Unit 2: Information Systems and Business
Operations (LH 7)
1. Types of Information Systems
Information systems (IS) are used at different levels of an organization to support decision-
making, coordination, control, analysis, and visualization. Based on their functions and the type
of decisions they support; information systems are classified into the following main types:
🔹 1. Transaction Processing System (TPS)
Definition: A TPS is an operational-level system that records daily routine transactions essential
to conduct business.
Purpose: Automates repetitive tasks and ensures smooth business operations.
Examples:
Payroll systems
Order processing systems
Billing systems
Inventory control systems
Features:
Handles large volumes of data
Real-time or batch processing
Ensures accuracy and speed
Data security and integrity
🔹 2. Management Information System (MIS)
Definition: MIS is a middle-level management system that summarizes and reports on the
company’s basic operations using data from TPS.
Purpose: Supports structured decision-making and routine problem-solving.
Examples:
Monthly sales reports
Performance summaries
Budgeting and accounting systems
Features:
Predefined reports
Decision support at tactical level
Not flexible for ad-hoc queries
🔹 3. Decision Support System (DSS)
Definition: DSS helps middle and senior managers in analyzing data to make non-routine and
semi-structured decisions.
Purpose: To support complex decision-making using models, analytical tools, and interactive
software.
Examples:
Forecasting sales
Risk analysis
Product pricing strategies
Features:
Interactive and user-friendly
"What-if" and sensitivity analysis
Integrates internal and external data
🔹 4. Executive Information System (EIS) or Executive Support System (ESS)
Definition: EIS is a strategic-level information system that provides top executives with easy
access to both internal and external information relevant to strategic goals.
Purpose: To support unstructured decision-making by executives.
Examples:
Dashboards with KPIs
Industry trend analysis
Strategic performance metrics
Features:
Visual and summarized reports (graphs, dashboards)
Drill-down capability
Real-time data presentation
🔹 5. Expert System (ES)
Definition: An AI-based system that emulates the decision-making ability of a human expert.
Purpose: To solve complex problems in specific domains.
Examples:
Medical diagnosis systems
Credit risk assessment tools
Features:
Knowledge base + inference engine
Logical reasoning
Offers explanations or justifications
2. Enterprise Systems
🔹 a. Enterprise Resource Planning (ERP) System
Definition: ERP is an integrated system that combines all departments and functions across an
organization into a single IT system.
Purpose: To increase operational efficiency and ensure consistency of data.
Examples:
SAP, Oracle ERP, Microsoft Dynamics
Features:
Unified database
Cross-functional integration
Real-time operations
🔹 b. Customer Relationship Management (CRM) System
Definition: CRM systems manage a company’s relationships with customers and track customer
interactions.
Purpose: To improve customer satisfaction, retention, and sales.
Examples:
Salesforce, Zoho CRM
Features:
Tracks customer history
Supports marketing automation
Personalizes customer service
🔹 c. Supply Chain Management (SCM) System
Definition: SCM systems manage the flow of materials, information, and finances across the
supply chain.
Purpose: To optimize inventory levels, reduce costs, and improve logistics.
Examples:
Warehouse management systems
Logistics tracking software
Features:
Tracks movement of goods
Forecasts demand and supply
Improves supplier coordination
Summary Table
Type of System Users Decision Type Example
TPS Operational Staff Structured Billing System
MIS Middle Managers Structured Monthly Sales Report
DSS Managers/Analysts Semi-structured Forecasting Tool
EIS Executives Unstructured Executive Dashboard
ERP All Departments Integrated SAP ERP
CRM Marketing/Sales Customer-focused Salesforce
SCM Operations Logistics Inventory Management
ES Domain Experts Complex Medical Diagnosis
3. MIS for Functional Areas
Management Information Systems (MIS) support business decision-making across various
functional areas of an organization. Each department uses MIS to collect, process, and analyze
information that aids in planning, control, and coordination of activities.
The major functional areas are:
🔹 1. MIS for Finance
Purpose: Helps in managing the organization’s financial resources effectively.
Functions Supported:
Budgeting and forecasting
Financial planning and analysis
Asset management
Risk management
Cost control
Examples:
Investment analysis systems
Profit and loss reporting tools
Financial statement generators
Benefits:
Accurate and timely financial reporting
Better control of expenses and revenues
Informed financial decision-making
🔹 2. MIS for Human Resources (HR)
Purpose: Manages employee-related information and supports HR activities.
