Chapter Six

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Chapter SixUnderstanding Information

and e-Business

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PRIDE HUGHES KAPOOR

INTRODUCTION TOBUSINESS

ELEVENTH EDITION


Learning Objectives

1. Examine how information can reduce risk when making a decision.

2. Discuss management’s information requirements.

3. Outline the five functions of an information system.

4. Describe how the computers and technology help improve productivity, in decision making, communications, sales, and recruiting and training.

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Learning Objectives (cont’d)

5. Analyze how computers and technology change the way information is acquired, organized, and used.

6. Explain the meaning of e-business.7. Describe the fundamental models of

e-business.8. Explore the factors that will affect the future

of e-business.

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Introduction

To improve the decision-making process, the information used by both individuals and business firms must be• Relevant• Useful to meet a specific need

Using relevant information results in better decisions For businesses, better intelligence and knowledge

that lead to better decisions are especially important because they can provide a competitive edge over competitors and improve a firm’s profits

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How Can Information Reduce Risk When Making a Decision?

The Relationship Between Information and Risk

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Figure 6.1


How Can Information Reduce Risk When Making a Decision? (cont’d)

Information rules• Information rules based on situational experience

provide guidance in handling similar situations or circumstances

• Business research continuously looks for new rules since business conditions are always changing

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How Can Information Reduce Risk When Making a Decision? (cont’d)

The difference between data and information• Data

- Numerical or verbal descriptions that usually result from some sort of measurement

• Information- Data presented in a form that is useful for a specific purpose

• Database- A single collection of data and information stored in one

place that can be used by people throughout an organization to make decisions

• Knowledge management (KM)- A firm’s procedures for generating, using, and sharing the

data and information

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What is a Management Information System?

Management information system (MIS)• A system that provides managers and employees with

the information they need to perform their jobs as effectively as possible

• Purpose: to distribute timely and useful information to the decision makers who need it

Information technology officer• A manager at the executive level who is responsible for

ensuring that a firm has the equipment necessary to provide the information the firm’s employees and managers need to make effective decisions

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Management Information System (MIS)

Source: Ricky W. Griffin, Management, 10/e (Mason, OH: Cengage Learning, 2011). Reprinted by permission.

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Figure 6.2


What is a Management Information System? (cont’d)

A firm’s information requirements• Summary of future possibilities• Summary of present situation• Summary of past performance• Information about five areas of management: finance,

operations, marketing, human resources, and administration

Size and complexity of the system• Must be properly sized to provide sufficient information

resources without being simple or too complex to be useful

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Five Management Information System Functions

Every MIS must be tailored to the organization it serves and must perform five functions

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Figure 6.3


How Do Employees Use a Management Information System?

Collecting data• Data should be relevant and accurate• Internal sources

- Managers and employees, company records and reports, minutes of meetings, accounting data, sales data, HR data, production data

• External sources- Customers, suppliers, bankers, trade and business publications,

industry conferences, online computer services, government sources, firms specializing in gathering data

• Cautions- The cost of obtaining data from some external sources can be

quite high- Outdated or incomplete data usually yield inaccurate information- Check computer data (or information) if you disagree with it

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More Computers in Record Numbers

Source: The Computer Industry Almanac, Inc. Web site at www.c-i-a.com, accessed May 25, 2010.

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How Do Employees Use a Management Information System? (cont’d)

Storing data• An MIS must be capable of storing data until they are

needed Updating data

• Manual updating—employee inputs fresh data into the database

• Automatic updating—MIS updates itself as data become available

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Processing data• The transformation of data into a form useful for a

specific purpose• Statistics

- A measure that summarizes a particular characteristic of an entire group of numbers

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Presenting information• Verbal information—list or paragraph form

- A formal business report typically includes an introduction, the body of the report, conclusions, and recommendations

• Visual displays- Graphs, bar charts, pie charts

• Tabular displays- Verbal or numerical information presented in columns

and rows

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Typical Visual Displays Used in Business Presentations

