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Text: Information Systems Today: Managing in the Digital World, 7th Ed.
This guide is intended to help you better prepare for Exam 2 of the MIS 3302 course. It points
out the essential learning points of each chapter for you to review and understand. This Review
and Study Guide is designed for you to use along with your text or online book and includes a
reference page number in the text where content discussion begins. Be sure and study the KEY
TOPICS OF INTEREST at the end of the list of learning points. These topics expand on
several of the key topics in each chapter.
LEARNING TIP: As you work through these essential learning points, jot down some notes or
high light sentences and key terms as you progress to help you able to better review and recall
this material prior to taking the exam.


1. Understand the multiple types of Electronic Commerce (EC) along with examples the
application of each type. (Page 135)


2. Understand the difference between the physical and virtual type of conducting business. That
is knowing the difference between Brick and Mortar, Click and Mortar also known is Bricks and
Clicks, and Click Only strategies. (Page 137)
3. Understand how Electronic Commerce facilitates along with examples and applications of
each: (Page 138)

Mass Customization (get it your way)

Disintermediation (cutting out the middleman)
Group Buying (Groupon)
New Revenue and Pricing Models (menu-driven pricing, reverse pricing)
Social Commerce (sharing purchase decisions with other on social media influencing

4. Understand the benefits and drawbacks of e-Tailing. (Page 140)

5. Understand and be able to explain and discuss the following terms: (Page 141)

Virtual storefront
The Long-Tail business model
The Reverse Pricing model
QR codes
Bar codes
RFID codes

6. Understand the basic rules of commerce for EC websites and Internet Marketing to be
successful: (Page 142)

Review the 4 Recommendations for e-commerce conversion rate (the key success metric
for e-tailers)
1. The web site should offer something unique
2. The web site must motivate people to visit, to stay and to return
3. You must advertise your presence on the web
4. You should learn from your web site.

7. Understand the meaning of Web Site terminology such as: (Page 145)

Structural firmness
Functional convenience
Representational delight
Online consumers hierarchy of needs
Search Marking (Paid search, Search advertising, Paid inclusion, Search engine
Optimization (SEO).

8. Understand Internet Marketing terms and concepts such as: (Page 149)

Click-through rate
Conversion Rate
Pay-Per-Click (including Click Fraud)
Exit Rate

9. Understand the megatrend of Mobil Commerce (m-commerce) and the major drivers of
mobile commerce (mobile devices in general such as mobile phones & tablets: (Page 150)
10. Understand the following terms related to mobile commerce: (Page 150)

Location-based m-commerce

Information on the go
Product and content sales

11. Understand Managing Finances and Navigation Legal Issues in Electronic Commerce such
as: (Page 154)

Securing payments in the digital world
Use of credit and Debit cards
Managing risks in B2C transactions
Ways to protect yourself when shopping online
Use of Payment Services (PayPal, Google Checkout)
Internet Tax Freedom Act

12. Understand other Legal Considerations such as copyright or trademark violations, Digital
Rights Management, and Net Neutrality. (Page 159)


1. When it comes to distinguishing the differences between the different electronic commerce
(EC) strategies it is important to understand that there are three strategies:
Brick-and-mortar business strategy: Companies following this business strategy choose to
operate solely in the traditional physical markets. These companies approach business activities
in a traditional manner by operating physical locations such as retail stores, and not offering their
products or services online.
Click-only business strategy: Companies following this business strategy (i.e., virtual
companies) conduct business electronically in cyberspace. These firms have no physical store
locations, allowing them to focus purely on EC. In e-business terminology, click-only companies
are sometimes called "pure play companies," focusing on one very distinct way of doing
Click-and-mortar business strategy: Firms pursuing this strategy choose to operate in both
physical and virtual arenas. This business strategy is also referred to as the bricks-and-clicks
business strategy.
2. When it comes to e-government relationships, government-to-citizen (G2C) EC allows for
interactions between federal, state, and local governments and their constituents. The Internal
Revenue Service's Internet tax filing, or e-filing, is one of the more recognizable G2C tools,
saving resources in terms of time and paper. Another e-government tool in wide use today is

Government-to-business (G2B) is similar to G2C, but this form of EC involves businesses'

relationships with all levels of government. This includes e-procurement, in which the
government streamlines its supply chain by purchasing materials directly from suppliers using its
proprietary Internet-enabled procurement system.
Government-to-government (G2G) EC is used for electronic interactions that take place between
countries or between different levels of government within a country.
3. An example of the capability of the Web to integrate information is knowing that Web
technologies allow for integration of information via Web sites that can be linked to corporate
databases to provide real-time access to personalized information. Customers no longer have to
rely on old information from printed catalogs or account statements that arrive in the mail once a
month. For example, like nearly every other major airline, US Airways (
dynamically adjusts fares based on availability, booking time, current and historical demand,
forecast demand, and other factors to maximize revenues. The most current fares are
disseminated in real-time on the company's Web site. This is particularly important for
companies operating in highly competitive environments such as the airline industry.
Furthermore, US Airways offers its valued customers the ability to check the balances of their
frequent-flyer accounts, linking customers to information stored on the firm's corporate database.
Customers do not have to wait for monthly statements to see if they are eligible for travel

4. When considering the features that make a Web site functionally convenient it is important to
understand that Web sites should provide easy navigation for users to find their way (and back).
They should provide feedback about where the users are on the site, and offer help features.
Further, features such as one-click ordering, offering a variety of payment methods, or order
tracking can increase the perceived functional convenience of a Web site.

