1. Global E-Business: How Businesses Use Information Systems
Lecture 3
Chapter 2
Global E-Business: How Businesses Use Information Systems
Part 1

2. 2.1 Business Processes and Information Systems
Business must deal with many different pieces of Information about Suppliers, Customers, Invoices and Payments, and of course their Products and Services In order to operate.
Information Systems make it possible for Businesses to manage all their information, make better decisions, and improve the execution of their Business Processes.

3. 2.1 Business Processes and Information Systems
Scenario
What would happen if you walked into work one day and the management told the employees they could do anything, anything at all, that they wanted to do that day.

4. 2.1 Business Processes and Information Systems
Scenario
If Jimmy from production decided he wanted to work in sales and marketing he could.
If Sally, who normally works in accounting, wanted to spend the day in shipping she could do that too.
No one would have to follow any rules or any set procedures.
They could accomplish the work any way that they chose.

5. 2.1 Business Processes and Information Systems
Scenario
Sally decides that she doesn’t want to use FedEx to ship out the products that day even though the company has a contract that saves them lots of money. She decides to use an alternate shipping service that will cost the company more and slow down the shipment significantly. She doesn’t see a need to tell accounting about the change.

6. 2.1 Business Processes and Information Systems
Scenario
Jimmy decides not to use the same old packing materials when he’s preparing glass bowls for movement across the country. He determines that it is faster if he just plops the bowls into a box, closes the lid, and sends it down the line. Unfortunately, his co-worker Tim (who doesn’t know anything about Jimmy’s decision) is responsible for answering customer complaints.

7. 2.1 Business Processes and Information Systems
Scenario
Bill in accounting decides that he needs a pay raise to help pay for his upcoming vacation. Normally he would be required to get his supervisor’s approval to change any pay record but since there aren’t any established procedures he can just go ahead and enter the new salary data in the system. While he’s at it, he gives ten of his friends pay raises also. While Bill’s friends may like the idea, the rest of the employees in the company are pretty upset.

8. 2.1 Business Processes and Information Systems
Scenario
As we discussed in Chapter 1, The digital firm must connect each functional area and each management level to one another. Data input to the system in manufacturing must be made available to sales, accounting, and shipping. Managers in the human resources department must have access to appropriate information regardless of its origin. Information integration is the key to the digital firm.

9. 2.1 Business Processes and Information Systems
Scenario
As we go through this chapter, we’ll look at the types of information systems organizations use at each management level.

10. 2.1 Business Processes and Information Systems
Workflows of material, information, knowledge
Sets of activities, steps
May be tied to functional area or be cross-functional
Businesses: Can be seen as collection of business processes
Business processes may be assets or liabilities

11. 2.1 Business Processes and Information Systems
Examples of functional business processes
Manufacturing and production
Assembling the product
Sales and marketing
Identifying customers
Finance and accounting
Creating financial statements
Human resources
Hiring employees

12. 2.1 Business Processes and Information Systems
HOW INFORMATION SYSTEMS ENHANCE BUSINESS PROCESSES
Information technology enhances business processes in two main ways:
Increasing efficiency of existing processes
Automating steps that were manual
Enabling entirely new processes that are capable of transforming the businesses
Change flow of information
Replace sequential steps with parallel steps
Eliminate delays in decision making

13. 2.2 Types of Business Information Systems
- Although there are many different Business Systems, We can categorize all these different Systems from two different perspectives:
Systems from a Functional Perspective Functional Perspective identifies Systems by their major Business Functions
Sales and Marketing Systems
Manufacturing and Production Systems
Finance and Accounting Systems
Human Resources Systems
2. Systems from a Constituency Perspective
Constituent Perspective identifies Systems in terms of major Organizational Groups that they serve.
Transaction Processing Systems
Management Information Systems and Decision-Support Systems
Executive Support Systems

14. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
Sales and marketing systems
Manufacturing and production systems
Finance and accounting systems
Human resources systems

15. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
SALES AND MARKETING SYSTEMS
The Sales and Marketing Function is responsible for selling the organization’s Product and Services.
Marketing Department is concerned with:-
- Identifying potential Customers need and want,
- Planning for developing product and services to meet customer needs
- Advertising and promoting these product and services.
Sales Department is concerned with:
- Contacting customers,
- Selling the products and services, Taking Orders, and following up on sales.
Sales And Marketing Information Systems support all Sales and Marketing Business functions.

16. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
Example of Sales and Marketing Information Systems
SYSTEM DESCRIPTION GROUP SERVED
Order Processing Enter, Process & Track Orders Operational Mgmt, and staff
Pricing Analysis Determine Price for products Middle Management
Sales trend Forecasting Prepare 5 year Sales plan Senior Management

17. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
MANUFACTURING AND PRODUCTION SYSTEMS
Manufacturing and Production Function is responsible for actually producing the firm’s goods and services.
Manufacturing and Production Systems deal with the:
Planning, Development, and Maintenance of Production facilities;
Establishment of Production goals;
Acquisition, Storage, and availability of materials;
Scheduling of equipment, facilities , material , and labour required to fashion finished products.
Manufacturing and Production Information Systems support these activities.

18. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
Examples of Manufacturing and Production Information Systems
SYSTEM DESCRIPTION GROUPS SERVED
Machine Control Controls the actions of machines Operational Management
Production Planning Decides when and how many Middle Management
Products should be produced .
Facilities Location Decides where to locate new Senior Management
Production facilities
Quality Control Identify source of defects
Inventory system will be discussed in details next slide

19. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
OVERVIEW OF AN INVENTORY SYSTEM
Most Manufacturing and Production Systems use some sort of Inventory System.
An Inventory System produces a Report that gives information about number of each item available in inventory, the number to be reorder replenished in each item to support Production activities.
Companies can Estimate the number of items to reorder, or use a formula to calculate the least expensive quantity called ‘Economic Order Quantity’ to reorder. See fig 2-3 p47

20. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
FINANCE AND ACCOUNTING SYSTEMS
The Finance Function is responsible for managing Firm's Financial Assets such as cash , stocks, bonds, and other investments to maximize return on the Financial assets.
Accounting Function is responsible for maintaining and managing the Firm’s Financial Records such as Receipts, Disbursements, Depreciation, and Payroll in order to account for the flow of funds in a firm.
To determine whether a firm is getting the best Return on its investment , the Financial Function must obtain a considerable amount of Information from sources external to the firm (i.e. from the external sources).
Finance And Accounting Information Systems support these activities

21. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
Example of Finance and Accounting Information Systems
SYSTEM DESCRIPTION GROUPS SERVED
Accounts Receivables Tracks money owed the firm Operational Management
Budgeting Prepares short term Budget Middle Management
Profit Planning Plans long term Profits Senior Management

22. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
HUMAN RESOURCES SYSTEMS
The Human Resources Function is responsible for attracting,
developing, and maintaining the firm’s workforce.
Human Resources Information Systems support activities such as:-
- Identifying potential employees,
- Maintaining complete record of existing Employees,
- Creating programs to develop employees’ talents and skills.

23. 2.2 Types of Business Information Systems
SYSTEMS FROM A FUNCTIONAL PRESPECTIVE
Examples of Human Resources Information Systems
SYSTEM DESCRIPTION GROUPS SERVED
Training and Development Tracks employees’ Training skills Operational Mgmt
and Performance appraisals
Compensation Analysis Monitors the range of distribution Middle Management
Wages, Salaries and Benefits
Human Resource Planning Plans the long term labour force Senior Management
needs of the Organization
AN EMPLOYEE RECORD KEEPING SYSTEM
The System maintains basic employee data that can be used to produce a variety of
Reports, such as ‘’List of Newly hired employees’’, Employees Classified by Job Type
and Educational Level’’, ‘’Employee Job Performance Evaluation Report’’ etc…
- Such Systems are typically designed to provide data that can satisfy Government (State) record keeping requirements.

24. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Although Functional Perspective is very useful for understanding how Business Systems serve specific Business Functions, it does not tell us how Systems help Mangers manage the Firm.
The Constituency Perspective examines in terms of the various Levels of Management and Types of Decisions that they support.

25. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Each Management Level has different information needs given their different responsibilities, and each can be seen as major Information Constituents.
Senior Managers need Summary Information that can quickly inform them about the Overall Performance of the Firm, such as Gross Sales Revenue, Sales By Product Group Range, and Overall Profitability.
Middle Managers need more specific information on the results of specific Functional areas and Departments of the Firm, such as contacts by Sales Force, Production Statistics for specific Factories or Product Lines, Employment Levels and Costs, and Sales Revenues for each Month or even each Day.
Operational Managers need Transaction Level Information, such as the number of Parts in Inventory each day or the number of hours logged on say Monday by each Employee.
Knowledge Workers may need access to external Scientific Database or Internal Databases with Organizational Knowledge
Production and Service Workers need access to Customer Records in order to take Order and Answer queries from Customers.

26. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
TRANSACTION PROCESSING SYSTEMS (TPS)
MANAGEMENT INFORMATION SYSTEM (MIS)
DECISION SUPPORT SYSTEMS (DSS)
EXECUTIVE SUPPORT SYSTEMS (ESS)

27. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Transaction processing systems
A Transaction Processing System is a Computerized System that performs and records the daily routine transactions necessary to conduct business Such as Sales Order Entry, Hotel Reservation, Payroll, Student Registration System etc..
The principle purpose of TPS at this level is to answer routine questions and to track the flow of transactions through the Organization. Eg. TPS must make information easily available, current and accurate to answer questions like How many parts are in inventory, What happened to XYZ companies payments?

28. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Transaction processing systems
Managers need TPS to monitor the status of internal Operations and the firm’s relationships with the external environment.
TPS are also major producers of information for the other types of Systems such as MIS, DSS Systems.
TPS are often so central to a business that failure for a few hours can lead to a firm’s demise and perhaps that of other firms linked to it.

29. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Management information systems
Middle Management needs Systems to help with Monitoring , Controlling, Decision making, and Administrative activities.
The term Management Information Systems (MIS) are a specific category of information Systems serving the Middle Management.
MIS provides Middle Managers with reports on the Organization’s current performance.
The information is used to monitor and control the business and predict future performance.

30. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
MIS Summarise and Report on the company’s basic operations using data supplied by Transaction Processing Systems (TPS).
The data from TPS are compressed and usually presented in reports that are produced on a regular schedule. i.e. Weekly, Monthly , Yearly Reports..
Today, many MIS Reports are delivered Online.
Some MIS enable Managers to ‘’Drill Down’’ reports to see daily or hourly data if required.
MIS generally provides answer to routine questions that have been specified in advance and have a predefined procedures for answering them.
MIS generally are not flexible and have little analytical capacity.
Most MIS use simple routines such as Summaries and Comparison, as opposed to sophisticated Mathematical Modules or Statistical techniques.

31. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Decision support systems
Decision Support Systems (DSS) support Non-routine Decision making of Middle Management.
DSS focus on problems that are unique and rather changing, for which the procedure for arriving at a solution may not be predefined in advance
DSS try answer ‘’What-IF’’ type of Questions.
e.g. What would be the impact on Production Schedules if we were to double sales in the month of December.
Although DSS use internal information from Transaction Processing Systems and the Management Information Systems, they often take in information from External Sources, such as Current Stock Prices from Stock Market Databases .

32. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
DSS use a variety of Models to analyze data , they condense large amounts of data into a form in which Decision makers analyze them.
DSS are designed so that Users can work with them directly and thus these Systems explicitly include User-friendly Software.
e.g. Voyage-Estimating System a small but powerful example of DSS.
DSS is also referred to as ‘’ Business Intelligence Systems’’ because they focus on helping Users make better business decisions

33. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Executive support systems
The nature of Senior Managers role involves with strategic issues and long-term trends, both in the firm and in the external environment.
Senior Managers are concerned with questions such as:-
- What will employment levels be in the next five years?
- What are the long term industry cost trends, and where does
our firm fit in?
- How well our competitors performing
- What product should we be making in 5 years?
- What new acquisitions would protect us from cynical business
swings?

34. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Executive Support Systems (ESS) also referred to as Executive Information System (EIS) help senior Managers make Strategic and Long term trend decisions.
ESS address nonroutine decisions that required judgement, evaluation, and insight because there is no agreed-on procedure for arriving at a solution.
ESS provide a generalized computing and communications capacity that can be applied to a changing array of problems.

35. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
ESS are designed to incorporate data from external sources , but they also draw summarized information from internal MIS and DSS. ESS filter, compress, and track critical data, displaying the data of greatest importance to senior managers.
ESS presents graphs and data from many sources through an interface that is easy for senior Managers to use. Often the information is delivered to a PORTAL, which uses a Web interface to present integrated personalized business content.

36. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Relationship of systems to one another
TPS: Major source of data for other systems
ESS: Recipient of data from lower-level systems
Data may be exchanged between systems
In reality, most businesses’ systems only loosely integrated

37. 2.2 Types of Business Information Systems
SYSTEMS FROM A CONSTITUENCY PRESPECTIVE
Interrelationships Among Systems
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 are loosely coupled in most business firms, but increasingly firms are using new technologies to integrate information that resides in many different systems.
Figure 2-10