1. CBMS4303: Management Information
Systems
Table of Contents
Topic 2: System Concept ............................................................................................................................... 2
Objectives ................................................................................................................................................. 2
2.1 Model .................................................................................................................................................. 2
2.2 General model system ........................................................................................................................ 2
2.2.1 Physical System ............................................................................................................................ 2
2.2.2 Conceptual system ....................................................................................................................... 3
2.2.3 Environment................................................................................................................................. 5
2.2.4 Problem Solving ........................................................................................................................... 6
2.3 System approach................................................................................................................................. 7
2.4 Preparation phase ............................................................................................................................... 8
2.5 Definition phase .................................................................................................................................. 8
2.6 Solution phase................................................................................................................................... 10
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

2. Topic 2: System Concept
Objectives
1. Define four (4) types of models and their usage in business;
2. Identify four (4) information dimensions;
3. Apply the concept of management through exceptions;
4. Apply the general model system to understand organisations; and
5. Apply the system approach to solve problems.
2.1 Model
Model: representation of things like an object, a concept or real activity known as entity, used to
represent problems, which need to be solved in a form easily understood.
Types of model –
1. Physical model - representation of 3D entities that can be seen by the naked eye, remodeled to
a smaller scale that the original. E.g.: house or car model.
2. Narrative model – oral / written communication with detailed explanation; most popular model
because it covers every aspect of business communication.
3. Graphical model – visualization of entity via graphs, charts, forms, symbols, and lines. E.g. data
flow diagram (DFD), entity relationship diagram (ERD), flowchart, structure chart.
4. Mathematical model – formula or mathematical equation consisting of a few variables and
constants. E.g. calculation of profit represented by profit = sale – cost
These models can be combined or used separately to suit the circumstances. They help make
understanding and communication easier since entities are presented in a simple form.
2.2 General model system
The general model is the foundation for info systems in every firm. If you can understand the
fundamental concept of the general model system, you can easily understand the entire concept of the
general model system and organisational structures. You only need to add or to modify the general
model system with the current types of information systems and the organisational structure when
analysing and designing the information system.
2.2.1 Physical System
A firm’s physical system transforms input to output. Input resources are extracted from the
environment, processed to form the output resources and then returned to the same environment.
Since interaction exists between the firm and its environment through physical resources, the firm’s
physical system can be classified as an open system. E.g. in the process of producing cooking oil, palm oil
is extracted from the firm’s environment while the cooking oil is marketed to the customers who live
within the environment.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

3. Firm’s boundary
Types of flows in a physical system consists of –
1. Material flow – suppliers send input (raw materials, components), firm stores and transforms
materials to become products, outputted by delivering and marketing to the customers.
2. Personnel flow – flow of manpower and managed by the human resources department, from
recruitment to job placement, then to retirement and/or resignation. Personnel are employed
from the environment and they return to their environment.
3. Machinery flow – explains how machines are supplied by the suppliers, assigned to different
departments or areas in the firm for a specific period and then returned to the environment
when they are in a bad condition or are replaced by new ones. E.g. computers, printers, fax
machines.
4. Monetary flow – financial input resources are obtained from stakeholders (owners, bank,
individuals, profit from customers, govt loans/grants), transformed to finance the operations of
the firm, then return to the environment as output resources to repay loans, as investment or as
donations.
2.2.2 Conceptual system
Open loop system: a system with no feedback loop or control mechanism.
Closed loop system: a system with feedback loop and control mechanism.
In the firm, Information assists management to evaluate the firm’s performance.
 Management = control mechanism
 Information = feedback which comes from input, transformation and output information.
Information processor: information-producing mechanism (a system or procedure) that produces
information from gathered data (input, transformation, output processes).
Information Management Information Information
processor
Data
Input Transformation Output
resources process resources
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

