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1. Describe three ways in which information systems are transforming business.

Transformation of Industrial Economies

While leading companies achieve competitive advantage through investments in IT, some
are indeed negatively affected by this trend in technology. Today, customers have other
preferences hence, old landline communications companies have lessen its customers;
travel agencies have reduced over-the-counter sales; and entertainment industries,
particularly music and film have lower revenues these past few years as compared with
that in the past. But despite of these, technology convergence arises in many ways. IT has
broken down boundaries and business relationships while new products and services are
introduced. For example, telecommunications network are offering its subscribers with
landline telephones merged with Internet services; handheld mobile telephones are
becoming Internet access devices and also cellular networks provide financial services to
its customers. The bottom-line of it all is that endless possibilities are in the doors of
business firms, provided that they are being open to IT-enabled tools and solutions.
Negatively affected industries can create new products and services, find another
platform to deliver existing products and services, or take partnership from another firm.

Transformation of the Business Enterprise

One foremost impact of technology is the reduced employees in every organization.

While traditional businesses tend to hire many employees to increase its production,
firms these times are compelled to flatten organizations. IT has simplified business
processes. As a result, multi-level management structure is being eliminated and
obviously various manual labors are being replaced by machines. Work responsibilities
are also becoming flexible among employees as MIS help their work easier and faster and
most especially, software allows them conduct major decisions with less supervision.
Furthermore, easy communications systems help businesses attract services provided by
another firm. Referring to previous example (the manufacturing firm), outsourcing
production and transportation is a smart option to reduce transaction cost and/or
maintenance cost. Outsourcing results to networked firms, work collaboration and
teamwork, which could further result to location independence among modern


Products and services are not just confined to restricted one area but are now being
distributed worldwide. Industries find global market possible. Modern technology
provides reliable, cheap and efficient communication systems. The Internet is a better
avenue to introduce one’s company and its products or services. Accessible information
allows businesses compare prices among suppliers and negotiate costs on various
services such as couriers and transportation. There are relatively a lot of financial services
that makes customer payment convenient. Connectivity and information systems have
opened the global market but, global standard is a serious challenge that is yet to develop

2. What are the characteristics of MIS? How do MIS differ from TPS and DSS?

Characteristics of a Management Information System

• Provides reports with fixed and standard formats

o Hard-copy and soft-copy reports
• Uses internal data stored in the computer system
• End users can develop custom reports
• Requires formal requests from users

Management Information Systems for Competitive Advantage

• Provides support to managers as they work to achieve corporate goals

• Enables managers to compare results to established company goals and identify
problem areas and opportunities for improvement

Functional Aspects

• MIS is an integrated collection of functional information systems, each supporting

particular functional areas.
A Transaction Processing System (or Transaction Processing Monitor) monitors
transaction programs, a special kind of programs. The essence of a transaction program is
that it manages data that must be left in a consistent state. E.g. if an electronic payment is
made, the amount must be either both withdrawn from one account and added to the
other, or none at all. In case of a failure preventing transaction completion, the partially
executed transaction must be 'rolled back' by the TPS. While this type of integrity must
be provided also for batch transaction processing, it is particularly important for online
processing: if e.g. an airline seat reservation system is accessed by multiple operators,
after an empty seat inquiry, the seat reservation data must be locked until the reservation
is made, otherwise another user may get the impression a seat is still free while it is
actually being booked at the time. Without proper transaction monitoring, double
bookings may occur. Other transaction monitor functions include deadlock detection and
resolution (deadlocks may be inevitable in certain cases of cross-dependence on data),
and transaction logging (in 'journals') for 'forward recovery' in case of massive failures.

Decision Support Systems (DSS) are a specific class of computerized information

system that supports business and organizational decision-making activities. A properly-
designed DSS is an interactive software-based system intended to help decision makers
compile useful information from raw data, documents, personal knowledge, and/or
business models to identify and solve problems and make decisions.

Typical information that a decision support application might gather and present would

• an inventory of all of your current information assets (including legacy and

relational data sources, cubes, data warehouses, and data marts),
• comparative sales figures between one week and the next,
• projected revenue figures based on new product sales assumptions;
• the consequences of different decision alternatives, given past experience in a
context that is described.

3. What is MIS? Briefly mention the role of information system in business.

Management Information System (MIS) is a subset of the overall internal controls of a

business covering the application of people, documents, technologies, and procedures by
management accountants to solving business problems such as costing a product, service
or a business-wide strategy. Management Information Systems are distinct from regular
information systems in that they are used to analyze other information systems applied in
operational activities in the organization. Academically, the term is commonly used to
refer to the group of information management methods tied to the automation or support
of human decision making, e.g. Decision Support Systems, Expert systems, and
Executive information systems.

