Chapter Two

Management Information
System (MIS)

Tesfahunegn Hailu
 Intro

• Management Information Systems (MIS) encompass a set of systems and

processes that manage information within an organization to facilitate
decision-making, problem-solving, and strategic planning.
• Purpose: MIS helps reduce uncertainty in managerial decisions by
providing accurate, timely, and relevant information.
• By transforming raw data into meaningful insights, MIS enables managers
to plan effectively, allocate resources, and optimize operations.
• Example: In a hospital, MIS can support scheduling, patient records, and
billing. By centralizing this information, hospital administrators can reduce
wait times, allocate staff efficiently, and ensure accurate billing, thus
improving both operational efficiency and patient satisfaction
 Business and Management Functions vs. MIS

• Business Functions in MIS

o Management Information Systems (MIS) supports a variety of business
functions, enabling organizations to operate more efficiently, make data-
driven decisions, and maintain a competitive edge.
• Management Functions in MIS
o Management Information Systems (MIS) play a vital role in supporting core
management functions across organizations.
o These functions, based on Henri Fayol’s management principles, include
planning, organizing, staffing, directing, and controlling.
o MIS provides the tools, data, and processes necessary to execute these
functions effectively.
 Core Business Areas supported by MIS

MIS integrates and streamlines operations across various departments to ensure seamless
coordination and efficiency:
• Marketing: Helps track customer behavior, manage campaigns, analyze market trends, and
forecast sales.
• Finance: Manages budgets, tracks financial performance, and generates reports for decision-
making.
• Operations/Manufacturing: Optimizes production schedules, monitors quality control, and
manages inventory.
• Human Resources (HR): Tracks employee performance, manages payroll, and assists in
recruitment and training.
• Information Services: Ensures data integrity, security, and accessibility across the
organization.
Example: A retail company uses MIS to coordinate between its inventory (operations),
advertising (marketing), and employee scheduling (HR) to ensure products are available and
promoted effectively.
 Functions of Management supported by MIS

According to Henri Fayol’s management theory, MIS supports the following

key functions:
• Planning
o Provides tools for forecasting and setting strategic objectives.
o Generates reports on historical data to identify trends and inform future
strategies.
o Example: A travel agency uses MIS to analyze seasonal demand trends, helping
plan promotional campaigns during peak seasons.
• Organizing
o Assists in resource allocation and coordination of activities across departments.
o Facilitates workflow design and task distribution through project management
tools.
o Example: An IT company uses MIS to assign tasks to project teams and monitor
progress via dashboards.
 Functions of Management supported by MIS

• Staffing
o Supports recruitment through data analysis of skill gaps.
o Tracks employee records, training schedules, and performance metrics.
o Example: HR managers use MIS to screen applicants, schedule interviews, and track
onboarding progress.
• Directing
o Provides communication tools to guide teams and monitor their activities.
o Facilitates real-time collaboration and decision-making through shared platforms.
o Example: A logistics company uses MIS to dispatch delivery routes and monitor driver
performance.
• Controlling
o Monitors organizational performance against set objectives.
o Tracks KPIs (Key Performance Indicators) and generates alerts for deviations.
o Example: A manufacturing firm uses MIS to identify production bottlenecks and
implement corrective measures.
 Data, Information, Knowledge, and Wisdom (DIKW Pyramid)

• The DIKW Pyramid is a

conceptual framework that
illustrates the progression of raw
data into actionable wisdom.
• It is widely used in management
and information systems to
understand how data transforms
into meaningful insights for
decision-making.
 DIKW Pyramid Cont.

Data
• Data consists of raw, unorganized facts and figures without context or meaning.
• Characteristics:
• Often presented as numbers, symbols, or observations.
• Requires processing to gain any significance.
• Represents the "building blocks" of information.
• Examples:
• Customer purchase records, temperature readings, or a list of sales figures.
• "35°C," "2023-11-19," or "12345" are data points without context.
• Role in MIS: Data is collected from sources like transactions, sensors, or user inputs and stored in
databases for further processing.
 DIKW Pyramid Cont.

