Chapter 2 Ebusiness How Businesses Use Information Systems145

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2007 by Prentice Hall
STUDENT LEARNING OBJECTIVES
Essentials of Business Information Systems
Chapter 2 E-Business: How Businesses Use Information Systems
What are the major features of a business that are important
for understanding the role of information systems?
How do information systems support the major business
functions: sales and marketing, manufacturing and
production, finance and accounting, and human resources?
How do systems serve the various levels of management in
a business and how are these systems related?
How do enterprise applications, collaboration and
communication systems, and intranets improve
organizational performance?
What is the role of the information systems function in a
business?
2.2
Information Systems Join the Tupperware Party
Problem: Changing business model caused unnecessary
difficulty for Tupperware sales consultants.
Solutions: Implement Web-based order management
system that simplifies order entry and other tasks.
Oracle Collaboration Suite and Oracle Portal also
streamlines communication and support.
Demonstrates ITs role in centralizing data, improving
production processes, and driving growth and profitability.
Illustrates the importance of automating business
processes to reduce workloads and increase productivity.
2.3
Information Systems Join the Tupperware Party
2.4
Components of a Business
Four basic business functions
Manufacturing and production
Sales and marketing
Finance and accounting
Human resources
Organizing a Business: Basic Business Functions
Business: Formal organization that makes products or
provides a service in order to make a profit
2.5
Figure 2-1
Every business,
regardless of its size,
must perform four
functions to succeed. It
must produce the
product or service;
market and sell the
product; keep track of
accounting and financial
transactions; and perform
basic human resources
tasks, such as hiring and
retaining employees.
The Four Major Functions of a Business
2.6
Five basic business entities:
Suppliers
Customers
Employees
Invoices/payments
Products and services
Organizing a Business: Basic Business Functions
2.7
Logically related set of tasks that define how specific
business tasks are performed
The tasks each employee performs, in what order, and on what
schedule
E.g., Steps in hiring an employee
Some processes tied to functional area
Sales and marketing: Identifying customers
Some processes are cross-functional
Fulfilling customer order
Business Processes
2.8
Figure 2-2
Fulfilling a customer order involves a complex set of steps that requires the close
coordination of the sales, accounting, and manufacturing functions.
The Order Fulfillment Process
2.9
Read the Interactive Session and then discuss the
following questions:
What are the basic principles of Toyotas production system? To
which areas of the organization do these principles apply?
How is TPS interconnected with the culture at Toyota? Are TPS
and Toyotas culture interdependent? Could one exist without
the other?
Describe how information systems support each of the
business processes described in this case.
Interactive Session: Organizations
Toyota As Number One
2.10
Managing a Business and Firm Hierarchies
Firms coordinate work of employees by developing
hierarchy in which authority is concentrated at top
Senior management
Middle management
Operational management
Knowledge workers
Data workers
Production or service workers
Each group has different needs for information
2.11
Figure 2-3
Business
organizations are
hierarchies
consisting of three
principal levels:
senior management,
middle management,
and operational
management.
Information systems
serve each of these
levels. Scientists and
knowledge workers
often work with
middle management.
Levels in a Firm
2.12
The Business Environment
Global environment
factors
Technology and
science
Economy
Politics
International change
Immediate environment
factors
Customers
Suppliers
Competitors
Regulations
Stockholders
2.13
Figure 2-4
To be successful, an
organization must
constantly monitor and
respond toor even
anticipate
developments in its
environment. A firm's
environment includes
specific groups with
which the business must
deal directly, such as
customers, suppliers, and
competitors as well as
the broader general
environment, including
socioeconomic trends,
political conditions,
technological innovations,
and global events.
The Business Environment
2.14
Firms invest in information systems in order to:
Achieve operational excellence
Develop new products and services
Attain customer intimacy and service
Improve decision making
Promote competitive advantage
Ensure survival
The Role of Information Systems in a Business
2.15

