
compared with standard costs. If any deviation is found between actual and standard
costs, a further analysis is made to identify the reason for the deviation. Once reasons
are ascertained, corrective actions are taken.
(F) Output:

PIS generates following type of reports

• Report on Production and Production hour

• Production Status Report
• Report on Finished products, semi-finished products and work-in-progress
• Report on consumption of raw material

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 • Report on wastage of material
• Report on machine break down
• Plant loading report
• Target and actual production report
• Report on failure to meet promised delivery date
• Report on Backlog of a large number of order

❖ COMPUTER APPLICATION AND TECHNOLOGIES USED IN PRODUCTION

1. Computer Aided Design (CAD):

Computer aided designed is known as computer aided engineering (CAE). CAD refers to the
use of a computer to design a product that is to be manufactured. CAD automates the
creation and revision of designs by using computers and sophisticated graphic software. CAD
was first used in designing components for automobiles. CAD software refines the drawing.
Once the design is entered into the computer, the design engineer detects the weak points and
finalises the design. CAD software prepares detailed specification that is necessary to
produce the product.

Advantages of CAD:

• It cuts down the time involved in the conception of new product (i.e.) it reduces too
much the time taken for design, testing and commercialisation of product.
• It reaps the benefits of being early entrants in the market places because it reduces the
time taken between new product idea generation and its commercial production.
• It saves cost (i.e.) actually greater costs are involved in manually design of product,
testing and if the product design is not acceptable and workable.
• It offers the benefits of flexibility that means an organization can do lot of experiment
with alternative designs of products.

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2. Computer Aided Manufacturing (CAM):

Computer Aided manufacturing means the application of computers in the production

process. In CAM, there are special computer controlled production machines which produce
the products according to the specification obtained from the design database.

3. Computer Integrated Manufacturing (CIM):

Computer integrated manufacturing is concerned with both the creation of designs of a
new product and the conversion of those designs into operation instruction. It is the
amalgamation of CAD and CAM.

4. Robotics:
Robotics is a technology that is used to create robots. Robots are the electric men with
more than humanly efficient automation. In 1971, the first Industrial robot was used in
one of the automobile companies to carry components for one assembly point to another.
Generally, industrial robots are used for feeding raw materials, collecting output and
storage of output. Industrial robots are preferred to used in the following
circumstances…
• When the plant releases an excessive heat which a human cannot bear
• At the plant where there is a production of chemical which is hazardous for human
• When there is a greater demand of physical efforts which is out of the capacity of
human.

Questions
Q1. Discuss Accounting (Financial) Information System in detail
Q2. Explain Input subsystems of Human Resource Information System
O3. Write a detailed note on components of HRIS
Q4. Write a short note on Input subsystems of Production (Manufacturing) Information
System
Q5. Prepare an elaborative note on Marketing Information System
Q6. Discuss output subsystems of HRIS
Q8. Prepare a brief note on output subsystems of Production Information System
Q9. Explain Operation of Inventory Information System
Q10. Write a shot note on Computer Aided Design

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Q11. Discuss Computer Application and Technologies used in Production
Q12. Explain Robotics
Q13. What is Computer Aided Manufacturing?
Q14. What is Computer Integrated Manufacturing?

Note: The given reading material is prepared and compiled by referring the following
reference books. Hence, contents and explanation included in the material are not
exhaustible one. It is just to facilitate the students. Students are requested to refer following
reference books for the detailed understanding. Moreover, the issuer of the material does not
claim the copyright of the material.

References:

O’Brien, James (2014), A Management Information System, TATA McGraw, Hill, New
Delhi, 10th Edition

Kenneth C. Laudon, Organisations, Management and the Network Enterprise

Varshney, Gagan, Madan, Pankaj and Gupta, Avdhesh (2010). Management Information
Systems, Global Vision Publishing House, New Delhi, First Edition

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 B.Com (Honours) Programme
Faculty of Commerce
The Maharaja Sayajirao University of Baroda

S.Y. B.Com (Honours) Semester III Management Information System (MIS)

Prepared By: Mr. Sushil Parmar

UNIT III – TYPES OF INFORMATION SYSTEM

Following are the types of Information System

1. Transaction Processing System

2. Decision Support System
3. Executive Information System
4. Artificial Intelligence and Expert System
5. Management Information
6. Office Automation System (discussed in unit no. 1)
7. Knowledge Management System (discussed in unit no. 1)
A. TRANSACTION PROCESSING SYSTEM (TPS)

Transaction processing system is the operational level of system and facilitates operational
managers. Transaction Processing System is a computerized system that performs and
records daily routine transaction necessary to conduct the business.

TPS is used for following

• Order Processing
• Material Movement
• Employee Record Keeping
• Account Payable / Receivable

TPS provides up to date information that means an instant information.

