SY BMS

SEM IV – Information Technology in Business Management II

Chapter 1 –Management Information System

 Information Technology Concepts-

1. Data & Information- Data simply means “Raw Fact”, which means it is fact but it
can’t be used as it, for example if we know that a college is having 2000 students, we
cannot use this fact to assign “Roll No.”, to prepare “ID Cards” because though the
number of students are 2000 is fact but we need to process it to get further details like
how many students are in first year, how many students are in which branch (e.g. Arts,
Commerce, Science etc.). Once we get these raw facts processed it becomes
“Information” and then it can be used for further action desired.
Data can be presented in form of numbers, text, pictures etc.

In simple words – “Data = Raw Facts” (which can’t be used as it is).

Data is like a raw material which gets appropriately processed by Computers / IT and
we get the output which is known as “Information”.

In simple words – “Information = Processed Data (Raw Facts)” (which can be used
further for making decisions).

Types of Data (Data Types)-

1 Numeric (Int) Integer, Numbers, Digits e.g. Roll No, Employee ID, Account No
2 Text (Char) Characters, Words e.g. First name. Last name, Address etc.
3 Date (Date) Dates (DD/MM/YYYY) e.g. Date of Birth, Joining Date, Expiry
Date etc.
 Data Types are used to store data (Information) in Databases as per its type.

Characteristics of the Information-

a. Relevant – Information should be in context with the user query, if it doesn’t

fulfill requirement of user it is called irrelevant e.g. if user needs current year
exam topper’s list and if information is given about last year’s toppers, it is
called irrelevant information.
b. Complete - Information should be in complete with all details and it should not
be partial. If it misses any part, it may give wrong picture to the user e.g. If
sales figures of entire nation for any company and if information is left about
any state it will give wrong information due to missing data.
c. Timely – Information has a time value; after which it has no importance for the
user. If a person received information about Job interview call after some days,
it will be of no use to him as he already missed interview call.
d. Accurate – Information should be accurate (very much correct and to the
point) and should cover the query in great details and very much true.
e. Accessible – User should be able to access the information as & when he
needs it. If user can’t access information at the right time it has no use / value
of it.
f. Understandable – Information should not be very complicated to understand
by the user. It should be in simple form / language and clear & free from any
ambiguity (confusing and having multiple meanings).
g. Valuable – Information should be valuable to the user / organisation, it should
be exclusive and effective so that user / organisation can remain ahead of all
rivals.

2. Knowledge- Knowledge means facts, information, and skills acquired through

experience or education; the theoretical or practical understanding of a subject.
In simple words, knowledge is the collection of information on various or a single topic
or subject. Knowledge need not be practical or self-experienced, it could have been
obtained or received from sources like print media (books, magazines etc.), electronic
media (TV, Movies etc.), Audio Channels (Radio), Wireless media (Internet,
messengers) or Social Media etc. with / without any practical experience. For example,
when we say we know how to drive car it means we know all the information about car
driving procedure.

3. Database- We are surrounded with the databases and we use databases in our daily
life e.g. Phonebook in mobiles, Bus Numbers, Train Timetable etc. Databases are
even used right from school & colleges where all the details of students, teachers,
teaching staff, non-teaching staff, and office staff are stored in the form of tables in
database.

Database is a collection of the Information (processed data) systematically structured

so that information can be added, updated, deleted or distributed in very easy manner.
Database can be manual (in the form of physical files) or Computerised.
 Database Table

Data in computerised databases are stored in table files. Databases are having
multiple tables which are connected to each other (Relational Data Base Management
System - RDBMS). Table structure of Databases is as shown in above pic. Two key
elements in any table are Columns (Fields) & Rows (Records / Tuples). The data in
each column are of the same type i.e. digits, text or dates (as explained previously in
DATA Types).

Database is very crucial part of any organisation & business management for growth &
retention of profit & earnings.
Introduction to Information Systems (IS) and it’s Major Components
A computer information system is a system composed of people and computers that processes or
interprets information. The term is also sometimes used in more restricted senses to refer to only the
software used to run a computerized database or to refer to only a computer system.

The purpose of an information system is to turn raw data into useful information that can be used for
decision making in an organization.

There are some general types of information systems. For example, a Database Management
System (DBMS) is a combination of software and data that makes it possible to organize and
analyze data. DBMS software is typically not designed to work with a specific organization or a
specific type of analysis. Rather, it is a general-purpose information system. Another example is an
Electronic Spreadsheet. This is a tool for basic data analysis based on formulas that define
relationships among the data. For example, you can use a spreadsheet to calculate averages for a
set of values or to plot the trend of a value over time.