Explain the different points how MIS helps in Business. Example it supports for taking
decision. It helps to generate different types of report etc.

4. Describe the relationship between TPS,MIS,DSS and ESS.

Draw the IS Hierarch Diagram and explain about DSS, TPS, ESS and MIS.

List and describe six reasons why information systems are so important for business

There are several competitive advantages of MIS. An MIS provides the following
advantages which helps the organization to compete with their competitors.

1. It Facilitates planning : MIS improves the quality of plants by providing relevant

information for sound decision - making . Due to increase in the size and complexity of
organizations, managers have lost personal contact with the scene of operations.

2. In Minimizes information overload : MIS change the larger amount of data in to

summarized form and there by avoids the confusion which may arise when managers are
flooded with detailed facts.

3. MIS Encourages Decentralization : Decentralization of authority is possibly when

there is a system for monitoring operations at lower levels. MIS is successfully used for
measuring performance and making necessary change in the organizational plans and
4. It brings Co ordination : MIS facilities integration of specialized activities by keeping
each department aware of the problem and requirements of other departments. It connects
all decision centers in the organization .

5. It makes control easier : MIS serves as a link between managerial planning and
control. It improves the ability of management to evaluate and improve performance .
The used computers has increased the data processing and storage capabilities and
reduced the cost .

6. MIS assembles, process , stores , Retrieves , evaluates and Disseminates the



Extra Questions and Answers

1. Identify and describe the four levels of the organizational hierarchy. What types
of information systems serve each level?

From lowest to highest, the four levels of the organizational hierarchy are operational,
knowledge, management, and strategic. Types of information systems include transaction
processing systems, office systems, knowledge work systems, decision-support systems,
management information systems, and executive support systems.

Transaction processing systems, such as order tracking, payroll, machine control, and
compensation, serve the operational level. Engineering workstations, word processing,
graphics workstations, managerial workstations, document imaging, and electronic
calendars are examples of knowledge work systems and office systems that serve the
knowledge level. Sales region analysis, cost analysis, annual budgeting, and relocation
analysis are examples of decision-support systems and management information systems.
Many of these systems are programs that students learn in their management science or
quantitative methods courses. Some are based on database management systems.
Examples of executive support systems that serve the strategic level are sales trend
forecasting, operating plan development, budget forecasting, profit planning, and
manpower planning.

2. List and briefly describe the major types of systems in organizations.

Transaction processing systems, office systems, knowledge work systems, decision-

support systems, management information systems, and executive support systems are
the major types of systems in organizations. Transaction processing systems function at
the operational level of the organization. Examples of transaction processing systems
include order tracking, order processing, machine control, plant scheduling,
compensation, and securities trading.
Knowledge work systems help create and integrate new knowledge within the
organization. Examples of knowledge work systems include engineering workstations,
managerial workstations, and graphics workstations. Office systems help increase data
worker productivity and include word processing document imaging, and electronic

Management information systems provide managers with reports based primarily on data
pulled from transaction processing systems, have an internal orientation, and have limited
flexibility. Examples of management information systems include sales management,
inventory control, and capital investment analysis. Decision-support systems function at
the management level and provide analytical models and data analysis tools to provide
support for semistructured and unstructured decision-making activities. Examples of
decision-support systems include sales region analysis, cost analysis, and contract cost

Executive support systems function at the strategic level, support unstructured decision
making, and use advanced graphics and communications. Examples of executive support
systems include sales trend forecasting, budget forecasting, and personnel planning.

The systems form a level of systems, with all types either formatting or processing the
information from a lower level. For instance, the office systems provide reports or
presentations on the information or data in transaction processing systems. Decision-
support and executive support systems often use office systems in presenting information
extracted from transaction processing systems and management information system.
Management information systems depend on data from transaction processing systems.
Some systems, including knowledge work systems, decision-support systems, and
executive support systems may use external information, such as stock market
information and design information from suppliers.

3. What are the five types of TPS in business organizations? What functions do they
perform? Give examples of each.

The five types of transaction processing systems include sales/marketing systems,

manufacturing/production systems, finance/accounting systems, human resources
systems, and other types. Figure 2-4 identifies and provides examples for each type of
transaction processing system. Sales/marketing systems provide sales management,
market research, promotion, pricing, and new product functions. Examples include sales
order information systems, market research systems, and sales commission systems.
Manufacturing/production systems provide scheduling, purchasing, shipping/receiving,
engineering, and operations functions. Examples of manufacturing systems include
machine control systems, purchase order systems, and quality control systems.
Finance/accounting systems provide budgeting, general ledger, billing, and cost
accounting functions. Examples of finance/accounting systems include general ledger,
accounts receivable/payable, and funds management systems. Human resource systems
provide personnel records, benefits, compensation, labor relations, training, and payroll
functions. Examples include employee records, benefit systems, and career path systems.
Other types include admissions, grade records, course records, and alumni for a
university. Examples of transaction processing systems for a university include a
registration system, student transcript system, and an alumni benefactor system.

