CHAPTER TWO

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Foundational Concepts in MIS
2.1 Introduction
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• The question of why we need to study information systems and information
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technology has evolved into a moot issue.
A
• Information systems have become as integrated into our daily business activities
as accounting, finance, operations management, marketing, human resource
management, or any other major business function.
• Information systems and technologies are vital components of successful
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businesses and organizations.
R
• A management information system (MIS) is designed by an organization for its
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smooth functioning. The MIS, a decision-making instrument used by top
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management, comprises of a set of controls.
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• These controls cover the basic spheres of the business: its people, technologies,
S policies and procedures.
S • The MIS gathers information on all the important realms of the business,
tabulates the information and provides meaningful reports.
• Information technology can help all kinds of businesses to improve the efficiency
and effectiveness of their business processes, managerial decision making, and
I workgroup collaboration, which strengthens their competitive positions in
N rapidly changing marketplaces.
F • Business firms invest heavily in information systems to achieve six strategic
O business objectives:
R • Operational excellence
M • New products, services, and business models
A • Customer and supplier intimacy
T • Improved decision making
I • Competitive advantage
O • Survival
N 2.2 MIS and Management Functions
The objective of MIS is to provide information for decision making on planning,
staffing, organizing and controlling the operations of subsystems of the form and to
K provide a synergetic organization in the process.
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2.3 Data, Information, Knowledge and Wisdom
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Data vs. Information
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Data consists of facts and figures that are relatively meaningless to the user. Data are
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E the raw materials in the production of information. For example, data may be the
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WISDOM
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number of hours worked for each employee in the company. When this data is
processed, it can be converted into information.

Information is processed data or meaningful data. Information can be raw data or data
manipulated through tabulation, addition, subtraction, division, or any other operation
that leads to greater understanding of a situation. For example; when the hours worked
by each employee are multiplied by the hourly rate, the product is the gross earnings.
The transformation of data into information is performed by an information processor.
The information processor is one of the key elements in the conceptual system and can
include computer components, non computer components or both.

The four stages of processing

All information systems operate in the same basic fashion whether they include a
computer or not. However, the computer provides a convenient means to execute the
four main operations of an information system:

 Entering data into the information system (input)

 Changing and manipulating the data in the information system (data processing)
 Getting information out of information system (output)
 Storing data and information (storage)
1. Input and transaction recording: The first step is collecting and introducing data,
known as the input into the information system. Most data an organization uses as
input to its information system are generated and collected within the organization.
These data results from transactions undertaken in the due course of business. A
transaction is a business event; a sale, a purchase, the hiring of a new employee etc.
These transactions can be recorded on paper and later entered into a computer system.

2. Processing: The computer’s greatest contribution to information systems is efficient

processing of data. The computer’s speed and accuracy let organization’s process
millions of pieces of data in several seconds. These astronomic gains in the speed and
affordability of computing have made information the essential ingredient for an
organization’s success.

3. Output: Output is the information an information system produces and displays in

the format most useful to an organization. The most widely used output device is the
video display, or video monitor, which displays output visually.

4. Storage: Computers store information on both devices that are internal to the
machine and those that are external. The computer’s internal memory stores data and
programs while processing them.

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Knowledge and Wisdom

Knowledge is information and understanding about a subject which a person has, or

which all people have. Knowledge is defined as a justified belief that increases an
entity's capacity for effective action. E.g. If you say that something is true to your
knowledge or to the best of your knowledge, you mean that you believe it to be true but
it is possible that you do not know all the facts. Knowledge may be viewed from several
perspectives (I) a state of mind, (2) an object, (3) a process, (4) a condition of having
access to information, or (5) a capability.
Knowledge has been described as "a state or fact of knowing" with knowing being a
condition of "understanding gained through experience or study; the sum or range of
what has been perceived, discovered, or learned. The perspective on knowledge as a
state of mind focuses on enabling individuals to expand their personal knowledge and
apply it to the organization's needs. A second view defines knowledge as an object. This
perspective posits that knowledge can be viewed as a thing to be stored and
manipulated (i.e., an object).
Alternatively, knowledge can be viewed as a process of simultaneously knowing and
acting. The process perspective focuses on the applying of expertise. The fourth view of
knowledge is that of a condition of access to information. According to this view,
organizational knowledge must be organized to facilitate access to and retrieval of
content. This view may be thought of as an extension of the view of knowledge as an
object, with a special emphasis on the accessibility of the knowledge objects.
Finally, knowledge can be viewed as a capability with the potential for influencing
future action builds upon the capability view by suggesting that knowledge is not so
much a capability for specific action, but the capacity to use information; learning and
experience result in an ability to interpret information and to ascertain what
information is necessary in decision making.
Wisdom: is complete understanding of the effects and outcomes of knowledge.
Wisdom is the ability to use your experience and knowledge in order to make sensible
decisions or judgments. If you talk about the wisdom of a particular decision or action,
you are talking about how sensible it is. You can use wisdom to refer to ideas that are
accepted by a large number of people.

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Figure 2.1 the linkage of data, info, knowledge and wisdom

Finally, wisdom is thought to be the collective and individual experience of applying knowledge
to the solution of problems. Wisdom involves where, when, and how to apply knowledge.

