fundamentals of information systems fourth edition chapter 5 electronic and mobile commerce and...
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Fundamentals of Information Systems
Fourth Edition
Chapter 5
Electronic and Mobile Commerce and Enterprise Systems
Fundamentals of Information Systems, Fourth Edition 2
Principles and Learning Objectives
• Electronic commerce and mobile commerce are evolving, providing new ways of conducting business that present both opportunities for improvement and potential problems– Describe the current status of various forms of e-
commerce, including B2B, B2C, C2C, and m-commerce
– Identify several e-commerce and m-commerce applications
– Identify several advantages associated with the use of e-commerce and m-commerce
Fundamentals of Information Systems, Fourth Edition 3
Principles and Learning Objectives (continued)
• E-commerce and m-commerce require the careful planning and integration of a number of technology infrastructure components– Identify the key components of technology
infrastructure that must be in place for e-commerce and m-commerce to work
– Discuss the key features of the electronic payment systems needed to support e-commerce
Fundamentals of Information Systems, Fourth Edition 4
Principles and Learning Objectives (continued)
• An organization must have information systems that support the routine, day-to-day activities that occur in the normal course of business and help a company add value to its products and services– Identify the basic activities and business objectives
common to all transaction processing systems– Identify key control and management issues
associated with transaction processing systems
Fundamentals of Information Systems, Fourth Edition 5
Principles and Learning Objectives (continued)
• A company that implements an enterprise resource planning system is creating a highly integrated set of systems, which can lead to many business benefits– Discuss the advantages and disadvantages
associated with the implementation of an enterprise resource planning system
– Identify the challenges multinational corporations must face in planning, building, and operating their TPSs
Fundamentals of Information Systems, Fourth Edition 6
Why Learn About Electronic and Mobile Commerce and Enterprise Systems?
• Most organizations have an Internet presence– Sales/marketing manager involved with e-commerce– Customer service employees help develop Web site– Human resource or public relations manger may
provide Web content for employees and investors
• Must learn about e-commerce and m-commerce
• Many organizations use enterprise systems to perform business processes and to keep records
• Support various business activities: Supply chain management, customer relationship management
Fundamentals of Information Systems, Fourth Edition 7
An Introduction to Electronic Commerce
• Electronic commerce: conducting business activities (e.g., distribution, buying, selling, marketing, and servicing of products or services) electronically over computer networks such as the Internet, extranets, and corporate networks
• Business activities that are strong candidates for conversion to e-commerce– Paper-based– Time-consuming – Inconvenient for customers
Fundamentals of Information Systems, Fourth Edition 8
Business-to-Business (B2B) E-Commerce
• Business-to-business (B2B) e-commerce: subset of e-commerce where all the participants are organizations– Considerably larger and growing more rapidly than
the business-to-consumer market
Fundamentals of Information Systems, Fourth Edition 9
Business-to-Consumer (B2C) E-Commerce
• Business-to-consumer (B2C) e-commerce: customers deal directly with the organization, avoiding any intermediaries
• Elimination of intermediaries:– Squeezes costs and inefficiencies out of supply
chain– Can lead to higher profits for companies and lower
prices for consumers
Fundamentals of Information Systems, Fourth Edition 10
Consumer-to-Consumer (C2C) E-Commerce
• Consumer-to-consumer (C2C) e-commerce: participants are individuals, with one serving as the buyer and the other as the seller– eBay: example of a C2C e-commerce site
Fundamentals of Information Systems, Fourth Edition 11
eGovernment
• eGovernment: use of information and communications technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizen and government
• Forms of eGovernment– Government-to-consumer (G2C)– Government-to-business (G2B)– Government-to-government (G2G)
Fundamentals of Information Systems, Fourth Edition 12
Mobile Commerce
• Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business
Fundamentals of Information Systems, Fourth Edition 13
Mobile Commerce in Perspective
• Market for m-commerce in North America is maturing much later than in Western Europe and Japan– Western European and Japanese consumers are
much more willing to use m-commerce
• Mobile phone gaming in the United States is expected to increase from about $380 million in 2006 to more than $1 billion by 2009
Fundamentals of Information Systems, Fourth Edition 14
Technology Needed for Mobile Commerce
• Handheld devices used for m-commerce have limitations that complicate their use
• Wireless application protocol (WAP): a standard set of specifications for Internet applications that run on handheld, wireless devices
