Business information systems
buis 6112
• Introduction to Business Information
Systems
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Learning Objectives:
• Discuss common applications of computers and
information systems;
• Explain the differences between computer literacy and
information literacy;
• Discuss the differences between data and information;
• Define transaction processing systems;
• Define management information systems;
• Describe the four major components of an information
system;
• Explain the importance and applications of information
systems in functional areas of an organisation;
• Discuss how information technologies are used to gain a
competitive advantage.
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Overview
• Information systems
• System components
• Types of system models
• Information systems components
• Major types of IS
• SDLC
• Reasons for studying IS
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Introduction
• In this learning unit the concept of information systems
will be discussed. A distinction will also be made between
different types of information systems and how
information systems can help an organization to gain a
competitive advantage.
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Introduction (CON’T)
• What is the reason for having information
systems?
To create competitive businesses managing
global markets, adding business value and
providing useful products and services.
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Information Systems
• Definition
• Information systems can be considered a set of
components (systems) that work together to
collect, process, store and distribute data,
information and knowledge to support the
management of an organization (The IIE, 2019).
• Examples: South African banks (FNB, ABSA, etc.),
and savings and loans companies, use
information systems to help them to grant sound
loans and to make good investments.
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Information Systems (CON’T)
All systems perform input, processing,
output, feedback and control functions,
but information systems are explicitly
there to support the management of an
organization.
• Information systems can support
management in the following ways
(Bidgoli, 2017):
•
1) Increasing the speed of service delivery;
2) Record stock levels and if necessary, automatically order
more stock to replenish stock levels;
3) Generate reports that can assist management in making
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System functions
• Input: refers to the activity of gathering and
capturing raw data.
• Processing: refers to converting the data into
useful outputs.
• Output: refers to production of useful
information in the form of report.
• Feedback and control: refers to the use of
output to made changes to input or
processing.
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Example of a system – Pick ‘n Pay.
• Inputs would comprise the number of hours
worked by part-time employees and their hourly
rates.
• processing would comprises calculating their wages
(multiplying hours worked by hourly rate).
• output would comprise calculating their gross
wages.
• feedback would comprise making changes to the
rate or hours worked.
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The Components Of An Information System
• Information systems have four (4) major
components (Bidgoli, 2017):
1. Data
2. Databases
3. Processes
4. Information
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The Components Of An
Information System (con’t)
• Data
• This component of an information system refers to the
input to the system and by implication, therefore, what the
user types into the system (Bidgoli, 2017).
• Information systems should collect data from internal and
external sources.
• Data has a time orientation (Bidgoli, 2017). Historical data
is used to assess performance, Current data will reveal
insights into the current operations of an organization,
Future data consists of predictions about the future
performance or position of an organization.
• Data can be collected in different forms( aggregated and
disaggregated ).
• Data is never collected at random. To determine what data
should be collected, an organization should determine
what output the system should produce.
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The Components Of An
Information System (con’t)
• Databases
• Data that is collected should be stored in an organized
and integrated series of files. Collectively, this set of
organized and integrated files is known as a database
(Bidgoli, 2017).
• In order to create this set of organized and integrated
files, the developers of the database will make use of a
Database Management System (DBMS).
• Not only is a DBMS used for creating the database but
also allows the user of the database to efficiently
capture and process information.
• Popular DBMSs include Microsoft Office Access and
Oracle (Bidgoli, 2017).
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The Components Of An
Information System (con’t)
• Processes
• The process component is the component of an
information system that truly demonstrates the
purpose of the information system as this is the
component that will generate the information that
will enable management to make sound business
decisions (Bidgoli, 2017).
• This component is responsible for generating the
required reports.
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The Components Of An
Information System (con’t)
• Information
• Information represents the output produced by the
information system after processing has been
concluded (Bidgoli, 2017).
• The terms information and data should not be
used interchangeable as they are not the same.
• Data in its own does not support decision making,
whereas information supports decision making
(Bidgoli, 2017).
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Characteristics of valuable information
• Accessible: Information should be easily accessible by
authorised users so that it can meet their needs.
• Accurate: Accurate information is error-free. In some
cases, inaccurate information is generated because
inaccurate data is fed into the transformation process.
• Complete: Complete information contains all the
important facts.
• Economical: Information should be relatively
economical to produce. Decision-makers must always
balance the value of information with the cost of
producing it.
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Characteristics of valuable information (con’t)
• Secure: Information should be secure from access by unauthorised users.
• Simple: Information should be simple and not overly complex.
• Timely: Timely information is delivered when it is needed. Knowing last week’s
weather conditions will not help when trying to decide what to wear today.
• Verifiable: Information should be verifiable. This means you can check it to
make sure it is correct, perhaps by checking the source of the information.
