MANAGEMENT INFORMATION SYSTEMS AND E-COMMERCE: CBU 2109

1. Introduction to Information Systems Technology

1.1 Definitions

Information Technology (IT) is the application of computers and telecommunications equipment

to store, retrieve, transmit and manipulate data, (Daintith, J. ed.2009. A Dictionary of Physics,
Oxford University Press, retrieved 01/08/2012 –
http://www.oxfordreference.com/views/ENTRY.html?subview=main&entry=t83.e1592 ) often
in the context of a business or other enterprise. It is used as a synonym for computers and
computer networks but also encompasses other information distribution technologies such as
television and telephones. The Information Technology Association of America defined it as
“the study, design, development, application, implementation, support or management of
computer-based information systems” (Proctor, 2011). Information System (IS) is the study of
complementary networks of hardware and software (see information technology) that people and
organizations use to collect, filter, process, create, and distribute data” (Archibald, J.A. May
1975 ‘Computer science education for majors of other disciplines’, AFIPS Joint Computer
Conferences: 903 – 906; Denning, P. July 1999. ‘Computer Science: The Discipline’,
Encyclopedia of Computer Science, 2000 Edition). Computer Information System(s) is a field
studying computers and algorithmic processes, including their principles, their software and
hardware designs, their applications, and their impact on society (Polack, J. December 2009.
‘Planning a CIS Education within a CIS Framework’, Journal of Computing Science in
Colleges, 25 (2):100 – 106.ISSN 1937 – 4771 – http://www.worldcat.org/ISSN/1937 -4771 )
while IS emphasizes functionality over design (Freeman, P. & Hart, D. August 2004. ‘A Science
of Design for Software – Intensive Systems Computer Science and engineering needs: an
intellectually rigorous, analytical, teachable design process to ensure development of systems as
we all can live with’, Communications of the ACM, 47 (8): 19 –21 –
http://dx.doi.org/10.1145%2F1012037.1012054 ).

Any specific Information System aims to support operations, management and decision making
(http://web.archive.org/web/20070903115947/
http://www.sei.cmu.edu/publications/documents/03.reports/03tr002/03tr002glossary.html ). The
term is used to refer not only to the information and communication technology (ICT) that an
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organization uses, but also to the way in which people interact with this technology in support of
business processes. Information Systems is “a set of interrelated components that collect
(retrieve), process, store and distribute information to support decision making and control in
organizations”(Laudon and Laudon, 2014: 45). Information Technology “refers to any computer-
based tool that people use to work with information and to support the information and
information-processing needs of an organization”(Rainer and Prince, 2016: 3).

Components of an information system are the input, processing, output and feedback processes.

Persware (people side)

Hardware Software

Hardware (input and output); software (processing) and feedback (persware). The first two tend
to receive attention but computer literacy is complete with the feedback loop.

1.2 The evolution of information systems technology

The history of information systems coincides with the history of computer science that began
long before the modern discipline of computer science emerged in 20 th Century
(http://www.cs.uwaterloo.ca/~shallit/Courses/134/history.html). Information systems are focused
upon processing information within organizations, especially within business enterprises, and
sharing the benefits with modern society. It is meant to meet the information needs of businesses
and other enterprises.

There are various types of information systems, e.g. transaction processing systems, decision
support systems, knowledge management systems, learning management systems, database
management systems, and office information systems. Critical to most information systems are
information technologies, which are typically designed to enable people to perform tasks for
which the human brain is not well suited such as handling large amounts of information,
performing complex calculations and controlling many simultaneous processes.

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Information systems has its roots in other disciplines such as computer science, cybernetics etc.
(Mingers, J. & Stowell, J. (eds) 1997. Information Systems: An Emerging Discipline? McGraw-
Hill, London). It can be defined as a collection of hardware, software, data, people and
procedures that work together to produce quality information. It is a scientific field of study
that addresses the range of strategic, managerial, and operational activities involved in the
gathering, processing, storing, distributing, and use of information and its associated
technologies in society and organizations (Scoping the Discipline of Information Systems –
http://www.dogpile.com/clickserver/z-iceUrlFlag=1?rawURL ). It often refers to the interaction
between algorithmic processes and technology. It includes technology an organization uses –
way in which organizations interact with the technology and way in which the technology works
with organisation’s business processes. IT is a subset of IS and is mainly involved in the
technology wing of the system (www.floridatechonline.com ). IT is concerned with
technological infrastructure and how it can be managed whereas IS focuses on the quality of
information and how it is stored, organized and managed (www.quora.com ). IT is associated in
invention of computers whereas IS has been in existence since the pre-mechanical era in the
form of books (www.managementstudy.com ).

Tasks

1. What is the difference between Information Systems and Information Technology (IT)?
2. What is the importance of an Information System in an organization?
A computer (based) Information System is essentially an IS using computer technology to carry
out most of its planned tasks. IT is the technological side of IS. The basic components of
computer based information system are:

1. Hardware – devices like the monitor, processor, printer and keyboard, all of which work
together to accept, process, show data and information.
2. Software – programmes that allow the hardware to process the data.
3. Databases – the gathering of associated files or tables containing related data.
4. Networks – a connecting system that allows diverse computers to distribute resources.
5. Procedures – the commands for combining the components above to process information
and produce the preferred output.

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The first 4 components (hardware, software, database and network) make up what is known as
the information technology platform. Information technology workers could then use these
components to create information systems that watch over safety measures, risk and the
management of data.

1.3 Computer hardware

Hardware refers to computer equipment, the actual machinery used in a computer system.
Managers should be able to understand what a computer is, the different types of computers
available, input devices, output devices, storage capacity, computer power, and any hardware
standards existing in an organization.

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5
 ADDRESS BUS

CPU RAM ROM HARD

DISK

CONTROL BUS

DATA BUS

The primary memory stores data for processing. The characteristics of primary memory are that
it is volatile; it can be accessed randomly and is fast. It is referred to as volatile because it retains
data only as long as the system is on. This is the main memory – sometimes referred to as the
RAM (Random Access Memory).

An auxiliary memory is provided by secondary storage. Secondary storage permits the storage of
more data than does main memory. Secondary memory takes the form of magnetic disks, tapes,
flushes, and CDs. Secondary storage is non-volatile. Data and instructions are stored in both
main memory and secondary storage as bits or binary digits. A binary digit has any two states;
‘on’ and ‘off’. The ‘on’ and ‘off’ bits form characters of the alphabet, numerals and any special
characters used in the code. Two of the mostly used codes are the ASCII (American Standard
Code for Information Interchange) and the EBCDIC (Extended Binary Coded Decimal
Interchange Code). ASCII and EBCDIC codes use 8 bits to make a character. The eight-bit set
that represents a character is called a byte. In EBCDIC, an ‘A’ is stored as 11 000 001. In ASCII,
the same ‘A’ is stored as 1 000 001.

The capacity of a computer’s primary storage and its secondary storage devices is usually
measured in terms of the number of bytes, which is the characters it can hold. One kilobyte (KB)
is equal to 1024 bytes. An advertisement may have a main memory size of 640 KB meaning it

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can hold 655 360 bytes in memory. A megabyte would be 1 000 000 bytes and a Gigabyte would
be 1 000 000 000 bytes. A Terabyte is 1 trillion bytes of storage positions.

To increase the memory of a computer, one has to add memory boards to the special memory
board slots on the motherboard. A double-sided double density 3.5 inch diskette has a capacity of
1.25 MB. A typical hard disk for a PC contains 4 GB, 6 GB or 8 GB.

1.3.1 The power of a computer

Measuring the power of a computer is through: (1) word-size, (2) clock speed measured in
megahertz and (3) number of instructions per unit time measured in millions of instructions per
second (MIPS).

Word-size refers to number of bits of data a computer can transfer between the CPU and main
memory at one time. A machine with a 32-bit word size can pass data through a 32-bit data path.
A data path is a set of wires through which data passes between the CPU and its components.
This is sometimes referred to as a bus. The data path is four characters wide (32 bits). Bigger
computers have bigger word size e.g. a data path size of 64-bit. Think of a 16-bit machine as a
high-way with two lanes – only two cars can use the highway at one time. A 32-bit machine is a
four-lane highway allowing four cars to pass concurrently. Therefore, the bigger the word-size,
the more the amount of data that can be transferred between the CPU and main memory.

Speed as a measure of computer power refers to the speed at which the CPU completes its
internal processing task. This is measured in millions of clock ticks per second, megahertz
(MHz).

MIPS are another measure of computer power. This is millions of instructions that the processor
can handle per given second.

1.3.2 Types of computers

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(1) Microcomputers (PC)

This is a small desk top computer that occupies a little more space than a typewriter and is
movable. It can be linked quite simply into a network system that is used by end users in
businesses and other organizations. Examples – laptop, desktop, pen-based computers, electronic
clipboards, pocket organizers, cellular-phones, i-pads, tablets etc. It can be used in word
processing, database management systems, graphics handling, communications, and application
development.

(2) Minicomputer systems

It is larger and more powerful than most microcomputers. It is popular in scientific research,
instrumentation systems, engineering analysis, and industrial monitoring and control. Also
popular in manufacturing plants and as network servers to help control local area networks.

(3) Mainframe computer systems

These are large, powerful computers physically larger than micros and minis. They have one or
more central processors with faster instruction processing speeds. They also have large primary
storage capacities and can service hundreds of users at once. It is designed to handle the
information process needs of organizations with many employees and customers with complex
computational problems.

(4) Supercomputer system

This is an extremely powerful and specialized mainframe computer system designed for high-
speed numeric computation e.g. military defense systems, national weather forecasting agencies.

1.3.3 Input devices

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These are devices used to facilitate the communication between the computer and the users
(people). It is used to input data and programmes in computers. They include an electronic
mouse, keyboard, scanner, trackballs and joystick.

 A mouse is a handheld input device connected to a computer terminal either with a wire
or via radio, infrared, or other wireless transmission that lets you enter data or commands
without a keyboard.

 A joystick looks like a gearshift set in a box (popular with video games).

 A trackball is a stationary device related to a mouse. An end user turns a roller ball with
only its top exposed outside its case to move the cursor on the screen. Using mice and
trackballs, a user can make menu selections.

 Touch sensitive screen devices allow you to make a selection by touching the surface of
its display screen (generate an electric current).

 Pen-based input devices allow the user to directly write onto the screen. A light-sensitive
pen can be used to write directly on a video screen using photoelectric circuitry. The
light-sensitive pen enables the computer to calculate the coordinates of the points on the
screen touched by the light pen. A graphics tablet allows the user to write or draw on the
surface of the tablet, the handwriting is digitized by the computer and accepted as input
displayed on the screen.

 A scanner is a device that converts a picture or text from hard copy into a computer file
e.g. instrument used in most supermarkets to detect price from products. Modern
cellphone scanner/camera.

Task Identify other input devices used by computers.

1.3.4 Output devices

These are devices that display results of the processes taking place in the processing unit. The
most common type of output device is the video display unit. Video displays use the cathode ray
tube (CRT) technology used in home televisions. Liquid crystal displays such as those used in

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calculators are also being used to display computer output. Plasma display devices have replaced
CRT devices where a flat display is needed. Curved TV or computer screen.

Printed output is another form of visual output. Printers can be used to display output. Two
types: impact and non-impact printers. Impact printers’ form characters on the paper by pressing
a printing element and an inked ribbon against paper e.g. a dot matrix printer. Non-impact
printers are quieter than impact printers e.g. laser printers & inkjet printers.

A plotter is an output device that is used to produce graphical output on papers. It uses single
colour or multi-colour pens to draw pictures as blue print etc.

Task: Identify other output devices used by computers.

Speakers.

1.3.5 Storage media

Media is a common name for what actually holds data in storage device. As of 2011 the most
commonly used data storage technologies are semiconductor, magnetic, and optical while paper
still sees some limited usage.

(1) Semiconductor – this uses semiconductor-based integrated circuits to store information.

A semiconductor memory chip may contain millions of tiny transistors or capacitors.
Both volatile and non-volatile forms of semiconductor memory exist. In modern
computers, primary storage almost exclusively consists of dynamic volatile
semiconductor memory or dynamic random access memory. In the 21st Century a type of
non-volatile semiconductor memory known as flash memory now used for home
computers.

(2) Magnetic – uses different patterns of magnetization on a magnetically coated surface to

store information. Magnetic storage is non-volatile. The information is accessed using
one or more read/write heads which may contain one or more recording transducers. A
read/write head only covers a part of the surface so that the head or medium or both must
be moved relative to another in order to access data. In modern computers, magnetic

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 storage takes these forms: magnetic disk – floppy disk used in off-line storage; hard disk
drive used for secondary storage and magnetic tape used for tertiary and off-line storage.

(3) Optical – the typical optical disc stores information in deformities on the surface of a
circular disc and reads this information by illuminating the surface with a laser diode and
observing the reflection. Optical disc storage is non-volatile. These include CD, CD-
ROM, DVD, B-ROM (read only storage, used for mass distribution of digital information
like music, computer programmes etc); CD-R, DVD-R, DVD+R, BD-R (write once
storage, used for tertiary and off-line storage) etc.

(4) Cloud server – is a logical server that is built, hosted and delivered through a cloud
computing platform over the Internet. Cloud servers possess and exhibit similar
capabilities and functionality to a typical server but are accessed remotely from a cloud
server provider. A cloud server may also be called a virtual server or virtual private
server. (file:///C:Users/Documents/Whatisacloudserver%20-
DefinitionfromTechopedia.htm ).

Tasks

1. Read and write notes on other forms of computer storage media not covered by this
lecture.
2. Discuss the factors organizations need to consider before acquiring computer hardware.
1.4 Computer Software

This refers to a set of programmes that enable an end user to use the computer hardware. It refers
to the generic term given to instructions or programmes and their associated documentation
which allows the computer system to operate. Documentation refers to manuals that instruct both
users and technical people. Computer software can be classified into the following:

(1) Systems software

(2) Applications software

(3) Development software.

1.4.1 Systems software

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This refers to the programmes that manage the computer resources (CPU, peripherals, secondary
devices and printers) and operations of the computer as it performs various information tasks.
These are programmes that manage computer hardware components to work together efficiently.
The major part of the system software is the operating system e.g. Windows 2010 or 7. Systems
software includes operating systems software, communications software and utility software.

People who write and maintain system software are called systems programmers.

Operating systems consist of supervisory programmes, job management programmes and input
management programmes. Supervisory programmes manage computer resources such as main
memory, disk storage, CPU processing time and peripherals. Job management programmes
select, initiate, terminate and otherwise schedule jobs which need to be processed. Input /output
management programmes interact with input and output devices, exchange data between the
CPU and input devices, output devices, and secondary storage devices.

Microcomputer operating systems

A manager using a stand-alone microcomputer in his /her work needs to know something about
microcomputer operating systems. This includes: (1) Is it a single or multi-tasking operating
system? Single tasking means the operating system allows only one person to run one
programme at a time. Multitasking and multi-user operating systems permit more than one
programme to run and more than one person to use the system at one time. Multitasking
operating system may allow a user to receive a fax message at the same time one is searching a
database.

(2) Is it a task switching operating system? A task switching operating system lets one load more
than one programme at a time and allows switching between programmes. The task that one is
working with is the foreground task and the suspended tasks are background tasks.

(3) What utilities are available with the operating system? Commonly used utilities of a
microcomputer operating system are delete, copy contents of one diskette to another, format a
diskette/flush, delete files stored in diskette/flush, and compress data.

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(4) Is the operating system hardware dependent? An operating system may be limited to running
on specific hardware or may have versions that allow it to run on different types of computer
systems.

Examples of operating systems include MS-DOS (Microsoft Disk Operating System),

Windows 95, 2007/2010 and Unix. MS- DOS is a single user, single tasking operating system.
Windows 95 is a multitasking operating system and provides integrated networking support.
Unix operating system is multitasking and multi-user because it permits more than one
programme to run and more than one person to use the system at one time.

1.4.2 Applications software

It performs specific data or text processing functions e.g. word processing and payroll
programme. Application software can be divided into general-purpose, function-specific and
industry-specific. People in different industries at different levels can use general-purpose
software. Functions –specific addresses certain specific functions within an organization e.g.
Accounting package. Industry-specific software includes programmes tailored to the problems
and needs of a particular industry e.g. job-estimation programmes are available for the
construction industries.

Application software can be classified into the following categories:

 Word-processing software = a collection of software that permits the user to create, edit
and print documents. Most word processing package come with spell-checkers, grammar
checkers and thesaurus programmes for creating drawings and table of contents.
Examples of word processing software are Word and WordPerfect.

 Spreadsheet software = allows managers to prepare budgets, tax analysis, sales and profit
projections. Spreadsheets allow managers to stimulate various solutions. Examples of
spreadsheets are Excel and Lotus 1-2-3.

 Presentation graphics software = this software allows managers prepare slides containing
charts, text and images. These make slides look more attractive and informative.

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  Database management software = this allows users to prepare reports based on data found
in different records. This is an important managerial decision support tool for managers at
all levels of an organisation.

 Statistical software = this offers an easy way to treat data statistically. This gives an
insight into the variations and significance of the underlying data. Uses tools like bar
graphs and line charts to give a more visual effect of such data.

Tasks

1. What other types of application software are available than those given above?

2. What is the difference between systems software and application software?

Whenever managers have to buy application software they need to consider the following:

 Relevance of the software to task at hand.

 Sophistication = simple programmes are usually easy to learn, cost less and are
appropriate for those who use the software infrequently.

 Ease of use; user-friendliness.

 Easiness of installation.

 Memory requirements = software packages vary in the amount of main memory they
require.

Task

Explain what is meant by the term ‘electronic office’. Explain the role of these in an electronic
office: word-processing; desktop publishing; electronic mail (email); facsimile (fax); voice mail;
videotext; tele-text; view-data and electronic funds transfer (EFT).

1.4.3 Development software

 This software allows the users to create their own software. They are also known as
programming languages e.g. Pascal (general purpose software); Cobol (common business

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 oriented language). This software is developed by technical people who develop
customized programmes for organizations.