Functions Supported:
Recruitment and onboarding
Attendance and leave tracking
Payroll and benefits administration
Performance evaluation
Training and development
Examples:
HR Information System (HRIS)
Employee database systems
Talent management platforms
Benefits:
Efficient personnel management
Legal compliance and record keeping
Enhances employee satisfaction and productivity
🔹 3. MIS for Marketing
Purpose: Helps in planning, analyzing, and controlling marketing activities.
Functions Supported:
Customer analysis
Market research and segmentation
Product pricing and promotion strategies
Sales forecasting
Customer relationship management
Examples:
Sales tracking systems
Digital marketing analytics tools
CRM (Customer Relationship Management) systems
Benefits:
Better understanding of customer needs
Improved sales and targeting
Enhanced marketing campaign performance
🔹 4. MIS for Operations / Production
Purpose: Assists in managing day-to-day production and operations.
Functions Supported:
Production scheduling
Quality control
Inventory management
Supply chain and logistics
Resource allocation
Examples:
Manufacturing Resource Planning (MRP)
Inventory control systems
Process control and monitoring software
Benefits:
Optimized use of resources
Reduced production costs
Improved product quality and delivery times
Summary Table
Functional MIS Key Functions Example
Area Application
Finance Financial MIS Budgeting, forecasting, risk analysis Profit & loss systems
HR HRMIS Payroll, attendance, performance HR software like Zoho
tracking HR
Marketing Marketing MIS Sales tracking, customer profiling CRM systems
Operations Operations Inventory, production planning ERP, MRP systems
MIS
4. Ethical Issues in IS Management
As organizations increasingly rely on information systems, they face ethical challenges in
managing data, privacy, and technology use. Ethical issues in IS management involve
determining what is right and wrong when acquiring, storing, accessing, and sharing
information.
🔹 1. Security Issues
Definition: Concerns related to protecting information systems from unauthorized access,
breaches, and attacks.
Key Ethical Concerns:
Hacking and cyberattacks
Malware, ransomware, phishing
Insider threats (employee misuse)
Data breaches compromising personal or financial data
Ethical Dilemma:
How much monitoring of users is acceptable?
Should companies inform customers about security breaches?
🔹 2. Privacy Issues
Definition: Deals with an individual’s right to control how their personal information is
collected and used.
Key Ethical Concerns:
Unauthorized tracking of online behavior
Selling user data to third parties
Lack of transparency in data collection
Ethical Dilemma:
Is it ethical for companies to track user data without consent?
Should government agencies be allowed to access private data for surveillance?
🔹 3. Accuracy Issues
Definition: Ensuring data stored and processed by information systems is accurate and up to
date.
Key Ethical Concerns:
Incorrect customer information leading to denial of service
Errors in credit reports, medical records, or employment history
Bias in automated decision systems (e.g., loan approvals)
Ethical Dilemma:
Who is responsible for correcting inaccurate data?
Should users be notified when decisions are made based on faulty data?
🔹 4. Property Issues
Definition: Concerned with the ownership of information and protection of intellectual property.
Key Ethical Concerns:
Software piracy
Unauthorized copying and distribution of digital content
Theft of trade secrets
Ethical Dilemma:
Is downloading pirated content justifiable if it’s unavailable or unaffordable?
🔹 5. Accessibility Issues
Definition: Involves determining who has the right or privilege to access information.
Key Ethical Concerns:
Digital divide (access inequality)
Accessibility for differently-abled individuals
Misuse of privileged access by employees or administrators
Ethical Dilemma:
Should all employees have equal access to sensitive data?
How should organizations handle access for employees with special needs?
🔹 6. Corporate Social Responsibility (CSR)
Definition: Organizations have an ethical duty to use information systems in a way that benefits
society and avoids harm.
Key Concerns:
Environmental impact of IT infrastructure
Use of automation leading to job losses
Misuse of AI for manipulation (e.g., deepfakes, misinformation)
Frameworks for Ethical Decision Making in IS
Organizations often use the following principles to guide ethical conduct:
1. Accountability – Individuals and organizations are responsible for their actions.
2. Liability – Legal responsibility for damage caused.
3. Due process – Fair procedures in handling disputes.
Real-World Examples
Facebook–Cambridge Analytica scandal: Unauthorized use of personal data for
political campaigns.
