1. 2.1 © 2007 by Prentice Hall 2 Chapter E-Business: How Businesses Use Information Systems

2. 2.2 © 2007 by Prentice Hall STUDENT LEARNING OBJECTIVES Essentials of Business Information Systems Chapter 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?

3. 2.3 © 2007 by Prentice Hall How do enterprise applications, collaboration and communication systems, and intranets improve organizational performance? What is the role of the information system’s function in a business? STUDENT LEARNING OBJECTIVES (Continued) Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

4. 2.4 © 2007 by Prentice Hall Information Systems Join the Tupperware Party Problem: Changing business model caused unnecessary difficulty for Tupperware sales consultants. Solutions: Implement Web-based order management system that simplifies order entry and other tasks. Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

5. 2.5 © 2007 by Prentice Hall Information Systems Join the Tupperware Party 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. Illustrates the importance of automating business processes to reduce workloads and increase productivity. Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

6. 2.6 © 2007 by Prentice Hall Information Systems Join the Tupperware Party Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

7. 2.7 © 2007 by Prentice Hall 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 Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Business: Formal organization that makes products or provides a service in order to make a profit

8. 2.8 © 2007 by Prentice Hall 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

9. 2.9 © 2007 by Prentice Hall Components of a Business Five basic business entities: Suppliers Customers Employees Invoices/payments Products and services Organizing a Business: Basic Business Functions Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

10. 2.10 © 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 what schedule E.g. Steps in hiring an employee Some processes tied to functional area Sales and marketing: Identifying customers rSome processes are cross-functional Fulfilling customer order Business Processes Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

11. 2.11 © 2007 by Prentice Hall 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

12. 2.12 © 2007 by Prentice Hall Read the Interactive Session and then discuss the following questions: What are the basic principles of Toyota’s production system? To which areas of the organization do these principles apply? How is TPS interconnected with the culture at Toyota? Are TPS and Toyota’s 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

13. 2.13 © 2007 by Prentice Hall 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

14. 2.14 © 2007 by Prentice Hall Figure 2-3 Business organizations are hierarchies consisting of three principal levels: senior management, middle management, and operational management. Information systems serve each of these levels. Scientists and knowledge workers often work with middle management. Levels in a Firm Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

15. 2.15 © 2007 by Prentice Hall The Business Environment Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Global environment factorsGlobal environment factors Technology and scienceTechnology and science EconomyEconomy PoliticsPolitics International changeInternational change Immediate environment factorsImmediate environment factors CustomersCustomers SuppliersSuppliers CompetitorsCompetitors RegulationsRegulations StockholdersStockholders

16. 2.16 © 2007 by Prentice Hall Figure 2-4 To be successful, an organization must constantly monitor and respond to—or even anticipate—developments in 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 Business Environment Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

17. 2.17 © 2007 by Prentice Hall 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

18. 2.18 © 2007 by Prentice Hall 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 Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

19. 2.19 © 2007 by Prentice Hall Sales and marketing systems Support activities for selling and marketing firm’s 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, pricing decisions, sales performance Operational management and employees: Locating and contacting prospective customers, process orders, provide customer service support Systems from a Functional Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

20. 2.20 © 2007 by Prentice Hall Figure 2-5 This 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. Example of a Sales Information System Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

21. 2.21 © 2007 by Prentice Hall Manufacturing and production systems Support activities for producing firm’s 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 Operational management Manage status of production tasks Systems from a Functional Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

22. 2.22 © 2007 by Prentice Hall 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 Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

23. 2.23 © 2007 by Prentice Hall Finance and accounting systems Support activities for managing financial assets, firm’s capitalization, and financial records Senior management: Establish long-term investment goals and provide long- range forecasts of firm’s financial performance Middle management: Oversee and control firm’s financial resources Operational management Track flow of funds in firm through transactions (paychecks, payments, securities reports, receipts, etc.) Systems from a Functional Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

24. 2.24 © 2007 by Prentice Hall Figure 2-7 An accounts receivable system tracks and stores important customer data, such as payment history, credit rating, and billing history. An Accounts Receivable System Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

25. 2.25 © 2007 by Prentice Hall Human resources systems Support activities for attracting, developing, and maintaining firm’s 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 of employees Operational management Track recruitment and placement of employees Systems from a Functional Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

26. 2.26 © 2007 by Prentice Hall Figure 2-8 This system maintains data on the firm’s employees to support the human resources function. An Employee Record-Keeping System Components of a Business Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

27. 2.27 © 2007 by Prentice Hall Read the Interactive Session and then discuss the following questions:Read the Interactive Session and then discuss the following questions: Did Google’s traditional hiring practices create business problems? Explain your answer.Did Google’s traditional hiring practices create business problems? Explain your answer. Is Google’s quantitative approach to hiring a good solution to its employee recruiting problems? Why or why not?Is Google’s quantitative approach to hiring a good solution to its 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? What kind of system or systems described in this chapter are discussed in this case? What are the inputs, processes, and outputs?What kind of system or systems described in this chapter are discussed in this case? What are the inputs, processes, and outputs? Interactive Session: People Google’s New Search for the Best and the Brightest Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Types of Business Information Systems