Fundamentals of Information Systems, Fourth Edition 15
Electronic and Mobile CommerceApplications: Retail and Wholesale
• Electronic retailing (e-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model
• Cybermall: a single Web site that offers many products and services at one Internet location
• Manufacturing, repair, and operations (MRO) goods and services
Fundamentals of Information Systems, Fourth Edition 16
Manufacturing
• To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet
• Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run back-office operations
Fundamentals of Information Systems, Fourth Edition 17
Manufacturing (continued)
Figure 5.2: Model of an Electronic Exchange
Fundamentals of Information Systems, Fourth Edition 18
Marketing
• Market segmentation: the identification of specific markets to target them with advertising messages
• Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize the entire relationship with that customer
Fundamentals of Information Systems, Fourth Edition 19
Investment and Finance
• Online stock trading has brought many investors to the Web
• Online banking– Online bill payment facility
• Electronic bill presentment: a method of billing whereby a vendor posts an image of your statement on the Internet and alerts you by e-mail that your bill has arrived
Fundamentals of Information Systems, Fourth Edition 20
Auctions
• eBay: synonymous with online auctions for both private sellers and small companies
• Hundreds of other online auction sites cater to newcomers to online auctions and to unhappy eBay customers
• Most frequent complaints– Increases in fees– Unscrupulous buyers
Fundamentals of Information Systems, Fourth Edition 21
Anywhere, Anytime Applications of Mobile Commerce
• M-commerce devices are ideal for accessing personal information and receiving targeted messages because of having a single user
• Companies can reach individual consumers to establish one-to-one marketing relationships and communicate whenever it is convenient—in short, anytime and anywhere
Fundamentals of Information Systems, Fourth Edition 22
Advantages of Electronic and Mobile Commerce
Table 5.1: Advantages of Electronic and Mobile Commerce
Fundamentals of Information Systems, Fourth Edition 23
Technology Infrastructure Required to Support E-commerce and M-commerce
• Successful implementation of e-business requires:– Significant changes to existing business processes– Substantial investment in IS technology
• Poor Web site performance drives consumers to abandon some e-commerce sites
Fundamentals of Information Systems, Fourth Edition 24
Technology Infrastructure Required to Support E-commerce and M-commerce
(continued)
Figure 5.3: Key Technology Infrastructure Components
Fundamentals of Information Systems, Fourth Edition 25
Hardware
• Storage capacity and computing power required of the Web server depends on:– Software that will run on the server– Volume of e-commerce transactions
• Web site hosting
Fundamentals of Information Systems, Fourth Edition 26
Web Server Software
• Web server software is used to perform fundamental services, including:– Security and identification– Retrieving and sending Web pages– Web site tracking– Web site development– Web page construction
Fundamentals of Information Systems, Fourth Edition 27
Web Server Software (continued)
• E-commerce software must support:– Catalog management– Product configuration– Shopping cart facilities– E-commerce transaction processing– Web traffic data analysis
Fundamentals of Information Systems, Fourth Edition 28
Web Server Software (continued)
Figure 5.4: Electronic Shopping Cart
Fundamentals of Information Systems, Fourth Edition 29
Electronic Payment Systems
• Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site
• Secure Sockets Layer (SSL): a communications protocol used to secure sensitive data during e-commerce
• Electronic cash: an amount of money that is computerized, stored, and used as cash for e-commerce transactions
Fundamentals of Information Systems, Fourth Edition 30
Electronic Payment Systems (continued)
• Credit card
• Charge card
• Debit card
• Smart card
Fundamentals of Information Systems, Fourth Edition 31
An Overview of Enterprise Systems:Transaction Processing Systems and
Enterprise Resource Planning• Enterprise system: a system central to the
organization that ensures information can be shared across all business functions and all levels of management to support the running and managing of a business
• Eliminates the problems of lack of information and inconsistent information caused by multiple transaction processing systems
Fundamentals of Information Systems, Fourth Edition 32
Transaction Processing Systems andEnterprise Resource Planning (continued)
• Enterprise resource planning systems support supply-chain processes
• Transaction processing systems capture and process detailed data necessary to update records about the fundamental business operations of the organization– Include order entry, inventory control, payroll,
accounts payable, accounts receivable, and the general ledger
Fundamentals of Information Systems, Fourth Edition 33