TRANSACTION PROCESSING SYSTEM INVOLVES FOLLOWING ACTIVITIES

1. Capturing data to organize in file and database

2. Processing of files / database using application
3. Generating Information in the form of reports

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 4. Processing of Queries

COMPONENTS OF TRANSACTION PROCESSING SYSTEM

1. Inputs: In Transaction Processing System, inputs are obtained from different sources
documents such as customer order, sales slips, invoices, purchase order and
employees time cards etc.
2. Processing: For processing of the data, journals and registers are used to provide a
permanent and chronological input such as purchase book, sales book, cash book,
stock register, employees attendance registers etc. Journals are created for financial
transactions whereas registers are for inventory and employees.
3. Storage: The processed data are stored temporarily in transaction file while
permanently in master file.
4. Output: The output of TPS is generated in the form of customer invoice, online air
ticket etc. The output of transaction process system helps in preparation of trail
balance, profit and loss account, balance sheet etc.

FEATURES OF TRANSACTION PROCESSING SYSTEM:

1. Large Volume of Data: As TPS is the transaction oriented system, it deals with great
amount of transactions required to run the business. Hence, TPS needs to have the
larger storage capacity.
2. Automation of basic operations: Transaction Processing system automates the basic
operations required to record the transactions. If transaction processing system fails
for a short time, it creates a big problem.
3. Benefits are easily measurable: TPS offers variety of benefits such as reducing work
load and improving efficiency in terms of accuracy and speed.
4. Source of Input for other system: TPS provides necessary information for tactical
and strategic decisions taken at managerial and strategic level of organization
respectively.

(Note: For further reading on Transaction Processing System, please refer the attached
pages of reference book)

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B. DECISION SUPPORT SYSTEM (DSS)

Decision Support System is the computer system at management level and combines data,
sophisticated analytical tools and user friendly software.

DSS supports both semi-structured and unstructured decisions. (Semi-structure decisions like
short term budget analysis while unstructured decisions like budget preparation, sales and
production planning, capital budgeting decisions).

Characteristics of Decision Support System

1. DSS is the Computerized System

2. It supports semi-structured and unstructured decisions
3. It makes tactical decisions
4. The main components of DSS are database, model base and DSS Software
5. DSS is the management level of system

Components of Decision Support System (DSS)

Componentsof
DSS

Data Base DSS Software

HR Data Manages Database Model Base
Marketing Data Creates, Statistical Model
Finance Data Storage and Optimisation Model
Production Data Retrieval of Models Forecasting Model
Sensitivity Analysis
Model

1. Data Base: Data is the pre-requisite for the decision support system. Data base deals
with both historical and present data pertaining to production, marketing, human
resources and finance etc.
2. Model Base: Another important component is model base. Model is an abstract
representation that explains various components, relationship of a phenomenon.
Model base is the collection of mathematical and analytical model. DSS software

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 generates output in form of various models to project future outcome by analyzing a
series of data.
(a) Optimization Model: Optimization model provides guidelines for optimal
solutions. For instance, how to get optimum returns either by maximizing revenue,
minimizing cost or both for which linear / non-linear programming is used.
Optimization model can be the optimal product mix to maximize profit.
(b) Forecasting Model: Forecasting model is used to forecast business prospects
such as sales. For forecasting model, historical data are used to know the likely
behaviour of these data in future. Eg: impact of entry of new competitor, new
substitute on future sales figure etc.
(c) Sensitivity Analysis Model: Sensitivity analysis model is used to see the impact
of discrete changes such as change in excise duty, ban on import / export products
3. DSS Software: DSS Software permits interaction between users, database and model
base. DSS Software manages database, stores and creates models and helps in
retrieval of model. For example, Desktop Spreadsheet software, Lotus 1-2-3, MS
Excel
4. (Note: For further reading on Decision Support System, please refer the attached
pages of reference book)

4
C. EXECUTIVE INFORMATION SYSTEM

CONCEPT OF EXECUTIVE INFORMATION SYSTEM

The term Executive Information System was the first appeared in the paper by Rockart and
Treacy. The EIS is also termed as Executive Support System. It is the strategic level of
system and supports mainly unstructured strategic decisions.
It deals with the strategic questions…..
• What business should we be in?
• What new acquisition would protect us from the cyclical fluctuation?
• What my competitors are doing?
• What would be our new product? Product Planning
• Should we go for merger and acquisition?

In EIS, data pertaining to functional areas as well as from government, supplier, competitors,
government policies etc are collected.
An executive support system is an information system at the strategic level of an organization
designed to address unstructured decision making through advanced graphics and
communications – Laudon and Laudon

FEATURES OF EXECUTIVE INFORMATION SYSTEM

• EIS assists the top level management of an organisation

• EIS cut across the functional areas. This system may derive data from different
functional areas but decisions are made integrating these data are not meant for any
specific functional area but for the organization as whole (i.e.) It affects the entire
organization
• EIS is known as Strategic Level of Information system since it supports more of
unstructured strategic level of decisions.
• Information (output) generated through EIS is in the forms of summary reports and
graphics
• In EIS, executives are helped by EIS coaches and chauffeurs. An EIS coach is a
member of the executive’s staff, information services or an outside consultant who
provides help in setting up the EIS while an EIS chauffeur is a member of executive’s
staff who operates the equipment for the executives.
• EIS uses both external and internal data.