5. To summarize the concept of online classifieds one should understand that online classifieds
is a type of C2C e-commerce. Although online classifieds sites such as are enabled
by Web capabilities, no transactions take place online. Yet, online classifieds have flourished in
recent years, enabling people to sell anything from flowers to furniture. A related concept that
has gained popularity is "freecycling," that is, giving away goods for free to anyone who is
willing to pick them up. Likewise, C2C marketplaces such as Etsy allow individuals to sell
vintage or handmade products to other consumers.

6. One relatively recent trend in Internet marketing is harnessing the power of social media, such
as the social networking site Facebook. More and more people rely on social media to stay in
contact with their friends or business associates, so including such sites in the interactive

marketing mix is a natural move for companies. In addition to placing display ads on such sites,
companies increasingly use social networking sites for interactive communication with their
customers. For example, the Coca-Cola Company has created a page on Facebook, allowing it to
interact with its over 82 million "fans" (i.e., Facebook users who "like" the page) in various
ways; Coke's fans can download free virtual goodies, can upload pictures related to everything
Coke, or can use interactive applications. By creating this page, Coke can build strong
relationships with a large group of its target customers. Similarly, people can follow Coke on
Twitter or visit Coke's channel on the video sharing site YouTube. A recent trend for companies
is establishing "social media listening centers" to feel the pulse of public opinion across a variety
of social media.

7. A key driver for m-commerce is location-based services, which are highly personalized
mobile services based on a user's location. Location-based services are implemented via the
cellular network, Wi-Fi networks, and Global Positioning System (GPS) functionality, now built
into most modern cell phones. Location-based services allow the service provider to offer
information or services tailored to the consumers' needs, depending on their location. For
example, search engines can provide specific information about attractions or restaurants located
in the user's vicinity, retail stores can enhance store locators with navigation instructions, or users
can receive real-time traffic or public transport information.

8. An exciting new technology on the horizon is Carbon Nanotubes. Carbon nanotubes are
hollow cylinders composed of a single sheet of carbon atoms. A number of features of nanotubes
make them ideal as the basis of tomorrow's electronic components. The nanotubes are so small
that it takes relatively little energy to power a nanotube transistor-only a fraction of the energy
required by transistors made of silicon-which could be a major boon to the legions of batterypowered mobile and wearable devices predicted in the future. Nanotubes' small size also makes
them easier to pack into small places. Nanotubes are also much more heat efficient, a key
consideration as excess heat severely decreases the effectiveness of computing devices. In short,
nanotube-based processors could do a whole lot more useful work while using a whole lot less



1. Understand the need and importance for effective communication and collaboration including
the enabling tools and technology. (Page 172)

Virtual teams - use of both synchronous (at the same time such as a phone conversation)
and asynchronous (not coordinated in time such as using email)
Groupware Microsoft Exchange or SharePoint (Check out Categories of Collaborative
tools in Table 5.1 on page 173
Videoconferencing desktop conferencing using webcams
Intranets (a network internal to an organization) facilitates virtual or collated meetings
Employee Portals provide employee real time access to corporate information,
enterprise information searches, collaboration among employees, and employee selfservice.

2. Understand the Evolving Web (Web 1.0 vs Web 2.0) See Table 5.2 on page 179

Social Interactions
Future Web Capabilities
Web 3.0 in the future, thought of as contextual Web

3. Semantic Web (Tim Berners-Lee) (Page 180)

4. Enterprise 2.0 can help in sharing organizational knowledge, making business more
innovative and productive facilitate connection with customers and the wider public. (Page 181
5. Social Media and the Enterprise

Enhancing communication using social media (blogs, blogging) considered the

amateurization of journalism by Nicholas Carr
Microblogging tools (social presence tools Twitter)
Instant Messaging
Virtual worlds Oculus virtual reality headset

6. Enhancing Cooperation with Social Media (Page 183

Media sharing Webcasting or podcasting

RSS Real Simple Syndication feeds
Social Bookmarking

Social cataloging
Tagging adding metadata (data about data)
Geotagging adding geospatial metadata (latitude, longitude, or altitude as metadata

