Management

Information
Systems

Prof. Nitin C. Kamat

B.E. (Electrical)

MUMBAI  NEW DELHI  NAGPUR  BENGALURU  HYDERABAD  CHENNAI  PUNE

LUCKNOW  AHMEDABAD  ERNAKULAM  BHUBANESWAR  INDORE  KOLKATA  GUWAHATI
© AUTHOR
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means,
electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers.

First Edition : 2011

Second Revised Edition : 2014

Published by : Mrs. Meena Pandey

for HIMALAYA PUBLISHING HOUSE PVT. LTD.,
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PREFACE TO SECOND EDITION
With a deep sense of satisfaction I am very grateful for a remarkable
response towards this book from various Institutions, Faculties and
Students. There have been very positive suggestions from all corners,
particularly from students, who have benefited from the use of this book.

Information Technology is ever changing and new technologies are

added every day. To align with this comprehensive and coverage of
various topics have been modified accordingly.

Contents of book are completely revised and in line with Pune

University Modified Syllabus 2013-14 for MBA

Chapter 12 Supply Chain Management, and Chapter 13 Customer

Relationship Management are deleted and new chapters on Cloud
computing and Mobile Computing are added.

For guidance of Students, hints for answering questions and case

studies appear in Pune University MBA Examination for last six years
are included in Appendix

The layout of the book has been modified to put the subject in better
sequence, Objectives, Summary and Review questions have since
been added

I being Practicing ERP Consultant and instrumental in developing

educational activities for Welingkar Distance Education Institute have
paid to the practical use of MIS techniques and included various
Snapshots for various modules.

Being a faculty, I am involved in imparting training in MIS as subject for

MBA Institutes in Pune and collecting feedback from students of
Symbiosis Institute of Management (UG), Pune.

I am thankful to my Guru Padmashri Dr.S.B.Muzumdar, President

and founder director of Symbiosis International University and
also giving blessings for second edition.
I am also thankful to my school mate and friend Pramod Jejurikar,
Chairman, South Asia e-learning Committee, Rotary Club RID 3131
District Governor who has first inspired me to write this book.

I am thankful to Prof Rajesh Aparnath, HOD, Distance Education Cell,

Welingkar Institute of Management, who has given many new
opportunities in writing books in various IT subjects such as E-
Commerce, Internet Marketing and Enterprise Solutions. This experience
gained in last two years was very useful in updating this MIS book.

My heartfelt thanks to Mr.K.N Pandey, Direcor, and Mrs. Nimisha Kadam

of Himalaya Publishing House Pvt. Ltd., Mumbai, instrumental in front
and back end in marketing and publishing this book in various
Management Institute all over India and also for giving useful feedback
for modifying contents of this book.

At last but not the least I am grateful to my family members, my wife

Arpita, sons Chinmay and Tanmay, daughters in law Chaitali and Asmita
who helped me in various stages of collating information from different
sources.

Prof. Nitin Kamat

Reader’s feedback is highly appreciated. Feel free to contact me or

mail to communicate your views for improvement.

9763216205
nitin.kamat@sify.com,
nitin.kamat2008@yahoo.com
 DETAIL CONTENTS

Section 1
Chapter 1 : Overview : Management Information Systems 3-22
1.1 Introduction, Need of MIS
1.2 Purpose and Objectives
1.3 MIS Definitions
1.4 Types of Information Systems
1.5 Conceptual Design Model of MISv
1.6 Role of MIS as Instrument for Organisational Change
1.7 Information Systems
1.7.1 Strategic Information System
1.7.2 Information Systems to Support Three Levels of Strategy used in Business
1.7.3 Why Information Systems?
1.8 Key Management Issues
1.9 Contemporary Approach to Information Systems
1.10 Porter-Miller Postulates
1.11 Summary
1.12 Review Questions

Chapter 2 : Information Systems in Organisation 23-52

2.1 IS at the Organisational Level
2.2 Types of IS
2.3 Interrelationship
2.4 IS by Function within Organisational Level
2.5 System as Planned Organisational Change
2.6 Establishing Organisational Information Requirement
2.6.1 Need for Information System in Organisation
2.7 Enterprise Analysis
2.8 Critical Success Factors
2.9 System Development and Organisational Change
2.10 The Spectrum of Organisational Change
2.11 Information Uncertainty
2.12 Value of Information
2.13 Sources of Information
2.14 Information Reporting in Organisation
2.15 Human as Information Process

Chapter 3 : Decision Making and Management Information System 53-100

3.1 Manager’s Role in Decision Making
3.2 Types of Decision
3.3 Conceptual Models of Decision Making
3.4 The Process of Decision Making
3.5 Herbert Simons Model of Decision Making
3.6 Group Decision Making
3.7 Characteristics of a DSS
3.8 Capabilities of DSS
3.9 Decision Making Levels
3.10 Integration of TPS, MIS, and DSS
3.11 Components of a DSS
3.12 Group Decision Support System
3.13 Decision Making Tools
3.13.1 Decision Tables
3.13.2 Decision Tree
3.13.3 Principle of Rationality
3.14 Role Play
3.15 Models for Decision Making

Chapter 4 : Database Management Systems 101-127

4.1 Data Cycle
4.2 Database Design
4.3 Database Languages
4.4 Types of Database Management System
4.5 Networking
4.6 Network Topology

Chapter 5 : Data Warehouse and Data Mining 128-150

5.1 Introduction
5.2 History of Data Warehousing
5.3 Data Warehouse
5.4 Data Warehouse Architecture
5.5 Benefits of Data Warehousing
5.6 Online Analytical Processing
5.7 Multidimensional Data
5.8 Data Mining
5.9 Data Mining Tools
5.10 Tasks Solved by Data Mining

