MANAGEMENT INFORMATION SYSTEM

UNIT I CONCEPTUAL FOUNDATIONS

Introduction to Systems - Basic Systems Concepts - Elements of
System-Characteristics of System-Types of Systems- System Approach to Problem
Solving- Information Systems- Definition & Characteristics- Types of Information-
Role of Information in Decision Making.
1. Introduction to Systems & Basic Systems
Concepts
Management Information System is an implementation of the organizational
systems and procedures. To a programmer it is nothing but file structures and
file processing. However, it involves much more complexity.
The three components of MIS provide a more complete and focused definition,
where System suggests integration and holistic view, Information stands for
processed data, and Management is the ultimate user, the decision makers.
Management information system can thus be analyzed as follows −

Management
Management covers the planning, control, and administration of the operations
of a concern. The top management handles planning; the middle management
concentrates on controlling; and the lower management is concerned with actual
administration.

Information
Information, in MIS, means the processed data that helps the management in
planning, controlling and operations. Data means all the facts arising out of the
operations of the concern. Data is processed i.e. recorded, summarized,
compared and finally presented to the management in the form of MIS report.

System
Data is processed into information with the help of a system. A system is made
up of inputs, processing, output and feedback or control.
Thus MIS means a system for processing data in order to give proper
information to the management for performing its functions.
Definition
Management Information System or 'MIS' is a planned system of collecting,
storing, and disseminating data in the form of information needed to carry out
the functions of management.

Objectives of MIS
The goals of an MIS are to implement the organizational structure and dynamics of the
enterprise for the purpose of managing the organization in a better way and capturing the
potential of the information system for competitive advantage.
Following are the basic objectives of an MIS −
● Capturing Data − Capturing contextual data, or operational information
that will contribute in decision making from various internal and external
sources of organization.
● Processing Data − The captured data is processed into information
needed for planning, organizing, coordinating, directing and controlling
functionalities at strategic, tactical and operational level. Processing data
means −
o making calculations with the data
o sorting data
o classifying data and
o summarizing data
● Information Storage − Information or processed data need to be stored
for future use.
● Information Retrieval − The system should be able to retrieve this
information from the storage as and when required by various users.
● Information Propagation − Information or the finished product of the
MIS should be circulated to its users periodically using the organizational
network.

2. Elements of Systems
Elements of a System :
o Outputs and inputs
o Processor
o Control
o feedback
o Environment
o Boundaries And Interface.
Outputs and inputs : The major objective of the system is to produce an
outputs that has value to its user. Inputs are the elements that enter the system
for processing the inputs, the outcome of processing. Output is the result of
processing. A system feeds on inputs to produce output in the much same way
that a business brings a human, financial, and material resources to produce
goods and service.

Processor(s) : The processor is the element of a system that involves the actual
transformation of input into output. It is the operational component of a system.
processor may modify the input totally or partially, depending on a specification
of the output. This means that as the output specifications change, so does the
processing.

Control : The control element guides the system, It is the decision-making

subsystem that controls the pattern of activities governing input, processing and
input.

Feedback : Control in a dynamic system is achieved by feedback. Feedback

measures output against a standard in some form of cybernetic procedure that
includes communication and control. The output information is fed back to the
input and/or to management for deliberation. After the output is compared
against performance standards, changes can result in the input or processing and
consequently, the output. Feedback may be positive or negative, routine or
informational.

Environment : The environment is the “suprasystem” within which an

organization operates. It determines how a system should work. A system
cannot exist in isolation. The system is covered by the environment with a
boundary in between the two.