5
COMPONENTS OF EXECUTIVE INFORMATION SYSTEM (EIS)

Data Base

Data Warehouse

Data mart

Data Mining

Executive

Query
EIS Software
Executive’s Staff

Output
e
1. Executive: An executive is the end-user of output generated from EIS. Most of the
executives prefer to get this job done by their staff either because they are busy in
their work or they do not prefer to work on computer.
2. Executive’s Staff: Executive’s staff personnel work as intermediaries between
executives and EIS. They do the job of retrieving information, making analysis and
interpreting the results to the executives.
3. Database: Database for EIS is both comprehensive as well as specific. It is
comprehensive as EIS requires data about the functioning of the entire organisation
along with external data from customers, suppliers, competitors, government policies
related to business and technological advancement. Database is specific because
relevant data for EIS are stored in concise form for easy retrieval and protected from
unauthorised accesses. Data base can be categorised as data warehouse and data
mart.
• Data warehouse: A data warehouse is a collection of current and historical
operational data stored for use in EIS. Besides operational data, data from relevant
environment (external environment) are collected (i.e.) necessary data are usually
extracted from a number of sources, collected, integrated and stored in a relational

6
 database for quick and easy access. The data stored in warehouse are updated daily or
weekly or monthly depending upon types of data and the need of data users. Data
warehousing is the process of creating data warehouse.
• Data mart: A data mart is usually a customised database as per the requirement of a
specific type of users. Data marts are created generally from data warehouses which
contain data to be used for a variety of purposes and by a variety of users. For creating
a data mart, relevant data are extracted from data warehouses and are earmarked for
specific users. EIS data marts contain those data which are relevant for executives for
strategic management that involves strategic planning and strategic control.
Data Mining: Data Mining is an activity which involves finding relevant data from
data warehouses. It is just like normal mining activity in which minerals are extracted
from mines.
4. EIS Software: EIS software is the dedicated form that is used for data manipulation
from database. There are three types of EIS software
• Personal Productivity Software: Personal Productivity software is general purpose
software that anyone can use to develop his/her own applications For example,
spreadsheet, analysis package, model generator etc.
• Pre-written EIS Software: Pre-written EIS software is specially designed to meet
the information needs of executives. Some software developers have developed
prewritten EIS software which contains external information in the form of industry
trends, competition analysis, proposed legislation changes and so on. Eg:
Commander EIS Software
• Customised EIS Software: If an organisation does not want to use prewritten
software, it can develop EIS software on its own according to its specific
requirements. Such software is more useful as compared to other software
alternatives. However, development of customised EIS software is much costlier in
terms of money and time as compared to other options.
5. EIS Output: EIS output is generally in the forms of reports and graphics which may
be either through hardcopy (printed on paper) or screen display. A basic nature of
EIS report is that it is brief and without much technical jargons. The reports remains
brief because executives require so many reports in a single days hence many times,
such reports are called as summary reports.

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D. ARTIFICIAL INTELLIGENCE AND EXPERT SYSTEM

CONCEPT OF ARTIFICIAL INTELLIGENCE

Intelligence is the natural logic and thinking through which new knowledge emerges.
Artificial Intelligence is the manmade, does not fully think the way as human beings do.

It is a kind of computer program that enables the computer to think or behave the way
programmer wants. Thus, the level of artificial intelligence depends on programming
capacity as well as computer capability

Artificial Intelligence has the potential to extend a manager’s problem solving ability beyond
his normal capabilities

Artificial Intelligence system is the computer based system that can behave like human
beings with ability to learn languages, accomplish physical tasks, uses a perceptual apparatus
and emulates human experience and decision making.

Artificial Intelligence is the efforts to develop computer-based systems that can behave like
humans, with the ability to learn languages, accomplish physical tasks, use a perceptual
apparatus and emulate human experience and decision making – Laudon and Laudon

BUSINESS APPLICATION OF ARTIFICIAL INTELLIGENCE:

• To capture and preserve the expertise of an employee who is not available due to
resignation, retirement or death.
• To enhance the distribution of knowledge in the organisation (Eg: through
demonstration).
• To create a mechanism that is not subject of human beings like fatigue and worry.
Routine jobs that create mental fatigue may be performed by artificial intelligence
systems like robots.
• To maintain / enhance strategic position of an organisation in the market place by
devising suitable systems through artificial intelligence that help in reducing cost
of production or providing better product mix or both.
• To provide solutions to problems that are too complex for human beings to
handle.

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EXPERT SYSTEM

Expert system is one of the prominent research domains of Artificial Intelligence. It is

introduced by the researchers at Stanford University, Computer Science Department.

The expert systems are the computer application developed to solve complex problems in a
particular domain or the level of extra-ordinary human intelligence and expertise.

Expert systems have occupied the prime place in artificial intelligence. An expert system is
a knowledge based system that uses rules to express logic of the problem being solved.