28. 2.28 © 2007 by Prentice Hall Create a list of ten questions that you think might be appropriate for Google’s job applicant survey. Justify each question with a short explanation of why the answer would be useful.Create a list of ten questions that you think might be appropriate for Google’s 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?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: People Google’s New Search for the Best and the Brightest Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Types of Business Information Systems

29. 2.29 © 2007 by Prentice Hall 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 Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

30. 2.30 © 2007 by Prentice Hall Transaction processing systems Serve operational managers Principal purpose is to answer routine questions and to track the flow of transactions through the organization E.g. Inventory questions, granting credit to customer Monitor status of internal operations and firm’s relationship with external environment Major producers of information for other systems Highly central to business operations and functioning Systems from a Constituency Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

31. 2.31 © 2007 by Prentice Hall Management information systems Provide middle managers with reports on firm’s 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 enable drilling down into daily or hourly data Typically not very flexible systems with little analytic capability Systems from a Constituency Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

32. 2.32 © 2007 by Prentice Hall How MIS Obtain Data from Organization’s TPS Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems 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.

33. 2.33 © 2007 by Prentice Hall Sample MIS Report Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-10 This report, showing summarized annual sales data, was produced by the MIS in Figure 2-9.

34. 2.34 © 2007 by Prentice Hall 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 Systems from a Constituency Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

35. 2.35 © 2007 by Prentice Hall Voyage-Estimating Decision Support System Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-11 This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts.

36. 2.36 © 2007 by Prentice Hall 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 Systems from a Constituency Perspective Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

37. 2.37 © 2007 by Prentice Hall Model of an Executive Support System Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-12 This system pools data from diverse internal and external sources and makes them available to executives in an easy-to-use form.

38. 2.38 © 2007 by Prentice Hall 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 Types of Business Information Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems

39. 2.39 © 2007 by Prentice Hall Interrelationships Among Systems Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-13 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 have been loosely coupled in most organizations.

40. 2.40 © 2007 by Prentice Hall Enterprise Applications Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise 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

41. 2.41 © 2007 by Prentice Hall Enterprise Application Architecture Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-14 Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization.

42. 2.42 © 2007 by Prentice Hall Integrate data from key business processes into single system 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 Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise

43. 2.43 © 2007 by Prentice Hall Enterprise Systems Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-15 Enterprise 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 focus primarily on internal processes but may include transactions with customers and vendors.

44. 2.44 © 2007 by Prentice Hall 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 Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise

45. 2.45 © 2007 by Prentice Hall Example of a Supply Chain Management System Systems That Span the Enterprise Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Figure 2-16 Customer orders, shipping notifications, optimized shipping plans, and other supply chain information flow among Haworth’s Warehouse Management System (WMS), Transportation Management System (TMS), and its back-end corporate systems.

46. 2.46 © 2007 by Prentice Hall Help manage relationship with customers Coordinate business processes that deal with customers to optimize revenue and customer satisfaction, and increase sales Combine sales, marketing, and service record data from multiple communication channels to provide unified view of customer, eliminate duplicate efforts E.g. Saab CRM applications to achieve 360º view of customers resulted in greater follow-up rate on sales leads and increased customer satisfaction Customer Relationship Management Systems Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise

47. 2.47 © 2007 by Prentice Hall Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise Illustrated here are some of the capabilities of Salesforce.com, a market-leading provider of on-demand customer relationship management (CRM) software. CRM systems integrate information from sales, marketing, and customer service.

48. 2.48 © 2007 by Prentice Hall Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise 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 that it can be leveraged for strategic benefit Include systems for: Managing and distributing documents, graphics, other digital knowledge objects Creating knowledge directories of employees with specialized expertise Distributing knowledge Knowledge Management Systems

49. 2.49 © 2007 by Prentice Hall Intranets and Extranets Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise 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

50. 2.50 © 2007 by Prentice Hall Collaboration and Communication Systems: “Interaction” Jobs in a Global Economy Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise Interaction jobs: Primary value-adding activities are talking, e- mailing, presenting, persuading 41% of U.S. labor force 70% of new jobs since 1998 Involves knowledge and problem-solving that can’t be put into information system

51. 2.51 © 2007 by Prentice Hall Collaboration and Communication Systems: “Interaction” Jobs in a Global Economy Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise Enterprise-wide information system solutions for interaction Internet-based collaboration environments E-mail and instant messaging (IM) Cell phones and wireless handhelds Social networking Wikis Virtual worlds

52. 2.52 © 2007 by Prentice Hall E-Business, E-Commerce, and E-Government Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems Systems That Span the Enterprise 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

53. 2.53 © 2007 by Prentice Hall The Information Systems Department Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems The Information System’s 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

54. 2.54 © 2007 by Prentice Hall Information Systems Services Information Systems Services Essentials of Business Information Systems Chapter 2 E-Business: How Businesses Use Information Systems The Information System’s Function in Business 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