MANAGEMENT INFORMATION

SYSTEM
UNIT 2
LEARNING OBJECTIVE

1. Identify the following cross-functional enterprise systems, and give examples of how they
can provide significant business value to a company:
a. Enterprise application integration
b. Transaction processing systems
c. Enterprise collaboration systems
2. Give examples of how Internet and other information technologies support business
processes within the business functions of accounting, finance, human resource management,
marketing, and production and operations management.
INTRODUCTION
• Business managers are moving from tradition to information technology.
• Many ways to use IT in business as
• Business activities to be performed
• Business problems to be solved
• Business opportunities to be pursued
• We should have a basic understanding and appreciation of the major ways IS
are used to support each of the business functions.
• So, we will discuss about functional business systems, (transaction
processing, management information, decision support) in various business
function of accounting, finance, marketing, HR, operations.
FUN
CTIO
NAL
BUSI
NESS
SYST
EMS
MARKETING SYSTEMS

• Marketing is concerned with the planning, promotion, and sale of existing

products in existing markets, and the development of new products and new
markets to better attract and serve present and potential customers.
• Business firms have increasingly turned to information technology to help them
perform vital marketing functions in the face of the rapid changes of today’s
environment
MARKETING INFORMATION SYSTEM

• It provide information technologies that support major components of the

marketing function. For Example,
• Interactive Marketing – customers can become partners in creating,
marketing, purchasing, and improving products and services.
• Sales force automation – use mobile computing and internet technologies to
automate many information processing activities for sales support and
management.
MARKETING INFORMATION SYSTEM
COMPONENTS
INTERACTIVE MARKETING
• Customer-focused marketing process that is based on using the Internet, intranets and extranets
to establish two-way transaction between a business and its customers or potential customers.
• Customers are not just passive participants who receive media advertising prior to purchase
• They are actively engaged in network-enabled proactive and interactive process.
• It encourages customers to become involved in product development, delivery and service
issues.
• This is enabled by various internet technologies, including chat and discussion groups, web
forms, questionnaires, instant messaging and e-mail correspondence.
• Its outcomes are a rich mixture of vital marketing data, new product ideas, volume sales and
strong consumer relationships.
 EXAMPLES OF INTERACTIVE MARKETING

https://www.youtube.com/watch?v=IQovoot_ZUM
 TARGETED MARKETING

• Targeted Marketing has

become an important tool in
developing advertising and
promotion strategies to
strengthen a company’s e-
commerce initiatives as well as
its traditional business venues.
COMPONENTS OF TARGETED MARKETING

• Community - companies can customize their web advertising messages and

promotional methods to appeal to people in specific communities.
• They can be communities of interest, such as vital communities of online
sporting enthusiastic, or arts and craft hobbyists or geographic communities
formed by the websites of a city or other local organization.
COMPONENTS OF TARGETED MARKETING

• Content – advertising such as electronic bill boards or banners, can be placed

on a variety of selected websites, in addition to a company website.
• An ad for a product campaign on the opening page of an internet search
engine is a typical example.
• Context - Advertising is targeted only in web pages that are relevant to the
content of a product or service.
• Example: Vacation travel
COMPONENTS OF TARGETED MARKETING

• Demographic/Psychographic: web marketing efforts can be aimed only at

specific types of people. Example: unmarried, male college graduates, etc.
• Online Behavior – Advertising and promotion efforts can be tailored to each
visit to a site by an individual.
• This strategy is based on a variety of tracking techniques, such as web
“cookie” file recorded on the visitor’s disk drive from previous visits.
• This enables company to track a person’s online behavior at its website so
marketing efforts can be targeted to that individual at each visit to its website.
 SALES FORCE AUTOMATION
• In many companies, the sales force is being outfitted with notebook computers,
web browsers, and sales contract management software that connect them to
marketing websites on the internet extranets, and their company intranets.
• This not only increases the personal productivity of salespeople, but it
dramatically speeds up the capture and analysis of sales data from the field to
marketing managers at company headquarters.
• Many companies are viewing sales force automation as a way to gain a strategic
advantage in sales productivity and marketing responsiveness.
SALES FORCE AUTOMATION