“An expert system is a knowledge-intensive program that solves a problem by capturing the
expertise of a human in limited domains of knowledge and experience” – Laudon and Laudon

For examples:

• Medical Domain – Diagnosis system to deduce cause of disease from observed data,
conduction medical operation on human
• Psychological Domain – Lie detector
• Knowledge Domain – Finding out faults in vehicles, computers
• Finance / Commerce Domain – Detection of possible fraud, suspicious transactions,
stock market trading, Airline Scheduling, Cargo Scheduling
• Design Domain – Camera lens design, automobile design

Characteristics of Expert System

• High Performance
• Understandable
• Reliable
• Highly responsive

Capabilities of Expert System

The expert systems are capable of –

• Advising
• Introducing and assisting human in decision making
• Demonstrating
• Deriving a solution

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 • Diagnosing
• Explaining
• Interpreting Input
• Predicting Results
• Justifying Conclusion

Expert systems are incapable of….

• Substituting human decision makers

• Possessing human capabilities
• Producing accurate output for inadequate knowledge base
• Refining their own knowledge

E. MANAGEMENT INFORMATION SYSTEM

MIS is the management level of information system. MIS provides periodic reports rather
than instant information on operation. MIS uses the results produced by TPS along with other
information.

MIS is an information system that evaluates, analyses and processes an organization’s data to
produce meaningful and useful information based on which the management can take right
decisions to ensure future growth of the organization.

For example, Reports showing…..

• number of units sold by salesmen

• number of leaves availed by the staffs
• amount of fund utilised for different activities
• Consumption and usage of different types of materials.

Some other examples are: monthly production reports, summary of daily sales, summary of
sales done by sales representatives etc.

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Output of Management of Information System (related to sales data)

• Scheduled Report

This type of report is produced periodically or for a schedule time (i.e.) daily, monthly,
weekly.

Weekly Sales Reports of Products

Product Quantity (K.G.) Amount (Rs)

A
B
C

• Key Indicator Report

Key Indicator report summaries the critical performance which means it summaries on the
basis of comparison between current data and previous data. It indicates deficiency or
efficiency in operation.

Comparative Sales Reports

Product January February

(Previous Month) (Present Month)
Quantity (kg) Amount (Rs) Quantity (kg) Amount (Rs)
A
B
C

• Demand Report

Demand report provides information at manager’s requirement. Following is the report

submitted by sales supervisor on the sales done by each sales representative (sales man)
which is to be sent of sales managers.

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 Sales Representative Report

Sales Representative ID Quantity Sold Amount

• Exception Report

Exception report is automatically produced when a situation is unusual or management action

is required.

Overall Sales Report

Order No Customer ID Sales Representative ID Product Quantity Amount

12
 B.Com (Honours) Programme
Faculty of Commerce
The Maharaja Sayajirao University of Baroda

S.Y. B.Com (Honours) Semester III Management Information System (MIS)

Issued By: Dr. Sushil Parmar

Unit IV: Strategic Roles of Information System

❖ BUSINESS PROCESS RE-ENGINEERING (BPR)

Business Process Re-Engineering is a competitive strategy. It is often known as Re-

engineering. BPR refers to a fundamental rethinking and radical redesign of business process
to achieve dramatic improvements in cost, quality, speed and services.

BPR promotes business innovation and brings improvement in the organization. It makes an
organization much stronger and more successful competitor in the market place. In fact,
making dramatic improvement is not easy task, it involves risk of failure and disruption to
organizational environment.

Re-engineering of business processes is done through ERP software, web-enabled e-business

and e-commerce.

Objectives of BPR

• To eliminate unnecessary processes

• To reduce cycle time
• To increase the degree of competitive advantage

Features / Characteristics of BPR

• Level of Change: It brings radical change in the organization (i.e.) grass root
level of change
• Process change: There is adoption and emergence of brand new process.
• Starting point: An organization has to write on clean slate (i.e.) no change in
existing one
• Frequency of change: It doesn’t bring regular changes. The nature of change is
periodical (i.e.) one time change

1
 • Time required: BPR demands more time so it is a long term process
• Scope: It has a broad scope and hence it is the cross functional.
• Horizon: It is future oriented process and strategy.
• Participation: There is the top-down participation as it is initiated at the top level
and implemented at middle and operational level.
• Path to Execution: Its successful execution requires necessary change in the
present culture and structure of organization.
• Primary Enabler: IT helps in Business Process Re-engineering
• High: BPR involves the greater degree of risk. it completely changes the entire
organization.

Process of Business Process Re-engineering

1. Developing Business vision and process objectives:

First of all, it is desirable to clearly define the business vision before going for re-
engineering of business process so that business processes function in tune with
vision. Organization vision represents that what the organization would be in future.
Based on its vision, the organization should define the objectives of business
processes. There are different ways in which business processes contribute to
business vision such as lowering costs by shortening process cycle time, enhancing
customer value by matching quality/cost and service/time, providing timely
information to various internal stakeholders.

2. Identifying the processes to be redesigned / re-engineered:

In this stage, the organization should now identify those processes which are to be
redesigned. Initially, it is desirable to identify those processes that are performed
repeatedly and have greatest potential payback such as manufacturing process, order
receiving and execution, product shipping, data entry etc. And then, weaknesses of
these processes can be identified on the basis of their symptoms, symptoms can be
excessive data redundancy(duplication) and re-entering information, too much time
spent in handling exceptional and special cases or in corrections and rework. This
gives an idea as to where and what changes are needed.