4. Information dimensions used to evaluate information processor output –
1. Relevant
 Information is relevant if the contents can fulfill the requirement of the problem faced
without any support from other unrelated information.
2. Accurate
 Information must be accurate without errors. It is important especially in issues involving
money. Forecast and performance reports must also be produced accurately by using the
accurate information.
3. On Time
 Information must always available when it’s needed. Past and latest information can help
the manager make the better decision.
4. Complete
 Information must be comprehensive and complete but not excessive to the point of being
irrelevant to the problem being solved.
Standards: measurement of a firm's performance, stated in specific terms and can be measured
quantitatively in the form of money, numbers, percentage and such.
Managers need information that can explain what is achieved by a firm's department or unit and
performance standards that should be obtained by the departments. Every system must have objectives
(the overall goals that need to be achieved), and every system has at least one objective.
Objectives are stated in general and something more specific must be determined to measure whether
the system's objectives can be achieved.
Management compares the firm's standard and performance to control the physical system. The
difference between them will confirm whether action must be taken.
Conceptual system
Physical system
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

5. Two management techniques to help managers execute their tasks effectively and efficiently –
1. Management by Exception
 This technique is applied when a manager takes an action only if an activity occurs out of
fixed performance and norms.
 As long as the firm’s activity is within the performance parameter (standard), the firm can
be considered stable.
 This technique is implemented by comparing the actual standard and performance of the
system produced by the information processor.
 This technique can be executed by CBIS.
2. Critical Success Factors (CSF)
 This technique is used to identify several main factors which bring success to a particular
function.
 Usually the firm determines several CSFs that need to be completely fulfilled.
 CBIS supports CSF by producing the information to the manager.
CSF and management by exception are similar in terms of the emphasis on certain parts of the system as
compared to the entire system. The difference is that CSF remains constant in the long term while
management by exception can change according to time.
2.2.3 Environment
The environment completes the general system model; physical resources enter the physical process
and conceptual resources (Information and data) enter the information processor to be stored or used
by the manager. These resources can flow to or from the environment.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

6. 2.2.4 Problem Solving
Decision-making: an action taken when choosing a decision or strategy that a manager feels would give
a better solution to the problem.
For better problem–solving, a manager should deal with several problem solving elements that must be
identified as shown in the figure below.
Problem
Solver
(Manager)
Standards show a desired situation which is the performance that needs to be achieved by a firm while
information shows the current situation, that is, the actual achievement of the form. The manager must
obtain both these information to know whether a problem exists or not.
Problems occur when there is a difference (either high or low) between standards and information.
Therefore, a problem is referred to as something that can give an advantage or disadvantage to the firm.
 If performance > standards, it may be better to increase standards to maintain good
performance
 If performance < standards, if the firm’s performance cannot achieve the standard, investigate
the reasons why the problem occur
When the problem is identified, the manager needs to determine several alternative solutions by using
the information from other staff or his or her own experience. IS can be used to evaluate each
alternative, by considering internal and external constraints.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

7. Internal constraint: the limited resources in a firm.
External constraint: constraints from the firm’s environment which limit the flow of the resource to and
from the firm.
Solutions can be achieved with the presence of every solution element which is understood by the
manager.
Problems and symptoms
Symptom is the situation caused by the problem. The manager can always observe the symptom as
compared to the problem. To understand the cause of the problem, the symptom needs to be studied
profoundly.
Problem structure
Most problems often faced by the manager are combinations of structured and non-structured
problems.
Structured problem: a problem that has certain elements, whereby relationship between the elements
can be clearly understood and seen, e.g. profit = sale-cost.
Semi-structured problem: a problem that has parts of elements or relationships that are understandable
and parts that are not understandable.
Unstructured problem: a problem not understood by the manager and do not have elements or
relationships that are understood by the problem solver, e.g. human behavior.
2.3 System approach
System approach: a guide to solving a problem step-by-step to ensure the problem can be understood,
an alternative solution is identified and the solution chosen is effective.
The 3 phases of system approach is –
1. Preparation
2. Definition
3. Solution
Decisions are made in every step of the Definition and Solution phases.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

