decision support system in management information

Perspective of Information Systems
ISs can be best be understood by looking at them from both a technology and a Business perspective.
An IS can be defined technically as a set of interrelated components that collect, process, store, retrieve
and distribute information to support decision making and control in an organization.
ISs help managers and workers analyze problems, visualize complex subjects and create new products.
ISs contain information about significant people, places, and things within the organization or in the
environment surrounding it.
Data are streams of raw facts representing events occurring in organizations or the physical
environment before they have been organized and arranged into a form that people can understand and
use.
Three basic activities such as input, processing, and output produce the information organizations need.
Feedback is output returned to appropriate people or activities in the organization to evaluate and refine
the input. 2

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• Environmental factors such as customers, suppliers, competitors, stockholders, and
regulatory agencies interact with the organization and its information systems.
• Formal information systems can be either computer based or manual.
• Manual systems use paper-and-pencil technology. These manual systems serve
important needs.
• Computer-based information systems (CBIS), rely on computer hardware and software
technology to process and disseminate information.
• To understand information systems, you must understand the problems they are
designed to solve, their architectural and design elements, and the organizational
processes that lead to these solutions.
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The business information value chain
Managers and business firms invest in IT and systems because they provide the economic value to the business.
An information system creates value for the firm as an organizational and management solution to challenges
posed by the environment Contemporary approaches to information system.
Multiple perspectives on information systems show that the information systems are the sociotechnical systems. It
can be divided into two approaches:
1. Technical approach
This emphasizes mathematically based models to study information systems as well as the physical technology
and formal capabilities of these systems.
Computer science is concerned with establishing methods of computation, storage and access.
Management science emphasizes on development of models for decision making and management practices.
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2. Behavioral approach
o It is concerned with the issues like strategic business integration, design, implementation, utilization
and management.
o It majorly focuses on the cognitive style of an individual.
o It also focuses on technical solutions, changes in attitudes, management and organizational policies.
Learning to use information systems: New opportunities with technology
The information systems investment challenge: It focuses on how can organization obtain
business value from their information systems?
The strategic business challenge: It is concerned with what complementary assets are needed to
use the information technology effectively?
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The globalization challenge: It emphasizes on how can firms understand the
business and system requirements of global economic environment?
The information technology infrastructure challenge: It explains how can
organizations develop in information technology infrastructure that can support
their goals when business conditions and technologies are changing so rapidly?
Ethics and security: The responsibility and control challenge: It describes how
can organization ensure that their information systems are used in an ethically
and socially responsible manner?
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Perspectives on Information Systems and Information Technology
So far we’ve used information systems and technologies informally without defining the terms.
Information technology (IT) consists of all the hardware and software that a firm need to use in order to achieve
its business objectives.
This includes not only computer hardware but also software.
What is an Information System?
An information system (IS) can be defined technically as a set of interrelated components that collect (or retrieve),
process, store, and distribute information to support decision making and control in an organization.
In addition to supporting decision making, coordination, and control, information systems may also help managers
and workers analyze problems, visualize complex subjects, and create new products.
Information systems contain information about significant people, places, and things within the organization or in
the environment surrounding it.
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• Three activities in an information system produce the information that organizations need to
make decisions, control operations, analyze problems, and create new products or services.
• These activities are input, processing, and output.
• Input captures or collects raw data from within the organization or from its external
environment.
• Processing converts this raw input into a meaningful form.
• Output transfers the processed information to the people who will use it or to the activities for
which it will be used.
• Information systems also require feedback, which is output that is returned to appropriate
members of the organization to help them evaluate or correct the input stage.
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Cont..
Figure 5.2 Functions of an Information System
Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some
examples of key stakeholders are creditors, directors, employees, government (and its agencies),
owners (shareholders), suppliers, unions, and the community from which the business draws its
resources.
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Dimensions of Information Systems
1. Organizations
Information systems are an integral part of organizations.
The history and culture of business firms also affects how the technology is used and how it should be used.
In order to understand how a specific business firm uses information systems, you need to know something about
the structure, history, and culture of the company.
Organizations have a structure that is composed of different levels and specialties. Their structures reveal a clear-
cut division of labor.
A business firm is organized as a hierarchy, or a pyramid structure, of rising authority and responsibility.
The upper levels of the hierarchy consist of managerial, professional, and technical employees, whereas the lower
levels consist of operational personnel.
Experts are employed and trained for different business functions, such as sales and marketing, manufacturing
and production, finance and accounting, and human resources.
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2. People
A business is only as good as the people who work there and run it.
Business firms require many different kinds of skills and people, including managers as well as rank-and-file
employees.
The job of managers is to make sense out of the many situations faced by organizations, make decisions, and
formulate action plans to solve organizational problems.
3. Technology
Information technology is one of many tools managers use to cope with change. Computer hardware is the
physical equipment used for input, processing, and output activities in an information system.
It consists of the following: computers of various sizes and shapes; various input, output, and storage devices;
and telecommunications devices that link computers together.
Computer software consists of the detailed, preprogrammed instructions that control and coordinate the computer
hardware components in an information system. 11