2
3. Measuring the Performance of Existing Processes:
Here, performance of existing organizational processes should be measured to find
out the type of re-engineering needed. Many methods can be used to measure the
performance of a process to determine whether an opportunity exists to improve its
efficiency, effectiveness and adaptability. There are two common methods viz.
benchmarking and process evaluation.
Benchmarking collects and analyses data to determine the performance of a process.
The organization can measure the performance of its process vis-à-vis benchmarked
organization (processes of industry leader locally / globally belonging to the same
industry or organization best in the class irrespective of the industry) to find out
whether re-engineering is needed.
In process evaluation, each process is assigned a rank – usually ranging from 1 to 5
with 1 denoting the best and 5 denoting the worst. The rank is assigned on the basis
of performance of a process and it is usually done by a committee of members having
the deep knowledge of the field.

4. Identifying the opportunity for applying information technology:

At this stage, the organization should identify how IT can be used to support a process
and redesign the process accordingly. For example, if an organization needs
inventory and reserve to prevent stock outs, it can design just in time inventory and
stockless supply systems keeping in view the role that can be played by
telecommunication networks and electronic data interchange. Thus processes
involved in just-in time inventory and stockless systems should be designed keeping
in view the support provided by above IT systems.

5. Building Prototype of New Process:

The organization should design a new process on an experimental basis, anticipating a
series of revisions and improvements until the redesigned process is put into actual
operation. The prototype must be tested to measure its performance and incorporate
needed changes. As far as possible, the testing should be in realistic environment.
After the testing phase is over and necessary corrections are incorporated, the process
can be put into operation.

3
❖ CREATING VIRTUAL COMPANY

Concept:

Virtual means something which is not real but its image is created in the mind.

Virtual Company emerged in 1990 and it is known as digital organization, modular

organization or network organization.

Virtual company is an organization that uses IT to link people, organizations, assets and
ideas. It is temporary network of Independent organization linked by IT to share skills, cost
and access to one another’s market. It is the combination of two or more organization to
create competitive advantages. For instance, 10 Up Append Up, Batch Book, Buffer, Clever
Tech

Virtual Organization is a network of co-operation made possible by ICT which is flexible and
comes to meet the dynamics of the market. In virtual organization, individuals working are
physically dispersed. VO is a network of strategic / alliance partners.

Types of Virtual Organizations

• Telecommuters: In such type of virtual organization, employees complete their work

sitting at home via computer and internet For instance Dow Chemicals, Xerox,
Coherent Tech. Inc etc
• Outsourcing: This type of company is involved in the performance of marketing,
sales, HR, finance and research functions on behalf of its clients. These functions
can be outsourced through KPO, BPO etc
• Completely Virtual: This type of virtual organization is the network of suppliers,
distributors, customers, joint venture partners. Eg: Sun Micro-system

Characteristics of Virtual Organization

• High Adaptability: It combines the knowledge and expertise of some organization

• It reduces face to face relations
• Organization becomes hollow organization as employees working are physically
scattered / dispersed.

4
Advantages of Virtual Organization

• It overcomes organizational and geographical boundary

• It helps in seizing global market opportunities
• It assists in finding out talented and motivated employees
• It saves time, travel expenses and eliminates lack of access to experts
• It offers opportunities such as money, labour and managerial skill
• Team’s communication and work reports are available
• Accommodate both personal and professional lives

Disadvantages

• It not advantageous at advanced degree in Conflict Management

• Possibility of technology and system failure
• It is built on trust
• In virtual organization, employees control their work becomes necessity
• There is no personal interaction

❖ BUILDING KNOWLEDGE CREATING COMPANY

Concept

• Today, a company has realised the need for acquiring competitive advantages due to
highly competitive market and technology invasion. And therefore it is essential to
become knowledge creating company. It is also termed as learning organization.
Such organizations are mainly involved in Knowledge Management.
• Knowledge creating company is engaged into creating new business knowledge and
disseminating it widely throughout the company. It quickly utilises the knowledge for
production of new product / service, growth and development of organization.
• Knowledge creating company exploits two kinds of knowledge namely Explicit and
Tacit Knowledge.

Types of Knowledge

• Explicit Knowledge refers to any knowledge that can be easily captured, shared and
codified. It includes data, documents and things written down or stored on computer.

5
• Tacit Knowledge means knowledge which resides in workers (i.e.) know how. It
represents the most important information within organization. Tacit knowledge is
not recorded or codified as it evolves into the minds of employees through the years
of experience. For example, how to manufacture a product or deliver the service or
deal with a particular vendor or operate an essential piece of information. Tacit
knowledge is never shared with anyone who might be in a position to record it

Knowledge Management by Knowledge Creating Company

• In an organization, strategic use of information and technology is done in the process

of knowledge management thereby development of knowledge management system.
KMS helps knowledge workers to capture, create, organize and make available
(share) important business knowledge (processes, procedures, patents, formulae, best
practices, forecast etc).
• Knowledge management system also facilitates organizational learning and
knowledge creation. They are designed to provide rapid feedback to knowledge
workers, encourage behaviour changes by employees, and significantly improve
business performance.
• Knowledge management system is the three levels of system that promotes the
collection, organization, access, sharing and use of work place and enterprise
knowledge.