Boundaries and interface : A system should be defined by its boundaries- the

limit that identify its components, process, and interrelationships when it
interfaces with another system. Each system has boundaries that determine its
sphere of influence and control.
 3. Characteristics of System
1. System approach:
MIS follows the system approach, which implies a step by step approach to the
study of system and its performance in the light of the objective for which it has
been constituted. It means taking an inclusive view at sub-systems to operate
within an organization.
2. Management-oriented:
The management-oriented characteristic of MIS implies that top-down approach
needs to be followed for designing MIS. A top-down method says the initiation
of system development determines management requirements as well as
business goals. MIS implies the management dynamically to the system
development towards the completion of management decision.
3. As per requirements:
The design and development of MIS should be as per the information required
by the managers. The required design and development information is at
different levels, viz., strategic planning, management control and operational
control. It means MIS should cater to the specific needs of managers in the
hierarchy of an organization.
4. Future-oriented:
The design and development of MIS should also be future purpose so that the
system is not restricted to provide only the past information.
5. Integrated:
A complete MIS is a combination of its multiple sub-components to provide the
relevant information to take out a useful decision. An integrated system, which
blends information from several operational areas, is a necessary characteristic
of MIS.
6. Common data flows:
This concept supports numerous basic views of system analysis such as
avoiding duplication, combining similar functions and simplifying operations.
The expansion of common data flow is a cost-effectively and logical concept.
7. Long-term planning:
MIS should always develop as a long term planning because it involves logical
planning to get success of an organization. While developing MIS, the analyst
should keep future oriented analysis and needs of the company in mind.
8. Relevant connection of sub-system planning:
The MIS development should be decomposing into its related sub-systems.
These sub-systems must be meaningful with proper planning.
Central database:

It contains data in tabular form. The data base is responsible to operations like
insertion, deletion, updation of records. This database covers information related to
inventory, personnel, vendors, customers, etc. the data stored in the database.

4. Types of Systems
6 Types of Information Systems
Most businesses utilize six different information technology systems, each with functionality
that assists in managing a particular business unit or organizational level.

Because the business environment has a wide range of data requirements, business
intelligence technology systems help each department manage and organize all of their data
in a manner that helps unit members meet key objectives.

If the data collected by an IS is relevant and accurate, the organization can use it to streamline
tasks, pinpoint inefficiencies, and enhance customer service.

Successful companies typically employ six different systems to ensure that every aspect of
the organization's data is properly managed and used to improve decision-making and
problem-solving.

This allows a company to maintain a competitive edge, find growth opportunities, and keep
an accurate audit trail of financial and transactional data for compliance purposes.
Here is an overview of the six types of information systems and how they work-

1. Transaction Processing Systems

A transaction encompasses all of the purchases and sales of products and services,
along with any daily business transactions or activities required to operate a company.

Quantities and the types of transactions performed vary, depending on the industry and
size/scope of the company. Examples of typical transactions include billing clients, bank
deposits, new hire data, inventory counts, or a record of client-customer relationship
management data.

A transaction processing system ensures that all of the contractual, transactional, and
customer relationship data is stored in a safe location and accessible to everyone who needs
it. It also assists in the processing of sales order entries, payroll, shipping, sales management,
or other routine transactions needed to maintain operations.

By utilizing a TPS, organizations can have a high level of reliability and accuracy in their
user/customer data while minimizing the potential for human error.
2. Office Automation Systems
An office automation system is a network of various tools, technologies, and people required
to conduct clerical and managerial tasks.

Typical examples of functions performed by an OAS include printing documents, mailing

paperwork, mailing, maintaining a company calendar, and producing reports. Primarily, an
office automation system assists in enhancing communication among different departments
so everyone can collaborate to complete a task.

An OAS can integrate with e-mail or word processing applications to ensure all
communication data is easily accessible and in one centralized location. By utilizing an office
automation system, businesses can improve communication between workers, streamline
managerial activities, and optimize knowledge management.

3. Knowledge Management Systems

A knowledge management system stores and extracts information to help users enhance their
knowledge and optimize collaboration efforts to complete tasks. Examples of documents
found in a knowledge management system include employee training materials, company
policies, and procedures, or answers to customer questions.

A KMS is used by employees, customers, management, and other various stakeholders

involved with the organization. It ensures that technical abilities are integrated throughout the
company while providing visuals to help employees make sense of the data they see.

