INTRODUCTION

Management Information System (MIS) is a study of people, technology, organizations, and the
relationships among them in a broader sense. However in precise terms MIS is a software system that
focuses on the management of information technology to provide efficiency and effectiveness or
strategy decision making. The term is often used in the academic study of businesses and has connections
with other areas, such as information systems, information technology, informatics, e-commerce and
computer science. In this unit, we will discuss the basic concepts in Management Information
System.

Management Information System is an accumulation of 3 different terms as explained below.

Management: We can define management in many ways like, “Manage Man Tactfully” or Management is
an art of getting things done by others. However, for the purpose of Management Information System,
management comprises the process and activity that a manager does in the operation of their
organization, i.e., to plan, organize, direct and control operations.
Information: Information simply means processed data or in the layman language, data which can be
converted into meaningful and useful form for a specific user.
System: The system can be explained in a following ways:

 System can be defined as a set of elements joined together for a common objective.
 A group of interrelated or interacting elements forming a unified whole e.g., business organization
as systems.
 A group of interrelated components working together towards a common goal by accepting input
and producing output in an organized transformation process.

Data and information

By data we mean the facts or figures representing an object, place or the events occurring in the
organization. It is not enough to have data (such as statistics on the economy). Data themselves are fairly
useless, but when these data are interpreted and processed to determine its true meaning, they become
useful.
Characteristics of Data
 They are facts obtained by reading, observation, counting, measuring and weighing etc. which are then
recorded
 Data are derived from external and internal sources (activities with firm).
 Data may be produced as an automatic by-product of some routine but essential operation such as the
production of an invoice or alternative a special counting or measuring procedure must be introduced
and the result recorded.
  The source of data need be given considerable attention because if the sources of the data flawed, any
resulting information will be worthless.
Data Processing
Data or processing systems perform the essential role of collecting and processing the daily transactions of
the organizations. Data processing is necessary to ensure that the day-to-day activities of the organization
are processed, recorded and acted upon. Files are maintained which provide both the current data for
transaction, for example the amount invoiced and cash received during the month for statement preparation,
and which also serve as a basis for operational and tactical control and for answering enquiries.
By information, we mean that the data have been shaped into a meaningful form, which may be useful for
human beings.

Business Information System: Meaning, Features and Components

Meaning of Business Information System:

Business information systems are sets of inter-related procedures using IT infrastructure in a business

enterprise to generate and disseminate desired information.

Such systems are designed to support decision making by the people associated with the enterprise in the

process of attainment of its objectives.

The business information system gets data and other resources of IT infrastructure as input from the

environment and process them to satisfy the information needs of different entities associated with the

business enterprise.
There are systems of control over the use of IT resources and the feedback system offers useful clues for

increasing the benefits of information systems to business. The business information systems are sub-

systems of business system and by themselves serve the function of feedback and control in business system.
Features of Business Information System:

Characteristics & features of business information system are:

1. The business information systems are subject to the dynamics of business environment and need to be

flexible enough to absorb the inevitable changes in the information needs of business. They have to be

efficient to satisfy the demanding and ‘hard task masters,’ the business managers. Thus, there is need to

balance the conflicting objectives in the process of designing business information systems.

2. Business information systems need to be proactive. They should anticipate changes in information needs

of users and accordingly adapt themselves to suit their needs. This has become important because of the fact

that the managers get involved in the routine activities to the extent that the decision making becomes a

matter of imitating what competitors are doing or planning to do, rather than making an informed choice.

3. The purpose of business information system is to cater to the information needs for decision making in

business.

4. The business information systems have to be designed keeping in view the availability of financial and

human resources to the business enterprise.

5. The cost effectiveness is a matter of prime concern in the development and maintenance of business

information systems. Economic justification for investment in IT infrastructure for business information

systems is a pre condition for its existence and sustenance.

Key Components of Business Information System:

Information systems can be described by four of their key components which are:

1. Decisions
2. Transactions and processing

3. Information and its flow

4. Individuals or functions involved.

It is difficult to observe the decision process through we can see and review the results of a decision.

Transactions are usually more visible, though many current systems use computer programs, which are not

easy to understand, to process transactions. In principle, an observer can see information and its flows.

Individuals can be observed too, but it is not always easy to figure out the information processing functions

they perform.

Information System
Meaning: An information system can be any organized combination of people, hardware, software,
communication software and data resource that collects transformation or screening the information in an
organization.
Definition: An information system can be defined as a set of interrelated components that collect (or
retrieve), process, store and distribute information to support decision making, coordination and control
in an organization.

Examples of Information System

A business is an example of an organizational system to an economic resource (input) is transformed by

various business processes into goods and services (output).
 Information system provides information on the operation of the system to management for the direction
and maintenance of the system as it exchanges inputs and output with its environment.

Some examples of information systems include the following.

 Airline reservations (seat, booking, payment, schedules, boarding list, special
needs, etc.).
 Bank operations (deposit, transfer, withdrawal) electronically with a
distinguish payment gateways.
 Integration of department with the help of contemporary software’s like ERP.
 Logistics management application to streamline the transportation system.
a. Feedback and control
A system with feedback and control components is sometimes known as cybernetic
system that is a self monitoring or self regulating system.
b. Feedback.
Feedback is a data about the performance of a system.
c. Control.