Enterprise Intelligence

Information Creation,
Sharing and
Management

Document
Management

Enterprise Intelligence: Leveraging organizational “Know how”, Performance support,

interacting with operational database, Building expert network

6
 Information Creation, Sharing and Management: Capturing and distributing expert
stories, real-time information management, Communication and collaboration, New
Content creation

Document Management: Accessing and retrieving documents stored online

❖ STRATEGIC ROLE OF INFORMATION SYSTEM

To grow and survive in the competitive environment, a company is required to acquire

competitive advantages. Information System not only identifies but also provides
competitive advantages.

1. It helps in formulating Generic Strategies: In the formulation of following generic

strategies, Information system plays a strategic role
• Overall cost leadership: it means the least cost producer in the broadly defined
market and a wide mix of products. Overall cost leadership creates
competitive advantage and captures large market shares. It is achieved
through use of information system in the production and marketing activities.
• Product Differentiation: Organisation can compete in the market on the basis
of differentiation
• Focused differentiation: New market by identifying specific target
Becoming low cost producer, an organization should to focus on internal operation,
management planning / control, personnel and lowering operation cost, raising profit
and making organization on efficient. For this purpose, Information System used in
different functional areas offers a great help.
2. Creating new products and services: IS assists in the creation of new product and
services. Some companies don’t want any longer to compete on the basis of cost,
rather prefer product differentiation. Computer Aided Design and Marketing
Information System enables the creation of new products and services.
3. Focus on Market Niche: Information System helps in improving the marketing
technology, examining transaction of customers, identifying profitable customers and
determining flexible pricing.
4. Creating Strategic Alliance: Strategic Alliance means the combination of two or
more organization to create competitive advantages. A Strategic alliance brings

7
 complementary alliance and works on virtual organization (i.e.) temporary network of
independent organization linked by Information Technology to share, skills, costs and
access one to another’s market For instance, 10up, Append up, Batchbook, Buffer,
Clever Tech etc.
5. Managing Value Chain: The term, value chain was firstly coined by Michael Porter.
The value chain views the firm as a series, chain or network of basic activities that
add value to its products and services. Value chain conceptual framework includes
primary and support processes. Primary Processes are those business activities that
are directly related to the manufacturing of products or the delivering of service to the
customers. Support processes are those business activities that help support the day
to day operation of the business.
Conceptual Framework of Value Chain

Primary Processes Support Processes

Use of IT Use of IT
Inbound Automated Just in Administrative Collaborative Intranet
Logistics Time Warehousing (increases flow of communication
& co-ordination)
Operations Computer Aided HRM Collaborative Intranet
Flexible
Manufacturing
Outbound Online Point of Technology Extranet & Intranet
Logistics Sale and Order Development
Processing
Marketing & Target Marketing Procurement of e-commerce
Sales Resources
Customer Customer
Service Relationship
Management

8
SUMMARY [ JUST FOR READING]

Basic Strategies in the Business Use of Information Technology

Lower Costs

• Use IT to substantially reduce the cost of business processes

• Use IT to lower the costs of customers or suppliers

Differentiate

• Develop new IT features to differentiate products and services

• Use IT features to reduce the differentiation advantages of competitors
• Use IT features to focus products and services at selected market niches

Innovate

• Create new products and services that include IT components

• Develop unique new markets or market niches with the help of IT
• Make radical changes to business processes with IT that dramatically cut costs;
improve quality, efficiency or customer services; or shorten time to market

Promote Growth

• Use IT to manage regional and global business expansion

• Use IT to diversify and integrate into other products and services

Develop Alliances

• Use IT to create virtual organizations of business partners

• Develop inter-enterprise information systems linked by the Internet and extranets that
supports strategic business relationships with customers, suppliers, subcontractors and
others.

Following are the examples of how over time companies have used information
technology to implement five competitive strategies for strategic advantages

Strategy Company Strategic Use of Business Benefit

Information

9
 Technology
Cost Leadership Dell Computer, Online build to order Lowest cost producer
Priceline.com, Online seller bidding Buyer set pricing
eBay.com Online auctions Auction set pricing

Differentiation AVNET Marshall, Customer/supplier of Increase in market

e-commerce share
Moen Inc. Online Customer Increase in market
share
design
Consolidated Customer online Increase in market
share
Freightways shipment tracking

Innovation Charles Schwab & Online discount stock Market Leadership

Co., trading
Federal Express, Online package Market Leadership
tracking and flight
management
Amazon.Com Online full-service Market Leadership
customer systems
Growth Citicorp Global intranet Increase in global
market
Walmart Merchandise ordering Market Leadership
by global satellite
network
Toys ‘R’ Us Inc. POS inventory Market Leadership
tracking
Alliance Walmart / Procter & Automatic inventory Reduced inventory
Gamble replenishment by cost/increased sales
supplier
Cisco Systems Virtual manufacturing Agile Market
alliances Leadership
Staples Inc. and Online one-stop Increase in market
Partners shopping with partners share

10
❖ USE OF INTERNET

Internet is a massive network of network. It connects millions of computers to gather.

