Applications of Management Information Systems in Business

1. Information Systems Based on Type of Decisions
• Systems that support operational, tactical, and strategic
decision are broadly classified into the following categories:
•
•
•
Transaction processing systems (TPS)
Management information systems (MIS)
Intelligent support systems (ISS), which include decision
support systems
(EIS), and expert
(DSS), executive
systems (ES)
information systems
2-7

2. Functional Information Systems
• Information systems can also be classified
according to function in these four areas:
•
•
•
•
Marketing
Manufacturing and service
Accounting and finance
Human resources
2-9

3. EIS OAS
MIS
TPS DSS ES
Functional Systems
Dss EIS
MIS
TPS ES
CUSTOMER
GIS EDI
Figure1: Functional Information System

4. Marketing Information System
A system that meets the marketing information needs of an organization.
•
• Customer-oriented and work toward achieving the strategic sales and marketing plan
• Aim is to gain instantaneous access to global market information
• Primary goal of retaining existing customers and attracting new ones
• Can't be standardized for all companies. Every company has its own
• Marketing system must be tailored to match the marketing policies, procedures and practices
each company.
of
• A very popular marketing information system is one that automates sales and marketing functions.
• Such systems capture valuable customer information and hence can improve productivity, enhance
customer service and create better sales and marketing strategies.
• Are influenced by and influence the strategic business plan and the strategic marketing plan.

5. .-
. Strategic Business Plan
de
Strategic Sales & Marketing Plan
dr
Strategic Information Plan
d
Market information System
,r
Sales Management
Marketing Mix (Product, place,
price, promotion)
D a t a b a s e s
External .
-
,-
...
..-. Market Intelligence
Market Analysis
I
..
Internal
Market Research
Customer Analysis
Forecasting
Figure2: Marketing Information System
Feedback

6. Benefits of Marketing Information System
Benefits of Marketing Information System
 Provides employees with information that helps companies capture niche
markets in highly competitive
 Helps in sales forecasting.
 Able to provide demand forecast. Helps in achieving a company's goal.
 Marketing Information system have a deep and direct influence on the
quality of customer service.
 Assists the marketing manager to maintain the better relationship with
valuable customer.

7. Manufacturing Information System
A system that supports the manufacturing functions of:
•
•
•
•
•
purchasing, receiving, quality control
inventory management, material requirement planning,
Production scheduling and plant design.
Applies to both manufacturing and service industries
capacity planning
Manufacturing should be viewed within the broad context of delivering
both goods and services since a manufacturer of automobile parts and a
travel agency are likely to have manufacturing information system.
Production system is a subset of manufacturing information system.
Production system pertains to the production of goods and services.
It specially addresses information needs relating to raw materials,
equipment, manpower and other issues related to production of goods
and services.
•
•
•

8. Strategic Business Plan
Strategic Manufacturing Plan
Strategic Information Plan
-
-
Manufacturing
dr
Manufacturing information System J r
. Services
d
Purchasing
Receiving
Databases
~
Quality Control
External -
- ~
,~
Inventory
-
~ Material R
equirement Planning
Capacity Planning
-
-
~
Internal
Scheduling
Facilities Layout
Figure3: Manufacturing Information System

9. Benefits Mfg. Information System
• Helps supplier to store such as Home Depot
Hardware.
Reduces operating cost and inventory levels
To achieve strategic goal of company
and Ace
•
•

10. Financial and Accounting Information System(FAIS)
• Provides information related to the accounting and financial activities
an organization
Includes a large number of subsystems that address the
operational, tactical and strategic information needs of the business
Includes some subsystems such as budgeting, cash and asset
of
•
•
management, capital budgeting, portfolio
account receivable, inventory control and
Other subsystems include record keeping,
analysis, general ledger,
payroll systems.
account analysis, cash
•
management, financial analysis, leasing options, insurance underwriting,
insurance claims processing and investment management.
Financial instit ut ion like bank, uses specialized F
AIS, such as commercial
loan analyzers, credit approval system, commercial account rating system,
credit applicat ion system, automated teller cont rol and securit ies trading.
•

