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2Chapter

EE--Business: How Business: How EE--Business: How Business: How Businesses Use Businesses Use

Information SystemsInformation SystemsBusinesses Use Businesses Use

Information SystemsInformation SystemsInformation SystemsInformation SystemsInformation SystemsInformation Systems

2.1 © 2007 by Prentice Hall

Essentials of Business Information SystemsEssentials of Business Information SystemsChapter 2 EChapter 2 E--Business: How Businesses Use Information SystemsBusiness: How Businesses Use Information Systems

STUDENT LEARNING OBJECTIVES

• What are the major features of a business that are important for understanding the role of information systems?information systems?

• How do information systems support the major business functions: sales and marketing,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?


systems related?


STUDENT LEARNING OBJECTIVES (Continued)

• How do enterprise applications, collaboration and communication systems, and intranets improve

i ti l f ?organizational performance?

• What is the role of the information system’s• What is the role of the information system s function in a business?



Information Systems Join the Tupperware Party

• Problem: Changing business model caused unnecessarycaused unnecessary difficulty for Tupperware sales

lt tconsultants.• Solutions: Implement

Web-based order management systemthat simplifies order entry and other


entry and other tasks.



• Oracle Collaboration Suite and Oracle Portal also streamlines communication and support.

• Demonstrates IT’s role in centralizing data, improving production processes, and driving growth and profitability.profitability.

• Illustrates the importance of automating business processes to reduce workloads and increaseprocesses to reduce workloads and increase productivity.



Components of a Business

Business: Formal organization that makes products orBusiness: Formal organization that makes products or provides a service in order to make a profit

• Four basic business functions

Organizing a Business: Basic Business Functions Organizing a Business: Basic Business Functions

• Manufacturing and production• Sales and marketingg• Finance and accounting• Human resources


u a esou ces


The Four Major Functions of a BusinessThe Four Major Functions of a Business


e ou ajo u ct o s o a us esse ou ajo u ct o s o a us ess

Figure 2-1Every 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


gtransactions; and perform basic human resources tasks, such as hiring and retaining employees.



Organizing a Business: Basic Business FunctionsOrganizing a Business: Basic Business Functions

• Five basic business entities:

Organizing a Business: Basic Business Functions Organizing a Business: Basic Business Functions

• Suppliers

• Customers

• Employees

• Invoices/payments• Invoices/payments

• Products and services



Business ProcessesBusiness Processes


• Logically related set of tasks that define how specific business tasks are performed

us ess ocessesus ess ocesses

• The tasks each employee performs, in what order, and on what schedule

E St i hi i l• E.g. Steps in hiring an employee

• Some processes tied to functional areaS l d k ti Id tif i t• Sales and marketing: Identifying customers

• Some processes arre cross-functionalF lfilli t d


• Fulfilling customer order


The Order Fulfillment ProcessThe Order Fulfillment Process


e O de u e t ocesse O de u e t ocess

Fulfilling a customer order involves a complex


Figure 2-2set of steps that requires the close coordination of the sales, accounting, and manufacturing functions.


Interactive Session: OrganizationsInteractive Session: Organizations


• Read the Interactive Session and then discuss the

ggToyota As Number OneToyota As Number One

• Read the Interactive Session and then discuss the following questions:• What are the basic principles of Toyota’s production p p y p

system? To which areas of the organization do these principles apply?

• How is TPS interconnected with the culture at Toyota? Are yTPS and Toyota’s culture interdependent? Could one exist without the other?

• Describe how information systems support each of the


ybusiness processes described in this case.


Managing a Business and Firm HierarchiesManaging a Business and Firm Hierarchies


Managing a Business and Firm HierarchiesManaging a Business and Firm Hierarchies

• Firms coordinate work of employees by developing hierarchy in which authority is concentrated at topy y p– Senior management

– Middle management

– Operational management

– Knowledge workers

– Data workers

– Production or service workers

• Each group has different needs for information


• Each group has different needs for information


Levels in a FirmLevels in a Firm


e e s ae e s a

Figure 2-3Business organizations are hierarchies consisting of three gprincipal levels: senior management, middle management, and operational management. Information systems serve each of these


levels. Scientists and knowledge workers often work with middle management.