Internet cannot be accessed by individuals; they are to avail the internet services through ISP
(Internet Service Providers). ISP is the company that provides access to the internet to
individuals. The most popular internet applications are email, instant message, browsing
sites on the World Wide Web.

POPULAR USES OF INTERNET

• Surf: Surfing means going from one website another website to get the website
resources and for the purposes such as multimedia information, entertainment and
electronic commerce.
• E-mail: Electronic mail / Instant message is used to exchange information with
colleagues, friends and other internet users.
• Discuss: Online discussion forums with special interest new group and website chat
rooms.
• Publish: One can publish his/her stuff such as subject matter, creative work, poem,
and article and also post the opinion on website, weblog, blogs etc.
• Buy and sell: A network of retailers, wholesalers, service providers and customers
are created online through e-commerce viz. Online auction, online shopping portals
• Downloading: One can download data files, software, reports, articles, pictures,
music and videos etc.
• Connect: With the help of social networking sites, people get connected with each
other.
• Other uses: Long distance phone calls, video-conferencing, radio Programme can be
the other uses of internet.

Business Use of the Internet

• Generates new revenue from online sales

• Reduces transaction cost through online sales and customer support
• Attracts new customer via web marketing and advertising and online sales
• Increases the loyalty of existing customers via improved web customer service and
support

11
 • Develop new web based markets and distribution channels for existing products
• Develop new information based products accessible on the web

❖ E-BUSINESS APPLICATIONS
1. Electronic Mail
2. Electronic Share Trading
3. Electronic Banking
4. Electronic Governance

1. ELECTRONIC MAIL (e-Mail)

Electronic mail (e-mail) is a fast and efficient method to exchange messages between two or
more person. E-mail can be defined as the exchange of messages through a computer
network. Messages can be entered via the key board or can be taken from files stored on a
disk. In general, e-mail takes the form of a text with little formatting, though more
sophisticated email software packages can allow users to send messages that contain different
typefaces, graphics and other elements that enhance the quality of presentation of the
messages.

E-mail messages can be composed on-line or off-lie. When a message is composed online,
the user’s connection to the internet is active. When the message is composed off-line, the
user’s connection to the internet is inactive. This allows the user to take more time and care
over the content of the message.

Architecture of E-mail: Architecture of email defines the subsystems of e-mail and how they
are organized. There are normally two subsystems in email- user agents and message transfer
agents. User agents allow the user to allow the user to send or read e-mail. While message
transfer agents move the messages from the source to the destination. E-mail system
supports five basic functions- composition, transfer, reporting, displaying and disposition

(Please refer attached pages for advantages and problems of E-mail)

2. ELECTRONIC SHARE TRADING (ONLINE TRADING)

Trading means selling and buying of securities, online trading was started by National Stock
Exchange in 1994.

12
In electronic share trading, buy/sell orders are executed on a broker’s terminal
(microcomputer is being used as terminal). For this purpose, connectivity is required
between brokers’ terminals and concerned stock exchanges have opted for dedicated network
through a satellite rather than going through conventional telecommunications lines.

Moreover, at the broker’s end, for transmitting data, an antenna (dish type) and VSAT (very
small aperture terminal) are required. The antenna is connected with the VSAT which in turn
is connected with the broker’s computer CPU. This connectivity enables a broker to transact
on-line without going to a trading ring. The buying/selling prices of shares of various
companies are displayed on the broker’s monitor and any transaction executed is also shown
on the monitor.

Steps of online trading

1. Placing an order: An investor cannot directly go to the stock exchange and do

trading, the broker purchase or sell the securities on behalf of investors. Hence, it is
necessary to open a trading account with the broker. The investor places an order of
purchasing or selling of securities either by sending an email or phone call or
personally going to broker’s office.
2. Settlement of all transactions is on rolling settlement basis. All transactions
conducted on a day are settled on the third day (excluding the day of transaction). A
transaction conducted on a day can be squared off on the same day if the investor so
wishes. A transaction can be squared off by entering the reverse transaction. (i.e.) if
an investor has bought specified number of shares of a company, he can square off his
transaction by selling the same number of shares of the company.
3. Delivery of shares in dematerialized (demat) form. In demat form, a company cancels
its share certificates and the same numbers of shares are credited to an investor’s
account. For this purpose, the investor has to open an account with a depository of
shares. For giving delivery of shares, the investor has merely to convey his
depository to credit his broker’s account and debit his own account.
4. For receiving payment from brokers or giving payment to them, electronic fund
transfer system is used. While stock exchange and brokers have this type of
connectivity, investors, particularly smaller ones, may not have this facility. They
can pay their broker or receive payment from him through cheque / demand draft.

13
 5. In order to have speedy settlement, the settlement period has been reduced
considerably and T + 3 (trading day plus three days) system is followed.