7. Enhancing Collaboration with Social Media (Page 187)

Cloud-based collaboration tools See Table 5.3 and 5.4 on pages 188 189
Content Management systems
Learning Management Systems think BlackBoard used here at UHD
Collective Intelligence open source software ( Linus, MySQL, PHP, Apache)
Wikis also based on collective intelligence (Wikipedia)
Human-based computing (Crowdsourcing)
Open innovation

8. Enhancing connection with Social Media (Page 192)

Social Networking
Social search
Viral Marketing critical factors:
o Do something unexpected
o Make people feel something
o Make sequels
o Allow sharing and easy distribution
o Never restrict access to the viral content

9. Managing the enterprise 2.0 Strategy (Page 195)

Organizational Issues
o Enterprise (not necessarily equal to) Web
o Culture
o Organizational Context
o Organizational Hierarchies
o Network effect and critical mass
o Generational gap
o Technological Inertia
o Technological Integrations Security

10. Pitfalls of Web 2.0 Marketing (Page 197)

Online product reviews

Social Networks
Bad vibes going viral
Lessons learned


1. Electronic Meeting Systems (EMSs) are a category of groupware which focuses on helping
groups have better meetings. An EMS is essentially a collection of personal computers
networked together with sophisticated software tools to help group members solve problems and
make decisions through interactive electronic idea generation, evaluation, and voting. EMSs
have traditionally been housed within a dedicated meeting facility; increasingly, Web-based
implementations support team members around the globe.

2. Desktop videoconferencing has been enabled by the growing power of processors powering
personal computers and faster Internet connections. A desktop videoconferencing system usually
comprises a fast personal computer, a webcam (i.e., a small video camera that is connected
directly to a PC), a speaker telephone or separate microphone, videoconferencing software (e.g.,
Skype, Google+, Yahoo! Messenger, or Windows Live Messenger), and a high-speed Internet
connection. Similarly, people can now use apps such as FaceTime, FriendCaller, or Skype on
their mobile devices, enabling them to make video calls on the go.
3. One major benefit of social software is the ability to harness the "wisdom of crowds," or
collective intelligence. The concept of collective intelligence is based on the notion that
distributed groups of people with a divergent range of information and expertise will be able to
outperform the capabilities of individual experts. This is demonstrated by the online
encyclopedia Wikipedia, which is entirely based on its users' contributions. Likewise, open
source software is another example of the power of collective intelligence. High-quality software
such as the Firefox Web browser, the Linux operating system, or the OpenOffice productivity
suite are created by thousands of volunteers located all over the world. For organizations, making
effective use of the collective intelligence of their employees, customers, and other stakeholders
can prove extremely valuable. In addition to the benefits of harnessing the wisdom of crowds,
societal changes (brought about by globalization, increasing wealth and consumerism, and the
Web) are increasingly changing the way in which organizations interact with internal and
external stakeholders.

4. Social presence tools (also called microblogging tools), similar to blogging, enable people to
voice their thoughts; however, in contrast to blogs, which often contain lengthy posts, social
presence tools are designed for relatively short "status updates." A popular social presence tool is
Twitter, which allows users to post short (up to 140 characters of text) "tweets."
In contrast to asynchronous status updates, instant messaging (or online chat) emulates real-time
written conversations. Using instant messaging, multiple participants can have conversations and
enjoy immediate feedback from their conversation partners.
5. Virtual worlds take the concept of real-time communication a step further by allowing people
to communicate using avatars. Popular virtual worlds such as Second Life, Meez, or IMVU
consist of 3D environments where people can interact and build, buy or sell virtual items, all
using their personalized avatar. While many companies have not been able to realize the full
potential of those environments beyond just providing virtual showcases for their products,
dedicated virtual worlds are increasingly used for rich communication; for example, virtual
worlds are increasingly being used for education-related activities, employee training, or medical
6. For many Web surfers, key challenges are finding information and finding it again at a later
time; hence, people often keep long lists of bookmarks to sites they find interesting or visit
frequently. Although this is useful for an individual, he or she may miss a plethora of other,
related, and potentially interesting Web sites. Social bookmarking helps to address this by
allowing users to share Internet bookmarks and to create categorization systems (referred to as
folksonomies). As more people participate in social bookmarking, the value for each user grows
as the bookmarks become more complete and more relevant to each user. Widely used public
social bookmarking tools include Reddit and Delicious. For organizations, social bookmarking
can be extremely valuable for knowledge management and harnessing the collective intelligence
of employees. Using enterprise-oriented social bookmarking tools, it is easy to map "islands" of
knowledge within an organization, thus helping to easily find experts on a given topic.
7. Social cataloging is the creation of a categorization system by users. Contributors build up
catalogs regarding specific topics such as academic citations, wireless networks, books and
music, and so on. Closely related to social cataloging is tagging, or manually adding metadata to
media or other content. Whereas certain metadata about documents or media files is captured
automatically, there are various other important pieces of information that are not automatically
captured, such as the topic of a document or the names of people in a picture. Tagging is the
process of adding such metadata to pieces of information. Tags are commonly added to pictures
and videos on Web sites.
8. Viral marketing is using the network effect to increase brand awareness. The term viral
marketing was coined by Harvard business professor Jeffrey Rayport to describe how good
marketing techniques can be driven by word-of-mouth or person-to-person communication,
similar to how real viruses are transmitted through offline social networks. Rather than creating
traditional banner ads or sending out massive amounts of spam, businesses create advertisements

