Chapter-1
Introduction to Management Information System (MIS)
Objectives: - under this topic we are going to Define the following terms & concepts
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Data, information and knowledge
Management, System, information Technology and information system
Components of Information Systems
Management Information system (MIS), Decision support System (DSS),
Transaction Processing System (TPS), Executive Information System (EIS),
Expert system (ES),
Contemporary approaches to MIS
Evolution of Information Age
Data, Information and Knowledge (DIK)
Data, information, and knowledge are related concepts that describe different levels of
understanding and insight.
Data: - refers to raw facts and figures that are collected and stored in a structured format. Data
can be in the form of numbers, words, images, or other types of information.
Examples of data include customer names, addresses, and purchase histories in a sales
database.
Information: - is derived from data through analysis and interpretation. It is the result of
processing and organizing data into a meaningful context. Information provides answers to
who, what, where, and when questions.
For example, the total revenue generated by a company in a given quarter is an example of
information derived from sales data.
Knowledge: - is a deeper level of understanding that is gained through experience and
expertise. It involves the ability to recognize patterns, make connections, and draw conclusions
based on the available information. Knowledge provides answers to how and why questions.
For example, understanding the reasons behind a company's success or failure requires
knowledge of the industry, market trends, and business strategies.
In summary, data is the raw material, information is the processed and organized data,
and knowledge is the deeper understanding that is gained from analyzing and interpreting
information.
How much you Trust your Data?
The ability to look critically at data and assess its validity is a vital managerial skill. When decision
makers are presented with wrong data, the results can be disastrous. And these problems can get
amplified if bad data is fed to automated systems. As an example, look at the series of man-made
and computer-triggered events that brought about a billion-dollar collapse in United Airlines stock.
In the wee hours one Sunday morning in September 2008, a single reader browsing back stories on
the Orlando Sentinel’s Web site viewed a 2002 article on the bankruptcy of United Airlines (UAL
went bankrupt in 2002, but emerged from bankruptcy four years later). That lone Web surfer’s
access of this story during such a low-traffic time was enough for the Sentinel’s Web server to
briefly list the article as one of the paper’s “most popular.” Google crawled the site and picked up
this “popular” news item, feeding it into Google News.
Early that morning, a worker in a Florida investment firm came across the Google-fed story,
assumed United had yet again filed for bankruptcy, then posted a summary on Bloomberg. Investors
scanning Bloomberg jumped on what looked like a reputable early warning of another United
bankruptcy, dumping UAL stock. Blame the computers again—the rapid plunge from these early
trades caused automatic sell systems to kick in (event-triggered, computer-automated trading is
responsible for about 30 percent of all stock trades). Once the machines took over, UAL dropped
like a rock, falling from twelve to three dollars. That drop represented the vanishing of $1 billion in
wealth, and all this because no one checked the date on a news story. Welcome to the new world of
paying attention (Harvey, 2008)!
Check your Understanding
Research to find additional examples of organizations that made bad decisions based on
bad data. Report your examples to your class. What was the end result of the examples
you’re citing (e.g., loss, damage, or another outcome)? What could managers have done to
prevent problems in the cases that you cited? What role did technology play in the
examples that you cite? What role did people or procedural issues play?
Management, System, information Technology and information system
Management, system, information technology, and information system are related concepts that
are commonly used in the field of business and technology.
Management refers to the process of planning, organizing, directing, and controlling
resources (such as people, finances, and materials) to achieve organizational goals. Effective
management involves making decisions, setting priorities, and allocating resources in a way that
maximizes efficiency and effectiveness.
A system is a set of components that work together to achieve a common goal. A system can be
physical (such as a manufacturing assembly line) or abstract (such as a business process).
Systems are designed to be efficient and effective, with clearly defined inputs, processes, and
outputs.
Information technology (IT) refers to the use of computers, software, and other technology
tools to process, store, and transmit data and information. IT is an essential tool for businesses
and organizations to manage information and support decision-making.
An information system (IS) refers to the use of IT to support the collection, processing,
storage, and dissemination of information in an organization. An IS can be used to support
various business functions such as accounting, marketing, and human resources. An IS typically
includes hardware, software, data, procedures, and people.
Components of information System
An information system (IS) is a set of interconnected components that work together to collect,
process, store and distribute information within an organization. The main components of an
information system are:
1. Hardware: This refers to the physical components of an IS, such as computers, servers,
storage devices, printers, and other peripherals. The hardware provides the processing power
and storage capacity necessary to run software applications and store data.
2. Software: This includes the programs and applications that are used to process and manage
data within an IS. Examples of software include operating systems, database management
systems, and productivity software like word processors and spreadsheets.