Chapter 6 : System Analysis and Design 151-187

6.1 Introduction
6.2 Type of System
6.3 Systems Development
6.4 The Systems Development Life Cycle (SDLC)
6.5 Design Tools use in System Analysis
6.5.1 Data Flow Diagram (DFD)
6.5.2 Entity Relationship Diagram
6.6 Systems Development Methodologies
6.6.1 Waterfall Development-based Methodology
6.6.2 Parallel Development
6.6.3 Development Methodology: Rapid Application Development (RAD)
6.6.4 Prototyping
6.7 Project Team Skills and Roles

Chapter 7 : Information Security and Control 188-207

7.1 Information Security
7.2 Basic Principles of Information Security
7.3 Ethical Issues
7.4 Threats to Information Security
7.5 Protecting Information Resources
7.6 What are firewalls?

Chapter 8 : Information System and Software Quality Assurance 208-219

8.1 Quality
8.2 Quality Concepts
8.3 Quality Costs
8.4 Total Quality Management
8.5 Software Quality Assurance
8.6 Software Reviews
8.7 Statistical Quality Assurance
8.8 Static Validation Techniques
8.9 SQA Plan

Chapter 9 : Functional Applications in Manufacturing and Service Sector 220-236

9.1 Introduction
9.2 MIS Application Framework (Model)
9.3 MIS Operations (Production)
9.4 MIS Materials
9.5 Human Resource Management
9.6 Financial Management
9.7 Marketing Management
9.8 Hotel Management System
9.9 Banking System

Section 2
Chapter 10 : Enterprise Resource Planning 239-274
10.1 What is the Relation of MIS and ERP?
10.2 ERP Definition
10.3 ERP Vendors
10.4 What is the difference between SAP and ERP?
10.5 ERP Customization
10.6 Why ERP?
10.7 Seamless Integration Policy
10.8 Implementing Strategy
10.9 ERP Project Management
10.10 BPR Overview
10.11 Why ERP Project Fails?
10.12 Selecting ERP
10.13 ERP Implementation Tips for Success
10.14 ERP Concept
10.15 Scope of ERP Modules
10.16 ERP Document Flow and Material Flow

Chapter 11 : IT Enabled Services 275-302

11.1 Business Process Outsourcing
11.2 Driving Factors of BPO Revolution
11.3 Business Specialization
11.4 BPO Types
11.5 Identifying and Selecting BPO Opportunity
11.6 Vendor Identification and Selection
11.7 Fundamental Characteristics of a BPO Project
11.8 BPO Relationship Success Factors
11.9 Profit and BPO Relationship
11.10 Developing Interpersonal Relationship
11.11 Geography Information System

Chapter 12 : Cloud Computing 303-318

12.1 Introduction
12.2 Definition
12.3 What is Cloud Computing?
12.4 Types of Cloud Computing
12.5 Cloud Architecture
12.6 Cloud Computing Benefits
12.7 Cloud Computing Transforms Your Business
12.8 Summary
12.9 Review Questions

Chapter 13 : In-Memory Technology and Enterprise Mobility 319-331

13.1 Introduction
13.2 What is Memory Concept?
13.3 What is In-Memory Technology?
13.4 Mobility and Its Need in an Enterprise
13.5 What is Enterprise Mobility?
13.6 Application of Enterprise Mobility to Business
13.7 Definition of Enterprise Mobility
13.8 Use of Mobile Technology in Enterprise
13.9 Summary
13.10 Review Questions

Section 3
Chapter 14 : Real Time Snapshots of MIS and ERP Software for Various
Modules 335-376
14.1 Purchase Master
14.2 Purchase Order
14.3 Item Master
14.4 Inventory Transaction
14.5 Work Order Information
14.6 Production Reports
14.7 Production Master
14.8 Process Production Entry
14.9 Production Indent
14.10 Sales Engineer Master
14.11 CRM Enquiry Data Sub Menu and Entry Screen
14.12 Proforma Invoice
14.13 Commercial Invoice
14.14 Material Inward Transaction
14.15 GL Master
14.16 Account Transaction
14.17 Money Receipts
14.18 Debit Note Journal Voucher
14.19 Payment Voucher
14.20 Credit Note
14.21 Expense Voucher
14.22 Credit Note
14.23 Service Tax Integration

Chapter 15 : Case Studies 377-428

15.1 Hospital Management
15.2 Payroll Accounting and HR Management
15.3 ERP for Corrugated Box Manufacturing Industry
15.4 ERP for Furniture Manufacturing Company
15.5 ERP for Chemical Company
15.6 Kettle Products
15.7 Toshiba Case for Data Warehousing
15.8 MIS in Banking
15.9 DSS Case Study
15.10 Leading Edge Award Winning Mobility Solution Provides MIS with Real Time Advantage
15.11 Michael K. Howard Limited
15.12 Cottsway Housing Association
15.13 South Staffs Housing Association
15.14 Garment Company
15.15 Retail Pharmacy Chain — Global Operation
15.16 How MIS Should Not be Done. Anif MIS Case Study
15.17 FMCG Companies Get IT Savvy
15.18 Bajaj Electrical bagsed the CSI 2010 IT Ecellence Award for its ERP
15.19 ERP in a Company which is Specialising in Glass Window and Glass Shuttrs in Pune
15.20 Scae Out State Server. In Memory Date Grid
15.21 Royal Mail Group
15.22 Cloud Computing for Small Business

