Fundamentals of Information Systems Fourth Edition

1
Fundamentals of Information SystemsFourth 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

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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

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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

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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

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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

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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

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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

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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

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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

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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)

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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

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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

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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

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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

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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

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Manufacturing (continued)
Figure 5.2 Model of an Electronic Exchange
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Marketing

• Market segmentation the identification of
  specific markets to target them with advertising
  messages
• Technology-enabled relationship management use
  of detailed information about a customers
  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

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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

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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

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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 convenientin short,
  anytime and anywhere

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Advantages of Electronic and Mobile Commerce
Table 5.1 Advantages of Electronic and Mobile
Commerce
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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

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Technology Infrastructure Required to Support
E-commerce and M-commerce (continued)
Figure 5.3 Key Technology Infrastructure
Components
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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

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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

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Web Server Software (continued)

• E-commerce software must support
• Catalog management
• Product configuration
• Shopping cart facilities
• E-commerce transaction processing
• Web traffic data analysis

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Web Server Software (continued)
Figure 5.4 Electronic Shopping Cart
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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

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Electronic Payment Systems (continued)

• Credit card
• Charge card
• Debit card
• Smart card

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An Overview of Enterprise SystemsTransaction
Processing Systems andEnterprise 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

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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

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Transaction Processing Systems andEnterprise
Resource Planning (continued)
Figure 5.5 TPS, MIS/DSS, and Special Information
Systems in Perspective
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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

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Traditional Transaction Processing Methods and
Objectives (continued)
Figure 5.6 Batch Versus Online Transaction
Processing
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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

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Transaction Processing Activities (continued)
Figure 5.8 Data-Processing Activities Common to
Transaction Processing Systems
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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

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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

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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

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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 organizations
  database for further processing

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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

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Document Production and Reports

• Document production the process of generating
  output records and reports
• Hard-copy paper reports
• Displays on computer screens (soft copy)

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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 companys critical
  business information systems that directly affect
  its cash flow

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Transaction Processing System Audit

• Transaction processing system audit a check of a
  firms 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?

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Traditional Transaction ProcessingApplications
Table 5.2 Systems That Support Order Processing,
Purchasing, and Accounting Functions
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Order Processing Systems

• Traditional order processing transaction
  processing systems include
• Order entry
• Sales configuration
• Shipment planning
• Shipment execution
• Inventory control
• Accounts receivable

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Order Processing Systems (continued)
Figure 5.10 Traditional TPS Systems That Support
the Order Processing Business Function
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Purchasing Systems

• Purchasing transaction processing systems
  include
• Inventory control
• Purchase order processing
• Receiving
• Accounts payable

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Accounting Systems

• Accounting transaction processing systems
  include
• Budget
• Accounts receivable
• Payroll
• Asset management
• General ledger

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Enterprise Resource Planning, SupplyChain
Management, and CustomerRelationship Management

• Enterprise resource planning (ERP) a set of
  integrated programs that manage a companys vital
  business operations for an entire multisite,
  global organization

Figure 5.11 Enterprise Resource Planning System
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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

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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

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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

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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

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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

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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 customers available credit

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Financial and Managerial Accounting

• General ledger main accounting record of a
  business
• Assets
• Liabilities
• Revenue
• Expenses
• Equity

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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 companys financial
  state and using these documented transactions to
  prepare financial statements to external decision
  makers, such as stockholders, suppliers, banks,
  and government agencies

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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

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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

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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

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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

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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

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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