CHAPTER FIVE

COMMON BUSINESS
APPLICATIONS OF
INFORMATION TECHNOLOGY

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 Chapter Outlines
5.1 Financial Information Systems
5.2 Marketing Information Systems
5.3 Manufacturing and Production
Information
Systems
5.4 Human Resource Information Systems
5.5 Managerial Decision Support Systems
5.6 Transaction Processing System (TPS)
5.7 E-Business

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• Business managers are moving from a tradition
where they could avoid, delegate, or ignore
decisions about IT to one where they cannot create
a marketing, product, international, organization,
or financial plan that does not involve such
decisions.
• There are as many ways to use information
technology in business as there are
– business activities to be performed,
– business problems to be solved, and
– business opportunities to be pursued.
• As a business professional, you should have a basic
understanding and appreciation of the major ways
information systems are used to support each of the
functions of business that must be accomplished in
any company that wants to succeed. 3
• As a business professional, it is also important that
you have a specific understanding of how
information systems affect a particular business
function (e.g., marketing) or a particular industry
(e.g., banking) that is directly related to your
professions.
• For example, someone whose job is a marketing
position in banking should have a basic
understanding of how information systems are used
in banking and how they support the marketing
activities of banks and other firms.
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The following figure illustrates how information
systems can be grouped into business function
categories.
Figure 5.1 Examples of functional business
information systems.

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5.2 Marketing Information Systems
• The business function of marketing is concerned
with the planning, promotion, and sale of existing
products in existing markets, and the development
of new products and new markets to better attract
and serve present and potential customers.
• Marketing information systems provide
information technologies that support major
components of the marketing function.
• Figure 5.2 illustrates how marketing information
systems provide information technologies that
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• For example, Internet/intranet web sites and services
make an interactive marketing process possible where
customers can become partners in creating, marketing,
purchasing, and improving products and services.
• Sales force automation systems use mobile computing
and Internet technologies to automate (computerize)
many information processing activities for sales
support and management.

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6.3 Manufacturing and Production
Information System
• Manufacturing information systems support
the production/operations function that
includes all activities concerned with the
planning and control of the processes
producing goods or services.
• A variety of manufacturing information
systems, many of them Web-enabled, are used
to support computer-integrated
manufacturing (CIM). 8
• CIM is an overall concept that emphasizes that the objectives
of computer-based systems in manufacturing must be to:
– Simplify (reengineer): production processes, product
designs, and factory organization as a vital foundation to
automation and integration.
– Automate: production processes and the business
functions that support them with computers, machines,
and robots.
– Integrate: all production and support processes using
computer networks, cross-functional business software,
and other information technologies.
• The overall goal of CIM and such manufacturing information
systems is to produce products of the highest quality.
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6.4 Human Resource Information System
• The human resource management (HRM)
function involves the recruitment, placement,
evaluation, compensation, and development of
the employees of an organization.
• The goal of human resource management is the
effective and efficient use of the human
resources of a company.
• The Internet has become a major force for
change in human resource management.
• For example, online HRM systems may10
• Companies are also using commercial recruiting
services and databases on the World Wide Web,
posting messages in selected Internet
newsgroups, and communicating with job
applicants via e-mail.
• The Internet has a wealth of information and
contacts for both employers and job hunters.
• Top Web sites for job hunters and employers on
the World Wide Web include Monster.com,
HotJobs.com and CareerBuilder.com
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Figure 5.3 Human resource information systems
support the strategic, tactical, and operational
use of the human resources of an organization.

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6.5 Financial Information System
• Computer-based financial management systems support
business managers and professionals in decisions
concerning

(1) the financing of a business and

(2) the allocation and control of financial resources

within a business.
• Major financial management system categories include
cash and investment management, capital budgeting,
financial forecasting, and financial planning.
• Electronic spreadsheet packages, DSS software, and Web-
based Groupware can be used for Financial Information
System. 13
Figure 5.4 Examples of important financial
management systems