• https://www.youtube.com
/watch?v=nmc22qBsAFk
MANUFACTURING SYSTEMS

• It supports production/operations function that includes all activities

concerned with the planning and control of the processes producing goods
and services.
• Information systems used for operation management and transaction
processing support all firms that must plan, monitor, and control inventories,
purchases, and the flow of goods and services.
• Firms such as transportation companies, wholesalers, retailers, financial
institutions, and service companies must use production/operations
information systems to plan and control their operations.
EARLY PRODUCTION ACTIVITIES

• At early, companies use Built-to-stock model – produced 100 of an item and sold
them via distribution networks.
• They keep track of the stock inventory and made more of the item once inventory
levels dipped below a threshold.
• Rush jobs were both rare and expensive, and configuration operations are limited.
• Concepts like just in time inventory, built to order manufacturing, end to end
supply chain visibility, the explosion in contract manufacturing, and the
development of web based e-business tools for collaborative manufacturing have
revolutionized plant management.
COMPUTER-INTEGRATED MANUFACTURING

• A variety of manufacturing information systems, many of them Web-enabled,

are used to support computer-integrated manufacturing (CIM).
• Simplify (reengineer) production process, product designs, and factory
organization as a vital foundation to automation and integration.
• Automate production process and the business functions that support them
with computers, machines and robots.
• Integrate all production and support process using computer networks, cross-
functional business software, and other information technologies.
HUMAN RESOURCE SYSTEMS

• Human resource management (HRM) function involves the recruitment,

placement, evaluation, compensation, and development of the employees of
an organization.
• The goal of human resource management is the effective and efficient use of
the human resources of a company.
HUMAN RESOURCE INFORMATION SYSTEM

• Human Resource Information System (HRIS) are designed to support

1. Planning to meet the personnel needs of the business
2. Development of employees to their full potential
3. Control of all personnel policies and programs
• Originally, business used computer-based information systems to
1. Produce paychecks and payroll reports
2. Maintain personnel records
3. Analyze the use of personnel in business operations
HRM AND INTERNET

• Online HRM systems may involve recruiting for employees through

recruitment sections of corporate websites, online job portals etc.
• Internet has a wealth of information and contacts for both employers and job
hunters.
HRM AND CORPORATE INTRANET

• Intranet technologies allow companies to process most common HRM

applications over their corporate intranets.
• Intranets can collect information online from employees for input to their
HRM files, and they can enable managers and other employees to perform
HRM tasks with little intervention by the HRM department.
• Eg.: Employee Self-Service (ESS) intranet applications allow employees to
view benefits, enter travel and expense reports, verify
ACCOUNTING SYSTEMS

• Accounting Information Systems are the oldest and most widely used
information system in business.
• They record and report the flow of funds through an organization on a historical
basis and produce important financial statements and financial budgets.
• Operational accounting systems emphasize legal and historical record keeping
and the production of accurate financial systems.
• Order Processing, inventory control, accounts receivable, accounts payable,
payroll and general ledger.
ONLINE ACCOUNTING SYSTEM
ONLINE ACCOUNTING SYSTEM

• The only interactive nature of networks calls for new forms of transaction documents and procedures
and controls.

• This particularly applies to system like order processing, inventory control, accounts receivable and
accounts payable.

• These systems directly involved in processing of transactions between a business and its customers and
suppliers.
COMMON BUSINESS ACCOUNTING SYSTEMS
 Order processing:

• Order processing is an important transaction processing system that captures and processes customer
orders and produces data needed for sales analysis and inventory control.

• In many firms, it also keeps track the status of customer orders until goods are delivered.

• Computer based sales order processing systems provide a fast, accurate, and efficient method of
recording, screening customer orders and sales transactions.

• They also provide inventory control systems with information on accepted orders. So they can be filled
as quickly as possible.
COMMON BUSINESS ACCOUNTING SYSTEMS
 Inventory Control:

• Inventory control system process data reflecting changes to items in inventory.

