Chapter 2

Global E-Business
How Businesses
Use
Information
Systems
2.1
 Management Information Systems

Outcomes

• Evaluate the role played by the major types of

systems in a business and their relationship to
each other

• Describe the information systems supporting the

major business functions: sales and marketing,
manufacturing and production, finance and
accounting, and human resources

2.2
 Management Information Systems

Outcomes (continued)

• Analyze the relationship between organizations,

information systems, and business processes

• Explain how enterprise applications promote

business process integration and improve
organizational performance

• Assess the challenges posed by information

systems in the enterprise and management
solutions

2.3
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Types of Information Systems

2.5 Figure 2-1

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Different Kinds of Systems

Three main categories of information systems serve
different organizational levels:

1. Operational-level systems: support operational managers,

keeping track of the elementary activities and
transactions

2. Management-level systems: serve the monitoring,

controlling, decision-making, and administrative activities

3. Strategic-level systems: help senior management tackle

and address strategic issues

2.6
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Major Types of Systems

• Transaction Processing Systems (TPS)

• Management Information Systems (MIS)

• Decision-Support Systems (DSS)

• Executive Support Systems (ESS)

2.7
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

The Four Major Types of Information Systems

2.8 Figure 2-2

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Transaction Processing Systems (TPS)

• Basic business systems that serve the

operational level

• A computerized system that performs and

records the daily routine transactions necessary
to the conduct of the business

2.9
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Typical Applications of TPS

2.11 Figure 2-4

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Management Information Systems (MIS)

Management level

• Inputs: High volume transaction level data

• Processing: Simple models

• Outputs: Summary reports

• Users: Middle managers

Example: Annual budgeting

2.12
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Management Information Systems (MIS) (continued)

2.13 Figure 2-5

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Management Information Systems (MIS) (continued)

A sample MIS report

2.14 Figure 2-6

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Decision-Support Systems (DSS)

Management level

• Inputs: Transaction level data

External data
• Processing: Interactive

• Outputs: Decision analysis

• Users: Professionals, staff

Example: Contract cost analysis

2.15
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Decision-Support Systems (DSS) (Continued)

Voyage-estimating decision-support system

2.16 Figure 2-7

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

EXECUTIVE SUPPORT SYSTEMS (ESS):

• Inputs: Aggregate data

(External & Internal)
• Processing: Interactive

• Outputs: Projections

• Users: Senior managers

Example: 5 year operating plan

2.17
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

EXECUTIVE SUPPORT SYSTEMS (ESS) (Continued)

• Top Level Management

• Designed to the individual senior manager

• Ties CEO to all levels

• Very expensive to keep up

• Extensive support staff

2.19
 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Relationship of Systems to One Another

Interrelationships among systems

2.20 Figure 2-9

 Management Information Systems

MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Relationship of Systems to One Another

In contemporary digital firms, the different types of

systems are closely linked to one another. This is
the ideal. In traditional firms these systems tend to
be isolated from one another, and information does
not flow seamlessly from one end of the organization
to the other. Efficiency and business value tend to
suffer greatly in these traditional firms

2.21
 Management Information Systems
e

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Sales and Marketing Systems

Major functions of systems:

• Sales management, market research, promotion,
pricing, new products

Major application systems:

• Sales order info system, market research system,
pricing system

2.22
 Management Information Systems
 

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Sales and Marketing Systems

SYSTEM DESCRIPTION ORGANIZATIONAL
LEVEL
     

Order Enter, process, and track orders Operational

processing
     

Pricing analysis Determine prices for products and Management

services
     

Sales trend Prepare 5-year sales forecasts Strategic

forecasting

Table 2-2
2.23
 Management Information Systems

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Manufacturing and Production Systems

Major functions of systems:

• Scheduling, purchasing, shipping, receiving,
engineering, operations

Major application systems:

• Materials resource planning systems, purchase
order control systems, engineering systems,
quality control systems

2.24
 Management Information Systems
 

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Manufacturing and Production Systems

SYSTEM DESCRIPTION ORGANIZATIONAL
LEVEL
     

Machine Control the actions of machines and Operational

control equipment
     

Production Decide when and how many products Management

planning should be produced

     

Facilities Decide where to locate new production Strategic

location facilities

2.25
 Management Information Systems

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Financing and Accounting Systems

Major functions of systems:

• Budgeting, general ledger, billing, cost
accounting

Major application systems:

• General ledger, accounts receivable, accounts
payable, budgeting, funds management systems

2.27
 Management Information Systems
 

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Financing & Accounting Systems (Continued)

SYSTEM DESCRIPTION ORGANIZATION-
AL LEVEL
     

Accounts Tracks money owed the firm Operational

receivable
     

Budgeting Prepares short-term budgets Management

     

Profit planning Plans long-term profits Strategic

2.28 Table 2-4

 Management Information Systems

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Human Resource Systems

Major functions of systems:

• Personnel records, benefits, compensation, labor
relations, training

Major application systems:

• Payroll, employee records, benefit systems,
career path systems, personnel training systems

2.29
 Management Information Systems
 

SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Human Resource Systems (Continued)

SYSTEM DESCRIPTION ORGANIZATIONAL
LEVEL
     
Training and Tracks employee training, skills, Operational
development and performance appraisals

     
Compensation Monitors the range and distribution Management
analysis of employee wages, salaries, and
benefits
     
Human resources Plans the long-term labor force Strategic
planning needs of the organization
 

Table 2-5
2.30
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Business Processes and Information Systems

Business processes:
• Manner in which work is organized, coordinated,
and focused to produce a valuable product or
service
• Concrete work flows of material, information, and
knowledge—sets of activities
• Unique ways to coordinate work, information, and
knowledge
• Ways in which management chooses to
coordinate work
2.32
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Business Processes and Information Systems

(Continued)

• Information systems help organizations

achieve great efficiencies by automating parts
of processes

• IS also contributes to completely rethinking

processes.

