Chapter 1 Introduction to MIS

Chapter 1 1

IntroductionIntroduction

Anil Tatti aniltatti [at] simca [dot] ac [dot] in Send mail – will reply within 24 hours Walk In Any time – You are Welcome If holiday- make it up in next week / available time slot Copy – Fail

Chapter 1 2

Why Do People Need Information?

Individuals - Entertainment and enlightenment

Businesses - Decision making, problem solving and control

Information SystemsInformation Systems

Chapter 1 3

Data, Information, and SystemsData, Information, and Systems

Data vs. Information

Data A “given,” or fact; a number, a statement, or a picture Represents something in the real world The raw materials in the production of information

Information Data that have meaning within a context Data in relationships Data after manipulation

Chapter 1 4


Data Manipulation

Example: customer survey Reading through data collected from a customer survey with

questions in various categories would be time-consuming and not very helpful.

When manipulated, the surveys may provide useful information.

Chapter 1 7


What Is a System? System: A set of components that work together to achieve a

common goal

Subsystem: One part of a system where the products of more than one system are combined to reach an ultimate goal

Closed system: Stand-alone system that has no contact with other systems

Open system: System that interfaces with other systems

Chapter 1 9


Information and Managers

Systems thinking Creates a framework for problem solving and decision

making. Keeps managers focused on overall goals and operations of

business.

Chapter 1 11


The Benefits of Human-Computer Synergy

Synergy When combined resources produce output that exceeds the

sum of the outputs of the same resources employed separately

Allows human thought to be translated into efficient processing of large amounts of data

Chapter 1 13


The Four Stages of Data Processing

Input: Data is collected and entered into computer.

Data processing: Data is manipulated into information using mathematical, statistical, and other tools.

Output: Information is displayed or presented.

Storage: Data and information are maintained for later use.

Chapter 1 14

Why Study IS?Why Study IS?

Information Systems Careers Systems analyst, specialist in enterprise resource planning (ERP),

database administrator, telecommunications specialist, consulting, etc.

Knowledge Workers Managers and non-managers Employers seek computer-literate professionals who know how to use

information technology.

Computer Literacy Replacing Traditional Literacy Key to full participation in western society

Chapter 1 15

Ethical and Societal IssuesEthical and Societal IssuesThe Not-So-Bright SideThe Not-So-Bright Side

Consumer Privacy Organizations collect (and sometimes sell) huge

amounts of data on individuals.

Employee Privacy IT supports remote monitoring of employees, violating

privacy and creating stress.

Chapter 1 16

Ethical and Societal IssuesEthical and Societal IssuesThe Not-So-Bright SideThe Not-So-Bright Side

Freedom of Speech IT increases opportunities for pornography, hate speech, intellectual

property crime, an d other intrusions; prevention may abridge free speech.

IT Professionalism No mandatory or enforced code of ethics for IT professionals--unlike

other professions.

Social Inequality Less than 20% of the world’s population have ever used a PC; less than

3% have Internet access.

Chapter 1 18

Management Information – Related SubsystemsManagement Information – Related Subsystems

Information Technology (IT) is any computer based tool that people use to work with

information and support the information-processing needs of an organisation.

Includes Hardware, Software, Communications, networks, production automation, etc

Any ‘Kit’ concerned with the capture, storage, transmission, and presentation of information

Chapter 1 20

Pioneers of Traditional / Scientific Management

5 Key Functions of Management

- To Plan- To Organise- To Command- To Co-ordinate- To Control

• Principles for Organisational Structure

- Unity of Command

- Small Spans of Control

- Line or Chain of Command

- Division of Work - specialism

- Delegate Authority & Retain Responsibility

Chapter 1 21

Modern Criticisms of Classical ManagementModern Criticisms of Classical Management

Inhuman working conditions and poor industrial relations

Over-specialisation and restrictive work practices

Bureaucratic organisational structures – long chains of command

Inward- looking organisational structures

Closed Systems – run out of steam when not conscious of environmental influences

Chapter 1 22

The Matrix ManagementThe Matrix Management

• Project Focussed• Multi-disciplinary teams• Team members have more than one

boss• Project team disbanded when

project completes• New project team for new project• Gives team members an insight into

the workings of other departments• Leadership training ground• Allows people with ideas to carry

them forward • May cause blurring of

communication lines

Chapter 1 25

Business TrendsBusiness Trends

Changing business environment Specialization Management by Methodology and Franchises Mergers Decentralization and Small Business Temporary Workers Internationalization Service-Oriented Business Re-engineering Recession