in a way that entices the viewers to share the message with their friends through e-mail or social
networks so that the message will spread like a virus. Viral marketing can take many forms, such
as video clips, e-books, flash games, and even text messages.
9. Often, Enterprise 2.0 initiatives are driven by user departments, and small-scale pilot
implementations appear to work quite well. However, organization-wide Enterprise 2.0
implementations typically need changes in terms of organizational culture and processes and
often the flattening of organizational hierarchies. Therefore, to be successful, Enterprise 2.0
implementations need the support and active involvement of senior management so as to cope
with the large magnitude of changes.
One factor hindering the adoption of many new technologies is technological inertia. In many
cases, people are not willing to switch to new applications unless they see real, tangible benefits.
This can be especially a hindrance with social media applications, many of which incorporate a
variety of other tools.
A final issue is related to security and intellectual property. For organizations, securing their
information systems infrastructure is of paramount concern. Any application that allows closer
collaboration by increasing data sharing will necessarily incur greater risks of security breaches.
Companies thus have to balance their desire for enhancing collaboration with the need to protect
intellectual property and comply with rules and regulations such as the Sarbanes-Oxley Act.



1. Understand the concept of a data-driven organization those that make decisions that can be
backed up with verifiable data and are measurably more productive and profitable than those that
are not. (Page 210)
2. Understand that Business Intelligence allow organization to better respond to ongoing threats
and opportunities as we as to better plan for the future. Because of a data-driven approach,
organizations can use a continuous planning cycle based on analyzing internal data primarily
from the operational level of an organization. Business Intelligence also include assessing
external sources of information to make better decisions.
3. Understand the difference between a continuous planning process for budgeting versus the
older backward looking approach for budgeting which was based on historical data rather than
being based on a clear understanding of current conditions and forecasts of future trends. (Page
4. Understand the importance of databases providing inputs into business intelligence
applications including: (Page 212)

Enabling interactive web site using databases

Database foundational concepts
Database Advantages

5. Understand the Database Types and how a Relational Database Management System
(RDBMS) are configured using the basic structure of:

Tables representing Entities (Person, Place, Event, or Thing)

Column representing Attributes (also referred to as a Field) of an Entity
Rows of a table (other than the column headings which indicate attributes) representing
Records which is a collection of related attributes about a single instance of an Entity
STUDY FIGURE 6.5 which illustrates a STUDENT Entity and related attributes, fields,
and records. PAGE 214 THEN STUDY FIGURE 6.8 to see how multiple Entities are
related to configure a database. PAGE 218

6. Understand the definition and use of: (Page 214-219) Study Table 6.1 page 215

Data model
Data type
Data dictionary
Business rules Structured Query Language (SQL)
Data Independence
Online transaction processing (OLTP)


7. Understand that a DBMS performs as an interface between computer applications (can be

dozens or more) to a single database that contains the data for all of those applications.
8. Understand the difference between Operational Systems (generally consists of narrow and
simple updates and queries) and Informational Systems (designed to enhance ease of access and
use). (Page 218-219. Review the following:

Master Data Management

Data Warehouses
Extraction, transformation and loading (ETL) and Data Cleansing of data from multiple
DBs to populate a Data Warehouse
Data Marts a subset of a Data Warehouse that is limited in scope

9. Understand the new breed of database management systems called NoSQL designed to
handle enormous data amounts called Big Data (think, Google, Facebook) (Page
10. Understand how Forms and Reports can be used to enter and report information from a DB.
(Page 217)
11. Understand that SQL queries can be used to Create, Retrieve, Update and Delete (CRUD)
data from databases.
12. Understand the Components of Business Intelligence (Page 221)

Information knowledge and discovery

Ad Hoc Queries and Reports (see Table 6.5 page 221)
Online Analytical Processing (OLAP dont confuse with OLTP Online Transaction
Data Mining (Pages 223-226)

13. Understand the basic concepts of Business Analytics to Support Decision Making (Page

Business Analytics uses predictive modeling to help identify trends or predict business
outcomes (think Financial Forecasting)
Decision Support Systems a special purpose information system design to assist in the
decision making process related to a particular recurring problem
Intelligence Systems (Artificial Intelligence) including Expert Systems that use
reasoning methods based on knowledge about problem domains to provide advice. An
ES uses encoded knowledge collect from expert employees in an organization. Can use
Neural Networks to approximate the functioning or the human brain and learn by
example and pattern recognition.
Check out Intelligent Agent Systems (think Apples Siri or Amazons Alexa on Page
User Agents

o Buyer Agents (Shopping Bots)

o Monitoring and Sensing Agents
o Data Mining Agents
o Web Crawlers
o Destructive Agents
Knowledge Management Systems refers to the process an organization uses to gain
the greatest value from its knowledge assets both Explicit Knowledge (knowledge that
can be documented, archived and codified and Tacit Knowledge which reflects much of
what if typically stored in a persons mind on how to perform a particular task.