The Business EnvironmentThe Business Environment


•• Global environment Global environment factorsfactors

•• Immediate Immediate environment factorsenvironment factorsfactorsfactors

•• Technology and Technology and sciencescience

environment factorsenvironment factors•• CustomersCustomers

S liS li•• EconomyEconomy•• PoliticsPolitics

•• SuppliersSuppliers•• Competitors Competitors

•• International International changechange

•• RegulationsRegulations•• StockholdersStockholders



The Business EnvironmentThe Business Environment


e us ess o e te us ess o e t

Figure 2-4To be successful, an organization must constantly monitor and respond to—or even anticipate—developments p pin 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 Role of Information Systems in a BusinessThe Role of Information Systems in a Business


• Firms invest in information systems in order to:A hi ti l ll

yy

• Achieve operational excellence• Develop new products and services• Attain customer intimacy and service• Improve decision making• Promote competitive advantage• Ensure survival



Systems from a Functional PerspectiveSystems from a Functional Perspective

Types of Business Information Systems

• Sales and marketing systems

y py p

g y

• Manufacturing and production systems

• Finance and accounting systems• Finance and accounting systems

• Human resources systems





• Sales and marketing systems• Support activities for selling and marketing firm’s products or

iservices• 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


Example of a Sales Information SystemExample of a Sales Information System


a p e o a Sa es o at o Systea p e o a Sa es o at o Syste

Figure 2-5This 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.




• Manufacturing and production systems• Support activities for producing firm’s products or

y py p

Support activities for producing firm s products or services

• Senior management: • Help plan long-term manufacturing goals such as• Help plan long-term manufacturing goals, such as

technology investments and locating new plants• Middle management:

• Analyze and monitor manufacturing and production costs• Analyze and monitor manufacturing and production costs and resources

• Operational management M t t f d ti t k


• Manage status of production tasks


Overview of an Inventory SystemOverview of an Inventory System


O e e o a e to y SysteO e e o a e to y Syste


Figure 2-6This system provides information about the number of items available in inventory to support manufacturing and production activities.




• Finance and accounting systems• Support activities for managing financial assets, firm’s

y py p

Support activities for managing financial assets, firm s capitalization, and financial records

• Senior management: • Establish long-term investment goals and provide long-• Establish long-term investment goals and provide long-

range forecasts of firm’s financial performance• Middle management:

• Oversee and control firm’s financial resources• Oversee and control firm s financial resources• Operational management

• Track flow of funds in firm through transactions (paychecks, t iti t i t t )


payments, securities reports, receipts, etc.)


An Accounts Receivable SystemAn Accounts Receivable System


ccou ts ece ab e Systeccou ts ece ab e Syste

Figure 2-7An accounts receivable system tracks and stores


yimportant customer data, such as payment history, credit rating, and billing history.




• Human resources systems• Support activities for attracting, developing, and

y py p

Support activities for attracting, developing, and maintaining firm’s workforce

• Senior management: • Identify manpower requirements (skill education level types• Identify manpower requirements (skill, education level, types

and numbers of positions, etc.) for meeting long-term business plans

• Middle management:Middle management: • Monitor and analyze recruitment, allocation, and

compensation of employees• Operational management


Operational management • Track recruitment and placement of employees


An Employee RecordAn Employee Record--Keeping SystemKeeping System


p oyee eco dp oyee eco d eep g Systeeep g Syste


Figure 2-8This system maintains data on the firm’s employees to support the human resources function.


Interactive Session: PeopleInteractive Session: PeopleG l ’ N S h f th B t d th B i ht tG l ’ N S h f th B t d th B i ht t


•• Read the Interactive Session and then discuss the Read the Interactive Session and then discuss the following questions:following questions:

Google’s New Search for the Best and the BrightestGoogle’s New Search for the Best and the Brightest

following questions:following questions:•• Did Google’s traditional hiring practices create business problems? Did Google’s traditional hiring practices create business problems?

Explain your answer.Explain your answer.

•• Is Google’s quantitative approach to hiring a good solution to its Is Google’s quantitative approach to hiring a good solution to its employee recruiting problems? Why or why not?employee recruiting problems? Why or why not?

•• What role does culture play in Google’s hiring preferences?What role does culture play in Google’s hiring preferences?p y g g pp y g g p

•• What kind of system or systems described in this chapter are What kind of system or systems described in this chapter are discussed in this case? What are the inputs, processes, and outputs?discussed in this case? What are the inputs, processes, and outputs?



Interactive Session: PeopleInteractive Session: PeopleG l ’ N S h f th B t d th B i ht tG l ’ N S h f th B t d th B i ht t


Google’s New Search for the Best and the BrightestGoogle’s New Search for the Best and the Brightest

•• Create a list of ten questions that you think might be appropriate for Create a list of ten questions that you think might be appropriate for Google’s job applicant survey. Justify each question with a short Google’s job applicant survey. Justify each question with a short explanation of why the answer would be useful.explanation of why the answer would be useful.