Need for faster responses and flexibility

MIS reflecting these requirements -

Chapter 1 26

Business Trends & ImplicationsBusiness Trends & Implications Specialisation

Increased demand for technical skills Specialized MIS tools Increased communication

Methodology & Franchises Reduction of middle management Increased data sharing Increased analysis by top management Computer support for rules Re-engineering

Mergers Larger companies Need for control and information Economies of scale

Decentralization & Small Business Communication needs Lower cost of management tasks Low maintenance technology

Chapter 1 27

Business Trends & ImplicationsBusiness Trends & Implications

Temporary Workers Managing through rules Finding and evaluating workers Coordination and control Personal advancement through technology Security

Internationalization Communication Product design System development and programming Sales and marketing

Service Orientation Management jobs are information jobs Customer service requires better information Speed

Chapter 1 28

Management Information Systems (MIS)Management Information Systems (MIS)

Management information system (MIS) An MIS provides managers with information and support for

effective decision making, and provides feedback on daily operations Output, or reports, are usually generated through accumulation of

transaction processing data Each MIS is an integrated collection of subsystems, which are

typically organized along functional lines within an organization

Chapter 1 29

Outputs of a Outputs of a Management Information SystemManagement Information System

Scheduled reports Produced periodically, or on a schedule (daily, weekly, monthly)

Key-indicator report Summarizes the previous day’s critical activities Typically available at the beginning of each day

Demand report Gives certain information at a manager’s request

Exception report Automatically produced when a situation is unusual or requires management

action

Chapter 1 30

Scheduled Report ExampleScheduled Report Example

Daily Sales Detail ReportPrepared: 08/10/xx

Order#

CustomerID

Sales Rep ID

ShipDate Quantity Item # Amount

P12453 C89321 CAR 08/12/96 144 P1234 $3,214

P12453 C89321 CAR 08/12/96 288 P3214 $5,660

P12453 C03214 GWA 08/13/96 12 P4902 $1,224

P12455 C52313 SAK 08/12/96 24 P4012 $2,448

P12456 C34123 JMW 08J/13/96 144 P3214 $720

Chapter 1 31

Key Indicator Report ExampleKey Indicator Report Example

Daily Sales Key Indicator Report

ThisMonth

LastMonth

LastYear

Total Orders Month to Date $1,808 $1,694 $1,014

Forecasted Sales for the Month $2,406 $2,224 $2,608

Chapter 1 32

Demand Report ExampleDemand Report Example

Daily Sales by Sales Rep Summary ReportPrepared: 08/10/xx

Sales Rep ID Amount

CAR $42,345

GWA $38,950

SAK $22,100

JWN $12,350

Chapter 1 33

Exception Report ExampleException Report Example

Daily Sales Exception Report – ORDERS OVER $10,000Prepared: 08/10/xx

Order#

CustomerID

Sales Rep ID

ShipDate Quantity Item # Amount

P12453 C89321 CAR 08/12/96 144 P1234 $13,214

P12453 C89321 CAR 08/12/96 288 P3214 $15,660

P12453 C03214 GWA 08/13/96 12 P4902 $11,224

… … … … … … …

… … … … … … …

Chapter 1 34

Outputs of a Management Outputs of a Management Information SystemInformation System

Earnings by Quarter (Millions)

Actual Forecast Variance

2ND Qtr 1999 $12.6 $11.8 6.8%

1st Qtr 1999 $10.8 $10.7 0.9%

4th Qtr 1998 $14.3 $14.5 -1.4%

3rd Qtr 1998 $12.8 $13.3 -3.0%

Etc. See Figure 9.2

Drill Down ReportsProvide detailed data about a situation.

Chapter 1 35

Characteristics of a Management Characteristics of a Management Information SystemInformation System

Provides reports with fixed and standard formats Hard-copy and soft-copy reports

Uses internal data stored in the computer system End users can develop custom reports Requires formal requests from users

Chapter 1 36

Management Information Systems for Management Information Systems for Competitive AdvantageCompetitive Advantage

Provides support to managers as they work to achieve corporate goals

Enables managers to compare results to established company goals and identify problem areas and opportunities for improvement

Chapter 1 37

Functional AspectsFunctional Aspects

MIS is an integrated collection of functional information systems, each supporting particular functional areas.

