CHAPTER ONE

1. INTRODUCTION TO MIS
1.1. Definition and Importance of MIS
Since it emerged as a field of study in 1970s, MIS has been defined by different authors in different ways.
Some of the most popular definitions are given here below:

 'A computer system or related group of systems which collects and presents management
information to a business in order to facilitate its control.' (CIMA: Computing Terminology)
 'A system to convert data from internal and external 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 for which
they are responsible (Lucey: Management Information systems).
 Management information system (MIS) is an integrated, user-machine system for providing
information to support operations, management, and decision-making functions in an organization.
The system utilizes computer hardware and software; manual procedures; models for analysis,
planning, control and decision-making; and a database (Davis and Olson: 1985). The fact that it is
an integrated system does not mean that is a single, monolithic structure; rather, it means that the
fact parts fit into an overall design. The elements of the definition are highlighted below

Management information system is

 An integrated user-machine system (Some can be performed using machine, other without machines).
 For providing information;
 To support the operations, management, analysis, and decision-making functions of an organization.
 In an organization (an organization is a stable, formal social structure that takes resources from the
environment and processes them to produce outputs).

The system utilizes:

 Computer hardware and software,
 Manual procedures,
 Models for analysis, planning, control, and decision making and,
 A database.
Importance of MIS in Business: Overall cost of information systems is growing overtime and should be
spent wisely. Well managed IS can bring about

- Improves process;
- Improves products and services;
- Improves quality;

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 - Cuts costs;
- Improves management, problem solving and decision making.
At strategic level, MIS can support organization in supporting their strategic goals such as cost leadership,
product differentiation, market niche, etc.,

Scope of MIS: What is common to these definitions is that information is presented to management.
However, this is not the only function of an organization's information systems. A number of tasks might be
performed simultaneously:

 initiating transactions (e.g. automatically making a purchase order if stock levels are below a
specified amount);

 recording transactions as they occur (e.g., a sale is input to the sales ledger system);

 processing data (as described in earlier chapters);

 producing reports (e.g., summaries);

 Responding to enquiries.

Objectives of MIS: The objective of an MIS is to provide information for decision making on planning,
initiating, organizing, and controlling the operations of the subsystems of the firm and to provide a
synergistic organization in the process.

1.2. Subsystems of MIS

MIS has been introduced as a broad concept referring to a federation of subsystems. Two approaches to
defining the subsystems of an MIS are according to the organizational functions which they support and
according to managerial activities for which they are used.

1.2.1. Organizational Function Subsystems

Because organizational functions are somewhat separable in terms of activities and are defined
managerially as separate responsibilities, MIS may be viewed as a federation of information system-- one
for each major organizational function such as production, marketing, finance, etc... There may be common
support systems used by more than one subsystem, but each functional system is unique in its procedures,
programs, models, etc. Typical subsystems for a business organization engaged in manufacturing are
marketing, manufacturing, logistics and personnel:

Table 1.1 Functional subsystems

Major functional subsystem Some typical uses

Marketing Sales forecasting, sales planning, customer and sales
analysis

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 Manufacturing Production planning and scheduling, cost control
analysis
Logistics Planning and control of purchasing, inventories,
distribution
Personnel Planning personnel requirements, analyzing
performance, salary administration
Finance and accounting Financial analysis, cost analysis, capital requirements
planning, income measurement
Information processing Information system planning, cost-effectiveness
analysis
Top management Strategic planning, resource allocation
The database is the primary means of integration of the various subsystems. A data item that is stored or
updated by one subsystem is then available to the other subsystems. For instance, the sales and inventory
information used by the marketing subsystem is supplied through the logistical subsystem; the same data is
used by the manufacturing subsystem for production planning and scheduling.

1.2.2. Activities Subsystems

Another approach to understanding the structure of an information system is in terms of the subsystems
which perform various activities. Some of the activities subsystems will be useful for more than one
organizational function subsystem; others will be useful for only one function.

Table 1.2: Organizational activities

Activity subsystem Some typical uses

Transaction processing Processing of orders, shipments, and receipts.
Operational control Scheduling of activities and performance reports.
Management control Formulation of budgets and resource allocation.
Strategic planning Formulation of objectives and strategic plans.
Note that these activities subsystems correspond to the levels of the pyramid structure that defines MIS
(some at strategic, others at tactical and still others in the operational levels).

