Chapter TWO

Dimension of IS: Management,

Organisation and Technology,
Computer based IS

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Decision types and Information requirement by Level of
Management

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 Objective
This chapter Introduces
◦ the concept of organisation,
◦ The information requirement by level of management
◦ Types of decision making
◦ Stages of decision making and the type of information
systems available at each stage
◦ Roles of managers and the type of information system to
support each role
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Information System for Strategic Management

IS for Strategic Planning


◦Strategic planning involves setting organizational long-term goals,
strategies, policies and objectives.
IS for Strategic Control

◦The strategic control is the process of getting external and internal
information to know if the organization is operating according to the plan to
achieve its strategic objectives
strategic management requires large volume of external and internal

information to:
1.Make strategic decisions
2.measure the overall performance of the organization.

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 Fundamental Competitive Strategies

Cost Leadership Strategy

Differentiation Strategy

Innovation Strategy

Growth Strategy

Alliance Strategy

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 Fundamental Competitive Strategies…

• Cost leadership Strategy : Becoming a low-cost producer in the

industry allows the company to lower prices to customers.
• Use IT to substantially reduce the cost of business processes.
• Use IT to lower the costs of customers or suppliers.
• Differentiation Strategy: Some companies create competitive
advantage by distinguishing their products on one or more features
important to their customers.
– Unique features or benefits may justify price differences and/or
stimulate demand.
• Develop new IT features to differentiate products and services;
• Use IT features to focus products and services at selected market
niches.
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 Fundamental Competitive Strategies…

Innovation Strategy: Unique products or services or changes in

business processes can cause fundamental changes in the way an
industry does business.
◦ Create new products and services that include IT components.
◦ Develop unique new markets or market niches with the help of IT.
◦ Make radical changes to business processes with IT that dramatically cut costs;
improve quality, efficiency, or customer service; or shorten time to market.
Growth Strategy : Significantly expanding production capacity, entering
new global markets, diversifying into new areas, or integrating related
products or services can all be a springboard to strong company
growth.
◦ Use IT to manage regional and global business expansion.
◦ 08:43
UsePMIT to diversify and integrate into other products and services.
10
 Fundamental Competitive Strategies…

• Alliance Strategy : Establishing new business linkages

and alliances with customers, suppliers, former
competitors, consultants, and others can create
competitive advantage
– Use of IT to create virtual organizations of business
partners.
– Develop inter-enterprise information systems linked
by the Internet and extranets that support strategic
business relationships with customers, suppliers,
subcontractors, and others.
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 Strategic roles for Information Systems

Improving Promote Locking in

Strategy Business Business Customers
Process Innovation and Suppliers

•Use IT to improve
IT Role
Use IT to reduce Use IT to create quality of service
costs of doing new products •Use IT to link
business e.g data and services or business to
base processes e.g customers and

data mining suppliers e.g

software website
Create New Maintain Valuable
Outcome Enhance
Business Relationships with
Operational
Opportunities Customers and Suppliers
Efficiency
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 Strategic roles for Information Systems

Raise Build a Build a

Strategy Barriers Strategic IT Strategic
to Entry Platform Information Base

Leverage investment Use IT to provide

Increase amount of
in IS resources from information to
investment or
operational uses to support firm’s
IT Role complexity of IT
strategic uses e.g. competitive strategy
needed to compete
networks, databases, e.g. data warehouse
e.g BI systems
application systems

Create New Enhance

Outcome Increase
Business Organizational
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Opportunities Collaboration
 Decision Making and Information Systems

 Decision-making: is the process of making choice from many

possible alternative courses of actions.
Four phases of decision-making activity
1. Intelligence activity searching the business
environment, the investigation and problem
identification activities. (MIS, internet, etc)
2. Design activity inventing and developing possible
courses of actions. It is possible to use decision
support systems.
3. Choice activity: analyzing and selecting a course of action
from those available (Decision support systems).
4. Implementation and Review activity, assessing the effect of
the implemented decision in solving the problem. Simple
management reporting system is suitable (MIS).
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 Types of decisions

• Decisions exist in a continuum between structured (programmable)

and unstructured (non-programmable) decisions.
Structured (programmable) decisions:
• are repetitive and routine and can be pre-specified by a set of rules or
decision procedures .
• are usually deterministic, in which the outcome can be known if a
specified sequences of activities (algorithms) are performed.
• the decision procedure specifies the information requirement before the
decision rules are applied.
• can be automated.