Schematic

Chapter 1 38

An Organization’sMIS

FinancialMIS

MarketingMIS

HumanResources

MIS

Etc.

AccountingMIS

Drill down reports

Exception reports

Demand reports

Key-indicator reports

Scheduled reports

Databasesof

externaldata

Databasesof

validtransactions

Transactionprocessing

systemsBusiness

transactions

Businesstransactions

ExtranetExtranet

InternetInternet

Figure 9.3

Etc.

Chapter 1 40

IntroductionIntroduction

What is MIS? Is a system which gives us the

Right information To the right person At the right place At the right time In the right form At the right cost

Chapter 1 41

RoleRole

Why is it necessary Increased Business and Management complexities

Who is a Good Manager One who minimizes / eliminates the elements of risk &

uncertainty.

Response Simulator Enables a decision maker to give either a reactive or proactive

response May be futuristic.

Chapter 1 42

Characteristics- Sub SystemsCharacteristics- Sub Systems

Marketing Sales Forecasting , Sales Planning, Customer & Sales

Analysis. Manufacturing

Production Planning, scheduling, cost control analysis. Logistics

Planning & Control of purchasing, inventories, distribution Personnel

Planning Personnel requirements , Analyzing performance, salary administration.

Chapter 1 43

Characteristics….Characteristics….

Finance & AccountingFinancial analysis, cost analysis, capital requirements,

planning, income measurement.Information Processing

Information system planning , Cost – Benefit analysis.Top Management

Strategic Planning, resource allocation.

Chapter 1 44

Users & CharacteristicsUsers & CharacteristicsType of System Information Inputs Processing Information Outputs Users

ESS/EIS Aggregate data , external , internal

Graphics; simulations, interactive

Projections; response to Queries Senior Managers

DSS Low- Volume data, analytic models

Interactive; simulations, analysis

Special reports; decision analysis; response to Queries

Professionals; Staff Managers

MISSummary Transaction data; high volume data; simple models

Routine reports; simple models; low level analysis

Summary & exception reports Middle Managers

KWS Design Specializations, Knowledge base Modeling, simulations Models, Graphics Professionals; Technical

Staff

OAS Documents, schedules

Document; management; scheduling; communication

Documents; schedules; mail Clerical Workers

TPS Transactions; events Sorting; listing; merging; updating

Detailed reports; list summaries

Operations; Personnel; Supervisors

Chapter 1 45

MIS RequirementsMIS Requirements

Unified system Should support / facilitate decisions Should be compatible with the organisation’s structure & culture Should be cost effective / beneficial Should be responsive to changes around & within the organisation. Should be speedy & accurate Should provide validated & valid information Should be Management & not Manipulated Information system.

Chapter 1 46

ApproachesApproaches

Technical Approach Based on Mathematical & normative models Relies heavily on physical technology – CS , MS, OR

Behavioral Approach Behavioral impact / response of people – Political

Science, Psychology, Sociology & organisational Behavior.

Socio-Technical Approach Borrows from both the above approaches.

Chapter 1 47

What is Strategy?What is Strategy?Strategy DefinitionsStrategy Definitions

Strategy A plan Early 1990s definition:

“A well coordinated set of objectives, policies, and plans aimed at securing a long-term competitive advantage. A vision for the organization that is implemented.”

Webster’s Dictionary

“a careful plan or method” “the art of devising or employing plans toward a goal” “the art and science of military command exercised to

meet the enemy in combat under advantageous circumstances”

Chapter 1 48

Strategic Advantage and ITStrategic Advantage and ITEvolution of Strategy ConceptsEvolution of Strategy Concepts

Competitive Strategy Competitive Advantage

Sustainable Competitive Advantage defensible market position (CQFDS), unique core competence long-term barriers to competition, non-competitive profits (>0)

Temporary (Non-Sustainable) Competitive Advantage

Strategic Advantage Sustainable Strategic Advantage

long-term, dominant strategy, strategic systems, strategic structural changes

Temporary Strategic Advantage

Leverageable Strategic Advantage (Carr)» dominant strategy is only a stepping-stone to future

dominant strategies

StrategySpeeding Up

Chapter 1 49

Information Systems as a Strategic Information Systems as a Strategic ResourceResource

Inwardly Strategic focused on internal processes

lower costs increase employee productivity improve teamwork enhance communication

Outwardly Strategicaimed at direct competition

beat competitorsnew services

new “knowledge” that leads to new services

Chapter 1 50

Elements of Strategic ManagementElements of Strategic Management

Innovation Response-Management Long-Range Planning

Competitive Intelligence

© 2007 Prentice Hall, Inc.