Transaction Processing Systems andEnterprise Resource Planning (continued)
Figure 5.5: TPS, MIS/DSS, and Special Information Systems in Perspective
Fundamentals of Information Systems, Fourth Edition 34
Traditional Transaction Processing Methods and Objectives
• Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch
• Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch
Fundamentals of Information Systems, Fourth Edition 35
Traditional Transaction Processing Methods and Objectives (continued)
Figure 5.6: Batch Versus Online Transaction Processing
Fundamentals of Information Systems, Fourth Edition 36
Transaction Processing Activities
• TPSs– Capture and process data that describes
fundamental business transactions– Update databases– Produce a variety of reports
• Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production
Fundamentals of Information Systems, Fourth Edition 37
Transaction Processing Activities (continued)
Figure 5.8: Data-Processing Activities Common to Transaction Processing Systems
Fundamentals of Information Systems, Fourth Edition 38
Data Collection
• Data collection: capturing and gathering all data necessary to complete the processing of transactions
• Data should be:– Collected at source– Recorded accurately and in a timely fashion
Fundamentals of Information Systems, Fourth Edition 39
Data Editing
• Data editing: the process of checking data for validity and completeness– Example: quantity and cost data must be numeric
and names must be alphabetic; otherwise, the data is not valid
Fundamentals of Information Systems, Fourth Edition 40
Data Correction
• Data correction: the process of reentering data that was not typed or scanned properly– Example: a scanned UPC code must match a code
in a master table of valid UPCs
Fundamentals of Information Systems, Fourth Edition 41
Data Manipulation
• Data manipulation: the process of performing calculations and other data transformations related to business transactions– Includes classifying data, sorting data into
categories, performing calculations, summarizing results, and storing data in the organization’s database for further processing
Fundamentals of Information Systems, Fourth Edition 42
Data Storage
• Data storage: the process of updating one or more databases with new transactions
• After being updated, this data can be further processed and manipulated by other systems and made available for management reporting and decision making
Fundamentals of Information Systems, Fourth Edition 43
Document Production and Reports
• Document production: the process of generating output records and reports– Hard-copy paper reports– Displays on computer screens (soft copy)
Fundamentals of Information Systems, Fourth Edition 44
Control and Management Issues: Disaster Recovery Plan
• Disaster recovery plan (DRP): formal plan describing the actions that must be taken to restore computer operations and services in the event of a disaster
• Necessary for preventing a lengthy disruption in the operation of any of a company’s critical business information systems that directly affect its cash flow
Fundamentals of Information Systems, Fourth Edition 45
Transaction Processing System Audit• Transaction processing system audit: a check
of a firm’s TPS systems to prevent accounting irregularities and/or loss of data privacy
• Attempts to answer four basic questions– Does the system meet the business need for which it
was implemented?– What procedures and controls have been
established?– Are these procedures and controls being used
properly?– Are the information systems and procedures
producing accurate and honest reports?
Fundamentals of Information Systems, Fourth Edition 46
Traditional Transaction ProcessingApplications
Table 5.2: Systems That Support Order Processing, Purchasing, and Accounting Functions
Fundamentals of Information Systems, Fourth Edition 47
Order Processing Systems
• Traditional order processing transaction processing systems include:– Order entry– Sales configuration– Shipment planning– Shipment execution– Inventory control– Accounts receivable
Fundamentals of Information Systems, Fourth Edition 48
Order Processing Systems (continued)
Figure 5.10: Traditional TPS Systems That Support the Order Processing Business Function
Fundamentals of Information Systems, Fourth Edition 49
Purchasing Systems
• Purchasing transaction processing systems include:– Inventory control– Purchase order processing– Receiving– Accounts payable
Fundamentals of Information Systems, Fourth Edition 50
Accounting Systems
• Accounting transaction processing systems include:– Budget– Accounts receivable– Payroll– Asset management– General ledger
Fundamentals of Information Systems, Fourth Edition 51
Enterprise Resource Planning, SupplyChain Management, and Customer
Relationship Management
• Enterprise resource planning (ERP): a set of integrated programs that manage a company’s vital business operations for an entire multisite, global organization
Figure 5.11: Enterprise Resource Planning System
Fundamentals of Information Systems, Fourth Edition 52
An Overview of Enterprise Resource Planning
• ERP systems evolved from materials requirement planning systems (MRP) developed in the 1970s
