CHAPTER 1:
INFORMATION SYSTEMS IN GLOBAL
BUSINESS TODAY
Prepared by: Rimsha Khan
Learning Objectives
Why information systems are so essential in business today.
 Define an information system from both technical and a business perspective.
 Business Objectives achieved through Information System
 Define and describe business processes and their relationship to information
systems.
 Identify and describe the three dimensions of information systems.
 Assess the complementary assets required for information technology to provide
value to a business.
 Identify and describe contemporary approaches to the study of information
systems and distinguish between computer literacy and information systems
literacy.

Management Information System (MIS)
DEFINITION: Management information systems (MIS) is the study of how people use
technology to manage information. It is a computer-based system that provides
managers with the tools to organizes, evaluate and manage departments within
organization.
 It’s purpose is to transform raw data into useful information for decision making. It’s
the process of turning data into insights that that guide business strategies and dayto-day operations.
 MEANING: Management information system is an acronym of three words, viz.,
Management, Information, System. In order to fully understand the term MIS, let us
try to understand these three words.

 Management:
Management is the art of getting things done through and with the people in
formally organized groups.
Data Vs Information
Data is a collection of raw facts that may or may not be meaningful for managers.
Input to any system may be treated as Data. It is very difficult to understand data
and needs to be processed to understand. Data may not be in the order.
 Information is the outcome derived after processing the data and is always
meaningful. Output after processing the system is Information. Processing is
performed by performing arithmetic logical calculations on data of simply by
rearranging the data. It is very easy to understand information. Information should be
in the order.


For example, researchers who conduct market research survey might ask a member of the public to complete
questionnaires about a product or a service.

These completed questionnaires are data; they are processed and analyze in order to prepare a report on
the survey. This resulting report is information.
Information System (IS)
System: A system may be defined as a set
of elements which are joined together to
achieve a common objective. The set of
elements for a system may be understood
as input, process and output.
 An information system (IS) consists of
several components: hardware, software,
data, people, and procedures. The
components’ common goal is to produce the
best information from available data.

System Hierarchy
Information systems are composed of three
main elements: technology, people, and
process.
 Information systems (IS) are defined more
broadly as the combination of technology
(the “what”), people (the “who”), and
process
 (the “how”) that an organization uses too
produce and manage information.

Characteristics of Information





Accuracy: Information must be correct and free from errors to ensure reliable decision-making.
Relevance: The information should be applicable to the purpose for which it is being used, ensuring it supports
current needs or decisions.
Timeliness: Information should be available when needed; too early or late can render it useless.
Completeness: All necessary details should be included so users can make informed decisions without gaps in
understanding.
Form/Presentation: The format of information should facilitate easy understanding by the intended user, whether
summarized or detailed.

Purpose: Information must serve a specific objective; otherwise, it remains mere data1.

Reliability/Validity: The source of information should be trustworthy and consistent with its intended purpose13.


Subjectivity/Objectivity: Awareness of personal biases (subjectivity) is crucial; ideally, information should strive
for objectivity to avoid misinterpretation2.
Accessibility/Adequacy/Availability: Information must be easily accessible and provide sufficient details to meet
user needs on time
Component of Information System (Technical Perspective)
Business Objectives achieved through IS

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Operational Excellence: Businesses can constantly improve their efficiency of their operations in order
to achieve higher profitability. They can do this by constantly having the correct amount of stock in
store so consumers can always get want they want.
New product services and business models: I.S systems play a major role for businesses in creating
new products and services. New business models can be created and these can describe how a
company produce, create and sell there products.
Customer and Supplier intimacy: The better services a company provides its consumers with more
likely they are too come back to them and as result the more they will buy off the supplier therefore
creating a good relationship with both parties.
Competitive advantage: If companies achieve any of the above objectives they will generally create
a competitive advantage over their rivals.
Day to Day survival: Business invest in these systems to make their jobs as easy as possibly. An
example is Citibank introduced the first ATM machine to make it easier for customer to access their
money and to cut down queues in their banks.
Why do Business need MIS?
 Supporting decision making: The main purpose of MIS is to provide managers with information
that helps them make better decisions. This includes data on performance, trends, and business
forecasts.
 Improving efficiency: By automating data collection and report generation, MIS helps improve
operational Efficiency. Tasks that would otherwise be manual and time-consuming are done quickly
and accurately.
 Enhancing Coordination: MIS integrates different department in an organization, ensuring that
everyone is working from the same set of data. This enhances coordination between departments
and leads to smoother operations.
 Facilitating Strategic Planning: MIS help organization plan for the future by analyzing trends and
forecasting outcomes. It allows managers to make long-term decisions based on data rather than
intuition.
 Resource Optimization: MIS provides insights into resource allocation, helping businesses use their
financial, human, and material resources effectively.
MIS Process

