CHAPTER TWO

ORGANIZATION AND
INFORMATION SYSTEMS
 Chapter II – Organization & IS

2.1. Organization, Management

& Decision Making Process
• Organization: Definition

• Features of Organization

• Levels of Management, Decision Types and

Information Requirements
 Dimensions of IS

Discussion Points:

- What is organisation?
- What do we understand by the relationship between change
and organisations? How it occurs and how will it be managed?
 A strategic information system is any information system
that uses IT to help an organization…
◦ Gain a competitive advantage

◦ Or meet other strategic enterprise objectives

05:02 PM 3
 Organisations
What are the main challenges of Management?
◦ Sustainability of competitive advantage
◦ Fitting the technology to the organisation or the
organisation to the technology
 organisations:
◦ are a collection of people with different types of skills and knowledge
(managers, knowledge workers, data workers, production or service
workers)
◦ Are social structures and consist of politics and culture
◦ Are systems that operate in an environment.
◦ Have Business processes that convert inputs to outputs
◦ Perform business functions: Marketing, Manufacturing, Finance
and Human resource functions
◦ Are formal and legal entities with internal rules and procedures
05:02 PM 4
Con’td
 Organization is an organized group of people with a particular
purpose, such as a business or government.
 An organization whose purpose is business is called business
organization.
 Asocial unit of people that is structured and managed to meet a need
or to pursue collective goals.
 All organizations have a management structure that determines
relationships between the different activities and the members, and
subdivides and assigned roles, responsibilities and authority to carry
out different tasks.
 Organizations are open systems--they affect and are affected by their
environment. 05:02 PM 5
 Chapter II – Organization & IS

Cont’d
• collection of people working together in a coordinated
and structured fashion to achieve one or more goals.

• A process:

• Work – designed and grouped

• responsibility & authority – defined & delegated

• Relationships – established

• Resources (Capital & labor) taken from environment

 processed  Output to Environment

• Legal entity: Internal rules & procedures; legal

capacity (contracts, obligations, incur & pay debt, sue
& be sued….)
 Features of Organization
 Internal Features
• Management/Employees
• Routines:
• Sequence of actions regularly followed (rules, procedures, practices)
• Processes:
• Collection of routines (Firm = collection of business processes)
• Information System  routines and business processes
• Organizational Culture:
• Shared assumptions, values & beliefs: what is appropriate and not
(behavior); about what, how, where and for whom to produce
• Unifying force
• Interaction – each other, clients, stakeholders
• Restraint to technological change if it threatens the basic
assumptions

Fu
Internal (Cont’d)
• Politics –
• View points – how resources, rewards,
punishments distributed  competition &
conflict;
• finding ways to gain advantage (access to
resources, preferential treatment, power, etc.)
• Resistance to change – IS investment

• Structure:
• lines of authority/reporting; workflow
• Any IS reflect the existing organizational
structure – functional area based IS
Decision types and Information requirement by
Level of Management

05:02 PM 9
05:02 PM 10
 Chapter II – Organization & IS

2.1.3. Levels of Management and Information

Functions, Information
Decision Requirement & Information System
Structure
policies, long term plans, objectives, budget
Unstructure
d Info: Low volume, highly aggregated,
• framework
Decision under
uncertain situation – Top Not current, approximate, futuristic,
undefined I, O, more external,
Procedures • IS: DSS, ESS, AI (Expert Systems)

Medium term planning, budget control,

Semi- sales management, inventory control,
Middle
structured
Some I, O, resource allocation, scheduling,
Procedures • measurement of performances
Info: Intermediate level of
not well volume, aggregation, current,
defined accuracy and more of internal,
etc.
Bottom • IS: MIS planning, production schedules, day-to-day
short-range
Structured decisions , use of resources, enforce polices, follow
procedures
Well defined • Info: High volume, low level of
decision aggregation, high currency, high
making accuracy, internal and external
procedure • IS: TPS
Major types of conditions under
which managers make decision
 Certainty
:- the decision-maker has perfect information
and knows which outcome comes following which
action.

