Management Information System

Md. Rashedul Hasan

Southern University Bangladesh.
OBJECTIVES

• Define an information system from both a technical and business perspective.

• Understanding Information Systems: A Business Problem-Solving Approach

• Identify the major management challenges to building and using information

systems

• Explain why information systems are so important today for business and
management

• Evaluate the role of information systems in today’s competitive business

environment

• Assess the impact of the Internet and Internet technology on business and
government
Four Factors of Production

• Land
• Labor
• Capital
• Entrepreneurship
Four Resources

• Physical Resources
• Human Resources
• Financial Resources
• Information Resources
Why Information Systems?

Ask managers to describe their most important resources and

they'll list money, equipment, materials, and people — not
necessarily in that order. It's very unusual for managers to
consider information an important resource, and yet it is. As
electronic business and electronic commerce grow in popularity
and more firms digitize their operations, having useful information
is becoming even more important to the global business
community. This chapter will begin to explain why you need to
manage your information resources as closely as any other in your
organization.
Information technology (IT) Vs. Information System (IS)

Information technology (IT) consists of all the hardware and

software that a firm needs to use in order to achieve its business
objectives.

This includes not only computer machines, storage devices, and

handheld mobile devices, but also software, such as the Windows
or Linux operating systems, the Microsoft Office desktop
productivity suite, and the many thousands of computer programs
that can be found in a typical large firm.

“Information systems” are more complex and can be best be

understood by looking at them from both a technology and a
business perspective.
What Information System is?

Technology perspective
Business Perspective
What Is an Information System? From the Technology perspective

A set of interrelated components

that collect (or retrieve), process,
store, and distribute information to
support decision making and
control in an organization
Technology perspective

Data and Information

Raw data from a supermarket checkout counter can be processed and organized
to produce meaningful information, such as the total unit sales of dish detergent or
the total sales revenue from dish detergent for a specific store or sales territory.
Data

Streams of raw facts representing events such as business

transactions

Data is the input

Think of data as a "raw material" - it needs to be processed before

it can be turned into something useful.
Data comes in many forms - numbers, words, symbols. Data
relates to transactions, events and facts.
Information

Information is data that has been processed in such a way as to

be meaningful to the person who receives it.

Information: Clusters of facts meaningful and useful to human

beings in the processes such as making decisions

Information is the output.

What Is an Information System? From the Technology perspective
A Business Perspective on Information Systems

Information systems are more than just technology.

Businesses invest in IS in order to create value and increase
profitability.
Every business has an information value chain, in which raw
information is systematically acquired and then transformed
through various stages that add value to that information.
The value of an information system to a business, as well as the
decision to invest in any new information system, is, in large part,
determined by the extent to which the system will lead to better
management decisions, more efficient business processes, and
higher firm profitability. Although there are other reasons why
systems are built, their primary purpose is to contribute to
corporate value.
A Business Perspective on Information Systems
A Business Perspective on Information Systems

Managers and business firms invest in information technology and systems

because they provide real economic value to the business.

The decision to build or maintain an information system assumes that the

returns on this investment will be superior to other investments in buildings,
machines, or other assets. These superior returns will be expressed as
increases in productivity, as increases in revenues (which will increase the
firm’s stock market value), or perhaps as superior long-term strategic
positioning of the firm in certain markets (which produce superior revenues
in the future).

Information systems enable the firm to increase its revenue or decrease its
costs by providing information that helps managers make better decisions
or that improves the execution of business processes.
A Business Perspective on Information Systems

From a business perspective, information systems are part of a

series of value-adding activities for acquiring, transforming, and
distributing information that managers can use to improve decision
making, enhance organizational performance, and, ultimately,
increase firm profitability.
What Is an
Information System?

An information system (IS) can be any organized combination of

people, hardware, software, communications networks, data
resources, and policies and procedures that stores, retrieves,
transforms, and disseminates information in an organization.
People rely on modern information systems to communicate with
one another using a variety of physical devices (hardware)
information processing instructions and procedures (software)
communications channels (networks) , and stored data (data
resources) . Although today’s information systems are typically
thought of as having something to do with computers, we have
been using information systems since the dawn of civilization.
Understanding Information Systems: A Business Problem-
Solving Approach