1.5 Data

 Data is more than the raw material of information systems. Data can take many forms,
including traditional alphanumeric data, composed of numbers and alphabetical and other
characters that describe business transactions and other events and entities. Text data,
consisting of sentences and paragraphs used in written communications; image data, such
as graphic shapes and figures; and audio data, the human voice and other sounds, are also
important forms of data (O’Brien, 1999:46). Data is the lowest level of abstraction,
information is the next level, and finally, knowledge is the highest level among the three.
Data on its own carries no meaning. For data to become information, it must be
interpreted and take on meaning. Therefore, data is raw material resources that are
processed into finished information products, while information is data that have been
converted into meaningful and useful context for specific end users. Information is data
that has been placed in a context that gives it value for specific end users.

 Computer data is information processed or stored by a computer. This information may

be in the form of text documents, images, audio clips, software programmes, or other
types of data. Computer data may be processed by the computer’s CPU and is stored in
files and folders on the computer’s hard disk. Because all computer data is in binary
format, it can be created, processed, saved, and stored digitally. This allows data to be
transferred from one computer to another using a network connection or various media
devices. It also does not deteriorate over time or lose quality after being used multiple
times.

Task: What are the differences among data, information and knowledge?

Laudon, K.C. and Laudon, J.P. (2014), Management Information System: Managing the
Digital Firm. 13th Ed. New York: Pearson Education limited.

Rainer Jr, R.K. and Prince, B. (2016), Introduction to Information Systems. 10th Ed. New York:
McGraw-Hill International.
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2. Introduction to Management Information Systems

2.1 Definition

An information system is an organized combination of people, hardware, software,

communication networks, and data resources that collects, transforms, and disseminates
information in organization (O’Brien, 1999:9). Management information system therefore refers
to managerial uses of this system to effectively manage organizations. Management information
systems help managers improve the efficiency and effectiveness of their business processes,
managerial decision making, and workgroup collaboration and thus strengthen their competitive
positions in a rapidly changing market place.

2.2 Management information systems and business

Management information systems are used by several end users in an organization. A managerial
end user is a manager, entrepreneur, or managerial-level professional who personally uses
information systems. So most managers are managerial end users. An employee can increase
their opportunities for success by becoming a knowledgeable end user of information
technology. Businesses and other organizations need people who can use networked computer
workstations to enhance their own personal productivity and the productivity of their
workgroups, process teams, departments, and organizations. E.g. one should be able to use the
Internet and electronic mail to communicate more effectively, spreadsheet packages to more
effectively analyze decision situations, database management packages to generate better reports
on organizational performance, and specialized business software to support one’s specific work
activities. One needs to be aware of management problems and opportunities presented by use of
information technology – this will enable one to use these systems efficiently and effectively to
benefit one’s career goals and goals of one’s organization.

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Management information systems play a vital role in the business success of an enterprise. E.g.
the Internet, intranets and extranets can provide the information infrastructure a business needs
for efficient operations, effective management, and competitive advantage. However,
information systems must also support the business strategies, business processes, and
organizational structures and culture of an enterprise. These need to be used as other measures of
success (in addition to minimizing costs, time etc.).

So, the proper management of information systems is a major challenge for managers. Thus, the
information systems function represents:

 A major functional area of business that is as important to business success as the

functions of accounting, finance, operations management, marketing, and human
resource management.

 An important contributor to operational efficiency, employee productivity and morale,

and customer service and satisfaction.

 A major source of information and support needed to promote effective decision making
by managers.

 An important ingredient in developing competitive products and services that give an

organization a strategic advantage in the global marketplace.

 A major part of the resources of an enterprise and its cost of doing business, thus posing a
major resource management challenge.

 A vital, dynamic, and challenging career opportunity for millions of men and women.
(O’Brien, 1999:11).

2.3 A Global Information Society

O’Brien (1999:11) states that we are living in a global information society, with a global
economy that is increasingly dependent on the creation, management, and distribution of
information resources over interconnected global networks like the Internet. So information is a
basic resource in today’s society. People in many nations no longer live in agricultural societies,

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composed primarily of farmers, or even industrial societies, where a majority of the workforce
consists of factory workers. Instead, much of the workforce in many nations consists of workers
in service occupations or knowledge workers, that is, people who spend most of their time
communicating and collaborating in teams and workgroups and creating, using, and distributing
information. Knowledge workers include executives, managers, and supervisors; professionals
such as accountants, engineers, scientists, stockbrokers and teachers; and staff personnel such as
secretaries and clerical office personnel. In the information age, information technology is
internetworking enterprises and individuals wherever they may be.

2.4 The ethical dimension of IT

As a managerial end user and knowledge worker in a global society, you should become aware
of the ethical responsibilities generated by use of information technology. E.g. what uses of
information technology might be considered improper, irresponsible or harmful to other
individuals or to society? What is the proper use of an organization’s information resources?
What does it take to be a responsible end user of information technology? How can you protect
yourself from computer crime and other risks of information technology? These are some of the
questions that outline the ethical dimensions of information systems usage.

A major challenge for our global information society is to manage its information resources to
benefit all members of society while meeting the strategic goals of organizations and nations.

Some benefits of Information System Technologies

 Able to provide user with information needed to do any task effectively and efficiently.

 Provide appropriate data about each user’s tasks in a format best suited to that user. It can
present real-time or archived data as needed and are adaptable to new or modified
information requirements.

 Provide each user the information he needs to make decisions or take action. A sales
manager looking at sales data may see an overall picture of her department’s activities
during the current week, while a salesperson, using the same data set, sees his records
displayed so that they indicate what customers have or haven’t been contacted. Digging
information out of a paper record system would take much longer, be more prone to
missed data and cost more to produce than the time and expense needed by a clerical
person to key in the data.
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  Flexible – can be reprogrammed to grow with the need. Often, individual parts of the
system can be upgraded and installed without disruption of the total system.

 Faster communication, electronic storage and the protection of records are advantages
that IT can have on an organisation.

 Allow businesses to research and develop new ways of doing business. Enable
automation of steps in business procedures that used to be done manually e.g. making an
invoice, shipping order and labels. It supports new business models.

Task

Read and write notes on more benefits to information system technologies to modern
organizations.

3. Fundamental Types of Management Information Systems

3.1 Introduction

The focus is to explain the various types of information systems within an organization. There
are six major types of information systems in use in organizations.

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3.2 Transaction Processing Systems (TPS)

At the operational level of an organization the transactional processing systems (TPS) are in use.
Transaction processing systems record and process data resulting from business transactions.
Typical examples are information systems that process sales, purchases and inventory changes.
The results of such processing are used to update customer, inventory, and other organizational
databases. These databases then provide the data resources that can be processed and used by
management information systems, decision support systems, and executive information systems.

Transaction processing systems also produce a variety of information products for internal or
external use. E.g. they produce customer statements, employee pay cheques, sales receipts,
purchase orders, dividend cheques, tax forms, and financial statements. Transaction processing
systems process transactions in two basic ways. In batch processing, transactions data is
accumulated over a period of time and processed periodically. In real-time (or online)
processing, data is processed immediately after a transaction occurs. E.g. point of sale (POS)
systems at retail stores may use electronic cash register terminals to capture and transmit sales
data over telecommunication links to regional computer centres for immediate (real-time) or
nightly (batch) processing.

The transaction processing system records the data from everyday throughout every division or
department in the organization. Each division/department is tied together through the TPS to give
a clear cut set of information to management levels throughout the company.

Task

Read and write further notes on transactions processing systems and batch processing.

3.3 Management Information Systems (MIS)

When information systems focus on providing information and support for effective decision
making by managers they are called management support systems. Management support systems
began when the concept of management information systems (MIS) originated in the 1960s. The
concept of MIS was developed to counteract inefficient development and ineffective use of

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computers. MIS emphasizes the management orientation of information technology in business.
A major goal of computer-based information systems should be the support of management
decision making, not merely the processing of data generated by business operations.

MIS are the most common form of management support systems. They provide managerial end
users with information products that support much of their day-to-day decision-making needs.
Management information systems provide a variety of reports and displays to management. The
contents of these information products are specified in advance by managers so that they contain
information that managers need. MIS retrieve information about internal operations from
databases that have been updated by transaction processing systems. They also obtain data about
the business environment from external sources.

Information products provided to managers include displays and reports that can be furnished (1)
on demand, (2) periodically, according to a predetermined schedule, or (3) whenever exceptional
conditions occur. E.g. sales managers could (1) use a Web browser to receive instantaneous
visual displays at their workstations of information about the sales of a product; (2) access
weekly sales analysis reports evaluating sales results by product, sales person, and sales territory;
or (3) receive reports produced automatically whenever a sales person fails to produce sales
results during a specified period.

Managers throughout the organization to help them in planning, organizing, leading, controlling,
and decision-making use a management information system. The MIS will help answer
structured questions on a periodic basis.

Task

Read and write further notes on Management Information Systems.

3.4 Decision Support Systems(DSS)

Decision support systems (DSS) are a natural progression from information reporting systems
and transaction processing systems. DSS are interactive, computer-based information systems
that use decision models and specialized databases to assist the decision-making processes of
managerial end users. Thus, they are different from transaction processing systems, which focus
on processing the data generated by business transactions and operations, though they extract
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data from corporate databases maintained by TPS. They also differ from management
information systems, which focus on providing managers with pre-specified information
(reports) that can be used to help them make more effective, structured types of decisions.

Instead, decision support systems provide managerial end users with information in an
interactive session on ad hoc (as needed) basis. A decision support system provides managers
with analytical modeling, simulation, data retrieval, and information presentation capabilities.
Managers generate the information they need for more unstructured types of decisions in an
interactive, simulation-based process. E.g. electronic spreadsheets and other decision support
software allow a managerial end user to pose a series of what-if questions and receive interactive
responses to such ad hoc requests for information.

Thus, information from a DSS differs from the pre-specified responses generated by
management information systems. When using a DSS, managers are simulating and exploring
possible alternatives and receiving tentative information based on alternative sets of assumptions.
Therefore, managerial end users do not have to specify their information needs in advance.
Instead, a DSS interactively helps them find the information they need. DSS are used for
complex ‘what-if’ questions that require internal and external data.

Task

1. Read and write further notes on Decision Support Systems.

2. Discuss the differences among the TPS, MIS and DSS.

3.5 Office Automation Systems (OAS)

Even in this day of the promised paperless society, no job is complete until the paperwork is
done. The Office Automation System (OAS) is dedicated mostly to data workers. The new
recipe discovered by the knowledge workers must be patented. The Office Automation System
makes easy work of developing press releases that Sales and Marketing will use to announce the
new and improved products. The clerical workers in Human Resource will use their OAS to
process the job changes the production workers will need for their new positions.

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One of the newest forms of OAS is the Document Imaging Systems that have been incorporated
into most effective systems in the last few years. Technological improvements now make the old
file cabinet bulging with pieces of paper a relic that can be stored in the basement.

An Office Automation System aids knowledge workers such as engineers, scientists, and legal
workers. It helps create or gather new knowledge useful to all parts of the organization. Data
workers to fulfill the coordination and communication functions vital to an organization use an
Office Automation System.

Task

Read and write further notes on Office Automation Systems.

3.6 Executive Support Systems (ESS)

Executive support systems are management information systems tailored to the strategic
information needs of top management. Top executives get the information they need from many
sources including letters, memos, periodicals, and reports produced manually as well as by
computers. Other sources of executive information are meetings, telephone calls, and social
activities. Thus, much of a top executive’s information comes from non-computer sources.
Computer-generated information has not played a primary role in meeting many top executives’
information needs.

The goal of computer-based executive information systems is to provide top management with
immediate and easy access to selective information about key factors that are critical to
accomplish a firm’s strategic objectives. Graphics displays are used extensively, and immediate
access to internal and external databases is provided. ESS provides information about the current
status and projected trends for key factors selected by top executives. The use of ESS has spread
into ranks of middle management.

Therefore, an ESS helps managers make strategic decisions affecting the entire organization. The
systems use internal and external data to give executives the information they need to determine
the proper course of action in unstructured situations.

Task

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 1. Read and write further notes on Executive Support Systems.

2. Discuss the similarities and differences among the MIS, DSS and ESS.

3.7 Expert Systems (ES)

The frontiers of information systems are being affected by development in artificial intelligence
(AI). Artificial intelligence is an area of computer science whose long-range goal is to develop
computers that can think as well as see, hear, walk, talk and feel. E.g. AI projects involve the
development of natural computer interface, advanced industrial robots, and intelligent computer
software. A major thrust is the development of computer functions normally associated with
human intelligence, such as reasoning, learning and problem solving.

One of the most practical applications of AI is the development of expert systems (ES). An
expert is a knowledge-based information system; that is, it uses its knowledge about a specific
area to act as an expert consultant to users. The components of an expert system are a knowledge
base and software modules that perform inferences on the knowledge and offer answers to a
user’s questions. Expert systems are being used in many different fields including medicine,
engineering, the physical sciences, and business. E.g. expert systems now help diagnose
illnesses, search for minerals, analyze compounds, recommend repairs, and do financial
planning. Expert systems can support either operations or management.

Task

Read and write further notes on Expert Systems.

3.8 Conclusion

The key element for all these systems is integration. Any product would not be near success it is
if all systems did not work together and help each other. If information from the Transaction
Processing System did not feed into the Management Information System, which incorporated
the Office Automation System which helped the Decision Support System which then worked
with the Executive Support System to make a successful product.

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4. Cross-Functional Information Systems

4.1 What is a Cross-Functional System?

A Cross-Functional Information System is an information system that has been developed to

cross the boundaries of traditional business functions in order to reengineer and improve vital
business processes. The focus is to understand how information systems affect a particular
business function – marketing, for example – or a particular industry (e.g. banking) that is
directly related to your career objectives. For example, someone whose career objective 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.

4.2 Marketing information systems

The marketing function 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 serve
present and potential customers. Business organizations have turned to information technology to
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help them perform vital marketing functions in the face of the rapid changes of today’s
environment. Marketing information systems provide information technologies that support
major components of the marketing function. E.g. 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 many information processing activities
for sales support and management. Other marketing information systems assist marketing
managers in product planning, pricing, and other product management decisions, advertising and
sales promotion strategies, and market research and forecasting.

The explosive growth of Internet technologies has had a major impact on the marketing function.
The term interactive marketing has been coined to describe a type of marketing that is based on
using the Internet, intranets and extranets to establish two-way interaction between a business
and its customers or potential customers. The goal of interactive marketing is to enable an
organization to profitably use those networks to attract and keep customers who will become
partners with the business in creating, purchasing, and improving products and services. The
Internet has become the primary distribution channel of the new online marketing environment.
Interactive marketing encourages customers to become involved in product development,
delivery, and service issues.

Increasingly, computers and networks are providing the basis for sales force automation. In
many organizations, the sales force is being outfitted with notebook computers, Web browsers,
and sales contact management software that connect them to marketing Web sites on the
Internet, extranets, and their company intranets. This increases personal productivity, speeds up
capture and analysis of sales data from the field to marketing managers at company headquarters.
In return, it allows marketing and sales management to improve the delivery of information and
the support they provide to their salespeople. Sales force automation is viewed as a way to gain a
strategic advantage in sales productivity and marketing responsiveness.

Sales managers must plan, monitor, and support the performance of the salespeople in their
organizations. So in most firms, computer-based systems produce sales analysis reports that
analyze sales by product, product line, customer, type of customer, salesperson, and sales
territory. Such reports help marketing managers monitor the sales performance of products
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and salespeople and help them develop sales support programmes to improve sales results.
Product managers need information to plan and control the performances of specific products,
product lines, and brands. Computers can help provide price, revenue, cost, and growth
information for existing products and new product development. Providing information and
analysis for pricing decisions is a major function of this system. Information is also needed on
the manufacturing and distribution resources proposed products will require. Computer-based
models may be used to evaluate the performances of current products and the prospects for
success of proposed products.

Marketing managers try to maximize sales at the lowest possible costs for advertising and
promotion. Marketing information systems use market research information and promotion
models to help (1) select media and promotional methods, (2) allocate financial resources, and
(3) control and evaluate results of various advertising and promotion campaigns.

Targeted marketing has become an important tool in developing advertising and promotion
strategies for a company’s electronic Web sites. It is an advertising and promotion management
concept that includes five targeting components:

 Community – companies can customize their Web advertising messages and promotion
methods to appeal to people in specific communities. These can be communities of
interest, such as virtual communities of online sporting enthusiasts or arts and crafts
hobbyists, or geographic communities formed by the Web sites of a city or local
newspaper.

 Content – advertising such as electronic billboards or banners can be placed on various

Web site pages, in addition to a company’s home page. These messages reach the
targeted audience. An ad for a movie on the opening page of an Internet search engine is
a typical example.

 Context – advertising appears only in Web pages that are relevant to the content of a
product or service. So advertising is targeted only at people who are already looking for
information about a subject matter (e.g. vacation travel) that is related to a company’s
products (e.g. car rental services).

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 Demographic/Psychographic – marketing efforts can be aimed only at specific types or
classes of people; unmarried, twenty-something, middle income, male college graduates,
for example.

 Online behavior – advertising and promotion efforts can be tailored to each visit to a site
by an individual. This strategy is based on ‘Web cookie’ files recorded on the visitor’s
disk drive from previous visits. Cookie files enable a company to track a person’s online
behavior at a Web site so marketing efforts can be instantly developed and targeted to
that individual at each visit to their Web site.

Market research information systems provide marketing intelligence to help managers

make better marketing forecasts and develop more effective marketing strategies. Marketing
information systems help market researchers collect, analyze, and maintain an enormous of
information on a wide variety of market variables that are subject to continual change. This
includes information on customers, prospects, consumers, and competitors. Market,
economic, and demographic trends are also analyzed. Data can be gathered from many
sources, including a company’s databases, data marts and data warehouse, World Wide Web
sites, and telemarketing services companies. Then, a variety of statistical tools can help
managers analyze market research data and forecast sales and other important market trends.

4.3 Human resources management information systems

The human resource management (HRM) function involves the recruitment, placement,
evaluation, compensation, and development of the employees of an organization. The goal of
HRM is the effective and efficient use of the human resources of an organization. Thus,
human resource information systems are designed to support (1) planning to meet the
personnel needs of the business, (2) development of employees to their full potential, and (3)
control of all personnel policies and programmes. Originally, businesses used computer-
based information systems to (1) produce pay-cheques and payroll reports, (2) maintain
personnel records, and (3) analyze the use of personnel in business operations. Many firms
have gone beyond these traditional personnel management functions and have developed
human resource information systems (HRIS) that also support (1) recruitment, selection, and
hiring; (2) job placement; (3) performance appraisals; (4) employee benefits analysis; (5)
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training and development; and (6) health, safety, and security. HRIS support the strategic,
tactical, and operational use of the human resources of an organization.

