Additional Knowledge Material

(Faculty E-notes)

▪ COURSE BCA 5th SEMESTER

▪ UNIVERSITY MDU
▪ SUBJECT Management Information System
▪ SUBJECT CODE CM-301
▪ UNIT NO & NAME UNIT1 (Introduction to system and Basic
System Concepts)
▪ NAME OF FACULTY MS. PREETI DAGAR

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 INDEX

UNIT 1
Introduction to system and Basic System Concepts

S.NO. TOPIC Page No.

1. Introduction to system 3

2. Types of Systems 4

3. The Systems Approach 5

4. Information System: Definition & 6

Characteristics
5. Types of information 8

6. Role of Information in Decision- 10

Making
7. Sub-Systems of an Information system 11

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Introduction to system and Basic System Concepts
“The word ‘System’ is derived from the Greek word ‘systema’ which means an organized
relationship among functioning units or components.”

A system is an orderly grouping of interdependent components linked together according to a

plan to achieve a specific purpose.

System is a set of interrelated components, with a clearly defined boundary, working together
to achieve a common set of objectives by accepting inputs and producing outputs in an
organized transformation process.

From the above definition, it is clear that:

• System is a group of components.

• The components are interdependent.
• The components are linked together to achieve a specific purpose.

e.g. (i) A business organization is a system with its components as:

• Marketing
• Manufacture
• Sales
• Research
• Shipping
• Accounting
• Personnel
• Administrative

All these components work together to create a profit.

(ii) Human body is a biological system which has a complex nervous system, a set of parts
including brain, spinal cord, nerves and special sensitive cells under our skin that work
together to make one experience the physical sensations like hot, cold and so on.

Basic System Concepts

The study of system concepts has three basic implications:

1. A system must be designed to achieve a predetermined objective.

2. Interrelationships and interdependence must exist among the components.
3. The objectives of the organization as a whole have a higher priority than the
objectives of its subsystems. For example, computerizing personnel applications must

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 conform to the organization’s policy on privacy, confidentiality and security, as well
as making selected data (e.g. payroll) available to the accounting division on request.

Various types of other systems may be:

• Telephone System
• Accounts system
• Education System
• Computer System etc.

Components of a system must be interdependent. Independent components do not make a

system. For example a cock, a table and motorcycle do not make a system because they are
neither interdependent nor they do any work to achieve a specifsystem tpyes

Types\Classification of System

Viewing the behavior of a system, a system can be classified into the following types:

1. Physical and Abstract Systems

2. Deterministic and Probabilistic Systems
3. Open and Closed Systems

1. Physical and Abstract systems

Physical systems

Physical systems are concerned with tangible entities\components i.e. the components which
we can touch. They can be seen and felt. These tangible entities may be static or dynamic in
operation.For example, desks and chairs are the static physical parts. Static parts do not
change. An air-conditioning unit is a dynamic physical system which responds to the
environment and changes with time.

Abstract systems

Abstract systems are those systems which are non-physical or these systems are conceptual.
For example, an educational system: Our social system.
These systems consist of concepts like
Theories concepts,
Laws concepts,
Principles concepts,
Formula stating relation-ship among large number of variables,
Equations having large number of variables.
Abstract models are often used to understand physical systems, their components and interrelationship
etc.

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 2. Deterministic and probabilistic systems

Deterministic Systems
Deterministic systems are those systems which are based on predetermined set of rules.
The behavior of a deterministic system is completely known. The outputs\results or events are
perfectly predictable. There is no uncertainty involved in defining the outputs of the system for the
known inputs.
For example, a computer program.
Interactions between various subsystems is known with certainty.

Probabilistic Systems
Probabilistic systems are not based on predetermined or predefined rules.
In the probabilistic systems, only probabilistic estimates can be given. The outputs\results or events
cannot be predicted with certainty. Such systems are controlled by chance events.
For example, sale of desert coolers depends on summer; sale of generator sets depends on power
shortage.
In these systems, interactions between various subsystems cannot be defined with certainty. The
system analyst deals almost with such systems.

3. Open and Closed Systems

Open Systems
Systems that interact with their surrounding or external environment are called open systems.
An open system receives or accepts inputs and delivers outputs to its environment. This type
of system can adapt to changing environmental conditions.
For example, an information system, a business organization.
Such systems are successful.

Closed systems
Systems that do not interact with their environment are called closed systems.
A closed system is self-contained. Closed systems usually exist as a concept only. Such
system cannot continue to operate for a long period of time. Such systems are rare and are
unsuccessful.