• Business processes typically span several

different functional areas.

2.33
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Examples of Business Processes

Manufacturing and production:

• Assembling product, checking quality, producing
bills of materials

Sales and marketing:

• Identifying customers, creating customer
awareness, selling

Table 2.6

2.34
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Examples of Business Processes (Continued)

Finance & accounting:

accounting
• Paying creditors, creating financial statements,
managing cash accounts

Human resources:
resources
• Hiring employees, evaluating performance,
enrolling employees in benefits plans
Table 2.6 continued

2.35
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Business Processes and Information Systems

Cross-Functional Business Processes:

• Transcend boundary between sales, marketing,

manufacturing, and research and development

• Group employees from different functional

specialties to a complete piece of work

Example: Order Fulfillment Process

2.36
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

The Order Fulfillment Process

2.37 Figure 2-12

 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Systems for Enterprise-Wide Process Integration

Enterprise applications:
• Designed to support organization-wide process
coordination and integration

2.38
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Systems for Enterprise-Wide Process Integration

(Continued)
Consist of :
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems

2.39
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Enterprise Systems

• Enterprise systems, also known as enterprise

resource planning (ERP) systems, provide a
single information system for organization-wide
coordination and integration of key business
processes.

• Information that was previously fragmented in

different systems can seamlessly flow
throughout the firm so that it can be shared by
business processes in manufacturing,
accounting, human resources, and other areas.
2.40 (Here 02)
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Traditional (historial) “Silo” View of Information

Systems
Within the business:
• There are functions, each having its uses of
information systems

Outside the organization’s boundaries:

• There are customers and vendors

Functions tend to work in isolation

2.42
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Traditional View of Systems

2.43 Figure 2-14

 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Enterprise Systems

2.44 Figure 2-15

 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Benefits of Enterprise Systems

• Help to unify the firm’s structure and

organization: One organization

• Management: Firm wide knowledge-based

management processes

• Technology: Unified platform

• Business: More efficient operations & customer-

driven business processes (Here 01)
2.45
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Challenges of Enterprise Systems

• Difficult to build: Require fundamental changes in

the way the business operates

• Technology: Require complex pieces of software

and large investments of time, money, and
expertise

• Centralized organizational coordination and

decision making: Not the best way for the firms to
operate
2.46
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Supply Chain Management (SCM)

• Close linkage and coordination of activities
involved in buying, making, and moving a
product

• Integrates supplier, manufacturer, distributor,

and customer logistics time

• Reduces time, redundant effort, and inventory

costs

• Network of organizations and business

processes
2.47
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Supply Chain Management (SCM)

• Helps in procurement of materials,
transformation of raw materials into intermediate
and finished products

• Helps in distribution of the finished products to

customers

• Includes reverse logistics - returned items flow in

the reverse direction from the buyer back to the
seller

2.48
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Information from Supply Chain Management

Systems helps firms:

• Decide when and what to produce, store,

and move

• Rapidly communicate orders

• Track the status of orders

• Check inventory availability and monitor

inventory levels
2.50
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Information from Supply Chain Management

Systems helps firms: (Continued)
• Reduce inventory, transportation, and
warehousing costs

• Track shipments

• Plan production based on actual customer

demand

• Rapidly communicate changes in product design

2.51
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Customer Relationship Management (CRM)

• Manages all ways used by firms to deal with

existing and potential new customers

• Business and technology discipline

• Uses information system to coordinate entire

business processes of a firm

2.52
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Customer Relationship Management (CRM)

(Continued)

• Provides end- to- end customer care

• Provides a unified view of customer across the

company

• Consolidates customer data from multiple

sources and provides analytical tools for
answering questions

2.53
 Management Information Systems

INTEGRATING FUNCTIONS AND BUSINESS PROCESSES:

Introduction to Enterprise Applications

Knowledge Management Systems

• Collects relevant knowledge and make it available

wherever and whenever it is needed
• Support business processes and management
decisions
• Also link the firm to external sources of
knowledge
• Support processes for acquiring, storing,
distributing, and applying knowledge
2.55
 Management Information Systems

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND

SOLUTIONS

Management Opportunities:

• There are extraordinary opportunities to use

information systems to achieve business value,
and increase profitability

2.56
 Management Information Systems

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND

SOLUTIONS

Management Challenges:
• Integration and the whole firm view: Given the
different interests and perspectives within a firm,
it is difficult to achieve consensus about the need
for the "whole firm" viewpoint.

• Management and employee training: Training a

large number of employees on many systems in a
large organization involves commensurately
large investments.

2.57
 Management Information Systems

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND

SOLUTIONS

Management Challenges: (Continued)

• Accounting for the cost of systems and

managing demands for systems: Given the large
number of different types of systems in a firm,
and the large number of people involved with
using them, it is a complex task to understand
which systems are truly necessary and
productive with high returns on investment

2.58
 Management Information Systems

MANAGEMENT OPPORTUNITIES, CHALLENGES, AND

SOLUTIONS

Solution Guidelines:

• Inventory the firm’s information systems: Develop

a list of firm-wide information requirements to give
a 360-degree view of the most important
information needs of the firm.

• Employee and management education: Ensure that

you understand how much training is required.

• Account for the costs and benefits: Develop an

accounting system for information services firm-
wide.
2.59
 Chapter 2

Global E-Business,
How Businesses Use
Information
Systems

2.60