CHAPTER ONE

Foundation Concepts of Information Systems

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Contents
 Introduction
 Why study information systems & information
technology?
 Data and Information
 Systems Concepts
 Information Systems and types of information systems
 Marketing Information System (MkIS)
 Marketing Information System Components

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1.1 Introduction
• Computers have been used to perform common
business applications in the developed countries.
• But the usage of computer for keeping track of
transactional data in Ethiopia is a recent phenomenon.
• An organization employs a large number of clerks to
record business transactions.
• A transaction is any business-related exchange such as:
o payment to employees, sales to customers, purchase
order placed to a vendor, payment received from a
customer, etc.

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• In order to meet or exceed their customers'
expectations, the business function of any
organization (such as marketing) has to use
information systems (IS) as a tool to win the fierce
competition.
• The marketing information system based on
information technology (IT) has become a common
management decision-making tool in organizations.
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Why study information systems & information
technology?
• That is the same as asking why anyone should study
marketing, accounting, etc. or any other major
business function.
• With the help of computers, organizations
automated the process expecting to reduce errors &
cost.
• The very first application of computers in business
was to create a transaction processing system (TPS).
• TPS is an organized collection of people,
procedures, software, databases & devices used to
record business transactions. 5
• TPS handle routine information items, more often
than not manipulating data in some constructive
way as it enters or leaves the firm’s databases.
• E.g. An order entry program is a TPS.
• Reasons for TPS are:
o recording,
o classification,
o sorting,
o calculation,
o summarization, storage & exhibit of results.

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 Data and Information
 Data are (unprocessed) facts & figures that are not currently
being used in a decision process.
• Data are collections of facts or events represented in the
form of symbols, such as digits, alphabets, pictures,
graphs, etc.
 Facts about people, objects, events in an organization
• (e.g. all the sales orders for the year)
• E.g. Business transactions such as buying a car or an
airline ticket can produce a lot of data.
• E.g. Each student's test score is one piece of data on MKIS.
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 Information is data that have been processed
& presented in a form suitable for human
interpretation (e.g. how many of each product
were ordered in each month, may be shown on
a graph).
 E.g. The average score of a class on the
course MKIS.

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 Example
•Names, quantities & dollar amounts recorded on sales
forms represent data about sales transactions.
• However, a sales manager may not regard these as
information.
•Only after such facts are properly organized &
manipulated can be meaningful sales information
furnished, specifying, for example, the amount of sales
by product type, sales territory, or salesperson.
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 E.g.
1234567 10,000.00
2345678 15,000.00
 The above lines contain data but the data is useless.
 Let us now put the data in the proper context as follows:
Account Number Money Withdrawn on
20/09/2022
1234567 10,000.00
2345678 15,000.00

 The data is now usable & we can process it to extract

information such as the amount withdrawn from account
number 1234567 is 10,000.00. We can consolidate the data &
extract the information that 25,000.00 were withdrawn on
20/09/2022.
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• Knowledge: data & information that is further refined
based on the facts, truths, beliefs, judgments, experiences,
& expertise of the recipient. Knowledge involves the
evaluation & understanding of information.

• Wisdom: the ability to make sensible decisions &

judgments based on personal knowledge & experience. It
is the ability to know when & how to apply knowledge.
• Acquiring wisdom doesn't mean that we stop making
errors, only that we never stop learning from them.
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 Information Quality:
Information that is up-to-date, accurate, clear will be
very meaningful, useful, or valuable to you/other end
users.
People want information of high quality, that is,
information products whose characteristics make the
information more valuable to them.
It is useful to think information as having the three
dimensions of :
o time,
o content &
o form.
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 Time Dimension
Timeliness Information should be provided when it is needed

Accuracy Information should be up to date when it is provided

Frequency Information should be provided as often as needed

Time Information can be provided about past, present or

period future time periods

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 Content Dimension
Accuracy Information should be free from errors