Appendix A: Pune University Questions and Answers (Guideline) 429-449

A to Z Index 451-453
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n1n

Section 1
CONTENTS
Chapter 1 Overview Management Information Systems
Chapter 2 Information Systems in Organisations
Chapter 3 Decision Making and Management Information Systems
Chapter 4 Database Management Systems
Chapter 5 Data Warehouse and Data Mining
Chapter 6 System Analysis and Design
Chapter 7 Information Security and Control
Chapter 8 Information System and Software Quality Assurance
Chapter 9 Functional Applications in Manufacturing and Service Sector
n2n MANAGEMENT INFORMATION SYSTEMS
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n3n

Chapter 1

Overview
Management Information Systems

Objectives

 Identify the Need of Management Information System in Organization

 Recognise the Purpose and Benefits of Management Information System in Organization

 Understand MIS Concept and Design Model

 Explore Key Management Issues

 Identify Types of Information System

 Understand Strategic Information System

Structure

1.1 Introduction, Need of MIS

1.2 Purpose and Objectives
1.3 MIS Definitions
1.4 Types of Information Systems
3
 n4n MANAGEMENT INFORMATION SYSTEMS

1.5 Conceptual Design Model of MIS

1.6 Role of MIS and MIS instrument for organizational change
1.7 Information Systems
1.7.1 Strategic Information System
1.7.2 Information Systems to Support Three Levels of Strategy used in Business.
1.7.3 Why Information Systems
1.8 Key Management Issues
1.9 Contemporary Approach to Information Systems
1.10 Porter-Miller Postulates
1.11 Summary

1.12 Review Questions

MIS Solutions grow with Customers’ changing needs.

Add new functionality as you need
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n5n

1.1 Introduction, Need of MIS

Management Information Systems is based on the premise that information system knowledge is
essential for creating competitive firms, managing global corporations, adding business value and
providing useful products, services to the customers. This book provides an introduction to management
Information Systems that undergraduate and MBA students will find vital to their professional success
Today, it is widely recognized that information system knowledge is essential to managers because
most organisations need information system to survive and prosper. Information system can help
companies extend their reach to far away location, offer new products, services, reshape jobs and work
flows and perhaps profoundly change the way they conduct business.
We are living in a time of great change and working in an Information Age. Managers have to
assimilate masses of data, convert that data into information, form conclusions about that information
and make decisions leading to the achievement of business objectives. For an organization, information
is as important resource as money, machinery and manpower. It is essential for the survival of the
enterprise.
Before the widespread use of computers, many organizations found difficulties in gathering, storing,
organizing and distributing large amounts of data and information. Developments in computer technology
made possible for managers to select the information they require, in the form best suited for their
needs and in time their wants. This information must be current and in many cases is needed by many
people at the same time. So it has to be accurate, concise, timely, complete, well presented and storable.
Most firms nowadays depend on IT.
The term management information system (MIS) made its first appearance in U.S. navy report on the
use of computers to construct a single integrated system to manage all navy resources.
A management information system (MIS) is a subset of the overall internal controls of a business
covering the application of people, documents, technologies, and procedures by management accountants
to solve business problems such as costing a product, service or a business-wide strategy. Managemen t
information systems are distinct from regular information systems in that they are used to analyze other
information systems applied in operational activities in the organization. Academically, the term is
commonly used to refer to the group of information management methods tied to the automation or
support of human decision making, e.g., Decision Support Systems, Expert Systems, and Executive
Information Systems.
 Information is necessary input for achieving our objectives to learn
 Information can be considered as the essence of all human intellectual activities
 It is a well known fact that information is fundamental input for activities
 Information would acquire importance like raw material, natural resources and energy as commodities.
 Chief Information Officer is a common designation in any enterprise today
 It is not only business executives and managers who need information support
 Without MIS, it would be impossible for information to be made available
 Organizations, involve several people with different background, culture, aspirations
 A single organisation consists of multiple business units located in different cities
 Materials Manager need information about inventory and capital blocked in inventory
 HR Managers need information about attendance for preparing payroll
 n6n MANAGEMENT INFORMATION SYSTEMS

 Plant Manager for resource allocation

 Need in Manufacturing and Service sectors

1.2 Purpose and Objectives of MIS

MIS combines tech., with business to get people the information they need to do their jobs better/
faster/smarter. MIS professionals work as systems analysts, project managers, systems administrators,
etc., communicating directly with staff and management across the organization.
An ‘MIS’ is a planned system of the collecting, processing, storing and disseminating data in the
form of information needed to carry out the functions of management. In a way, it is a documented
report of the activities those were planned and executed.
According to Philip Kotler “A marketing information system consists of people, equipment, and
procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to
marketing decision makers.”
Management information systems are those systems that allow managers to make decisions for the
successful operation of businesses. Management information systems consist of computer resources,
people, and procedures used in the modern business enterprise. MIS also refers to the organization that
develops and maintains most or all of the computer systems in the enterprise so that managers can
make decisions. The goal of the MIS organization is to deliver information systems to the various levels
of corporate managers. MIS professionals create and support the computer system throughout the
company. Trained and educated to work with corporate computer systems, these professionals are
responsible in some way for nearly all of the computers, from the largest mainframe to the desktop and
portable PCs.
Its purpose is to help managers to solve structured problems. But it should also fulfill a number of
other purposes:
 It should provide a basis to analyze warning signals that can originate both externally and
internally; this is the main function of data base;
 It should automate routine operations thus, avoiding human work in the processing tasks;
 It should assist management in making routine decisions;
 It should provide the information necessary to make non-routine decisions;
 It should serve as a strategic weapon to gain competitive advantage
The fundamental purpose is to provide information support to management functions within an
organisation. MIS is designed and implemented with a view to provide the required information support
to undertake managerial activities such as planning, organizing, staffing, coordination, control and
decision making
MIS in a business organisation has several objectives. They are dependent on different factors
specific to particular business.
Some of the common objectives are :
1. To provide right type of information at lowest cost and right time
2. To ensure managerial activities are provided with adequate and appropriate information support
3. To ensure information overloads as well as generation of redundant information is avoided.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n7n