14. Understand the importance and value of Information Visualization (Page 235)

Digital Dashboards presenting Key Performance Indicators (KPIs) and summary

Visual Analytics (visual data discovery)
Geographic Information Systems (GIS) (see Table 6.10 page 238 and 6.11 page 239)


1. In a continuous planning process, organizations continuously monitor and analyze business
processes. The results lead to ongoing adjustments to how the organization is managed, but these
results are also reflected in ongoing updates to the organizational plans. It is only through timely
and accurate business intelligence that continuous planning can be executed.
2. A database management system (DBMS) is a software application with which you create,
store, organize, and retrieve data from a single database or several databases. In the DBMS, the
individual database is a collection of related attributes about entities.
An entity is something you collect data about, such as people or classes. We often think of
entities as tables, where each row is a record and each column is an attribute. This is also referred
to as a field. A record is a collection of related attributes about a single instance of an entity. Each
record typically consists of many attributes, which are individual pieces of information.
3. A crucial process for consolidating data from operational systems with other organizational
data - to facilitate the use of data mining techniques to gain the greatest and broadest
understanding from the data - is extraction, transformation, and loading.
First, the data need to be extracted from different systems. In the transformation stage, data are
being cleansed and manipulated to fit the needs of the analysis. Data cleansing refers to the
process of detecting, correcting (e.g., standardizing the format), or removing corrupt or
inaccurate data retrieved from different systems. Finally, the transformed data are loaded into
the data warehouse and are ready for being used for complex analyses.

4. Online analytical processing (OLAP) refers to the process of quickly conducting complex,
multidimensional analyses of data stored in a database that is optimized for retrieval, typically
using graphical software tools. OLAP tools enable users to analyze different dimensions of data
beyond simple data summaries and data aggregations of normal database queries.
The chief component of an OLAP system is the OLAP server, which understands how data is
organized in the database and has special functions for analyzing the data. The use of dedicated
databases allows for tremendous increases in retrieval speed. OLAP systems pre-aggregate data
so that only the subset of the data necessary for the queries is extracted, greatly improving
OLAP systems are designed for efficient retrieval of data and categorize data as measures and
dimensions. Measures, sometimes called facts, are the values or numbers the user wants to
analyze, such as the sum of sales or the number of orders placed. Dimensions provide a way to
summarize the data, such as region, time, or product line. To enable these multidimensional
analyses, OLAP arranges the data as so-called cubes. An OLAP cube is a data structure allowing
for multiple dimensions to be added to a traditional two-dimensional table. Analyzing the data on
subsets of the dimensions is referred to as slicing and dicing.
5. Clustering is the process of grouping related records together on the basis of having similar
values for attributes. For example, an airline may cluster its frequent fliers based on miles flown
or the number of flight segments. These results can then be used for targeting certain groups of
customers in marketing campaigns.
In contrast, classification is used when the groups ("classes") are known beforehand, and records
are segmented into these classes. For example, a bank may have found that there are different
classes of customers who differ in their likelihood of defaulting on a loan. All customers can be
classified into different risk categories in order to ensure that the bank does not exceed a desired
level of risk within its loan portfolio. Typically, classification would use a decision tree to
classify the records.
6. The architecture of the expert system and neural networks can be described using the basic
systems model. Inputs to the system are questions and answers from the user. Processing is the
matching of user questions and answers to information in the knowledge base. The processing in
an expert system is called inferencing, which consists of matching facts and rules, determining
the sequence of questions presented to the user, and drawing a conclusion. The output from an
ES is a recommendation.
An expert system (ES) is a type of intelligent system that uses reasoning methods based on
knowledge about a specific problem domain in order to provide advice, much like a human
expert. ESs are used to mimic human expertise by manipulating knowledge-understanding
acquired through experience and extensive learning-rather than simply manipulating information.
Human knowledge can be represented in an ES by facts and rules about a problem coded in a