11. Strategic Business Plan
Strategic Financial Plan
d
Strategic Information Plan
•
Financial & Accounting
Information Systems
General Ledger
Databases
Asset management
Order entry, Accounts Receivables, Accounts payable
External
Inventory control, Payroll, Cash management, Capital
management, Investment management
Internal
Long-range Forecasting
Business Intelligence
Figure5: Financial & Accounting Information System

12. Human Resource Information System (HRIS)
• Supports the planning, control, coordination, administration and
management of an organization's human resources.
HRIS includes a large number of subsystems that address the informat ion
needs of various human resource functions.
They provide managers with information, policies and procedures
concerning recruiting, layoffs, employee evaluation, promotion,
termination,transfer, salary equity monitoring, job
•
•
descriptions and responsibilities, training, affirmative action and
employment opportunities.
An HRIS also determines how hiring and training decisions made
personnel department can increase sales revenues.
equal
• by the

13. Strategic Business Plan
Strategic Human Resource Plan
Strategic Information Plan
Human Resource Information
Systems
Personnel
D a t a b a s e s
Payroll
r Benefits
External
Equity Monitoring
Internal
Recruitment
Compliance systems
Manpower Planning
Figure6: H u m a n R e s o u r c e In f o r m a t i o n S ys t em

14. Developing Cross-functional System
Today, the emphasis is on building cross-functional systems that facilitate
the flow of information among all units in an organization. Some critics to
develop a Cross-functional System are:
1. Decision-making should not be compartmentalized in functional areas,
but should instead be viewed in the context of the entire organization
2. A close link is made in between information system and functional
system.
3. System must be designed in such a way that it can work combinely with
both the systems
For example, a report of the number of people who worked overtime
last month or the number of machines that operated during the night
shift last month (manufacturing) are often the output of an MIS.

15. 12-15
Strategic Information
Systems

16. 12-16

17. 12-17

18. 12-18
Definition of SIS
 Researchers have classified IS into
three categories:
Systems that support business
functions
Systems that support strategic
planning such as DSS and EIS
Systems that are a part of a
firm’s strategy

19. 12-19
Definition of SIS Contd…
 Strategic Information System (SIS)
A system that delivers information
products and services that play a
direct and prominent role in helping
the firm achieve its strategic goals.

20. 12-20
Definition of SIS Contd…
An SIS also supplies an organization with
Business Intelligence or competitive
information
 Business Intelligence
Business Intelligence consists of internal
and external data used to assess and
analyze opportunities and threats in
business environment

21. 12-21
Types of SIS
SIS can be external or internal systems.
External strategic systems are used primarily by
external entities in the business environment,
such as customers, suppliers, and distributors.
Benefits to the customer:
1. Increased customer satisfaction
2. Increased customer control
3. Reduction in transaction costs (shipping and
handling costs)

22. 12-22
Types of SIS Contd…
SIS can be external or internal systems.
Internal Strategic Systems are used by employees
within the organization and do not have a value-
added component. They focus on issues such as
improving the quality of products and services
and enhancing the decision-making capabilities
of managers.
Benefits to the Organization:
1. Increased market share
2. Reduction of processing costs
3. Ability to charge higher prices because of
value-added component
4. Increase in profit margins

23. 12-23
Examples of SIS
An example for a SIS is the Automated Teller
Machine (ATM) first introduced by Citibank in
1977. This completely revolutionized the system
in banking industry and forever changed the way
people conducted financial transactions.
ATMs were strategic systems because the only
alternative to ATMs would require banks to open
branch offices at a large number of convenient
locations and these offices would have to remain
open for 24hrs per day, 7 days per week, to
provide the same level of service as ATMs.

24. 12-24
Strategic Information Systems Plan (SISP)
 Strategic Business Plan:
A plan that identifies a company’s goals as a means
of achieving the organizational mission; also
includes what is popularly referred to as SWOT
analysis.
 Strategic Information Systems Plan (SISP):
Identifies the information systems and technologies
that are vital to support a firm’s business strategy;
derived from the strategic business plan.
-Is like a road map that helps IS managers to
identify any potential gaps between what is available
and what should be available to promote good
decision making.