1.3 MIS Definition

Kelly, defines Management Information System as “A combination of human and computer-based
resources that result in collection, storage, communication and use of data for the purpose of efficient
management of operations and for business planning
T. Lucey, defines MIS as “A system to convert data from external and internal sources into
information and to communicate that information in an appropriate form to managers at all levels in all
functions to enable them to make timely and effective decisions for planning, directing and controlling
the activities of organisation
According to Davis Gordon, “Integrated user machine system for providing information to support
operations, management and decision making functions in an organisation. The system uses computer
hardware and software, manual procedures, models for analysis, planning control and decision making,
and a database
According to Barry Cushing, “MIS is a set of human and capital resources within an organisation
which is responsible for the collection and processing of data to produce information which is useful to
all levels of management in planning and controlling activities in an organisation.
Now if we put discussion together, We can say
— MIS is defined as computer-based information system.
— MIS is system based on the database of the organisation evolved
Though there are a number of definitions, all of them converge on one single point, i.e., the MIS is
a system to support the decision making function in the organization. The difference lies in definin g the
elements of the MIS. However, in today is world MIS a computerized business processing system
generating information for the people in the organization to meet the information needs of decision
making to achieve the corporate objective of the organization.
In any organization, small or big, a major portion of the time goes in data collection, processing,
documenting it to the people. Hence, a major portion of the overheads goes into this kind of unproductive
work in the organization. Every individual in an organization is continuously looking for some information
which is needed to perform his/her task. Hence, the information is people-oriented and it varies with the
nature of the people in the organization.
The difficulty in handling this multiple requirement of the people is due to a couple of reasons. The
information is a processed product to fulfill an imprecise need of the people. It takes time to sear ch the
data and may require a difficult processing path. It has a time value and unless processed on time and
communicated, it has no value. The scope and the quantum of information is individual-dependent and
it is difficult to conceive the information as a well-defined product for the entire. Organization. Since the
people are instrumental in any business transaction, a human error is possible in conducting the same.
Since a human error is difficult to control, the difficulty arises in ensuring a hundred per cent quality
assurance of information in terms of completeness, accuracy, validity, timeliness and meeting the decision
making needs.
In order to get a better grip on the activity of information processing, it is necessary to have a
formal system which should take care of the following points:
 Handling of a voluminous data.
 Confirmation of the validity of data and transaction.
 n8n MANAGEMENT INFORMATION SYSTEMS

 Complex processing of data and multidimensional analysis.

 Quick search and retrieval.
 Mass storage.
 Communication of the information system to the user on time.
 Fulfilling the changing needs of the information.
The management information system uses computers and communication technology to deal with
these points of supreme importance.

1.4 Types of Information System

There are six major types of information systems in contemporary organisations that are designed
for different purposes and different audiences.
1. Operational-level systems are Transaction Processing Systems (TPS), such as payroll or order
processing, that track the flow of the daily routine transactions necessary to conduct business.
Knowledge-level systems support clerical, managerial and professional workers.
2. They consist of Office Automation Systems (OAS) for increasing the productivity of data
workers and Knowledge Work Systems (KWS) for enhancing the productivity of knowledge
workers
3. Management-level systems (MIS and DSS) provide the management control level with reports
and access to the organisation’s current performance and historical records
4. Most MIS reports condense information from a TPS and are not highly analytical. Decision
support systems (DSS) support management decisions when these decisions are unique, rapidly
changing, and not specified easily in advance.
These systems have more advanced analytical models and data analysis capabilities than MIS
and often draw on information from external as well as internal sources.
5. Executive Support Systems (ESS) support the strategic level by providing a generalized computing
and communications environment to assist senior management’s decision making.
An ESS has limited analytical capabilities but can draw on sophisticated graphics software and
many sources of internal and external information.
6. An Expert System is a Software System that attempts to reproduce the performance of one or more
humans and experts, most commonly in a specific problem domain.

1.5 Conceptual Design Model of MIS

Process Model defines entity or a set of activities that together respond to a set of inputs to produce
desired output.
The process of converting input to desired output is governed by factors such as performance
standards, knowledge, procedures, material, machine, constraints and control points
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n9n

Material Machines

Input Processing Output

Knowledge and Training Methods and procedures

MIS or management information sysems is the name given for data processing and so it is needed in
an organization as it is able to process data so much faster than people could do it and because an
organization has so much data to process MIS is essential for the smooth running of the organization .
The concept of the MIS has evolved over a period of time comprising many different facets of the
organizational function. MIS is a necessity of all the organizations.
The initial concept of MIS was to process data from the organization and present it in the form of
reports at regular intervals. The system was largely capable of handling the data from collection to
processing. It was more impersonal, requiring each individual to pick and choose the processed data
and use it for his requirements.
This concept was further modified when a distinction was made between data and information. The
information is a product of an analysis of data. This concept is similar to a raw material and the finished
product. What are needed are information and not a mass of data. However, the data can be analyzed in
a number of ways, producing different shades and specifications of the information as a product. It was,
therefore, demanded that the system concept be an individual-oriented, as each individual may have a
different orientation towards the information. This concept was further modified, that the system should
present information in such a form and format that it creates an impact on its user, provoking a decision
or an investigation. It was later realized then even though such an impact was a welcome modification,
some sort of selective approach was necessary in the analysis and reporting. Hence, the concept of
exception reporting was imbibed in MIS. The norm for an exception was necessary to evolve in the
organization. The concept remained valid till and to the extent that the norm for an exception remained
true and effective. Since the environment turns competitive and is ever changing, fixation of the norm
for an exception becomes futile exercise at least for the people in the higher echelons of the organization.
The concept was then evolved that the system should be capable of handling a need-based exception
reporting. This need may be either of an individual or a group of people. This called for keeping all data
together in such a form that it can be accessed by anybody and can be processed to suit his needs. The
concept is that the data is one but it can be viewed by different individuals in different ways. This gave
rise to the concept of DATA BASE, and the MIS based on the DATABASE proved much more effective.
Over a period of time, when these conceptual developments were taking place, the concept of the
end-user computing using multiple databases emerged. This concept brought a fundamental charge in
MIS. The change was decentralization of the system and the user of the information becoming
independent of computer professionals. When this becomes a reality, the concept of MIS changed to a
decision making system. The job in a computer department is to manage the information resource and
leave the task of information processing to the user. The concept of MIS in today’s world is a system
which handles the databases, provides computing facilities to the end-user and gives a variety of
decision making tools to the user of the system.
 n 10 n MANAGEMENT INFORMATION SYSTEMS