51

Q1 – How does organizational strategy determine information Q1 – How does organizational strategy determine information systems structure?systems structure?

An organization’s goals and objectives are determined by its competitive strategy.

In turn, an organization’s competitive strategy determines every information system’s

– Structures

– Features

– Functions

Fig 3-1 Organizational Strategy Determines Information Systems


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Q2 – What Five Forces Determine Industry Structure?Q2 – What Five Forces Determine Industry Structure?

You can use Porter’s Five Forces Model to assess an industry structure based on these five questions:How much bargaining power do customers have?

How much of a threat do substitution products or services pose?

How much bargaining power do suppliers have?

How great is the threat of new competitors entering the marketplace?

How great is the rivalry among existing firms?

The intensity of each force determines the characteristics of the industry, how profitable it is, and how sustainable that profitability will be.

An organization develops its competitive strategy based on how it intends to respond to these forces.


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Fig 3-2 Porter’s Five Forces Model of Industry Structure



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Fig 3-3 Examples of Five Forces



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Q3 – What is Competitive StrategyQ3 – What is Competitive Strategy

A company can choose one of four competitive strategies to help it respond to the structure of its industry.

Be the cost leader across its industry – Wal-Mart is the lowest cost leader in the retail industry.

Differentiate its products from others across its industry – Apple Computer competes on how much better its computers are than PCs.

Be the cost leader in an industry segment – Southwest Airlines is the cost leader in certain portions of the airline industry.

Differentiate its product in an industry segment – Apple’s iPhone competes by being different than other cell phones.


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Fig 3-4 Porter’s Four Competitive Strategies

Q3 – What is Competitive StrategyQ3 – What is Competitive Strategy


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Q4 – What is a Value Chain?Q4 – What is a Value Chain?

Each competitive strategy requires a system whose benefits outweigh the risks and provide value to the customer.

Value is defined as the amount of money a customer is willing to spend on a product, service, or resource.

The difference between the value that an activity generates and the cost of the activity is the margin.

A value chain is a network of value-creating activities and is divided into primary activities and support activities.


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Primary Activities in the value chain include:

Inbound logistics activities involve receiving and managing raw materials.

Operations activities transform raw materials into final products or create services.

Outbound logistic activities deliver finished products to customers.

Marketing and Sales activities create marketing strategies and sell products or services to customers.

Services activities provide after-sale customer support for products or services.



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Support Activities in the value chain indirectly enhance production of products and services.

Firm infrastructure includes general management, finance, accounting, legal, and government affairs (if necessary).

Human Resources recruits, compensates, evaluates and trains employees.

Technology Development includes research and development for new processes or techniques.

Procurement finds suppliers and vendors for raw materials, creates contracts, and negotiates prices of raw materials.



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Fig 3-5 Porter’s Value Chain Model



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Each activity in a value chain links to other activities in the value chain. Linkages are the interactions across the value activities.

Understanding a company’s linkages helps it succeed in designing or redesigning its business process.

Rather than automating or improving existing functional systems, Porter contends companies should create new, more efficient business processes that integrate the activities of the entire value chain.



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Q5 – How Do Business Processes Generate Value?Q5 – How Do Business Processes Generate Value?

Each company has many business processes which are networks of activities that generate value by transforming inputs into outputs.

You determine the cost of each business process by adding the cost of inputs plus the cost of activities used in the process.

You determine the margin of each business process by subtracting the cost of the activity from the value of the output.


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Fig 3-7 Three Examples of Business Processes



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Each network of activity transforms input resources into output resources. Bicycle parts are transformed into a bicycle through a network of activities, both primary and support.

A company’s resources, like inventory parts, equipment, or cash, flow between or among all the activities used to produce a product.

Facilities, like buildings or banks, store resources used in the company’s network of activities.



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The key to a company’s competitive advantage is to increase the margin of its products by adding value, reducing costs, or both.

Business process redesign helps a business streamline its activities in order to increase its margins.

The most difficult part of process redesign is associated with employee resistance.


