CHAPTER FOUR

COMMON BUSINESS
APPLICATIONS OF
INFORMATION TECHNOLOGY

1
 Chapter Outlines
4.1 Financial Information Systems
4.2 Marketing Information Systems
4.3 Manufacturing and Production
Information
Systems
4.4 Human Resource Information Systems
4.5 Managerial Decision Support Systems
4.6 Transaction Processing System (TPS)
4.7 E-Business

2
The following figure illustrates how information
systems can be grouped into business function
categories.
Figure 4.1 Examples of functional business
information systems.

3
4.1 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.
4
Figure 4.3 Examples of important financial
management systems

5
Electronic spreadsheet packages, DSS
software, and Web-based Groupware can be
used for Financial Information System.

6
4.2 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.
For example, Internet/intranet Web sites and
7
Sales force automation systems use mobile
computing and Internet technologies to automate
(computerize) many information processing
activities for sales support and management.

8
4.3 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-integrated9
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.

10
4.4 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 may11
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
12
4.5 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. 13
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, or
14
Herbert Simon, a researcher of management

and decision making, described decision making

as a three-phase process.
First, in the Intelligence phase, decision
makers collect facts, beliefs, and ideas.
Second, in the Design phase, the method for

considering the data is designed. The

methods are sequences of steps, formulas,
models, and other tools that systematically
reduce the alternatives to a manageable number.
Third, in the Choice phase, when there is a15
16
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.
17
 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.

18
4.6 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 so19
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.
20
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.
21
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

22
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 mice,
23
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
24
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

25
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.

26
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.
27
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.

28
Figure 7.4 The transaction processing cycle

29
4.7 E-Business (Electronic Business)
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 services over the Internet.
It also encompasses activities supporting
those market transactions, such as30
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.
31
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.

32
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 and
33
 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. 34
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 take35
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.
36
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.
37
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.
38
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.
39
 Amazon.com

One of the most widely recognized examples of

an e-business that uses shopping-cart
technology is Amazon.com Founded in 1994,
the company has grown to become one of the
world's largest online retailers.
Amazon.com offers millions of products to
customers in over 160 countries. The site also
hosts online auctions. Although Amazon.com
originally served as a mail-order book retailer,
its product line has expanded to include music,
videos, DVDs, electronic cards, consumer
electronics, hardware, tools, beauty items and
toys. Amazon.com’s catalog is growing
constantly, not only as it adds new products,
but as it partners with or buys additional40
Amazon.com uses a database on the server
side (the merchant’s computer systems) that
offers customers on the client side (the
customer’s computer or handheld device)
multiple ways to search for products. This
system exemplifies client/server application.
The Amazon.com database consists of
product specifications, availability, shipping
information, prices, sales histories, reviews
and in-depth product descriptions. In addition
to providing customers with details on items
for sale, this extensive database enables
Amazon.com to cross-reference products. For
example, a novel can be listed under various41
Amazon.com provides personalized service to
returning customers.
A database keeps records of users’ previous
transactions, including items purchased,
shipping addresses and credit-card
information. Upon returning to the site,
customers are greeted by name and
presented with lists of titles that are
recommended to them on the basis of their
previous purchases.
This enables the company to offer
personalization that would otherwise be
handled by sales representatives.
Amazon.com also uses customer data for data
42
The purchase process at Amazon.com is
simple. The company’s home page provides
various search features and categorical
options, allowing users to select the product
or type of product they wish to locate.
For example, the book “Internet &World Wide
Web How to Program”, Third Edition, can be
found by using the Search box on the home
page. To purchase an item once it is found,
users simply click the Add to Shopping Cart
button on the page containing the item’s
details. The shopping-cart technology
processes the information and displays a list
of the products in the shopping cart (users
can view their cart at any time while43
When users are ready to place their orders, they
proceed to checkout.
First-time visitors are prompted to fill out a
personal-identification form in which they provide
their names, billing addresses, shipping
addresses, shipping preferences and credit-card
information.
Users are also asked to enter a password that they
will use to access account data during future
transactions. Once the shipping, billing and
password information is confirmed, orders can be
placed.
44
Customers returning to Amazon.com can use
its 1-Click system.
This patented system allows consumers to
reuse previously entered payment and
shipping information, enabling them to place
orders with a single click of the mouse.
The 1-Click system exemplifies how an
intelligently designed database application
can improve the efficiency and convenience
of business transactions.

45
When the order process is complete,
Amazon.com sends a confirmation e-mail to
the user.
A second e-mail is sent when an order is
shipped, and a database monitors the status
of all shipments. Users can track the status of
their purchases until they leave the
Amazon.com shipping center by selecting the
Your Account link at the bottom of the page
and entering their passwords. This will bring
them to an Account Maintenance page.
Orders can be cancelled at any time before
the product is shipped, which usually occurs
within 24 to 48 hours of purchase.
46
Amazon.com operates on secure servers that
protect personal information.
Users who feel uncomfortable about using
their credit cards on the Web can initiate
orders through Amazon’s Web site by
entering the last five digits of their credit-
card numbers.
To complete such orders, users call Amazon’s
Customer Service Department and provide
the remaining numbers.

47