mis unit iii-2

7/30/2019 Mis Unit III-2

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Data

Data are raw facts about a business and its business transactions. Data areobjective measurement of attributes of entities (such as people, place, thing orevent). These measurement are usually represented by symbol such as numbers,codes, words, alpha numeric, images, audio and video etc.

Data is the collection of facts, which is unorganized but can be organized into

useful information.

Information

Information has to be generated from data, which acts as a raw material that

needs some processing. Information is a necessary and vital input I any decisionmaking process in an organization. Information reduces uncertainty and triggeraction.


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DATA Processing Information

Definition of Information

Data that has been processed into a form that is meaningful to the recipient and isof real or perceived value in current or prospective actions or decisions.

Data Processing

The conversion of facts into meaningful information is know as data processing. Itis the execution of systematic sequence of operations performed upon data totransform it into information.


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Characteristics of useful / good Information

1. Timeliness : an information to be useful must be made available to the recipienton appropriate time. The appropriate time is one when the recipient wants toinitiate some actions that are meant to achieve organizational objectives.

2. Adequacy: To be useful, an information must be adequate so that desired actionscan be initiated. In measuring the adequacy of information, following aspects

should be taken into consideration.

i. Information should be complete as possible so that it reflects the true

picture of an issue.

ii. Information should be reliable.iii. Information should be valid to the purpose for which it will be used.

iv. Appropriate level of quality of information should be maintain.

v. Data redundancy should be avoided


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3. Form: for making an information useful. It should be made available in a form whichsuits the recipient most. Information may be communicated in visual, written or verbal

form. Following aspects of useful information are

i. Often a combination of different forms can be used.

ii. Information should be provided in right format.

iii. Data should be classified into those categories which are relevant for takingactions.

iv. Format should be simple


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Sources of Information

The sources of information can be divided into types

1. Internal Source: the internal information is that information which has been

generated from the operations of the organization at various functional areas like

sales , production, HR and finance etc. it is generally required by middle and

lower level of management for making routine and regular decisions. Internal

information is collected from within the boundary of the business organization.

E.g. balance sheet, sales forecast, budge allocation and utilization reports.

Internal reports are generally generated weekly, monthly, quarterly and yearly.


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Types of Information

1. Action versus no-action information: information which induces action is calledaction information. The information which communicates only the status of asituation is a non-action information. For e.g. No Stock report calling apurchase action is an action information but the stock ledge showing is No-action information.

2. Recurring versus non-recurring information: information generated at regularinterval is a recurring information. E.g. monthly sales, stock statements etc. theinformation that are not generated at regular interval and generated only whenrequired is called non-recurring information. E.g. financial analysis or thereport on the market research.

3. Internal versus External information: information generated within theboundaries of business is known as internal information. Whereas theinformation generated from outside the boundaries of business is known asexternal information.


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Information can also be classified as under, in terms of its application

1. Planning information: certain standards, norms and specifications are used inthe planning of any activity. Hence such information is called planninginformation.

2. Control information: reporting the status of an activity through feedback

mechanism is called the control information.

3. Knowledge information: a collection of information through the libraryreports and the resea4rch studies to build up a knowledge base as ainformation source for decision making is known as knowledge information.


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Classification of information on the basis of usage

1. Organization information: when the information is used by everybody in theorganization

2. Database information: when the information has a multiple use andapplication

3. Functional information: when the information is used in the operation of abusiness .


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Relevance of Information in Decision Making

Decision theory suggests the methods of solving the problems of decision makingunder certainty, risk and uncertainty.

Decision making under certaintyis possible when decision maker has full knowledgeabout the alternatives and its outcomes (known as Perfect information).

In uncertain situations, the decision maker requires additional information to takemore accurate decisions. If this additional information wipes out uncertainty or riskcompletely then it is calledperfect information.

In organization, Managers play a key role in decision making for this informationsystem have become the main tool.


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Status ReportTrend Report

Statistical Model

Analytical Tools

AlternativesScenario

Feedback and

follow up

ReviewMonitoring

Choose alternativesSelection best

alternative

Design StrategyAlternative StrategiesForecast Possible

Business IntelligenceData CollectionData Processing

Information Requiredat each stage

Decision MakingStages


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Cost Benefit Analysis

Any system in the organization must produce more benefits as compared to titscosts for the organization to survive and grow.

Identification of costand benefit

Evaluation of costsand benefits

Choice of system

Process of cost / benefit analysis


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Identification of Costs and Benefits

In this step, the different cost and benefit associated with the information system.

Tangible and Intangible Costs and Benefits:

Tangible Cost: Payment of Cash like hardware/software purchase

Tangible Benefit: Reduced time in preparing a report

Intangible Cost: Cost of breakdown of an on-line system during banking hours willcost lose of deposit and human resourceIntangible Benefit: Higher customer satisfaction or improved business image.

Fixed and Variable Costs and Benefits

Fixed Cost: remain same irrespective of volume e.g. interest on loanFixed Benefit: benefit from reduced number of employees

Variable cost:vary in proportion to the volume of activities of the system.

Variable Benefit: are realized on a regular basis.


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Direct and Indirect Costs and Benefits

Direct Cost: that are associated directly to an operationDirect Benefit: are specifically attached to a given operation e.g. save in time.

Indirect Cost: are not directly related to an operation e.g. insurance cost,maintenance cost

Indirect Benefit: are realized as a by-product of another operation.


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Evaluation of Costs and Benefits

Capital Budgeting is planning the deployment of available capital for thepurpose of maximizing the long term profitability of an organization.

It is of two types

1. Discounted cash flow criteria: in this future cash inflows (earning frominvestment ) are discounted to make these comparable with present dayinvestment.

2. Non-Discounted Cash flow criteria: no such discounted is made.


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Discounted cash f low criteria

1. Net present value2. Internal rate of return3. Profitability index4. Discounted payback period

Non-Discounted

1. Simple payback period2. Accounting rate of return


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Quantitative and Qualitative cost benefit analysis

In Quantitative cost benefit comparison which expresses all costs and benefits inmonetary terms, compares costs and benefits by summarizing the ratio of benefitsby summarizing the ratio of benefits to costs.

In Qualitative cost benefit analysis differs from quantitative cost benefit analysis in

drawing on a range of evidence of costs and benefits, not all cost and benefits canbe converted to monetary value.

Quantitative Benefits are: Reduced costs, reduced staff, increase productivity

Qualitative Benefits: Improved public performance, increased work satisfaction,

improved management, better time management


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Assessing Information Needs of the Organization

InformationNeeds Depends

On

Type ofBusiness

Type ofBusinessDecision

Type ofBusinessManager


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Marketing

Finance

Production

HR

BusinessFunctions

Structured Decision

Semi-structured decision Unstructured decision

BusinessDecision

Top level (Strategic planning)

Middle level (Tactical planning) Supervisory level( Operational planning)

Type ofbusinessmanager

mis unit iii-2

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