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 Type of decisions …
Unstructured decisions.
In such decisions, it is difficult to specify in advance the
decision procedures and the information requirement
because of the frequent changes of events in the
external environment of the organization.
most non-programmed decisions need the attention of
the higher level management, and they are not easy to
be automated.
• Semi structured decision
◦ part of the decision procedures can be pre-specified but the
procedures are not complete enough to arrive to a definite
decision.
◦ the middle level managers make semi-structured decisions.
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 The Decision types and Information requirement

• The decision type changes from unstructured

decision to structured decision as one moves
down from strategic management to
operational management or vice versa.

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Decision types and Information requirement by Level of
Management

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08:43 PM 19
 Function based Systems
• Major types of systems in the organization are expected to
support different interests, specialties, and levels in an
organization. No single system can provide all the information
an organization needs.

Strategic

Middle Management

Operational Level
Functional
Areas
MKG Finance Product HRM R&D
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Functional Information Systems
◦ Accounting Information Systems

◦ Marketing Information Systems

◦ Manufacturing Information systems

◦ HR Information Systems

◦ Finance Information Systems

21
 Marketing Information Systems
• Marketing is concerned with planning, promotion
and sale of existing products in existing markets, and
development of new products and new markets to
better serve present and potential customers.

• IS supports marketing in product planning, pricing

decision, advertising and sales promotion strategies,
forecasting market potential for new and present
products, determining distribution channels etc.

22
 Marketing …
• Sales Management Systems
− Plan, monitor and support the performance of
sales people and sales of products and services.
Sales force Automation
− Automate the recording and reporting of sales
activity from the field where sales people are
found to headquarter marketing mangers.
Product management
◦ Plan, monitor and support the performance of
products, product lines and brands
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 Marketing …
• Advertising and Promotion (Value-Based)
− Help to select media and promotional methods and control and evaluate
advertising and promotion results
• Sales forecasting
− Produce short range and long range sales forecasts
• Market Research
− Collect and analyze internal and external data on market variables,
developments and trends
• Marketing Management
− Develop marketing strategies and plans based on corporate goals and
market research and sales activity data; monitor and support marketing
activities

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Human Resource Information Systems

HRM involves the recruitment,

placement, evaluation, compensation and
development of employees of an
organization.
HRIS support:
Recruitment, selection and hiring
Job placement,
Performance appraisals
Employee benefit analysis
Training and development
Health safety and security 25
 Accounting Information Systems

Order Processing (Sales)

◦ a TPS that captures and processes customer orders and
produces invoices for customers and data needed to sales
analyst and inventory control

Inventory Control
◦ process data reflecting changes to items in inventory, stock
adjustment;
◦ It prepare shipping documents and notify the manager.

26
 Accounting …
Accounts Receivable
◦ Record amounts owed by customer and produces monthly
customer statements and credit management reports.

Account payable
◦ Records purchases from, amounts owed to, and payments
to suppliers and produces ahs management report.

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 Accounting …
• Payroll
– Records employee work and compensation data and
produces paychecks and other payroll documents and
reports

• General Ledger
– Consolidates data from other accounting systems and
produces that periodic financial statement and reports for
the business

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 Finance Information Systems
Cash and Security Management
◦ Forecasts cash receipts and disbursements (Cash
Flow) and manage investment in short term securities.

Capital Budgeting
◦ Evaluate the profitability and financial impact of
proposed capital expenditure

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 Finance …

• Financial Forecasting
– Forecast business and economic trends and financial
developments

• Financial Planning
– Evaluate the present and projected financial
performance and financing needs of the business.