3. Data: This refers to the raw facts and figures that are collected and stored within an IS. Data
can be structured (such as in a database) or unstructured (such as in text documents or
multimedia files). Data is essential for decision-making and analysis within an organization.
4. Procedures: These are the standard operating procedures and business processes that are
used to manage and use the information within an IS. Procedures define how data is collected,
processed, stored, and distributed within an organization.
5. People: This refers to the individuals who use and manage the information within an IS.
This includes system administrators, users, and other stakeholders who are involved in the
design, implementation, and use of the system.
In summary, the main components of an information system are hardware, software, data,
procedures, and people. These components work together to provide organizationswith the tools
and resources they need to collect, manage, and analyze information, and make informed
decisions.
Management Information Systems (MIS)
An MIS is a system that provides managers with the necessary information to make decisions
about an organization's operations. The MIS gathers data from various sources and processes it to
provide information tailored to the managers' and their staff's needs.
While businesses use different types of MISs, they all share one common goal: to provide
managers with the information to make better decisions. In today's fast-paced business
environment, having access to accurate and timely information is critical for success. MIS allows
managers to track performance indicators, identify trends, and make informed decisions about
where to allocate resources.
Importance of management information systems for businesses
MISs allow businesses to have access to accurate data and powerful analytical tools to identify
problems and opportunities quickly and make decisions accordingly. A management information
system should do the following:
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Provide you with information you need to make decisions
Can give you a competitive edge by providing timely, accurate information
Can help you improve operational efficiency and productivity
Allows you to keep track of customer activity and preferences
Enables you to develop targeted marketing campaigns and improve customer service
MIS vs other information systems
MIS differs from other information systems in that it focuses on providing information for
decision-making and coordination of an organization’s operations1. MIS is a specific subset of
information systems that involves people, processes, and technology in an organizational context.
Other information systems may have different purposes, such as supporting specific functions,
processes, or tasks within an organization.
1. Transaction Information System (TIS)
A transaction processing system is a computerized system that performs and records the daily
routine transactions necessary to conduct business. A transaction processing system (TPS) is an
information system that collects, processes, and stores data resulting from transactions that occur
within an organization or between an organization and its external stakeholders. A TPS is
designed to support the operational activities of an organization, such as sales, inventory
management, and accounting.
Examples of TPS include point-of-sale systems used in retail stores, inventory management
systems used in warehouses, and financial transaction processing systems used by banks and
other financial institutions.
A TPS has the following four components. One must understand them to know how the system
works.
1. Inputs: Inputs are original requests for payments or products outside parties send to an
organization’s TPS. Typically, inputs include bills, coupons, custom orders, and invoice.
2. Output: Outputs are the documents a TPS generates after it processes all inputs, for
example, the receipts stored by companies in their records. Such documents help
validate transactions and offer crucial reference details for tax and multiple official
purposes.
3. Storage: A TPS’s storage component is where organizations keep their output and input
data. Some businesses store the documents in a database. This component ensures the
security, accessibility, and organization of all documents for late use.
4. Processing System: The processing system goes through every input and establishes a
useful output, for example, a receipt. It helps outline the input data and defines what the
outputs must be. One must remember that the processing time varies depending on the
type of TPS an organization uses.
2. Decision Support System
What is a Decision Support System (DSS)?
A decision support system (DSS) is an information system that aids a business in decisionmaking activities that require judgment, determination, and a sequence of actions. The
information system assists the mid- and high-level management of an organization by analyzing
huge volumes of unstructured data and accumulating information that can help to solve
problems and help in decision-making. A DSS is either human-powered, automated, or a
combination of both.
Purpose of a Decision Support System
A decision support system produces detailed information reports by gathering and analyzing
data. Hence, a DSS is different from a normal operations application, whose goal is to collect
data and not analyze it.
Clearly, by design, DSS have more analytical power than other systems. They use a variety of
models to analyze data, or they condense large amounts of data into a form in which they can be
analyzed by decision makers. DSS are designed so that users can work with them directly; these
systems explicitly include user-friendly software. DSS are interactive; the user can change
assumptions, ask new questions, and include new data.
3. Expert System
An expert system is a computer-based information system that uses artificial intelligence (AI)
techniques to simulate the problem-solving ability of a human expert in a particular domain.
Expert systems are designed to provide expert-level knowledge and advice to users, allowing them
to make more informed decisions and solve complex problems.
The main components of an expert system include:
1. Knowledge base: This is the repository of knowledge and expertise about a particular domain
that the expert system draws upon to make decisions. The knowledge base is typically created by
subject-matter experts and is organized in a way that allows the expert system to access and use
the information effectively.
2. Inference engine: This is the software component of the expert system that processes the
information in the knowledge base and applies reasoning rules to arrive at a conclusion or
decision. The inference engine uses techniques such as rule-based reasoning, case-based
reasoning, and fuzzy logic to analyze the data and generate recommendations.