Information
• Refers to the data that has been processed, organized, or structured to
provide meaning.
• Characteristics:
• Answers questions such as "who," "what," "where," and "when."
• Provides relevance and context to data.
• Examples:
• "The average temperature in November is 35°C."
• "Customer #12345 spent $200 on November 19, 2023."
• Role in MIS: Information is generated through processes like data analysis
and reporting, turning raw data into useful summaries, charts, and insights
for users.
 DIKW Pyramid Cont.

Knowledge
• Is information that has been analyzed, interpreted, and applied in a specific
context. It reflects understanding and insights gained from experience or expertise.
• Characteristics:
• Addresses "how" questions.
• Combines information with context, experience, and understanding.
• Examples:
• "Sales increase by 20% during the holiday season due to higher customer demand."
• "If the temperature rises above 35°C, electricity consumption tends to spike due to increased
air conditioning usage."
• Role in MIS: Knowledge systems in MIS, such as decision support systems (DSS),
help managers interpret information and guide strategic or operational decisions.
 DIKW Pyramid Cont.

Wisdom
• Refers to the ability to make sound judgments and decisions based on knowledge.
It is the highest level of the DIKW hierarchy, incorporating ethics, principles, and
long-term vision.
• Characteristics:
• Addresses "why" questions.
• Involves using knowledge to achieve desirable outcomes.
• Examples:
• "To maximize holiday sales, launch a promotional campaign starting mid-November."
• "To reduce energy costs, implement energy-saving measures when temperatures exceed
35°C."
• Role in MIS: Wisdom is supported by systems like executive information systems
(EIS), enabling leaders to set organizational strategies and achieve goals effectively.
 Information Needs and Sources

• Users: Different users rely on MIS for various purposes:

o Managers: Use information to guide strategic planning and reduce decision uncertainty.
o Employees: Access MIS to improve productivity and streamline tasks.
o External Stakeholders: Customers, investors, and government bodies benefit from reports,
data, and compliance documents generated by MIS.
• Internal Sources: Transaction Processing Systems (TPS) provide data on daily
operations, and internal databases store historical and current organizational
information.
• External Sources: Includes government publications, industry reports, and market
analyses. The Internet also provides access to global data that can enrich
decision-making.
• Example: For a telecommunications company, internal sources like call records
and billing systems provide insights into usage patterns, while external sources
like competitor analysis and regulatory reports help the company stay
competitive and compliant
 System View of Organazation

• A system is a collection of interconnected components working together to

achieve a common goal.
• Inputs: Resources or data entering the system.
• Processes: Activities that transform inputs into outputs.
• Outputs: The final products or results of the system's activities.
• Control Mechanisms: Methods to monitor and adjust the system’s activities to meet
desired outcomes.
• Feedback Loop: Provides information about outputs back to the control mechanism
for continuous improvement.
• Organizational Example: In a manufacturing plant, raw materials and labor
are inputs, the assembly line is the process, and the finished product is the
output. MIS ensures efficient control of this process through real-time
monitoring.
 Open Systems

Open systems interact with their external environment by exchanging

information, resources, or energy. They adapt and respond to external
changes, ensuring sustainability and growth.
• Characteristics:
• Receive inputs from the environment (e.g., data, materials, energy).
• Deliver outputs back into the environment (e.g., products, services, information).
• Adaptable to external changes (e.g., customer needs, market trends).
• Continuous feedback loop with the environment.
• Role in MIS:
• Open systems in MIS integrate with external databases, APIs, and tools to gather
external data and provide outputs like analytics or reports.
• They support functions like customer relationship management (CRM), supply
chain management (SCM), and market analysis.
 Closed Systems