form that can be manipulated by a computer. When you use an ES, the system asks you a series
of questions, much as a human expert would. It continues to ask questions, and each new
question is determined by your response to the preceding question. The ES matches the
responses with the defined facts and rules until the responses point the system to a solution. A
rule is a way of encoding knowledge, such as a recommendation, after collecting information
from a user. Rules are typically expressed using an "if-then" format.
Neural networks, composed of a network of processing elements that work in parallel to
complete a task, attempt to approximate the functioning of the human brain and can learn by
example. Typically, a neural network is trained by having it categorize a large database of past
information for common patterns. Once these patterns are established, new data can be compared
to these learned patterns and conclusions drawn.
7. Buyer agents search to find the best price for a particular product that a user wishes to
purchase. In contrast, Web crawlers are agents that continuously browse the Web for specific
8. Explicit knowledge assets reflect knowledge that can be documented, archived, and codified,
often with the help of information systems. Explicit knowledge assets reflect much of what is
typically stored in a database management system (DBMS).
In contrast, tacit knowledge assets reflect the processes and procedures that are located in a
person's mind on how to effectively perform a particular task. Tacit knowledge assets often
reflect an organization's best practices-procedures and processes that are widely accepted as
being among the most effective and/or efficient.
9. A geographic information system (GIS) is a system for creating, storing, analyzing, and
managing geographically referenced information. A GIS can visualize features and relationships
between features drawn from an underlying geographic database that describes the data in
geographic terms and attribute data so as to enable inquiry and analysis. Using GIS, analysts can
combine geographic, demographic, and other data for locating target customers, finding optimal
site locations, or determining the right product mix at different locations. Additionally, GIS can
perform a variety of analyses, such as market share analysis and competitor analysis. GIS
provides a user with a blank map of an area. The user can then add information stored in
different layers, each resembling a transparency containing different information about an area.



1. Understand the core business process and organizational value chains in traditional companies
along with the five distinct functional areas. (Page 252)

Marketing and Sales

Supply Chain Management
Manufacturing and Operations
Accounting and Finance
Human Resources

2. Understand and describe Core Business Processes (Page 252)


3. Understand and describe Organizational Activities along the Value Chain (Page 254)

Core Activities (see Figures on Page 255)

o Inbound Logistics
o Operations and Manufacturing
o Outbound Logistics
o Marketing and Sales
o Customer Service
Support Activities
o Administrative
o Infrastructure
o Human Resources
o Technology Development
o Procurement

4. Understand Value Systems: Connecting Multiple Organizational Value Chains (Page 258)

Upstream information flow (see Figure 7.8 Page 259)

Downstream information flow

5. Understand and describe Enterprise Systems (Page 259)

Standalone applications
Legacy systems
Enterprise Systems (ERPs Enterprise Resource Planning systems)


6. Understand Supporting Business Process (think information systems to gain a competitive

advantage) - (Page 260) see Figure 7.10 on page 261

Internally focuses systems

Externally focused systems
Inter-organizational system (IOS crosses functional organizational boundaries)
o Supply Chain Management (upstream side)
o Customer Relationship Management (downstream side)
See Figures 7.11 and 7.12 on pages 262 and 263

7. Understand Improving Business Processes through Enterprise Systems

Packaged Software (off the shelf software or COTS commercial of the shelf software)
Custom Software (Expensive!)
Modules components that can be selected and implemented as needed (Finance, HR,
Customer Management Relationships CRM, etc.)

8. Understand and describe the following concepts: (Page 264)

Vanilla versus Customized Software

Best Practices-Based Software
Business Process Management (BPR Business Process Reengineering - Radical)
o Total Quality Management (incremental)
o Continuous Business Process Improvement (incremental)

9. Understand the Benefits and Costs of Enterprise Systems (Page 266-267)

Examine the bullet points on the above pages
10. Understand and describe Enterprise Resource Planning (ERP)

Core Components
o Financial Management
o Operations Management
o Human Resources
Extended ERP Components

11. Enabling Business Processes using ERP Core Components

Other Business Processes

12. Understand the ERP Installation challenges (Configuration and implementation is highly


13. Understand the ERP Limitations (Modification of organizational processes, difficult to make
further changes, limits organizational flexibility and agility when facing new external
14. Understand and describe the Keys to Achieving Enterprise Systems Success (Page 274)

Secure Executive Sponsorship

Get Help from Outside Experts
Thoroughly Train Users
Take a Multidisciplinary Approach to Implementation
Evolve the Implementation


