Fundamentals of Information

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Fundamentals of Information
Systems

Fourth Edition

Chapter 5

Electronic and Mobile Commerce and Enterprise
Systems

Edited for AK ITEC 1010 Fall, 2007

Fundamentals of Information Systems, Fourth Edition

2

Principles and Learning Objectives

See List on Page 202 of text.


Learn acronyms in chapter


“Why Learn?”


Page 204

Fundamentals of Information Systems, Fourth Edition

3

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



The star means

you really should

learn this material!

Fundamentals of Information Systems, Fourth Edition

4

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



Fundamentals of Information Systems, Fourth Edition

5

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

Fundamentals of Information Systems, Fourth Edition

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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


Ebay is a mixed example: many sellers are businesses.

Fundamentals of Information Systems, Fourth Edition

7

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
( No laughter, please !! )


Forms of eGovernment


Government
-
to
-
consumer (G2C)


Government
-
to
-
business (G2B)


Government
-
to
-
government (G2G)



Fundamentals of Information Systems, Fourth Edition

8

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

Fundamentals of Information Systems, Fourth Edition

9

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


Fundamentals of Information Systems, Fourth Edition

10

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


P 209

definition

Fundamentals of Information Systems, Fourth Edition

11

Electronic and Mobile Commerce

Applications: 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


Fundamentals of Information Systems, Fourth Edition

12

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


Fundamentals of Information Systems, Fourth Edition

13

Marketing


Market segmentation
:

the identification of specific
markets to target them with advertising messages


Technology
-
enabled relationship management:
use of detailed information about a customer’s
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



should we invent the acronym “TERM” for this?

Know !!

Fundamentals of Information Systems, Fourth Edition

14

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

Know !!

Fundamentals of Information Systems, Fourth Edition

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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

Fundamentals of Information Systems, Fourth Edition

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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 convenient

in short,
anytime and anywhere


Convenient for who?

Fundamentals of Information Systems, Fourth Edition

17

Advantages of Electronic and Mobile
Commerce

Table 5.1: Advantages of Electronic and Mobile Commerce

Fundamentals of Information Systems, Fourth Edition

18

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




P 215, ff

Fundamentals of Information Systems, Fourth Edition

19

Hardware


The storage capacity and computing power needed
by the Web server depends on:


Software that will run on the server


Volume of e
-
commerce transactions


Size and type of web site.



Web site hosting



--

External (outsourced)


--

Internal


Fundamentals of Information Systems, Fourth Edition

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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

Fundamentals of Information Systems, Fourth Edition

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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


Fundamentals of Information Systems, Fourth Edition

22

An Overview of Enterprise Systems:

Transaction Processing Systems and

Enterprise 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
(reduces?)

the problems of lack of
information and inconsistent information caused by
multiple transaction processing systems


P 220

Fundamentals of Information Systems, Fourth Edition

23

Transaction Processing Systems and

Enterprise 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

Fundamentals of Information Systems, Fourth Edition

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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

Fundamentals of Information Systems, Fourth Edition

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Transaction Processing Activities


TPS
s


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


Fundamentals of Information Systems, Fourth Edition

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Transaction Processing Activities
(continued)

Figure 5.8: Data
-
Processing Activities Common to Transaction
Processing Systems


Understand Concept !!

Fundamentals of Information Systems, Fourth Edition

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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

Q: Why ?

Fundamentals of Information Systems, Fourth Edition

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Data Editing & Correction


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




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



P227

Fundamentals of Information Systems, Fourth Edition

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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 organization’s
database for further processing




Fundamentals of Information Systems, Fourth Edition

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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


Fundamentals of Information Systems, Fourth Edition

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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)



Fundamentals of Information Systems, Fourth Edition

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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 company’s critical business
information systems that directly affect its cash flow


Fundamentals of Information Systems, Fourth Edition

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Transaction Processing System Audit


Transaction processing system audit:

a check
of a firm’s 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?

Fundamentals of Information Systems, Fourth Edition

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Traditional Transaction Processing

Applications

Table 5.2: Systems That Support Order Processing, Purchasing, and
Accounting Functions


Fundamentals of Information Systems, Fourth Edition

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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



Fundamentals of Information Systems, Fourth Edition

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Purchasing Systems


Purchasing transaction processing systems
include:


Inventory control


Purchase order processing


Receiving


Accounts payable

Fundamentals of Information Systems, Fourth Edition

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Accounting Systems


Accounting transaction processing systems
include:


Budget


Accounts receivable


Payroll


Asset management


General ledger

Fundamentals of Information Systems, Fourth Edition

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Enterprise Resource Planning, Supply

Chain Management, and Customer

Relationship Management



Enterprise resource planning (ERP):

a set of
integrated programs that manage a company’s vital
business operations for an entire multisite, global
organization


Figure 5.11: Enterprise Resource Planning System

P 232

Fundamentals of Information Systems, Fourth Edition

39

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

Fundamentals of Information Systems, Fourth Edition

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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



Term: “Best Practices”: P 233:

Fundamentals of Information Systems, Fourth Edition

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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


Fundamentals of Information Systems, Fourth Edition

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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


Fundamentals of Information Systems, Fourth Edition

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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

Fundamentals of Information Systems, Fourth Edition

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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 customer’s available credit

Fundamentals of Information Systems, Fourth Edition

45

Financial and Managerial Accounting


General ledger:

main accounting record of a
business


Assets


Liabilities


Equity


Revenue


Expenses



Assets = Liabilities + Owner’s Equity

The Accounting, or Balance Sheet,

Equation

Fundamentals of Information Systems, Fourth Edition

46

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


Fundamentals of Information Systems, Fourth Edition

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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


Fundamentals of Information Systems, Fourth Edition

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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

Fundamentals of Information Systems, Fourth Edition

49

International Issues Associated with

Enterprise 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


Fundamentals of Information Systems, Fourth Edition

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That’s All

for Now !!