Following are the steps in MIS process:
 Data collection: The first step is data collection. This can be sales data, production
numbers, customer feedback, or external market trends.
 Data processing: The data is then processed to make it useful. This could involve
organizing the data, performing calculations, or filtering out irrelevant information.
 Data storage: The processed data is stored in a database. A well-designed MIS
ensures that this data is stored securely and can be easily retrieved when needed.
 Data Distribution: Once the data is processed and stored, it distributed to relevant
departments and managers through reports, dashboards, or automated notifications.
 Feedback and Analysis: The final step is involves analyzing the data and providing
feedback to the system. This ensures that the MIS is continually improving and
providing more accurate and relevant information.
Four Stages of Processing

All information systems operate in the same basic fashion whether they
include a computer or not. However, the computer provides a
convenient means to execute the four main operations of an
information system:
 Entering data into the IS (input).
 Changing and manipulating the data in the IS (data processing).
 Getting information out of the IS (output).
 Storing data and information (storage).
Real-time Examples

Walmart: Real-time inventory Management and Supply Chain
Optimization
 Walmart operates one of the largest and most efficient supply chain in the
world. Their MIS allows them to track inventory levels, sales data, and
supply chain performance in real-time.
 For example
 When a customers buys a product, the transaction is recorded immediately, and the
inventory is updated.
 If stock levels drop below a certain threshold, Walmart’s system can automatically
notify suppliers and even place an order to restock.
 This ensures that Walmart always has the product customers want on the shelves and
helps them optimize their supply chain efficiency.
Real-time Examples

Amazon’s MIS
 Amazon uses the most advanced MIS systems in the world to mange its vast
network of warehouses, delivery services, and customer data. MIS tracks
customer preferences, sales trends, and supply chain efficiency in real
time, helping the company optimize every aspects of its operations.
 For Example, Amazon’s recommendation engine is part of their MIS. It
collects data about what customers are buying, what they are viewing, and
even what they are searching for.
 This data is then processed and then used to suggest products that customers
are most likely to buy, increasing sales and customers satisfaction.
Types of Information Systems
Following are the
types of IS
Transaction
Processing Systems
Supply Chain
Management
Systems
Customer
Relationship
Management
Systems
Business Intelligence
Systems
Decision Support
and Expert Systems
Geographic
Information Systems
Transaction Processing Systems



Transaction Processing Systems are designed to handle a large volume of routine transactions
efficiently. They capture, store, and process data generated from business transactions.
 Transaction: A business activity between seller and buyer to exchange an asset for
payment is called transaction.
 Examples: Customer orders, purchase orders, receipts,, and payroll checks in an
organization.
Characteristics:
 Operate at the operational level of an organization.
 Typically used by frontline staff to manage daily operations.
 Ensure accuracy and consistency in transaction handling, improving overall efficiency.
Examples: Point of Sale (POS) systems, payroll systems, and order processing systems
Supply Chain Management Systems
The term “supply chain” refers to the sequence of activities involved in producing
and selling a product or service.
 Supply Chain Management Systems facilitate the flow of goods, information, and
finances as products move from supplier to manufacturer to wholesaler to retailer to
consumer.
 Characteristics:

 Integrate various supply chain processes including procurement, production, distribution, and
logistics.
 Enhance collaboration among supply chain partners.
 Provide real-time data for better inventory management and demand forecasting.

Examples: Systems that track inventory levels, manage supplier relationships, and
optimize logistics
Customer Relationship Management Systems


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Customer relationship management (CRM) systems help manage an organization’s relationships with
its customers.
The term refers to a large variety of information systems, from simple ones that help maintain
customer records to sophisticated systems that dynamically analyze and detect buying patterns and
predict when a specific customer is about to switch to a competitor.
The main goals of CRM systems are to increase the quality of customer service, reduce the amount
of labor involved in serving customers, and learn as much as possible about the buying habits
and service preferences of individual customers.
Characteristics

Focus on improving customer service and relationships.