• Once data about customer’s orders are received from an order processing system, a computer based
inventory control system records changes to inventory level and prepares appropriate shipping
documents.

• Then it may notify managers about items that need reordering and provide them with a variety of
inventory status reports.

• Computer based inventory control systems thus help a business provide high quality service to
customers while minimizing investments in inventory and inventory carrying costs.
COMMON BUSINESS ACCOUNTING SYSTEMS
 Accounts Receivable:

• Accounts receivable systems keep tracks of amounts owed by customers from data generated by
customer purchases and payments.

• They produce invoices to customers, monthly customer statements, and credit management reports.

• Computer based accounts receivable systems stimulate prompt customer payments by preparing
accurate and timely invoices and monthly statements to credit customers.

• They provide managers with reports to help them control the amount of credit extended and the
collection of money owed.

• This activity helps to maximize profitable credit sales while minimizing losses from bad debts.
COMMON BUSINESS ACCOUNTING SYSTEMS
 Accounts Payable

• Accounts payable systems keep track of data concerning purchases from and payments to suppliers.

• They prepare checks in payment of outstanding invoices and product cash management reports.

• Computer based accounts payable systems help ensure prompt and accurate payment of suppliers to
maintain good relationships, ensure a good credit standing, and secure any discounts offered for
prompt payment.

• They provide tight financial control on overall cash disbursements of the business.

• They also provide management with information needed for the analysis of payments, expenses
purchases, employee expense accounts and cash requirements.
COMMON BUSINESS ACCOUNTING SYSTEMS
 Payroll:
• Payroll systems receive and maintain data from employee time cards and other work records.
• They produce paychecks and other documents such as earning statements, payroll reports, and labour analysis
reports.

• Other reports also prepared for management and government agencies.

• Computer based payroll system help business make prompt and accurate payments to their employees, as well
as repots to management, employees and government agencies concerning earnings, taxes and other
deductions.

• They may also provide management with reports analyzing labour costs and productivity.
 
COMMON BUSINESS ACCOUNTING SYSTEMS
 General Ledger:

• General ledger systems consolidate data received from accounts receivable, accounts payable, payroll,
and other accounting information systems.

• At the end of each accounting period, they close the books of a business and produce the general
ledger trail balance, the income statement and balance sheet of the firm, and various income and
expense reports for management.

• Computer based general ledger systems help business accomplish these accounting tasks in an accurate
and timely manner.

 
ONLINE ACCOUNTING REPORT
FINANCIAL MANAGEMENT SYSTEMS

• Computer based financial management systems support business managers and

professionals in decisions concerning
1. The financing of a business
2. The allocation and control of financial resources within a business
• Major financial management system categories include cash and investment
management, capital budgeting, financial forecasting, and financial planning.
• For example, capital budgeting process involves evaluating the profitability and
financial impact of proposed capital expenditures.
• Long term expenditure proposals for facilities and equipment can be analyzed using a
variety of return on investment (ROI) evaluation technique.
FINANCIAL MANAGEMENT SYSTEMS
FINANCIAL MANAGEMENT SYSTEMS

• Cash Management:
• Cash Management systems collect information on all cash receipts and
disbursements with in a company on a real time or periodic basis.
• Such information allows businesses to deposit or invest excess funds more
quickly and thus increase the income generated by deposited or invested funds.
• These systems also produce daily, weekly or monthly forecasts of cash receipts
or disbursements that are used to spot future cash deficits or surpluses.
FINANCIAL MANAGEMENT SYSTEMS

• Online Investment:
• Many businesses invest their excess cash in short-term low-risk marketable securities or in higher-
return / higher-risk alternatives. So that investment income may be earned until the funds are
required.
• The portfolio of such securities can be managed with the help of portfolio management software
packages.
• Investment information and securities trading are available from hundreds of online sources on the
Internet and other networks.
• Online investment management services help a financial manager make buying, selling or holding
decisions for each type of security that an optimum mix of securities is developed that minimizes
risk and maximizes investment income for the business.
FINANCIAL MANAGEMENT SYSTEMS