This information system also provides intuitive access to external information required by
workers who need outside knowledge to complete their roles. For example, a KMS may hold
competitor data that helps a sales team member optimize his/her strategy when pitching to a
customer.

Because a KMS shares expertise and provides answers to essential questions, using one can
improve communication among team members and assist everyone in meeting performance
goals.

4. Management Information Systems

A management information system uses various transaction data from a TPS to help middle
management optimize planning and decision-making.

It retrieves TPS information, aggregates it, and generates reports to help those at the
management level know important details of a situation. Summaries and comparisons are
utilized to allow senior managers to optimize the decision making process to achieve better
results.

Most of the report formats encompass summaries of annual sales data, performance data, or
historical records. This provides a secure and systemized way for managers to meet their
targets and oversee business units.
 5. Decision Support Systems
A decision support system processes data to assist in management decision-making. It stores
and gathers the information required for management to take the proper actions at the correct
time. For example, a bank manager can use a DSS to assess the evolving loan trends to
determine which yearly loan targets to meet.

Decision models are programmed into the IS to analyze and summarize large quantities of
information and put it into a visual that makes it understandable.

Because a DSS is interactive, management can easily add or delete data and ask important
questions. This provides the evidence required for mid-management to make the right choices
that will ensure the company meets its targets.

6. Executive Support System

Executive support systems are similar to a DSS but are primarily used by executive leaders
and owners to optimize decision-making.

An expert system helps enterprise leaders find answers to non-routine questions so they can
make choices that improve the company's outlook and performance. Unlike a DSS, an
executive support system provides better telecommunication functionality and a bigger
computing functionality.

Graphics software is integrated within an ESS to display data about tax regulations, new
competitive startups, internal compliance issues, and other relevant executive information.
This allows leaders to track internal performance, monitor the competition, and pinpoint
growth opportunities.

5. System Approach to Problem Solving

Systems approach is widely used in problem solving in different contexts.
Researchers in the field of science and technology have used it for quite some time
now. Business problems can also be analyzed and solved using this approach. The
following steps are required for this:
● Defining the Problem
● Simplifying a System or Applying Systems Approach For Problem Solving

Defining the Problem

This is the step when the problem has to be defined. Sometimes one may confuse the
symptoms or the exhibition of a behavior to be a problem but actually it may only be
a symptom of a larger malaise. It may just exhibit the behavior of a larger
phenomenon. It is vital to drill deep into an issue and clearly understand the problem
rather than having a superficial understanding of the problem. One must appreciate
that this in the initial stage of problem solving and if the problem itself is not
correctly diagnosed then the solution will obviously be wrong.
Systems approach is therefore used to understand the problem in granular detail to
establish requirement and objectives in-depth. By using the systems approach the
problem will be analyzed in its totality with inherent elements and their
interrelationships and therefore this detailed analysis will bring out the actual
problem and separate out the symptom from it.
Developing Alternative Solutions

This the logical next step in the systems approaches for problem solving. In this stage
alternative solutions are generated. This requires creativity and innovation. In this
stage-the analyst uses creativity to come up with possible solutions to the problem.
Typically in this stage only the outline of solutions are generated rather than the
actual solutions.
Selecting a Solution

In this step, the solution that suits the requirement and objectives in the most
comprehensive manner is selected as the ‘best’ solution. This is done after evaluating
all the possible solutions and then comparing the possible set of solutions to find the
most suitable solution lot of mathematical, financial and technical models is used to
select the most appropriate solution.
Designing the Solution

Once the most appropriate solution is chosen, it is then made into a design document
to give it the shape of an actionable solution, as in the evaluation stage, only the
outline of the solution is used. At this stage the details of the solution are worked out
to create the blueprint for the solution. Several design diagrams are used to prepare
the design document. At this stage the requirement specifications are again compared
with the solution design to double check the suitability of the solution for the
problem.
Implementing the Solution

It is the next step in the process. The solution that has been designed is implemented
as per the specifications -laid down in the design document. During implementation
care is taken to ensure that there are no deviations from the design.
Reviewing the Solution