HRM and the Internet – the Internet has become useful in HRM. E.g. online HRM systems
may involve recruiting for employees through recruitment sections of corporate Websites.
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 by Internet E-mail. The Internet has a wealth of information and contacts for both
employers and job seekers. E.g. http://www.careerpath.com lets you simultaneously search
the classified job listings of 25 major US newspapers by category and job title. What is
available in Zimbabwe in terms of job seeking? CV People, Classifieds, www.jobseekers
etc.

HRM and the Corporate Intranet – Intranet technologies allow companies to process most
common HRM applications over their corporate intranets. Intranets allow the HRM
department to provide around-the-clock services to their customers: employees. They can
also disseminate valuable information faster than through previous company channels.
Intranets can collect information online from employees for input to their HRM files and they
can enable employees to perform HRM tasks with little intervention by the HRM department.

Intranet can serve as a training tool. Employees can easily download instructions and
processes to get the information or education they need. Employees using new technology
can view training videos over the intranet on demand. This eliminates the need to loan out
and track training videos.

Staffing the Organization – the function must be supported by information systems that
record and track human resources within a company to maximize their use. E.g. a personnel
record-keeping system keeps track of additions, deletions, and other changes to records in a
personnel database. Changes in job assignments and compensation, or hirings and
terminations, are examples of information that would be used to update the personnel
database. Another example is an employee skills inventory system that uses the employee
skills data from a personnel database to locate employees within a company who have the
skills required for specific assignments and projects.

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A final example involves forecasting personnel requirements to assure a business an adequate
supply of high-quality human resources. This application provides forecasts of personnel
requirements in each major job category for various company departments or for new
projects and other ventures being planned by management. Such long-range planning may
use a computer-based simulation model to evaluate alternative plans for recruitment,
reassignment, or retraining programmes.

Training and Development – information systems help human resource managers plan and
monitor employee recruitment, training and development programmes by analyzing the
success history of present programmes. They also analyze the career development status of
each employee to determine whether development methods such training programmes and
periodic performance appraisals should be recommended. Computer-based multimedia
training programmes and appraisals of employee job performance are available to help
support this area of human resource management.

Compensation Analysis – information systems can help analyze the range and distribution
of employee compensation (wages, salaries, incentives payments, and fringe benefits) within
a company and make comparisons with compensation paid by similar firms or with various
economic indicators. This information is useful for planning changes in compensation,
especially if negotiations with labour unions are involved. It helps keep the compensation of
a company competitive and equitable, while controlling compensation costs.

4.4 Accounting Information Systems

Accounting information systems are the oldest and most widely used information systems
in business. They record and report business transactions and other economic events.
Accounting information systems are based on the double-entry bookkeeping concept and
other recent accounting concepts such as responsibility accounting and activity-based
costing. Computer-based accounting systems record and report the flow of funds through an
organization on a historical basis and produce important financial statements such as balance
sheets and income statements. Such systems also produce forecasts of future conditions such
as projected financial statements and financial budgets.

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Operational accounting systems emphasize legal and historical record-keeping and the
production of accurate financial statements. Typically, these systems include transaction
processing systems such as order processing, inventory control, accounts receivable,
accounts payable, payroll, and general ledger systems. Management accounting systems
focus on the planning and control of business operations. They emphasize cost accounting
reports, the development of financial budgets and projected financial statements, and
analytical reports comparing actual to forecasted performance.

Online Accounting Systems – using the Internet, intranets, extranets, and other networks
changes how accounting information systems monitor and track business activity. The online
interactive nature of such networks calls for new forms of transaction documents, procedures,
and controls. This applies to systems like order processing, inventory control, accounts
receivable, and accounts payable. These systems are directly involved in the processing of
transactions between a business and its customers and suppliers.

Order Processing or sales order processing, is an important transaction processing system

that captures and processes customer orders and produces data needed for sales analysis and
inventory control. In many firms it also keeps track of the status of customer orders until
goods are delivered. Computer-based sales order processing system provide a fast, accurate,
and efficient method of recording and screening customer orders and sales transaction. They
also provide inventory control system with information on accepted orders so that they can
be filled as quickly as possible.

Inventory Control systems process data reflecting changes to items in inventory. Once data
about customer orders are received from an order processing system, a computer-based
inventory control system records changes to inventory levels and prepares appropriate
shipping documents. Then it may notify managers about items that need reordering and
provide them with a variety of inventory status reports. These systems help a business
provide high-quality service to customers while minimizing investment in inventory and
inventory carrying costs.

Accounts receivable systems keep records of amounts owed by customers from data
generated by customer purchases and payments. They produce invoices to customers,

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monthly customer statements, and credit management reports. Computer-based accounts
receivable systems stimulate prompt customer payments by preparing accurate and timely
invoices and monthly statements to credit customers. They provide managers with reports to
help them control the amount of credit extended and the collection of money owed. This
helps maximize profitable credit sales while minimizing losses from bad debts.

Accounts payable systems keep track of data concerning purchases from and payments to
suppliers. They prepare cheques in payment of outstanding invoices and produce cash
management reports. Computer systems help ensure prompt and accurate payment of
suppliers to maintain good relationships, ensure a good credit standing, and secure any
discounts offered for prompt payment. They provide tight financial control over all cash
disbursements of the business. They also provide management with information needed for
the analysis of payments, expenses, purchases, employee expense accounts, and cash
requirements.

Payroll systems receive and maintain data from employee time cards and other work records.
They produce pay-cheques and other documents such as earning statements, payroll reports,
and labour analysis reports. Computer-based payroll systems help businesses make prompt
and accurate payments to their employees, as well as reports to management, employees, and
government agencies concerning earnings, taxes, and other deductions. Also provide
management with reports analyzing labour costs and productivity.

General ledger systems consolidate data received from accounts receivable, accounts
payable, payroll, and other accounting information systems. At the end of each accounting
period, they close the books of a business and produce the general ledger trial balance, the
income statement and balance sheet of the firm, and various income and expense reports for
management. Computer-based general ledger systems help businesses accomplish these
accounting tasks in an accurate and timely manner. System uses fewer personnel and lower
costs than manual accounting methods.

4.5 Financial Information Systems

Computer-based financial information systems support financial managers in decisions

concerning (1) the financing of a business and (2) the allocation and control of financial
32
resources within a business. Major financial information system categories include cash and
investment, capital budgeting, financial forecasting, and financial planning.

Cash management systems collect information on all cash receipts and disbursements
within a company on a real-time or periodic basis. Such information allows businesses to
deposit or invest excess funds more quickly, and thus increase the income generated by
deposited or invested funds. These systems also produce daily, weekly, or monthly forecasts
of cash receipts or disbursements (cash flow forecasts) that are used to spot future cash
deficits or surpluses.

Online Investment Management – many businesses invest their excess cash in short-term
low-risk marketable securities (such as treasury bills) or in higher-return/higher-risk
alternatives, so that investment income may be earned until the funds are required. The
portfolio of such securities can be managed with the help of portfolio management software
packages. Online investment management services help a financial manager make buying,
selling or holding decisions for each type of security so that an optimum mix of securities is
developed that minimizes risk and maximizes investment income for the business.

Capital Budgeting involves evaluating the profitability and financial impact of proposed
capital expenditures. Long-term expenditure proposal for plants and equipment can be
analyzed using a variety of techniques. This application makes heavy use of spreadsheet
models that incorporate present value analysis of expected cash flows and probability
analysis of risk to determine the optimum mix of capital projects for a business.

Financial Forecasting and Planning – financial analysts use electronic spreadsheets and
other financial planning software to evaluate the present and projected financial
performance of a business. They also help determine the financial needs of a business and
analyze alternative methods of financing. Financial analysts use financial forecasts
concerning the economic situation, business operations, types of financing available, interest
rates, and stock and bond prices to develop an optimal financing plan for the business.
Electronic spreadsheet packages, DSS software, and Web-based groupware can be used to
build and manipulate financial models. Answers to what-if and goal-seeking questions can be
explored as financial analysts and managers evaluate their financing and investment
alternatives.

4.6 Manufacturing information systems

Manufacturing information systems support the production/operations that include all

activities concerned with the planning and control of the processes producing goods or
services. Thus, the production/operations function is concerned with the management of the
operational processes and systems of all business firms. Information systems used for
operations management and transaction processing support all firms that must plan, monitor,
and control inventories, purchases, and the flow of goods and services. Therefore, firms such
33
as transportation companies, wholesalers, retailers, financial institutions, and service
companies must use production/operations information systems to plan and control their
operations.

Computer-Integrated Manufacturing –computer-integrated manufacturing (CIM) is an

overall concept that stresses that the objectives of computer-based systems in manufacturing
must be to:

 Simply (reengineer) production processes, product designs, and factory organization

as a vital foundation to automation.

 Automate production processes and the business functions that support them with
computers, machines, and robots.

 Integrate all production and support processes using computers, telecommunications

networks, and other information technologies.

The overall goal of CIM and such manufacturing information systems is to create
flexible, agile, manufacturing processes that efficiently produce products of the highest
quality. Thus, CIM supports the concepts of flexible manufacturing systems, agile (quick
and well-coordinated movement) manufacturing, and total quality management.
Implementing such manufacturing concepts enables a company to quickly respond to and
fulfill customer requirements with high-quality products and services.

Manufacturing information systems help companies simply, automate, and integrate

many of the activities needed to produce products of all kinds. E.g. computers are used to
help engineers design better products using both computer-aided engineering and
computer-aided design, and better production processes with computer-aided process
planning. Also used to help plan the types of material needed in the production process,
which is called material requirements planning (MRP), and to integrate MRP with
production scheduling and shop floor operations, which is known as manufacturing
resource planning.

Computer-aided manufacturing (CAM) systems are those that automate the production
process. E.g. this could be accomplished by monitoring and controlling the production
process in a factory through manufacturing executions systems, or by directly controlling
a physical process (process control), a machine tool (machine control), or machines with
some humanlike work capabilities (robots).

Manufacturing execution systems (MES) are performance monitoring information

systems for factory floor operations. They monitor, track, and control the five essential
components involved in a production process: materials, equipment, personnel,
instructions and specifications, and production facilities. MES includes shop floor
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scheduling and control, machine control, robotics control, and process control systems.
These manufacturing systems monitor, report, and adjust the status and performance of
production components to help a company achieve a flexible, high-quality manufacturing
process.

Benefits of CIM – computer-integrated manufacturing systems can provide major

benefits to manufacturing companies. (1) CIM enables flexible production processes that
produce high-quality products to quickly meet changing market and customer demands. It
gets these results through work simplification and automation, better production schedule
planning, and better balancing of production workload to production capacity. (2)
Improved utilization of production facilities, higher productivity, and better quality
control resulting from continuous monitoring, feedback, and control of factory
operations, equipment, and robots. (3) CIM results in reduced investment in production
inventories and facilities through work simplification, just-in-time inventory policies, and
better planning and control of production and finished-goods requirements. (4) Customer
satisfaction is improved by quickly producing products to customer orders, by drastically
reducing out-of-stock situations, and by producing high-quality products that better meet
customers’ specifications.

Collaborative Manufacturing Networks – manufacturing processes like computer-

aided engineering and design, production control, production scheduling, and
procurement management typically involve a collaborative process. This involves using
the Internet, intranets, extranets, and other networks to link the workstations of engineers
and other specialists with their colleagues at other sites. These collaborative
manufacturing networks may link employees within a company, or include
representatives from a company’s suppliers or customers wherever they may be located.

Process Control is the use of computers to control an ongoing physical process. Process
control computers control physical processes in petroleum refineries, cement plants, steel
mills, chemical plants, food product manufacturing plants, pulp and paper mills, electric
power plants etc. Many process control computers are special-purpose minicomputer
systems. Process control software uses mathematical models to analyze the data
generated by the ongoing process and compare them to standards or forecasts of required
results. Then the computer directs the control of the process by adjusting control devices
such as thermostats, valves, switches etc. The process control system also provides
messages and displays about the status of the process so a human operator can take
appropriate measures to control the process. Personal computers have become a popular
method of analyzing and reporting process control data.

Machine Control is the use of a computer to control the actions of a machine. This is
also known as numerical control. The control of machine tools in factories is a typical
numerical control application, though it also refers to the control of typesetting machines,
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weaving machines, and other industrial machinery. Numeric control computer
programmes for machine tools convert geometric data from engineering drawings and
machining instructions from process planning into a numerical code of commands that
control the actions of a machine tool. Machine control may involve the use of special-
purpose microcomputer called programmable logic controllers (PLCs). These devices
operate one or more machines according to the directions of a numerical control
programme. Specially equipped personal computers that can withstand a factory
environment are used to develop and install numerical control programmes in PLCs.
They are also used to analyze production data furnished by the PLCs. This analysis helps
engineers fine-tune machine tool performance.

Robotics are devices that directly control their own activities with the aid of
microcomputers. Robotics is the technology of building and using machines (robots)
with computer intelligence and computer-controlled human-like physical capabilities
(dexterity, movement, vision etc.). Robotics has also become a major thrust of research
and development efforts in the field of artificial intelligence. Robots are used as “steel-
collar workers” to increase productivity and cut costs. E.g. a robot might assemble
compressor valves with 12 parts at the rate of 320 units per hour, which is 10 times the
rate of human workers. Robots are also particularly valuable for hazardous areas or work
activities. Robots follow programmes distributed by servers and loaded into separate or
on-board special-purpose micro-computers. Input is received from visual and/or tactile
sensors, processed by the microcomputer, and translated into movements of the robot.
This involves moving its arms and hands to pick up and load items or perform some other
work assignment such as painting, drilling or welding. Robotics developments are
expected to make robots more intelligent, flexible, and mobile by improving their
computing, visual, tactile, and navigational capabilities.

Computer- Aided Engineering (CAE) is used to stimulate, analyze, and evaluate the
models of product designs they have developed using computer-aided design (CAD)
methods. Networks of powerful engineering workstations with enhanced graphics and
computational capabilities and CAD software help them analyze and design products and
manufacturing processes and facilities. CAD packages refine an engineer’s initial
drawings and provide three-dimensional computer graphics that can be rotated to display
all sides of the object being designed. The engineer can zoom in for close-up views of a
specific part and even make parts of the product appear to move as they would in normal
operation. The design can then be converted into a finished mathematical model of the
product. This is used as the basis for production specifications and machine tool
programmes.

Manufacturing engineers design products according to product specifications determined

in cooperation with the product design efforts of marketing research, product

36
 development, and customer management specialists. Manufacturing engineering is
responsible for developing standards for product quality as part of a total quality
management effort. Engineers are also responsible for design of production processes
needed to manufacture products they design (computer-aided process planning).

Task: Read and make a good summary of the manufacturing information system.

4.7 Conclusion

Various types of information systems used within departments have been discussed.
These systems have been handled in relation to the departmental functions but
collectively they should aid the organization to function more efficiently and effectively.

5. Strategic Information Systems

5.1 Introduction

James Champy, one of the founders of the business reengineering revolution of the 1990s,
once said “IT has become a strategic necessity. Believe it, act on it, or become a footnote”
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(cite in O’Brien, 1999: 508). Why? Because IT can change the way businesses compete.
Information systems should be viewed strategically, that is, as vital competitive networks, as
a means of organizational renewal, and as a necessary investment in technologies that help an
organization achieve its strategic objectives.

5.2 Competitive Strategy Concepts

The strategic role of information systems involves using information technology to develop
products, services, and capabilities that give an organization strategic advantage over the
competitive forces it faces in the global marketplace. This creates strategic information
systems, information systems that support or shape the competitive position and strategies of
an enterprise. So a strategic information system can be any kind of information system (TPS,
MIS, DSS etc) that helps an organization gain a competitive advantage, reduce a competitive
disadvantage, or meet other strategic enterprise objectives. Several questions help to define
basic concepts in strategic information systems.

How should a managerial end user think about competitive strategies? How can competitive
strategies be applied to the use of information systems by an organization? Several important
conceptual frameworks for understanding and applying competitive strategies have been
developed by Michael Porter (1985), Charles Wiseman and others. The diagram on the next
page shows that a firm can survive and succeed in the long run if it successfully develops
strategies to confront five competitive forces that the structure of competition in its industry.
These are: (1) rivalry of competitors within its industry, (2) threat of new entrants, (3) threat
of substitutes, (4) the bargaining power of customers, and (5) the bargaining power of
suppliers

Porter’s Five Forces of

Competitive Position

New Market Entrants, eg:

 entry ease/barriers
 geographical factors
 incumbents resistance
 new entrant strategy
 routes to market

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Supplier Power, eg: Competitive Rivalry, eg: Buyer Power, eg:

 brand reputation  number and size of firms  buyer choice

 geographical coverage  industry size and trends  buyers size/number
 product/service level quality  fixed variable cost bases  change cost/frequency
 relationships with customers  product/service ranges  product/service importance
 bidding processes/capabilities  differentiation, strategy  volumes, JIT scheduling

Product and Technology Development, e.g:

 alternatives price/quality
 market distribution changes
 fashion and trends
 legislative effects

A variety of competitive strategies can be developed to help a firm confront these competitive
forces. E.g. businesses may to try to counter the bargaining power of their customers and
suppliers by developing unique business relationships with them. This effectively locks in
customers or suppliers by creating “switching costs” that make it expensive or inconvenient for
them to switch to another firm. Thus, competitors are also locked out by such strategies.
Companies may use other strategies to protect themselves from the threat of new businesses
entering their industry or the development of substitutes for their products or services. For
example, businesses may try to develop legal, financial, or technological requirements that create
barriers to entry to discourage firms from entering an industry, or make substitution unattractive
or uneconomical.

Another way that businesses can counter the threats of competitive forces that confront them is
to implement five basic competitive strategies:

 Cost Leadership Strategy – this means becoming a low-cost producer of products and
services in the industry. Also a firm can find ways to help its suppliers or customers to
reduce costs so as to increase the costs of their competitors.

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 Differentiation Strategy – developing ways to differentiate a firm’s products and
services from its competitors’ or reduce the differentiation advantages of competitors.
This may allow a firm to focus its products or services to give it an advantage in
particular segments or niches of a market.