• Capital Budgeting:
• The Capital budgeting process involves evaluating the profitability and
financial impact of proposed capital expenditures.
• Long-term expenditure proposals for plants and equipment can be analyzed
using a variety of techniques.
• This application makes heavy use of spreadsheet models that incorporate
present value analysis of expected cash flows and probability analysis of risk
to determine the optimum mix of capital projects for a business.
FINANCIAL MANAGEMENT SYSTEMS
• Financial Forecasting & Planning:
• Financial analysts typically use electronic spread sheets and other financial planning
software to evaluate the present and projected financial performance of a business.
• They also help determine the financing needs of a business and analyze alternative
methods of financing.
• Financial analyst use financial forecasts concerning the economic situation, business
operations, and type of financing available, interest rates and stock and bond prices to
develop an optimal financing plan for the business.
• Electronic spreadsheet packages, DSS software, and web-based groupware can be
used to build and manipulate financial models.
TRANSACTION PROCESSING SYSTEM (TPS)

• An Information system that processes data arising from the occurrence of business
transactions.
Transaction processing systems (TPS) are aimed at improving the routine
business activities on which all organizations depend.A transaction is any event or activity that affects the
organization which occur
as part of doing business, such as sales, purchases, deposit, withdrawals,
refunds and payments.
• Common transactions include placing orders, billing customers, hiring
employees, and depositing cheques.
• The types of transactions that occur vary from organization to organization.
• Transaction processing, the set of procedures for handling the transactions,
often includes the activities like calculation, storage and retrieval, classification,
summarization, sorting.
• Transaction processing procedures are often called standard operating
procedures.
TRANSACTION PROCESSING SYSTEM (TPS)

• An Information system that processes data arising from the occurrence of business
transactions.
Transaction processing systems (TPS) are aimed at improving the routine
business activities on which all organizations depend.A transaction is any event or activity that affects the
organization which occur
as part of doing business, such as sales, purchases, deposit, withdrawals,
refunds and payments.
• Common transactions include placing orders, billing customers, hiring
employees, and depositing cheques.
• The types of transactions that occur vary from organization to organization.
• Transaction processing, the set of procedures for handling the transactions,
often includes the activities like calculation, storage and retrieval, classification,
summarization, sorting.
• Transaction processing procedures are often called standard operating
procedures.
TRANSACTION PROCESSING CYCLE
• Transaction processing systems capture and process data describing business
transactions.
• Then they update organizational files and databases and produce a variety of
information products for internal and external use.
• Transaction processing systems generally go through a five-stage cycle of
1) Data entry activities
2) Transaction processing activities
3) File and database processing
4) Document and report generation
5) Inquiry processing activities.
TRANSACTION PROCESSING CYCLE
TRANSACTION PROCESSING CYCLE
• Data Entry:
• The input activity in transaction processing systems involves a data entry
process.
• In this process, data is captured, or collected by recording, coding, and editing
activities.
• Then the data may be converted to a form that can be entered into a
computer system.
• Data entry activities have always been a bottleneck in the use of
computers for transaction processing
TRANSACTION PROCESSING CYCLE
• Data Entry:
• The input activity in transaction processing systems involves a data entry
process.
• In this process, data is captured, or collected by recording, coding, and editing
activities.
• Then the data may be converted to a form that can be entered into a
computer system.
• Data entry activities have always been a bottleneck in the use of
computers for transaction processing
TRANSACTION PROCESSING CYCLE
• Transaction Processing:
• Transaction processing systems process data in two ways.
a) Batch processing
b) Real-time processing