This is the final step in the problem solving process where the review of the impact
of the solution is noted. This is a stage for finding out if the desired result has been
achieved that was set out.
A Systems Approach Example

Let us assume that A is the coach of the Indian cricket team. Let us also assume that
the objective that A has been entrusted with is to secure a win over the touring
Australian cricket team. The coach uses a systems approach to attain this objective.
He starts by gathering information about his own team.
Through systems approach he views his own Indian team as a system whose
environment would include the other team in the competition, umpires, regulators,
crowd and media. His system, i.e., team itself maybe conceptualized as having two
subsystems, i.e., players and supporting staff for players. Each subsystem would have
its own set of components/entities like the player subsystem will have openers,
middle order batsmen, fast bowlers, wicket keeper, etc. The supporting staff
subsystem would include bowling coach, batting coach, physiotherapist,
psychologist, etc. All these entities would indeed have a bearing on the actual
outcome of the game. The coach adopts a systems approach to determine the playing
strategy that he will adopt to ensure that the Indian side wins. He analyses the issue in
a stepwise manner as given below:
Step 1: Defining the problem-In this stage the coach tries to understand the past
performance of his team and that of the other team in the competition. His objective
is to defeat the competing team. He realizes that the problem he faces is that of losing
the game. This is his main problem.
Step 2: Collecting data-The coach employs his supporting staff to gather data on the
skills and physical condition of the players in the competing team by analyzing past
performance data, viewing television footage of previous games, making
psychological profiles of each player. The support staff analyses the data and comes
up with the following observations:

▪ Both teams use an aggressive strategy during the period of power play. The
competing Australian team uses the opening players to spearhead this attack.
However, recently the openers have had a personal fight and are facing
interpersonal problems.
▪ The game is being played in Mumbai and the local crowd support is estimated to
be of some value amounting to around fifty runs. Also the crowd has come to
watch the Indian team win. A loss here would cost the team in terms of morale.
▪ The umpires are neutral and are not intimidated by large crowd support but are
lenient towards sledging.

Step 3: Identifying alternatives-Based on the collected data the coach generates the
following alternate strategies:

▪ Play upon the minds of the opening players of the competitors by highlighting
their personal differences using sledging alone.
 ▪ Employ defensive tactics during power play when the openers are most
aggressive and not using sledging.
▪ Keep close in fielders who would sledge and employ the best attacking bowlers
of the Indian team during the power play.

Step 4: Evaluating alternatives-After having generated different alternatives, the

coach has to select only one. The first alternative may lead to loss of concentration on
the part of openers and result in breakthroughs. However, there is a chance that the
interpersonal differences between the two openers may have already been resolved
before they come to the field and in such a case this strategy will fail. The second
strategy provides a safer option in the sense that it will neutralize the aggressive
game of the openers but there is limited chance of getting breakthroughs. The third
option of employing aggressive close in fielders to play upon the internal personal
differences of the openers and at the same time employing the best bowlers may lead
to breakthroughs and may also restrict the aggressive openers.
Step 5: Selecting the best alternative-The coach selects the third alternative as it
provides him with the opportunity of neutralizing the aggressive playing strategy of
the openers as well as increases the chances of getting breakthrough wickets.
Step 6: Implementing and monitoring-The coach communicates his strategy to his
players and support staff, instructs support staff to organize mock sessions and tactics
to be employed to make the strategy a success. The players and support staff
performance is monitored by the coach on a regular basis to ensure that the strategy is
employed perfectly.
Simplifying a System or Applying Systems Approach For Problem Solving

The easiest way to simplify a system for better understanding is to follow a two-stage
approach.
Partitioning the System into Black Boxes

This is the first stage of the simplification process, in this stage the system is
partitioned into black boxes. Black boxes need limited knowledge to be constructed.
To construct a black box one needs to know the input that goes into it, the output that
comes out of it and its function. The knowledge of how the functionality is achieved
is not required for constructing a black box. Black box partitioning helps in the
comprehension of the system, as the entire system gets broken down into granular
functionalities of a set of black boxes.
Organizing the Black Boxes into Hierarchies

