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Chapter SixUnderstanding Information
and e-Business
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PRIDE HUGHES KAPOOR
INTRODUCTION TOBUSINESS
ELEVENTH EDITION
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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
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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
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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
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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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How Do Employees Use a Management Information System? (cont’d)
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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How Do Employees Use a Management Information System? (cont’d)
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
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Typical Visual Displays Used in Business Presentations (cont’d)
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Figure 6.4
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Typical Three-Column Table Used in Business Presentations
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Table 6.1
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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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Improving Productivity with the Help of Computers and Technology (cont’d)
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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Improving Productivity with the Help of Computers and Technology (cont’d)
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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Improving Productivity with the Help of Computers and Technology (cont’d)
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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Improving Productivity with the Help of Computers and Technology (cont’d)
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
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Improving Productivity with the Help of Computers and Technology (cont’d)
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
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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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Defining e-Business (cont’d)
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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Defining e-Business (cont’d)
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
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Other Business Models That Perform Specialized e-Business Activities
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Table 6.4
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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