1. For business organizations, selling products or services are the main way of generating
revenue. Many online retailers provide real-time stock information; however, in case an item is
out of stock after placing an order, the customer will be notified. If the item is in stock, the
customer's order will be put together and shipped, and his credit card will be charged. Together,
the processes associated with selling a product or service are referred to as the order-to-cash
process. This process can be broken down into multiple sub-processes. For most businesses, the
order-to-cash process entails sub-processes such as creating a customer record; checking the
customer's creditworthiness; creating an order; checking and allocating stock; picking, packing,
and shipping; invoicing; and collecting the payment. Depending on the nature of the transaction,
the individual sub-processes and the time in which these are completed can differ considerably.
An ineffective order-to-cash process can have various negative effects for organizations; for
example, the manual input of order information often causes errors, as do suboptimal picking and
shipping processes. Together, such errors can lead to a high rate of disputes that have to be
resolved, ineffective collection processes, and, ultimately, defecting customers. In contrast, an
effective order-to-cash process can create customer satisfaction, speed up the collection process,
and serve to provide valuable inputs into business intelligence and customer relationship
management applications.
2. Online retailers need to manage suppliers, place purchase orders, receive the products,
allocate warehouse space, receive and pay invoices, and handle potential disputes. These
processes associated with procuring goods from external vendors are together referred to as the
procure-to-pay process. Sub-processes of the procure-to-pay process include price and terms
negotiations, issuing of the purchase order, receiving the goods, and receiving and paying the
invoice. An ineffective procure-to-pay process can increase error rates in purchase order and
invoice processing; further, it inhibits a company from developing close relationships with
preferred vendors. Together, this can increase the cost per transaction, lead to an increase in
disputes to be resolved, and prohibit the company from obtaining the most favorable conditions
from its vendors. In contrast, an effective procure-to-pay process can help to obtain favorable
conditions, reduce transaction costs, and, ultimately, create customer goodwill as it helps to
efficiently fulfill customer orders.

3. In the make-to-stock process, goods are produced based on forecasts and are stocked in a
warehouse (i.e., a push-based approach); sales orders are then fulfilled from inventory. In
contrast, in the make-to-order process, raw materials, subcomponents, and accessories are
procured based on forecasts, but actual manufacturing does not start until sales orders are
received (a pull-based approach); in extreme cases, even design and engineering start only when
an order is received. For example, mass-produced goods, such as television sets or home
appliances, are typically produced under a make-to-stock approach. Here, the organization holds
these stocked products, pushing the order out to customers after it is received. Alternatively,
highly customizable or very expensive low-volume goods are often produced under a make-toorder approach, as is the case with Dell computers or with commercial aircraft, where the
assembly starts only after the customer places his order. Here, the organization waits for an order,
allowing it to initiate a pulling sequence to move the order through the production process. The
processes associated with making products are comprised of processing sales orders, procuring
the inputs to the manufacturing process, scheduling production, production, quality control,
packaging, and stocking or shipping the product.
4. In order to efficiently conduct the core business processes as well as other business processes,
the different functional areas within a company need to share data. Businesses have leveraged
information systems (IS) to support business processes for decades, beginning with the
installation of applications to assist companies with specific business tasks, such as issuing
paychecks. As companies began to leverage IS applications, they started out by fulfilling the
needs of particular business activities in a particular department within the organization. Such
systems that focus on the specific needs of individual departments were not designed to
communicate with other systems in the organization and were therefore referred to as stand-alone
applications. Stand-alone applications usually ran on a variety of computing hardware platforms,
such as mainframes and midrange computers. However, although departmental systems enabled
departments to conduct their daily business activities efficiently and effectively, these systems
were not very helpful when people from one part of the firm needed information from another
part of the firm. Organizations often purchased proprietary software systems from software
vendors; these systems, however, were not designed to share data with other vendors' systems.
To utilize data stored in separate applications to facilitate business processes and decision
making, information had to be reentered from one system to the next or be consolidated by a
third system. To address these challenges, organizations have turned to enterprise-wide
information systems. An enterprise-wide information system (or enterprise system) is an
integrated suite of business applications for virtually every department, process, and industry,
allowing companies to integrate information across operations on a company-wide basis using
one large database. Rather than storing information in separate places throughout the
organization, enterprise systems provide a central repository common to all corporate users. This,
along with a common user interface, allows personnel to share information seamlessly, no matter
where the user is located or who is using the application.
5. Information systems (IS) can be used to gain and sustain competitive advantage by supporting
and/or streamlining activities along the value chain. IS can be used to support either internally or
externally focused business processes.