 Innovation Strategy – finding new ways of doing business. This may involve the
development of unique products and services, or entry into unique markets or market
niches. It may also involve making radical changes to the business processes for
producing or distributing products and services that are so different from the way
business has been conducted that they alter the fundamental structure of an industry.

 Growth Strategies – significantly expanding a company’s capacity to produce goods and

services, expanding into global markets, diversifying into new products and services, or
integrating into related products and services.

 Alliance Strategies – establishing new business linkages and alliance with customers,
suppliers, competitors, consultants, and other companies. These linkages may include
mergers, acquisitions, joint ventures, forming of “virtual companies”, or other marketing,
manufacturing, or distribution agreements between a business and its trading partners.

5.3 Strategic Roles for Information Systems

How can the preceding competitive strategy concepts be applied to the strategic role of
information systems in an organization? Or how can managers use investments in
information technology to directly support a firm’s competitive strategies? These questions
can be answered in terms of the key strategic roles that information systems can perform in a
firm.

Improving Business Processes – strategic role of information technology is making major

improvements in a company’s business processes. Investments in information technology can
help make a firm’s operational processes substantially more efficient, and its managerial
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processes much more effective. Making such improvements to its business processes could
enable a company to cut costs, improve quality and customer service and develop innovative
products for new markets. E.g. manufacturing processes for everything from automobiles to
watches have been automated and significantly improved by computer-aided design,
engineering, production and manufacturing resource management technologies. In the
automobile industry, the process for the production, distribution and sales of cars and parts
and the sharing of vital business data by managers and others has been substantially
improved by using the Internet, extranets and other networks that electronically connect an
automobile manufacturer’s production and distribution facilities with car dealers and
suppliers.

Example – Chrysler Corporation has reorganized its vehicle development process into
multidisciplinary platform teams interconnected by the CATIA Pipeline, a
telecommunications network that connects nearly every part of the company’s “extended
enterprise” to every other, including external suppliers and contractors. The software engine
that moves data through the network and manages its database is CATIA (Computer-Aided
Three-Dimensional Interactive Application), an integrated computer-aided design,
development, engineering and manufacturing execution system from Dassault Systems of
France. Product information flows instantaneously from all directions, linking managers,
designers, engineers, marketers, service technicians, suppliers and manufacturing.

Promoting Business Innovation –investments in information technology can result in the

development of unique products and services or processes. This can create new business
opportunities and enable a firm to expand into new markets or into new segments of existing
markets. The use of automated teller machines (ATMs) in banking is a classic example of an
innovative investment in information systems technology. Citibank (USA) was first to install
ATMs (and other large banks)—able to gain a strategic advantage over their competitors that
lasted several years. ATMs lured customers away from other institutions by cutting cost of
delivering bank services and increasing convenience of such services. ATMs were example
of product differentiation – innovative changes in delivery of bank services.

Locking in Customers and Suppliers – investments in information technology can also

allow a business to lock in customers and suppliers (and lock out competitors) by building
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 valuable new relationships with them. This can deter both customers and suppliers from
abandoning a firm for its competitors or intimidating a firm into accepting less-profitable
relationships. Early attempts to use information systems technology in these relationships
focused on significantly improving the quality of service to customers and suppliers in a
firm’s distribution, marketing, sales, and service activities. Then businesses moved to more
innovative uses of information technology. Example – Wal-Mart built an elaborate satellite
network linking all of its stores. The network was designed to provide managers, buyers and
sales associates with up-to-date sales, shipping, inventory and account status information to
improve product buying, inventories and store management. Then the store began to use
operational efficiency of such information systems to offer better-quality products and
services and thereby differentiate itself from competitors. It extended networks to their
customers and suppliers in order to build innovative relationships that would lock in their
business.

Creating Switching Costs – a major emphasis in strategic information systems has been to find
ways to build switching costs into the relationships between a firm and its customers or
suppliers. That is, investments in information systems technology have attempted to make
customers or suppliers dependent on the continued use of innovative, mutually beneficial inter-
organizational information systems. Then, they become reluctant to pay the costs in time, money,
effort, and inconvenience that it would take to change to a company’s competitors.

A classic example is the computerized airline reservation systems, such as the SABRE system of
AMR Corporation (American Airlines) and the APOLLO system of COVIA (United Airlines)
used by most travel agents. Once a travel agency has invested a substantial sum in installing such
an inter-organizational system, and travel agents have been trained in its use, the agency is
reluctant to switch to another reservation system. The new system has become a strategic
weapon that has given these providers a major competitive advantage.

Raising Barriers to Entry - by making investments in information technology to improve its

operations or promote innovation, a firm could also erect barriers to entry that would discourage
or delay other companies from entering a market. This happens by increasing the amount of
investment or the complexity of the technology required to compete in an industry or a market

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segment. Such actions would tend to discourage firms already in the industry and deter external
firms from entering the industry.

Example: Merrill Lynch’s cash management account is a classic example. By making large
investments in information technology, along with a groundbreaking alliance with BancOne,
they became the first securities brokers to offer a credit line, cheque account, Visa credit card,
and automatic investment in a money market fund, all in one account. This gave them a major
competitive advantage for several years before they could develop the IT capability to offer
similar services on their own.

Leveraging a Strategic IT platform – investing in information technology enables a firm to

build a strategic IT platform that allows it to take advantage of strategic opportunities. This
happens when a company invests in advanced computer-based information systems to improve
efficiency of its own business processes. E.g. they may develop client/server networks of PC and
NC clients and network servers; develop intranets, extranets, and Internet services; hire more IS
specialists; and do extensive multimedia training of end users. Armed with this technology
platform, the firm can leverage investment in information technology by developing new
products and services than would not be possible without a strong IT capability. Example: the
development of corporate intranets and extranets by many companies, which enables them to
leverage their previous investments in Internet browsers, servers, and client/server networks.
Another example is development by banks of remote banking services using automated teller
machines.

Developing a Strategic Information Base – information systems also allow a firm to develop a
strategic information base that can provide information to support the firm’s competitive
strategies. Information in a firm’s corporate database has always been a valuable asset in
promoting efficient operations and effective management of a firm. However, information about
a firm’s operations, customers, suppliers, and competitors, as well as other economic and
demographic data, stored in data warehouses, data marts, and other corporate data-bases, is now
viewed as a strategic resource. That is, it is used to support strategic planning, marketing, and
other strategic initiatives. In much the same way, information about best business practices and
other business knowledge stored in intranet Web site database is a strategic knowledge base.
Example: many businesses are now using data mining and online analytical processing to help
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design targeted marketing campaigns to selectively sell customers new products and services.
Once you become a customer of a subsidiary of American Express, you quickly become a target
for marketing campaigns by their many other subsidiaries, based on information provided by the
American Express strategic information resource base. An Econet line may link you to several
other products like Ecosure, Ecohealth, Ecocar etc.

5.4 Breaking Business Barriers

There are several vital capabilities of information technology that break traditional barriers to
strategic business success. These are (1) computers and telecommunications networks break time
barriers, (2) computers and telecommunications break geographic barriers, (3) information
technology can break cost barriers, and (4) information technology can break structural barriers.

Breaking Time Barriers – How can information technology shorten the intervals between the
various critical steps in a business process? That’s the focus of interval reduction and just-in-time
operations. Their goal is to shorten response time to customer demands and reduce inventory
investment to a minimum, thus making a company an agile competitor. Producers who deliver
their products and services in real-time relative to their competitors will have a strategic
advantage. Every major online use of IT in core operations moves firms toward just-in-time
something – inventory, sales, distribution, publishing, scheduling, or reporting.

Example: Toyota Motor Corp. – this a classic example of the use computers and
telecommunications networks for interval reductions and just-in-time operations that resulted in
a significant strategic advantage. In early 1980s, Toyota found that while it took 2 days to
manufacture a car, it took about 25 to 30 days to process a customer’s order for a car. From a
total cost stand-point, Toyota then concluded that it was costing more to process the order on a
car than to manufacture the car!

Toyota responded by developing a global telecommunications network that links the computers
of its dealers and distribution centres to computers at its headquarters in Toyota City, and the
production and scheduling computers to the computers at its manufacturing centres. Its goal is to
enable a customer in Japan to order a car that is not in inventory and have it delivered within 48
hours. As a result, Toyota gained a major competitive advantage measured by increases in

44
customer satisfaction at the faster response times, and reductions in costs involved in delivering a
car from the factory to a customer.

Breaking Geographic Barriers – many companies today operate from several locations and
have customers or suppliers at distant locations and do business in regional, national, or global
markets. Information technology breaks the geographic barriers that hinder the managerial
control of operations, raise the cost of doing business, and limit the quality of services and the
coverage of potential markets. That’s why telecommunications networks have become a vital IT
component of business operations today.

The Internet, intranets, extranets and other telecommunications and computing technologies
make it possible to distribute key business activities to where they are most needed, where
they are best performed, or where they best support the competitive advantage of a
business. These networks link remote locations with company headquarters, other remote
locations, and external entities such as suppliers, customers, consultants, and other business
partners. All of these entities can participate in business activities as if geographic barriers did
not exist. Example: Citibank of New York moved its entire credit card operation to South
Dakota during the 1980s because of high labour costs in New York City and restrictions by the
state of New York on the interest rates it could charge for credit cards. Citibank accomplished
this strategic change in business operations by leasing satellite channels for data and voice
communications, facsimile, and teleconferencing between its New York headquarters and its
credit card operations centre in South Dakota. Thus, Citibank’s experience demonstrates that
telecommunications networks enable a business to move part of its operations to distant locations
with lower costs, a better workforce, or less-restrictive government regulations.

Breaking Cost Barriers – How can information technology enable a business to gain strategic
reductions in operating costs? Using intranets and other telecommunications networks to
interconnect key business areas can substantially reduce the costs of production, inventory,
distribution, or communications for many business firms. Thus, information technology has
helped companies cut labour costs, minimize inventory levels, reduce the number of distribution
centres, and lower communications costs. Example: A few years ago, Hewlett – Parkard Co. (H-
P) realized that it was spending $50 to $100 million more each year than necessary on raw
material purchases. That’s because H-P is highly decentralized. H-P grants its operating
45
divisions almost complete autonomy in purchasing and other operating divisions, “because they
know their needs best”. However, because of this decentralization of purchasing, company could
not take advantage of high-volume discounts available from its suppliers. Instead of centralizing
purchasing, H-P used telecommunications networks to link computer of divisional purchasing
departments to a corporate procurement centre’s database. Each division at H-P still makes its
own purchasing decisions but corporate office is able to integrate divisional purchasing
information in the database to help negotiate volume discounts for H-P’s purchases, thus saving
company millions of dollars each year.

Breaking Structural Barriers – How can information technology enable a firm to break
structural barriers that inhibit its operations or limit its drive for competitive advantage? The
Internet, intranets, extranets, and other telecommunications networks can support in delivery of
services, increase the scope and penetration of markets, and create strategic alliance with
customers, suppliers, and even a firm’s competitors. E.g. automated teller machines shared by
several banks and credit card companies placed in supermarkets and shopping malls break
structural barriers between competing firms and expand market for innovative financial services.
Extranets and electronic data interchange (EDI) networks can create strategic links between a
business and its customers and suppliers. Example: Miller Brewing Company is a customer of
Reynolds Metals Company and one of Reynolds’s EDI business partners. Miller is helping
reduce the inventory of aluminum coils used at tin can manufacturing plants and track the quality
of aluminum that is received from Reynolds and other suppliers. Reynolds developed software
that enables Miller to use EDI and extranet links to track in-transit inventories, as well as do
materials forecasting and ordering and quality control monitoring. Thus, EDI and Reynolds’s
extranet have helped it to develop a new business alliance with one of its biggest customers.

Task

1. Discuss how Michael Porter’s value chain concept can help a manager identify
opportunities for strategic information systems.

2. With the aid of examples, explain the role of Information Technologies (IT) in the re-
engineering of business processes.

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 3. With the aid of examples, explain how the Internet can be used by organizations to create
strategic competitive advantage.

6. Database Management

6.1 Introduction

Data are a vital organizational resource that needs to be managed like other important business
assets. Most organizations could not survive or succeed without quality data about their internal
operations and external environment. The focus is the managerial implications of using database
management technologies and methods to manage an organization’s data assets to meet the
information requirements of a business.

6.2 Foundation Data Concepts

Data may be logically organized into characters, fields, records, files, and databases, just as
writing can be organized in letters, words, sentences, paragraphs, and documents.

Character – this is most basic data element and consists of a single alphabetic, numeric, or other
symbol. One might argue that the bit or byte is a more elementary data element but those terms
refer to the physical storage elements provided by computer hardware. From a user’s point of
view (i.e. from a logical as opposed to a physical or hardware view of data), a character is the
most basic element of data that can be observed and manipulated.

Field – this is the next higher level of data. It consists of a grouping of characters e.g. grouping
of alphabetic characters in a person’s name forms a name field, and the grouping of numbers in a
sales amount field. A data field represents an attribute (a characteristic or quality) of some
entity (object, person, place or event). E.g. an employee’s salary is an attribute that is a typical
data field used to describe an entity who is an employee of a business.

Record – related fields of data are grouped to form a record. Thus, a record represents a
collection of attributes that describe an entity. E.g. payroll record for a person, which consists of
data fields describing attributes such as the person’s name, Social Security number, and rate of

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pay. Fixed-length records contain a fixed number of fixed-length data fields. Variable-length
records contain a variable number of fields and field lengths.

File – a group of related records is a data file or table. Thus, an employee file would contain
records of employees of a firm. Files are frequently classified by the application for which they
are primarily used, such as a payroll file or an inventory file, or the type of data they contain,
such as a document file or a graphical image file. Files are also classified by their permanence,
e.g. a payroll master file versus a payroll weekly transaction file. A transaction file, therefore,
would contain records of all transactions occurring during a period and might be used to update
permanent records contained in a master file. A history file is obsolete transaction or master file
retained for backup purposes or for long-term historical storage called archival storage.

• Database - a collection of integrated and related files

• File - a collection of related records

• Record - a collection of related fields

• Field - a group of characters

• Character - basic building block of information, represented by a byte.

Database – this is an integrated collection of logically related records or objects. An object

consists of data values describing attributes of an entity, plus the operations that can be
performed upon the data.

A database consolidates records previously stored in separate files into a common pool of data
records that provides data for many applications. The data stored in a database are independent
of the application programmes using them and of the type of secondary storage devices on which
they are stored. E.g. a personnel database consolidates data formerly segregated in separate files
such as payroll files, personnel action files (insurance coverage, job performance data), and
employee skills files.

6.3 The Database Management Approach

The development of databases and database management software is the foundation of modern
methods of managing organizational data. The database management approach consolidates

48
data records and objects into databases that can be accessed by many different application
programmes. In addition, an important software package called database management system
(DBMS) serves as a software interface between users and databases. This helps users easily
access records in a database. It involves the use of database management software to control how
databases are created, interrogated, and maintained to provide information needed by end users
and their organizations. E.g. customer records and other common types of data are needed for
several different applications in banking, such as cheque processing, automated teller systems,
bank credit cards, savings accounts, and installment loan accounting. These data can be
consolidated into a common customer database, rather kept in separate files for each of those
applications.

Thus, database management approach involves three basic activities:

 Updating and maintaining common databases to reflect new business transactions and
other events requiring changes to an organization’s records.

 Providing information needed for each end user’s application programmes that share the
data in common databases. This sharing of data is supported by the common software
interface provided by a database management system package. Thus, end users and
programmers do not have to know where or how data are physically stored.

 Providing an inquiry/response and reporting capability through a DBMS package so that

end users can easily interrogate databases, generate reports, and receive quick responses
to their ad hoc requests for information.

6.4 Using Database Management Software

A database management system (DBMS) is a set of computer programmes that controls the
creation, maintenance, and use of databases of an organization and its end users. There are four
major uses of a DBMS:

(1) Database Development – these packages like Microsoft Access or Lotus Approach
allow end users to easily develop databases they need. However, large organizations with
client/server or mainframe-based systems usually place control of enterprise-wide

49
 database development in the hands of database administrators (DBAs) and other
database specialists. This improves the integrity and security of organizational databases.
Database developers use the data definition language (DDL) in database management
systems like Oracle 8 or IBM’s DB2 to develop and specify data contents, relationships,
and structure of each database, and to modify these database specifications when
necessary. Such information is cataloged and stored in a database of data definitions and
specifications called a data dictionary, which is maintained by the DBA.

The Data Dictionary – this is another tool of database administration. It is a computer-

based catalog or directory containing metadata, that is, data about data. A data dictionary
includes a software component to manage a database of data definitions, that is, metadata
about the structure, data elements, and other characteristics of an organization’s
databases. E.g. it contains names and descriptions of all types of data records and their
interrelationships, as well as information outlining requirements for end users’ access,
use of application programmes, and database maintenance and security.

Data dictionaries can be queried by database administrator to report the status of any
aspect of a firm’s metadata. Administrator can then make changes to the definitions of
selected data elements.

(2) Database Interrogation – the database interrogation is a major benefit of a database

management system. End users can use a DBMS by asking for information from a
database using a query language or a report generator. They can receive an immediate
response in the form of video displays or printed reports. No difficult programming is
required. The query language features lets you easily obtain immediate responses to ad
hoc data requests: you merely key in a few short inquiries. The report generator feature
allows you to quickly specify a report format for information you want presented as a
report. The use of a DBMS report generator: SQL and QBE.

SQL or Structured Query Language is a query language found in many database

management packages. It basic form is SELECT … FROM …WHERE … after
SELECT you list data fields you want retrieved. After FROM you list files or tables from
which data must be retrieved. After WHERE you specify conditions that limit the search

50
 to only those data records in which you are interested. E.g. suppose a financial manager
wanted to retrieve the names, Social Security numbers, departments, and salaries of all
employees who are financial analysts from the employee and payroll files in company’s
human resources database. Then she might use SQL query to display such information.

QBE or query by example is another language available in some packages. QBE’s point-
and-click capabilities make it easier for end users than SQL. This method displays boxes
for each of the data fields in one or more files. You then use your keyboard or mouse to
fill in, click on, query, or check boxes to indicate which information you want.

(3) Database Maintenance – databases of an organization need to be updated continually to

reflect new business transactions and other events. Other miscellaneous changes must
also be made to ensure accuracy of the data in the databases. This database maintenance
process is accomplished by transaction processing programmes and other end user
application packages, with the support of the DBMS. End users and information
specialists can also employ various utilities provided by a DBMS for database
maintenance.