Collect customer data across various channels to provide insights for personalized marketing strategies.

Enable tracking of customer interactions and sales activities.
Examples: Salesforce, HubSpot, and Zoho CRM
Business Intelligence Systems

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ISs whose purpose is to pick up from raw data relationships and trends that might help organizations
compete better are called business intelligence (BI) systems. The applications access large pools of
data, usually transactional records stored in large databases called data warehouses.
With proper analysis models, BI systems might discover particular buying patterns of consumers, such
as combinations of products purchased by a certain demographic group or on certain days; products
that are sold at faster cycles than others; reasons for customers leaving a service provider for a
competitor; and other valuable business intelligence that helps managers quickly decide on changing a
strategy.
Characteristics
 Aggregate data from multiple sources for comprehensive analysis.
 Utilize data visualization tools to present findings in an understandable format.
 Help organizations identify trends, patterns, and anomalies in their operations.
Examples: Tableau, Microsoft Power BI, and SAP BusinessObjects
Decision Support and Expert Systems

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Professionals often face multiple alternatives and lack the time or resources to analyze detailed reports.
Organizations develop Decision Support Systems (DSS) to aid in decision-making.
This system help find optimal courses of action and answer "What if?" questions.
It process raw data and generate concise information and assist in areas such as financial investment,
marketing strategy, and credit approval.
Limitations:

DSS are decision aids, not substitutes for human judgment.

In unstructured environments (e.g., stock management, medical care), no single best answer exists.
Expert Systems (ES):

Utilize artificial intelligence to support knowledge-intensive decision-making.

It preserve the knowledge of retiring experts.

Reduce costs associated with hiring human experts.

Store expertise in a knowledge base, allowing for repeated use and distribution.
Geographic Information Systems

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GIS ties data to physical locations, enabling users to visualize and analyze spatial data for decision-making and
operations.
Applications:

Mapping flood-prone areas, population levels, transportation routes, and resource allocation.

Supporting business decisions like supermarket expansion by integrating geographic and demographic data.

Managing daily operations such as vehicle tracking, route optimization, and service location mapping.

Web-based GIS tools (e.g., Google Maps, Zillow) provide real-time navigation, real estate insights, and consumer
services.
Technological Integration:

Many GIS systems incorporate GPS for real-time tracking, traffic updates, and route planning.

Mobile GIS applications are widely used in vehicles, portable devices, and smartphones.
Industries Using GIS:

Urban planning, environmental management, disaster response, agriculture, public health, and utilities.

GIS is an essential tool for spatial analysis and decision-making across various sectors, offering insights through
visualized geographic data.
Examples of IS
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Transaction Processing Systems (TPS):

Automated Teller Machines (ATMs)

Point of Sale (POS) systems

Online banking systems
Supply Chain Management Systems
(SCM):


Business Intelligence Systems (BI):

Microsoft Power BI used by companies like Ford
Motor Company

Tableau analytics at Dell Technologies

SAP BusinessObjects in large enterprises
Decision Support and Expert Systems:

Walmart's inventory management system

Medical diagnosis systems in hospitals

Amazon's logistics and delivery network


Procter & Gamble’s supply chain optimization tools
Financial forecasting models at investment banks like
Goldman Sachs
Customer Relationship Management
Systems (CRM):

Salesforce used by companies like Coca-Cola

HubSpot for marketing automation and customer
tracking

Zoho CRM for small businesses

Geographic Information Systems
(GIS):

Google Maps for navigation and location-based
services

Zillow for real estate mapping

Urban planning tools in city governments
Information Systems in Business Functions

ISs are used in many business functions, most commonly accounting,
finance, marketing, and human resources.
 In accounting, information systems help record business transactions, produce periodic financial
statements, and create reports required by law, such as balance sheets and profit-and-loss
statements.
 In finance, information systems help organize budgets, manage cash flow, analyze investments, and
make decisions that could reduce interest payments and increase revenues from financial
transactions.
 Marketing information systems help analyze demand for various products in different regions and
population groups in order to more accurately market the right product to the right consumers.
Marketing ISs provide information that helps management decide how many sales representatives
to assign to specific products in specific geographical areas.
 HR management systems help mainly in record-keeping, employee evaluation, and employee
benefits. HR management systems have evolved to serve many purposes: recruiting, selection,
placement, benefits analysis, requirement projections, and other services.
Careers in Information Systems

The job prospects for IT professionals are bright.
 Systems analyst
 Database administrator
 Network administrator
 System administrator
 Webmaster
 Chief security officer
 Chief information officer
 Chief technology officer
Dimensions of Information Systems
To
fully
understand
information systems, you must
understand
the
broader
Management, Organization,
and Technology dimensions
of systems.
 Each dimension plays a crucial
role
in
the
effective
functioning of information
systems
within
an
organization.