Internally focused systems support functional areas, business processes, and decision making
within an organization. These activities can be viewed as a series of links in a chain along which
information flows within the organization. At each stage in the process, value is added in the
form of the work performed by people associated with that process, and new, useful information
is generated. Information begins to accumulate at the point of entry and flows through the
various links, or business processes, within the organization, progressing through the
organization with new, useful information being added every step of the way.
In contrast, externally focused systems coordinate business processes with customers, suppliers,
business partners, and others who operate outside organizational boundaries. A system that
communicates across organizational boundaries is sometimes referred to as an interorganizational system (IOS). The key purpose of an IOS is to streamline the flow of information
from one company's operations to another's (e.g., from a company to its potential or existing
6. Companies can gain several advantages by integrating and converting stand-alone systems, so
that information stored on separate computing platforms can be consolidated to provide a
centralized point of access-which typically comes in the form of enterprise resource planning
applications. Although such applications do an excellent job of serving the needs of internal
business operations on an organization-wide basis, they are not necessarily designed to
completely accommodate the communication of information outside the organization's
Systems that facilitate inter-organizational communications focus on the upstream and
downstream information flows. Since these systems coordinate business activities across
organizational boundaries, they are classified as externally focused applications. Customer
relationship management applications concentrate on the activities involved in promoting and
selling products to the customers as well as providing customer service and nourishing long-term
relationships. In contrast, supply chain management applications integrate the value chains of
business partners within a supply chain, improving the coordination of suppliers, product or
service production, and distribution. Integrated enterprise systems can be extremely valuable for
companies operating in global markets. Most large enterprise systems vendors offer a suite of
integrated core business applications that combine internally focused and externally focused
7. Business process management (BPM) is similar to quality improvement approaches such as
total quality management in that they are intended to be cross-functional approaches to improve
an organization. BPM differs from these quality improvement approaches, however, in one
fundamental way. These quality improvement approaches tend to focus on incremental change
and gradual improvement of processes, while the intention behind BPM is radical redesign and
drastic improvement of processes.
8. Enterprise resource planning (ERP) control refers to the locus of control over the computing
systems and data contained in these systems, as well as decision-making authority. Companies

either opt for centralized control or allow particular business units to govern themselves. In the
context of ERP, these decisions are based on the level of detail in the information that must be
provided to management. Some corporations want to have as much detail as possible made
available at the executive level, whereas other companies do not require such access. For
instance, an accountant in one company may want the ability to view costs down to the level of
individual transactions, while an accountant in another company may want only summary
information. Another area related to control involves the consistency of policies and procedures.
Some companies prefer that policies and procedures remain consistent throughout an
organization. Other companies want to allow each business unit to develop its own policies and
procedures to accommodate the unique ways that they do business. ERP applications vary widely
in their allowance for control, typically assuming either a corporate or a business-unit locus of
control. Some ERP applications allow users to select or customize the locus of control. In either
case, management must consider the ERP's stance on control to ensure that it will meet the
business requirements of the company.
9. Enterprise resource planning (ERP) core components support the important internal activities
of the organization for producing their products and services. These components support the
following internal operations:
1. Financial Management. Components to support accounting, financial reporting, performance
management, and corporate governance
2. Operations Management. Components to simplify, standardize, and automate business
processes related to inbound and outbound logistics, product development, manufacturing, and
sales and service
3. Human Resource Management. Components to support employee recruitment, assignment
tracking, performance reviews, payroll, and regulatory requirements
10. The primary reason that enterprise system implementations fail is believed to be a direct
result of the lack of top-level management support. Although executives do not necessarily need
to make decisions concerning the enterprise system, it is critical that they buy into the decisions
made by project managers. Many problems can arise if projects fail to grab the attention of toplevel management. In most companies, executives have the ultimate authority regarding the
availability and distribution of resources within the organization. If executives do not understand
the importance of the enterprise system, this will likely result in delays or stoppages because the
necessary resources may not be available when they are needed.
A second problem that may arise deals with top-level management's ability to authorize changes
in the way the company does business. When business processes need to be changed to
incorporate best practices, these modifications need to be completed. Otherwise, the company
will have a piece of software on its hands that does not fit the way people accomplish their
business tasks. Lack of executive sponsorship can also have a trickle-down effect within the
organization. If users and mid-level management perceive the enterprise system to be
unimportant, they are not likely to view it as a priority. Enterprise systems require a concentrated
effort, and executive sponsorship can propel or stifle the implementation. Executive management
can obliterate any obstacles that arise.


11. Enterprise systems are complex. Even the most talented IS departments can struggle in
coming to grips with ERP, customer relationship management, and supply chain management
applications. Most vendors have trained project managers and experienced consultants to assist
companies with installing enterprise systems. Using consultants tends to move companies
through the implementation more quickly and tends to help companies train their personnel on
the applications more effectively. However, companies should not rely too heavily on support
from the vendors and should also draw on external consultants to help define the functionality
before selecting a vendor. In addition, the company should also plan for the consultants leaving
once the implementation is complete. When consultants are physically present, company
personnel tend to rely on them for assistance. Once the application goes live and the consultants
are no longer there, users have to do the job themselves. A key focus should, therefore, be
facilitating user learning.




Opening Case
Brief Cases (Several mixed in chapter content in colored boxes)
End-of-Chapter Case

READ (That means read with intent to understand and learn the material. Highlight and/or
underline what the authors emphasis along the way. I suggest reading no more than an hour
without taking a short break).
REVIEW (Go back through the chapter and refresh your memory with what you have
highlighted or underlined. Again, look over the Key Points, Key Terms, Review Questions, SelfStudy Questions, Problems, Application, and Team Work Exercises and Case Study.
RECITE (Form a focus group or discussion session with other class members to discuss the
chapter material. Talking and conversing about the information and the knowledge you gained
by studying the material is a very effective way in internalize and remember what you have