25. 12-25
Strategic Information Systems Plan (SISP) Contd…
The SISP should specifically target the following four
areas:
- Aligning IS investment with business goals
- Exploiting information technologies for competitive
edge
- Ensuring the efficient management of IS resources
-Developing technology policies and practices

26. 12-26
Strategies for Developing an SIS
Steps involved in developing an SISP:
 Establish the purpose of the plan and develop a broad outline
describing what the plan will address.
 Update the strategic business plan and the goals of the
business. Reassess the current business environment
 Identify the existing information systems including hardware,
software, and networking capabilities. Determine future
information needs and systems
 Identify the new systems, projects, and capabilities required to
meet the changing environment and changing information
needs.
 Identify the resources required to implement the plan and to
win the support of top management for the plan.
An organization should ask two important questions before
investing in strategic systems:
- Is the project financially feasible?
- Is the project technically feasible?

27. 12-27
Steps to Ensure Success of Strategic Systems
Re-engineering:
Re-evaluating and radically redesigning the way in which a
company does business; driven by the question, “Why do
we do what we do?”
 Technology decisions should be grounded in a clear
understanding of the processes that drive the technology.
 Strategic systems should be driven by strategic alliances
between trading partners
 Continuous improvement and investment in strategic
systems are essential for their long-term success
 The organizational culture should encourage some risk
taking
 Users must be fully trained if the full potential of the
strategic system is to be achieved

28. 12-28
Potential Barriers for Developing an SIS
 Development (Definition) Barriers:
- Generating Workable ideas requires leadership and teamwork
- Many innovative ideas are technically feasible
- Many innovative ideas are prohibitively expensive
-Many ideas die because they lack a sufficient market.
 Implementation Barriers:
- Telecommunications increases the complexity of implementing
SIS
- Multiple systems are difficult to integrate
- SIS systems often require inter-organizational cooperation
- State-of-the-art technologies are difficult to implement
 Maintenance Barriers:
- Competitors can copy SIS
- Unanticipated demand can overwhelm the usefulness of an SIS
- Applications can be expensive to maintain or enhance
- High exit barriers can cause devastating losses.

29. 12-29
Securing
Information
Systems

30. 12-30
Computer Security
 The process of protecting and
safeguarding hardware, software,
networks, physical facilities, data,
and personnel from accidental,
intentional, or natural disasters.

31. 12-31
Common Types of Security
Violations
 Company data theft by employees
 Gaining access to information stored on computer
networks by cracking passwords
 Industrial espionage by criminals eavesdropping on
wireless communications or on LANs and Internet
connections
 Deliberate, unauthorized modification of software
 Theft of employees’ identities to make outrageous or illegal
statements on the Internet
 Starting or fueling rumors on the Internet that are designed
to harm the company
 Denial of service attacks in which people call a toll-free
number or send an e-mail but the number stays perpetually
busy or they are denied access

32. 12-32
Awareness of Security Violations
0
60
50
10
40
30
20
70
Yes No Unknown
53%
69%
9%
14%
38%
17%
1996
1998
Has your organization been the target of information espionage?
Source: Warroom Research, Inc., Annapolis, Md.

33. 12-33
Why Information Systems Are
Vulnerable
 Increased Access to the System
 Key sources of security breaches are employees,
authorized external users such as suppliers, and
crackers outside the business
 Increased System Complexity
 Information systems today are much more
complex than systems even a few years ago
– the software has many more functions and features and
the hardware has integrated components, all of which
must work together to provide overall system security
– each operating system has its own security features, so
switching to a new operating system can throw previous
security measures into disarray

34. 12-34
Why Information Systems Are
Vulnerable (cont.)
 Cyber Terrorism on the Internet
 The Internet is a haven for those engaging in
security misdeeds
 The Internet connects two million host computers
and provides access to a rich and extensive set
of data and information to millions of users, with
the numbers increasing by 15 percent every
month
 Networks Are the Weakest Link in the Chain
 “Networks are essentially sieves to anyone with
minor technical skills, and the desire to retrieve
other peoples’ information”

35. 12-35
Why Information Systems Are
Vulnerable (cont.)
 Complacent Management
 Top managers are often reluctant to invest
in security because it is difficult to see the
effect it has on the ‘bottom line”

36. 12-36
The Three Categories of Security
Breaches
Types of Security
Breaches Description
Accidental or unintentional
errors
Accidents relating to hardware and software.
Employees can also cause unintentional
security breaches.
Most common type of security violation, in
which individuals intentionally decode
passwords.
Breaking into computer hardware such as
modems, faxes, and cellular phones.
Infected software that behaves in unexpected
and undesirable ways.
Tornadoes, earthquakes, and other disasters
that cause computer systems to fail.
Intentional errors
Cracking passwords
Breaking into
computer hardware
Software virus
Natural disasters