Equifax Data Breach: Sensitive financial data of millions exposed due to poor security.
AI Bias in Hiring Systems: Algorithms unfairly rejecting certain candidates.
Case Study: Implementing ERP at Nestlé
Background
Nestlé, the world’s largest food and beverage company, operates in over 190 countries with
hundreds of production facilities and thousands of suppliers and distributors. Due to its vast
operations, Nestlé faced difficulties in managing data across departments, resulting in duplicate
records, inconsistent processes, and poor coordination.
Problem Statement
Before implementing a unified system, Nestlé’s departments (like purchasing, sales, logistics,
finance) used separate databases and software, making it difficult to:
Track inventory across global locations
Generate accurate financial reports
Ensure consistent supply chain management
Integrate customer and supplier information
This lack of integration caused inefficiencies, higher costs, and delayed decision-making.
Solution: Implementation of ERP System
Nestlé decided to adopt an Enterprise Resource Planning (ERP) system using SAP R/3, one of
the leading ERP platforms.
Objectives:
Integrate business processes across departments
Standardize data across the organization
Improve collaboration between suppliers, warehouses, and retailers
Support real-time decision-making
Implementation Process
1. System Integration: All regional branches began using a common ERP platform.
2. Business Process Reengineering: Some existing workflows were redesigned to align
with SAP's best practices.
3. Training & Change Management: Employees received training, and change
management practices were adopted to ensure smooth transition.
4. Phased Rollout: ERP modules were introduced in stages—starting with finance, then
extending to procurement, logistics, and HR.
Outcomes & Benefits
Improved Supply Chain Coordination: Real-time updates on stock levels and
shipments.
Better Decision-Making: Managers could access accurate data instantly.
Cost Savings: Reduced duplication and better inventory management led to financial
savings.
Customer Satisfaction: Faster order processing and better service delivery improved
customer relations.
Challenges Faced
Resistance from employees who were used to old systems.
Initial delays in implementation due to system complexity.
High cost of software and training.
Conclusion
The ERP implementation at Nestlé showcases how enterprise systems can streamline business
operations and enhance decision-making. Despite challenges, the project became a global model
of how integrated information systems can transform a large, complex organization.
Lessons Learned
Information systems must be aligned with business goals.
Top management support and employee involvement are crucial.
Phased implementation and continuous improvement are key to success.
Case Study: Use of Information Systems in Nepal Telecom
(NTC)
Background
Nepal Telecom (NTC) is the state-owned telecommunications company in Nepal, providing
voice, data, internet, and other communication services to millions of customers nationwide. As
customer demands increased and operations expanded, NTC faced challenges in managing
services efficiently across departments like billing, customer service, maintenance, and
marketing.
Problem Statement
Before implementing advanced information systems, NTC relied heavily on manual processes
and legacy systems, resulting in:
Delays in customer service and billing
Difficulty tracking complaints and service requests
Inefficiencies in managing large volumes of customer data
Lack of integration between departments (technical, finance, customer care)
Solution: Implementation of Integrated Information Systems
To address these issues, NTC implemented several enterprise systems, including:
Customer Relationship Management (CRM) system to manage customer interactions
and complaints
Enterprise Resource Planning (ERP) for finance, inventory, and HR management
Automated Billing Systems for accurate and timely billing
Network Management Systems for infrastructure monitoring
Business Process Improvement
The introduction of these systems enabled NTC to:
Digitize and streamline customer service processes
Automate billing and payment collection
Manage network outages more efficiently
Coordinate better between regional offices and central departments
Outcomes and Benefits
Improved customer service: Faster response time to complaints and queries
Accurate billing: Reduction in billing errors and revenue leakage
Operational efficiency: Time-saving in administrative processes
Data-driven decisions: Real-time reports for management
Challenges Faced
Resistance from employees to shift from manual to digital systems
Technical difficulties in integrating old data into new platforms
Need for extensive training and IT support
Conclusion
Nepal Telecom’s adoption of integrated information systems reflects how information
technology can enhance business operations, especially in public sector organizations. With
improved communication, better service delivery, and streamlined internal processes, NTC
became more competitive and customer-focused.
Lessons Learned
Digital transformation is essential for public utility services in developing countries.
Employee training and change management are key to success.
Strategic use of MIS can improve efficiency and customer satisfaction in Nepalese
organizations.