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Computer Literacy vs. Information
Literacy
• For an organization to achieve a competitive
advantage, employees should be both computer
literate and information literate. In this section the
difference between computer literacy and
information literacy will be considered.
• Computer literacy refers to an individual’s ability to
use a computer and productivity software
applications that is installed on the computer
effectively (Bidgoli, 2017).
• Information literacy refers to whether an individual
understands the value of the information in terms of
generating and using business intelligence (Bidgoli,
2017).
• The concept of information literacy can be extended
beyond the business world.
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Models
• Models are used to simplify and
understand the real world, which might be
complex.
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Types of models
• Narrative: can be written form, verbal form or both to represent reality.
Example: Verbal description of Nivea products given to the store
manager. Other examples would be written reports submitted to
management.
• Physical: is tangible representation of the context or reality. Eg house
models. Example: In plastic surgery, the creation of artificial fingers.
Another example would be of a builder who scales models of buildings
to show to clients.
• Schematic: is a graphic representation of reality. This model uses a
sketch or graphic design to describe reality. Example: Flow charts used
for software (program) development. Other examples include charts,
graphs, illustrations, diagrams and pictures.
• Mathematical: arithmetic equations are used to represent the context
or reality.
Computers excel at solving mathematical models. Other examples include
retail chains that have developed mathematical models to identify
activities, effort and time associated with planning, building and opening a
new store, so that they can forecast how long it will take to complete the
store.
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Homework
• Find descriptions of the following models
• Stochastic
• Deterministic
• Regression
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CBIS
• Computer Based Information Systems is a
“single set of hardware, software, databases,
telecommunications, people, and procedures
configured to collect, manipulate, store, and
process data into information” (Stair and
Reynolds, 2006)
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Major Types of “ IS ”
1.
2.
3.
4.
Transaction Processing Systems (TPS)
Management Information Systems (MIS)
Decision Support Systems (DSS)
Executive Information Systems (ESS)
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Transaction Processing Systems
(TPS)
• A TPS is a type of information system employed to
primarily perform routine and structured tasks such as
record keeping, clerical operations, and inventory
control.
• The most prominent reason for employing
transaction processing is that it can result in a
significant cost saving for the company (Bidgoli, 2017).
• TPS serves the operational level of the organization
and performs mainly two (2) types of processing
• Batch processing – transactions are accumulated and
processes later as a group in a batch. Eg payroll
• On-line/ real-time transaction processing (OLTP)
where data is processed immediately after being
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Transaction Processing Systems
(TPS) (con’t)
• A TPS can help an organization achieve a
competitive advantage in the following ways Stair
and Reynolds (2010, cited in The IIE, 2019):
• Increased customer loyalty;
• Aiding and providing a superior service to
customers;
• Supporting the development of better
relationships with suppliers;
• More effective and efficient information
gathering;
• Cost reductions and
• Reducing the levels of stock to only what is
needed.
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Management Information Systems
(MIS)
• An MIS is an organized integration of hardware
and software technologies, data, processes, and
human elements designed to produce timely,
integrated, relevant, accurate, and useful
information for decision-making purposes’.
• MIS serve middle management.
• provide routine information to managers and
decision makers.
• An MIS generates its reports from the TPS and is
mainly used to improve operational efficiency.
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Decision Support Systems (DSS)
• DSSs are used to support problem-specific
decision making
• DSSs use analytical models, specialised
databases and user-friendly software that
support the making of semi-structured
decisions by individual managers.
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DSS (CON’T)
• 4 types of analytical modelling (O’ Brien, 2002):
• What-if-analysis: The process of making hypothetical
changes to problem data and observing the impact of the
results.
• Sensitivity analysis: The process of making changes to
assumptions that projects are based on, and identifying
how these changes will affect the performance of a
project.
• Goal seeking: The process of determining the problem
data required for a given result.
• Optimisation: Optimisation comprises a set of techniques
that help management arrive at optimal solutions for the
business objectives set by them within certain limitations.
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Executive Information Systems (ESS)
• Used by senior managers to make decisions
at the strategic level of the organisation.
• May summarise information from MIS and
DSS.
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Information Systems In
Organizations
• Information systems can be designed in such a
way that they support the various functional
areas of an organization. According to The Law
Dictionary (n.d.), a functional area within an
organization can be seen as a group of people
who perform the same work. Examples of the
functional areas within an organization can
therefore include manufacturing, IT, human
resources, logistics etc.
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Human Resource Information
System (HRIS)
• An HRIS provides support to the human resources
functional area of an organization. It helps the
members of this functional area to perform the tasks
in their areas of responsibility more efficiently
(Bidgoli, 2017).