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 Business Intelligence
A term primarily used in industry that incorporates a range of
analytical and decision support applications in business to utilize
the vast amount of information in the organization
it is a system to extract useful information from large data store
in the form of patterns, trends and present it to decision makers
in more understandable way
Focuses to provide timely information at a strategic level

Provide indirect support for particular decisions rather than

decision specific orientation of decision support system

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Business Intelligence Applications

32 10-32
 Management Information Systems
The original type of information system
that supported managerial decision making

◦ Produces information products that support

many day-to-day decision-making needs of management

◦ Produces reports, display, and responses which provide

information that mangers have specified in advance as
adequately meeting their information needs.

◦ See previous slides

33 10-33
 Decision Support Systems
Are computer based information systems that provide
interactive information support to managers during the
decisions making process
Decision support systems use the following to support the
making of semi-structured business decisions
◦ Analytical models
◦ Specialized databases
◦ A decision-maker’s own insights and judgments
◦ An interactive, computer-based modeling process
◦ Support of what if analysis
DSS systems are designed to be ad hoc,
quick-response systems for decision maker
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Online Analytical Processing (OLAP)

• It is integration of large scale data and data processing

models.

• Enables managers and analysts to examine and

manipulate large amounts of detailed and consolidated
data from many perspectives

• Done interactively, in real time, with rapid response to

queries

35 10-35
 Cont….
OLAP involves analyzing complex relationships
among thousands or even millions of data items
stored in data marts, data warehouses, and other
multidimensional databases to discover patterns,
trends, and exception conditions.
Data marts are data ware house for one department
OLAP use data cube data structure

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 Online Analytical Operations
Consolidation
◦ Aggregation of data
◦ Example: For example, data about sales offices can be
rolled up to the district level, and the district-level
data can be rolled up to provide a regional-level
perspective.
Drill-Down
◦ Display underlying detail data
◦ Example: sales figures by individual product
◦ For example, the sales by individual products or sales
reps that make up a region’s sales totals could be
easily accessed.

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 Cont..
• Slicing and Dicing
– Viewing database from different viewpoints

– Often performed along a time axis

– E.g. one slice of the sales database might show all sales
of a product type within regions.
– Another slice might show all sales by sales channel
within each product type.

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 Data Mining
• Provides decision support through
knowledge discovery
– Analyzes vast stores of historical business data
– Looks for patterns, trends, and correlations
– Goal is to improve business performance
• Types of analysis
– Regression
– Decision tree (if-else-if)
– Neural network
– Cluster detection
– Market basket analysis

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Market Basket Analysis (MBA)
• One of the most common uses for data mining
– Determines what products customers purchase together
with other products
• Results affect how companies
– Market products
– Place merchandise in the store
– Lay out catalogs and order forms
– Customize solicitation phone calls
– Determine what new products to offer

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 The Executive Information System (EIS)

• EIS can be said MIS tailored to serve the strategic information need of the
top management.
• “The goal of EIS is to provide top management with immediate and easy
access to selective information about key factors that are critical to
accomplishing a firms strategic objective."
• EIS helps the executive to have immediate access to internal and external
databases:
– to monitor organizational performance.
– To track activities of competitors
– Spot problems
– To identify opportunities and,
– Forecast trends

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 Expert Systems
• An Expert System (ES)
– Are systems to represent experts
– A knowledge-based information system
– Contain knowledge about a specific, complex
application area
– Acts as an expert consultant to end users

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 Benefits of Expert Systems
Captures the expertise of an expert or group of experts in
a computer-based information system
◦ Faster and more consistent than an expert

◦ Can contain knowledge of multiple experts

◦ Does not get tired or distracted

◦ Cannot be overworked or stressed

◦ Helps preserve and reproduce the knowledge of human experts

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 Limitations of Expert Systems
• Limited focus
• Inability to learn
• Maintenance problems
• Development cost
• Can only solve specific types of problems in a
limited domain of knowledge

45 10-45
 Review questions
• What common information systems by functional areas?
• Why we have different information system for different
functional areas?
• Is there integration among different information systems? How
they are integrated?
• Do we need different technologies to implement different
information systems in different functional areas?
• Can you identify information systems that exist in your
organization?
• What are the main challenges to develop and implement
information systems in your organization?

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 The End

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