Sales and marketing systems
Manufacturing and production systems
Finance and accounting systems
Human resources systems
Systems from a Functional Perspective
Types of Business Information Systems
2.16
Sales and marketing systems
Support activities for selling and marketing firms products or
services
Senior management:
Monitor trends affecting products and sales, planning for new
products and services, monitor performance of competitors
Middle management:
Support market research, analyze marketing campaigns, pricing
decisions, sales performance
Operational management and employees:
Locating and contacting prospective customers, process orders,
provide customer service support
2.17
Figure 2-5
This system
captures sales
data at the
moment the sale
takes place to
help the business
monitor sales
transactions and
to provide
information to
help management
analyze sales
trends and the
effectiveness of
marketing
campaigns.
Example of a Sales Information System
2.18
Manufacturing and production systems
Support activities for producing firms products or services
Senior management:
Help plan long-term manufacturing goals, such as technology
investments and locating new plants
Middle management:
Analyze and monitor manufacturing and production costs and
resources
Manage status of production tasks
2.19
Figure 2-6
This system provides information about the number of items available in inventory
to support manufacturing and production activities.
Overview of an Inventory System
2.20
Finance and accounting systems
Support activities for managing financial assets, firms
capitalization, and financial records
Senior management:
Establish long-term investment goals and provide long-range
forecasts of firms financial performance
Middle management:
Oversee and control firms financial resources
Track flow of funds in firm through transactions (paychecks,
payments, securities reports, receipts, etc.)
2.21
Figure 2-7
An accounts
receivable
system tracks
and stores
important
customer
data, such as
payment
history, credit
rating, and
billing history.
An Accounts Receivable System
2.22
Human resources systems
Support activities for attracting, developing, and maintaining
firms workforce
Senior management:
Identify manpower requirements (skill, education level, types and
numbers of positions, etc.) for meeting long-term business plans
Middle management:
Monitor and analyze recruitment, allocation, and compensation of
employees
Track recruitment and placement of employees
2.23
Figure 2-8
This system maintains data on the firms employees to
support the human resources function.
An Employee Record-Keeping System
2.24
Read the Interactive Session and then discuss the following
questions:
Did Googles traditional hiring practices create business problems? Explain.
Is Googles quantitative approach to hiring a good solution to its employee
recruiting problems? Why or why not?
What role does culture play in Googles hiring preferences?
What kind of system or systems described in this chapter are discussed in
this case? What are the inputs, processes, and outputs?
Create a list of ten questions that you think might be appropriate for
Googles job applicant survey. Justify each question with a short
explanation of why the answer would be useful.
If you were applying for a job at Google, how would you want to be
evaluated? Which evaluation techniques do you think favor your strengths?
Which techniques might expose your weaknesses?
Interactive Session: People
Googles New Search for the Best and the Brightest
2.25
Transaction processing systems
Keep track of basic activities and transactions of organization
(e.g., sales, receipts, cash deposits, payroll, credit decisions,
flow of materials in a factory)
Management information systems and decision-support
systems
Help with monitoring, controlling, decision-making, and
administrative activities
Executive support systems:
Help address strategic issues and long-term trends, both in
firm and in external environment
Systems from a Constituency Perspective
2.26
Transaction processing systems
Serve operational managers
Principal purpose is to answer routine questions and to
track the flow of transactions through the organization
E.g., Inventory questions, granting credit to customer
Monitor status of internal operations and firms
relationship with external environment
Major producers of information for other systems
Highly central to business operations and functioning
2.27
Management information systems
Provide middle managers with reports on firms
performance
To monitor firm and help predict future performance
Summarize and report on basic operations using data
from TPS
Provide weekly, monthly, annual results, but may enable
drilling down into daily or hourly data
Typically not very flexible systems with little analytic
capability

2.28
How MIS Obtain Data from Organizations TPS
Systems That Span the Enterprise
Figure 2-9
In the system illustrated by this diagram, three TPS supply summarized transaction data to the MIS
reporting system at the end of the time period. Managers gain access to the organizational data
through the MIS, which provides them with the appropriate reports.
2.29
Sample MIS Report
Figure 2-10
This report,
showing
summarized
annual sales
data, was
produced by
the MIS in
Figure 2-9.
2.30
Decision support systems (DSS)
Support non-routine decision making for middle
management
E.g., What would impact on production schedules be if
sales doubled in December?
Use information from TPS, MIS, and external sources
Use models to analyze data
E.g., voyage estimating system of metals company that
calculates financial and technical voyage details
Focus on extracting, analyzing information from large
amounts of data
2.31
Voyage-Estimating Decision Support System
Figure 2-11
This DSS
operates on
a powerful
PC. It is
used daily by
managers
who must
develop bids
on shipping
contracts.
2.32
Executive support systems (ESS)
Serve senior managers
Address strategic issues and long-term trends
E.g., What products should we make in 5 years?
Address non-routine decision-making
Provide generalized computing capacity that can be
applied to changing array of problems
Draw summarized information from MIS, DSS and data
from external events
Typically use portal with Web interface to present content
2.33
Model of an Executive Support System
Figure 2-12
This system
pools data from
diverse internal
and external
sources and
makes them
available to
executives in an
easy-to-use
form.
2.34
TPS: Major source of data for other systems
ESS: Primarily a recipient of data from lower-level
systems
Other systems may exchange data as well
Exchange of data between functional areas
E.g., Sales order transmitted to manufacturing system
In most organizations, systems are loosely
integrated
Relationship of Systems to One Another
2.35
Interrelationships Among Systems
Figure 2-13
The various types of
systems in the
organization have
interdependencies.
TPS are major
producers of
information that is
required by many
other systems in the
firm, which, in turn,
produce information
for other systems.
These different types
of systems have
been loosely coupled
in most
organizations.
2.36
Enterprise Applications
Enterprise applications are systems that span functional
areas and automate processes for multiple business
functions and organizational areas; they include:
Enterprise systems
Supply chain management systems
Customer relationship management systems
Knowledge management systems
2.37
Enterprise Application Architecture
Figure 2-14
Enterprise
applications
automate
processes that
span multiple
business
functions and
organizational
levels and may
extend outside
the organization.
2.38
Integrate data from key business processes into single
system
Speed communication of information throughout firm
Enable greater flexibility in responding to customer
requests, greater accuracy in order fulfillment
Enable managers of large firms to assemble overall
view of operations
Alcoa used ERP to eliminate redundancies and
inefficiencies in its disparate systems
Enterprise Systems
2.39
Enterprise Systems
Figure 2-15
Enterprise
systems integrate
the key business
processes of an
entire firm into a
single software
system that
enables
information to
flow seamlessly
throughout the
organization.
These systems
focus primarily on
internal
processes but
may include
transactions with
customers and
vendors.
2.40
Manage relationships with suppliers, purchasing firms,
distributors, and logistics companies
Manage shared information about orders, production,
inventory levels, etc.
Goal is to move correct amount of product from source to
point of consumption as quickly as possible and at lowest cost
Type of interorganizational system:
Automating flow of information across organizational
boundaries