This is the second stage of the simplification process, in this stage the black boxes
constructed in the earlier phase are organized into hierarchies so that the relationships
among the black boxes is easily established. Once, a hierarchy of the black boxes is
established, the system becomes easier to understand as the internal working of the
system becomes clearer.
6. Information Systems- Definition &
Characteristics
"Information system is set of people, information technology, and business process in
order to achieve a business objective."
Information systems are a set of interconnected elements working together to collect, process,
store, and distribute information to help coordination, visualization in an organization,
analysis, and decision-making.
The Information system can be defined as a collection of software, hardware,
and telecommunications network that people develop and use to gather,
create, and distribute useful data, mainly in organizational settings.
In other words, an information system means a collection of interrelated components which
work together to gather, process, store, and break down the information to help decision
making.

Dimensions of an information system

There are various dimensions of an information system:

1. Organizational dimension
2. Management dimension
3. Technology dimension

Let's discuss the above dimensions in detail:

1. Organizational Dimension
The information system is the organization's part. The ordinary operating
procedure and culture of an organization would be embedded in the information
system. This includes the following:
o Business processes
o Political interest groups
 o Functional specialties
o Cultured

2. Management Dimension
In today's world, managers face business challenges. Information systems
provide managers with the tools and information they have to plan, manage,
monitor their work, make decisions, develop new goods and services, and make
long-term tactical decisions.
3. Technology Dimension
Management makes use of technology to fulfill their duties. It contains-
computer hardware and software, networking/telecom technology, and data
management. It's one of the many strategies a manager can use to deal with
changes. Organizational levels, processing, system goals, mode of data and type
of support provided are used to classify information systems.

Characteristics
● In information system is based on long-term planning.
● It provides a holistic view of the dynamics and the structure of the
organization.
● It works as a complete and comprehensive system covering all
interconnecting sub-systems within the organization.
● It is planned in a top-down way, as the decision makers or the
management take part and provides a clear direction at the development
stage of the information system.
● It is based on a need for strategic, operation and tactical information of
managers of an organization.
● It is capable of making forecasts and estimates and generating advanced
information. Thus it provides a competitive advantage. Decision makers
can take actions on the basis of such a prediction.
● It creates a linkage between all sub-systems within the organization, so
that the decision makers can take the right decision based on an integrated
view.
● It allows an easy flow of information through various sub-systems,
thereby avoiding redundancy and duplicity of data.
● A central database is the backbone of a well-built information system. It
is capable of processing data accurately and with high speed, using
various techniques like operations research, simulation, heuristics, etc.
● It provides flexibility in data storage and retrieval.
● It collects, organizes, manipulates, and updates a large amount of raw
data of both related and unrelated nature, coming from various internal
and external sources at different periods of time.
 ● It provides organized and relevant information for all levels of
management: strategic, operational, and tactical.

7. Types of Information System

The types of information systems are as follows:

1. Transaction Processing System (TPS):

o The term "transaction processing system" refers to an information system
that processes data are originating from business transactions.
o The primary purpose of a transaction processing system is to offer
transactions to update records and produce reports required for
storekeeping.
o Online Transaction Processing and Batching Processing are the methods
which we used to complete the transaction.
o Examples of transaction processing systems are Stock control systems,
Payroll systems, Bill systems.

2. Management Information System (MIS):

o The purpose of a management information system is to transform
comparatively raw data accessible through using Transaction Processing
System into a summarized and aggregated form for managers, generally
in the form of a report. Operational supervisors and middle management
are likely to use the reports.
o In MIS, there are various kinds of reports generated. Few reports are a
kind of summary report, ad-hoc reports, exception report, and on-demand
report.
o Examples of Management Information System are Human resource
management system and Sales management systems.
3. Decision Support System (DSS)
o Another type of information system is a decision support system. It is
interactive, which offers information, data manipulation tools, and models
to support decision-making in a semi-structured and unstructured
scenario.
o This type of information system includes tools and techniques to help
gather relevant information and examine options, and substitutes, the
end-user being more elaborate in making DSS than MIS.
o Examples of Decision Support System: Bank loan management systems,
financial planning systems.