Our approach to understanding information systems is to consider

information systems and technologies as solutions to a variety of
business challenges and problems. We refer to this as a “problem-
solving approach.” Businesses face many challenges and
problems, and information systems are one major way of solving
these problems.
A Business Problem-Solving Approach
A Business Problem-Solving Approach
Problem Identification
The first step in the problem-solving process is to understand what kind of
problem exists.
Before problems can be solved, there must be agreement in a business that
a problem exists,
• about what the problem is,
• about what its causes are,
• and about what can be done about the problem given the limited
resources of the organization.
Problems have to be properly defined by people in an organization before
they can be solved.
For instance, what at first glance what might seem like a problem with
employees not adequately responding to customers in a timely and
accurate manner might in reality be a result of a older, out-of-date
information system for keeping track of customers. Or it might be a
combination of both poor employee incentives for treating customers well
and an outdated system. Once you understand this critical fact, you can
start to solve problems creatively. Finding answers to these questions will
require fact gathering, interviews with people involved in the problem, and
analysis of documents.
Organizational dimensions & Problems

Dimension Description
Outdated business processes
Organizational dimensions Unsupportive culture and attitudes
Political conflict
Turbulent business environment,
change
Complexity of task
Inadequate resources
Technology dimensions & Problems

Dimension Description
Insufficient or aging hardware
Technology dimensions Outdated software
Inadequate database capacity
Insufficient telecommunications
capacity
Incompatibility of old systems with
new technology
Rapid technological change
People dimensions & Problems

Dimension Description
Lack of employee training
Difficulties of evaluating performance
People dimensions Legal and regulatory compliance
Work environment
Lack of employee support and
participation
Indecisive management &
Poor management
A Business Problem-Solving Approach

• Solution Design
The second step is to design solutions to the problem (s) you have
identified. As it turns out, there are usually a great many
“solutions” to any given problem, and the choice of solution often
reflects the differing perspectives of people in an organization.
You should try to consider as many different solutions as possible
so that you can understand the range of possible solutions. Some
solutions emphasize technology; others focus on change in the
organization and people aspects of the problem. As you will find
throughout the text, most successful solutions result from an
integrated approach in which new technologies are accompanied
by changes in organization and people.
A Business Problem-Solving Approach

• Choice
Choosing the “best” solution for your business firm is the next step
in the process. Some of the factors to consider when trying to find
the “best” single solution are the cost of the solution, the feasibility
of the solution for your business given existing resources and
skills, and the length of time required to build and implement the
solution. Also very important at this point are the attitudes and
support of your employees and managers. A solution that does not
have the support of all the major interests in the business can
quickly turn into a disaster.
A Business Problem-Solving Approach

• Implementation
The best solution is one that can be implemented. Implementation
of an information system solution involves building the solution
and introducing it into the organization. This includes purchasing
or building the software and hardware—the technology part of the
equation. The software must be tested in a realistic business
setting; then employees need to be trained, and documentation
about how to use the new system needs to be written.

The software must be tested in a realistic business setting; then

employees need to be trained, and documentation about how to
use the new system needs to be written. You will definitely need to
think about change management.
A Business Problem-Solving Approach

• Implementation
• Change management refers to the many techniques used to
bring about successful change in a business. Nearly all
information systems require changes in the firm’s business
processes and, therefore, changes in what hundreds or even
thousands of employees do every day. You will have to design
new, more efficient business processes, and then figure out how
to encourage employees to adapt to these new ways of doing
business. This may require meeting sessions to introduce the
change to groups of employees, new training modules to bring
employees quickly up to speed on the new information systems
and processes, and finally some kind of rewards or incentives to
encourage people to enthusiastically support the changes.
A Business Problem-Solving Approach

• Implementation
Implementation also includes the measurement of outcomes. After
a solution has been implemented, it must be evaluated to
determine how well it is working and whether any additional
changes are required to meet the original objectives. This
information is fed back to the problem solvers. In this way, the
identification of the problem can change over time, solutions can
be changed, and new choices made, all based on experience.
Problem Solving: A Process, Not an Event

• it is easy to fall into the trap of thinking about problem solving as an event
that is “over” at some point, like a relay race or a baseball game. Often in
the real world this does not happen. Sometimes the solution chosen does
not work, and new solutions are required.
• For instance, the U.S. National Aeronautics and Space Administration
(NASA) spent more than $1 billion to fix a problem with shedding foam on
the space shuttle. Experience proved the initial solution did not work. More
often, the chosen solution partially works but needs a lot of continuous
changes to truly “fit” the situation. Initial solutions are often rough
approximations at first of what ultimately “works.”
• Sometimes, the nature of the problem changes in a way that makes the
initial solution ineffective. For instance, hackers create new variations on
computer viruses that require continually evolving antivirus programs to
hold in check. For all these reasons, problem solving is a continuous
process rather than a single event.
Components of an information system
Why Information Systems Matter

