Foundational Concepts in Management Information Systems

1. Chapter 2 Foundational Concepts in Management Information System

2. Management has been defined in a verity of ways, but for our purposes it comprises the processes and activities that describe what managers do in the operation of their organization; plan, organize, initiate, and control operations.

3. Because decision making is such a fundamental prerequisite to each of the foregoing processes, the role of MIS becomes that of facilitating decisions necessary for planning, organizing, and controlling the work and functions of the business.

4. 2.3. Business and Management Functions • Business Areas • Managers are found in various business areas of the firm. The three traditional business areas are marketing, manufacturing, and finance in addition to other two areas that have gained major importance-human resources and information services.

5. What managers do? • According the French management theorist, Henri Fayol, managers perform five major functions. • They plan what they are to do. • • They organize to meet the plan. • • They staff their organization with the necessary resources. • • They direct the available resources to execute the plan. • • Finally, they control the resources, keeping them on course. • All managers perform these functions, however with varying emphasis as shown below

6. Figure-2.1: Management Functions

7. 2.4. Data, Information, Knowledge and Wisdom • Data – raw facts about people, places, events, and things that are of importance in an organization. • Information – data that has been processed or reorganized into a more meaningful form for someone. • Knowledge – data and information that is further refined based on the facts, truths, beliefs, judgments, experiences, and expertise of the recipient. • Wisdom-good sense: the ability to make sensible decisions and judgments based on personal knowledge and experience.

8. The information makes a person more knowledgeable. Knowledge is an awareness and understanding of a set of information that help decision-making. Knowledge makes a person wise.

9. 2.5. The Information Needs and Sources • Who are the information users? • • Managers • Non-managers • Non-manages and staff specialists also use the MIS output. • • Persons & organizations in the firm’s environment

10. What are the sources of information? • An organizations information needs are met through gathering information from both internal and external environment. Internal information can be generated by maintaining and processing business transactional data and overall organizational data or information. To this end information system such as TPS & internal database systems play a critical role.

11. While external information can be generated from the following diverse sources: • Various publications of the central, state, or local government • Various publications of international bodies or their subsidiaries or foreign governments • Technical or trade journals • Books, magazines and news papers • Reports and publications of various organizations • Reports of research scholars in different fields • Public records and statistics, historical documents and other sources of published information. • In modern days, Internet is used as a base for information retrieval. One can have access to any kind of information amounting to any quantity through Internet.

12. 2.6. System View • Simply put, a system is an organized collection of parts (or subsystems) that are highly integrated to accomplish an overall goal. • The system has various inputs, which go through certain processes to produce certain outputs, which together, accomplish the overall desired goal for the system. • So a system is usually made up of many smaller systems, or subsystems. • For example, an organization is made up of many administrative and management functions, products, services, groups and individuals.

13. Systems range from simple to complex. • There are numerous types of systems. • For example, there are biological systems (for example, the heart), mechanical systems (for example, a thermostat), human/mechanical systems (for example, riding a bicycle), ecological systems (for example, predator/prey) and social systems (for example, groups, supply and demand and also friendship). • Complex systems, such as social systems, are comprised of numerous subsystems, as well.

14. Not all systems have the same combination of elements, but a basic configuration is illustrated in the figure. below:

15. Input resources are transformed into output resources. • The resources flow from the input element, through the transformation element, and to the output element. • A control mechanism monitors the transformation process to ensure that the system meets its objectives. • The control mechanism is connected to the resource flow by means of a feedback loop, which obtains information from the system output and makes it available to the control mechanism.

16. Open and Closed Systems • Open system: Connected to its environment by means of resource flows (e.g., heating system) • Closed system: Not connected to its environment. They usually exist in tightly controlled laboratory systems. • What is a subsystem? • A subsystem is simply a system within a system. This means that systems exist on more than one level and can be composed of subsystems or elemental parts. • What is interface? • An interface is a connection at system or subsystems boundaries. Example two typical business systems that interface with each other are inventory control and purchasing.