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• Networking and telecommunications technology, consisting of both physical devices and
software, links the various pieces of hardware and transfers data from one physical location to
another.
• Computers and communications equipment can be connected in networks for sharing voice,
data, images, sound, and video.
• A network links two or more computers to share data or resources, such as a printer. The
world’s largest and most widely used network is the Internet.
Figure 5.3 Information Systems are more than computers 12

Organizations and Information Systems
The interaction between IS and Organization is complex and is influenced by many mediating factors, including
organization structure, standard, politics, and culture and management decision.
The organization is a stable, formal social structure that takes resources from the environment and processes them
to produce outputs.
Capital and labor are primary production factors provided by the environment.
The organization transforms these inputs into products and services in organization.
Organization is a collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a
period of time through conflict and conflict resolution.
Organizations are social structures because they are collection of several elements.
In behavioral view of the firm, people who work in the organization develop customary ways of working: they
gain attachments to existing relationships; they make agreements with subordinates and superiors about the work.
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Common Features of Organizations
 Based on the hierarchical structure of an organization all the organizations share same characteristics like:
 Clear division of labor, hierarchy, explicit rules and procedures, impartial judgments, technical qualifications for positions,
maximum organizations efficiency.
 All organizations develop business processes, politics, and cultures.
Routines and Business Processes:
 Individuals in the firm develop a routine for producing goods and services.
 Routines sometimes called as standard operating procedures in terms of rules, procedures.
 As employees learn these routines they become highly productive and efficient.
Organizational Politics:
 Political resistance is one of the great difficulties bringing about organizational changes.
 Managers who know how to work with the politics of an organization will be more successful than less skilled managers.
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Organizational Culture
Organizational culture is the set of fundamental assumptions about what products the
organization should produce, when, why, and for whom.
Organizational culture is a powerful restraint on change in technological changes.
How Information Systems Impact Organizations and Business Firms
1. Economic Impacts:
IS changes both the relative costs of capital and the costs of information.
IS can be viewed as a factor of production that can be substituted for capital and labor.
IS also affects the cost and quality of information and changes the economics of the
information.
It helps to manage the large number of employees in the firm.
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Cont..
2. Organizational and behavioral impact:
In complex organizations IT is more useful.
Postindustrial organizations and virtual firms.
Increasing flexibility of organizations.
Understanding organizational resistance to change.
The internet and organizations.
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The Impact of IT on Management Decision Making:
Manager‘s responsibility ranges from making decisions, to writing reports, to attending meetings etc.
Behavioral models:
Behavioral models state that the actual behavior of manager appears to be less systematic, more informal, less
reflective, more reactive, and less organized one. Manager ‘s behavior has five attributes:
Managers perform a great deal of work without stopping the work.
Managerial activities are fragmented.
Managers prefer investment in terms of ROI (Return on Investment) terms
They prefer oral communication.
Managers give high priority to maintain the system towards the achievements of goals.
Managerial roles fell into three categories as interpersonal roles, informational roles and decisional roles.
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There are several models of decision making such as:
• Rational model: As per this model of human behavior an individual identifies the
goals, ranks all the possible actions by their contribution towards the goals.
• Organizational Model: It considers the structural and political characteristics of an
organization.
• Bureaucratic model: It is used to preserve the organization i.e. to reduce the
uncertainty.
• Political model: It gives the working of organization as a result of political bargains
struck among the key leaders and interest groups.
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Information systems and business strategy:
Business strategy is a set of activities and decisions.
This helps in strategic planning of an organization.
It determines the decisions related to products and services, competition, long term goals.
Business level strategy: It is based on the value chain model for managing supply chain. It is
concerned with the leveraging technology, information system products and services, systems
to focus on market trends, supply management and customer relationship.
Firm level strategy: It focuses the usability of information technology. It helps to understand
the concept of enhancing core competencies,
Industry level strategy: It analyzes the strategy at industry level. The principal concept of
this strategy is information partnership, the competitive forces model, business systems, and
network economics. 19