Control involves monitoring and evolving feedback determines whether a system is moving towards the achievement

of its goals. The control function makes necessary adjustments to a system input and possessing components to ensure

that to produce proper output.

Types of Information Systems:

1. TPS Transaction Processing System

2. MIS Management Information System
3. DSS Decision Support system
4. ESS Executive Support System
5. OAS Office Automation System

1. TPS are used primarily for structured operational, and to a lesser degree, management control
applications.

2. MIS are used for semi--structured, management control applications. It also overlaps into the
operational and strategic planning realms as well.

3. DSS are used primarily for unstructured decision-making whether that occurs at the
operational, management and strategic planning levels.

4. ESS is used primarily for structured management and strategic planning applications.

5. OAS are used as a facilitator of office correspondence and communication, underlies all of
this activity.

A typical organization is divided into operational, middle, and upper level. The information
requirements for users at each level differ. Towards that end, there are number of information
systems that support each level in an organization.
 Pyramid Diagram of Organizational levels and information requirements
 Transaction Processing System (TPS)
 Management Information System (MIS)
 Decision Support System (DSS)
 Artificial intelligence techniques in business
 Online Analytical Processing (OLAP)
Pyramid Diagram of Organizational levels and information requirements
Understanding the various levels of an organization is essential to understand the
information required by the users who operate at their respective levels.
The following diagram illustrates the various levels of a typical organization.
 Operational Management Level
The operational level is concerned with performing day to day business transactions of
the organization.
Examples of users at this level of management include cashiers at a point of sale, bank
tellers, nurses in a hospital, customer care staff, etc.
Users at this level use make structured decisions. This means that they have defined rules
that guides them while making decisions.
For example, if a store sells items on credit and they have a credit policy that has some
set limit on the borrowing. All the sales person needs to decide whether to give credit to a
customer or not is based on the current credit information from the system.

Tactical Management Level

This organization level is dominated by middle-level managers, heads of departments,
supervisors, etc. The users at this level usually oversee the activities of the users at the
operational management level.
Tactical users make semi-structured decisions. The decisions are partly based on set
guidelines and judgmental calls. As an example, a tactical manager can check the credit
limit and payments history of a customer and decide to make an exception to raise the
credit limit for a particular customer. The decision is partly structured in the sense that
the tactical manager has to use existing information to identify a payments history that
benefits the organization and an allowed increase percentage.

Strategic Management Level

This is the most senior level in an organization. The users at this level make unstructured
decisions. Senior level managers are concerned with the long-term planning of the
organization. They use information from tactical managers and external data to guide
them when making unstructured decisions.

Transaction Processing System (TPS)

Transaction processing systems are used to record day to day business transactions of the
organization. They are used by users at the operational management level. The main objective of
a transaction processing system is to answer routine questions such as;
 How printers were sold today?
 How much inventory do we have at hand?
 What is the outstanding due for John Doe?
By recording the day to day business transactions, TPS system provides answers to the above
questions in a timely manner.
 The decisions made by operational managers are routine and highly structured.
 The information produced from the transaction processing system is very detailed.
 For example, banks that give out loans require that the company that a person works for should
have a memorandum of understanding (MoU) with the bank. If a person whose employer has a
MoU with the bank applies for a loan, all that the operational staff has to do is verify the
submitted documents. If they meet the requirements, then the loan application documents are
processed. If they do not meet the requirements, then the client is advised to see tactical
management staff to see the possibility of signing a MoU.

Examples of transaction processing systems include

 Point of Sale Systems – records daily sales
 Payroll systems – processing employees salary, loans management, etc.
 Stock Control systems – keeping track of inventory levels
 Airline booking systems – flights booking management

Management Information System (MIS)

Management Information Systems (MIS) are used by tactical managers to monitor the
organization's current performance status. The output from a transaction processing system is
used as input to a management information system.
The MIS system analyzes the input with routine algorithms i.e. aggregate, compare and
summarizes the results to produced reports that tactical managers use to monitor, control and
predict future performance.
For example, input from a point of sale system can be used to analyze trends of products that are
performing well and those that are not performing well. This information can be used to make
future inventory orders i.e. increasing orders for well-performing products and reduce the orders
of products that are not performing well.

Examples of management information systems include

 Sales management systems – they get input from the point of sale system
 Budgeting systems – gives an overview of how much money is spent within the
organization for the short and long terms.
 Human resource management system – overall welfare of the employees, staff
turnover, etc.
Tactical managers are responsible for the semi-structured decision. MIS systems provide the
information needed to make the structured decision and based on the experience of the tactical
managers, they make judgement calls i.e. predict how much of goods or inventory should be
ordered for the second quarter based on the sales of the first quarter.