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Figure 6.4


Typical Visual Displays Used in Business Presentations (cont’d)

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Figure 6.4


Typical Three-Column Table Used in Business Presentations

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Table 6.1


Improving Productivity with the Help of Computers and Technology

Areas of concern for a business include decision making, communications, sales, recruiting and training employees, business software applications, and virtual offices

Making smart decisions• Three different applications can help to improve and

speed the decision-making process for people at different levels within an organization

- Decision support system (DSS) is a type of computer program that provides relevant data and information to help a firm’s employees make decisions

- Executive information system (EIS) is a computer-based system that facilitates and supports the decision-making needs of top managers and senior executives

- An expert system is a type of computer program that uses artificial intelligence

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Improving Productivity with the Help of Computers and Technology (cont’d)

Helping employees communicate• E-mail—provides virtually instantaneous

communication with other employees and customers• Seven tips for effective use of e-mail

- Most important: Think about what you say, message may be read by more people than the original recipient(s), don’t include anything you wouldn’t say face-to-face

- Write perfect subject lines- One email, one subject- Keep emails short- Only use ALL CAPS for emphasis, represents shouting- Limit use of the “reply all” option, only reply to those who

need to know- Reread the message before sending it

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Helping employees communicate (cont’d)• Groupware—software that facilitates the management

of large projects among geographically dispersed employees as well as such group activities as problem solving and brainstorming

• Collaborative learning system—a work environment that allows problem-solving participation by all team members

Assisting the firm’s sales force• Customer-relationship management programs• Sales force automation programs

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Training employees• Reduced educational and training costs• Increased flexibility and availability of training• Faster transfer of information about changes in the

firm’s policies and procedures Recruiting employees

• Provides for a global recruiting reach, especially for individuals with unique skills

• Helps build a database of potential employees• Reduces recruiting costs for initial applications and

screening interviews

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Telecommuting, Virtual Offices, and Technology Virtual office–allows employees to work any place where they

have access to computers, software, and other technology that enables them to perform their normal work activities• Benefits:

- Higher job satisfaction and increased productivity- Greater independence and flexible work hours- No commuting saves costs and time- Lower employee turnover- New employment opportunities for people who can’t/won’t commute

• Challenges:- Feelings of isolation/exploitation- Working too many hours- Lack of support from managers- Inability to access needed information

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Business Applications Software• Integrated software combines many applications

(functions) in a single package- Allows the easy linking of text, numerical data, graphs,

photos, audiovisual clips- Data entered into one application can be used in other

applications within without having to re-enter it- Once one application is learned, it’s much easier to learn

the other applications

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Current Business Application Software Used to Improve Productivity

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Table 6.2



Computer Backup and Disaster Recovery• Lost data and information can threaten the existence of a

firm and its ability to operate on a day-to-day basis• Computer backup–process of storing data, information, and

computer systems on secondary computer systems that can be accessed if a firm’s main computer system fails

- Schedule data and information backups- Backup the computer system needed to access data- Keep backups offsite- Test backup systems- May be performed by employees or outside vendors

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Using Computers and the Internet to Obtain Information

Information society• A society in which large groups of employees generate or

depend on information to perform their jobs The Internet and Networks

• Internet- A worldwide network of computers linked through

telecommunications; used for e-business, communication, information gathering

• World Wide Web (the Web)- The Internet’s multimedia environment of audio, visual, and

text data• Broadband technology

- General term referring to higher-speed Internet connections that deliver data, voice, and video material

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Using Computers and the Internet to Obtain Information (cont’d)

The Internet and Networks• Network

- A group of two or more computers linked together to share data and information

• Wide-area network (WAN)- A network that connects computers over a large

geographic area- World’s most popular WAN is the Internet

• Local-area network (LAN)- A network that connects computers that are in

close proximity; within a company, less commonly referred to as an Intranet

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Using Computers and the Internet to Obtain Information (cont’d)