37. 12-37
Techniques for Reducing Accidental
Security Breaches
WAYS TO REDUCE
ACCIDENTAL SECURITY
BREACHES
Introduce Hardware
Tracking Methods
Establish and Enforce
Clear Security Policies
and Procedures
Training and
Educating Users

38. 12-38
Eight Symptoms of a Software Virus
 Inexplicable loss of free memory
 Unusually long program loading or execution
times
 Changes in program or file size
 Malfunctioning print routines
 Computer freezing
 Unusual messages or beeps
 Computer rebooting in the midst of a process
 Corrupt files

39. 12-39
Computer Security Controls
 Policies, procedures, tools,
techniques, and methods designed
to reduce security breaches, system
destruction, and system errors from
accidental, intentional, and natural
disasters.

40. 12-40
Classifications of Security Controls
SECURITY CONTROLS
Examples:
•Documentation
•Encryption
•Firewalls
Examples:
•Passwords
•Smart cards
•Biometric
identification
•Backups
Development Controls
Examples:
•Fire alarms
•Security personnel
•Restricted access
to a facility
•Devices that monitor
temperature
Physical Facility
Controls
Application Controls

41. 12-41
Application Controls
 Passwords
 Many companies require employees to change their
passwords frequently
 Employees should use hard-to-guess or randomly
generated passwords
 Smart cards
 A plastic card with an embedded chip that provides users
with a new password each time they log on

42. 12-42
Application Controls (cont.)
 Biometric identification techniques
 Rely on body parts to validate that the user can access the
system
– finger prints
– retinal scans
– voice recognition
 Backup
 Treat information like gold
 Establish a backup routine
 Keep your backups in a safe place

43. 12-43
Development Controls
 Documentation
 Written set of documents that explain in detail the
reasoning behind processes, procedures, and other details
– The more detailed the documentation, the better off the company
will be in the future
 Encryption
 Converts data into a secret code before they are
transmitted over the network

44. 12-44
Physical Facility Controls
 Physical Facility Controls are the policies
and procedures that control the physical
environment in which systems reside
 Posting security personnel
 Installing fire alarms
 Security alarms
 Hidden cameras
 Requiring users to wear badges or use smart
cards to gain access to a building

45. 12-45
Disaster Recovery Plan (DRP)
There are seven steps in developing a DRP
 Identify specific situations that are classified as a disaster
 Name the individuals who have the right and the
responsibility to declare a disaster
 Identify specific steps for declaring a disaster
 Inventory all crucial corporate assets, functions, and
resources that are essential to operate the business
 Specify the general course of action the business will take
when disaster strikes
 Develop a specific course of action that each employee
must take to make the company operational when disaster
strikes
 Identify resources required to recover from the disaster,
including money, time, personnel, and facilities

46. 12-46
Business Guidelines for Security
Success
 Recognize the Symptoms of Security Breaches
 Unknown accounts added to the system and file server
 An unusual number of log-on failures and dial-in attempts
 Unexpected system or network crashes
 Unauthorized changes to system software and system files
 High system activity when no users are logged on, especially during
off-peak hours

47. 12-47
Business Guidelines for Security
Success (cont.)
 Be Watchful of Disgruntled Employees
 Disgruntled employees, or those who have been fired, are often
likely to cause security breaches
 Establish clear policies and legal agreements with fired employees
 Involve Law Enforcement When You Suspect a Security
Breach
 Call police immediately
 Train employees not to erase or destroy files that the suspected
employee used or created
 Cooperate with law enforcement
 Quantify damages to assist with prosecution

48. 12-48
Business Guidelines for Security
Success (cont.)
 Build Security Partnerships
 Security depends on partnerships with suppliers and
customers, and sometimes the government
 Convince Top Management That Security Is Not an
Option
 41% of survey participants reported that their company
doesn’t have formal security policies
 More than half said they lack disaster recovery plans
 More than a third said they don’t monitor their networks for
suspicious activity
 Fewer than one in five use encryption technology to
safeguard sensitive information