If l i f j b G l h ld bIf l i f j b G l h ld b•• If you were applying for a job at Google, how would you want to be If you were applying for a job at Google, how would you want to be evaluated? Which evaluation techniques do you think favor your evaluated? Which evaluation techniques do you think favor your strengths? Which techniques might expose your weaknesses?strengths? Which techniques might expose your weaknesses?



Systems from a Constituency PerspectiveSystems from a Constituency Perspective


• Transaction processing systems• Keep track of basic activities and transactions of organization

y y py y p

(e.g. sales, receipts, cash deposits, payroll, credit decisions, flow of materials in a factory))

• Management information systems and decision-g ysupport systems• Help with monitoring, controlling, decision-making, and

administrative activitiesadministrative activities

• Executive support systems::• Help address strategic issues and long-term trends, both in


firm and in external environment




• Transaction processing systems• Serve operational managers

y y py y p

Serve operational managers

• Principal purpose is to answer routine questions and to track the flow of transactions through the organizationorganization• E.g. Inventory questions, granting credit to customer

• Monitor status of internal operations and firm’s o to status o te a ope at o s a d srelationship with external environment

• Major producers of information for other systems


• Highly central to business operations and functioning




• Management information systems• Provide middle managers with reports on firm’s

y y py y p

Provide middle managers with reports on firm s performance

• To monitor firm and help predict future performanceperformance

• 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


• Typically not very flexible systems with little analytic capability


How MIS Obtain Data from Organization’s TPSHow MIS Obtain Data from Organization’s TPS

Systems That Span the Enterprise

How MIS Obtain Data from Organization s TPSHow MIS Obtain Data from Organization s TPS

Figure 2-9In the system illustrated yby 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.


Sample MIS ReportSample MIS Report


Sample MIS ReportSample MIS Report

Figure 2-10This report, showing


summarized annual sales data, was produced by the MIS in Figure 2-9.




• Decision support systems (DSS)• Support non-routine decision making for middle

y y py y p

Support non routine decision making for middle management• E.g. What would impact on production schedules be if

sales doubled in December?sales doubled in December?

• Use information from TPS, MIS, and external sources

• Use models to analyze datay• E.g. voyage estimating system of metals company that

calculates financial and technical voyage details

F t ti l i i f ti f l


• Focus on extracting, analyzing information from large amounts of data


VoyageVoyage--Estimating Decision Support SystemEstimating Decision Support System


VoyageVoyage Estimating Decision Support SystemEstimating Decision Support System

Figure 2-11This DSS operates on a


ppowerful PC. It is used daily by managers who must develop bids on shipping contracts.


Systems from a Constituency PerspectiveSystems from a Constituency PerspectiveTypes of Business Information Systems

• 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 problemsapp ed to c a g g a ay o p ob e s

• Draw summarized information from MIS, DSS and data from external events


• Typically use portal with Web interface to present content


Model of an Executive Support SystemModel of an Executive Support System


Model of an Executive Support SystemModel of an Executive Support System

Figure 2-12This system pools data from


y pdiverse internal and external sources and makes them available to executives in an easy-to-use form.


Relationship of Systems to One AnotherRelationship of Systems to One Another


• TPS: Major source of data for other systems

• ESS: Primarily a recipient of data from lower

p yp y

• ESS: Primarily a recipient of data from lower-level systems

• Other systems may exchange data as well• 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


Interrelationships Among SystemsInterrelationships Among Systems


Interrelationships Among SystemsInterrelationships Among Systems

Figure 2-13The 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.


Enterprise ApplicationsEnterprise Applications


Enterprise ApplicationsEnterprise Applications

• Enterprise applications are systems that span p pp y pfunctional areas and automate processes for multiple business functions and organizational areas; they include:areas; they include:• Enterprise systems

• Supply chain management systems• Supply chain management systems

• Customer relationship management systems• Knowledge management systems



Enterprise Application ArchitectureEnterprise Application Architecture


Enterprise Application ArchitectureEnterprise Application Architecture

Figure 2-14Enterprise applications automate processes that span


p pmultiple business functions and organizational levels and may extend outside the organization.


Enterprise SystemsEnterprise Systems


• Integrate data from key business processes into single system

Enterprise Systems Enterprise Systems

• Speed communication of information throughout firm

f• Enable greater flexibility in responding to customer requests, greater accuracy in order fulfillment

• Enable managers of large firms to assemble overallEnable managers of large firms to assemble overall view of operations

• Alcoa used ERP to eliminate redundancies and i ffi i i i it di t t


inefficiencies in its disparate systems





Figure 2-15Figure 2 15Enterprise 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


g yfocus primarily on internal processes but may include transactions with customers and vendors.


