Pride/Hughes/Kapoor Business, 10th Edition

Audio Review Transcript
Chapter 16 Understanding Information and e-Business

1. Examine how information can reduce risk when making a decision

You may recall that managers require four major resources to operate a business. Information resources help managers reduce risk when making a decision. Without correct and timely information, individual performance will be undermined and the performance of the organization will suffer. Too much information can be almost as bad as not enough.
Rarely is there adequate time to process and analyze all the information we receive. As a result, managers often use information rules. An information rule occurs when business research consistently confirms the same results each time it studies the same or a similar set of circumstances. Information rules are useful for reducing the time needed to make certain decisions. They are “the great simplifier.” Let’s look at some other ways that we organize information, starting with the difference between data and information. Data are numerical or verbal descriptions that usually result from some sort of measurement. Information, on the other hand, is data presented in a form useful for a specific purpose. Sometimes this may be in the form of a graph, table, or chart that compares similar types of data, perhaps over a given period of time. Most firms maintain a great deal of data relating to employees, inventory, sales, and accounting, which can be turned into information when needed. The data can be most effectively used when they are organized into a database, a single collection of data stored in one place that can be used by people throughout an organization to make decisions. The way data, information, and databases are used is of the utmost value to an organization. Knowledge management, a firm’s procedures for generating, using, and sharing data and information contained in the firm’s databases, allows management to see the “big picture” more clearly. All of these pieces become part of the firm’s management information system. (LO 1 ends)

2. Discuss management’s information requirements

A management information system (MIS), sometimes called an information technology or IT system, provides managers and employees with the information they need to perform their jobs as effectively as possible. The purpose of an MIS is to distribute timely and useful information from all sources to employees who need it. Most medium and large firms today have an information or IT 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.
Since all managers are responsible for activities in the past, present, and future, they need access to a wide range of information. Management information systems can vary in size and complexity and must be tailored to meet the needs of the organization. An MIS that is too large or complex can be almost as bad as one that is too small and that doesn’t provide the necessary information when it is needed.
An MIS contains information from all the major functional groups in an organization, including finance, operations, marketing, human resources, and administration. Generally, financial managers focus on a firm’s debts and receivables, cash flow, future capitalization needs, and financial ratios. Operations managers are concerned with present and future sales levels, the availability of resources to produce products and services, and new product planning. Marketing managers need detailed information about the firm’s product mix and those offered by competitors, as well as pricing strategies, promotional campaigns, and developments within channels of distribution. Human resources managers must be aware of current wage levels and benefits packages, legislation and court decisions that affect human resources, union activities, and any plans for the firm’s growth or expansion. Administrative managers are responsible for the overall management of the organization, so they are concerned with coordinating all the essential information that allows other managers to do their jobs. (LO 2 ends)

3. Outline the five functions of an information system

To provide all this information effectively, an MIS must perform five specific functions: collecting data, storing the data, updating data, processing data into information, and presenting the information to the users. Let’s look at each of these functions.
An MIS must collect the data needed to establish the firm’s data bank, which should include all past and present data that may be useful. The data entered into the system must be relevant and accurate. Most data come from internal sources, such as the managers themselves, company records, reports, minutes of meetings, accounting records, and production forecasts. External sources of data include customers, suppliers, bankers, trade and financial publications, industry conferences, and online services. Whatever the source, three cautions must be kept in mind. (1) The high cost of obtaining some data can outweigh its usefulness. (2) Although computers do not make mistakes, the people using them can. And (3) outdated or incomplete data usually yield inaccurate information.
Storing and updating data means that the data must be held until they are needed and kept current to ensure accuracy, completeness, and timeliness. Data may be updated manually, such as when an employee inserts a disk, locates the data to be changed, and inputs the new data. Some data are updated daily, others weekly or even monthly. Some systems have automatic updating, where the system itself updates the databank as new data become available.
After data are collected, stored and updated, they may be accessed by managers. Most data, however, need to undergo data processing to become most usable. Data processing is the transformation of data into a form that is useful for a specific purpose. This transformation is often done through the use of statistics, a measure that summarizes a particular characteristic of an entire group of numbers. Most business data involves thousands of numbers in a wide range of categories, but computers can be programmed to extract those that are wanted almost immediately. The last of the five functions of an MIS is presenting information in a usable form. Verbal information may be presented in a list or paragraph or report. A business report includes four sections: an introduction, the body, the conclusions, and the recommendations. A report may also include visual and tabular displays, which are effective at conveying the importance of numerical data. Visual displays include graphs, bar charts, and pie charts. Tabular information is presented in columns and rows and is best for comparing two or more related variables.
(LO 3 ends)
4. Describe how the internet helps in decision making, communications, sales, and recruiting and training