(4) Application Development – DBMS packages play a major in application development.

Application developers can use the internal 4GL programming language and built-in
software development tools provided by many DBMS packages to develop custom
application programmes. E.g. you can use a DBMS to easily develop the data entry
screens, forms, reports, or Web pages of a business application. A DBMS also makes the
job of application programmers easier, since they do not have to develop detailed data-
handling procedures using a conventional programming language every time they write a
programme. Instead, they can include data manipulation language (DML) statements in
their programmes that call on the DBMS to perform necessary data-handling activities.

6.5 Types of Databases

Developments in information technology have resulted in the evolution of several major types of
databases.

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(1) Operational Databases – these databases store detailed data needed to support
operations of the entire organizations. They are also called subject area databases
(SADB), transaction databases, and production databases. Examples are a customer
database, personnel database, inventory database, and other databases containing data
generated by business operations.

(2) Analytical Databases – these databases store data and information extracted from
selected operational and external databases. They consist of summarized data and
information most needed by an organization’s managers and other end users. Analytical
databases are also called management databases or information databases. They are also
called multidimensional databases, since they frequently use a multidimensional database
structure to organize data. These are databases accessed by the online analytical
processing (OLAP) systems, decision support systems, and executive information
systems.

(3) Data Warehouses –these store data from current and previous years that have been
extracted from various operational databases of an organization. It is a central source of
data that has been screened, edited, standardized, and integrated so it can be used by
managers and other end user professionals for a variety of forms of business analysis,
market research, and decision support. These may be subdivided into data marts, which
hold specific subsets of data from the warehouse. A major use of data warehouse
databases is data mining. In data mining, data in a data warehouse are processed to
identify key factors and trends in historical patterns of business activity. This can be used
to help managers make decisions about strategic changes in business operations to gain
competitive advantages in the marketplace.

(4) Distributed Databases – many organizations replicate and distribute copies or parts of
databases to network servers at a variety of sites. These distributed databases can reside
on network servers on the World Wide Web, on corporate intranets or extranets, or other
company networks. Distributed database may be copies of operational or analytical
databases, hypermedia or discussion databases, or any other type of database. Replication
and distribution of databases is done to improve database performance and security.

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 (5) End User Databases – these consist of a variety of data files developed by end users at
their workstations. E.g. users may have their own electronic copies of documents they
downloaded from the World Wide Web, generate with word processing packages, or
receive by electronic mail. Or they may have their own data files generated from using
spreadsheet and DBMS packages.

(6) External Databases – access to a wealth of information from external databases is

available for a fee from commercial online services, and with or without charge from
many sources on the Internet. Web sites provide an endless variety of hyperlinked pages
of multimedia documents in by-permedia databases for you to access. Data available in
form of statistics on economic and demographic activity from statistical data banks or
from newspapers, magazines, newsletters, research papers, periodicals and other
published material.

(7) Hypermedia Databases on the Web – the rapid growth of Web sites on the Internet and
corporate intranets and extranets has dramatically increased use of databases of hypertext
and hypermedia documents. A Web site stores such information in a hypermedia
database consisting of a home page and other hyperlinked pages of multimedia or mixed
media (text, graphic and photographic images, video clips, audio segments etc). That is,
from a database management point of view, the set of interconnected multimedia pages at
a Web site is a database of interrelated hypermedia pages, rather than interrelated data
records. Web server software to access and transfer the Web pages when a manager
wants can be put on one’s PC – software acts as a database management system to
manage the use of the interrelated hypermedia pages of the Web site.

Task: What are hypertext and hypermedia documents?

6.6 Managerial Considerations for Data Resource Management

Managerial end users should view data as an important resource that they must learn to manage
properly to ensure the success and survival of their organizations. Database management is an
important application of information systems technology to the management of a firm’s data
resources. To improve data resource management the following activities need to be done:

53
 (1) Database administration is an important data resource management function
responsible for proper use of database management technology. This includes
responsibility for developing and maintaining the organization’s data dictionary,
designing and monitoring the performance of databases, and enforcing standards
for database use and security. Database administrators and analysts work with systems
developers and end users to provide their expertise to major systems development
projects.

(2) Data planning is a corporate planning and analysis function that focuses on data
resource management. It includes the responsibility for developing an overall data
architecture for the firm’s data resources that ties in with the firm’s strategic mission and
plans, and the objectives and processes of its business units. Data planning is done by
organizations that have made a formal commitment to long-range planning for the
strategic use and management of their data resources.

(3) Data administration is another vital data resource management function. It includes the
establishment and enforcement of policies and procedures for managing data as a
strategic corporate resource. This means administering the collection, storage, and
dissemination of all types of data in such a way that data become a standardized
resource available to all end users in the organization. The focus of data
administration is the control of data in support of an organization’s business functions
and strategic business objectives. It may also include responsibility for developing
policies and setting standards for corporate database design, processing, and security
arrangements, and for selecting database management and data dictionary software.

Task: What is the difference between database administration and data administration?

6.7 Benefits and Limitations of Database Management

The database management approach provides managerial end users with several important
benefits. It reduces the duplication of data and integrates data so that they can be accessed by
multiple programmes and users. Programmes are not dependent on the format of the data and the
type of secondary storage hardware being used. Users are provided with an inquiry/response and
reporting capability that allows them to easily obtain information they need without having to
54
write computer programmes. Computer programming is simplified, because programmes are not
dependent on either the logical format of the data or their physical storage location. Finally, the
integrity and security of the data stored in databases can be increased, since access to data and
modification of the database are controlled by database management system software, a data
dictionary, and a database administrator function.

The limitations arise from its increased technological complexity. Thus, a database management
approach can pose problems in data resource management. Developing large databases of
complex data types and installing a DBMS can be difficult and expensive. More hardware
capability is required, since storage requirements for the organization’s data, overhead control
data, and the DBMS programmes are greater. Longer processing times may result from high-
volume transaction processing applications since an extra layer of software (the DBMS) exists
between application programmes and the operating system. Finally, if an organization relies on
centralized databases, its vulnerability to errors, fraud, and failures is increased. Yet problems of
inconsistency of data can arise if a distributed database approach is used. Therefore, the security
and integrity of an organization’s databases are major concerns of an organization’s data
resource management effort.

6.8 Database Structures

In order to get any information from information system data needs to be stored in an organized
way and there should be a systematic way to retrieve it. Thus, data structures and access methods
ranging from simple to complex have been devised to efficiently organize and access data stored
by information systems. Data management system packages are designed to use a specific data
structure to provide end users with quick, easy access to information stored in databases. Five
fundamental databases structures are hierarchical, network, relational, object-oriented, and
multidimensional models.

(1) Hierarchical Structure – early mainframe DBMS packages used the hierarchical
structure, in which the relationships between records form a hierarchy or treelike
structure. In the traditional hierarchical model, all records are dependent and arranged in
multilevel structures, consisting of one root record and any number of subordinate levels.
Thus, all of the relationships among records are one-to-many, since each data element is

55
 related to only one element above it. The data element or record at the highest level of the
hierarchy is called the root element. Any data element can be accessed by moving
progressively downward from a root and along the branches of the tree until the desired
record is located.

(2) Network Structure can represent more complex logical relationships, and is still used by
some mainframe DBMS packages. It allows many-to-many relationships among records,
i.e., the network model can access a data element by following one of several paths,
because any data element or record can be related to any number of other data elements.
E.g. departmental records in an organization can be related to more than one employee
record. Thus, one could locate all employee records for a particular department.

(3) Relational Structure – the model has become the most popular of the three database
structures. It is used by most microcomputer DBMS packages, as well as by many
minicomputer and mainframe systems. In this model, all data elements within the
database are viewed as being stored in the form of simple tables. Database management
system packages based on the relational model can link data elements from various tables
to provide information to users. E.g. a DBMS package could retrieve and display an
employee’s name and salary from the employee table, and the name of the employee’s
department table by using their common department number field to link or join the two
tables.

(4) Multidimensional Structure – this structure is a variation of the relational model that
uses multidimensional structures to organize data and express the relationships between
data. You can visualize multidimensional structures as cubes of data and cubes within
cubes of data. Each side of the cube is considered a dimension of the data. Each cell
within a multidimensional structure contains aggregated data related to elements along
each of its dimensions. E.g. a single cell may contain the total sales for a product in a
region for a specific sales channel in a single month. A major benefit of multidimensional
databases is that they are a compact and easy-to-understand way to visualize and
manipulate data elements that have many interrelationships. So multidimensional
databases have become the most popular database structure for the analytical databases

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 that support online analytical processing (OLAP) applications, in which fast answers to
complex business queries are expected.

(5) Object-Oriented Structure – this model is considered to be one of the key technologies
of a new generation of multimedia Web-based applications. An object consists of data
values describing the attributes of an entity, plus the operations that can be performed
upon the data. This encapsulation capability allows the object-oriented model to better
handle more complex types of data (graphics, pictures, voice, and text) than other
database structures.

The object-oriented model also supports inheritance, i.e. new objects can be automatically
created by replicating some or all of the characteristics of one or more parent objects. E.g.
object technology allows designers to develop product designs, store them as objects in an
object-oriented database, and replicate and modify them to create new product designs. In
addition, multimedia Web-based applications for the Internet and corporate intranets and
extranets have become a major application area for object technology.

Evaluation of Database Structures

The hierarchical data structure is a natural model for the databases used for many of the
structure, routine types of transaction processing characteristics of many business operations.
Data for many of these operations can easily be represented by groups of records in a
hierarchical relationship. However, there are many cases where information is needed about
records that do not have hierarchical relationships. E.g. it is obvious that, in some organizations,
employees from more than one department can work on more than one project. A network data
structure could easily handle this many-to-many relationship. It is thus more flexible than the
hierarchical structure in support of databases for many types of business operations. However,
like the hierarchical structure, because its relationships must be specified in advance, the network
model cannot easily handle ad hoc requests for information.

Relational databases, on the other hand, allow an end user to easily receive information in
response to ad hoc requests. That’s because not all of the relationships between data elements in
a relationally organized database need to be specified when the database is created. Database
management software (such as Oracle 8, DB2, Access, and Approach) creates new tables of data
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relationships using parts of the data from several tables. Thus, relational databases are easier for
programmers to work with and easier to maintain than the hierarchical and network models.

The major limitation of relational model is that database management systems based on it cannot
process large amounts of business transactions as quickly and efficiently as those based on the
hierarchical and network models, in which all data relationships are pre-specified. However, this
gap is narrowing with development of advanced relational DBMS software. The use of database
management software based on the object-oriented and multidimensional models is growing
steadily, but these technologies are still playing a supportive role to relational database software
for most applications in business information systems.

Task

1. Using an organization of your choice, discuss how you would develop a database for this
organization.
2. Explain any 4 uses of database management software.
3. Explain any 5 types of databases.
4. Discuss the 3 main activities that are done to improve data resource management.
5. With the aid of diagrams, explain any 4 database structures.

7 Value Added by Information Systems to process, products, quality, management,

problem solving and decision making.

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Introduction

Information systems have become the back bone of most organisations in recent years. Laudon
and Laudon (2014:45) define information systems “technically as a set of interrelated
components that collect (retrieve), process, store and distribute information to support decision
making and control in organization”. Information systems are implemented within an
organisation for the main purpose of improving the effectiveness and efficiency of the
organisation (Silver et al, 1995). Information systems if well implemented can contribute to the
success of an organisation to a large extent and in addition to that organisations should also be
willing to invest much in the latest information technology. Information technology as defined
by Rainer and Prince (2016:3) “refers to any computer-based tool that people use to work with
information and to support the information and information-processing needs of an
organization”. Information systems aid businesses in developing a large number of value added-
systems in the company. This topic looks at how information systems have added value to
process, products, quality, management, problem solving and decision making.

Process

How well a business performs depends on how well its business processes are designed and
coordinated. Rainer and Prince (2016:34) define a business process as “an on-going collection
of related activities that create a product or a service of value to the organisation, its business
partners and/or its customers”. A process can also be seen as a series of steps undertaken to
achieve a desired outcome or goal (bus206.pressbooks.com). Information systems are becoming
more and more integrated with the organizational processes, bringing more productivity and
better control to those processes. Using technology only is not enough but the businesses are
looking at utilizing information systems to aid in business processes. There are two most
important ways that information systems have enhanced business processes; increasing
efficiency of existing processes (thus automating steps that were manual) and enabling entirely
new processes that are capable of transforming the businesses (thus changing flow of
information, replacing sequential steps with parallel steps and eliminating delays in decision
making) [www.academia.edu]. For example, back in the olden day’s banks could not process
payments automatically where each customer had to have a bank book where each transaction
was written down manually. Nowadays with the aid of information systems customers can
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interact with the bank’s information system rather than the personnel. Customers can now
withdraw money on Automated Teller Machines (ATMs) and there and there the process is done
which deducts your bank balance, and show you your new bank balance or even better people
can now make electronic transfers and the process of sending money to your loved ones is even
faster.

One of the types of information systems within an organisation that has made processes to be
better is the Transaction Processing Systems. Transaction processing systems are computerized
systems that perform and record daily routine transactions necessary in conducting business. It
is mainly used at the operational level of the organisation. The transaction processing systems
process the transactions in two basic ways; batch processing and real-time processing.
Processing of data maybe done periodically using batch processing, for example a bank may
come up with the customers bank statement on a monthly basis or data may be processed
immediately after the transaction has been made using real-time processing, for example the use
of Point of Sale systems which gives a report after a transaction has been made (when one uses
his/her bank card in a retail supermarket to pay for goods, as soon as the card is swiped on the
point of sale machine, you automatically get a message that so much amount has been deducted
and also the name of the supermarket where you purchased from).

Furthermore, information systems add controls to employee processes, ensuring that only users
with application rights perform certain tasks (smallbusiness.chron.com). For example, at the
National University of Science and Technology only those in the Bursar’s section can access the
students payment details and also only those in the Admissions and Student Records section can
access the students contact details, qualifications but to mention a few. Rainer and Prince
(2016:37) mention that information systems play a vital role in three areas of business processes;
executing the process, capturing and storing process data and monitoring process performance.
For example, in the procurement process the information systems generate the purchase
requisitions and then inform the purchasing department that action on these requisitions is
needed thus playing the role of executing the processes by informing people when it is time to
complete a task.

Business processes has been aided by information systems in several different functional areas of
the organisation. For example, in the Human Resources area the process of hiring employees
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can now be done using information technology and also in the Manufacturing/ Production area
the production of bills of materials and assembling the product is now aided by the use of
information systems. Companies continue to look for more ways to make their processes more
efficient and effective and by the use of information systems most processes which include
manufacturing products, processing orders, delivering products, customer servicing and
recruitment are excelling very well (Marchand, 2010). With all having been said information
systems has managed to improve processes both within the company and externally with
suppliers and customers, and most businesses have actually gained an advantage over their
competitors.

Products

Recently, global competition has led to shorter product life cycles hence products and
manufacturing systems are also becoming more complex due to rapid developments in
microelectronics and increasing consumer demands for lower costs, greater variety and greater
performance (Nookabadi and Middle, 2001:657). It is against this background that information
systems have managed to add value to organisations in producing products which customers
want and help them to differentiate their products from other competitors. Laudon and Laudon
(2014:43) postulate that information systems and technologies are a major enabling tool for firms
to create new products and services, as well as entirely new business models. Product
differentiation is one of the aspects of products that have been aided by the use of information
systems. New products and services and change in existing products or services are enabled by
using information systems. For example, Google continuously introduces new and unique search
services on its website, such as Google Map (Laudon and Laudon, 2014:127)

The use of manufacturing information systems to support the production of goods has been
adopted by most organisations because they would like to produce products quickly and with less
cost. An organisation looks at the method of production to use taking into account the nature of
the product and the required rate of production. Manufacturing information systems help
companies to choose whether to use machines or people in the production of goods. Companies
have used manufacturing information systems to produce products of highest quality which
meets the changing market and customer demand by using the computer-integrated
manufacturing. Computers are used to help engineers to design better products using both
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computer-aided engineering and computer-aided design. Besides the use of computers to aid in
product development other organisations have also adopted the use of Robots in producing
products which increases productivity and cut costs, all of this having been necessitated by the
use of information systems.

Quality

Quality control systems used by manufacturing units provide information about quality of
incoming material and parts as well as the quality of in-process semi-finished goods and finished
products (Rainer and Prince, 2016:301). Information systems have helped most businesses to
produce quality products and also to assess their goods during production if they are of quality
nature. Total quality management effort has been used by most manufacturing engineers in
order to maintain standards for product quality. The use of an expert system in the design of
Quality Assurance Information Systems (QAIS) helped to release managers and specialists from
the routine issues of the task, allowing them to concentrate on more complex problems and
issues (Nookabadi and Middle, 2001:660).

Rainer and Prince (2016:301) argue that the systems record the results of all inspection and then
compare the results plus also they generate periodic reports that contain information about
quality, for example, the percentage of products that contain defects or that need to be reworked.
They went on to say that the quality control data which can be collected by Web-based sensors
can be interpreted in real time or can be stored in a database for future analysis. Information
systems have added value to quality in the sense that nowadays most organisations are no longer
producing products with defects because they can be detected during production unlike when
they used manual production many defects were detected and even going to an extent of losing a
lot of money if the defect was not detected before the product went on the market.

Management

Managing organisations is one complex task if there is lack of information. Information systems
have added value to the role of management by helping managers to effectively and efficiently
use the organisation’s resources to run the businesses. The use of management information
systems helps managers to improve the efficiency and effectiveness of their business processes.
Argyris (1991:291) defines management information systems as a system using formalized
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procedures to provide management at all levels in all functions with appropriate information
based on data from both internal and external sources, to enable them to make timely and
effective decisions for planning, directing and controlling the activities for which they are
responsible. Managers should at all times be well appraised of events and changes occurring in
an organisation and that can only be accomplished by using information systems.

Managers are now able to plan, organise, lead and control their organisations through the use of
Management Information Systems. Information is readily available, by a click of a button they
can view the performance of the business either by looking as sales figures for a specific period
of time or even checking the performance of employees by looking at their results. Management
Information Systems aid the managers to answer structured questions on periodic basis. For
example, what are the sales figures for the year ending 2016? O’Brien and Marakas (2010:438)
argue that the management information systems provide pre-specified reports and responses for
managers on a periodic, exception, demand or push reporting basis to meet their need for
information to support decision making. Due to the use of information systems management as
an aspect in an organisation has been made easier.