Brief idea about the systems approach

A system is a set of interrelated but separate parts of working towards a common purpose. A
system is composed of related and dependent elements which when in interaction, from a
unitary whole. The arrangement must be orderly and there must be proper communication
facilitating interaction between elements and finally this interaction should lead to achieve a
common goal.

Systems approach views the organization as a unified, purposeful system composed of

interrelated parts. Systems approach is based on the generalization that everything is
inter-related and interdependent.

Systems approach also gives the manager to see the organization as a whole and as a whole
and as a part of the larger external environment. A systems oriented manager would make

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decisions only after they have identified impact or these decisions on all other departments
and the entire orgasystem-approach-to-management

Following are the features of Systems Approach:

• One of the most important characteristics is that it is composed of a hierarchy of sub-

systems i.e. the parts forming the major system and so on.
• A system consists of interacting elements. It is set of inter-related and inter-dependent
parts arranged in a manner that produces a unified whole.
• The various sub-systems should be studied in their inter-relatio9nships rather, than in
isolation from each other.
• An organizational system has a boundary that determines which parts are internal and
which are external.
• A system does not exist in a vacuum. It receives information, material and energy
from other systems as inputs. These inputs undergo a transformation process within a
system and leave the system as output to other systems.
• In the systems approach, attention is paid towards the overall effectiveness of the
system rather than the effectiveness of the sub-system. The interdependence of the
sub-systems is taken into account.
• In applying system concepts, organizations are taken into account and not only the
objectives and performances of different departments (sub-systems).
• Systems approach is useful because is aims at achieving the objectives and views
organization as an open system.

Information System

An information System can be seen as the organized combination of people, hardware,

Software, communication, networks, data resources, policies and procedures, that stores,
retrieves, transforms and disseminates, information in an organization. Various types of
physical devices (hardware), information processing instructions in the form of flow charts
and structed languages (software), communication channel (Networks) and stored data or
information are used by people or machines to communication and gather information
knowledge and wisdom in this digital age.

Definition:

“Information systems are combinations of hardware, software, and telecommunications

networks that people build and use to collect, create, and distribute useful data, typically in
organizational settings.”
OR
” An information system is a set of interrelated components that works together to collect,
process, store and breakdown the information to support decision making. ”

Characteristics of Information system:

1.Availability/accessibility:

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Information should be easy to obtain or access. Information kept in a book of some kind is
only available and easy to access if you have the book to hand. A good example of
availability is a telephone directory, as every home has one for its local area. It is probably
the first place you look for a local number. But nobody keeps the whole country’s telephone
books so for numbers further afield you probably phone a directory enquiry number. For
business premises, say for a hotel in London, you would probably use the Internet.

2.Accuracy:

Information needs to be accurate enough for the use to which it is going to be put. To obtain
information that is 100% accurate is usually unrealistic as it is likely to be too expensive to
produce on time. The degree of accuracy depends upon the circumstances. At operational
levels information may need to be accurate to the nearest penny – on a supermarket till
receipt. Accuracy is important. As an example, if government statistics based on the last
census wrongly show an increase in births within an area, plans may be made to build schools
and construction companies may invest in new housing developments. In these cases any
investment may not be recouped.

3.Reliability or objectivity:

Reliability deals with the truth of information or the objectivity with which it is presented.
You can only really use information confidently if you are sure of its reliability and
objectivity.
When researching for an essay in any subject, we might make straight for the library to find a
suitable book. We are reasonably confident that the information found in a book, especially
one that the library has purchased, is reliable and (in the case of factual information)
objective. The book has been written and the author’s name is usually printed for all to
see. The publisher should have employed an editor and an expert in the field to edit the book
and question any factual doubts they may have. In short, much time and energy goes into
publishing a book and for that reason we can be reasonably confident that the information is
reliable and objective.

4.Relevance/appropriateness:

Information should be relevant to the purpose for which it is required. It must be suitable.
What is relevant for one manager may not be relevant for another. The user will become
frustrated if information contains data irrelevant to the task in hand.

For example, a market research company may give information on users’ perceptions of the
quality of a product. This is not relevant for the manager who wants to know opinions on
relative prices of the product and its rivals. The information gained would not be relevant to
the purpose.

5.Completeness:

Information should contain all the details required by the user. Otherwise, it may not be
useful as the basis for making a decision. For example, if an organisation is supplied with

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information regarding the costs of supplying a fleet of cars for the sales force, and servicing
and maintenance costs are not included, then a costing based on the information supplied will
be considerably underestimated.