 Risk: - there is no perfect information on the outcomes.

The decision-maker knows multiple possible outcomes
for actions and probability information attached to each
outcome.

 Uncertainty: - does not have any probability

information even to make a best guess about the
outcome
05:02 PM 12
 Chapter II – Organization & IS

Decision Environments

complete information Incomplete information Very poor information

Managerial Roles and Information
Systems
Managerial roles; are expectations of the
activities that managers should perform in
an organization.
Mintzberg identified ten roles of
managers.

Discussion Point:
What are these roles? What ICT can we
use to support each role?
05:02 PM 14
 1. Interpersonal Role
 Figurehead role:- when a manager represents an
organization symbolically. Tele-presence systems.
 Leader role: When a manager motivates and inspires his
subordinates to do their job effectively. Systems:
Telepresence, social networks, Twitter.
 Liaison role: when a manager establishes a network of
connection inside and outside the organization. Electronic
communication system such as telephones Smartphones,
social networks, email and office05:02
networks.
PM 15
 Informational Roles
 Monitor: When a manager looks for key information about
internal activity of the organization and its environment.
◦ Support systems: transaction processing systems, management information
systems, EIS and the Internet

 Disseminator: When a manager passes valuable information

along to others in the unit.
◦ Support systems office automation systems and e-mails.

 Spokesperson: When a manager passes valuable information to

those outside the unit - superiors and persons in the environment.
◦ support Systems: office automation systems, Webinars, telepresence
05:02 PM 16
 Decisional Roles
 Entrepreneur: when a manager initiates changes and makes constant
improvements within an organization.
◦ No support system is available for this role so far.

 Disturbance handler: when a manager reacts to unanticipated

events.
◦ No support system is available so far.

 Resource allocator: when a manager determines which unit should

get which resource.
◦ different Decision Support Systems.

 Negotiator: when a manager resolves disputes both within the unit

and between the unit and its environment.
05:02 PM 17
Types of Computer Based
Information Systems
The Evolution of Computer Based Management Information
Systems

Internet Technology: For

Strategic Management
Trend of power of computers in Information System
relation to time
Power and capacity of Computers

Expert Systems, Executive Support

Systems, Knowledge Base Systems, etc.

DBMS, Decision Support Systems and Office

Automation
Management Reporting Systems

Business Transaction Processing System

1950 1960 1970 1980 1990 2000 2010

1st Generation 2nd Generation 3rd Generation 4th Generation

19
Cont…
 The first generation of computers was largely used for
accounting applications such as order processing, inventory
data and customer accounts
 it was the accounting function of business where Computer
Based Information System was first applied.
 To overcome the limitations of AIS, information specialists
attempted to design information systems useful for analysis,
planning & decision-making activities, Management
Reporting and Decision support systems.
20
Interdependence of Information Systems
 The development of computer based information system has
begun by using first generation computers for data processing
purpose and reached the level of using computers for
executive information system (EIS).
 However, this does not mean that data processing systems are
outdated and they are not useful for advanced managerial
information systems.
 Rather the advancement in information technology has
strengthened the transaction processing systems (TPS) to
capture large volume of external and internal data and to be
the basis for higher-level information
05:02 PM systems. 21
Functional Information Systems
◦ Accounting Information Systems
◦ Marketing Information Systems
◦ Manufacturing Information systems
◦ HR Information Systems
◦ Finance Information Systems
Accounting Information System

Financial Accounting Information System

 is used to collect, record, classify, summaries and report
financial data of an organization on a historical
basis(Analysis).
 The reporting aspect is mainly producing financial
statements such as balance sheet & income statement.
 Financial accounting reports are important to provide
external users such as investors, government agencies and
banking institutions with information on the performance
of the business.