Problem Solving

Information systems have been used by many organisations as a powerful instrument for
organizational problem solving (Lyytinen, 1987:5). Organisations are faced with many problems
which might interfere with the well-being of their business; hence information systems have
helped organisations to come up with different set of solutions to a given problem. Computer-
aided software engineering tools are merely a means of supporting problem solving processes,
and as such they communicate with one another to produce a synthesis of information about the
problem (Bergin, 1993:73). Information systems added value to problem solving by providing
information about the problem and how the problem can be solved. One type of information
systems used by organisations in problem solving is the Expert Systems.

Expert Systems are “an intelligent technique for capturing tacit knowledge in very specified and
limited domain of human expertise” (Laudon and Laudon, 2014:463). Expert systems are one of
the most practical applications of Artificial Intelligence. Artificial intelligence is an area of
computer science whose long-range goal is to develop computers that can think as well as walk,

63
see, hear, talk and feel. Rainer and Prince (2016:457) define artificial intelligence as “a subfield
of computer science that studies the thought processes of humans and recreates the effects of
those processes via machines, such as computers and robots”. A major thrust of artificial
intelligence is the simulation of computer functions normally associated with human intelligence,
such as reasoning, learning and problem solving (O’Brien and Marakas, 2010:418). Since the
inception of information systems problem solving has been aided by expert systems in that they
have knowledge of all specific areas in an organisation, hence it becomes easy by using the
knowledge base and software modules that perform inferences on the knowledge and offer
answers/solutions to a user’s questions/problems. Artificial intelligence helps in analysing
complex problems. It assists human decisions by providing an overview of the problem, or
identify critical areas, to help human experts decide how best to address the issue. Information
systems have added value to problem solving in such a way that time taken to diagnose a
problem and look for the best fit solution is now faster than banking on human expertise.

Decision Making

The long-term success of a company depends upon the adequacy of its strategic plan.
Information systems have aided management teams to formulate strategic plans and make
decisions for the organisations longevity and prosperity (smallbusiness.chron.com). Information
systems in today’s businesses provide information to all levels of management in an organisation
which makes it easier for the managers to make decisions. Types of information systems mainly
used to aid in decision making are: Decision Support Systems (DSS), Executive Support Systems
(ESS) and Management Information Systems (MIS). All three of them aid in decision making
but the only difference is on the type of decisions and the level of management which uses each
system. Decision Support Systems uses information from both management information systems
and transaction processing systems to make non routine or unstructured decisions and is mainly
used for complex ‘what-if’ questions.

The main benefit of information systems in decision making is that it provides a rational view
when coming up with decisions. For example, many decisions made by individuals or human
beings are mainly affected by emotions or feelings and this may limit the usefulness of the
human-based decision. However, on the other hand decision making using information systems
is rational and not affected by emotions. Decisions are based on information gathered using
64
transactions processing systems and management processing systems both internally and
externally. Also managers are assisted by information systems to make better decisions, for
example, decisions about what lines of merchandise need to be added or discontinued and what
kind of investments they require are typically made after an analysis provided by computer-
based information systems (O’Brien and Marakas, 2010:8).

Conclusively, the valued added by information systems to process, products, quality,

management, problem solving and decision making has seen most business prospering in their
dealings and having competitive advantage over their competitors. Information systems are
transforming businesses by an increase in wireless technology use, websites and also internet has
drastically reduced costs of operating on global scale.

References

Argyris, C. (1991), Management Information Systems: The Challenge to Rationality and

Emotionality, Management Science, p. 291

Bergin, T. J. (1993), Computer-Aided Software Engineering: Issues and Trends for the 1990s
and Beyond, Idea Group Publishing, Harrisburg, USA
Laudon, K.C and Laudon, J.P (2014), Management Information System: Managing the
Digital Firm, 13th Edition, Pearson Education Limited, New York.

Lyytinen, K (1987), Different Perspectives on Information Systems: Problems and Solutions,

ACM Computing Surveys, Vol. 19, No. 1, pp. 5-46

Nookabadi, A.S and Middle, J.E (2001), A Knowledge-based System as a Design aid for Quality
Assurance Information Systems, International Journal of Quality and Reliability
Management, Vol. 18, No. 6, pp. 657-670

O’Brien, J.A and Marakas, G.M. (2010), Management of Information Systems, 10th Edition,
McGraw-Hill, USA

Rainer Jr, R.K and Prince, B (2016), Introduction to Information Systems, 6th Edition, John
Wiley and Sons, USA

Silver, M.S, Markus, M.L and Beath, C.M. (1995), The Information Technology Interaction
Model: A Foundation for the MBA Core Course, MIS Quarterly, Vol. 19, No. 3, Special Issue
on IS Curricula and Pedagogy (Sep., 1995), pp. 361-390
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Marchand, D.A (2010), Value Added through Effective Use of Information, [Online]
https://www.imd.org/research/challenges/tc001-10.cfm [Accessed on: 31August 2017]

8. The Internet and E-Commerce

8.1 Introduction

Business use of the Internet is growing from an electronic information exchange to a broad
platform for strategic business applications. Notice how applications like collaboration among
business partners, researching competitors, providing customer and vendor support, and buying
and selling products and services have become major business uses of the Internet. Other studies
of leading corporations and organizations show that they are using Internet technologies
primarily for marketing, sales, and customer service applications. One writer (cited in O’Brien,
1999:304) sees the Internet as “a place to publish information about themselves and their
products – as well as to communicate with customers and business partners. But the Internet is

66
capable of far more”. The Internet is a global network of networks (linking the globe through
computers).

8.2 Business use of the Internet

Several applications of the Internet in business are now available.

Communications and Collaboration – the Internet, intranets, and extranets support real-time
global communications and collaboration among employees, customers, suppliers and other
business partners. Interactive Web sites, E-mail, bulletin board systems, discussion groups,
audio- and-videoconferencing, and other Internet features enable internal and external business
information to be researched, solicited, disseminated, and shared. This enables members of
different organizations and people at different locations to work together as members of virtual
teams on business projects to develop, produce, market, and maintain products and services.

Electronic Commerce – electronic commerce is doing business over interconnected networks

using Web-based technologies. It is more than just buying and selling online. It encompasses the
entire online process of developing, marketing, selling, delivering, servicing, and paying for
products and services purchased by internet-worked, global virtual communities of customers,
with the support of a worldwide network of business partners.

The Internet, the World Wide Web, and Internet-based technologies such as intranets and
extranets provide global links to a company’s customers and suppliers. This enables electronic
commerce applications – the marketing, buying, selling, and support of products and services
over these networks. Such applications include interactive order processing at company Web
sites, electronic data interchange (EDI) of business transactions documents, and secure electronic
fund transfer (EFT) payment systems.

Interactive Marketing – because of the Internet, marketing a company and its products and
services has become an interactive process. A company’s Web site can now offer more than
hyper-linked multimedia product catalogs and promotional material. The Internet and the Web
enable companies to create a dialog with customers through online discussion groups, bulletin
boards, electronic questionnaires, mailing lists, newsletters, and E-mail exchanges. Thus,
customers can be interactively involved in the development, marketing, sales, and support of

67
products and services, along with a company’s market researchers, product designers, marketing
and sales staff, and support specialists.

Strategic Alliances – the Internet enables companies to form strategic alliance with customers,
suppliers, consultants, subcontractors, and even competitors. Internet and extranet global links to
such business partners support network organizational structures and the formation of virtual
companies. That is, the Internet enables global alliances of business partners to be quickly
formed to take advantage of market opportunities by interconnecting the unique strengths of each
partner into an integrated network of business resources and capabilities.

FedEx and UPS – the World Wide Web is a key business battlefield for FedEx and UPS as they
compete for leadership of the express package delivery market. Both companies are
implementing a variety of electronic commerce and logistics management applications using
Internet, intranet, and extranet technologies. And both companies have set long-range business
goals of doing all customer business interactions and operations online using the Internet.

FedEx was the first to use the Web with an online package tracking service in November of
1994, followed by UPS six months later. Then in March of 1996 UPS beat FedEx with a
complete Web shipping service that can handle package scheduling and pickup, including
checking delivery routes, calculating rates, locating local offices and drop box sites, and
scheduling pickups. FedEx followed with similar services four months later. Payment for
shipments is now electronic or by phone or still email payment to FedEx. Both companies have
expanded online services to their customers, as Web traffic grows to over five million hits and
one million package tracking requests per month.

8.3 Interactive Marketing

The Internet has made an interactive marketing process possible. Intranets and extranets and
other networks may also be used to enable a multilevel interaction between a company’s
marketing, development, and customer support personnel, and its customers and prospective
customers. The goal of interactive marketing is to attract and keep customers who will become
partners with a business in creating, purchasing, and improving products and services. Customers
are also no longer just passive participants who receive media advertising prior to purchase.
Instead, they are actively engaged in a network-enabled proactive and interactive marketing
68
experience. So, interactive marketing depends on many of the capabilities of the Internet and the
World Wide Web to enable this interactive process.

E.g. as a prospective customer you might surf the Web until you find a Web site with products or
a message that interests you. Then you might randomly view hypermedia information about the
company and its products and services. Next, you might hotlink to a company-sponsored
discussion forum, or a Usenet newsgroup that discusses similar products and engage in online
discussions.

Task: What is the difference between the Internet and the World Wide Web?

At this point, you might switch to a competing Web site via a URL (universal resource locator)
or hot button provided by the newsgroups or an Internet search engine. Then you might send and
receive E-mail messages about a particular product from marketing representatives of its vendor
on the Web. All this activity occurs prior to your online credit check and purchase process.
Finally, as a new customer, you may share questions, complaints, compliments, and suggestions
for improvement of products via a Web questionnaire, E-mail, or a discussion group interaction
with the vendor’s customer support specialists.

Task: What is a search engine?

Push versus Pull Marketing – the interactive marketing process includes a choice between push
or pull marketing methods. That is, marketing material can be put on customers’ or prospects’
computer screens using either push or pull technologies. Pull marketing relies on you to access
your Web browser. Thus, for example, you would use your browser to find and read or download
multimedia from marketing material from a company’s Web site. A user with Web browser
“pulls” information, usually in the form of Hypertext Markup Language pages, to his or her PC
from a Web server. The client software is cheap and easy to get. But users have limited
customization abilities and can waste time looking over search engine results.

Task: What is a Web browser?

Push marketing, on the other hand, relies primarily on software called Web broadcasters or net
broadcasters. Software such as PointCast, Back-Web, and Castanet automatically transmits a
variety of information from the Web or other sources to your PC. The information transmitted to
69
you can be from sources and on topics that you pre-select, or can be sent to you via your
company intranet as optional or required reading. Webcast information can intermittently appear
as a screen saver, as a continuous scrolling banner, or in other forms on your PC screen. Unlike
when a user pulls information to his or her PC with a Web browser, push software collects
information and automatically sends it. It increases sales opportunities by collecting leads and
distributing them to the proper representatives. Benefits include ability to customize information
sent to users; automate delivery of crucial news to users; cost-effective alternative to E-mail,
voice mail, or paper; and uses low-cost, relatively open Web protocols. Possible risks include
pushing too much data at peak times or improper network configuration may still clog networks;
and may add to information overload rather than ease it.

8.4 The Business Value of the Internet

Substantial cost savings can arise because applications that use the Internet and Internet-based
technologies (like intranets and extranets) are typically less expensive to develop, operate, and
maintain than traditional systems. E.g. American Airlines saves money every time customers use
their Web site instead of their customer support telephone system. Another example is corporate
intranet applications, which are typically a lot easier and cheaper to develop and maintain than
using traditional mainframe or client/server systems.

Most companies are building commercial sites on the World Wide Web to achieve four major
business objectives:

 Attract new customers via Web marketing and advertising.

 Improve service to existing customers via Web customer service and support
functions.

 Develop new Web-based markets and distribution channels for existing products.

 Develop new information-based products accessible on the Web.

Assessing Strategic Business Value – an Internet strategy matrix helps a business assess how
the Internet can help build business value. The matrix emphasizes that a company should
undertake an internal and external assessment of itself and its environment to discover Internet
applications that add strategic business value to the organization. E.g. a company should make
internal assessments of its communications flows and information resources to discover

70
communication and information deficiencies that could be improved by Internet technologies.
An external assessment should include an evaluation of the Internet activity of a company’s
competitors and business partners. A business should also assess the unmet needs of current and
prospective customers that might be met by Internet-based electronic markets.

The Internet itself can be viewed as having six strategic capabilities that support a variety of key
applications that can add business value to a company. These capabilities are discussed below.
Each of these capabilities serves as building blocks for a mix of Internet-based applications that
can give strategic business value and competitive advantage to a company.

(1) Global Dissemination – since most countries now have Internet connections, global
communication has become a fact of life in business. E-mail, electronic mailing lists,
World Wide Web sites, and other Internet services have made international
dissemination of information significantly faster, cheaper, and easier. This provides
strategic business value in the increased cost savings and efficiency of global
communications, and the ability to reach, sell, and provide customer service to new or
expanded international markets.

(2) Interaction – interactive communication of the Internet may take the form of
interactive Web sites; discussion forums and chat groups; interactive forms for
customer orders, feedback, and technical support; and immediate E-mail responses to
online queries and comments. Fast, efficient feedback from customers and responses
from customer specialists provide multiple opportunities to demonstrate a company’s
responsiveness to its customers. Thus, Internet technologies help a business build
customer value and loyalty.

(3) Customization – the ability to automatically provide information and services

customized to an individual customer or user is a strategic business capability of the
Internet, intranets, and extranets. Information can be accessed and disseminated from
network servers on an individual basis, depending on a variety of user factors. E.g.
you can fill out interest profile or registration forms that give you quick access to
selective levels of Web site resources. Or software can “remember” your visits to a
site and provide Web site access keyed to your preferences. Thus, efficient, low-cost,

71
 and interactive target marketing to an individual customer or prospect is a key
business value of Internet technologies.

Task: Read more on the Internet’s ability to customize products and services.

(4) Collaboration – the Internet, intranets, and extranets enable easy and efficient access
to shared data and other network resources. E.g. project information at Web sites can
be easily shared using Web browsers. Other groupware tools help coordinate projects
and manage the information they store on servers at cross-linked Web sites. This
enhances the collaboration process among teams, workgroups, and business partners,
and thus provides strategic business value to a company.

(5) Electronic Commerce – the Internet has become the technology platform for
electronic commerce. The Internet, along with intranets and extranets, links
companies to their customers and suppliers, and thus enables them to electronically
market, buy, sell, and support products and services. Internet opens up new markets
and /or makes possible new products and services.

(6) Integration – the internetworked enterprise integrates its external online activities
with its internal business process. E.g. a company’s Internet Web site can be linked
by extranets to selected operational databases stored on its intranet Web servers. This
provides more detailed, up-to-date information that can be used to support electronic
commerce applications. In addition, intranets promote the integration of cross-
functional business processes within a company. Thus, the business value of Internet
technologies arises from efficiencies and innovations they make possible in internal
and external business processes. The supplier and retailer integrate their businesses.

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9 Buyer and Seller Roles in E-Commerce
9.1 Introduction

Electronic commerce is defined as any form of business transaction in which the parties interact
electronically rather than by physical exchanges or direct physical contact (European
Commission, 1998). It can further be defined as the purchasing and selling of products or
services through the electronic systems like computer networks and the internet. Electronic
commerce improves market efficiency through several means which includes the elimination of
the middleman or the suppliers and distributers. It enables buyers to purchase products directly
from the manufacturer thereby eliminating added costs. Electronic commerce also provides an
easy and effective way to get or obtain pricing information since consumers can easily search
and compare prices on the Web. It also provides sellers with price elasticity information
implying that sellers can gauge the demand for a product based on the fluctuations in price
(http://philosophe.com/ecommerce/roles/). However, buyers and sellers in electronic commerce
have roles to play as discussed below if the system or platform is to produce the desired results:

9.2 Roles of the buyer:

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Buyers expect to perform three important actions from a typical transaction and these are
decision to buy, making the payment for the product or service and assuming ownership of the
product or service.

1. Making the decision to buy:

This process involves the finding of what one wants to buy, evaluating one’s budget and
evaluating one’s trust of the seller. In some cases, the buyer faces challenges in making
this decision to buy as a result of the fact that some sellers make the buying process
difficult with such design decisions as forcing the prospective buyer to register and log in
before accessing the shopping card function or requiring a specialised browser for buying
from their site (http://philosophe.com/ecommerce/roles/).
2. Making the payment:

After making the decision to buy, one has to make the payment for the product or service
using the platform. Payments are usually done using credit cards or debit cards and the
purchase agreement is finalised upon confirmation of the payment by the seller. If the
buyer receives ambiguous feedback during the payment phase they will be frustrated and
worried and will experience doubt towards every aspect of the transaction
(http://philosophe.com/ecommerce/roles/).

3. Assuming ownership:
Buyers expect to assume ownership upon making a payment online. Up until the buyer
receives the order they want to know the status of the order and expect the seller to
provide useful order status information timeously. The buyer would want to know when
the order will be shipped and when and how the order will be delivered. This information
should constantly be communicated on the site or through other electronic means
available (http://philosophe.com/ecommerce/roles/).

9.3 Roles of the seller:

1. Boost brand awareness:

Pleasing the individual user is usually not a priority, but getting the users to recognise
the site’s branding is a priority for the seller, however the assumption is that the
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 exposure will translate to patronage. To increase their market share, the seller has to
boost their sales by making their products known worldwide. For example,
BeForward Japan is known globally because the seller increased the website search
engine optimisation thereby increasing target audience within their site (E-business
toolkit, 2013).
2. Exercise competence
The seller has to exercise competence in managing the whole process from marketing
to the delivery of the purchased products or service. The seller has to make sure that
the website is user friendly so as to make it easy for site visitors to access all the
information they need before making a decision to buy the product or service. The
seller must be efficient and effective in handling the delivery of the product or service
in that he has to deliver as per the communicated schedule (E-business toolkit, 2013).

3. Offer product data sheets:

The seller has the duty or role to offer product data sheets on site so that the buyer
will be well informed of the product he is buying. This is to make available the
description and details from the online product catalogue, for example, Avon
Products. The catalogue needs constant update so that the information concerning the
products or service is available at any time of the day, of the week and of the year
(24/7/365). Through information availability, the role of buyers to make purchase
decisions is accomplished (E-business toolkit, 2013).