1.6 Role of MIS and MIS Instrument for Organizational Change

MIS acts’ as an agent or a catalyst to bring about organisational change that is needed to cope up
with the changing business environment and the effect of external forces. MIS has shifted from back office
to front office. Information system professionals are conversant with constant change and rapid rate of
technological obsolescence, offers a “Cockpit view” to managers.
The role of the MIS in an organization can be compared to the role of heart in the body. The
information is the blood and MIS is the heart. In the body, the heart plays the role of supplying pure
blood to all the elements of the body including the brain.
The heart works faster and supplies more blood when needed. It regulates and controls the incoming
impure blood, processes it and sends it to the destination in the quantity needed. It fulfills the n eeds of
blood supply to human body in normal course and also in crisis.
The MIS plays exactly the same role in the organization. The system ensures that an appropriate
data is collected from the various sources, processed, and sent further to all the needy destinations.
The system is expected to fulfill the information needs of an individual, a group of individuals, the
management functionaries: the managers and the top management.
The MIS satisfies the diverse needs through a variety of systems such as Query Systems, Analysis
Systems, Modeling Systems and Decision Support Systems. The MIS helps in Strategic Planning,
Management Control, Operational Control and Transaction Processing.
The MIS helps the clerical personnel in the transaction processing and answers their queries on the
data pertaining to the transaction, the status of a particular record and references on a variety of
documents. The MIS helps the junior management personnel by providing the operational data for
planning, scheduling and Controlling and helps them further in decision making at the operations level
to correct an out of control situation. The MIS helps the middle management in short-term planning,
target setting and controlling the business functions. It is supported by the use of the management
tools of planning and control. The MIS helps the top management in goal setting, strategic planning
and evolving the business plans and their implementation.
The MIS plays the role of information generation, communication, problem identification and helps
in the process of decision making. The MIS, therefore, plays a vital role in the management, administration
and operations of an organization.

1.7 Information Systems

The various types of systems the organisation, exchange data with one another. Transaction
processing systems are major source of data for other systems, especially MIS and DSS. Executive
support systems are primarily receipts of data from lower level systems.
However, the different systems in an organisation are only loosely integrated. The information needs
of the various functional areas and organisational levels are too specialized to be served by a single
system.

1.7.1 Strategic Information System

A strategic information system in changes the goals, operations, product, services, or environmental
relationship of organisations to help them gain an edge over competitors. Today, information systems
can so dramatically boost a firm’s productivity and efficiency that business view information as a weapon
against competition and a strategic resource. In the past, information used to be considered a bureaucratic
nuisance.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 11 n

1.7.2 Information systems to support three levels of strategy used in business.

 Information systems can be used to support strategy at the business, firm and industry level.
 Information systems can be used to help firms become a low-cost producer, differentiate products,
or serve new markets.
 Information systems can also be used to “lock in” customers and suppliers using efficient customer
response and supply chain management applications.
 Value chain analysis is useful at the business level to highlight specific activities in the business
where information systems are most likely to have a strategic impact.
 At the firm level, information systems can be used to achieve new efficiencies or to enhance services
by tying together the operations of disparate business units, so that they can function as a whole
or promote the sharing of knowledge across business units.
 At the industry level, systems can promote competitive advantage by facilitating cooperation with
other firms in the industry, creating consortiums or communities for sharing information, exchanging
transactions or coordinating activities.
 The competitive forces model and network economics are useful concepts for identifying strategic
opportunities for systems at the industry level.

1.7.3 Why Information Systems

Four powerful worldwide changes have altered the business environments :
- Emergence of the Global Economy
- Transformation of Industrial Economies
- Transformation of the Business Enterprise
- The Emerging Digital Firm

Emergence of the Global Economy

 Management and control in a global marketplace
 Competition in world markets
 Global work groups
 Global delivery systems
Transformation of Industrial Economies
 Knowledge and information-based economies
 New products and services
 Knowledge a central productive and strategic asset
 Time-based competition
 Shorter product life
 Turbulent environment
 Limited employee knowledge base
Transformation of the Enterprise
 Flattening
 n 12 n MANAGEMENT INFORMATION SYSTEMS

 Decentralization
 Flexibility
 Location Independence
 Low Transaction and Coordination Costs
 Empowerment
 Collaborative Work and Teamwork
Emergence of the Digital Firm
 Digitally enabled relationships with customers, suppliers and employees
 Core business processes accomplished via digital networks
 Digital management of key corporate assets
 Rapid sensing and responding to environmental changes