Supply Chain Management SystemsSupply Chain Management Systems


• Manage relationships with suppliers, purchasing firms distributors and logistics companies

Supply Chain Management SystemsSupply Chain Management Systems

firms, distributors, and logistics companies• Manage shared information about orders,

production, inventory levels, etc.p , y ,• Goal is to move correct amount of product from source to

point of consumption as quickly as possible and at lowest costlowest cost

• Type of interorganizational system: • Automating flow of information across organizational


Automating flow of information across organizational boundaries


Example of a Supply Chain Management SystemExample of a Supply Chain Management System


Example of a Supply Chain Management SystemExample of a Supply Chain Management System

Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworth’s


Figure 2-16

, pp g , p pp g p , pp y gWarehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems.


Customer Relationship Management SystemsCustomer Relationship Management Systems


• Help manage relationship with customers• Coordinate business processes that deal with

Customer Relationship Management SystemsCustomer Relationship Management Systems

pcustomers to optimize revenue and customer satisfaction, and increase sales

• Combine sales, marketing, and service record dataCombine sales, marketing, and service record data from multiple communication channels to provide unified view of customer, eliminate duplicate effortsefforts

• E.g. Saab CRM applications to achieve 360º view of customers resulted in greater follow-up rate on

l l d d i d t ti f ti


sales leads and increased customer satisfaction



Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on demandof on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer servicecustomer service.




Knowledge Management SystemsKnowledge Management Systems• Intangible knowledge assets

• Knowledge about producing and delivering products

Knowledge Management SystemsKnowledge Management Systems

• Source of value and advantage for firms• Knowledge management systems:

• Help capture, storage, distribute, and apply knowledge so p p , g , , pp y gthat it can be leveraged for strategic benefit

• Include systems for:• Managing and distributing documents, graphics, g g g , g p ,

other digital knowledge objects• Creating knowledge directories of employees with

specialized expertise


• Distributing knowledge


Intranets and ExtranetsIntranets and Extranets


Intranets and ExtranetsIntranets and Extranets

• Technology platforms that increase integration and expedite the flow of informationand expedite the flow of information• Intranets:

• Internal networks based on Internet standards• Internal networks based on Internet standards

• Typically utilize a portal

• Extranets:Extranets: • Intranets extended for authorized use outside the

company for partners, customers


• Facilitate collaboration


Collaboration and Communication Systems:Collaboration and Communication Systems:


Collaboration and Communication Systems: Collaboration and Communication Systems: “Interaction” Jobs in a Global Economy“Interaction” Jobs in a Global Economy

• Interaction jobs:j

• Primary value-adding activities are talking, e-mailing, presenting, persuading

• 41% of U.S. labor force

• 70% of new jobs since 199870% of new jobs since 1998

• Involves knowledge and problem-solving that can’t be put into information system


p y


Collaboration and Communication Systems:Collaboration and Communication Systems:


Collaboration and Communication Systems: Collaboration and Communication Systems: “Interaction” Jobs in a Global Economy“Interaction” Jobs in a Global Economy

• Enterprise-wide information system solutions for p yinteraction• Internet-based collaboration environments

• E-mail and instant messaging (IM)

• Cell phones and wireless handhelds

• Social networking

• Wikis

Vi l ld


• Virtual worlds


EE--Business, EBusiness, E--Commerce, and ECommerce, and E--GovernmentGovernment


EE Business, EBusiness, E Commerce, and ECommerce, and E GovernmentGovernment

• E-businessU f di it l t h l d I t t t d i j• Use of digital technology and Internet to drive major business processes

• E-commerceE commerce• Subset of e-business

• Buying and selling goods and services through Internety g g g g

• E-government:• Using Internet technology to deliver information and


g gyservices to citizens, employees, and businesses


The Information Systems DepartmentThe Information Systems Department

The Information System’s Function in Business

The Information Systems DepartmentThe Information Systems Department

• Programmers• Systems analystsSystems analysts

• Principle liaisons to rest of firm• Information systems managers

• Leaders of teams of programmers and analysts project• Leaders of teams of programmers and analysts, project managers, physical facility managers, telecommunications managers, database specialists, managers of computer operations and data entry staffa age s o co pute ope at o s a d data e t y sta

• Senior managers: CIO, CSO, CKO• End users• External specialists


• External specialists


Information Systems ServicesInformation Systems Services

The Information System’s Function in Business

Information Systems ServicesInformation Systems Services

• Services provided by the information systems department include:p• Computing and telecommunications services• Data management services• Application software services• Physical facilities management services• IT management services• IT management services• IT standards services• IT educational services


• IT research and development services

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