Another way of considering MIS in an organization is in terms of inputs, processes and outputs as shown in
the following table.

Table 1.3: Inputs, processes and output of MIS at all levels of management

INPUTS PROCESS OUTPUTS

Strategic Plans, competitor Summarize, Investigate, Key ratios, ad hoc market
Information, overall market Compare, Forecast analysis, strategic plans
information
Management/ Historical, and budget data Compare, Classify, Variance analysis
Tactical Summarize. Exception report

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Operational Customer orders, Update files, Output Updated files listings,
programmed stock control reports. invoices
levels, cash
Receipts/payments

1.3. Contemporary Approaches To MIS

Multiple perspectives on management information systems show that the study of MIS is a
multidisciplinary field. No singe theory or perspective dominates.

Computer
Science

Operations
Psychology
Research

MIS

Management
Sociology
Science

Economics

Figure 1.1 Contemporary approaches to MIS

Figure 1.1 illustrates the major disciplines that contribute problems, issues, and solutions to the study of
management information systems. In general, the field can be divided into technical and behavioral
approaches. Information systems are socio-technical systems. Though they comprise machines, devices and
“hard” physical technology, they still require substantial social, organizational, and intellectual investments
to make them work properly.

Technical Approach: The technical approach to MIS emphasizes mathematically based models to study
information systems as well as the physical technology and formal capabilities of these systems. The
disciplines that contribute to the technical approach are computer science, management science, and
operations research. Computer science is concerned with establishing theories of computability, and
methods of efficient data storage and access. Management science emphasizes the development of models

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for decision making and management practice. Operations research focuses on mathematical techniques for
optimizing selected parameters of organization, inventory control and transaction costs.

Behavioral Approach: An important part of the information systems field is concerned with behavioral
issues that arise in the development and long-term maintenance of information systems. Issues such as
strategic business integration, design, implementation, utilization, and management cannot be explored
usefully with the models used in the technical approach. Other behavioral disciplines contribute important
concepts and methods. For instance, sociologists study information systems with an eye toward how groups
and organizations shape the development of systems and also how systems affect individuals, groups, and
organizations. Psychologists study information systems with an interest in how human decision makers
perceive and use formal information; they also study how people deal with the changes brought about by
new technology. Economists study information systems with an interest in the impact systems have on
control and cost structures within the firm and within the markets.

The behavioral approach does not ignore technology. Indeed, information systems technology is often
stimulated for a behavioral problem or issue. But, the focus of this approach is generally not on technical
solutions. Instead, it concentrates on changes in attitudes, management and organizational policy and
behaviors.

Sociotechnical Systems: Adopting a sociotechnical systems perspective helps to avoid a purely

technological approach to information systems. For instance, the fact that information technology is rapidly
declining in cost and growing in power does not necessarily or easily translate into productivity
enhancement or bottom-line profits.

In this approach, there is the need to optimize systems performance as a whole. Both technical and
behavioral components need attention. This means that technology must be changed and designed in such a
way as to fit organizational and individual needs. At times, the technology may have to be “de-optimized”
to accomplish fit. Organizations and individuals must also be changed through training, learning, and
planned organizational change to allow the technology to operate and prosper. People and organizations
change to take advantage of new information technology change.

1.4 The Evolution and Characteristics of the Information Age

1.4.1 The Evolution of the Information Age
Before 1800s, long before the day of the Lexus, people lived in partnership with the land. In most parts of
the world, the majority of people were farmers whose lives revolved around agriculture. During the
Agriculture Age, entire families worked hand to provide enough food for themselves (table 1.1). This is
still the case in many of the world’s developing countries.

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Gradually, new tools and techniques improved and extended the land that farmers could use for
growing crops or grazing their lands. With these new technologies, more food could be produced; for
the first time, more food was produced than was needed to feed the family. People began to have
surplus food; for the first time, more food was produced than was needed to feed the family. These
surpluses led to the barter and sale of food in return for other goods, food, and services.