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Fig 3-8 Improved Materials Ordering Process



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Each business must first analyze its industry and choose a competitive strategy. Will it be a low-cost provider or differentiate its products from competitors?

Then it must design its business processes to span value-generating activities.

Once those decisions have been made, a business can structure an information system that supports its business processes.

Q6 – How Does Competitive Strategy Determine Business Q6 – How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?Processes and Structure of Information Systems?


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Fig 3-10 Business Process & Information System for Bike Rental

Q6 – How Does Competitive Strategy Determine Business Q6 – How Does Competitive Strategy Determine Business Processes and Structure of Information Systems?Processes and Structure of Information Systems?


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Q7 – How Do Information Systems Provide Competitive Q7 – How Do Information Systems Provide Competitive Advantages?Advantages?

There are two ways businesses can respond to the five competitive forces.

They can gain a competitive advantage via their products and services.

They can gain a competitive advantage by developing superior business processes.


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A business can gain a competitive advantage via its products by

Creating new products and services, or

Enhancing its existing products or services, or

Differentiating its products and services from its competitors

Information systems can help create a competitive advantage by being part of the product or by providing support to the product.



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A company can gain a competitive advantage by using business processes to

Lock in customers via high switching costs, making it too expensive for the customer to switch to a competitor.

Lock in suppliers via easy-to-use connections, discouraging them from changing to another business.

Create entry barriers for new competitors, thereby raising the costs to enter the market.

Establish alliances with other organizations and set standards, reducing purchase costs and providing benefits for everyone.

Reduce costs which in turn reduces prices and increases profitability.

Q7 – How Do Information Systems Provide Competitive Advantages?


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ABC, Inc, an actual company, used information systems to create a competitive advantages by

Investing heavily in information technology from the beginning and

Leading the shipping industry in application of information systems.

The following slide shows some of the Web pages ABC, Inc uses within its information system.



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Fig3-13 ABC, Inc Web Page to Select recipient from customer records



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Fig 3-14 ABC, Inc Web page to select contact from customer records



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Fig 3-15 ABC, Inc Web page to specify email notification



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ABC’s information system helps the company create a competitive advantage by

Enhancing its existing services—making it easy for the customer to use its system, and reducing errors.

Differentiating its service from its competitors who don’t have a similar service to provide to customers.

Providing new services for customers that competitors don’t provide.

Locking customers into its system based on the benefits they receive from it.



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ABC’s competitive advantage continued…

Raising barriers for new competitors to enter the market. They will have to provide similar services to customers.

Reducing the costs associated with data input and information output.


Chapter 1 78

RelationshipRelationship

Chapter 1 79

SummarySummary

Strategic Information System Applications Cost leadership Differentiation Growth Alliances Innovation Improve internal efficiency Customer-oriented approaches

Chapter 1 80

Functional Use Of MISFunctional Use Of MIS

To lower cost in all parts of Value chain Facilitate product delivery Adding value to quality Transform physical processing component into information component Speed / Ability – Competitive Advantage Quality Enhancement Simplification – Product , Process, Cycle Time Organisation – Benchmark , Customer Service, Precision etc

Chapter 1 81

Strategic UseStrategic Use

Out perform rivals Product differentiation Focussed differentiation Right linkages to customers & suppliers Low cost Product Precise development of strategies, planning , forecasting &

monitoring. Problem Solving / Decision making

Chapter 1 82

Strategic Uses Contd….Strategic Uses Contd….

Coordinate activities globally Think Globally, act Locally Competitive Advantage More Flexible & Responsive Flexibility

Chapter 1 83

Information Systems for Competitive AdvantageInformation Systems for Competitive Advantage

Businesses continually seek to establish competitive advantage in the marketplace. There are eight principles:

The first three principles concern products. The second three principles concern the creation of barriers. The last two principles concern establishing alliances and reducing costs.

Chapter 1 84

Organizational ChangeOrganizational Change Organizational change deals with how organizations plan for,

implement and handle change. Overcoming resistance to change can be the hardest part of bringing information systems into a business. Too many computer systems and new technologies have failed because managers and employees were not prepared for change.

A change model identifies the phases of change and the best way to implement it: Unfreezing is the process of removing old habits and creating a

climate receptive to change Moving is the process of learning new work methods, behaviors

and systems Refreezing involves reinforcing changes to make the new process

second nature, accepted and part of the job