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5.6 Decision Support System (DSS)
• The success of an organization largely depends on the
quality of the decisions that its employees make.
• When decision making involves large amounts of
information and a lot of processing, computer-based
systems can make the process efficient and effective.
• When do you have to make a decision? When you drive
your car to a certain destination and there is only one
road, you do not have to make a decision. The road will
take you there.
• But if you come to a fork, you have to decide which way
to go. In fact, whenever more than one possible action is
available, a decision must be made. 15
• If you have to decide based only on distance,
making a decision is easy. If you have to choose
between a short but heavily trafficked road and a
longer road with lighter traffic, the decision is a
bit more difficult.
• A decision is easy to make when one option will
clearly bring about a better outcome than any
other. Decisions become more difficult when
more than one alternative seems reasonable and
when the number of alternatives is great.
• In business, there can be dozens, hundreds, or16
• Decision Support Systems (DSS) are a class of
computerized information systems that support
decision-making activities.
• DSS are interactive computer-based systems and
subsystems intended to help decision makers use
communications technologies, data, documents,
knowledge and/or models to successfully
complete decision process tasks.
• Decision Support Systems should be defined as a
broad category of information systems for
informing and supporting decision-makers.
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 Basic themes of DSS

– Information systems.
– Used by managers.
– Used in making decisions.
– Used to support, not to replace people.
– Used when the decision is
– "semi-structured" or "unstructured."
– Incorporate a database of some sort.
– Incorporate models.
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6.7 Transaction Processing System (TPS)
• Whenever two people make an exchange, it is
called a transaction.
• Transactions are important events for a
company, and collecting data about them is
called transaction processing.
• Examples of transactions include making a
purchase at a store, withdrawing money from a
checking account, making a payment to
creditor, or paying an employee.
• Because transactions generally involve an
exchange of money, it is critical that the data be
protected during transmission and stored
carefully so that it cannot be altered.
• It is also critical that the data be saved so that
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managers can verify the data if any conflicts
• A transaction processing system (TPS) is an
information system that records company
transactions (a transaction is defined as an
exchange between two or more business entities).
• Transaction processing systems (TPS) are cross-
functional information systems that process data
resulting from the occurrence of business
transactions.
• Transactions are events that occur as part of doing
business, such as sales, purchases, deposits,
withdrawals, refunds, and payments.
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• Let us look at a simple example of a business
transaction.
• McDonald’s, which sells a large number of
hamburgers every day, orders raw materials from
its suppliers. Each time the company places an
order with a supplier, a transaction occurs and a
transaction system records relevant information,
such as the supplier’s name, address, and credit
rating, the kind and quantity of items purchased,
and the invoice amount.
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 Process of Transaction Processing System

The five steps in processing a transaction are:

1. Data entry
2. Transaction Processing
3. Database Maintenance
4. Document and Report Generation
5. Inquiry Processing

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1. Data Entry
• The first step of the transaction processing
cycle is the capture of business data.
• There are a number of input devices for
entering data:
 Keyboard/video display terminals
 Optical character recognition (OCR) devices,
such as optical scanning wands and grocery
check--out scanners.
 Other technologies, including electronic
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 2. Transaction Processing

• Transaction processing systems process data

in two basic ways:
(1) batch processing, where transaction data
are accumulated over a period of time and
processed periodically, and
(2) real-time processing (also called online
processing), where data are processed
immediately after a transaction occurs.
• All online transaction processing systems
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3. Database Maintenance
• An organization’s databases must be updated
by its transaction processing systems so that
they are always correct and up-to-date.
• For example, credit sales made to customers
will cause customer account balances to be
increased and the amount of inventory on hand
to be decreased.
• Database maintenance ensures that these and
other changes are reflected in the data records
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stored in the company’s databases.
4. Document and Report Generation
• Transaction processing systems produce a
variety of documents and reports.
• Examples of transaction documents include
purchase orders, paychecks, sales receipts,
invoices, and customer statements.
• Transaction reports might take the form of a
transaction listing such as a payroll register.

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 5. Inquiry Processing

• The last step in processing a transaction is

querying (asking questions of) the system.
• Query facilities allow users to process data and
information that may otherwise not be readily
available.
• For example, a sales manager may query the
system the number of damaged items in a
given store.

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• Many transaction processing systems
responses are displayed in a variety of pre-
specified formats or screens.
• For example, you might check on the status of
a sales order, the balance in an account, or the
amount of stock in inventory and receive
immediate responses at your PC.