05:02 PM 23
Cont…
Managerial Accounting Information System
 is the process of producing projected financial
statements and financial budgets against which the
firm's financial performance is measured
(projection).
 Managerial Accounting is also concerned with
determining relevant costs, variances between actual
performance and budgeted performance, and
performing other analysis useful for managerial
control and decisions. Generally, Managerial
05:02 PM 24
Transaction processing system (TPS):
 TPS can be classified according to how often data are needed to
be processed. There are two major classifications

◦ Batch processing TPS: is accumulated over a period of time &

processed periodically

• Online processing TPS : real time processing

25
Cont’d
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.
Cont..
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.
 Cont…
 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
Technological Trends, Strategic Planning
Labour situations

New Production Technology Options

Manufacturing Top Management
Information System
System
Financial Analysis of Different
Investment Options,
Alternative sources of financing operations

Capacity of Production,
Financial management
Quantity and Cost Demand, Price
Information System Customers Analysis
of Material and Labour
Competitors Analysis
New market options

Human Resource
Income Statement, Analysis and Planning
Balance Sheet
and Other Accounting Reports
Demand Marketing Information
System

Sales and procurment Accounting Sales Data

Transactions Information System Payrol Information
Human Resource
Management
Preference and tastes of customers, Information System
Competitors and Market situations

Recruitment and
Sources of employment

05:02 PM 29
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.
 Therefore, IS are useful in marketing in product planning,
pricing decision, advertising and sales promotion strategies,
forecasting market potential for new and present products,
determining distribution channels etc.
 Cont….
• 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
Cont…
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
 Manufacturing Information
Systems
 Computer Integrated Manufacturing
Systems:
 It has three fundamental purposes.
− Simplify (reengineer) production process, product designs.
− Automate production process and the business functions that
support them with computers and robots.
− Integrate all production and support process using computer
and telecommunication network
 Benefits of Computer Integrated
Manufacturing Systems

 Increase efficiency
 Improved utilization of production facilities
 Higher Productivity
 Better Quality Control

 Improved customer service

 Reduced investment in production inventories and
facilities
Cont…
 Process Control

◦ The use of information systems to control physical process

in petroleum refineries, cement factories, chemical plants,

food product manufacturing …

◦ Use sensor to measure physical phenomenon like

temperature and pressure.

◦ Use mathematical models to analyze the data generated

and compare them to standards; based on which reports to

human in the form of signal or display text on the screen.

Cont…
 Machine Control
◦ Used to control actions of the machine
◦ Brewery Factories use this system to determine the
input
 Robotics
 Technology of building machines with human like
physical capabilities (dexterity, movement, vision
etc) using artificial intelligence that less human
dependent.
 Used for hazardous areas or work activities
Cont….
 CAE (Computer Aided Engineering)
◦ Used to simulate, analyze and evaluate the models
of product designs so that the products will be
manufactured based on required specifications.
◦ It is also used to design processes
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
Cont…

Staffing Systems

◦ Personal Record Keeping (track of updates of

profile)
◦ Employee skills inventory (for assignment and
projects)
◦ Personnel Requirement Forecasting
Cont…
Training and Development

◦ to plan and monitor employee recruitment, training and

development

◦ To analyze success story of present programs

◦ Career development status of employee

Compensation Analysis

◦ Analyze distribution of employee compensation with in a

company and to compare compensations with
competitors’.
 Cont…
Government Reporting

◦ Government offices required details of employees

and employment in organizations; hence
information systems can be used to prepare report
for government reporting.
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
Cont…
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.
Information System by level of Mgt to
support managerial decision and
strategic advantage of the
organizations.

05:02 PM 44
IS for different levels of Management
 Information reporting system,

 Decision support system

 Expert System (Artificial Intelligence)

 Executive information (Support) system.

05:02 PM 45
Why are information systems become

more and more intelligent and

advanced as we move from bottom to

up ?