Supply Chain Management Systems
2.41
Example of a Supply Chain Management System
Figure 2-16
Customer orders, shipping notifications, optimized shipping plans, and other supply
chain information flow among Haworths Warehouse Management System (WMS),
Transportation Management System (TMS), and its back-end corporate systems.
2.42
Help manage relationship with customers
Coordinate business processes that deal with
customers to optimize revenue and customer
satisfaction, and increase sales
Combine sales, marketing, and service record data
from multiple communication channels to provide
unified view of customer, eliminate duplicate efforts
E.g., Saab CRM applications to achieve 360 view of
customers resulted in greater follow-up rate on sales
leads and increased customer satisfaction
Customer Relationship Management Systems
2.43
Illustrated here are
some of the capabilities
of Salesforce.com, a
market-leading provider
of on-demand
customer relationship
management (CRM)
software. CRM
systems integrate
information from sales,
marketing, and
customer service.
2.44
Intangible knowledge assets
Knowledge about producing and delivering products
Source of value and advantage for firms
Knowledge management systems:
Help capture, storage, distribute, and apply knowledge so that
it can be leveraged for strategic benefit
Include systems for:
Managing and distributing documents, graphics, other
digital knowledge objects
Creating knowledge directories of employees with
specialized expertise
Distributing knowledge
Knowledge Management Systems
2.45
Intranets and Extranets
Technology platforms that increase integration and
expedite the flow of information
Intranets:
Internal networks based on Internet standards
Typically utilize a portal
Extranets:
Intranets extended for authorized use outside the
company for partners, customers
Facilitate collaboration
2.46
Collaboration and Communication Systems:
Interaction Jobs in a Global Economy
Interaction jobs:
Primary value-adding activities are talking, e-
mailing, presenting, persuading
41% of U.S. labor force
70% of new jobs since 1998
Involves knowledge and problem-solving that
cant be put into information system
2.47
Collaboration and Communication Systems:
Interaction Jobs in a Global Economy
Enterprise-wide information system solutions for
interaction
Internet-based collaboration environments
E-mail and instant messaging (IM)
Cell phones and wireless handhelds
Social networking
Wikis
Virtual worlds
2.48
E-Business, E-Commerce, and E-Government
E-business
Use of digital technology and Internet to drive major
business processes
E-commerce
Subset of e-business
Buying and selling goods and services through Internet
E-government:
Using Internet technology to deliver information and
services to citizens, employees, and businesses
2.49
The Information Systems Department
The Information Systems Function in Business
Programmers
Systems analysts
Principle liaisons to rest of firm
Information systems managers
Leaders of teams of programmers and analysts, project
managers, physical facility managers, telecommunications
managers, database specialists, managers of computer
operations and data entry staff
Senior managers: CIO, CSO, CKO
End users
External specialists
2.50
Information Systems Services
Services provided by the information systems
department include:
Computing and telecommunications services
Data management services
Application software services
Physical facilities management services
IT management services
IT standards services
IT educational services
IT research and development services
The Information Systems Function in Business
2.51
Key Terms
Business, 41
Business processes, 43
Chief information officer (CIO), 68
Chief knowledge officer (CKO), 68
Chief privacy officer (CPO), 68
Chief security officer (CSO), 68
Customer relationship management
(CRM) systems, 62, Data workers, 45
Decision-support systems (DSS), 55
Electronic business (e-business), 67
Electronic commerce (e-commerce), 67
E-government, 67
End users, 68
Enterprise applications, 59
Enterprise systems, 59
Executive support systems (ESS), 57
Finance and accounting information
systems, 50
Human resources information systems,
51, Information systems department, 67
Information systems managers, 68
Interorganizational system, 61
Knowledge management systems (KMS),
64, Knowledge workers, 45
Management information systems (MIS),
55, Manufacturing and production
information systems, 49,
Middle management, 45
Operational management, 45
Portal, 57, Production or service workers,
45, Programmers, 68
Sales and marketing information
systems, 48, Senior management, 45
Supply chain management (SCM)
systems, 61, Systems analysts, 68
Transaction processing systems (TPS),
54

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