Agriculture Age Industrial Age Information Age

Time period: Pre-1800s 1800s to 1957 1957 to present
Majority of workers: Farmers Factory workers Knowledge workers
Partnership: People and land People and machines People and people
Principal tool: Hand tools Machines Information Technology

Table 1.4 the Evolution of the Information Age

With the coming of the Industrial Age, first to England in the 1800s (and strictly later to other countries),
machines began assisting people with their work. These machines extended workers’ capabilities, and the
partnership became one between people and machines. As the 1800s progressed, machines became the
primary tools for the majority of the workers. More and more processes were simplified through
mechanization and automation, and the number of people working in manufacturing and industry increased.

Of course, both agriculture and manufacturing are still important today, in the Information Age. But the
majority of today’s workers are involved in the creation, distribution, and application of information. These
knowledge workers now outnumber those employed in agriculture or manufacturing in the developed world.
( In the United States, white-collar workers outnumbered blue-collar workers for the first time in 1957; the
date often used to mark the beginning of the Information Age). In the Information Age, the partnership is
one of people with other people, and the principal tool is information technology.

Some knowledge workers are very visible, because they use concrete information daily. Stockbrokers,
bankers, accountants, financial planners, and risk managers come to mind immediately. Other types of
knowledge workers include telephone communication specialists, physicians, attorneys, systems analysts,
computer programmers, journalists, and medical researchers.

Knowledge workers often depend on front-line workers for important data. The counter attendants at Hotels
are not knowledge workers, but they do capture data when entering details of your order into a cash
register-like computer terminal. Those data are in turn used by a knowledge worker to manage inventory,
other supplies, and schedule workers. Knowledge workers use information generation throughout the
organization: on the front line, in back office, and in the executive suite.

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 1.4.2 The Characteristics of the Information Age
The information age is distinguished from previous ages on the basis of five characteristics.

 The Information Age came about with the rise of an information based society.
 Businesses in the Information Age depend on information technology to get their work done.
 In the Information Age, work processes are transformed to increase productivity.
 Success in the Information Age is largely determined by the effectiveness with which information
technology is used.
 In the Information Age, information technology is embedded in many products and services.
Underlying all of these characteristics is the central importance of data and information processing in the
day-to-day activities of most people in the industrialized world.

An Information Society: The Information Age came about with the rise of an information society. In an
information society, more people work at handling information than at agriculture and manufacturing
combined. This is true in most advanced western countries.

The Information Age is all about working with information technology and allowing people easy access to
IT. Person-to-person communications and the links between individuals and businesses are important
features of the information age.

Dependence on Information Technology: In the information age, businesses depend on information

technology. Furthermore, an information society depends on much more than computers alone. Knowing
when to use computers is as important as knowing how to use them. Equally important are the abilities to
communicate information using computers and to interconnect people through information technology.

Transformation of Work: In addition to providing new tools, the Information Age transforms earlier tools
and work processes by increasing their productivity and effectiveness. Work processes are the activities that
workers perform, the way they perform these activities, and the tools they use. Productivity is a measure of
the amount of work that can be accomplished with a given level of effort. Effectiveness is the extent to
which desirable results are achieved.

Information Technology Influences Successes: In the Information Age, the most successful are those who
know how to make the most of information technology. Using information technology means much more
than just knowing how to key data into a computer or how to print reports. It also means knowing what IT
can improve your personal performance and how it can exchange a business’s products and services in a
way that increases their value to the firm’s customers.

Embedded Information Technology: In the Information Age, information technology is embedded in

many products and services. Keep in mind, however, that knowledge-based products are desirable only if

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the knowledge adds extra value to the product. Value may be convenience, quality, reliability, or novelty---
any characteristic the consumer feels is useful. Currently, many products are affected by the information
technology such as travel, automobile, television, aircraft, etc.,

1.5 What is Information Technology?

The term Information Technology (IT) refers to whole variety of items and abilities used in the creation,
storage, and dispersal of information. It is important to distinguish between data, information, and
knowledge (these concepts will be discussed in detail in chapter two). Data are simply raw facts, figures,
and details. Information is an organized, meaningful, and useful interpretation of data. Knowledge is an
awareness and understanding of a set of information and how that information can be put to the best use.