Many managers today supervise employees who conduct day-to-day business activities on the Internet—they conduct research, improve productivity and performance, and communicate with other employees. Some areas of concern for managers include communications, sales, training and recruiting, and accounting and finance. But there is so much information available, how do you sort out the relevant and useful information? Three applications can help improve the decision-making process. The first is a decision-support system or DSS, which provides relevant data and information to help a firm’s employees make decisions and choose different courses of action. It can be used to determine the effect of changing variables and answer “what if” questions. The second is an executive information system, or EIS, which facilitates and supports the decision-making needs of top managers and senior executives by providing easy access to both internal and external information. Finally, an expert system uses artificial intelligence to imitate a human’s ability to think.
Communications have been enhanced by e-mail, which provides an efficient means for people in various locations to work on a common project, reducing the need for meetings and travel expenses. Groupware is one of the latest types of software that facilitates the management of large projects among geographically dispersed employees as well as such group activities as problem solving and brainstorming. In addition to helping manage large projects, groupware provides an opportunity to nurture a collaborative learning system, which is a work environment that allows problem-solving participation by all team members.
In addition to communication tools, customer-relationship management (CRM) programs focus on the special informational needs of sales representatives with organized databases of information such as client names, status of pending orders, and sales leads and opportunities. As sales reps complete their visits to clients, information about what was learned should be entered into the system as soon as possible to be available to everyone.
Training is facilitated by using the Internet to distribute information about the firm, its products and services, new procedures, and general information. This can replace the intensive training that has commonly been done in a classroom setting. Online training may be used to keep both new and experienced employees up-to-date on the latest information.
Human resources uses the Internet to recruit employees with specialized skills. Software programs can help large firms establish databases of potential employees. (LO 4 ends)

5. Analyze how computers and technology change the way information is acquired, organized, and used

The need for more and better information continues to grow. We live in an information society, in which large groups of employees generate or depend on information to perform their jobs. One key factor in this society is the Internet. The Internet is a worldwide network of computers linked through telecommunications. Telecommunications is the merger of computer and telephone technologies. The most commonly used network for finding information is the World Wide Web, which contains numerous sites that can be found using a web browser, software that helps users move around the World Wide Web. Connections to the Internet can be made through telephone lines or the faster digital subscriber lines, or DSLs. Broadband technology is the general term that refers to higher-speed Internet connections that deliver data, voice, and video material. The first page of a site is its home page, which directs the user to specific areas of interest by clicking on words or icons. In addition to corporate sites, the World Wide Web has a wide array of government and institutional sites that provide information to the public. A smaller version of the Internet is an Intranet, for use only within the firm. Employees can quickly find information about their own firm as well as connect to external sources.
Both the Internet and intranets are examples of computer networks. A computer network is a group of two or more computers linked together that allows users to share data and information. A wide-area network, or WAN, connects computers over a large geographic area, such as a state, province, or country. The Internet is a WAN. A local-area network, or LAN connects computers that are in close proximity to each other, such as an office building or college campus.
Thanks to standardization, which is the guidelines that let products, services, material, and processes achieve their purposes, all you have to do to go to a specific site on the Web is enter its address, or URL. To search for specific information you may want to use a search engine to help locate what you need. Search engines are free of charge because the services are paid for by advertisers. The engines will provide you with a list of sites that match your search criteria.
(LO 5 ends)
6. Explain the meaning of e-business

E-business, short for electronic business, is 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. The term e-business can apply to both individual firms that are organized to do business solely on the Internet as well as to those business activities that are part of a larger organization, but are accomplished using Internet technology. The human, material, information, and financial resources that any business requires are highly specialized for e-business. In an effort to reduce the cost of e-business resources, many firms have turned to outsourcing.
Using e-business activities, it is possible to satisfy new customer needs created by the Internet as well as traditional ones in unique ways. Meeting customer needs is especially important when an e-business is trying to earn profits by increasing sales and reducing expenses. Each source of revenue flowing into the firm is referred to as a revenue stream.  (LO 6 ends)

7. Describe the fundamental models of e-business

E-business models focus attention on the identity of a firm’s customers. They tend to fall into one of two primary categories. The two main categories are the business-to-business model and the business-to-consumer model.
The business-to-business or B2B model is used by businesses to conduct business with other businesses. The vast majority of e-business is of this type. B2B e-businesses are of two types. The first consists of firms that focus on facilitating sales transactions between businesses. The second involves the relationships and procedures used by companies and their suppliers. Significant savings are being realized by eliminating human error and by reducing transaction time.
Unlike B2B firms, the business-to-consumer or B2C model focuses on individual buyers. B2C firms are concerned with consumer buying behavior and offering the right products and services. Many B2C firms make a special effort to build long-term relationships with their customers. As a result, their customer list is a highly valuable asset.
While B2B and B2C models are the most popular e-business models, there are other models that perform specialized e-business activities to generate revenues. (LO 7 ends)

8. Explore the factors that will affect the future of e-business

Since the advent of commercial activity on the Internet, developments in e-business have been rapid and formidable. Clearly, the slowdown in e-business activity that began in 2000 caused a shakeout of excessive optimism in this new business environment. Today, most firms involved in e-business use a more intelligent approach to development. The long-term view held by the vast majority of analysts is that the Internet will continue to expand along with related technologies. While approximately 70 percent of Americans now have access to the Internet, it is expected that worldwide users will exceed 2 billion by 2011 or 2012. Although the environmental forces at work are complex, it is useful to think of them as either internal or external forces that affect an e-business. Internal environmental forces are those that are closely associated with the actions and decisions taking place within a firm. In contrast, external environmental forces are those factors affecting an e-business originating outside an organization.  (LO 8 ends)