Information as a strategic resource

Business environment is prone to changes and this factor makes business planning very complex.
Some factors such as the market forces, technological changes, complex diversity of business and
competition have a significant impact on any business prospects. MIS is designed to assess and
monitor these factors. The MIS design is supposed to provide some insight into these factors enablin g
the management to evolve some strategy to deal with them.
Since these factors are a part of the environment, MIS design is required to keep a watch on
environment factors and provide information to the management for a strategy formulation. Strategy
formulation is a complex task based on the strength and the weakness of the organization and the
mission and goals it wishes to achieve. Strategy formulation is the responsibility of the top management
and the top management relies on the MIS for information.
There are various business strategies such as overall company growth, product, market, financing
and so on. MIS should provide the relevant information that would help the management in deciding
the type of strategies the business needs. Every business may not require all the strategies all the time.
The type of strategy is directly related to the current status of business and the goals it wishes to
achieve. The MIS is supposed to provide current information on the status of the business vis-a-vis the
goals. MIS is supposed to give a status with regard to whether the business is on a growth path or is
stagnant or is likely to decline, and the reasons thereof. If the status of the business shows a declining
trend, the strategy should be of growth. If business is losing in a particular market segment, then the
strategy should be a market or a product strategy.
The continuous assessment of business progress in terms of sales, market, quality, profit and its
direction becomes the major role of MIS. It should further aid the top management in strategy formulation
at each stage of business.
The business does not survive on a single strategy but it requires a mix of strategy operating at
different levels of the management. For example, when a business is on the growth path, it would
require a mix of price, product and market strategies. If a business is showing a decline, it would need
a mix of price-discount, sales promotion and advertising strategies.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 13 n

The MIS is supposed to evaluate the strategies in terms of the impact they have on business and
provide an optimum mix. The MIS is supposed to provide a strategy-pay-off matrix for such an evaluation.
In business planning, MIS should provide support to top management for focusing its attention on
decision making and action. In business management, the focus shifts from one aspect to another. In
the introductory phase, the focus would be on a product design and manufacturing. When the business
matures and requires and requires to sustain or to consolidate, the focus would be on the post sales
services and support. The MIS should provide early warning to change the focus of the management
from one aspect to the other.
Evolving the strategies is not the only task the top management has to perform. It also has to
provide the necessary resources to implement the strategies. The assessment of resource need, and its
selection becomes a major decision for the top management. The MIS should provide information on
resources, costs, quality and availability, for deciding the cost effective resource mix.
When the strategies are being implemented, it is necessary that the management gets a continuous
feedback on its effectiveness in relation to the objective which they are supposed to achieve. MIS is
supposed to give a critical feedback on the strategy performance. According to the nature of the
feedback, the management may or may not make a change in the strategy mix, the focus and the
resource allocation.
MIS has certain other characteristics for the top management. It contains forecasting models to
probe into the future—the business model for evaluation of the strategy performance by simulation
business conditions. It contains functional models such as the model for a new product launching,
budgeting, scheduling and the models using PERT /CPM technique for planning.
MIS for the top management relies heavily on databases which are external to the organization. The
management also relies heavily on the internal data which is evolved out of transaction processing.
Management uses the standards, the norms, the rations and the yardsticks while planning and controlling
the business activities. They are also used for designing strategies and their mix.
The MIS is supposed to provide correct, precise and unbiased standards to the top management for
planning.
We can summarise the role of the MIS in the top management function as follows.
MIS supports by way of information, to
1. decide the goals and objectives.
2. determine the correct status of the future business and projects.
3. provide the correct focus for the attention and action of the management.
4. evolve, decide and determine the mix of the strategies.
5. evaluate the performance and give a critical feedback on the strategic failures.
6. provide cost-benefit evaluation to decide on the choice of resources, the mobilization of
resources, and the mix of resources.
7. generate the standards, the norms, the ratios and the yardsticks for measurement and control.
Success of a business depends on the quality of support the MIS gives to the management. The
quality is assured only through an appropriate design of the MIS integrating the business plan with the
MIS plan.
n 14 n MANAGEMENT INFORMATION SYSTEMS

Characteristics of Strategic Information

1.8 MIS and Key Management Issues

 Planning
Planning is basic to all managerial functions. It is a process of selecting one course of action from
different alternatives, for achieving the stated goals, objective and targets. It is a decision making
process determining in advance what to do, when to do, how to do what is to do. Planning creates a
frame of activity and events which are to happen or a runway for achieving corporate goals, objective
and targets. Planning process demands resource allocation through decision making. The organization
may have a plan; but question is how effective the plan is.
 Organizing
Organizing is an important step in the managerial process and relates to the people in an enterprise.
It deals with a quantitative and a qualitative aspect of manpower in terms of placement, the roles they
and the relations amongst them, with the aim that they work together effectively towards accomplishing
the goals, objectives and the targets of the organization. In essence, it deals with organizing the
manpower resources for a given plan of execution.
 Staffing
The function of staffing deals with manning the enterprise as per the organization structure so that
they together implement the process of the management. Staffing involves not only selection of a
person but also appraisal and development so that they perform their designated roles. The selection of
a person is a difficult task.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 15 n

 Coordinating and Directing

After organizing the resources and staffing the planned activities, the business plan is launched.
The process of implementing thepla is dynamic. It calls upon the manager to perform a number of things
in a coordinated manner so that the plan remains valid and the development takes place as per the plan.
Controlling
The last but the most important step in the process of management is controlling, the successful
execution of management plan. Without control, the process becomes unproductive. The purpose of
control is to regulate the process in such a way that the management process continuously strives for
the achievement of the goals, objectives and targets. The control is exercised through a system.