Closed systems are self-contained and do not interact with the external
environment. They operate independently, focusing solely on internal
processes and controls.
• Characteristics:
• No input or output from the external environment.
• Operate within fixed parameters and boundaries.
• Typically lack flexibility and adaptability.
• Often used for controlled experiments or specific internal processes.
• Role in MIS:
• Closed systems in MIS are useful for maintaining data integrity and
ensuring secure processing in isolated environments.
• Often used in legacy systems or processes that require high levels of
control, such as payroll systems or internal simulations.
 Hierarchical Level of Management

• Levels:
• Strategic (Top Level): Executives and senior managers who focus on long-term goals and
decisions that impact the entire organization.
• Tactical (Middle Level): Managers who implement strategies and make medium-term
decisions that bridge top-level strategies and day-to-day operations.
• Operational (Bottom Level): Supervisors and team leaders responsible for short-term,
routine tasks and operational efficiency.
• Influence on MIS Design:
• Strategic Level: Needs summarized reports and insights on trends.
• Tactical Level: Requires analytical reports to implement policies and strategies.
• Operational Level: Relies on detailed, real-time data for managing day-to-day tasks.
• Example: A retail chain’s CEO might review monthly sales summaries (strategic),
regional managers analyze weekly sales performance (tactical), and store
managers monitor daily transactions (operational).
 E-Business and MIS

E-business involves conducting business processes over the internet, utilizing digital platforms to
manage operations, communicate with stakeholders, and deliver value to customers.
Management Information Systems (MIS) play a crucial role in supporting and integrating e-business
activities by providing the necessary tools for data management, process automation, and
decision-making.
What is E-Business?
• Refers to the use of internet-based technologies to manage and automate business operations,
including sales, marketing, customer service, and supply chain management.
• Scope:
• Goes beyond e-commerce (online sales) to include internal processes like production,
inventory management, and employee collaboration.
• Encompasses interactions with customers (B2C), other businesses (B2B), and employees
(intranet systems).
• Example: Amazon integrates e-business technologies for customer purchases, supply chain
automation, and personalized marketing.
 Role of MIS in E-Business

MIS supports e-business by integrating and managing the digital tools and
data required for online operations.
• Data Management
o Collects, processes, and stores large volumes of data generated by e-business
activities.
o Ensures data accuracy and accessibility for informed decision-making.
o Example: A CRM system powered by MIS helps track customer interactions, purchase
history, and preferences.
• Process Automation
o Automates routine tasks such as order processing, inventory updates, and billing.
o Reduces manual effort, increasing efficiency and reducing errors.
o Example: An e-business platform uses MIS to automatically update stock levels after
an online purchase.
 Role of MIS in E-Business Cont.

• Real-Time Reporting
o Provides real-time insights into sales performance, website traffic, and customer
behavior.
o Enables quick adjustments to strategies based on current trends.
o Example: An e-commerce site uses MIS to monitor daily sales and adjust
promotional offers dynamically.
• Decision Support
o Delivers actionable insights through dashboards, reports, and predictive analytics.
o Helps managers make strategic decisions like pricing, marketing campaigns, or
inventory stocking.
o Example: A retailer uses MIS to analyze seasonal sales data and plan holiday
promotions.
 Systems in E-Business Models

• Email and Internet: Essential for communication with suppliers, partners,

and customers. Email allows for direct marketing and efficient document
sharing, while the Internet provides access to information and competitive
intelligence.
• Website: Acts as an online storefront to promote products, gather
feedback, and complete transactions.
• E-Commerce Models:
o B2B (Business-to-Business): Direct transactions between companies. For example, a
car manufacturer ordering parts from suppliers online.
o B2C (Business-to-Consumer): Direct sales to individual consumers, such as online
retail platforms like Walmart or Target.
o Example: Alibaba’s B2B marketplace allows manufacturers to showcase products to
buyers worldwide, while Amazon’s B2C model delivers products directly to end
consumers