1. Fundamentals of Information Systems Fourth Edition
Chapter 5
Electronic and Mobile Commerce and Enterprise Systems

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 Commerce Applications: 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 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. Figure 5.3: Key Technology Infrastructure Components
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 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 and Enterprise 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 and Enterprise 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 Processing Applications
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. Figure 5.11: Enterprise Resource Planning System
Enterprise Resource Planning, Supply Chain 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 with Enterprise 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
Fundamentals of Information Systems, Fourth Edition