MIS: A Tool for Management Process

The process of management requires a lot of data and information for execution of the plan. This
requirement arises on account of that in each step of management, a variety of decisions are taken to
correct the course of development. The decisions or actions are prompted due to the feedback given by
the control system incorporated in the management system. The control of overall performance is made
possible by way of budget summaries and reports. The summary showing sales, costs, profit and return
on investment throws light on the direction the organization is moving to. The exception reports identify
the weaknesses in the system of management.
If effective management system is to be assured, it has to rest on business information. The
management performance improves if the business risk and uncertainties are handled effectively. If the
information provided is adequate, one can deal with these factors squarely. The information support
improves the lack of knowledge, enriches experience and improves analytical abilities leading to better
business judgment. So, if efficient information support is to be provided, it calls for a system with the
goals of generating management information. A good MIS must furnish information to the managers to
expand their knowledge base. He must know the adverse trends in business, the shortfalls and failures
in the management process.
The MIS should provide the support to act decisively. It should support management in terms of
basic business information at the corporate level and meet the specific needs of the managers. It should
highlight on the critical success factors and support key areas of management.
MIS should have, wherever possible, support systems to help the manager in decision making.
Modern management systems rely on MIS. The complexity of business operations with skill and foresight
to avert the crisis.
Modern business management requires shift from the traditional controls to managerial control. The
shift requires the manager to become more efficient in handling the work he is entrusted with. The
manager becomes more efficient if he is well informed, made richer in knowledge, experience and analytical
skills and is able to face the uncertainties and the risk of business. This is possible only if he is
supported by MIS in his specific task of management of business.
Modern business has business has become more technology- oriented wherein the manager is
required to be up to date on technological advancement not only in his field of operations but also in
the other technologies. The emerging new technologies are posing threats to current business and are
opening new opportunities for new business ventures. The manager has to keep himself abreast on the
information of how these technologies affect his business prospects. A good MIS designed for such a
support is absolutely essential. MIS therefore, is a tool for effective execution of the management
process.
n 16 n MANAGEMENT INFORMATION SYSTEMS

1.9 Contemporary Approach to Information Systems

1. Technical Approach
2. Behavioral Approach
3. Socio-technical Approach
Technical Approach
 Computer science
Theories of computability
Methods of computation
Methods of efficient data storage and access
 Management science
Models for decision making
Management practices
 Operations research
Mathematical techniques for optimizing selected parameters of organisations, such as transportation,
inventory control, etc.
 Socio-technical Systems
Optimize systems performance: Technology and organisation
Organisations mutually adjust to one another until fit is satisfactory
Information systems are socio-technical systems. Although they are composed of machines, devices,
and “hard” physical technology, they require substantial social, organizational, and intellectual
investments to make them work properly. Since problems with information systems — and their solutions
— are rarely all technical or behavioral, a multidisciplinary approach is needed.

Technical Approaches

Computer Science Operations Research

Management Science Sociology

Economics
Psychology

Behavioral Approaches
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 17 n

The technical approach emphasizes mathematically-based, normative models to study information

systems, as well as the physical technology and formal capabilities of these systems. The behavioral
approach, a growing part of the information systems field, does not ignore technology, but tends to
focus on non-technical solutions concentrating instead on changes in attitudes, management and
organizational policy, and behavior.
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.
In the socio-technical view of systems, optimal organizational performance is achieved by jointly
optimizing both the social and technical systems used in production. Adopting a socio-technical systems
perspective helps to avoid a purely technological approach to information systems.
Technology must be changed and designed, sometimes even “de-optimized,” to fit organizational
and individual needs. Organizations and individuals must also be changed through training, learning,
and planned organizational change to allow technology to operate and prosper. The technical approach
emphasizes mathematically based, normative models to study information systems, as well as the physical
technology and formal capabilities of these systems. The behavioral approach, a growing part of the
information systems field, does not ignore technology, but tends to focus on non-technical solutions
concentrating instead on changes in attitudes, management and organizational policy, and behavior.
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.
In the socio-technical view of systems, optimal organizational performance is achieved by jointly
optimizing both the social and technical systems used in production. Adopting a socio-technical systems
perspective helps to avoid a purely technological approach to information systems.
Technology must be changed and designed, sometimes even “de-optimized,” to fit organizational
and individual needs. Organizations and individuals must also be changed through training, learning,
and planned organizational change to allow technology to operate and prosper.
The logical view presents data as they would be perceived by end-users or business specialists;
whereas the physical view shows how data are actually organized and structured on physical storage
media.
High-level versus low-level. Logical implies a higher view than the physical. Users relate to data
logically by data element name; however, the actual fields of data are physically located in sectors on
a disk. For example, if you want to know which customers ordered how many of a particular product,
your logical view is customer name and quantity. Its physical organization might have customer name in
a customer file and quantity in an order file cross referenced by customer number. The physical sequence
of the customer file could be indexed, while the sequence of the order file could be sequential.
A message transmitted from Phoenix to Boston logically goes between two cities; however, the
physical circuit could be Phoenix to Chicago to Philadelphia to Boston.
When you command your program to change the output from the video screen to the printer that is
a logical request. The program will perform the physical change of address from, say, device number 02
to device number 04.
 n 18 n MANAGEMENT INFORMATION SYSTEMS

The word physical view comes from the viewing of the database. The viewing of database can be
categorized into two categories: physical view and logical view. In viewing a database, there can be
many different ways users can view a database depending on their needs and purposes. Physical view
refers to the way data are physically stored and processed in a database. On the other side, logical view
is designed to suit the need of different users by representing data in a meaningful format. Another
word, the logical view tells the users, in their term, what is in the database. So while there can be
numerous logical views of a database to suit the needs of the users, there can only be one physical
view of a database because physical view deals with the physical storage of information on a storage
device.

