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INTRODUCTION
1.1
1.2
1.3
1.4
1.5
1.5.1
1.5.2.
1.6
1.7
1.8
1.9
1.10
SUMMARY
REVIEW QUESTIONS
After reading this unit you could able to understand,
The distinction between data and information
Concepts of system and its classification
Concepts of information
Definitions of management information systems
Need for computer based information system
Functional and hierarchy levels of management
Evolution of Management information system
permits diverse applications to share data, meet audit and control requirements, and be shared
by multiple users. For instance an application may be developed to run on a particular small
computer. Standards for integration may dictate that the equipment selected be compatible
with existing computers and that the application be designed for communication with the
centralized database.
In the design of information system data and application is aparted. The separate
database is maintained while the integration is across many applications and to a variety of
users.
IMPORTANCE OF A DATABASE
The underlying concept of a database is that data needs to be managed in order to be
available for, processing and have appropriate quality. This data management includes both
software and organization. The software to create and manage a database is a database
management system.
When all access to and use of the database is controlled through a database
management system. All applications utilizing a particular data item access the same data
item which is stored in only one place. A single updating of the data item updates it for all
uses. Integration through a database management system requires a central authority for the
database. The data can be stored in one central computer or dispersed among several
computers; the overriding requirement is that there be an organizational function to exercise
control.
UTILIZATION OF MODELS
Data need to be processed to attain the decision in the business. To do this, processing
of data items is based on a decision model. For instance, an investment decision relative to
new capital expenditures might be processed in terms of capital expenditure decision model.
Decision model can be used to support different stages in the decision-making
process. Intelligence models can be used to search for problems and / or opportunities.
Models can be used to identify and analyze possible solution. Choice models such as
optimization models may be used to find the most desirable solution.
1.3 CONCEPTS OF DECISION MAKING
The word decision has been derived form the Latin word decidere which means a
cutting away or a cutting off. Thus, a decision involves a cut of alternatives between those
that are desirable and those that are not desirable. The decision is a kind of choice of a
desirable alternative. Decision making is a process to arrive at a decision; the process by
which an individual or organisation selects one position or action from several alternatives.
Shull et al have defined decision making as follows:
Decision making is a conscious process involving both individual and social
phenomena based upon factual and value premises which conclude with a choice of one
behavioural activity from among one or more alternatives with the intention of moving
toward some desired state of affairs.
Managers life is filled with making decisions after decisions. Looking at the role of
decision making in management, William Moore has equated it with management when he
says that management means decision making. In fact, decision making permeates all
managerial functions and classical management theorists have viewed it as the centre of
managerial activities. Though this classical view on decision making is not exactly true,
decision making is one of managers more challenging roles. This is the reason why
information systems designers have focused their maximum attention on designing systems
that help managers communicate and distribute information for decision making.
Decisions may be classified into various categories, which are,
Routine and non routine.
Programmed and non programmed
Strategic and tactical or operational decisions.
Programmed / structured and non - programmed / unstructured are mutually
exclusive. Strategic decisions are non - programmed and non - routine while tactical or
operational decisions are mostly routine and programmed. Therefore, understanding of
programmed and non - programmed decisions is important.
Outcome
Certainty
Risk
Uncertainty
Knowledge of outcome
Multiple outcomes
alternative
for
each No
knowledge
of
the
probability to be attached to
each outcome.
Nature
decision
Top
Strategic
of Level
structuring
Low
Lower
Operational
High
Transaction
processing
systems
Office Automation system
FIGURE 1.1
Problem
identification
Alternative
generation
Choosing an
alternative
Implementation
PROBLEM IDENTIFICATION
In this phase of decision-making process involves searching the environment for
conditions calling for decisions. the problem is identified and formulated. A problem is the
difference between current state of affairs and expected state of affairs on the subject matter
of decision.
For instance, in organizational scenario, a problem will be found when there is
diversion outcome from the desired results. Manager develop the suitable model and tries to
identify the problem existence.
Without formulating the problem the identified problem seems to vague. At this
stage, the problem identified earlier, is more precisely defined and complexity get clarified.
MacGrimmon and Taylor have suggested four strategies for reducing complexity and
formulating a problem:
1. Determining the boundaries (clearly identifying what is included in the
problem).