Relevancy Information should be related to the information needs of the

specific recipient for the specific situation

Completeness All necessary information that is needed should be provided

Conciseness Only the information that is needed should be provided

Scope An information can have a broad or narrow scope an internal

or external focus

Performance Information can reveal performance by measuring activities

accomplished, progress made, or resources accumulated

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 Form Dimension
Clarity Information should be provided in a form that is easy
to understand/ use familiar /conversational words
Detail Information can be provided in detail or summery
form
Order Information can be arranged in a predetermined
sequence
Presentation Information can be presented in narrative, numeric,
graphic, or other forms
Media Information can be provided in the form of printed
paper documents, video displays, or other media
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 Definition and Basic Concepts of Marketing
Marketing: Marketing is a social & managerial process by

which individuals & groups obtain what they need & want
through creating, exchanging products & value with others.
 Marketing has moved on from its emphasis on products to focus
on the delivery of customer value, & benefits that the customer
appreciates.
 Marketing is not selling. Selling revolves around the needs &
interests of the seller; but marketing revolves around the needs
& interests of the buyer.
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To satisfy the needs & interests of the buyer, marketing
managers understand:
© To satisfy a consumer, his needs are to be known.
© This is possible only when information is collected
from the consumers.
© Through market research information about current
consumer needs can be known.
© The task of marketing starts with the consumer &
ends with the consumer.
© We must find out much more about what the consumer
is willing to buy.
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 Systems Concepts
 A system is an organized collection of parts (or subsystems)
that are highly integrated to accomplish an overall goal.
 The system has various inputs, which go through certain
processes to produce certain outputs, which together,
accomplish the overall desired goal for the system.
 A system is a collection of people, machines, & methods
organized to accomplish a set of specific tasks.
 A system is an interrelated & interdependent set of elements
functioning as a whole.
 If one part of the system is changed, the nature of the overall
system is often changed.
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 For example, an organization is made up of many
administrative & management functions, products,
services, groups & individuals.
A system can also be defined as collections of people
using information technology & processes that define
how people carry out their work.
The system includes informal interactions that take
place in an organization (example emails, phone calls).

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• Systems boundary: all systems have a boundary that
separates them from their environment.
• When defining a system, you need to establish a boundary.

• A boundary may delineate an area of responsibility. This

boundary depicts the scope of activities to be supported by
the system.

• Systems and subsystems: systems may consist of

numerous subsystems, each of which has elements,
interactions, & objectives.
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Example:
 A factory system has various sub-systems like the
production sub-system, the financial sub-system,
the marketing sub-system & the personnel sub-
system.
 Now a production sub-system could consist of
sub-sub-systems of production control, materials
control, quality control etc.
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A system (a dynamic system) has three basic
interacting components or functions:
 Input: involves capturing & assembling elements that
enter the system to be processed.
 For example, raw materials, energy, data & human
effort must be secured & organized for processing.
 Another example, an ATM machine accepts data when
you enter the PIN number.

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 Processing: involves transformation processes that
convert input in to output. Examples: are a
manufacturing process, marketing plan, sales,
advertisement, product dev’t etc.
 Output: involves transferring elements that have been
produced by a transformation process to their ultimate
destination.
o For example, finished products offers, human
services & marketing information(messages regards
its product) must be transmitted to their human users.
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Example
• A manufacturing system accepts raw materials as
input & produces finished goods as output.
• An information system is a system that accepts
resources (data) as input and processes them in to
products (information) as output.
• A business organization is a system where economic
resources are transformed by various business
processes in to goods and services.
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 The system concept becomes more useful by including two

additional components: feedback and control.

 A system with feedback and control components is

sometimes called a cybernetic system, that is, a self-

monitoring, self- regulating system.
 Feedback: is data about the performance of a system.
 For example, data about sales performance is feedback to a

sales manager. E.g. Comments from customers or clients

using the products.
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 Control: involves monitoring & evaluating feedback to
determine whether a system is moving toward the
achievement of its goal.
 The control function then makes necessary adjustment
to a system’s input & processing components to ensure
that it produces proper output.
 For example, a sales manager exercises control when
reassigning sales persons to new sales territories after
evaluating feedback about their sales performance.
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 What is Interface?

•An interface is a connection at system or

subsystems boundaries.

•Example two typical business systems that

interface with each other are inventory control &
purchasing. Production and sales etc.

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Open-vs-Closed Systems
• Open systems operate in an external environment &
exchange information & material with that
environment.
• An open system needs to receive feedback to change
& to continue to exist in its environment.
• For example, a marketing system, which is an open
system, operates in an environment of competition.
• If a competitor introduces new technology by
providing customers with on line order entry
terminals, the marketing function must adapt to the
change in the environment.
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• A closed system is relatively self- contained; it
doesn't exchange information with its
environment.
• Closed systems don't get the feedback they
need from the external environment and tend to
deteriorate.