MIS generally integrated & comprises of-

1. DSS – Decision Support System

2. ERP – Enterprise Resource Planning
3. SCM – Supply Chain Management
4. CRM – Customer Relationship Management
5. PM – Project Management
6. EIS – Executive Information System

Types & Levels of Information Systems (IS)

A typical organization has five types of information systems with each supporting a specific
organizational level. These systems include-
1. Transaction Processing Systems (TPS) at the operational level,
2. Office Automation / Office Support Systems (OAS / OSS)
3. Management Information Systems (MIS) and
4. Decision Support Systems (DSS) at the management level and
5. The Executive Support Systems (ESS) at the strategic level.

1. Transaction Processing Systems

Every firm needs to process transactions in order to perform their daily business operations. A
transaction refers to any event or activity that affects the organization. Depending on the
organization’s business, transactions may differ from one organization to another. In a manufacturing
unit, for example, transactions include order entry, receipt of goods, shipping, etc., while in a bank,
transactions include deposits and withdrawals, cashing of cheques etc.

However, some transactions, including placing orders, billing customers, hiring employees, employee
record keeping, etc., are common to all organizations. To support the processing of business
transactions, the transaction processing systems (TPS) are used in the organizations.

2. Office Automation Systems

An office automation / support system (OAS / OSS) is a collection of communication technology,

computers and persons to perform official tasks. It executes office transactions and supports official
activities at every organizational level. These activities can be divided into clerical and managerial
activities.

Clerical activities performed with the help of office automation system include preparing written
communication, typesetting, printing, mailing, scheduling meetings, calendar keeping.etc. Under
managerial activities, office automation system helps in conferencing, creating reports and messages,
and controlling performance of organization. Many applications like word processing, electronic filing
and e-mail are integrated in office automation system.

 Word Processing
Word processing is used for the preparation of documents like letters, reports, memos, or any
type of printable material by electronic means. The text is entered by keyboard and displayed
on the computer’s display unit. This text can be edited, stored, and reproduced with the help
of commands present in the word processor. Word processors have facilities for spell
checking, grammar checking, counting (character, lines, pages, etc.), automatic page
numbering, index creation, header and footer, etc.
 Email
E-mail or electronic mail facilitates the transfer of messages or documents with the help of
computer and communication lines. This helps in speedy delivery of mails and reduces time
and cost of sending a paper mail. E-mail supports not only the transfer of text messages but it
also has options for sending images, audio, video, and many other types of data.
 Voice Mail
Voice mail, an important call service, allows recording and storing of telephone messages into
the computer’s memory. The intended person can retrieve these messages any time.

3. Management Information Systems

Management information systems are especially developed to support planning, controlling, and
decision-making functions of middle managers. A management information system (MIS) extracts
transaction data from underlying TPSs, compiles them, and produces information products in the form
of reports, displays or responses.

These information products provide information that conforms to decision-making needs of managers
and supervisors. Management information systems use simple routines like summaries and
comparisons, which enable managers to take decisions for which the procedure of reaching at a
solution has been specified in advance.

Generally, the format of reports produced by MIS is pre-specified. A typical MIS report is a summary
report, such as a report on the quarterly sales made by each sales representative of the organization.
Another type of management information system report is an; for example, exception report that
specifies the exception conditions the sales made by some sales representative is far below than
expected.

Usually, management information systems are used to produce reports on monthly, quarterly, or
yearly basis. However, if managers want to view the daily or hourly data, MIS enables them to do so.
In addition, they provide managers online access to the current performance as well as past records
of the organization.

4. Decision Support Systems

A decision support system (DSS) is an interactive computer-based information system that, like MIS,
also serves at the management level of an organization. However, in contrast to MIS, it processes
information to support the decision making process of managers. It provides middle managers with
the information that enables them to make intelligent decisions. A decision support system in a bank,
for example, enable a manager to analyze the changing trends in deposits and loans in order to
ascertain the yearly targets.
Decision support systems are designed for every manager to execute a specific managerial task or
problem. Generally, they help managers to make semi-structured decisions, the solution to which can
be arrived at logically. However, sometimes, they can also help in taking complex decisions. To
support such decisions, they use information generated by OASs and TPSs.