4. Experts System
o The expert system contains expertise which is helpful for a manager
in identifying problems or in problem-solving. The principles of artificial
intelligence research are used to develop these kinds of information
systems.
o This type of information system is a knowledge-based system. It acts as
an expert consultant to users by utilizing its knowledge of a specific area.
o There are some components of expert systems such as Knowledgebase
and software modules. These modules make inferences based on
knowledge and provide answers to a user's query.

Components of Information System

There are various components of an information system:

1. Hardware
2. Software
3. Data
4. Procedures
5. People
6. Feedback

8. Role of Information in Decision Making.

o Information plays a vital role in decision-making. Even to take very
simple decisions, we need information. To understand the role played by
information in decision-making, we have to understand how decisions are
taken. Decision-making is basically a process that includes the following
stages:
o Information is thus, very important to take decisions.
o Imagine a simple decision like the one a driver (say) makes when he puts
on the brakes to stop a speeding vehicle when he sees a child crossing the
road (in middle of the road). The driver decides on braking based on a lot
of information processing that happens in his brain. At every stage of the
decision-making he uses information that he captures visually. All
decisions are like this.
o First we get information about a problem, format it into a structure and
then factor in the information about the context in which the problem has
occurred. Like in the above case instead of the child being at the middle
of the road and crossing it, the driver would have seen the child about to
cross over with a few steps only he would probably not have braked to
stop but would have slowed down, as he would have calculated that by
the time the vehicle reaches the crossing stage, the child would already
have passed. So if the problem was structured as ‘how to not hit the child
crossing the road?’, and if the child was at the middle of the road, the
driver would have braked but had the child been at (say) at ninety per
cent completion level of crossing the road, the driver would have only
slowed down and not braked to stop.

o Therefore, we see that the context has a major role in the decision-making
and information is required both about the problem and about the context
in which the problem occurred. The next stage for the decision maker
would be to generate alternatives. In the driver’s case such possible
alternatives would be
o
o to stop by braking
o to slow down
o to take a sharp turn towards left or right to avoid the child
o press the horn so that the child crosses the road fast
o To drive the vehicle on to the footpath and out of the road to avoid
collision, etc.
So the decision-maker generates these possible solutions to the problem at hand
based on information about such possible solutions. Each of the alternatives
represents a possible solution, which one can generate if one has information
about them. In the case of the driver, obviously, he needs knowledge and
information to generate these alternatives, i.e., to stop by breaking the driver
would need to know that braking stops the vehicle.

If he is unaware of this crucial information he would not have been able to

generate this alternative. So information is vital for generation of alternatives.
Now for the choice part also, the decision maker needs to have information
about the suitability of each alternative to decide, which the ‘best’ is. In our
example, the driver calculates the ‘payoff’ for each alternative based on his
calculation of the outcome that again is based on information.

He selects the ‘best’ option that solves the problem. Thus, we can see that
information is the key to the decision making process, without information and
the right kind of information decision-making is not possible. Information
plays a crucial role in every stage of the decision-making process.

Decision-making is the most important task of managers in an organization.

Therefore, to enable managers to take good quality decisions, it is very
important to provide them with the right kind of information.

Information management in organizations therefore assumes a special

significance. In most organizations, business or otherwise, a systematic systems
based method is used for information management. Systems based information
management works best under a computerized environment and
such computer based information management system is normally
called‘Management Information Systems (MIS)’, which provides the service of
information supply to the managers enabling them to take informed decisions.

It may be worthwhile to mention here that MIS does not necessitates the use
of computer based technology, but the use of computers and information
technology makes MIS suitable for business organizations in a competitive
environment as it helps to provide timely and accurate information. MIS done
manually, without the help of computers is neither timely nor accurate.