ALTERNATIVE GENERATION
In this phase, decision maker generates possible alternatives through which the
problem can be solved. If there is only one way of solving a problem, no question of decision
arises. So, the decision maker must try to find out the various alternatives available in order
to get the most satisfactory result of a decision. Identification of various alternatives not only
serves the purpose of selecting the most satisfactory one, but It also avoids bottlenecks in
operation as alternatives are available if a particular decision goes wrong. However, it should
be borne in mind that it may not be possible to consider all alternatives either because some
of the alternatives cannot be considered for selection because of obvious limitations of the
decision maker or information about all alternatives may not be available. Therefore, while
generating alternatives, the concept of limiting, factor should be applied.
A decision maker can use several sources for identifying alternatives - his own past
experience; practices followed by others, using creative forecasting and statistical techniques,
research.
CHOOSING AN ALTERNATIVE
In this phase, the best alternative is chosen to solve the problem. Evaluation of
various alternatives presents a clear picture as to how each of these contributes to solution of
the problem. A comparison is made among likely outcomes of the various alternatives and
the most appropriate one is chosen. Choice aspect of decision making is, thus, related to
deciding the most acceptable alternative which fits with the organisational objectives. It may
be seen that the chosen alternative should be acceptable in the light of organisational
objectives, and it is not necessary that the chosen alternative is the best one. However, all
alternatives available for decision making will not be taken for detailed evaluation because of
the obvious limitations of managers in evaluating all alternatives.
IMPLEMENTATION
Even though the actual process of decision making ends with the choice of an
alternative through which the objectives can be achieved, this phase will help manager to r
know what way their choice has contributed. The implementation of decision may be seen as
an integral aspect of decision.
Implementation of a decision requires the communication to subordinates, getting
acceptance of subordinates over the matters involved in the decision, and getting their
support for putting the decision into action. The decision should be effected at appropriate
time and in proper way to make the implementation more effective. The effectiveness of
implementation is important because it is only effective action through which organisational
objectives can be achieved. When a decision is put into action, it brings certain results. These
results provide indication whether decision making and its implementation is proper.
Therefore, managers should take follow-up action in the light of feedback received from the
results. If there is any deviation between objectives and results, this should be analyzed and
factors responsible for this deviation should be located. The feedback may also help in
reviewing the decision when conditions change which may require change in the decision.
METHODS OF DECIDING AMONG ALTERNATIVES
There are different methods to evaluate various alternatives through which a problem
can be solved. In evaluating alternatives, an attempt is made to find out the likely outcome of
each alternative so that the alternative which is likely to provide maximum outcome is
chosen. In evaluating the likely outcomes of various alternatives, generally, following
methods are used:
1.
2.
3.
4.
5.
6.
7.
Optimization techniques.
Pay-off matrices.
Decision tree.
Decision table.
Game theory.
Elimination by aspects.
Decisional balance sheet
FIGURE 1.2
Output
Input
Process
System model
Storage Subsystem
FIGURE 1.3
memory
units
Input Subsystem
Processing
Input
Subsystem
Output Subsystem
CPU
Output
External
Interfaces
Open systems exchange information, material, energy with the environment. For
instance, humans and organizational systems are examples of open systems. Open system
will react to the changes in the external environment and surveys in the environment.
SUBSYSTEMS
The system is integration of various subsystems and interfaces between them. This is
a basic concept in analysis and development of systems. A development of complex system
is tedious, so the system is decomposed into subsystems. This process of decomposition of
system is continued until subsystems could be of independent in behaviour and manageable
in size. For instance the funds management system is described in the figure as a combination
of subsystems.
FIGURE 1.4
Funds
Management
system
Internal fund
flow
processing
Cash flow
system
processing
Check
Printing
Working
capital
processing
FIGURE: 1.5
Unstructured
Higher
Level
Management
Strategic
Planning
Management
Control
Lower
Level
Management
and
Operational
Control
clerical
Transaction processing
Structured
decisions
Integrated database
PERSONNEL SUBSYSTEM
PRODUCTION SUBSYSTEM
Management
Control & DM
(DSS,EIS)
LOGISTICS SUBSYSTEM
Strategi
c
Plannin
FIGURE 1.6
TABLE 1.3
Functional subsystem
Marketing
Manufacturing
Logistics
Personnel
Management control
Strategic planning
TABLE 1.5
Level of
management
Strategic
planning
Tactical
planning
Operations
planning
Definition
Comments
FIGURE 1.7
Sales or purchase
transactions entry
Transactions form
Assemble hatch
Conversion
from
Form to
Records
Correction
Input
Validation
Invalid
Records
Valid
Transaction
records
Transactions report
Control
log
approach to problem solving, use of models, and computer-based solutions are generally
incorporated in the decision support system.