Decision support systems have more analytical power as compared to other information systems.
They employ a wide variety of decision models to analyze data or summarize vast amount of data
into a form (usually form of tables or charts) that make the comparison and analysis of data easier for
managers. They provide interactive environment so that the users could work with them directly, add
or change data as per their requirements, and ask new questions.

5. Executive Support / Information Systems (ESS / EIS)

An executive support system (ESS) – an extension of MIS – is a computer based information system
that helps in decision making at the top-level of an organization. The decisions taken with the help of
executive support system are non-routine decisions that affect the entire organization and, thus,
require judgment and sight.

As compared to DSSs, ESSs offer more general computing capabilities, better telecommunications
and efficient display options. They use the advanced graphics software to display the critical
information in the form of charts or graphs that help senior executives to solve a wide range of
problems. To make effective decisions, they use summarized internal data from MIS and DSS as well
as data from external sources about events like new tax laws, new competitors, etc. They filter,
compress, and track data of high importance and make it available to the strategic-level managers.

Executive support systems help to monitor performance, track activities of competitors, identify
opportunities, and forecast trends. They also assist senior managers in answering the following
question:

• What business should we do?

• How are our competitors doing the business?

• Which units can be sold and which new units are to be bought?

ESS gives guideline for taking decisions to executives with a strong backing based on information.

Computer- Based Information System (CBIS)

A computer- based information system, or CBIS, uses computers to collect, process, store, analyze
and distribute information for a specific purpose, such as meeting a business objective.

A computer-based information system (CBIS) is an information system in which the computer plays a
major role. Such a system consists of the following Main components -

• Hardware: The term hardware refers to machinery. This category includes the computer itself,
which is often referred to as the central processing unit (CPU), and all of its support equipment.
Among the support equipment are input and output devices, storage devices and communications
devices.
• Software: The term software refers to computer programs and the manuals (if any) that support
them. Computer programs are machine-readable instructions that direct the circuitry within the
hardware parts of the CBIS to function in ways that produce useful information from data. Programs
are generally stored on some input / output medium-often a disk or tape.

• Data: Data are facts that are used by program to produce useful information. Like programs, data
are generally stored in machine-readable from on disk or tape until the computer needs them.

• Procedures: procedures are the policies that govern the operation of a computer system.
"Procedures are to people what software is to hardware" is a common analogy that is used to
illustrate the role of procedures in a CBIS.

• People: Every CBIS needs people if it is to be useful. Often the most over-looked element of the
CBIS is the people: probably the components that most influence the success or failure of information
system.

Types of MIS
1. Executive Information Systems (ESS / EIS) Explained above previously.
2. Office Automation Systems
3. Knowledge based System’
4. Expert System

3. Knowledge based Systems-

A Knowledge based Work System (KWS) is a specialized system built to promote the creation of
knowledge and to make sure that knowledge and technical skills are proper integrated into business.
It helps the knowledge workers in creating and propagating new information and knowledge by
providing them the graphics, analytical, communications, and document management tools.
The knowledge workers also need to search for knowledge outside the organization.
Thus, knowledge work system must give easy access to external databases. In addition, knowledge
work systems should have user-friendly interface to help users to get the required information quickly
and easily.
Some examples of knowledge work systems are computer-aided design (CAD) systems, virtual
reality systems, and financial workstations.

 Computer-aided design (CAD) systems: These systems are used for automating the
creation and revision of designs using computers and graphics software. The CAD software
has the capability to provide design specifications for tooling and manufacturing process. This
saves much time and money while making a manufacturing process.
 Virtual Reality System: These systems have more capabilities than CAD systems for
visualization, rendering and simulation. They make use of interactive graphics software to
build computer-generated simulations, which almost look like real. They can be used in
educational, scientific and business work.
 Financial Workstations: They are used to combine a wide range of data from internal as well
as external sources. This data includes contact management data, market data and research
reports. Financial workstations help in analysing trading situations and large amount of
financial data within no time. It is also used for portfolio management.
4. Expert System-

It is an Artificial Intelligence Program that has Expert-Level Knowledge about a particular subject
and knows how to use its knowledge to respond properly. Expert system is made to think like human
brain and to get best solution for the given task, lots of knowledge is incorporated in expert system.
Expert systems are developed to replace human experts to handle the situations.

Expert systems typically consist of three parts:

(1) A Knowledge Base, which contains the information acquired by interviewing experts, and logic
rules that govern how that information is applied;
(2) An Inference Engine that interprets the submitted problem against the rules and logic of
information stored in the knowledge base; and
(3) Interface that allows the user to express the problem in a human language such as English.