Friday, August 9, 2024 Chapter One 46

Decision Support in Business
 Companies are investing in data-driven
decision support application frameworks to
help them respond to
◦ Changing market conditions
◦ Customer needs
 This is accomplished by several types of IS
like
◦ Management information
◦ Decision support
◦ Expert Systems and others

10-47
Levels of Managerial Decision Making

10-48
 Decision Structure
Structured (operational)
◦ The procedures to follow when decision
is needed can be specified in advance
Unstructured (strategic)
◦ It is not possible to specify in advance
most of the decision procedures to follow
Semi-structured (tactical)
◦ Decision procedures can be pre-specified,
but not enough to lead to the correct decision

10-49
 Discussion
If you have a restaurant, what
kind of information system will
you adopt? And what functions
you expect to obtain from the
system you decided to adopt?

05:02 PM 50
Business Intelligence
A term primarily used in industry that

incorporates a range of analytical and

decision support applications in business
It includes management information systems,

data mining, decision support systems,

knowledge management systems, and online
analytical processing.
Business Intelligence Applications

10-52
 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.

10-53
Cont…
◦ Satisfies needs of operational and tactical
decision makers who face more structured
decision situations.

◦ For example, sales managers rely heavily on sales

analysis reports to evaluate differences in
performance among salespeople who sell the same
types of products to the same types of customers.

05:02 PM 54
Management Reporting Alternatives
 Periodic Scheduled Reports

◦ Pre-specified format on a regular basis

◦ E.g. daily or weekly sales analysis reports and monthly financial
statements.
 Exception Reports

◦ Reports about exceptional conditions

◦ May be produced regularly or when an
exception occurs
◦ E.g. a report that contains only information on customers who
have exceeded their credit limits.
10-55
 Cont…
Demand Reports and Responses

◦ Information is available on demand

◦ Sometimes mangers may demand information without

keeping the regularly scheduled reporting time.

Push Reporting
◦ Information is pushed to a networked computer
◦ many companies are using webcasting software to
broadcast selectively reports and other information to
the networked PCs of managers and specialists over their
corporate intranets
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
DSS systems are designed to be ad hoc,
quick-response systems that are initiated and
controlled by decision makers
10-57
DSS Model Base
Model Base

◦ A software component that consists of

models used in computational and analytical
routines that mathematically express relations
among variables
◦ An organized collection of mathematical models
◦ It includes models developed to support
specific decisions as well as general purpose
models.
Spreadsheet Examples

◦ Linear programming
◦ Multiple regression forecasting
◦ Capital budgeting present value
10-58
 Using Decision Support Systems
 Using a decision support system involves an interactive

analytical modeling process

◦ Decision makers are not demanding pre-specified information

◦ They are exploring possible alternatives

 What-If Analysis

◦ Observing how changes to selected variables affect other variables

◦ Example

10-59
Using Decision Support Systems
 Sensitivity Analysis

◦ Observing how repeated changes to a single variable affect

other variables

◦ Frequency has relationship with the impact

 Goal-seeking Analysis

◦ Making repeated changes to selected variables until a chosen

variable reaches a target value

 Optimization Analysis

◦ Finding an optimum value for selected variables, given

certain constraints
10-60
 MIS vs. DSS

Management Information Decision Support Systems

Systems
Decision support Provide information about the Provide information and
provided performance of the organization techniques to analyze specific
problems
Information form Periodic, exception, demand, and Interactive inquiries and
and frequency push reports and responses responses

Information Prespecified, fixed format Ad hoc, flexible, and

format adaptable format
Information Information produced by Information produced by
processing extraction and manipulation of analytical modeling of
methodology business data business data

10-61
 Cont…
MIS - produce sales analysis reports (by

product line, salesperson, sales region, and so

on)
DSS – Sales analysis report + the effects on
sales performance of changes in a variety of
factors (e.g., promotion expense and
salesperson compensation)
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

10-63
 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.
OLAP use data cube data structure
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.
10-67
 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.
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

10-69
 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

10-70
 Major Applications of MBA
 Cross Selling: Offer the associated items when customer buys any

items from your store.

 Product Placement: Items that are associated (such as bread and

honey, tissues and cold medicine, potato chips and beer…..) can be put

near each other. If the customers see them, it has higher probability

that they will purchase them together.