4. Describe the functions performed by knowledge work systems and office systems
and some typical applications of each.

Knowledge work systems (KWS) aid knowledge work professionals to create new
information and knowledge, and ensure that new knowledge and technical expertise are
properly used in their corporations. Examples of knowledge workers (and some of their
software) include engineers (graphics workstations), Wall Street traders, analysts, and
arbitrageurs (financial and stock market workstations), research scientists, doctors, and
designers (CAD systems).

Office systems provide support for data workers, including secretaries, accountants, filing
clerks, and some managers. Software examples include word processing, desktop
publishing, presentation programs, electronic calendars, and document imaging.

5. What are the characteristics of MIS? How do MIS differ from TPS? From DSS?

MIS supports the management level by providing routine summary reports and exception
reports for various purposes, including planning, controlling, and decision making.
Examples include sales and profit per customer and per region, relocation summary and
analysis, inventory control, capital investment analysis, and even a report on students
who were here in the autumn but did not to return in the spring. MIS differs from TPS in
that MIS deals with summarized and compressed data from the TPS and sometimes
analysis of that summarized data.

Decision-support systems provide material for analysis for the solution of semi-structured
problems, which often are unique or rapidly changing. Typically, they provide the ability
to do “what if” analysis. While MIS have an internal orientation, DSS will often use data
from external sources, as well as data from TPS and MIS. DSS supports “right now”
analysis rather than the long-term structured analysis of MIS. MIS are generally not
flexible and provide little analytical capabilities. In contrast, DSS are designed for
analytical purposes and are flexible.

6. What are the characteristics of DSS? How do they differ from those of ESS?

DSS provide sophisticated analytical models and data analysis tools to support
semistructured and unstructured decision-making activities. DSS use data from TPS,
MIS, and external sources, provide more analytical power than other systems, combine
data, and are interactive. ESS support senior managers with unstructured strategic-level
decision making. They may be less analytical than DSS with less use of models such as
linear programming or forecasting. However, they often rely on external data and rely
heavily on graphics.
7. Describe the relationship between TPS, office systems, KWS, MIS, DSS, and ESS.

The various types of systems in the organization exchange data with one another. TPS are
a major source of data for other systems, especially MIS and DSS. TPS are operational-
level systems that collect transaction data. Examples of these are payroll or order
processing that track the flow of the daily routine transactions that are necessary to
conduct business. TPS provide data that are required by office systems, KWS, MIS and
DSS, although these systems may also use other data. KWS and office systems not only
use data from TPS but also from MIS. DSS not only use data from TPS but also from
KWS, office systems, and MIS. MIS rely heavily on data from TPS but also use data
from KWS and office systems. ESS obtain most of their internal data from MIS and DSS.

8. List and describe the information systems serving each of the major functional
areas of a business.

Sales and marketing information systems help the firm identify customers for the
organization's products and services. These systems help develop, promote, sell, and
provide ongoing customer support for the firm's products and services. Specific sales and
marketing information systems include order processing, market analysis, pricing
analysis, and sales trend forecasting.

Manufacturing and production information systems provide information for planning,

product development, production or service scheduling, and controlling the flow of
products and services. Specific manufacturing and production information systems
include machine control, CAD, production planning, and facilities location.

Finance and accounting information systems track the organization's financial assets and
fund flows. Financial and accounting systems include accounts receivable, portfolio
analysis, budgeting, and profit planning.

Human resources information systems maintain employee records; track employee skills,
job performance, and training; and support planning for employee compensation,
including pensions and benefits, legal and regulatory requirements, and career
development. Systems include training and development, career pathing, compensation
analysis, and human resources planning.

9. What is a business process? Give two examples of processes for functional areas
of the business and one example of a cross-functional process.

Business processes are the ways in which organizations coordinate and organize work
activities, information, and knowledge to produce their valuable products or services.
Business processes for the manufacturing and production area include product
assembling, quality checking, and producing bills of materials. For the sales and
marketing area, business processes include identifying customers, making customers
aware of the product, and selling the product. For finance and accounting, business
processes includes paying creditors, creating financial statements, and managing cash
accounts. For human resources, business processes include hiring employees, evaluating
job performance of employees, and enrolling employees in benefits plans.