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Basic Difference between Open and Closed System

Open System Closed System

The system which interacts with its The system which does not interacts with
environment its environment

It takes input from environment & gives It neither take input nor provides output to
output back to environment environment self-contained, self-sufficient
systems

It gets influenced by the changes taking It remains uninfluenced by the

place in the environment environmental changes

The life time of such system is relatively It’s life time is much shorter compared to
longer open system

e.g. Business Organization

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Systems Share Common Characteristics,
Including:

 A system has structure, it contains parts/

components that are directly or indirectly

related to each other
 A system has behavior , it exhibits processes

that fulfill its function or purpose

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 A system has interconnectivity: the parts &
processes are connected by structural &/or
behavioral relationships.
 A system's structure & behavior may be
decomposed via subsystems and sub-processes
to elementary parts & process steps.

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 What is a Super System?
•When a system is part of a larger system, the larger
system is the super system.
Physical and Conceptual Systems
 Physical system: The business firm is a physical
system, composed of physical resources
 Conceptual system: It’s a system that uses conceptual
resources-information and data- to represent a physical
system.
 Example: The Computer is a physical system, but the
data and information stored in it can be viewed as a
conceptual system.
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System Entropy and Negative Entropy: systems can
become run down if they are not maintained.
•If employees do not have opportunities to learn new
concepts and techniques, the skills they apply to
performing job tasks will become out of date.
•The process of maintaining a system is negative
entropy. Example: Sending automobile mechanic to
training classes to learn new diagnostic techniques is
negative entropy.
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•Negative entropy can be achieved through preventive
maintenance checks, such as a yearly physical
examination for an employee or a routine tune up for an
automobile.
 Entropy: is system' principle which says that
systems will die out unless they interact with their
environment.
 Synergy: is principle which can be stated as the
whole is greater than the sum of its parts.
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 What is an Information System?
♣An information system can be any organized
combination of:
o people, hardware,
o software,
o communication networks, &
o data resources that stores & retrieves, transforms,
& disseminates information in an organization .

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♣ People have tried on information systems to
communicate with each other using a variety of:
o physical devices (hardware),
o information processing instructions &
o procedures (software),
o communications channels/ networks &
o stored data/data resources since the dawn of

civilization.

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 Information systems can provide the information that a
business needs for:
o efficient operations, effective management &
competitive advantage through the computerized
systems established.
 In addition supporting decision making, coordination,
& control, information systems may help managers &
workers analyze problems, visualize complex subjects,
& create new products.
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 Types of Information Systems
The applications of information systems that
are implemented in today’s business world can
be classified in several different ways.
For example, several types of information
systems can be classified as either operations or
management information systems.

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 Information Systems: can be categorized as:
1. Operations Support Systems: Support of Business
Operations
2. Management Support Systems: Support of
Managerial Decision Making
1. Operations Support Systems: Can be categorized as
A. Transaction Processing Systems:
B. Process Control Systems
C. Enterprise Collaboration Systems
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A. Transaction Processing Systems: Processing
business transaction data resulting from business
transactions, update operational data bases, & produce
business documents.
 Examples: Sales & inventory processing &
accounting systems. Allows managers to track and
react to daily sales fluctuations, evaluate the
effectiveness of point-of-sale activities.

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B. Process Control Systems: Monitor and control
industrial processes. Examples: petroleum refining,
power generation, and steel production systems.
C. Enterprise Collaboration Systems: team and
work group collaboration. Support team, workgroup,
& enterprise communications & collaboration.
Examples: e-mail, chat & videoconferencing
groupware systems.
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2. Management Support Systems: Can be
categorized as:
A. Management Information Systems
B. Decision Support Systems
C. Executive Information Systems

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 A. Management Information Systems: Provide
information in the form of reports and displays to managers and
many business professionals.
 MIS provide a variety of pre specified information.
 It is “an integrated user machine system for providing
information to support operations, management & decision
making functions in an organization.
 The system utilizes computers, manual procedures, models
for analysis, planning, control and decision making,& a
database.
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For example, sales managers may use their
networked computers and Web browsers to get
instantaneous displays about the sales results of
their products and to access their corporate
intranet for daily sales analysis reports that
evaluate sales made by each sales person.

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B. Decision Support Systems: Interactive decision
support. Provide interactive ad hoc support for the
decision making processes of managers & other business
professionals.
 Example: A production manager may use a DSS to
decide how much product to manufacture based on the
expected sales associated with a future promotion &
the location & availability of the raw materials
necessary to manufacture the product.
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C. Executive Information Systems: Information
tailored for executives. Provide critical information
from MIS, DSS, & other sources tailored to the
information needs of executives.
 For example top executives may use touch screen
terminals to instantly view text and graphics displays
that highlight key areas of organizational &
competitive performance.