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A Model of the Problem-Solving Process
Problem Identification: The first step in the problem-solving process is to
understand what kind of problem exists.
Solution Design: The second step is to design solutions to the problem(s) you
have identified.
Choice: Choosing the “best” solution for your business firm is the next step in
the process.
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Table 5.1 Dimensions of Business Problems
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Implementation: The best solution is one that can be implemented.
• Implementation of an information system solution involves building the solution and
introducing it into the organization.
Figure 5.4 Problem Solving is a Continuous Four- Step Process 22

Capabilities of a Decision Support System
• Support for problem-solving phases
• Intelligence, design, choice, implementation, monitoring
• Support for different decision frequencies
• Ad hoc DSS: Concerned with decisions that come up once in every 5 years (e.x.,
where should a company open a new distribution center?)
• Institutional DSS: Concerned with decisions that repeat (e.x., what should the
company invest in?
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cont’’’’
• Support for different problem structures
• Highly structured problems: Known facts and relationships
• Semi-structured problems: Facts unknown or ambiguous, relations vague
• E.x.Which person to hire for a position?
• Support for various decision-making levels
• Operational level: Daily decisions
• Tactical level: Planning and control
• Strategic level: Long-term decisions
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Support for Various Decision-Making Levels

Components of a DSS
Conceptual Model of a DSS
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The Database
• Data in databases, data marts, warehouses
• Use data mining to help with the decisions
• Ex. Who should an airline target for flights from Istanbul to Ankara?

The Model Base
• Decision makers perform quantitative analysis on data
• Model base contains a list of models for mathematical computations
• Model management system: Allows access to such models

Cont..
Programmed and Non-Programmed Decisions
• There are two types of decisions - programmed and non-programmed decisions.
1. Structured, Programmable Decisions
• A structured decision can be said to be programmable, in the sense that unambiguous
decision rules can be specified in advance.
• When a decision can be programmed, an organization can prepare a decision rule or
decision procedure.
• Programmed decisions are basically automated processes, general routine work, where:
These decisions have been taken several times.
These decisions follow some guidelines or rules.
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Cont..
Unstructured, Nonprogrammable Decisions
• An unstructured decision can be said to be nonprogrammable.
• Non-programmed decisions occur in unusual and non-addressed situations, so:
 It would be a new decision.
 There will not be any rules to follow.
 These decisions are made based on the available information.
 These decisions are based on the manger's discretion, instinct, perception and judgment.
Decision Support Systems (DSS) involve flexible interactive access to data
 Decision support systems are designed with an understanding of the requirements of the decision makers and the decision-
making process in mind.
 This has implications, two of the most important being:
1. The need for interactive support:
2. Flexible access to data: 33

Characteristics of a Decision Support Systems (DSS)
Support for decision-makers in semi-structured and unstructured problems.
Support for managers at various managerial levels, ranging from top executive to line
managers.
Support for individuals and groups.
Less structured problems often require the involvement of several individuals from different
departments and organization level.
Support for interdependent or sequential decisions.
Support for intelligence, design, choice, and implementation.
Support for variety of decision processes and styles.
DSSs are adaptive over time.
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Benefits of Decision Support Systems (DSS)
Improves efficiency and speed of decision-making activities.
Increases the control, competitiveness and capability of futuristic decision-making of the
organization.
Facilitates interpersonal communication.
Encourages learning or training.
Since it is mostly used in non-programmed decisions, it reveals new approaches and sets up
new evidences for an unusual decision.
Helps automate managerial processes.
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