6.Level of detail/conciseness:

Information should be in a form that is short enough to allow for its examination and use.
There should be no extraneous information. For example, it is very common practice to
summarise financial data and present this information, both in the form of figures and by
using a chart or graph. We would say that the graph is more concise than the tables of figures
as there is little or no extraneous information in the graph or chart. Clearly there is a trade-off
between level of detail and conciseness.

7.Presentation:

The presentation of information is important to the user. Information can be more easily
understand if it is aesthetically pleasing. For example, a marketing report that includes graphs
of statistics will be more concise as well as more aesthetically pleasing to the users within the
organisation. Many organisations use presentation software and show summary information
via a data projector. These presentations have usually been well thought out to be visually
attractive and to convey the correct amount of detail.

8.Timing:

Information must be on time for the purpose for which it is required. Information received too
late will be irrelevant. For example, if you receive a brochure from a theatre and notice there
was a concert by your favourite band yesterday, then the information is too late to be of use.

9.Value of information:

The relative importance of information for decision-making can increase or decrease its value
to an organisation. For example, an organisation requires information on a competitor’s
performance that is critical to their own decision on whether to invest in new machinery for
their factory. The value of this information would be high. Always keep in mind that
information should be available on time, within cost constraints and be legally obtained.

10.Cost of information:

Information should be available within set cost levels that may vary dependent on situation. If
costs are too high to obtain information an organisation may decide to seek slightly less
comprehensive information elsewhere. For example, an organisation wants to commission a
market survey on a new product. The survey could cost more than the forecast initial profit
from the product. In that situation, the organisation would probably decide that a less costly
source of information should be used, even if it may give inferior information.

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MIS - Classification of Information
Information can be classified in a number of ways and in this chapter, you will learn two of the
most important ways to classify information.

Classification by Characteristic
Based on Anthony's classification of Management, information used in business for decision-
making is generally categorized into three types −
• Strategic Information − Strategic information is concerned with long term
policy decisions that defines the objectives of a business and checks how well
these objectives are met. For example, acquiring a new plant, a new product,
diversification of business etc, comes under strategic information.
• Tactical Information − Tactical information is concerned with the information
needed for exercising control over business resources, like budgeting, quality
control, service level, inventory level, productivity level etc.
• Operational Information − Operational information is concerned with
plant/business level information and is used to ensure proper conduction of
specific operational tasks as planned/intended. Various operator specific,
machine specific and shift specific jobs for quality control checks comes under
this category.

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Classification by Application
In terms of applications, information can be categorized as −
• Planning Information − These are the information needed for establishing
standard norms and specifications in an organization. This information is used
in strategic, tactical, and operation planning of any activity. Examples of such
information are time standards, design standards.
• Control Information − This information is needed for establishing control over
all business activities through feedback mechanism. This information is used for
controlling attainment, nature and utilization of important processes in a system.
When such information reflects a deviation from the established standards, the
system should induce a decision or an action leading to control.
• Knowledge Information − Knowledge is defined as "information about
information". Knowledge information is acquired through experience and
learning, and collected from archival data and research studies.
• Organizational Information − Organizational information deals with an
organization's environment, culture in the light of its objectives. Karl Weick's
Organizational Information Theory emphasizes that an organization reduces its
equivocality or uncertainty by collecting, managing and using these information
prudently. This information is used by everybody in the organization; examples
of such information are employee and payroll information.
• Functional/Operational Information − This is operation specific information.
For example, daily schedules in a manufacturing plant that refers to the detailed
assignment of jobs to machines or machines to operators. In a service oriented
business, it would be the duty roster of various personnel. This information is
mostly internal to the organization.
• Database Information − Database information construes large quantities of
information that has multiple usage and application. Such information is stored,
retrieved and managed to create databases. For example, material specification
or supplier information is stored for multiple users.

Role of information in decision-making (MIS)

Information plays a vital role in decision-making. Even to take very simple decisions, we
need information. To understand the role played by information in decision-making, we have
to understand how decisions are taken. Decision-making is basically a process that includes
the following stages:

1. Identification and structuring of problem/opportunity: One needs information to

identify a problem and put it in a structured manner. Without information about a problem or
opportunity, the decision-making process does not even start.

2. Putting the problem/ opportunity in context: Without information about the context in
which the problem has occurred, one cannot take any decision on it. In a way, the information
about the context defines the problem.

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3. Generation of alternatives: Information is a key ingredient in the generation of alternatives
for decision-making. One has to have information about possible solutions to generate
alternatives.

4. Choice of the alternatives: Based on the information about the suitability of the
alternatives, a choice is made to select the best alternative.