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1.4 Meaning of Marketing Information System (MkIS)
 Organizations face changes & challenges from outside as
well as inside their boundaries. The role of marketing is to
anticipate & identify such changes & advise the organization
on how to respond to challenges in the context of a
competitive marketplace.
 Marketing needs information to carry out this task.
 Marketing research collects information & a marketing
information system (MkIS) analyses & acts on such
information.
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•MkIS consists of people, equipment, & procedure to gather,
sort, analyze, evaluate, & distribute timely & accurate
information to marketing decision makers(Kotler and Keller).
•MkIS provides:
o a store of historical customer data. This produces better

efficiency internally due to better organized data,

o better identification of opportunities that might lead to the
development of new products & services, & the
development of better long-term relationships with
customers arising from increased customer loyalty.
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 MkIS is a management information system (MIS) designed

to support marketing decision making.

 It is a system in which marketing data is formally gathered,

stored, analyzed & distributed to managers in accordance

with their informational needs on a regular basis.

 An overall MkIS is a set structure of procedures & methods

for the regular, planned collection, analysis & presentation

of information for use in making marketing decisions.

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Marketing information is the lifeblood of marketing

process; marketing decision won't be taken in the absence

of marketing information.

Marketing decisions are affected by many internal &

external environmental variables, so the marketing decision

maker needs a great deal of information related to these

variables, to predict their directions & expected effects on

the internal activities of the organization & the market.

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• MkIS provides a store of historical customer data.

• This produces better efficiency internally:

© due to better organized data,

© leading to more effective strategic improvements

© better identification of opportunities that might lead to

the development of new products and services,
© the development of better long-term relationships with
customers arising from increased customer loyalty.

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 An effective marketing information system in
modern organizations:
© improves not only internal performance,
including functional performance &
organizational climate,
© but also external performance such as better
adaptability to market conditions & customer
responsiveness.
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 Components of MkIS
 The information needed by marketing
managers comes from:
1) Internal Record System
2) Marketing Intelligence System
3) Marketing Decision Support System (MDSS)
4) Marketing Research

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The information needed by marketing managers comes from:
1) Internal Record System
•Internal database is part of the most marketing information
systems. It's relatively convenient for access & retrieve of
information.
•A database allow marketers to tap into an abundance of
information useful in making marketing decisions:
o internal sales reports, newspaper articles, company news
releases, government economic reports, reports on
orders, sales, prices, inventory levels, receivables,
payables & so on.
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©The most basic information system used by marketing
managers is the internal records system.
©By analyzing this information, marketing managers can
spot important opportunities and problems.
©Most marketing managers use internal records &
reports regularly, especially for making day-to-day
planning, implementation & control decisions.

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2) Marketing Intelligence System
©A marketing intelligence system is a set of procedures &
sources used by managers to obtain their everyday
information about pertinent development in the marketing
environment.
©Marketing managers often carry on marketing
intelligence by reading books, newspapers, & trade
publications; talking to customers, suppliers, distributors
& other outsiders; & talking with other managers etc.
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©Marketing intelligence is everyday information about
developments in the marketing environment that helps
managers prepare and adjust marketing plans.
©The marketing intelligence system determines the
intelligence needed, collects it by searching the
environment & delivers it to marketing managers.
©Marketing intelligence comes from many sources. Much
intelligence is from the company's personnel - executives,
engineers & scientists, purchasing agents & the sales force.

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3. Marketing Decision Support System (MDSS)
 A growing number of organizations are using a marketing
decision support system to help their marketing managers
make better decisions. MDSS can be defined as follows.
©A MDSS is a coordinated collection of data, systems, tools
& techniques with supporting software & hardware by
which an organization gathers & interprets relevant
information from business & environment & turns it into a
basis for marketing action.

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©It supports with exceptional and nonrecurring decisions,
which are moderately unstructured .
©Here is how a MDSS works. The manager puts questions
to the appropriate model located in the MDSS. The model
draws up data, which are then analyzed statistically.
©The manager can then use a program to determine the
optional courses of action.
©Some of the statistical tools used in MDSS are regression
Analysis, Game theory etc.
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4. Marketing Research
It is used to collect primary & secondary data, &
displays the results in z forms of reports.
It is the process of collecting & analyzing of data for
the purposes of identifying & resolving problems
related to companies marketing services & marketing
opportunities, it's a planned & managed activity on a
scientific basis to ensure efficiency in dealing with
those problems & opportunities.
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 MkIS is designed properly to solve many information
problems facing the administration, like the wrong
kind of information, in the wrong location, at the
wrong time etc.
 MkIS can support managers in their marketing
decision making by providing them with internal
linking and operational integration between
departments or sections.

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 END

THANK YOU !

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