The order fulfillment process is an example of a cross-functional process. As Figure 2-12

illustrates, the order fulfillment process involves activities performed by sales,
accounting, and manufacturing functions.

10. Why are organizations trying to integrate their business processes? What are the
four key enterprise applications for organization-wide process integration?

An organization operates in an ever-increasing competitive, global environment.

Operating in a global environment requires an organization to focus on the efficient
execution of its processes, customer service, and speed to market. To accomplish these
goals, the organization must exchange valuable information across different functions,
levels, and business units. By integrating its processes, the organization can more
efficiently exchange information among its functional areas, business units, suppliers,
and customers. The four key enterprise applications are enterprise systems, supply chain
management systems, customer relationship management systems, and knowledge
management systems.

11. What are enterprise systems? How do they change the way an organization

Enterprise systems integrate the key business processes of an organization into a single
software system. Data from various functional areas are maintained centrally where they
can be accessed and used by other functions and cross-functional processes. This changes
the work flow of an organization. Now information can seamlessly flow throughout the
organization, improving coordination, efficiency, and decision making.

12. What are the benefits and challenges of implementing enterprise systems?

Enterprise systems are firm-wide information systems that integrate key business
processes so that information can flow freely between different parts of the firm.
Enterprise systems help create a more uniform organization in which everyone uses
similar processes and innovation and measures their work in terms of organization-wide
performance standards. Enterprise systems are very difficult to successfully implement
and once implemented, are very difficult to change. Enterprise systems require extensive
organizational change, use complicated technologies, and require large up-front costs for
long-term benefits that are difficult to quantify.

13. What is supply chain management? What activities does it comprise? Why is it
so important to businesses? How do information systems facilitate supply chain

Supply chain management is the close linkage of activities involved in the processes of
buying, making and moving a product. Supply chain management is important to a
business because through its efficiency it can coordinate, schedule, and control the
delivery of products and services to customers.

Supply chain management closely links and coordinates activities in buying, making, and
moving a product. The system should lower costs and streamline the user’s business.
Information systems make supply chain management more efficient by helping
companies coordinate, schedule, and control procurement, production, inventory
management, and delivery of products and services to customers. Information systems
help organizations achieve great efficiencies by automating parts of these processes or by
helping organizations rethink and streamline these processes.

14. What is collaborative commerce? How can organizations benefit from it?

For supply chain management to work, an atmosphere of trust must exist among supply
chain members. Members need to work together on a common goal, and they must
redesign appropriate business processes so they can more easily coordinate their
activities. Collaborative commerce uses digital technologies to enable the members of the
supply chain to collaboratively design, develop, build, and manage products through their
lifecycles. It helps the various partners to integrate their systems with each other. Aside
from gaining benefits from any successful supply chain, they also benefit by achieving
new levels of efficiency in reducing product design cycles, minimizing excess inventory,
forecasting demand, and keeping all partners informed.

15. How can organizations benefit from participating in private industrial


Private industrial networks are Web-enabled networks that permit firms and their
business partners to share such activities as product design and development, marketing,
inventory, production scheduling, and communications, including graphics, CAD
drawings, and e-mail. Benefits include the ability to reduce inventory, product cycle time,
inventory costs, and system costs. Private industrial networks also improve the
coordination and sharing of information, as well as provide the ability to track a product
from raw materials to the customer, track demand, adjust production, and adjust the
timing and size of deliveries, as well as monitor product availability, production capacity,
and inventory levels.

16. What is customer relationship management? Why is it so important to

businesses? How do information systems facilitate customer relationship

Customer relationship management is a business and technology discipline to coordinate

all of the business processes for dealing with existing and potential customers. With the
growth of the Web, potential customers can easily comparison shop for retail and
wholesale goods and even raw materials, so better treatment of customers has become
very important. Good CRM systems consolidate customer data from multiple sources and
provide analytical tools for answering questions such as: What is the value of a particular
customer to the firm over his/her lifetime? CRM tools integrate the firm’s customer-
related processes and consolidate customer information from multiple communication
channels, so that the firm can put one coherent face to the customer.

17. What is the role of knowledge management systems in the enterprise? What
organizational processes are supported by knowledge management applications?

Knowledge management systems codify knowledge and experience, make the collected
knowledge and experience available when and where it is needed, and provide links to
external sources of knowledge. Organizational processes include creating knowledge,
discovering and codifying knowledge, sharing knowledge, and distributing knowledge.
Knowledge work systems support knowledge creation; artificial intelligence systems
support knowledge discovery and codification; group collaboration systems support
knowledge sharing, and office and communication tools support knowledge distribution.