Benefits of Electronic Share Trading

1. Wide Area Coverage: Through electronic share trading, wide area can be covered.
An investor residing in any place of India can trade the shares of any company listed
on any stock exchange of India electronically through internet.
2. Speedy Transaction and Settlement: E-share trading has facilitated speedy
transactions and their settlement as a result; an investor who sells his shares can
receive payment within a week. Similarly, an investor who has bought shares can
receive their deliver within a week. Earlier, this period ranged from 3 to 4 weeks.
3. Reduces Transactions Costs: Electronic share trading has reduced transaction costs
considerably. There has been reduction in travelling expenses as brokers are not
required to go the stock ring. Moreover, the third way of transaction cost reduction is
in the form of lower rate of brokerage charged by brokers and elimination of paper
work.
4. Transparent Transactions: Electronic share trading has brought transparency in
transaction which has resulted into better investor-broker relationship. In the
electronic share trading era, investors have means to verify the actual rates at which
transactions have been done even if they are not physically present at the time when
the transactions have been done.
5. Lower Paper Work: Electronic share trading has reduced paper work almost to nil
both at a broker’s end as well as investor’s end.
6. Elimination of Bad Deliveries: A bad delivery is one which does not have the
required information filled in the transfer forms attached with share certificates. A
transfer form must have the same signature of an investor which has been in the
record of the company concerned. If the signature of an investor put on a transfer
form differs, the company can refuse the transfer of the shares enclosed with the
transfer form. This problem has resulted pilling of bad deliveries worth crores of
rupees. In the electronic share trading, since shares are delivered in dematerialized
forms and sellers’ accounts are debited immediately, the question of bad deliveries
does not arise at all.

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Problems of e-Trading

• Unnecessary Burden on small investors in smaller towns because of no facility of

electronic fund transfer
• Due to dematerialization of securities, they have to be deposited with depository.
Investors cannot trade their shares, unless annual depository charges are paid. It is a
kind of financial burden.

3. ELECTRONIC BANKING (E-BANKING)

E-Banking means providing banking services to customers electronically. It includes two

aspects online – banking transaction and electronic fund transfer.

Online banking: A customer can with amount from his account without writing a cheque or
any other means of withdrawal. Earlier it was within the restricted time period (banking
working hours). But with the introduction of ATM and Internet Banking, it is virtually
extended 24 hours. Now banks provide online deposit services too.

Electronic Fund Transfer: It means the transmission of financing transaction between bank
and other organization, bank and customer.
For examples
• Direct deposit of payment
• Direct debit of payment without writing any instruments
• Direct credit of receipt of dividend and interest
• Payment of insurance premium, loan instalment and other recurring payment

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3. ELECTRONIC GOVERNANCE

Electronic Governance enhances the relationship between Government and government,

Government and citizen, private and NGO.

There are four models which are created for E-Governance

1. Wider Dissemination Model:

This model supplies information such as laws / legislation, plans, budgets / expenditure,
judiciary decision pertaining to citizen rights & environmental decisions, contact details
of local / regional / national / international official online.

2. Critical Value Information Flow Model:

It disseminates information of critical value to the targeted audience such as
• Corruption data about a particular Ministry / division / official online to
concerned electoral constituency or to the concerned government body
• Reports of inquiry committees / commissions online to the affected parties
• Human right violation by government / officials online to the concerned
citizen
3. Comparative Analysis Model:
Here, citizens are provided the comparative information about various government
activities…
• To learn historical policies, actions or lessons derived for future policy making
• To evaluate the effectiveness of current policies and identity, their strength
and weaknesses
• To evaluate the performance of decision makers / decision making bodies
4. Interactive Service Model:
It is based on the principle that citizens should play active role in government decision
making process in a democratic country.
• Interactive communication channel with key policy makers / numbers of
planning commission (NITI Ayog)
• To conduct public debate / opinion poll before formation of policies and
legislative framework
• Filling of grievances and receiving feedback
• Establishing decentralized form of governance.

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❖ IMPROVING BUSINESS QUALITIES THROUGH MIS / IT

Whether it is a quality of product or work, an improvement in the quality is achieved through

use of IT / MIS in the business operation. In fact, various business functions are conveniently
performed with the help of Information and Technology. Therefore, the adoption of IT
becomes necessary to receive the different benefits like improved and better product quality,
accuracy, efficiency, productivity and timely right decision.

1. IT improves the quality of data because a manager can accurately collect, handle and
share the data. This assists in making quality decisions for the organization.
2. Product quality can be enhanced through production information system where
quality standards are set and ensured. Due to CAD and CIM, product can be
produced with zero defects. Very often, variance in product quality is seen due to
boredom and fatigue of employees. This problem can be eliminated with the help of
Robotics.
3. Human Resource Information System supplies the information about the performance
of each employee and to the some extent identifies the area of improvement. On the
basis of this, training is arranged so as to bring improvement in the quality of work
and productivity.
4. Expert system detects the fault in the machinery thereby avoids the problem of
production of defective products.
5. Marketing Research, one of the components of Marketing Information System
collects the data pertaining to the expectations of the customers with respect product’s
quality. This is of an immense help note only to improve quality but also to decide
the quality standards.

Note: The given reading material is prepared and compiled by referring the following
reference books. Hence, contents and explanation included in the material are not
exhaustible one. It is just to facilitate the students. Students are requested to refer following
reference books for the detailed understanding.

References:

O’Brien, James (2014), A Management Information System, TATA McGraw, Hill, New
Delhi, 10th Edition

Kenneth C. Laudon, Organisations, Management and the Network

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