Chapter 2

• Business


  Formal organization that makes products or provides a service in order to make a profit
• Four basic business functions

  • Manufacturing and production
  • Sales and marketing
  • Finance and accounting
  • Human resources
• Every business, regardless of its size, must perform four functions to succeed. It must produce the product or service; market and sell the product; keep track of accounting and financial transactions; and perform basic human resources tasks, such as hiring and retaining employees
• Five Basic Business Entities

  • Suppliers
  • Customers
  • Employees
  • Invoices/payments
  • Products and services
• Global environment factors


  • Technology and science
  • Economy
  • Politics
  • International change
• Immediate environment factors


  • Customers
  • Suppliers
  • Competitors
  • Regulations
  • Stockholders
• Business Processes


  Logically related set of tasks that define how specific business tasks are performed
• The tasks each employee performs, in what order, and on what schedule
• Business Processes


  • Steps in hiring an employee
  • Identifying customers (sales and marketing)
  • Fulfilling customer order
• Business Processes


  • Flows of material, information, knowledge
  • Sets of activities, steps
  • May be tied to functional area or be cross-functional
  • Businesses can be seen as collection of business processes
• How IT Enhances Business Processes

  • Automates manual processes
  • Changes the flow of information
  • Replaces sequential processes with simultaneous activity
  • Transforms how a business works
  • Drives new business models
• You need to fully understand your current business processes. By conducting a business process analysis, you will begin to change the business to make it more efficient or effective
• How IT Improves Business Processes

  • Increasing efficiency of existing processes (e.g. downloading a song from iTunes)
  • Enabling entirely new processes (e.g. online passport application)
• Levels in a Firm

  • Senior management
  • Middle management
  • Operational management
  • Knowledge workers
  • Data workers
  • Production or service workers
• Systems for Different Management Groups

  • Transaction processing systems (TPS)
  • Management information systems (MIS)
  • Decision support systems (DSS)
  • Executive support systems (ESS)
• Transaction processing systems (TPS)

  Keep track of basic activities and transactions of organization, serve operational managers, monitor status of internal operations and firm's relationship with external environment, highly central to business operations and functioning, serve predefined, structured goals and decision making
• A TPS for payroll processing captures employee payment transaction data (such as a timecard). System outputs include online and hard copy reports for management and employee paychecks
• Management information systems (MIS)


  Provide middle managers with reports on firm's performance, to help monitor firm and predict future performance, summarize and report on basic operations using data from TPS, provide weekly, monthly, annual results, but may enable drilling down into daily or hourly data, typically not very flexible systems with little analytic capability
• This report, showing summarized annual sales data, was produced by the MIS
• Decision support systems (DSS)

  Serve middle managers, support nonroutine decision making, often use external information as well from TPS and MIS, model driven DSS (e.g. voyage-estimating systems), data driven DSS (e.g. Excel Pivot Tables)
• This DSS operates on a powerful PC. It is used daily by managers who must develop bids on shipping contracts
• Executive support systems (ESS)

  Serve senior managers, address strategic issues and long-term trends, address nonroutine decision making, provide generalized computing capacity that can be applied to changing array of problems, draw summarized information from MIS, DSS, and data from external events, typically use portal with Web interface, or digital dashboard, to present content
• Digital Dashboard


  Delivers comprehensive and accurate information for decision making, often using a single screen, the graphical overview of key performance indicators helps managers quickly spot areas that need attention
• Four major types of Enterprise Applications

  • Enterprise Resource Planning
  • Supply chain management systems
  • Customer relationship management systems
  • Knowledge management systems
• Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization
• Digital dashboard


  Delivers comprehensive and accurate information for decision making, often using a single screen. The graphical overview of key performance indicators helps managers quickly spot areas that need attention.
• Enterprise applications


  • Enterprise Resource Planning
  • Supply chain management systems
  • Customer relationship management systems
  • Knowledge management systems
• Enterprise applications


  • They span functional areas, focus on executing business processes across the firm, and include all levels of management
• Enterprise applications automate processes that span multiple business functions and organizational levels and may extend outside the organization.
• Supply Chain Management (SCM) Systems

  Manage relationships with suppliers, purchasing firms, distributors, and logistics companies. Manage shared information about orders, production, inventory levels, and so on. Goal is to move correct amount of product from source to point of consumption as quickly as possible and at lowest cost.
• Customer Relationship Management (CRM) Systems


  Help manage relationship with customers. Coordinate business processes that deal with customers in sales, marketing, and customer service. Goals: Optimize revenue, Improve customer satisfaction, Increase customer retention, Identify and retain most profitable customers, Increase sales.
• Knowledge Management Systems


  Manage processes for capturing and applying knowledge and expertise. Collect relevant knowledge and make it available wherever needed in the enterprise to improve business processes and management decisions. Link firm to external sources of knowledge.
• Enterprise Resource Planning (ERP)


  Collect data from different firm functions and store data in single central data repository. Resolve problems of fragmented data. Enable: Coordination of daily activities, Efficient response to customer orders (production, inventory), Decision making by managers about daily operations and longer-term planning.
• 1. business


  Use of digital technology and Internet to drive major business processes
• 1. commerce


  Subset of e-business. Buying and selling goods and services through Internet.
• 1. government


  Using Internet technology to deliver information and services to citizens, employees, and businesses
• Intranets


  Internal networks based on Internet standards. Often are private access area in company's Web site.
• Extranets


  Company Web sites accessible only to authorized vendors and suppliers. Facilitate collaboration.
• Enterprise social networking helps ABB innovate and grow. Problem: Corporate intranet outmoded, poor search capability, inefficient information storage. Solution: Replace intranet with a newer, more social intranet that supported dynamic knowledge sharing.
• Inside+ provided single point of entry to shared knowledge and assets, including Microsoft Yammer, Office 365, and SharePoint. Demonstrates IT's role in fostering community and sharing knowledge. Illustrates the benefits of using social tools to improve corporate knowledge.