There are four reasons why IT makes a difference to the success

of a business:

Capital management
Foundation of doing business
Productivity
Strategic opportunity and advantage
Capital Management:

• IT is the largest single component of capital investment in the

United States.
• About $1.8 trillion is spent each year by American businesses.
• Managers and business students need to know how to invest this
capital wisely.
• The success of your business in the future may well depend on
how you make IT investment decisions.
Capital Management

Information technology capital investment, defined as hardware, software, and

communications equipment, grew from 32 percent to 52 percent of all invested
capital between 1980 and 2009.
Foundation of doing business:

• Most businesses today could not operate without extensive use of

information systems and technologies.
• The local restaurant probably manages their lunchtime crowds
using hand-held devices that allow the waiter or waitress to
communicate menu orders directly to the kitchen.
• The rental car company uses information technology to track not
only customer orders but may also use global positioning systems
that relay the exact position of every car wherever it is.
Productivity:

• IT is one of the most important tools managers have to increase

productivity and efficiency of businesses.
• According to the Federal Reserve Bank, IT has reduced the rate of
inflation by 0.5 to 1% in the last decade. For firms this means IT is
a major factor in reducing costs.
• It is estimated that IT has increased productivity in the economy
by about 1% in the last decade. For firms this means IT is a major
source of labor and capital efficiency.
Strategic Opportunity and Advantage:

Create competitive advantage: IT makes it possible to develop

competitive advantages.

New Business Models: Dell Computer has built its competitive

advantage on an IT enabled build-to-order business model that
other firms have not been able to imitate.
Create new services: eBay has developed the largest auction
trading platform for millions of individuals and businesses.
Competitors have not been able to imitate its success.

Differentiate yourself from your competitors: Amazon has

become the largest book retailer in the United States on the
strength of its huge online inventory and recommender system. It
has no rivals in size and scope.
What is digital firm? Characteristics of the Digital firm

When a firm goes digital, it's not about just adding a computer system to the
mix. Throwing a computer system at outdated business processes is
exactly the wrong thing to do. A truly digital firm has several characteristics
that distinguish it from most of the firms claiming to be digitized:
Characteristics:
Significant business relationships are digitally enabled and mediated
Core business processes are accomplished through digital networks and
span the entire organization
Key corporate assets are managed digitally internal and external
environments are quickly recognized and dealt with
And the number one reason digital firms experience greater opportunities
for success and profits is because they view information technology as the
"core of the business and the primary management tool."
WHY DO BUSINESS INVEST IN INFORMATION SYSTEMS

• Operational Excellence
Businesses continuously seek to improve the efficiency of their operations
in order to achieve higher profitability. Information systems and
technologies are some of the most important tools available to managers
for achieving higher levels of efficiency and productivity in business
operation.
Wal-Mart, the largest retailer on Earth, exemplifies the power of information
systems coupled with brilliant business practices and supportive
management to achieve world-class operational efficiency. In 2007, Wal-
Mart achieved more than $348 billion in sales—nearly one-tenth of retail
sales in the United States—in large part because of its Retail Link system,
which digitally links its suppliers to every one of Wal-Mart’s 5,289 stores
worldwide. As soon as a customer purchases an item, the supplier
monitoring the item knows to ship a replacement to the shelf. Wal-Mart is
the most efficient retail store in the industry, achieving sales of more than
$28 per square foot, compared to its closest competitor, Target, at $23 a
square foot, with other retail firms producing less than $12 a square foot.
WHY DO BUSINESS INVEST IN INFORMATION
SYSTEMS
• New Products, Services, and Business Models
Information systems and technologies are a major enabling tool
for firms to create new products and services, as well as entirely
new business models. A business model describes how a
company produces, delivers, and sells a product or service to
create wealth. Today’s music industry is vastly different from the
industry in 2000. Apple Inc. transformed an old business model of
music distribution based on vinyl records, tapes, and CDs into an
online, legal distribution model based on its own iPod technology
platform. Apple has prospered from a continuing stream of
innovations, including the original iPod, the iPod nano, the iTunes
music service, the iPod video player, and the iPhone.
WHY DO BUSINESS INVEST IN INFORMATION SYSTEMS

• Customer and Supplier Intimacy

When a business really knows its customers and serves them well, the way they want to
be served, the customers generally respond by returning and purchasing more. This
raises revenues and profits. Likewise with suppliers: the more a business engages its
suppliers, the better the suppliers can provide vital inputs. This lowers costs. How to
really know your customers, or suppliers, is a central problem for businesses with
millions of offline and online customers.