17. What is a Super System? • When a system is part of a larger system, the larger system is the super system. • Physical and Conceptual Systems • Physical system: The business firm is a physical system, composed of physical resources • Conceptual system: It’s a system that uses conceptual resources-information and data- to represent a physical system. • Example: The Computer is a physical system, but the data and information stored in it can be viewed as a conceptual system

18. 2.7.A Framework for Information Systems Figure 2.3: Hierarchy of management

19. Management Levels • Strategic Planning Level • The strategic planning level involves mangers at the top of the organizational hierarchy. The term strategic indicates the long-term impact of top managers’ decisions on the entire organization. The term executive is often used to describe a manager on the strategic planning level. •  Management Control Level • Middle-level managers include regional managers, product directors, and division heads. Their level is called “management control level” due to their responsibility of putting plans into action and ensuring the accomplishment of goals. • Operational Control Level • Lower level managers are persons responsible for carrying out the plans specified by managers on upper levels. Their level is called the “operational control level” because this is where the firm’s operations occur.

20. 2.8. E-Business • What isE-Business? • Electronic business, or e-business, means using the Internet and the web to perform business processes. • Although the terms e-business and e-commerce are used interchangeably, e-commerce refers to selling online, while e-business encompasses all business transactions—marketing, accounting, operations, procurement and supply management. E-business is about using web technology to enhance your business practices. • E-business is not a new concept. Banks have been using electronic fund transfers to move money around the world for decades. Large businesses have used electronic data interchange to place orders and send invoices since the 1960s. What is new is the current accessibility of e-business to small businesses due to reduced costs and simpler set-up.

21. Why Get IntoE-Business? • Like electronic tools developed earlier, including the telephone, fax and calculator, e- business is simply a tool that can enable you to broaden your customer service approach, increase productivity and reduce costs. Consider the top five reasons to use e-business in your organization: • Extend your customer base • E-business provides an easy, low-cost mechanism to market and sell your products and services to customers anywhere. A carefully planned web site and a targeted marketing strategy can enable you to develop new niche markets, become an instant exporter and provide product and service information 24 hours a day, 7 days a week.

22. 2. Respond to new customer and competitive demands • A growing number of customers prefer the shopping and communication convenience, wider product selection (including customized products) and lower costs that e-business offers. Your competitors may be embracing e-business. Therefore, you may want to consider e-business to compete effectively. 3. Enhance your productivity • Companies use e-business to be more productive by reducing duplication, improving communication and streamlining processes. E-mail, for example, facilitates quick, efficient communication with clients, staff and suppliers. And it’s very inexpensive to set up. You might also consider setting up a web site to answer frequently asked questions, save money on printing and paper handling costs and coordinate your supply chain.

23. 4. Lower your procurement and inventory costs • Your e-business activity can help you to buy supplies efficiently. You can research supplier catalogues online and easily compare product features and prices from many competing suppliers. E-business can also help you forecast and monitor inventory levels. Also, you can use e-business to compete on electronic procurement tenders. Many government tenders are now posted on web sites so businesses can access these opportunities electronically. 5. Improve your customer service • Many people prefer to research product information, download software updates, pay bills and check warranty information online—all examples of enhanced customer service. You can use your web site to gather customer feedback that helps you tailor your products and services to your customers’ needs.

24. Web-based business models • The array of business relationships which have emerged in recent times: • E-mail and Internet • You can easily get connected to the Internet and set up an e-mail address. E-mail can enhance your communication with partners, suppliers, and customers in many ways: • A. Marketing • a. Promote products and services to specific client groups and respond to customer enquiries • b. Bid on tender opportunities • B. Communication • a. Keep partners and business associates informed about projects and meetings • b. Transfer documents for development, review, or revision • c. Exchange order forms and invoice • d. Send permission-based e-mail such as subscription newsletters • C. Research/intelligence gathering • a. Compare supplier prices and product specifications online • b. Access electronic databases to gain market intelligence • c. Seek advice from similar businesses outside your competitive market

25. 2. Web site • Consider creating a web site for your business. Web sites range from very simple online brochures to very complex electronic storefronts or marketplaces. You can use a web site to: • a. Promote your products or services • b. Sell products directly to your customers • c. Generate greater awareness of your business • d. Distribute business information to customers and company stakeholders • e. Gather client information and feedback

26. Figure-2.4: An Electronic Commerce Storefront

27. 3. E-Commerce •  Once you market your products and services online, the next step is to buy and sell online either business to business (B2B) or business to consumer (B2C). i.) Business-to-Business E-Commerce (B2B) ii.) Business-to-Consumer E-Commerce (B2C)

28. End!!!