8. 2.4 Preparation phase
The steps in this phase do not have to be executed sequentially.
Step 1– View the Firm as a System
You must imagine the firm as a system by using the general system concept. You must map your firm
using the general system model.
Step 2– Identify the system’s environment
You must identity the firm’s environment which consists of customers, suppliers, competitors, owners or
stock holders, unions, financial community, government and global community.
Step 3– Identify Every Sub-System in the Firm
Sub-systems in the firm can be viewed from many aspects. Sub-systems which can be easily understood
by manager are departments or units in the firm. Every department can be looked upon as a separate
system. Sub-systems in the firm can also be viewed as management levels. These sub-systems have a
‘superior and subordinate’ relationship and are connected by the low of decision information and
decisions. Decisions and orders made by top level management are channeled to the entire
organisation. Hence, the manager can see the importance of information clearer through this
management hierarchy.
2.5 Definition phase
Step 4 - Continue from System Level to Sub-System
Briefly, this step aims to detect sub-systems that contain the source of the problem.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

9. When a manager wants to understand a problem, he will initiate the analysis at the system under his
responsibility, consisting of the firm or one of the firm’s units. The analysis will continue according to
system’s hierarchy on every level. Systems can exist at every level of the firm and analysis can start at
any sub-system.
Firstly, the manager studies the status of the firm in its relationship with the environment.
 Does the firm have a balanced relationship with its environment?
 Does the flow to and from the firm’s environment occurs as it should?
 Has the system achieve its objective in producing products and services to its environment?
Then, the manager analyses the system from the aspect of the sub-system.
 Is every sub-system working together with other sub-systems to achieve the system’s objective?
Step 5 - Analysis of System Parts According to Certain Sequences
The manager studies every level of the system by sequences that are arranged according to priority as in
the figure below. Through this, the problem in the fifth element cannot be solved if there is a problem in
the fourth element.
First element – Evaluate the standard. The standard for system performance is determined in
quantitative such as amount, percentage and finance . Elements in the standards are analysed to ensure
the following criteria are met:
a) Have a valid value
b) Realistic
c) Easily understood
d) Can be measured
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

10. Second element - Compare system output with standard. The system output is compared with the
standard.
Third element - Evaluate management. Organisation structure and management are analysed, such as
quality and quantity of cooperation between teams, sufficient number of people, skills and capability
within the management.
Fourth element – Evaluate the information processor. Unreachable or insufficient information may
exist.
Fifth element – Evaluate the inputs and input resources. At this level, the conceptual system is no
longer of concern, and the problem exists within the physical system. Both physical resources and the
resources flowing through the input element from the environment are analysed.
Sixth element – Evaluate the transformation process for incomplete procedures and processes. The
efficiency of the transformation process can be increased with the help of technologies such as robots,
machines and computers.
Seventh element – Evaluate the output resources, focusing on the output as well as the physical
resources in the output elements like warehouses, manpower and machines during delivery and
transport, etc.
2.6 Solution phase
Step 6: Identify alternative solutions
Alternative solutions are identified to get the best solution for the problem. Managers usually use past
experiences or intuition in this step. Managers always solve problems as a group, such as brainstorming.
Step 7 – Evaluate alternative solutions
Every alternative solution must be evaluated using the same evaluation criteria (measure of how well an
alternative would solve the problem to see its advantages and disadvantages). This stage analyses how
each alternative can solve the problem in the best possible way and the extent to which each alternative
fulfills the system's objectives.
Step 8 - Choose the Best Solution
Mintzberg identified three methods which can be used by the manager for this purpose.
a) Analysis of the alternative is made systematically by considering the effects that the alternative has
towards the firm’s aims.
b) Consideration - the thought process of a manager.
c) Bargaining - Discussions between a group of managers.
Step 9 - Executing the Solution
The solution is executed by taking a certain action.
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah

11. Step 10 – Follow-Up to Ensure the Solution is Effective
The manager must continuously monitor the situation after the solution is executed to ensure it can
solve the problem as expected.
END OF TOPIC 2 NOTES
CBMS4303 Short Notes September 2011 | Lorna Timbah, PPW Sabah