2.4 The Information Needs and Sources of Managers

 Generally, managers at different levels of an organizational hierarchy:
 Make different types of decisions
 Control different types of processes
 Therefore, they have different information needs
Management structure for information systems projects
 Hierarchy in large firms
– Corporate strategic planning group
 Responsible for firm’s strategic plan
– Information systems steering committee
 Reviews and approves plans for systems in all divisions
– Project management group
 Responsible for overseeing specific projects
– Project team
 Responsible for individual systems project

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2.2 management level and need of information
Characteristics of Information at Different Managerial Levels
 Different management levels have different information needs
 Information needed by different managerial and operational levels varies in the
time span covered, level of detail, source, and other characteristics over a broad
spectrum
 Data Range: Amount of data from which information is extracted
 Time Span: How long a period the data covers
 Level of Detail: Degree to which information is specific
 Source: Internal versus External
 Internal data: collected within the organization
 External data: collected from outside sources
• Media, newsletters, government agencies, Internet
 Outside information now easier to get
 More free information
 Information available in easy-to-manipulate format
 “Data shoppers” allowed to download data they can further process to fit their
needs
 Subscriptions to online message services on highly focused topics
 Results of research and reports of trends and forecasts offered for a fee
2.5 A Framework for Information Systems
Figure 1.2 illustrates a useful conceptual framework that organizes the knowledge
presented in this text and outlines areas of knowledge you need about information

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systems. It emphasizes that you should concentrate your efforts in the following five
areas of IS knowledge:

Management
Challenge

Business Information
Application technology
Information
system

Development Foundation
system concepts

FIGURE 1.2 A framework that outlines the major areas of information systems
knowledge needed by business professionals.
Foundation Concepts: Fundamental behavioral, technical, business, and managerial
concepts about the components and roles of information systems. Examples include
basic information system concepts derived from general systems theory or competitive
strategy concepts used to develop business applications of information technology for
competitive advantage.
• Information Technologies: Major concepts, developments, and management issues in
information technology, that is, hardware, software, networks, data management, and
many Internet-based technologies.
• Business Applications: The major uses of information systems for the operations,
management, and competitive advantage of a business
• Development Processes: How business professionals and information specialists
plan, develop, and implement information systems to meet business opportunities.
Management Challenges: The challenges of effectively and ethically managing
information technology at the end-user, enterprise, and global levels of a business.
2.6 Business Systems
While there are a seemingly endless number of software applications, there are three
fundamental reasons for all business applications of information technology. They are

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found in the three vital roles that information systems can perform for a business
enterprise:
• Support of business processes and operations.
• Support of decision making by employees and managers.
• Support of strategies for competitive advantage.
The Internet and related technologies and applications have changed the ways
businesses operate and people work, as well as how information systems support
business processes, decision making, and competitive advantage. Thus, many
businesses today are using Internet technologies to Web-enable their business processes
and create innovative e-business applications.
2.6.1. e-business
E-business (electronic business) is the conducting of business on the Internet, not only
buying and selling but also servicing customers and collaborating with business
partners. The processes and tools that allow an organization to use Internet-based
technologies and infrastructure, both internally and externally, to conduct day to day
business process operations.

E-business stands for electronic business and refers to any kind of sales, services,
purchasing or commerce on the Internet. A new-tech jargon word used more for
marketing than for technical description. Most commonly it broadly refers to
conducting business over the Internet (email and web) by communicating and perhaps
transacting (buying and selling) with customers, suppliers, and business partners.

E-business transactions can be done between various parties.

Consumers to Consumers (C2C)
Commerce with no middle business people. The most notable examples are Web-based
auction and classified as sites. Most large venues for such models are quickly
permeated by consumers who participate so actively and regularly that they become
small businesses for them. The Internet has facilitated new types of C2C although it is
important to note that this kind of commerce -- in the form of barter, yard sales, flea
markets, swap meets, and the like -- has existed since time immemorial. Notably, most
of the highly successful C2C examples using the Internet actually use some type of
corporate intermediary and are thus not strictly "pure play" examples of C2C.

Business to Business (B2B)

B2B stands for "business-to-business," as in businesses doing business with other
businesses. B2B stands for transaction activities involving two business entities
(business-to-business transaction). The term is most commonly used in connection with

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e-commerce and advertising, when you are targeting businesses as opposed to
consumers.
On the Internet, B2B (business-to-business), is the exchange of products, services, or
information between businesses. B2B is e-commerce between businesses. B2B
Communication using XML (hypertext markup language) over HTTP B2B - the basics

Business-to-business electronic commerce (B2B) typically takes the form of automated

processes between trading partners and is performed in much higher volumes than
business-to-consumer (B2C) applications.

Business to Consumers (B2C)

Refers to businesses selling products or services to end-user consumers.
B2C stands for transaction activities involving a business and a consumer (business-to-
consumer transaction).

Electronic commerce comprises commercial transactions, involving both organisations

and individuals. From the technical point of view e-commerce is the processing and
transmission of digitised data. E-commerce decreases the distance between producers
and consumers. Consumers can make their purchase without entering a traditional
shop.

Business to Administration (B2A)

Short for business-to-administration, also known as e-government. B2A is the idea that
government agencies and businesses can use central Web sites to conduct business and
interact with each other more efficiently than they usually can off the Web. FindLaw is
an example of a site offering B2A services -- a single place to locate court documents, tax
forms and filings for many different local, state and federal government organizations

Figure 2.2 E-business categories

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