Decision-making is the most important task of managers in an organization. Therefore, to

enable managers to take good quality decisions, it is very important to provide them with the
right kind of information. Information management in organizations therefore assumes a
special significance. In most organizations, business or otherwise, a systematic systems-based
method is used for information management. Systems based information management works
best under a computerized environment and such computer-based information management
system is normally called ‘Management Information Systems (MIS)’, which provides the
service of information supply to the managers enabling them to take informed decisions. It
may be worthwhile to mention here that MIS does not necessitates the use of computer-based
technology, but the use of computers and information technology makes MIS suitable for
business organizations in a competitive environment as it helps to provide timely and
accurate information. MIS done manually, without the help of computers is neither timely nor
accurate.

4 Types of Information Systems Used in Organisations

Since the early days of computer technology, different classifications or types of information
systems have been used in organisations to identify how information should be used,
managed, and analysed.
However, there seems to be a lot of confusion around what is meant by an ‘information
system’, as this is a term that can be loosely referred to many different things depending on
what type of information we’re looking at and who it is being used by.
To help your understanding, we’ve put together a quick guide to the main 4 types of
information systems used in an organisation according to each level of management. This
includes:
• Low level workers – Transaction Processing Systems
• Middle Managers – Management Information Systems
• Senior Managers – Decision Support Systems
• Executives – Executive Information Systems

1. Transaction Processing Systems – For Low Level Workers

Transaction processing systems are at the most foundational and basic level of information systems for a
business organisation. This is because transaction processing systems are often the first step in acquiring basic
information that is later used by higher management to make better business decisions.
Transaction processing systems are involved in things such as payroll, tracking stock, order
processing, and more. All of these processes are carried out by the lower level of employees
within an organisation or business.

2. Management Information System – For Middle Managers

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In the next level up we have Management Information Systems which deal with merging,
sorting, and organising the data received in the Transaction Information Systems. This
information is still relatively well structured for middle managers to gain a better picture of
how information is being managed by the organisation.
Some examples of management information systems include inventory control systems, sales
management systems, Human Resource Management systems, and more.

3. Decision Support System – For Senior Managers

Decision Support Systems are used for ‘what if’ analysis, taking the data we have and
projecting solutions for areas of concern. This usually involves pulling different types of data
and requires a high level of interactivity as it is often used for less structured challenges in an
organisation.
An example of a decision support system in use would be comparing sales data between two
different time periods. This information could help identify what sort of trend we could see
happening in the future or how the company’s process could be improved.

4. Executive Information System – For Executives

Executive Information Systems are one step up from Decision Support Systems in that it has
a more user-friendly interface that provides key information for business decision making.
It often encompasses a ‘drill down’ feature which provides not only an overview of how the
organisation is performing in various departments and areas, but can also be narrowed down
to specific aspects of information.
Executive Information Systems are used to compare, analyse and focus on different variables
– often being in the form of a digital dashboard, analytic tool, reporting dashboard, etc.

Types Of Information System

1. Transaction Processing System (TPS):

• Transaction Processing System are information system that processes data
resulting from the occurrences of business transactions
• Their objectives are to provide transaction in order to update records and
generate reports i.e to perform store keeping function
• The transaction is performed in two ways: Batching processing and Online
transaction processing.
• Example: Bill system, payroll system, Stock control system.

2. Management Information System (MIS):

• Management Information System is designed to take relatively raw data
available through a Transaction Processing System and convert them into a
summarized and aggregated form for the manager, usually in a report format. It
reports tending to be used by middle management and operational supervisors.
• Many different types of report are produced in MIS. Some of the reports are a
summary report, on-demand report, ad-hoc reports and an exception report.
• Example: Sales management systems, Human resource management system.

3. Decision Support System (DSS):

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 • Decision Support System is an interactive information system that provides
information, models and data manipulation tools to help in making the decision
in a semi-structured and unstructured situation.
• Decision Support System comprises tools and techniques to help in gathering
relevant information and analyse the options and alternatives, the end user is
more involved in creating DSS than an MIS.
• Example: Financial planning systems, Bank loan management systems.

4. Experts System:
• Experts systems include expertise in order to aid managers in diagnosing
problems or in problem-solving. These systems are based on the principles of
artificial intelligence research.
• Experts Systems is a knowledge-based information system. It uses its knowledge
about a specify are to act as an expert consultant to users.
• Knowledgebase and software modules are the components of an expert system.
These modules perform inference on the knowledge and offer answers to a
user’s question.

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