Decision Support System (DSS)

Decision support systems are used by senior management to make non-routine decisions.
Decision support systems use input from internal systems (transaction processing systems and
management information systems) and external systems.
 The main objective of decision support systems is to provide solutions to problems that are
unique and change frequently. Decision support systems answer questions such as;

 What would be the impact of employees' performance if we double the production lot at
the factory?
 What would happen to our sales if a new competitor entered the market?
Decision support systems use sophisticated mathematical models, and statistical techniques
(probability, predictive modeling, etc.) to provide solutions, and they are very interactive.

Examples of decision support systems include

 Financial planning systems – it enables managers to evaluate alternative ways of
achieving goals. The objective is to find the optimal way of achieving the goal. For
example, the net profit for a business is calculated using the formula Total Sales less
(Cost of Goods + Expenses). A financial planning system will enable senior executives to
ask what if questions and adjust the values for total sales, the cost of goods, etc. to see the
effect of the decision and on the net profit and find the most optimal way.
 Bank loan management systems – it is used to verify the credit of the loan applicant and
predict the likelihood of the loan being recovered.

Artificial intelligence techniques in business

Artificial intelligence systems mimic human expertise to identify patterns in large data sets.
Companies such as Amazon, Facebook, and Google, etc. use artificial intelligence techniques to
identify data that is most relevant to you.
Let's use Facebook as an example, Facebook usually makes very accurate predictions of people
that you might know or went with to school. They use the data that you provide to them, the data
that your friends provide and based on this information make predictions of people that you
might know.
Amazon uses artificial intelligence techniques too to suggest products that you should buy also
based on what you are currently getting.
Google also uses artificial intelligence to give you the most relevant search results based on your
interactions with Google and your location.
These techniques have greatly contributed in making these companies very successful because
they are able to provide value to their customers.

Online Analytical Processing (OLAP)

Online analytical processing (OLAP) is used to query and analyze multi-dimensional data and
produce information that can be viewed in different ways using multiple dimensions.
 Let's say a company sells laptops, desktops, and Mobile device. They have four (4) branches A,
B, C and D. OLAP can be used to view the total sales of each product in all regions and compare
the actual sales with the projected sales.
Each piece of information such as product, number of sales, sales value represents a different
dimension
The main objective of OLAP systems is to provide answers to ad hoc queries within the shortest
possible time regardless of the size of the datasets being used.

Information Systems for Competitive Advantage

In Management Information Systems by Effy Oz (2008), there are eight ways to gain
competitive advantage: Reducing cost, raising barriers to market entrants, establishing high
switching costs, creating new products or services, differentiating products or services,
enhancing products or services, establishing alliances.
Locking in suppliers or buyers Competitive Advantage in any industry or business venture is
achieved when one particular organization performs more effectively and/or efficiently than the
others in the same category. This Competitive Advantage does not have to be all encompassing
of the industry and may only cover small segments. A Competitive Advantage is achieved when
an organization can do any one thing, process, function, etc. more effectively and or efficiently
than others in that industry segment or in some cases across the entire industry.
According to the authors W.R. King, V. Grove, and E.H. Hufnagel (1989), information
technology is used as a strategic tool for companies to increase their competitive advantage at a
time when uncertainty is growing. The idea that information technology can contribute to the
optimization of enterprise resources, enhances, enable and enhance business performance. This
idea was accepted and supported by many empirical studies (V. Sethi and WR King, 1994),
(Chan, SL Huff, DW Barclay, 1997), (AM Croteau and F. Bergeron, 2001).
Authors Rackoff, Wiseman, and Ullrich (1985) have identified several factors that ensure
computerization of competitive advantage of enterprises. They are:
• Modification, differentiation or changes that make the company stand out with its
products and services or weaken competition and reduce the competitive advantages;
• Adapting and adjusting supply cutting costs, reducing consumer spending and increasing
competition expenses;
• Company being introduced innovative products or services that result in changes in the
way business is passed then in the industry;
• Improving growth and development by increasing volume, expanding geographically
and being harmonized with suppliers and customers;
• Forms of mergers and alliances through various agreements in marketing etc.
Since the business environment is constantly changing and evolving, the business itself changes
all the time and with the growth and development information needs to ask businesses will vary.
At the same time computing system needs to support growth, change and development. (Vakola
and Wilson, 2004). The findings of the authors mentioned above clearly show that businesses
invest in computing technology, because they believe that this technology will enable
them to be more competitive (Malaga A. Ross, 2001).
Some other authors Urwiller and Florick (2008) noted that to create competitive
difference as a result of computerization first condition are innovations in
information technology, which today have become an integral part of organizational
strategy and planning processes. Information Technology is not only possible, but is
streamlined entity and the way to create competitive edge. To achieve competitive
difference information technology and its use in business processes results in a new
way of doing business (e-business) as well as providing products and services
electronically. So information technology plays a crucial role in supporting the
business by creating competitive advantage (Competitive Advantage), offering
services and products so that customers appreciate more than the competition. This
technology is able to provide operational excellence (Operational excellence),
initiatives in key business branches (Major Business Initiatives) then the decision
(Decision Making) and organizational transformation (Organizational
Transformation). In what manner is information technology provides operational
perfection (Operational Excellence) being efficient in what we do, using transaction-
processing systems within the organization Transaction processing system (TPS)
using Customer self-