Organization Dimension
Information systems are an integral part of organizations.
 Key elements: People, structure, operating procedures, politics, culture,
and functional specialties.

 People: Managers, knowledge workers, data workers, and production/service workers.
 Structure: Hierarchical arrangement with defined roles and responsibilities. The upper levels of the
hierarchy consist of managerial, professional, and technical employees, whereas the lower levels
consist of operational personnel.
 SOPs: Rules developed for consistent operations.
 Politics & Culture: Competing interests and shared organizational assumptions.
 Business Functions: Sales, marketing, production, finance, and HR.
Management Dimension

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The Management Dimension of information systems focuses on leadership, strategy, and decisionmaking processes essential for achieving organizational goals. The classical descriptions of
management focuses on five classical functions of managers like planning, organizing, leading,
and controlling.
Managers at different levels—senior, middle, and operational—use information systems to plan,
analyze data, solve problems, and guide daily operations.
They ensure that technology, people, and processes align to improve efficiency, support innovation,
and maintain competitive advantage.
This dimension helps organizations adapt to change and make informed decisions by leveraging data
and technological tools. The Behavioral Model of Management further highlights what managers
actually do in practice.
Technology Dimension

The technology dimension consists of computer hardware, software, data management technology, and
networking/telecommunications technology.

Computer Hardware: It consists of processing unit; various input, output, and storage devices; and physical media to
link these devices. A desktop computer consists of a monitor (output), keyboard and mouse (inputs), CPU and
motherboard inside the case (processing unit).

Computer Software: It consists of detailed preprogrammed instructions that control and coordinate the work of
computer hardware components in an information.

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
Operating System: Windows or macOS manages hardware resources.

Application Software: Microsoft Office or Google Docs for productivity tasks.

Utility Software: Antivirus programs like Norton or McAfee protect against malware.
Data Management Technology: Software designed to organize stored information for efficient retrieval. For example,
DBMS software like MySQL or Oracle manage structured data efficiently.
Communication technology: It includes physical devices and software that link various computer hardware components
that transfer data from one physical location to another.

Network Interface Cards (NICs): Connect computers to networks via Ethernet cables or Wi-Fi adapters.

Routers & Switches: Manage network traffic flow between devices
Complementary assets
Organizations achieve varying returns from IT investments despite similar spending,
as seen in cases where firms invest heavily and gain substantial returns, while others
invest the same but benefit little.
 This variation highlights that IT investments alone don't ensure success.
 Effective results require complementary assets, such as supportive values,
organizational structures, and behavioral changes, allowing businesses to adapt and
fully leverage new technologies.
 Complementary assets are those assets required to derive value from a primary
investment.


For instance, to realize value from automobiles requires substantial complementary investments in highways,
roads, gasoline stations, repair facilities, and a legal regulatory structure to set standards and control drivers.
Contemporary approaches to information systems
The study of information systems is a multidisciplinary field that combines
various disciplines to understand and manage the complex interactions
between technology, organizations, and individuals. This field does not
rely on a single theory or perspective; instead, it integrates insights from
multiple areas.
 Key Aspects of Information Systems

 Technical Approach:
 Focuses on mathematically based models and physical technology.
 Disciplines involved include computer science, which deals with computability and data storage
 Management science emphasizes on decision-making models
 Operations research focuses on mathematical techniques for optimizing selected parameters of
organizations, such as transportation, inventory control, and transaction costs.
CONTEMPORARY APPROACHES TO INFORMATION SYSTEMS

Behavioral Approach:
 Examines how social, organizational, and individual factors influence
information systems.
 Behavioral disciplines such as sociology (studying group dynamics),
psychology (examining human perception), and economics (analyzing digital
markets) contribute to this approach

Sociotechnical Systems Perspective:
 Recognizes that optimal performance requires balancing both technical
capabilities (hardware/software) and social/organizational elements.
 This view emphasizes mutual adjustments between technology design and
organizational needs for effective implementation
Excel Functions used in MIS

In the context of Management Information Systems (MIS), forecasting techniques and what-if
analysis are crucial tools for strategic planning and decision-making. Here’s how they
relate to MIS:
 Forecasting Techniques in MIS
 Forecasting involves predicting future outcomes based on past data. In MIS, forecasting is used to
anticipate business trends, manage resources effectively, and make informed decisions.