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Figure 7.4 The transaction processing cycle

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6.7 E-Business (Electronic Business)
E-commerce is changing the shape of
competition, the speed of action, and the
streamlining of interactions, products, and
payments from customers to companies and
from companies to suppliers.
• Electronic business, or e-business, refers to
the use of digital technology and the Internet to
execute the major business processes in the
enterprise.
• E-business includes activities for the internal
management of the firm and or coordination with
suppliers and other business partners. It also
includes electronic commerce, or e-commerce.
• E-commerce is the part of e-business that deals
with the buying and selling of goods and services30
over the Internet.
• E-commerce refers to aspects of online
business involving exchanges among
customers, business partners and vendors.
• For example, suppliers interact with
manufacturers, customers interact with sales
representatives and shipment providers
interact with distributors.
• E-business encompasses these elements, but
also includes operations that are handled
within the business itself.
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• E-business and e-commerce have increased the
speed and ease with which business can be
transacted, resulting in intense competition
among online vendors.
• To remain viable, e-businesses must adjust to
evolving technologies, continually integrate
new systems and satisfy a wide variety of
consumers.
• If a business fails to do so, its customers do not
have far to go to buy from competitors.
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• The construction and maintenance of an e-
business, especially one that processes a large
number of transactions, requires
– technical,
– marketing and
– advertising expertise.
• Customers want access to products and
services on 24/7 basis (24 hours per day, 7 days
per week).
• They also expect reliable, functional, fast and33
• Figure 5.6 E-commerce involves
accomplishing a range of business processes to
support the electronic buying and selling of
goods and services.

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 Types of e-commerce
• E- commerce can be broken into four main
categories: B2B, B2C, C2B, and C2C.
1. B2B (Business-to-Business)
– Companies doing business with each other
such as manufacturers selling to distributors
and wholesalers selling to retailers.
– Pricing is based on quantity of order and is
often negotiable.
2. B2C (Business-to-Consumer)
• Businesses selling to the general public typically
through catalogs utilizing shopping cart
software. By dollar volume, B2B takes the prize,
however B2C is really what the average people
has in mind with regards to e-commerce as a
whole. 35
3. C2B (Consumer-to-Business)
• A consumer posts his project with a set
budget online and within hours companies
review the consumer’s requirements and bid
on the project.
• The consumer reviews the bids and selects
the company that will complete the project.
4. C2C (Consumer-to-Consumer)
• There are many sites offering free classifieds,
auctions, and forums where individuals can
buy and sell thanks to online payment
systems like PayPal where people can send
and receive money online with ease.
• eBay’s auction service is a great example of
where person-to-person transactions take36
 E – COMMERCE ADVANTAGES:

 Faster buying/selling procedure, as well as easy

to find products
 Buying/selling 24/7.
 More reach to customers, there is no theoretical
geographic limitations.
 Low operational costs and better quality of
services.
 No need of physical company set-ups.
 Easy to start and manage a business.
 Customers can easily select products from
different providers without moving around
physically.
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 E – COMMERCE DIS-ADVANTAGES:

 Any one, good or bad, can easily start a business.

And there are many bad sites which eat up
customers’ money.
 There is no guarantee of product quality.
 Mechanical failures can cause unpredictable effects
on the total processes.
 As there is minimum chance of direct customer to
company interactions, customer loyalty is always on
a check.
 There are many hackers who look for opportunities,
and thus an e-commerce site, service, payment
gateways, all are always prone to attack.
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 Build an e-commerce site

• Register a Domain name

– Search for domain names
– What is the criteria of selecting a good
name?
• Find a Web Host
– Select the suitable ISP
• Web Developers
– Hire a web designer
– Cut cost and work with the designer
– If your site is easy to use, the customers
will stay longer and come more frequent.
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 Online shopping risks

• A list of safeguards to keep in mind.

– Shop with trusted merchants.
– Read the site’s delivery, return, and
privacy policies.
– Only enter your details with the URL that
begins with https://
– Be careful not to hit the ORDER NOW
button more than once.
– Never send credit card information via e-
mail.
– Keep a record of your transactions until
shipped.
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 Figure 5.7 Some of the key factors for success in
e-commerce.

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