Simple examples will clarity these differences. At a retail store, a specific customer’s order contains raw
data identifying the customer, the item(s) and quantity purchased, and the price. At the end of the business
period, the details of all orders are assembled, summarized, and compared with expectations. The resulting
information tells the store’s managers that performance is better or worse than expected. This information
may be combined with another set of information to create the knowledge that some customers are going
elsewhere because of a competitor’s new low price program. This knowledge may cause the store’s
managers to the role of good information in improving performance.

Information technology is divided into three primary components: computers, communications networks
and know-how (the issue of information technology will be treated in detain in chapter three). The ways in
which these elements are combined create opportunities for people and organizations to be productive,
effective, and generally successful.

Computers: In simplest terms, a computer is any electronic system that can be instructed to accept,
process, store and present data and information. The computer includes hardware, software and information.
The computer has become a part of the day-to-day existence of people around the globe. It is difficult to
think of any field that does not involve or is not affected by computers. Computers come in four different
sizes: microcomputers, midrange/minicomputers, mainframes, and supercomputers.

Communication Networks: The invention of the telephone by Alexander Graham Bell in 1876 did a great
deal to foster communication between people. Today, you can call someone virtually anywhere in the
world. As you speak into the telephone, your voice reaches its destination in less than one second. When the
person on the other end of the line talks, you also hear his or her words in a fraction of a second, whether
the voice is coming from Britain, USA, Russia, Japan, etc., virtually any of the 200 countries in the world.

The reason we purchase telephones, and telephone services, is to communicate. A telephone not connected
to the public telephone network is not useful at all. (And, increasingly, a computer not connected to a

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communications network or to other computers will also have limited usefulness.) An integral part of
information technology is the ability to communicate: to send and receive data and information over a
communications network.

A communication network is the interconnection of stations at different locations through a medium that
enables people to send and receive data and information. Telephone wires and cables are common
communications media. Data communication is the transmission of data and information over a
communication medium.

Communications networks are revolutionizing both personal life and products and services of business. For
instance, airlines use communications network to connect with each other, sharing information on passenger
reservations, meal requirements, and baggage handling.

Know How: Although computers and the data communications are very important parts of information
technology, an equally critical par of IT is the ability to draw on the power of IT to solve problems and to
take advantage of the opportunities it creates. Information technology, therefore, implies a need for know-
how, know how to do something well.

Know how includes:

 Familiarity with the tools of IT;

 The skills needed to use these tools;
 Understanding when to use IT to solve a problem or capitalize on an opportunity.

1.6 The Principles of Information Technology

A principle is a fundamental rule, guideline, or motivating idea that, when applied, produces a desirable
result rather than focusing on a particular situation or set of facts, principles prepare you to deal with the
wide variety of situations (problems and opportunities) that you will encounter everyday. The most
important principle of information technology describes the purpose of IT: The purpose of information
technology is to solve problems, to unlock creativity and to make people more effective than they would be
if they did not involve IT in their activities.

An equally important principle of information technology, the more important it is to consider the “high –
touch. It says: the more you rely on advanced technology, like information technology, the more
important it is to consider the “high-touch” aspects of the matter --- that is, “the people side.” A
related principle stresses that: we should always fit information technology to people, rather than ask people
to adjust to information technology.

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These principles suggest that the more we rely on IT, whether in personal activities or in business, the more
important it is to be sure that the personal element is not forgotten.

1.6.1 The Functions of Information Technology

What exactly can IT do? IT performs six information handling functions: capture, processing, generation,
storage, and retrieval, and transmission. The way a person or organization applies these functions
determines the impact and results of using IT.

1. Capture: It is often useful to compile detailed records of activities. This process, data capture, is
performed when IT users expect the data to be useful later.

2. Processing: The activity most often associated with computers, processing, is usually the reason that
people and organizations purchase computers. The processing function entails converting, analyzing,
computing, and synthesizing all forms of data or information. One of the first business applications of
computers, data processing, focuses on handling data (raw numbers, symbols, and letters) and
transforming them into information. Information Processing is a general term for the computer
activity that entails processing any type of information and transforming it into a different type of
information. Text (reports, correspondence), sound (voice, music, tones) and images (visual information
such as charts, graphs, drawings, and animated drawings) can all be processed.