Accessing the Internet• Computers and software must be standardized so different

systems can “talk” to each other in order to search for and obtain information

• Web site addresses- URL—Uniform Resource Locator - http—HyperText Transfer Protocol

• Web search engines- www.altavista.com; www.google.com; www.yahoo.com

Creating web sites• Reflects the company image• Should be kept current• Most companies manage their sites internally but some pay

an outside hosting service to provide site management

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Tips for Web Site Development

Develop a theme Determine how much information to include on

your site Plan the layout of your site Add graphics Outline the material for each page Develop plans to update the site Make sure your site is easy to use

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Defining e-Business

e-Business (electronic business)—The organized effort of individuals to produce and sell, for a profit, the products and services that satisfy society’s needs through the facilities available on the Internet

Organizing e-Business Resources• Resources may be more specialized than in a

typical business• Outsourcing—The process of finding outside vendors

and suppliers that provide professional help, parts, or materials at a lower cost.

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Combining e-Business Resources

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Figure 6.5


Defining e-Business (cont’d)

Satisfying Needs Online• The Internet has created new customer needs• E-business can satisfy those needs, as well as

traditional ones- Global access to information and entertainment- Virtually unlimited selections of products- Opportunities for interaction- Individually custom-tailored content

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Creating e-Business Profit• Increasing Sales Revenue• Revenue stream–source of revenue flowing into a firm

- Sales of merchandise online- Intelligent information systems to suggest purchases

to repeat online customers- Increased sales in physical stores because of product

information available online- Advertising on web pages- Subscription fees charged for access to online services

and content

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Creating e-Business Profit (cont’d)• Reducing expenses

- Offering online services that- Reduce transaction costs- Provide information- Provide customer assistance

- Reduces the costs of dealing with customers- Reduces the need for as many physical store locations

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Fundamental Models of e-Business

Business model• A group of common characteristics and methods

of doing business to generate sales revenues and reduce expenses

Business-to-Business (B2B) model• Firms that use the Internet mainly to conduct

business with other businesses- Facilitating sales transactions between businesses- Elicit bids and offers from suppliers and potential suppliers;

learning about the customer’s rules and procedures. Expensive to start and maintain but savings are significant

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Fundamental Models of e-Business (cont’d)

Business-to-Consumer (B2C) model • Firms that focus on conducting business with

individual buyers• Success comes from understanding how the

customer behaves online to build good customer relationships

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Planning for a New Internet Business or Building an Online Presence for an Existing Business

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Figure 6.6


Other Business Models That Perform Specialized e-Business Activities

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Table 6.4


The Future of Computer Technology, the Internet, and e-Business

The Internet and e-business will continue to expand along with related computer technologies

Internet Growth Potential• Opportunity: only about 1.8 billion of the world’s nearly

7 billion people in the world use the Web• Americans comprise 12 percent of all users• Internet growth potential in the U.S. is limited since

73 percent of Americans already use it• Projections indicate worldwide users will exceed

2.1 billion by 2012• Social network site–a Web site that functions like an online

community of Internet users who share personal information, messages, photos, friends

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The Future of Computer Technology, the Internet, and e-Business (cont’d)

Ethical and Legal Concerns• Essentially the Internet is a new “frontier” without

borders and without much control by governments or other organizations

• Ethics and Social Responsibility- Spamming- Log-file records- Data mining

• Internet Crime- Malware- Computer virus

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The Future of Computer Technology, the Internet, and e-Business (cont’d)

Future Challenges for Computer Technology and E-Business• More information is now available than ever

before, its amount will only increase• Businesses must consider more than the cost

factors in using technology- Internal, more controllable by management: planning,

organization structure, human resources, management decisions, information database, financing

- Green IT: activities to support a healthy environment and sustain the planet

- External: less controllable or not at all: globalization, economy, competition, politics

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Internal and External Forces That Affect an e-Business

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Figure 6.7

Documents

Chapter Six