The Mandarin Oriental in Manhattan and other high-end hotels exemplify the use of
information systems and technologies to achieve customer intimacy. These hotels use
computers to keep track of guests’ preferences, such as their preferred room
temperature, check-in time, frequently dialed telephone numbers, and television
programs, and store these data in a giant data repository. Individual rooms in the hotels
are networked to a central network server computer so that they can be remotely
monitored or controlled. When a customer arrives at one of these hotels, the system
automatically changes the room conditions, such as dimming the lights, setting the room
temperature, or selecting appropriate music, based on the customer’s digital profile. The
hotels also analyze their customer data to identify their best customers and to develop
individualized marketing campaigns based on customers’ preferences.
WHY DO BUSINESS INVEST IN INFORMATION
SYSTEMS

JCPenney exemplifies the benefits of information systems-

enabled supplier intimacy. Every time a dress shirt is bought at a
JCPenney store in the United States, the record of the sale
appears immediately on computers in Hong Kong at the TAL
Apparel Ltd. supplier, a giant contract manufacturer that produces
one in eight dress shirts sold in the United States. TAL runs the
numbers through a computer model it developed and then decides
how many replacement shirts to make, and in what styles, colors
and sizes. TAL then sends the shirts to each JCPenney store,
bypassing completely the retailer’s warehouses. In other words,
JCPenney’s shirt inventory is near zero, as is the cost of storing it.
WHY DO BUSINESS INVEST IN INFORMATION
SYSTEMS

• Improved Decision Making

In the past 10 years, information systems and technologies
have made it possible for managers to use real-time data
from the marketplace when making decisions. For instance,
Verizon Corporation, one of the largest regional Bell
operating companies in the United States, uses a Web-based
digital dashboard to provide managers with precise real-time
information on customer complaints; network performance
for each locality served, and line outages or storm-damaged
lines. Using this information, managers can immediately
allocate repair resources to affected areas, inform consumers
of repair efforts, and restore service fast.
WHY DO BUSINESS INVEST IN INFORMATION
SYSTEMS

• Competitive Advantage
When firms achieve one or more of these business objectives
—operational excellence; new products, services, and
business models; customer/supplier intimacy; and improved
decision making—chances are they have already achieved a
competitive advantage. Doing things better than your
competitors, charging less for superior products, and
responding to customers and suppliers in real time all add up
to higher sales and higher profits that your competitors
cannot match.
WHY DO BUSINESS INVEST IN INFORMATION
SYSTEMS

• Survival
Business firms also invest in information systems and
technologies because they are necessities of doing business.
Sometimes these necessities are driven by industry-level
changes.
For instance, after Citibank introduced the first automatic
teller machines (ATMs) in the New York region in 1977 to
attract customers through higher service levels, its
competitors rushed to provide ATMs to their customers to
keep up with Citibank. Today, virtually all banks in the United
States have regional ATMs and link to national and
international ATM networks.
Providing ATM services to retail banking customers is simply
a requirement of being in and surviving in the retail banking
business.
Dimensions of Information Systems

There are three basic

dimensions of
information systems.
Organizations

• organizations exist everywhere, and each has its own structure, just as workplace
organizations have structures and personalities to fit their needs, or in some cases, their
old habits.
• A baseball team needs talented, well-trained players at different positions. Sometimes,
the success of the team depends on a good, well-informed coach or manager. So too
with the workplace organization. Business organizations have their major business
functions, which need many kinds of players with various talents, who are well-trained
and well-informed, in order to succeed.
• The larger the organization, the more formal the management structure, including the
need for standard operating procedures (SOPs). SOPs can help streamline standard
business processes so that managers and employees can properly complete their tasks
in a more efficient manner. Many companies now integrate these business processes
into their information systems to ensure uniformity, consistency, and compliance. As
we'll see in upcoming chapters, many companies are even incorporating the informal
work processes into their information systems in an effort to capture as much corporate
knowledge as possible.
• Just as every baseball team needs good players at different positions, a business
organization requires different employees to help it succeed. Knowledge workers help
create new knowledge for the organization and data workers help process the
paperwork necessary to keep an organization functioning. Without production or
service workers, how would the company get its products and services to the
customer?
Management