4. Receive payment and deliver the order in utmost good faith:

The seller has to give feedback to the buyer upon receipt of correct payment. The
seller has also the duty of notifying the buyer of any fraudulent websites. Sellers must
make sure that they deliver the ordered product in utmost good faith rather than
pretending not to have received payment online or even supplying wrong products
intentionally (E-business toolkit, 2013).

Task: Read and make additional notes on the roles of the buyer and the seller.

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References:

E-business toolkit(2013), Queens’ printer, Ontario

European commission (1998), An introduction to electronic commerce, European Commission,
Brussels.
http://philosophe.com/ecommerce/roles/

10. E-Business Models

10.1 Introduction

There are several categories of electronic commerce applications available including business-to-
business (B2B), consumer-to-consumer (C2C), business-to-consumer (B2C) and consumer-to-
business (C2B).

10.2 Business-to-Business Commerce (B2B)

This category of electronic commerce involves both electronic business marketplaces and direct
market links between businesses. E.g. many companies offer the business community a variety
of marketing and product information on the World Wide Web. Others also rely on electronic
data interchange (EDI) via the Internet or extranets for direct computer-to-computer exchange of
business transaction documents with their business customers and suppliers.

B2B electronic commerce is the wholesale side of the commercial process. E.g. let’s suppose a
company wants to build and sell a product to other businesses. Then it must buy raw materials
and a variety of contracted services from other companies. The interrelationships with other
businesses needed to build and sell a product make up a network of business relationships that is
called the supply chain. Electronic commerce systems like electronic data interchange (EDI), and

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business management processes like supply chain management, seek to reengineer and
streamline traditional supply chain processes.

Supply Chain Management (SCM) – this is a management concept that integrates the
management of supply chain processes. The goal of SCM is to cut costs, increase profits,
improve performance in relationships with customers and suppliers, and develop value-added
services that give a company a competitive edge. SCM has three business objectives: get the
right product to the right place at the least cost; keep inventory as low as possible and still offer
superior customer service; and reduce cycle times. SCM seeks to simplify and accelerate
operations that deal with how customer orders are processed through the system and ultimately
filled, as well as how raw materials are acquired and delivered for manufacturing processes.

Wholesaling on the Web – wholesale electronic commerce and supply chain management rely
on many different information technologies, most of which can be implemented on the Internet,
the World Wide Web, and corporate intranets and extranets. These include E-mail, electronic
business forms, bulletin board systems, electronic data interchange, electronic fund transfers,
Web sites with multimedia marketing information and product catalogs, interactive order
processing systems etc.

Electronic Data Interchange – EDI involves the electronic exchange of business transaction
documents over computer networks between trading partners (organizations and their customers
and suppliers). Data representing a variety of business transaction documents (such as purchase
orders, invoices, requests for quotations, and shipping notices) are electronically exchanged
between computers using standard document message formats. Typically, EDI software is used
to convert a company’s own document formats into standardized EDI formats as specified by
various industry and international protocols. Thus, EDI is an example of the almost complete
automation of an electronic commerce process.

Formatted transaction data are transmitted over network links directly between computers,
without paper documents or human intervention. Besides direct network links between
computers of trading partners, third-party services are widely used.

Electronic Funds Transfer – payment for products and services is a vital step in the electronic
commerce transaction process and takes place between networked computer systems of buyers
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and sellers (many security issues). Electronic funds transfer (EFT) systems are a major form of
electronic commerce systems in banking and retailing industries. EFT systems use a variety of
information technologies to capture and process money and credit transfers between banks and
businesses and their customers. E.g. banking networks support teller terminal at all banking
offices and automated teller machines (ATMs) at locations throughout this world. Banks also
support pa-by-phone services allowing bank customers to use their telephones as terminals to
electronically pay bills. In addition, wide area networks may connect POS terminals in retail
stores to bank EFT systems. This makes it possible to use a credit card or debit card to instantly
pay for gas, groceries, or other purchases at participating retail outlets.

Task: Check Hewlett-Packard Corporation’s (HP) success in B2B through the use of EDI over
the Internet.

10.3 Business-to-Consumer Commerce (B2C)

In this form of electronic commerce, businesses must develop attractive electronic marketplaces
to entice and sell products and services to consumers. E. g. companies may offer multimedia
Web sites that provide virtual storefronts and virtual shopping malls, interactive order
processing, and secure electronic payment systems.

B2C commerce is accelerating the impact of information technology on consumer behavior and
business processes and markets. Electronic commerce technologies provide access to a variety of
products and services which have transformed consumer behavior and choice. Consumer choice
dictates the marketing, distribution, and production of products and services. Business processes
and marketplace competition have created the need to cut costs which has led to drive to for
improved technology (E- Commerce technologies). So the wide-open economic model of the
Internet and the fast pace of change in Internet technologies are fundamental contributors to the
development of electronic commerce applications between businesses and consumers. Retailing
on the World Wide Web is a classic example of this business phenomenon.

Retailing on the Web – no site is any closer to its customers. This makes it vital that businesses
find ways to keep customers coming back to their stores. The key to this goal is to optimize
factors such as performance and service efficiency, personalization, socialization, the look and
feel of the site, offering incentives to purchase, and security.
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Performance and service – people don’t want to be kept waiting when browsing, selecting, or
paying for products in an electronic store. A site must be efficiently designed for ease of access,
shopping, and buying, with sufficient server power and telecommunications capacity. Marketing,
ordering, and customer service processes must also be friendly and helpful, as well as quick and
easy.

Personalization – personalizing your shopping experience encourages you to make return visits.
Many sites have you fill out a personal interest profile. Then when you return, you are welcomed
and guided just to those parts of a site that you are interested in. Some sites automatically record
details of your visits and build similar user interest profiles.

Socialization – giving online customers with similar interests a feeling of belonging to a unique
group of like-minded individuals helps build customer loyalty and value. Web-based relationship
marketing promotes such virtual communities of customers, suppliers, company representatives,
and other consumers through a variety of techniques. Examples include customer discussion
forums and chat rooms, product focus groups, bulletin board systems, and cross-links to related
Web sites and newsgroups.

Look and Feel – Web sites can offer you an attractive virtual storefront. This may range from
providing an exciting shopping experience with audio, motion, and striking graphics, to a more
traditional look and feel, including a virtual shopping mall of related Web sites. E.g. Oracle
software lets shoppers browse product sections, select products, drop them into a virtual
shopping cart, and go to a virtual checkout stand to pay for the order. Amazon.com.

Incentives – Web stores must offer shoppers incentives to buy and return. This means coupons,
discounts, special offers, and vouchers for other Web services, sometimes at other cross-linked
Web sites (Ecocash points). Some sites provide you with an electronic wallet where you can
accumulate coupons for future use, as well as receipts and credit card information. Ecocash
points.

Security and Reliability – as a customer of a Web store, you must feel confident that your credit
card, personal information, and details of your transactions are secure from unauthorized use.
Having your orders filled as you requested and in the time frame promised are important
measures of a Web store’s reliability.
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Amazon (www.amazon.com ) is one of the biggest and best virtual bookstores on the Web. The
site is designed to speed you through the process of browsing and ordering books, while giving
you reassuring, personal service at discount prices. E.g. the search engine for finding books you
want is quick and accurate, and the ordering process easy and fast. Confirmation is quick, and
notifications are accurate and friendly. Delivery is prompt. Orders are carefully wrapped and
accompanied by handwritten notes that explain any changes in the order. Buyers are E-mailed
both when their order is confirmed, as well as the day their order is shipped.

Task

Read and write notes on (1) consumer-to-consumer commerce (C2C), and (2) consumer-to-
business commerce (C2B).

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12. Advantages and Disadvantages of E-Commerce

E-commerce is business transaction through electronic means, including the Internet, telephones,
television and computers. As the number of Internet users grow, many believe e- commerce will
soon be the main way to complete business transactions. According to Daft et al (2010, p 63) E-
commerce is a narrower term referring specifically to business exchanges or transactions that
occur electronically. E-commerce replaces the exchange of money and products with the
exchange of data and information from one computer to another. Laudon (2008) argues that the
use of the internet and web to transact business more formally digitally enabled commercial
transactions between and among organisations and individuals.

Types of E-commerce

Business-to-consumer – this is mostly used by companies which sell their products to

consumers over the internet. This is the most visible expression of e-commerce to the public.

Business-to-business - fastest growing area of e-commerce which refers to electronic transaction

between organisations. Large organisations such as Wal-Mart, General Motors buy and sell
billions of dollars worth of goods and services a year via either public or private internet
linkages.

Consumer –to-business – is the most recent E-Commerce business model. In this model, individual
customers offer to sell products and services to companies who are prepared to purchase them. This
business model is the opposite of the traditional B2C model.

Consumer-to-consumers – is made possible when an Internet based business acts as an

intermediary between consumers, for example, actions at eBay. Internet actions create large
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electronic market place where consumers can buy and sell directly with one another, usually
handling practically the entire transaction via the web (Daft et al, 2010, p. 64).

Advantages of E-Commerce

Ubiquity – Technology is available everywhere, at work, at home and elsewhere via mobile
devices anytime. For example, a customer can do any transaction at any time of the day. In other
words business can be done 24/7/365 (Fort, 2013). If it is snowing and roads are closed, or its
too hot and humid to even step outside in the summer, or a holiday that every store in town
closes, your online business is open for consumers 24/7 everyday for the year. The doors never
close and profits will keep rising (Daft et al, 2010).

Global reach – Technology reaches across national boundaries, around the earth. E-commerce
allows cross cultural transactions across national boundaries and is more convenient and cost
effective. The potential market for e-commerce is roughly equal to the size of the world’s online
population. An example, an individual in Zimbabwe can buy a car from Japan irrespective of the
great distances between the two nations. The customer base is every business’s main concern,
online or offline. When online, a business does not have to worry about getting the best property
in town, people from around the world have access to their products and can come back at
anytime (Choga, 2013).

Universal standards – there is one set of technology standards. The technical standards of the
internet and standards of conducting e-commerce are universally applicable globally. The
standards are shared by all nations and enable any computer to link with other computers
regardless of the technology platform. These universal standards of internet and e-commerce
have low market entry costs, that is, a cost merchant must pay simply to bring their goods to the
market. For consumers universal standards reduce search costs, that is, the effort required to find
suitable products (Choga, 2013, p176).

Richness and convenience – Daft et al (2010) argue that the web makes it possible to deliver
rich messages, with video, audio and text messages simultaneously to large numbers of people.
Convenience – every product is at the tip of your fingers on the internet, literally. Type in the
product you are looking for into your favourite research engine, for example, Google, and every
option will appear in a well organised list in a matter of seconds.
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Interactivity –O’Brien (2002) states that technology works through interaction with the user.
Interactive communication of the internet may take the form of an interactive web site. This may
be in the form of discussion forums, chat groups and interactive forms for customer orders,
feedback, technical support and immediate e-mail responses to online queries and comments.
This is fast and efficient way of getting information from customers.

Information density – according to Choga (2013) information density refers to the total amount
and quality of information available to all market participants. The market participants include
consumers and merchants. The information available to all participants is just alike. E-
commerce reduces information collection, storage, processing and communication costs and
greatly increases currency, accuracy and timelines of information. Information in e-commerce
markets make prices and costs more transparent, that is, the ease with which consumers can find
out variety of prices in the market.

Time saving – with e-commerce, there is no driving in circles while looking and digging in hope
of finding what you need. Stores online offer their full line as well as use warehouses instead of
store fronts, products are easy to locate and can be delivered to your door in just days (O’Brien,
2002).

Options – without driving from store to store, the consumer can easily compare and contrast
products. See who offers the best in pricing and have more options to choose from while a
physical store has limited space, the same store on the internet will have full stock
(www.enkivillage, 2015).

Easy to compare – Daft et al (2013) postulate that side by side comparisons are readily available
and easy to do. When products are placed on line, they come with all specifics and they want
you to compare them with others, know they have the best options, and come back for more.

Easy to find reviews – because competition is high, companies online want you to look at other
consumer reviews. Good and bad luck reviews are on every site, not only can you see if the
product is liked, you can also see the reasons behind the thumbs up or down (O’Brien, 2002)

Coupons and deals – with every online business wanting you, more and more coupons and
deals cannot be avoided, which are totally great for customers with major sites that act as

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department store, you may find items up to 80% off. Take advantage of the competition and find
the best price available (www.enkivillage, 2015).

Rise in sales - by not managing a storefront, any business will have more sales online with a
higher profit margin. They can redistribute money to make the consumer shopping experience
faster and more efficient. While being available to international markets, more products will sell
(www.enkivillage, 2015).

Expand business reach – Kendall and Kendall (1992) state that a great tool on the internet is
translation. A business online does not have to make a site for every language. With the right
marketing, every consumer around the globe can find the business site, products and information
without leaving home.

Recurring payments made easy – with a little research every business can set up recurring
payments. Find the provider that best suit your needs and billing will be done in a consistent
manner, payments will be received in the same way (Kendall and Kendall, 1992).

Instant transactions (speed in terms of transaction process)- with e-commerce, there is no

more waiting for the cheque to clear, or a 30 day wait for certain other types of payment.
Transactions are cleared immediately or at most two to three days for the money to clear through
the banking system (Kendall and Kendall, 1992).

Disadvantages of E-Commerce

Privacy and security - before making instant transactions online, be sure to check the sites
certificates of security. While it may be easy and convenient to shop, no one wants their personal
information be to be stolen. While many sites are reputable, always do your research for those
with less than sufficient security (Choga, 2013). Security issues – while businesses make great
efforts to keep themselves and the consumer safe there are people out there that will break every
firewall possible to get the information they want. We have seen recently how the biggest and
most renowned business can be hacked online.

Hidden costs – when making purchases, the consumer is aware of the product cost, shipping,
handling and possible taxes. Be advised there may be hidden fees that won’t show up on your

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purchasing bill but will show up on your form of payment. Extra handling fees may occur;
especially with international purchases (Daft et al, 2013).

Delay in receiving goods - although delivery of products is often quicker than expected, be
prepared for delays. A snow storm in one place may throw off the shipping system across the
board. There is also a chance that your product may be lost or delivered to the wrong address
(Choga, 2013).

Need to access Internet – O’Brien (2002) states that the internet or computer at home may not
be available and therefore it may be best to shop locally.

Lack of personal interaction – while the rules and regulations of E-commerce business is laid
out for you to read, there is a lot to read and it may be confusing when it comes to the legalities.
With large or important orders, there is no one you can talk to face to face when you have
questions and concerns (Turban et al, 2001).

Credit card issues – many credit card businesses will take the side of the consumer when there
is dispute about billing – they want to keep their clients too. This can lead to a loss for E-
commerce business as goods have already been delivered and the payment is refunded back to
the customer (Laudon and Traver, 2008).

Extra expense and expertise for E-Commerce infrastructure – to be sure an online business
is running correctly, money will have to be invested. As an owner, you need to know that
transactions are being handled properly and products are represented in the most truthful way.
To make sure you get what you need, you will have to hire a professional to tie up any loose
ends (Turban et al, 2001).

Needs for expanded reverse logistics – the infrastructure of an online business must be on
point. This will be another cost to the business because money will need to be invested to ensure
proper handling of all aspects of buying and selling, especially with disgruntled consumers that
want more than a refund (Turban et al, 2001).

Sufficient internet service- although it seems that everyone is now on the internet all the time,
there are still areas which network bandwidth can cause issues. Before setting up an E-

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commerce, be sure your area can handle telecommunication bandwidth you will need to run
effectively (Laudon and Traver, 2008).

Constant upkeep – when a business has started as E-commerce, they must be ready to make
changes to stay compatible. While technology grows, the systems that support your business
must be kept up to date or replaced if needed. They may be additional overhead in order to keep
data bases and application running (Laudon and Traver, 2008).

Tasks

1. With special reference to distance, time factor, accessibility, speed, technology,

integration, security, global market issues and skill, discuss the advantages and
disadvantages of Electronic Commerce.

2. Discuss the major forces that drive E-Commerce.

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13 Threats to Information Systems

13.1 Introduction

A threat is a potential cause of an incident that may result in harm of systems and organization.
The cause could be physical such as someone stealing a computer that contains vital data. The
cause could also be non-physical such as a virus attack. In this module a threat is defined as a
potential attack from a hacker that can allow them to gain unauthorized access to a computer
system (www.guru99.com/potential-security-threats-to-your-computer-systems.html).

What is a physical threat?

A physical threat is a potential cause of an incident that may result in loss or physical damage of
the computer systems.

The following list classifies the physical threats into three (3) main categories;

 Internal: MounaJouini et al (2014) say internal threats occur when someone has
authorized access to the network with either an account on a server or physical access to
the network. A threat can be internal to the organization as the result of employee action
or failure of an organization process. The threats include fire, unstable power supply,
humidity in the rooms housing the hardware etc.

 External: MounaJouini et al (2014) say external threats can arise from individuals or
organizations working outside of a company. They do not have authorized access to the
computer systems or network. The most obvious external threats to computer systems
and the resident data are natural disasters: hurricanes, fires, floods and earthquakes.
External attacks occur through connected networks (wired and wireless), physical
intrusion, or a partner network. These threats include lightening, floods, earthquakes etc.
 Human: These threats include theft, vandalism of the infrastructure and/or hardware,
disruption, accidental or intentional errors.
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What are Non-physical threats?

A non-physical threat is a potential cause of an incident that may result in:

 Loss or corruption of system data

 Disrupt business operations that rely on computer systems

 Loss of sensitive information

 Illegal monitoring of activities on computer systems

 Others

(http://www.guru99.com/potential-security-threats-to-your-computer-systems.html).

The non-physical threats are also known as logical threats. The common types of non-physical
threats are viruses, Trojans, worms, spyware amongst many.

Explain the following threats to Information Systems:

(a) Fire:

 Fire can cause serious damage to your computer. Even if the computer does not actually
catch fire, the heat can be enough to damage delicate components. Smoke can damage the
CPU fan, causing damage to the CPU due to overheating.

 Many components of the computer are designed to operate within a specific range of
temperatures. Some components may start to malfunction if they experience excessive
heat or cold and you may need to replace them. If your computer has been exposed to
extreme temperatures you should let it return to room temperature before starting it again
(http://online-passport.info/comsecpriv/?page_id=37).