• An HRIS can support the members of the human
resources functional area in making the following
decisions (Bidgoli, 2017):
• Choosing the best job candidate;
• Scheduling and assigning employees;
• Predicting future staffing needs and
• Generating reports and statistics on employee
demographics.
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Logistics Information System (LIS)
• The Logistics Information System was
developed with the aim to reduce the cost of
processes involved in the logistics functional
area of an organization (Bidgoli, 2017).
• Decisions supported by the LIS include
(Bidgoli, 2017):
• Improving routing and delivery schedules;
• Selecting the best modes of transportation;
• Improving budgeting for transportation and
• Improving shipment planning.
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Manufacturing Information System
(MFIS)
• The MFIS was developed with the aim of reducing
the cost of the manufacturing process and
increase the quality of the products being
produced (Bidgoli, 2017).
• Decisions supported by the MFIS include (Bidgoli,
2017):
• Ordering decisions;
• Product cost calculations;
• Space utilization;
• Decisions related to tenders and
• Decisions in relation to price changes and
discounts.
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Financial Information System (FIS)
• An FIS provides timely information to those
members in an organization who has to make
financial decisions (Bidgoli, 2017).
• An FIS can support decisions with regards to
(Bidgoli, 2017):
• Budget allocations;
• Capital investment risk management;
• The monitoring of cost trends;
• The managing of cash flows and
• Determining portfolio structures.
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Information Technologies for a Competitive
Advantage
• A competitive advantage is a long-term,
strategic advantage that an organization
has over its competitors (The IIE, 2019).
• The three strategies identified by Michael
Porter (1979):
1. Cost Leadership Strategy
2. Differentiation Strategy
3. Focus
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Cost Leadership Strategy
• The focus of a cost leadership strategy is on
reducing the overall cost of products and services
(Bidgoli, 2017).
• IT can support an organization’s efforts in reducing
the cost of their products and services in, amongst
other things, in the following ways (Spacy, 2018):
1. Using less physical resources: For example, if an
organization used to send all statements to a
customer via traditional post, they would have
printed all of the customer’s statements on paper,
placed it in an envelope and posted it.
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Cost Leadership Strategy (con’t)
2. Modernizing the workplace: Newer technologies
are often more energy efficient which provides
organizations with the ability to save on their
electricity bill and by saving money on the
organization’s electricity bill an organization’s
production process will become less expensive.
3. Support advertising to increase the volume of
sales: As was pointed out at the beginning of the
learning unit, the use of social media by individuals is
on the increase.
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Differentiation Strategy
• When organizations make use of a differentiation
strategy in order to obtain a competitive
advantage, they are attempting to create a clear
difference between their products and services and
those of their competitors (Bidgoli, 2017).
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Focus
• A focus strategy is one in which an organization
focuses on a specific segment of a market in order
to achieve a cost or differentiation strategy (Bidgoli,
2017).
• The strategy to be employed by an organization is
determined by analysing an organization, its
position in the marketplace, and how information
systems can best support an organization in
achieving a competitive advantage (Bidgoli, 2017).
• For accomplishing this, Michael Porter’s Five Forces
Model framework can be used
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Focus (con’t)
• five forces include:
1. Buyer Power: is high when customers have many
products and services they can choose from and
conversely, buyer power becomes lower as the
number of products and services they can choose
from becomes less.
2. Supplier Power: When buyer power is low,
supplier power is high. This means that supplier
power is high when customers have less options
in terms of products and services to choose from.
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Focus (con’t)
3. Threat of substitute products or services: When an
organization’s competitors offer similar products
and services, there is a significant threat that
consumers might purchase the services and
products from the competitors.
4. Threat of new entrants: Organizations will attempt
to make it as hard as possible for others to duplicate
their products and services. If an organization can
manage the threat of new entrants successfully,
they will keep buyer power low and supplier power
high.
5. Rivalry among existing competitors: Rivalry among
existing competitors increase as the number of
competitors occupying a particular market increase.
Organizations manage this rivalry by offering more
value-added services than their competitors.
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System Development Life Cycle
• System development is the activity of creating or
modifying existing business systems.
• SDLC consists of 5 phases
1. System investigation
2. System analysis
3. System design
4. System implementation
5. System maintenance and review
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Reasons for studying IS
• Ilunga (2006) note that:
• Investors in SA are using IS for making decisions
• IS used to speed up manufacturing and
distributing goods.
• Computers to follow stock indexes.
• Major companies (BMW, Toyota) are using IT
excessively
• Electronic Data Interchange has enhanced most
SA companies to reduce costs
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Summary
• Information systems
• System components
• Types of system models
• Information systems components
• Major types of IS
• SDLC
• Reasons for studying IS
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Questions
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