Benefit of Different View

The capability of allowing different views (both logical views and physical views) in a database,
gives users a lot of flexibility. With the logical views, the users can see data differently from how they
are stored and most of all, users doesn’t need to know the technically detail of the physical storage. On
the other hand, database specialist and advance users could benefit from the use of physical view of
the database because through physical view, they can see the physical storage of the data. This allows
specialist to make the database more efficient.

Understanding the purpose of different views and examples

Understanding physical view and the difference between physical and logical views is very important.
Imagine that if a database called “data soft “hit the market with only one physical view, would the
database sell and be very popular? May be not. This is because the database would get too technical
that user has to look through the physical storage to see the database itself. How about if “data soft”
now has one physical view and one logical view, would the database sell and be popular? May be not,
because there’s only one way the users can view the database no matter how many users are there.
Think about the employee database in a restaurant, it would store lots of data like employee Id,
social security Id, numbers of complaints, hours worked, hourly rate, vacation time, sick days taken,
taxes paid and wage paid. However, managers and employees do not need to see all the information of
that database. For employee, the data that are relevant to them are hour work and hourly rate, but they
do not need to see data like numbers of complaints.
For managers, data like numbers of complaints, hours’ work and wage paid would be necessary for
them to monitor the cost and access employee performance. However, managers do not need see the
data like social security as those are personal information of the employee. Hence, a database would
works best when it has many different logical views for different users and each view would have only
the relevant information for that users.
The physical view of the database becomes useful when a database specialist design the database
and makes the database efficient. The physical views contain the information of where the data are
physically stored. In the example of the restaurant employee database, the whereabouts of physical
storage of the database are irrelevant to manager and employee because they do not need to know that.
However, when the database becomes substantially large and complicated, it’s important for database
specialist to design the physical storage of the data so that data are well organize and efficient to
access.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 19 n

External Schema Internal Schema

– User View – – Computer View –

MIS
Vision, Mission,
Goals

Principles and Applications of

Management

Uses of Database and Knowledge Base

Computers and Information Technology

Logical view of MIS

Layered
Products

Functional Application Systems

Business Transaction Processing Systems

Physical view of MIS

 n 20 n MANAGEMENT INFORMATION SYSTEMS

1.10 Porter-Miller Postulates

Acording to Porter-Miller, Information Technology is affecting competition in three vital ways.
1. It changes industry structure, and in doing so, alters the rule of competitions.
2. It spawns whole new business, often from within the companies’ existing operations.
3. It creates competitive advantages by giving companies new ways to out perform their rivals

1. Changes in structure
According to Porter-Miller the structure of industry is emboidied in five competitive forces that
collectivelly determine industry profitabilty
(a) The bargaining power of customers
(b) The bargaining power of suppliers
(c) Threat of new entrants in firm’s market
(d) Pressure from substitute products or services
(e) Positioning of traditional industry competitors
Information Technolgy can alter each of competitive forces and thereby help the firm gain competitive
advantage

2. Spawning of new business

It helps new industry in 3 ways
1. Makes new business technologically feasible
2. By creating derived demand for new product
3. It helps to create/spawn business with old ones.

3. New ways of doing the things

Information, and IT facilitate evolution/development of new ways of doing old things differentlly.
This difference makes the difference and confers competitive advantage on a firm.
In order to understand the specific use of information for competitive advantage, we would consider
the consider the use under two types :

a) Functional uses
Information helps in lowering cost in all parts of value chain
Helps in product delivery
Adding value to quality
Improves quality of services and operations.

b) Strategic uses
Information gives new way to out perform their rivals
A firm can use four competitive strategies to deal with competitive forces
Product differentiation.
OVERVIEW MANAGEMENT INFORMATION SYSTEMS n 21 n

Focused differentiation.
Developing right linkages to customers and suppliers.
Becoming a low cost producer.
A firm may/can achieve competitive advantage by pursuing one or more above strategies
simultaniously.

Porter-Miller’s Competitive Forces Model

Threat of Threat of
New Market Substitute Products
Entrants and Services

INDUSTRY

The Rivalry among

Firm Existing
Competitors

Bargaining Power Bargaining Power

of of
Suppliers Customers
 n 22 n MANAGEMENT INFORMATION SYSTEMS

1.11 Summary
Management Information Systems is based on the premise that information system knowledge is
essential for creating competitive firms, managing global corporations, adding business value and
providing useful products, services to the customers.
Information system can help companies extend their reach too far away location, offer new products,
services, reshape jobs and work flow and perhaps profoundly change the way they conduct business.
The fundamental purpose is to provide information support to management functions within an
organization MIS is designed to and implemented with a view to provide the required information
support to undertake managerial activities such as planning, organizing, staffing, coordination, con trol
and decision making
MIS is defined as Computer-based information system.MIS is system based on the database of the
organization evolved. The system uses computer hardware and software, manual procedures, models
for analysis, planning control and decision making, and a database
There are six major types of information systems in contemporary organizations that are designed
for different purposes and different audiences
Four powerful worldwide changes have altered the business environment
- Emergence of the Global Economy
- Transformation of Industrial Economies
- Transformation of the Business Enterprise
- The Emerging Digital Firm
Contemporary approach to information systems.
1. Technical approach
2. Behavioral approach
3. Socio-technical approach

1.12 Review Questions

1. Explain the role of IT in MIS department. (Pune University May 2007)
2. Define MIS and explain contemporary approaches to MIS. (Pune University Dec 2010)
3. Explain contemporary approaches to MIS. (Pune University Dec 2010)
4. MIS: A Tool for Management Process. Discuss

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