3. User interface: This is the component of the expert system that allows users to interact with
the system and receive advice and recommendations. The user interface may be text-based,
graphical, or a combination of both, and is designed to be user-friendly and easy to navigate.
Examples of expert systems include medical diagnosis systems, financial planning and investment
systems, and legal decision support systems. Expert systems are used in a variety of industries and
applications, including healthcare, finance, manufacturing, and education.
Overall, expert systems are designed to provide users with expert-level knowledge and advice in a
particular domain, allowing them to make more informed decisions and solve complex problems.
By leveraging AI techniques to simulate the problem-solving ability of human experts, expert
systems can provide valuable insights and recommendations that would otherwise be difficult or
impossible to obtain.
Contemporary Approaches to MIS
Multiple perspectives on information systems show that the study of information systems is a
multidisciplinary field. In general, the field can be divided into technical and behavioral
approaches. Information systems are socio-technical systems. Though they are composed of
machines, devices, and ―hard physical technology, they require substantial social, organizational,
and intellectual investments to make them work properly.
1. Technical Approach
The technical approach to information systems emphasizes mathematically based models to
study information systems, as well as the physical technology and formal capabilities of these
systems.
Computer science is concerned with establishing theories of computability, methods of
computation, and methods of efficient data storage and access.
Management science emphasizes the development of models for decision-making and
management practices.
Operations research focuses on mathematical techniques for optimizing selected parameters
of organizations, such as transportation, inventory control, and transaction costs
2. Behavioral approach
An important part of the information systems field is concerned with behavioral issues that arise
in the development and long-term maintenance of information systems.
Sociologists study information systems with an eye toward how groups and organizations
shape the development of systems and also how systems affect individuals, groups, and
organizations.
Psychologists study information systems with an interest in how human decision makers
perceive and use formal information.
Economists study information systems with an interest in understanding the production of
digital goods, the dynamics of digital markets, and how new information systems change the
control and cost structures within the firm.
The behavioral approach concentrates on changes in attitudes, management and organizational
policy, and behavior.
3. Socio-Technical Approach
The study of management information systems (MIS) arose to focus on the use of computerbased information systems in business firms and government agencies. MIS combines the work
of computer science, management science, and operations research with a practical orientation
toward developing system solutions to real-world problems and managing information
technology resources. It is also concerned with behavioral issues surrounding the development,
use, and impact of information systems, which are typically discussed in the fields of sociology,
economics, and psychology.
Note From experience no single approach effectively captures the reality of information
systems. The successes and failures of information are rarely all technical or all behavioral.
Adopting a sociotechnical systems perspective helps to avoid a purely technological approach to
information systems. For instance, the fact that information technology is rapidly declining in
cost and growing in power Note From experience no single approach effectively captures the
reality of information systems. The successes and failures of information are rarely all technical
or all behavioral. 3 does not necessarily or easily translate into productivity enhancement or
bottom-line profits. The fact that a firm has recently installed an enterprise-wide financial
reporting system does not necessarily mean that it will be used, or used effectively. Likewise, the
fact that a firm has recently introduced new business procedures and processes does not
necessarily mean employees will be more productive in the absence of investments in new
information systems to enable those processes.
Evolution of Information Age
The way people work has changed significantly over time. To mark these changes, we created the
terms 'Ages'. These 'Ages' are the Agricultural Age, the Industrial Age and the Information Age.
Agricultural Age
Humankind began as Nomads, but we soon learned how to gather and plant seeds. Thus the
Agricultural Age began.
During the Agricultural Age most people were merchants, craftspeople, farmers, or farm
workers. Creative ideas and skill were rewarded as more people would buy from you if your
product was made better.
Being an enterprising or entrepreneurial person was important because most people worked for
themselves as merchants, farmers or craftspeople.
Industrial Age
The Agricultural Age changed to the Industrial age as people began creating equipment for mass
production of goods to reduce costs and machines became more important in everyday life.
During the Industrial Age most people were factory workers. They were treated badly and their
creative thoughts were frowned upon, sometimes causing one to be fired.
Few people worked for themselves due to the large expenses of owning the large equipment in
factories. Only the rich could afford to be entrepreneurs and they were the ones to own the
factories.
Information Age
Employees grew frustrated with their ideas being suppressed and the way they were treated so
trade unions were formed to ensure better working conditions.
Technology became more advanced and the unions altered the economy ushering in the
Information Age
Information technology makes it easier and cheaper to work for oneself. Those who seek out
new information constantly are the ones who succeed in today’s workplace. Individuals are
encouraged to be creative and constantly learning. One must always be thinking of new ideas to
be the best.
Enterprising and entrepreneurial people flourish in today’s workplace and we are encouraged to
be so.