• 1980s - early 1990s: organizations recognized that their legacy transaction processing systems lacked integration– Result: higher costs and poorer customer service
• Realization of a need for a system to coordinate activities and share valuable information across all the business functions of the firm, i.e., an ERP system
Fundamentals of Information Systems, Fourth Edition 53
Advantages of ERP
• Improved access to data for operational decision making
• Elimination of costly, inflexible legacy systems
• Improvement of work processes
• Upgrade of technology infrastructure
Fundamentals of Information Systems, Fourth Edition 54
Disadvantages of ERP Systems
• Expense and time in implementation
• Difficulty implementing change
• Difficulty integrating with other systems
• Risks in using one vendor
• Risk of implementation failure
Fundamentals of Information Systems, Fourth Edition 55
Production and Supply Chain Management
• ERP systems follow a systematic process for developing a production plan– Sales forecasting– Sales and operations plan– Demand management– Detailed scheduling– Materials requirement planning– Purchasing– Production
Fundamentals of Information Systems, Fourth Edition 56
Customer Relationship Management and Sales Ordering
• Customer relationship management (CRM) system: a system that helps a company manage all aspects of customer encounters, including marketing and advertising, sales, customer service after the sale, and programs to retain loyal customers
• Goals of CRM– Understand and anticipate the needs of current and
potential customers to increase customer retention and loyalty
– Optimize the way products and services are sold
Fundamentals of Information Systems, Fourth Edition 57
Customer Relationship Management and Sales Ordering (continued)
• Sales ordering: set of activities that must be performed to capture a customer sales order
• Essential steps include:– Recording the items to be purchased– Setting the sales price– Recording the order quantity– Determining the total cost of the order including
delivery costs– Confirming the customer’s available credit
Fundamentals of Information Systems, Fourth Edition 58
Financial and Managerial Accounting
• General ledger: main accounting record of a business– Assets– Liabilities– Revenue– Expenses– Equity
Fundamentals of Information Systems, Fourth Edition 59
Financial and Managerial Accounting (continued)
• In an ERP system, input to the general ledger occurs simultaneously with the input of a business transaction
• Financial accounting: capturing and recording all transactions that affect a company’s financial state and using these documented transactions to prepare financial statements to external decision makers, such as stockholders, suppliers, banks, and government agencies
Fundamentals of Information Systems, Fourth Edition 60
Financial and Managerial Accounting (continued)
• Managerial accounting: use of historical and estimated data to provide information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies
Fundamentals of Information Systems, Fourth Edition 61
Hosted Software Model for Enterprise Software
• Target market: small-to-medium businesses
• Offered by vendors such as NetSuite, Salesforce.Com Inc., Everest Software, and SAP
• Appealing to small businesses because they:– Can experiment with powerful software capabilities
without major financial investment– Do not need to employ a full-time IT person to
maintain key business applications– Can expect additional savings from reduced
hardware costs
Fundamentals of Information Systems, Fourth Edition 62
International Issues Associated withEnterprise Systems
• Challenges that must be met by an enterprise system of a multinational company include:– Different languages and cultures– Disparities in information system infrastructure– Varying laws and customs rules– Multiple currencies
Fundamentals of Information Systems, Fourth Edition 63
Summary
• In business-to-business (B2B) e-commerce, the participants are organizations
• In business-to-consumer (B2C) e-commerce, customers deal directly with the organization
• In consumer-to-consumer (C2C) e-commerce, participants are individuals, with one serving as the buyer and the other as the seller
• Mobile commerce (m-commerce) uses wireless devices to place orders and conduct business
Fundamentals of Information Systems, Fourth Edition 64
Summary (continued)
• Transaction processing systems (TPSs): process the detailed data necessary to update records about the fundamental business operations
• Transaction processing cycle: data collection, data editing, data correction, data manipulation, data storage, and document production
• Order processing TPSs: order entry, sales configuration, shipment planning, shipment execution, inventory control, and accounts receivable
Fundamentals of Information Systems, Fourth Edition 65
Summary (continued)
• Purchasing TPSs: inventory control, purchase order processing, receiving, and accounts payable
• Accounting TPSs: budget, accounts receivable, payroll, asset management, and general ledger
• Primary benefits of implementing ERP: improved access to data for operational decision making, elimination of inefficient or outdated systems, improvement of work processes, and technology standardization