Chapter 2 Ebusiness How Businesses Use Information Systems145

8/12/2019 Chapter 2 Ebusiness How Businesses Use Information Systems145

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2.1 2007 by Prentice Hall

STUDENT LEARNING OBJECTIVES

Essentials of Business Information SystemsChapter 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 improveorganizational performance?

What is the role of the information systems function in a

business?


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Information Systems Join the Tupperware Party

Problem:Changing business model caused unnecessary

difficulty for Tupperware sales consultants.

Solutions: Implement Web-based order management

systemthat simplifies order entry and other tasks.

Oracle Collaboration Suite and Oracle Portalalso

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.



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Information Systems Join the Tupperware Party



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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


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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




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Five basic business entities:

Suppliers

Customers

Employees

Invoices/payments

Products and services

Organizing a Business: Basic Business Functions




7/512.7 2007 by Prentice Hall

Logically related set of tasks that define how specific

business tasks are performed

The tasks each employee performs, in what order, and on whatschedule

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





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





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 TPSand 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





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





Figure 2-3Business

organizations are

hierarchies

consisting of three

principal levels:senior management,

middle management,

and operational

management.

Information systems

serve each of theselevels. Scientists and

knowledge workers

often work with

middle management.

Levels in a Firm





The Business Environment


Global environmentfactors

Technology andscience

Economy

Politics International change

Immediate environment

factors

Customers

Suppliers

Competitors

Regulations

Stockholders




Figure 2-4

To be successful, an

organization must

constantly monitor and

respond toor even

anticipate

developments in its

environment. A firm'senvironment 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





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





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




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, pricingdecisions, sales performance

Operational management and employees:

Locating and contacting prospective customers, process orders,

provide customer service support





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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






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




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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 Operational management

Track flow of funds in firm through transactions (paychecks,

payments, securities reports, receipts, etc.)





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Figure 2-7

An accounts

receivable

system tracks

and stores

important

customer

data, such as

payment

history, creditrating, and

billing history.

An Accounts Receivable System




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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 ofemployees


Track recruitment and placement of employees





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Figure 2-8

This system maintains data on the firms employees to

support the human resources function.

An Employee Record-Keeping System




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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 forGoogles 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: PeopleGoogles New Search for the Best and the Brightest




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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




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Transaction processing systems

Serve operational managers

Principal purpose is to answer routine questions and totrack 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





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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 enabledrilling down into daily or hourly data

Typically not very flexible systems with little analytic

capability





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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.


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Sample MIS Report


Figure 2-10

This report,

showing

summarizedannual sales

data, was

produced by

the MIS in

Figure 2-9.



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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





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Voyage-Estimating Decision Support System



Figure 2-11

This DSSoperates on

a powerful

PC. It is

used daily by

managers

who must

develop bidson shipping

contracts.

E i l f B i I f i S


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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





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E ti l f B i I f ti S t


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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





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Interrelationships Among Systems



Figure 2-13

The various types of

systems in the

organization have

interdependencies.

TPS are major

producers ofinformation that is

required by many

other systems in the

firm, which, in turn,

produce information

for other systems.

These different typesof systems have

been loosely coupled

in most

organizations.



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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



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Enterprise Application Architecture



Figure 2-14

Enterprise

applications

automateprocesses that

span multiple

business

functions and

organizational

levels and may

extend outsidethe organization.

Essentials of Business Information Systems


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Integrate data from key business processes into singlesystem

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





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Enterprise Systems



Figure 2-15Enterprisesystems integrate

the key business

processes of an

entire firm into a

single software

system thatenables

information to

flow seamlessly

throughout the

organization.

These systems

focus primarily oninternal

processes but

may include

transactions with

customers and

vendors.



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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





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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.



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Help manage relationship with customers

Coordinate business processes that deal withcustomers to optimize revenue and customersatisfaction, and increase sales

Combine sales, marketing, and service record datafrom multiple communication channels to provideunified view of customer, eliminate duplicate efforts

E.g., Saab CRM applications to achieve 360 view ofcustomers resulted in greater follow-up rate on salesleads and increased customer satisfaction

Customer Relationship Management Systems





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Illustrated here are

some of the capabilities

of Salesforce.com, a

market-leading provider

of on-demandcustomer relationship

management (CRM)

software. CRM

systems integrate

information from sales,

marketing, and

customer service.



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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 thatit can be leveraged for strategic benefit

Include systems for:

Managing and distributing documents, graphics, otherdigital knowledge objects

Creating knowledge directories of employees withspecialized expertise

Distributing knowledge

Knowledge Management Systems



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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


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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



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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



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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


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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 informationsystems, 48, Senior management, 45

Supply chain management (SCM)

systems, 61, Systems analysts, 68

Transaction processing systems (TPS),

54

Documents

Chapter 2 Ebusiness How Businesses Use Information Systems145