• Batch Processing:
• In a batch processing system, transaction data is accumulated over a period
of time and processed periodically
TRANSACTION PROCESSING CYCLE
• Batch Processing:
TRANSACTION PROCESSING CYCLE
• Batch Processing:
• It usually involves the following activities.
• Gathering source documents originated by business transactions, such as sales
orders and invoices, into group called batches.
• Recording transaction data on an input medium , such as magnetic disks or
magnetic tapes.
• Sorting the transactions in a transaction file in the same sequence as records in
a sequential master file.
• Processing transaction data and creating an updated master file and a variety of documents (such as customer
invoices or paycheques) and reports)
• Capturing and storing batches of transactions data at remote sites, and then
transmitting it periodically to central computers for processing. This is called
remote job entry or RJE.
TRANSACTION PROCESSING CYCLE
• Real-time Processing :
TRANSACTION PROCESSING CYCLE
• Real-time Processing :
• Real-time processing systems process transaction data immediately after they
are generated and can provide immediate output to end users.
• In full-fledged real-time processing systems, data is processed as soon as it is
originated or recorded, without waiting to accumulate batches of data.
• Data is fed directly into the computer system from online terminals, without
being sorted, and it is always stored online in direct access files.
• Files and databases are always up to data since they are updated as and
whenever data is originated, regardless of its frequency.
• Responses to end users' inquiries are immediate, since information stored on
direct access devices can be retrieved almost instantaneously.
• Real-time processing depends on telecommunication networks of online
terminals and computers.
TRANSACTION PROCESSING CYCLE
• File and Database Processing:-
• File and database processing are the basic activities of transaction processing
systems.
• These are also known as file and database maintenance.
• This term emphasizes that an organization's files and databases must be
maintained by its transaction processing systems so that they are always correct
and up to date.
• Transaction processing systems update and make changes to corporate databases,
which are then used to
a) Provide data needed to produce proper information products, and
b) Provide data needed for further processing by management information
systems
TRANSACTION PROCESSING CYCLE
• Document & Report generation:-
The final stage in the transaction processing cycle is the generation of information products
such as documents and reports.
• Documents produced by transaction processing systems are called transaction
documents. There are various types of documents such as
• Action documents that initiate actions or transactions on the part of their
recipient. For e.g., a paycheque authorizes a bank to pay the customer.
• Information documents relate, confirm or prove to their recipients that
transactions have occurred. For e.g., sales receipts, customer statements etc.
• Turnaround documents say that some types of transaction documents are
designed to be read by magnetic or optical scanning equipment.
• Forms produced in this manner designed to be returned to the sender. For e.g., many
computer-printed invoices consist of a turnaround portion, which is returned to
the customer along with his/her payment.
TRANSACTION PROCESSING CYCLE
• Document & Report generation:-
Transaction processing systems also produce several types of reports and are
used by managers. Such reports provide an audit trail for transaction control
purposes. For example,
• Control listings, are detailed reports that describe each transaction occurring
during a period. They are also called logs. For example, a payroll register lists
every paycheque printed on a specified payday by a payroll system.
• Edit reports, describe errors detecting during processing. For e.g., invalid
Account Number, missing data etc would be presented in edit reports.
• Accounting statements are such reports that legally document the financial
performance or status of a business. For e.g., statements of cash flow, income
statements etc.
TRANSACTION PROCESSING CYCLE
• Inquiry Processing:-
• Many transaction processing allows us to use Internet and Web
browsers or database management query languages to make inquiries
and receive responses concerning the results of transaction
processing activity.
• Typically responses are displayed in a variety of pre specified
formats or screens. For e.g., checking balance in A/C and receive
immediate response on PC.
INFORMATION REPORTING SYSTEMS

• Information is data that has been processed and is useful in decision making.
it helps decision makers by increasing knowledge and decreasing
uncertainty.
• IRS Provide the following;
• Correct and timely information to appropriate managers
• Information on medium and long range operations
• Summarised information
INFORMATION REPORTING SYSTEMS-TYPES
OF REPORTS