COMPUTER SCIENCE
Computer science deals with the hardware and software of computer systems. The
knowledge of computer science enables information storage, processing, and retrieval faster.
Computer science covers the concepts of algorithms, computation and data structures which
are important in development of MIS. However, modern MIS is not merely an extension of
computer science but the emphasis in MIS is on the application of the technical capabilities
that computer science has made available. The fundamental processes of management
information systems are more related to organizational processes and organizational
effectiveness then computer algorithms.
Various academic disciplines are contributing to the development of MIS and it is
considered a separate field of study. Other academic disciplines help in designing and
developing MIS.
1.7 NEED FOR COMPUTER-BASED INFORMATION SYSTEM
As long as organizations are small and have limited operational goals manual
information systems are satisfactory. Many trends in the development of industry and
commerce have made computer -based information systems essential to efficiently run
organizations. These are: The size of organizations is becoming larger. This is particularly true in India due to
increase in population and rapid rate of industrial development.
Computer - based processing enables the same data to be processed in many ways,
based on needs, thereby allowing managers to look at the performance of an organization
from different angles.
As the volume of data has increased and the variety of information and their
timeliness is now of great importance, computer based information processing has now
become essential for efficiently managing organizations.
Organizations are now distributed with many branches.Markets are becoming
competitive. To maintain favorable balance of payments in a country, organizations have to
be internationally competitive.
The general socio - economic environment demands more up-to-date and accurate
information. Human systems are changing faster than ever before. Governmental regulations
have become complex. Organizations have to interact with many other interested parties such
as consumer groups, environmental protection groups, financial institutions, etc., which did
not exist before.
All the above developments demand decision making based on up-to-date, well
analyzed and presented information rather than thumb rules and hunches of an earlier era.
TABLE 1.6
Decade
1951-60
Information systems
Electronic data processing
1961-70
Management
system
1971-80
decisions.
Solution for structured decisions.
Decision Support System, Analytical models for semi structured
expert system
decisions
Functions
Student section
Accounts section
University budget
Payroll
General ledger of receipts/ payments
Purchase section
Scholarships
Order processing
Stores
Vendor selection
Stock register maintenance
Issues
Hostel office
Receipts
Mess records
Hostel purchases / stores
Room assignment
Medical centre
Residents data
Medical records
Works department
Supply
Maintenance
of
installations, water
Personnel
Miscellaneous
Personnel recruitment
Mailing
Telephones
Transport
electrical
Sections
Production
Marketing
Finance
Personnel
Functions
Production planning and
control
Maintenance management
Bill of materials processing
Order processing
Advertising
Customer records/follow up
Sales analyses
Billing, payments
Payroll
Costing
Share accounting
Budget and finance planning
Tax planning
Resource mobilization
Recruitment
Records
Training
Deployment of labor
Assessment/promotions
Stores
Purchase
Maintenance
Research and
development
We see that there are some common functions such as personnel, purchase, stores and
accounts and there are organization specific functions such as students section in a university
and production section in a manufacturing organization. This is a general observation.
Information processing methods, however, have general features regardless of the
organization for which they are designed.
SUMMARY
The vital role of information in an organization has been discussed. how the
manager should react to the information of external environment and internal environment.
The information systems have become essential for helping organizations deal with changes
in global economies and the business. The kinds of systems built today are very important for
the organizations overall performance, especially in todays highly globalize and
information- based economy. Information systems are driving both daily operations and
organizational strategy. Powerful computers, software and networks, including the internet ,
have helped organizations become more flexile , eliminate layers of management , separate
work from location , coordinate with suppliers and customers, and restructure work flows ,
giving new powers to both line workers and management. Information technology provides
managers with tools for more precise planning forecasting and monitoring of the business. To
maximize the advantages of information technology, there is a much greater need to plan the
organizations information architecture and information technology infrastructure.
REVIEW QUESTIONS
1.
2.
3.
4.