3. Advances in computer technology have led today to a growing interest in multimedia systems. These
systems process multiple types of information simultaneously – for example, an animated presentation
displayed on a computer screen using information retrieved from within the computer, perhaps
accompanied by music, voice, or other types of sound. Other types of processing may have encountered
include the followings:

 Word processing --- The creation of text-based documents, including reports, newsletters, and
correspondence. Word processing systems assist people in entering data, text, and images and
presenting them in an attractive format.

 Image Processing – Converting visual information (graphics, photos, and so forth) into a format
that can be managed within a computer system or transmitted between people and locations. A
process called scanning converts a print or film image into a form that a computer can use.

 Voice processing --- The processing of spoken information. Currently, voice information is most
frequently entered through telephone. Other systems that enable people to “speak” information
directly into a computer system are also emerging.

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4. Generation: Information technology is frequently used to generate information through processing.
Generating information means organizing data and information into a useful form, whether as numbers,
text, sound, or visual image. Sometimes the information is generated in its original form. Other times, a
new form may be generated, as when recorded musical notes are “played” as sound with rhythm and
pauses --- that is, as music.

5. Storage and Retrieval: Through information storage, computers keep data and information for later
use. Stored data and information are placed on a storage medium (for example, a magnetic disk, or CD-
ROM optical disk) that the computer can read. The computer converts the data or information into a
form that takes less space than the original source. For example, voice information is not stored as a
voice we know, but rather as specialty coded form that the computers can manage.

Retrieval entails locating and copying stored data or information for further processing or for
transmission to another user. The person using the computer must keep track of the medium on which
he or she has stored that data or information and make it available to the computer for processing.

6. Transmission: The sending of data and information from one location to another is called transmission.
As noted earlier, telephone systems transmit our conversations from a point of origin to a destination.
Computer systems do precisely the same thing, often using telephone lines. Computer networks can
also send data and information through other media, including satellites and light beams transmitted
along plastic or glass optical fibers. People can send data and information to and from one another,
using the networks to overcome distance barriers.

Two of the most common forms of information transmission are:

 Electronic mail (e-mail) --- The acceptance, storage and transmission of text and image messages
between users of a computer system. Messages can be sent between individuals or broadcast to a
large number of people simultaneously. Typically, these messages are entered through a computer
keyboard and are viewed on the receiving parties’ computer monitor (thus eliminating the need for
sending paper messages).

 Voice messaging (voice mail) – A form of voice processing in which callers leave spoken
messages entered through their telephone receiver. The voice information is transmitted, stored, and
retrieved (“played”) by the recipients.

1.6.2 The Benefits of Information Technology

Information technology is used because of the benefits it provides to the people who use it in their personal
and business activities. Computers and communication systems collectively offer four benefits to users:
speed, consistency, precision, and reliability.

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Speed: Unlike people, computers do everything in fraction of seconds. They are very fast--- much faster
than people could ever be. They can perform complex calculations, recall stored information, transmit
information from one location to another, and move objects around a computer screen in a matter of
seconds.

Consistency: People often have difficulty repeating their actions exactly. Indeed, doing something once is
not nearly as difficult as doing it the same way, and with the same result, repeatedly.

Computers excel at repeating actions consistently whether running a spell-checker built into a word
processor or playing multimedia animation for training purposes, a computer will carry out the activity the
same way every time.

Precision: In addition to being fast and accurate, computers are extremely precise. They can detect small,
even minute, differences the people may not be able to see. In manufacturing an automobile, for example,
the precise placement of a part into position may take the difference between long use and early wear.
Computers excel in managing the smaller differences --- in being precise.

Reliability: With speed, consistency and precision comes reliability. When you know that the same
procedure will be followed consistently, you can expect reliability of results. In other words, you can expect
the same result to be achieved again and again. Another kind of reliability, reliability of use, means that you
can count on computers and communications networks to be available and properly functioning when you
need them.

Computers in general are very reliable. Many people have personal computers that have never needed a
service call. Communications networks are also very reliable, and are generally available for use whenever
needed.

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