• Scheduled listings
• Exception Reports
• Predictive reports
• Demand Reports
INFORMATION REPORTING SYSTEMS-TYPES
OF REPORTS
• Scheduled listings
• Produced at regular intervals and provide routine information to a wide variety of users.
• Suffer from information overload and problems of relevance
• Control and tracking oriented
• Examples
• Stock Listings
• Standard costs
• Customer Balances
• Debtors listings
• Monthly Sales reports
INFORMATION REPORTING SYSTEMS-TYPES
OF REPORTS
• Exception Reports
• Action Oriented
• Monitors the performance of the business and any deviation from expected results
triggers the generation of a report.
• Examples
• Stock Out Reports
• Bad debts Report
• Customer complaints
INFORMATION REPORTING SYSTEMS-TYPES
OF REPORTS
• Predictive reports
• Used for planning what if models,
• Examples
• MRP
• Budgeting
INFORMATION REPORTING SYSTEMS-TYPES
OF REPORTS

• Demand Reports
• Solicited by managers
• Normally produced online and from a database
• Examples
• Correlation reports
• Capital Expenditure evaluations
INFORMATION FOR STRATEGIC ADVANTAGE

• Information systems can play a major role in support of the strategic objectives of an organization.
• Gaining competitive advantage is critical for organisations. Baltzan and Phillips (2010, p. 16)
• define competitive advantage as ‘a product or service that an organization’s customers value more
• highly than similar offerings from its competitors’ (in other words, you have something useful
• (i.e. products, services, capabilities) that your competitors do not have).
• Competitive advantages are typically temporary as competitors often seek ways to duplicate the competitive advantage
(Baltzan & Phillips 2010, p. 16).

• In order to stay ahead of competition, organisations have to continually develop new competitive advantages.
• Tools to analyse, identify, and develop competitive advantages are Porter’s Five Forces,
• three generic strategies, and value chains.
INFORMATION FOR STRATEGIC ADVANTAGE

•Porter’s Five Force Model

•Michael Porter’s Five Forces Model is a useful tool to assist in assessing the competition in an industry and
determining the relative attractiveness of that industry. Porter states that in order to do an industry analysis a
firm must analyse five competitive forces (Baltzan & Phillips 2010, p. 17):
•• Rivalry of competitors within its industry
•• Threat of new entrants into an industry and its markets
•• Threat posed by substitute products which might capture market share
•• Bargaining power of customers
•• Bargaining power of suppliers.
INFORMATION FOR STRATEGIC ADVANTAGE

•Porter’s Five Force Model

•Michael Porter & Victor Millar have said, IT is affecting competition in three vital ways:
•1. It changes the industry structure & in so doing, affecting the rules of competitions.
•2. It spawns the new business, often from within the company existing operations.
•3. It creates competitive advantage by giving companies new ways to outperform their
•Rivals.
INFORMATION FOR STRATEGIC ADVANTAGE
• Porter’s Five Force Model
INFORMATION FOR STRATEGIC ADVANTAGE

• The Value chain model

INFORMATION FOR STRATEGIC ADVANTAGE

• The Value chain model

• The value chain is an analytical frame work to disaggregate a firm in to the different interdependent
activities that add value to its raw materials and bring the firms products or service to the customer.

• The key feature of a value chain is to examine each step of production & determine how value is added at
each step.

• The second objective of value chain analysis is to examine the bigger picture in the industry.
INFORMATION FOR STRATEGIC ADVANTAGE

• The Value chain model

• The value chain is combination of primary and support activities.
• Primary activities involve physical creation of the product, marketing and delivery to buyers, support and service after sale.
• Support activities provide the input & infrastructure that allow the primary activities to take place.
• Each activity adds value; there is a cost of adding a value in every level of the chain.
• Value chain enables a company to analyses where & how it can add value to reduce cost.
• If the total cost of added values is less then what the values is less than, what the customer pays, there is profit.
• The concept of value chain is a useful frame work for identifying information technology opportunities.
• The value chain concept can help managers decide where and how to apply the strategic capabilities of information system technology
INFORMATION FOR STRATEGIC ADVANTAGE

• The Value chain model

• Each activity adds value; there is a cost of adding a value in every level of the chain.

• Value chain enables a company to analyses where & how it can add value to reduce cost.

• If the total cost of added values is less then what the values is less than, what the customer pays, there is
profit.

• The concept of value chain is a useful frame work for identifying information technology opportunities.

• The value chain concept can help managers decide where and how to apply the strategic capabilities of
information system technology