Purpose, Need and Objectives of MIS –

MIS is of vital importance to any organization, because: It emphasizes on the management decision
making, not only processing of data generated by business operations. It emphasizes on the systems
framework that should be used for organizing information systems applications.

Purpose of a MIS –
Business owners and operators routinely make decisions that determine the success or failure of a
business enterprise. Effective decision making requires accurate, timely and useful information.
The purpose of management information systems, including Decision Support Systems, is to guide
the decision-making process. Specifically, MIS combines people, computer hardware, software and
communication devices to collect, store and convert raw data into useful information, which
subsequently is communicated to the right people precisely when needed.

There are three types of business decisions according to their hierarchical position within a company:
 Strategic: Unstructured decisions based almost entirely on judgment without the benefit of
known or definitive outcomes. Its Top Level management activity.
 Tactical: Semi-structured decisions that require some judgment but also have some
agreement on solution methods and outcomes. Its Middle Level management activity.
 Operational: Repeated, structured decisions for routine tasks involving daily company
operations. Its Lower Level management activity.
MIS is commonly used as the umbrella term to include systems that support all three types of
business decisions.

Need for MIS –

Managers make decisions. Decision-making generally takes a four-fold path:
 Understanding the need for decision or the opportunity,
 Preparing alternative course of actions,
 Evaluating all alternative course of actions,
 Deciding the right path for implementation.
MIS provides information in the form of standardized reports and displays for the managers. MIS is a
broad class of information systems designed to provide information needed for effective decision
making.
Data and information created from an accounting information system and the reports generated
thereon are used to provide accurate, timely and relevant information needed for effective decision
making by managers.
Management information systems provide information to support management decision making, with
the following goals:
 Pre-specified and pre-planned reporting to managers.
  Interactive and ad-hoc support for decision making.
 Critical information for top management.

Objectives of MIS –
The following are the objectives of a management information system:
1. MIS is very useful for efficient and effective planning and control functions of the management.
Management is the art of getting things done through others. MIS will be instrumental in getting
the things done by providing quick and timely information to the management.

2. Reports give an idea about the performance of men, materials, machinery, money and
management (resources). Reports throw light on the utilisation of resources employed in the
organisation.

3. MIS is helpful in controlling costs by giving information about idle time, labour turnover, wastages
and losses and surplus capacity.

4. By making comparison of actual performance with the standard and budgeted performance,
variances are brought to the notice of the management by MIS which can be corrected by taking
remedial steps.

5. MIS brings to the notice of the management strength (i.e., strong points) of the organisation, to
take advantage of the opportunities available. It also helps for SWOT / SWOC analysis.

6. MIS reports on production statistics regarding rejection, defective and wastage and their effect on
costs and quality of the products.

Applications of Information at various levels of management –

Internal Information (Company’s internal information)

Management Level Data / Information Application

Operational level  Employee Benefit Program  Internal & External Reports
(Lower)
 Compensation Program  Record of Employee
 Insurance Program  Estimate of Productivity
 Statistics & Position Description  Monitoring Healthcare
Functional Level  Employee Data & Their  Recruitment
(Middle) Experience
 Evaluation of Experience  Assignment of Employees
 Employee Skills Systemisation  Promotion of Employees
 Level of Compliance with
the Objectives
Strategic Level (Top)  Economic Trends  Training Projects
 Economic Forecasts  Planning of Employees
 Forecast of Labour force demand  Investment for Pension
Funds

External Information (Market / Business Intelligence)

Management Level Data / Information Application

Operational level  Industry Standards for all  Comparative Reports
(Lower) benefits Insurance &
 compensation etc.
 Comparison Data of rival
organisation for routine & day to
day basis
 Statistical Data of Industry
standards of wages, salary &
perks rates of rivals
Functional Level  How rivals / industry manages
(Middle) their day to day operations
 What new policy they adopts
 What are SWOT of rivals
 What are self-SWOT
Strategic Level  New Business Plans / Ideas
(Top)
 Government Policies Forecast
 Technical trends
 PESTEL Studies & its impacts
PESTEL Study for MIS Consideration at TOP Management Level –
 Reports indicating Pro-Cons
of system comparison & its
cost effectiveness

 Comparative Reports
 Policy formation /
modification recommendation
 Business plan suggestions
 Remedial measures
 Strategic Planning
 Development / Diversification
 Merger & Acquisitions
decisions
 CSR Implementations