What-If Analysis in MIS
 What-if analysis allows managers to explore different scenarios by changing input variables in
their models. What-if analyses support DSSs by enabling exploration of different decision paths
before implementation.

Tools Used for What-If Analysis
 Scenarios Manager (Excel): Allows testing multiple scenarios simultaneously.
 Goal Seek (Excel): Finds the value needed for a specific outcome.
 Data Tables (Excel): Allows us to see how different values affect your results, all in one place
FORECAST Function in Excel



Every business wants to be able to see into the future. Excel is used in forecasting because it has a
range of relevant tools at its disposal. It used algorithms and drawing on data from the past to
forecast values and make the right choices in the future. However, Excel is a basic forecasting tool. It’s
good for businesses as a starting point.
In simple terms, forecasting predicts trends and opportunities that your business can exploit going
forward. This is an activity undertaken by both old and new companies and shapes business decisions
like budgeting, hiring, and broader business policies.
Key points about the FORECAST function:
 Syntax: FORECAST(x, known_y's, known_x's)
 "x": The future data point you want to forecast
 "known_y's": The range of historical data values you want to use for prediction
 "known_x's": The corresponding time or date range associated with your historical data
What-if Analysis
Excel includes powerful tools to perform complex mathematical
calculations, including what-if analysis. It is a feature in Excel for
Data Analysis and optimization.
 It will help to making it perfect for forecasting, budgeting, and more.
 In Microsoft Excel there are, three main tools within What-If Analysis:

 Scenario Manager
 Goal Seek
 Data Table

Each one is designed to help you in different ways.
What-if Analysis

Scenario Manager:
 Let’s start with Scenario Manager. Imagine you’re planning a budget, and you want to see what
happens if your expenses go up or down. Instead of manually changing the numbers over and
over, you can use Scenario Manager to create different scenarios—like “Best Case,” “Worst Case,”
or “Average Case.”
 This feature can help you to save and switch between these scenarios quickly, so you can easily
compare them.

How to Use Scenario Manager:

Go to the Data tab on the Excel Ribbon.

Click on What-If Analysis and choose Scenario Manager.

You’ll be able to create different scenarios by selecting the cells you want to change and entering the various
values for each scenario.

Finally, you can flip between these scenarios to see how your data changes, helping you make informed
decisions with ease.
What-if Analysis

Goal Seek: Find the Perfect Number
 Next up is Goal Seek, which is like having a GPS for your data. Imagine you know
where you want to go—a specific result you need—but you’re not sure how to get
there.
 Goal Seek lets you work backward to find the exact number you need to reach
your target.
 For example, let’s say you’re trying to figure out the price you should set for a
product to hit a specific profit goal. Instead of guessing and checking, you can just
use Goal Seek to do this. Just input your target profit. It will tell you what price you
need to charge.
What-if Analysis

Data Table: See All the Outcomes at Once
 The Data Table tool allows you to see how different values affect your
results, all in one place. If you’re curious about how changing one or two
variables could change everything, Data Table lets you compare all these
possibilities side by side.
 For instance, if you’re looking at how different interest rates might impact
your loan repayments, a Data Table can show you all the scenarios at a
glance.
Why Should You Use What-If Analysis?
It gives you the power to explore different scenarios without messing up your
original data. This means you can make smarter, data-driven decisions with
confidence.
 Whether you’re managing a business, planning a project, or just organizing your
personal finances, these tools can help you get the most out of your data.
 Key Points to Remember:

 Scenario Manager lets you easily switch between different outcomes by creating and saving
multiple scenarios.
 Goal Seek helps you figure out the exact number you need to reach a specific goal.
 Using the Data tables, you can compare the different values with your results in table format.