 Affinity Promotion: Design the promotional events based on

associated products.

 The way sister companies promote their products is in most cases

affinity promotion.
 Cont….
 Survey Analysis : The fact that both independent and dependent
variables of market basket analysis are nominal (categorical) data
type makes MBA (Market Basket Analysis) very useful to analyze
questionnaire data.
 Fraud Detection: Based on credit card usage data, we may be

able to detect certain purchase behaviors that can be associated

with fraud.
 Customer Behavior: Associating purchase with demographic,
and socioeconomic data (such as age, gender, and preference) may
produce very useful results for marketing.
 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
05:02 PM 73
 Cont…
 Have the ability to drill down, moving from summary data to
lower and lower level of detail; e.g. OLAP (online analytical
processing software).
 The major challenge has been to integrate data from
systems designed for different purposes. Today, this has been
resolved using enterprise systems that provide firm wide
information
 They have also facilities for environmental scanning
 EIS are flexible, help to analyse, compare and highlight trends.
 Improves the span of management and enables top
management to monitor lower level activities.
 Enables top managers to centralise operational
information.

05:02 PM 74
Executive Information Systems (EIS)

◦ Combines many features of MIS and DSS

◦ Provide top executives with immediate and

easy access to information

◦ Identify factors that are critical to accomplishing

strategic objectives (critical success factors)

◦ So popular that it has been expanded to managers,

analysis, and other knowledge workers.

10-75
Features of an EIS
◦ Information presented in forms tailored to the
preferences of the executives using the system
◦ Customizable graphical user interfaces
◦ Exception reports
◦ Trend analysis
◦ Drill down capability

10-76
 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

10-77
Which do you prefer?

Experts vs. Expert Systems

What are the conditions we need

to use Expert Systems?

Friday, August 9, 2024 Chapter One 78

 Components of an Expert System
Knowledge Base
◦ Facts about a specific subject area
◦ Heuristics that express the reasoning procedures of an
expert (rules of thumb)
Software Resources
◦ An inference engine processes the knowledge
and recommends a course of action
◦ User interface programs communicate with
the end user
◦ Explanation programs explain the reasoning process to
the end user

10-79
Components of an Expert System

10-80
Methods of Knowledge Representation
 Case-Based

◦ Knowledge organized in the form of cases

◦ Cases are examples of past performance, occurrences, and experiences

 Frame-Based

◦ Knowledge organized in a hierarchy or

network of frames

◦ A frame is a collection of knowledge about

an entity, consisting of a complex package
of data values describing its attributes

10-81
Methods of Knowledge Representation

 Object-Based

◦ Knowledge represented as a network of objects

◦ An object is a data element that includes both data and

the methods or processes that act on those data

 Rule-Based

◦ Knowledge represented in the form of rules

and statements of fact

◦ Rules are statements that typically take the

form of a premise and a conclusion (If, Then) 10-82
Expert System Application Categories
Decision Management
◦ Loan portfolio analysis
◦ Employee performance evaluation
◦ Insurance underwriting
Diagnostic/Troubleshooting
◦ Equipment calibration/adjustment
◦ Medical diagnosis
◦ Software debugging
Design/Configuration
◦ Computer option installation
◦ Manufacturability studies
◦ Communications networks

10-83
 Cont….
Selection/Classification

◦ Material selection

◦ Delinquent account identification

◦ Information classification

◦ Suspect identification

Process Monitoring/Control

◦ Machine control (including robotics)

◦ Inventory control

◦ Production monitoring
10-84
 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
10-85
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

10-86
 Knowledge Engineering
A knowledge engineer
◦ Works with experts to capture the knowledge (facts and
rules of thumb) they possess
◦ Builds the knowledge base, and if necessary,
the rest of the expert system
◦ Performs a role similar to that of systems
analysts in conventional information systems development

10-87
 Discussion
Scan your environment, take a
specific case (problem domain)
and discuss on how you can
apply business intelligence to
solve the problem.
05:02 PM 88