• Every good organization needs good managers. Pretty simple, pretty

reasonable. Take professional baseball managers. They don't actually play
the game; they don't hit the home run, catch the fly ball for the last out, or
hang every decoration for the celebration party. They stay on the sidelines
during the game. Their real role is to develop the game plan by analyzing
their team's strengths and weaknesses. But that's not all; they also determine
the competition's strengths and weaknesses. Every good manager has a
game plan before the team even comes out of the locker room. That plan
may change as the game progresses, but managers pretty much know what
they're going to do if they are losing or if they are winning.
• The same is true in workplace organizations. In every organization you'll find
senior managers making long-range decisions, middle managers carrying
out the plans and goals set by senior managers, and operational managers
handling the day-to-day operations of the company. As we'll see, information
systems output must be geared to each of these levels of management.
Technology

The World Wide Web allows big companies to act "small” and
small companies to act "big." It has leveled the playing field so
entrepreneurs can break into new markets previously closed to
them. A Web site, consisting of a few pages or hundreds of
pages, enables businesses to get close and stay close to their
customers in new ways. It is truly a revolution in our global
economy.
The Challenge of Information Systems: Key Management Issues

1. The Information Systems Investment Challenge: Too often managers

look at their technological investments in terms of the cost of new hardware
or software. They overlook the costs associated with the non-technical side
of technology. Is productivity up or down? What is the cost of lost sales
opportunities and lost customer confidence from a poorly managed e-
commerce or e-business Web site? How do you determine if your
management information system is worth it?
Many brick-and-mortar companies have seriously struggled with e-
commerce Web sites because of the drain on corporate resources for which
they weren't prepared. As successful as Wal-Mart is in the traditional
retailing sense, their Web site, Walmart.com has at times resembled a yo-
yo more than a successful e-commerce venture. The site has been
reinvented, reworked, and reintroduced more times than a second-rate rock
band. Information systems should be part of the solution and not part of the
problem.
The Challenge of Information Systems: Key
Management Issues

2. The Strategic Business Challenge: Companies spend

thousands of dollars on hardware and software only to find that
most of the technology actually goes unused. "How can that be?"
you ask. Usually because they didn't pay attention to developing
the complementary asset associated with the full integration of the
technology into the organization. Merely buying the technology
without exploiting the new opportunities it offers for doing business
smarter and better doesn't make you a digital firm. Think and
rethink everything you do, and figure out how you can do it better.
Information must be managed just as you would any other
resource.
The Challenge of Information Systems: Key Management
Issues

3. The Globalization Challenge: The world becomes smaller every

day. Competition increases among countries as well as
companies. A good management information system meets both
domestic and foreign opportunities and challenges. How does
DaimlerChrysler integrate its organizations and cultures into one
— or almost one?
The Challenge of Information Systems: Key Management
Issues

4. The Information Technology Infrastructure Challenge:

You have to decide what business you are in, what your core
competencies are, and what the organization's goals are. Those
decisions drive the technology, instead of the technology driving
the rest of the company. Purchasing new hardware involves more
than taking the machine out of the box and setting it on someone's
desk. Information architecture is the description of how technology
is incorporated into the mainstream processes in which the
business is involved. How will the new information system support
getting the product produced and shipped? How will the
information system help the Advertising and Marketing department
know when to launch ad campaigns? How will Accounting know
when to expect payment using the information system?
The Challenge of Information Systems: Key
Management Issues

5. The Responsibility and Control Challenge: Remember,

humans should drive the technology, not the other way around.
Too often we find it easier to blame the computer for messing up
than to realize it's only doing what a human being told it to do.
Your goal should be to integrate the technology into the world of
people. Humans do control the technology, and as a manager,
you shouldn't lose sight of that fact.
Many pundits, experts, and technology companies sometimes
gloss over the negative impacts of new technology in an attempt
to win over converts. Unfortunately, we've learned a lot of our
ethical and security lessons the hard way. By educating yourself
on the positive and negative issues, you, as a manager, can make
more informed decisions.
ThankYou