(b) Electrical power failure:

Frequent electrical storms and power outages can damage electronic devices or full-out destroy
them, and that includes computers.
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Blackout

When power completely shuts off, it’s known as a blackout. These tend to occur due to issues
beyond your control (e.g., power station disruptions, load shedding, damaged electrical lines,
etc.) but sometimes they can be self-inflicted (e.g., by shorting or overloading circuits).

Brownout

This is when your electrical voltage experiences a temporary drop without fully blacking out.
When lights dim for unknown reasons, it is probably due to a brownout. Brownouts can be
intentional as a way to reduce electrical loads and prevent blackouts, though they can be
unintentional as well.

Power surge

On the other side of the spectrum, we’ve got the power surge, which is when an appliance
receives more electricity than intended for at least three nanoseconds. Surges can be caused by a
number of factors, including short circuits and electrical line malfunctions. If the increased
voltage only lasts one or two seconds, it’s a power spike, which is most commonly caused by
lighting.

Why Blackouts and Surges Are Dangerous

 The real danger of blackouts and brownouts is the unexpected computer shutdown.
Operating systems are complex and they must go through a “shutdown sequence” to
make sure all running processes have correctly terminated before powering off. A sudden
loss of electricity can interrupt important threads and leave your computer in an
inoperable state.
 System files are the largest concern. Consider what happens when a hard drive is writing
data to the disk but suddenly shuts down in the middle of it. Suppose the file being
written was a system file necessary for the booting process? Now that file is corrupted
and you can’t boot up your computer without going through an involved recovery
procedure.

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  Furthermore, frequent power outages can reduce a hard drive’s physical lifespan. The
read-and-write head, which hovers over the spinning platters during operation, snaps
back into its original position upon power loss. This sudden movement can cause tiny
imperfections that accumulate over time, increasing the likelihood of a “head crash”: a
malfunction that occurs when the head touches and scrapes the platter surfaces,
effectively destroying the hard drive.
 Solid state drives can also suffer catastrophic damage from sudden power cuts. Issues can
range anywhere from data corruption to total malfunction.
 It should be noted that although power outages will not cause direct harm to computer
hardware other than data drives, it’s possible for power outages to be accompanied by
power surges, which can cause severe damage to hardware.
 As far as power surges and spikes are concerned, your biggest worry should be lightning.
Most homes are built with electricity lines that deliver somewhere around 120 volts. The
current of a lightning strike, however, can exceed several million volts. That’s like trying
to fit the flow of Victoria Falls through a straw.
 Electronic devices aren’t designed to withstand that kind of influx and if the power of a
lightning strike ever surges through your lines, you can be sure that any unprotected
device will be fried beyond repair
(http://www.guru99.com/potential-security-threats-to-your-computer-systems.html).

(c) Hardware malfunction

Your dictionary (2016), defined a hardware malfunction within the electronic circuits or electro
mechanical components (disks, tapes) of a computer system”. Recovery from a hardware failure
requires repair or replacement of the offending part. It can occur when the operating system
becomes corrupted. When there is a hardware malfunction, Opening programs will be slower and
response times will lag. When you have multiple applications running, you may experience
crashes and freezes. There can be numerous causes of this error including excessive startup
entries, registry errors, hardware/RAM decline, fragmented files, and unnecessary or redundant
program installations and so on. The speed of the machine can be improved by addressing these
problems and it is recommended to download the 'Hardware Malfunction Repair Tool'. This is an

90
advanced optimization tool that can repair all the problems that are slowing your computer down
(https://repairs.net/hardware-malfunction.html).

There are many reasons why Hardware Malfunction happen, including having malware,
spyware, or programs not installing properly. You can have all kinds of system conflicts, registry
errors, and Active X errors. Reimage specializes in Windows repair. It scans and diagnoses, then
repairs, your damaged PC with technology that not only fixes your Windows Operating System,
but also reverses the damage already done with a full database of replacement files. The repair
will deactivate then quarantine all Malware found then remove virus damage. A FREE
Scan (approx. 5 minutes) into the PC's Windows Operating System detects problems divided into
3 categories - Hardware, Security and Stability. At the end of the scan, one can review the PC's
Hardware, Security and Stability in comparison with a worldwide average and there are several
factors that can be detected (https://repairs.net/hardware-malfunction.html).

These errors include:

 windows errors occur when an unexpected condition occurs or when a desired operation
has failed and this may cause programmes to close or freeze and crush although this may
seem to be harmless but it is annoying,
 blue screen of death is caused by a fatal system error and is the error screen displayed
by the Microsoft Windows family of operating systems upon encountering a critical
error, of a non-recoverable nature, that causes the system to "crash",
 Damaged DLLs is caused by constantly installing and uninstalling programs. This often
means that DLL's will get overwritten by newer versions when a new program is
installed, for example. This causes problems for those applications and programs that still
need the old version to operate. Thus, the program begins to malfunction and crash. 
 Computer Freezing or hanging occurs when either a program or the whole system
ceases to respond to inputs. In the most commonly encountered scenario, a program
freezes and all windows belonging to the frozen program become static. Almost always,
the only way to recover from a system freeze is to reboot the machine, usually by power
cycling with an on/off or reset button.

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  Virus Damage occurs once the computer has been infected with a virus; it's no longer
the same. After removing it with your anti-virus software, you're often left with lingering
side-effects. Technically, your computer might no longer be infected, but that doesn't
mean it's error-free. Even simply removing a virus can actually harm your system
(https://repairs.net/hardware-malfunction.html).

(d) Software error

This is a problem which causes program to crash or produce invalid output. The problem is
caused by insufficient or erroneous logic. An error can be a bug, mistake, defect or fault, which
may cause failure or deviation from expected results. Most software errors are due to human
errors in source code or its design. Some errors might not have serious effects on the
functionality of the program and may remain undetected for a long time. A program might crash
when serious bugs are left unidentified. Some errors may allow a malicious user bypass access
controls and obtain unauthorized privileges (https://blog.testfort.com/automated-testing/8-
factors-that-cause-software-bugs). These errors may be detected during the testing process.
Identified are several reasons listed below why these errors occur.

 Human factor – Due to human propensity to make mistakes, the software cannot be made
perfectly without any bugs in it.
 Communication failure – This factor takes place in the different levels. Communication
failure, such as miscommunication, lack of communication or incorrect communication
can arise when the requirements are incomplete or indistinct, also when the code is
modified for second time.

 Unreal development timeframe – The situations when tester doesn’t have enough
information and his/her development schedule is limited by deadlines arise very often. It
could lead to bad-quality and defective service.

 Poor design login – For today the software development is improved every day. So many
applications need more time and brainstorming to high quality of the technical feasibility.

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 Poor coding practices – When lack of validation or missing error happen it could lead to
defects in the code. Poor tools, faulty debuggers, profiles, etc. make almost unavoidable
for many programmers attracting defects and make it more difficult to debug.

 Lack of version control -- Parallel version systems help tracking all changes in set of
code base. If the programmer has not made sure that the recent version control system
was available, error could still stay into the code.

(https://blog.testfort.com/automated-testing/8-factors-that-cause-software-bugs).

(e) User Errors

Ahmad et al (2013; 93) defined human error as “an explanation of malfunctions, unintended
consequences from operating a system.” Reason (1990) says errors are distinct from
mistakes, errors are distinguished into two types: slips and lapses. Slips are execution failure
for example: being attached by the wrong document to an email. Lapses are memory storage
failure for example: forgetting to logoff the computer. Mistakes are a result of inadequate
planning for example replying email that appears to come from a reasonable source. One of
the most subtle sources in data loosing and failure is human operator errors. It happens for
many reasons, but the main cause can be mismatch between a human mental and the
environment actual state. Sometimes this happens because of poorly designed security’s
guard. In 2001, Microsoft suffered 24-hour disorder in Web properties because of human
error while configuring named resolution system.

Ahmad (2013) shows us that although several types of human error have been identified and
studied the biggest risk to an organization’s network security is human error. The errors can
be a result of lack of knowledge, ignorance, and experience. The knowledgeable also make
poor and incorrect decisions. Therefore, it is critical that designers and operators be aware of
human errors problem and build mechanisms for coping with the errors that will occur.
Ahmad (2013) also argues that a person can be fooled, distracted, persuaded, and
blackmailed but the conditions that increase the errors can be individual and based on the
human’s characteristics, for example, when a person is tired, idle, apathetic and uncaring.
The study of human errors in the event is relevant to industry accident.

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(f) Computer crime

Computer crime is an act performed by knowledgeable computer user sometimes referred to as

a hacker that legally browses or steals a company’s or individual’s private information. Wiley
(2005) says computer crime is the manipulation of a computer or computer data, by whatever
method, to dishonestly obtain money, property or some other advantage of a value or to cause a
loss. Kunz (2004) asserts that computer crime poses a daunting task for law enforcement
agencies because they are highly technical crimes.

There are many types of computer crimes. Computer fraud is one of the most rapidly increasing
forms of computer crime. Computer fraud is also commonly referred to as Internet fraud.
Department of Justice (2001) gives the view that, computer/ Internet fraud is any type of fraud
scheme that uses one or more components of the Internet-such as chat rooms, e-mail, message
boards, or Web sites to present fraudulent transactions, or to transmit the proceeds of fraud to
financial institutions or to others connected with the scheme. Rushinek and Rushinek (1993) as
well as Haugen and Selin (1999) say computer crimes involving theft are very diverse. The
gaining of access and removal of property through the use of electronic resources generally
defines theft as computer crime. This property may include money, service, programs, data, or
computer output, and computer time.

Business Software Alliance (2004) stated that Internet piracy is a more prominent form of theft
in a digital medium. Piracy is the act of duplicating copyrighted material without authorization.
For the past few years, private and law enforcement organizations have been putting a
concentrated effort on stopping this offense. Unauthorized access is a prerequisite to many forms
of computer crimes and computer fraud. This form of crime amounts to electronic intrusion, or
gaining access to resources via a computer resource without permission.

Unauthorized access may occur both on individuals’ personal computers, as well as in the
workplace. One major form of unauthorized access is known as hacking. Hacking is the act of
gaining unauthorized access to a computer system or network and in some cases making
unauthorized use of this access. Rushinek and Rushinek, (1993) state that unauthorized access
may be a gateway to commit other offenses. The Wiki-leaks – Julian Assange, who hacked into
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the US government databases and released the information into the public domain, resulting in
serious compromise of the US government’s foreign relations.

A denial of service attack is a targeted effort to disrupt a legitimate user of a service from having
access to the service. This may be accomplished through a number of methods. CERT (2001)
Offenders can limit or prevent access to services by overloading the available resources,
changing the configuration of the service’s data, or physically destroying the available
connections to the information. Online child pornography is defined by pedophiles using
computer resources to distribute illegal media of and to minors, as well as engaging in actions to
sexually exploit children. According to 18 USC 2252 and 18 USC 2252A, possessing or
distributing child pornography is against federal law distributing child pornography of any form
to a minor is illegal.

Online harassment is unwanted contact by offenders that may negatively impact a victim’s
livelihood, well-being, and mental or emotional state. One of the most common forms of online
harassment is cyber stalking. Another form of computer crime is spam mail. Spam mail is the
distribution of bulk e-mail that offers recipients deals on products or services. The purpose of
spam mail is to make customers think they are going to receive the real product or service at a
reduced price. However, before the deal can occur, the sender of the spam asks for money, the
recipients’ credit card number or other personal information.

Another form of computer crime that is prohibited by most states is unauthorized use of a
computer, computer system, or computer network. The state of Maryland outlines this crime in
Maryland Annotated Code Article 27 section 146: “a person may not intentionally, willfully and
without authorization access, attempt to access, or cause access to a computer, computer
network, computer software, computer control language, computer system, computer services,
computer data base, or any part of these systems or services. (2) A person may not intentionally,
willfully, and without authorization access, attempt to access, or cause access to a computer,
computer network, computer software, computer control language, computer system, computer
services, computer data base, or any part of these services to (i) cause the malfunction or
interrupt the operation of a computer, computer network, computer software, computer control
language, computer system, computer services, computer data base, or any part of these.” Check

95
how the government of Zimbabwe has gone with development of the Computer Crime and
Cybercrime Bill of 2016.

In the loosest sense of the term, cyber stalking is using a computer in the perpetration of the
traditional crime of stalking. The traditional crime of stalking usually involves “harassing and
threatening behaviour that an individual engages in repeatedly, such as following a person,
appearing at a person’s home or place of business, making harassing phone calls, leaving
messages or objects, or vandalizing a person’s property” (United States 1). Cyber stalker
involves the use of a computer in the perpetration of those acts. People can cyber stalk others by
sending harassing or threatening messages through e-mail, instant messaging, or by posting
messages on websites/chat rooms. However, there are other, unconventional ways to cyber stalk
an individual.

Computer Crimes and Intellectual Property Section (2003).Viruses and malicious programs can
potentially impact a massive amount of individuals and resources. These programs are intended
to cause electronic resources to function abnormally and may impact legitimate users access to
computer resources. For instance, the “Melissa” virus released in early 1999 contaminated 1.2
million computers used by U.S. businesses, impacted computer resources throughout the U. S.
and Europe, and is estimated to have created eighty million dollars in damages worldwide. Cyber
terrorism is the adaptation of terrorism to computer resources, whose purpose is to cause fear in
its victims by attacking electronic resources. Denning (2000) says cyber terrorism is generally
understood to mean unlawful attacks and threats of attack against computers, networks, and the
information stored therein when done to intimidate or coerce a government or its people in
furtherance of political or social objectives. Further, to qualify as cyber terrorism, an attack
should result in violence against persons or property, or at least cause enough harm to generate
fear.

(g) Computer Abuse

Wiley (2005) says Computer abuse is the unauthorized use of, or access to, a computer for
purposes contrary to the wishes of the owner of the computer. According to 6 august 2016 News
DzeZimbabwe “ those abusing social media to instigate violence, banditry, sabotage and general
instability in Zimbabwe will soon be jailed in Terms of new regulations being crafted by the

96
government”. A good number of private citizens have also suffered at the hands Of cyber bullies
and one such victim was a Harare based model Tafadzwa Mushuynje who was falsely accused of
having injected a toddler with HIV infected blood only for the story to be disapproved by the
latter. In June 2016 a suspected pedophile circulated images of two semi-nude girls on Whatsapp
and the story is still under investigation.

14 Controls to Management Information Systems

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14.1 Introduction

The information systems are so vulnerable to destruction, error, abuse, and system quality
problems. This is so because of accessibility of networks, hardware problems, software
problems, disasters, use of network computers outside of firm’s control or even loss and theft of
portable devices (Bhattacharjee and Purkayastha, 2015). In order to minimize the dangers
encountered in information systems, special policies and procedures must be incorporated into
the design and implementation of information systems. The combination of manual and
automated measures that safeguard information systems and ensure that they perform
according to management standards is termed controls. The major controls that minimize
these dangers are the general controls and the application controls (wps.prenhall.com).

14. 2 GENERAL CONTROLS

The general controls are the overall controls that ensure the effective operation of programmed
procedures and they apply to all the application areas. On the whole, the general controls apply
to all computerized applications and consists of combination of systems software and manual
procedures that create an overall control environment. These include software, physical
hardware, computer operations, data security, and implementation administrative controls
(wps.prenhall.com).

Software controls

The software controls are essential for the various categories of software that are used in the
computer systems. They are responsible for monitoring the use of system software and they
prevent unauthorized access of software programmes. This is important because it performs the
overall control functions for those programmes that directly process the data and the data files.
Software controls for example are also used for compilers, utility programs, reporting of
operations, file setup and `handling, and library recordkeeping (www.paginas.fe.up). The
software controls go a long way in minimizing the software vulnerabilities that may arise from
unintended coding errors and other quality issues ranging from incomplete requirements to poor
implementation. They may for example prevent the information systems from damages due to
malicious software such as Trojan horses, viruses, worms amongst others (Baldina et al.).

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Physical Hardware controls.

The physical hardware controls are essential for ensuring that the computer’s hardware are
physically secure and they also check for the equipment malfunction. They also make sure that
the computers are protected against dangers such as fire and extremes of heat or humidity. More
so, the organizations that depend on their computers must also make sure that they make
provision for backup in the event of power failure, or continued operation to maintain constant
service. The physical hardware controls protects the hardware from physical action that could
cause serious loss. Thus physical controls minimize the dangers such as natural disasters, fire,
floods, vandalism, to mention but a few. Physical controls may be locks, alarms, erecting of
fences, security guards, biometric systems backups amongst others (en.wikibooks.org).

Computer operations controls

These are responsible for overseeing the work of the computer department in an organization in
order to ensure that the programmed procedures are applied correctly to the storage and
processing of data. They include controls over the setup of computer jobs, operations software
and computer operations and backup and recovery that ends abnormally. There should be fully
documented instructions for running the computer jobs and those instructions should be reviewed
by a responsible official. The operations controls include the manual procedures which are
designed for both preventing and detecting errors. These are also comprised of specified
operating instructions for system software, restart and recovery procedures for specific
applications
(http://paginas.fe.up.pt/~als/mis10e/learniingtrakchapters/MIS_10E_CH08_LT1.pdf).

By preventing errors, computer operations controls prevent the loss or harm from occurring. The
detective controls monitor activities to identify instances where practices or procedures were not
followed. For example, a business might reconcile the general ledger or review payment request
audit logs to identify fraudulent payments. In computer operation controls, the corrective
controls restore the systems or process back to the state it was before the harmful event. For
example, a business may implement a full restoration system from backup tapes after the
evidence is found that someone has improperly altered the payment data. A business can
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implement manual controls to minimize the chance of fraudulent payments, such as requiring an
administrator and a manager to manually sign the applicable paperwork to indicate that the
transaction was authorized and approved. As an alternative, the business could automate these
controls by introducing a computer program with logical access, segregation of duties and
maker/checker controls (http://ishandbook.bsewall.com).

Data Security Controls

Data security controls ensure that valuable business data files on either disk or tape are not
subject to unauthorized access, change, or destruction while they are in use or in storage. They
are mostly required when the files are being held for storage. The online and real time systems
are vulnerable at several points as they can be accessed through terminals as well as by operators
during the production runs. Therefore when data can be input online through a terminal entry of
unauthorized entry can be prevented. The terminals can be restricted so that they can only be
available to authorized users. The data security controls may include systems software which can
be assigned to authorized individuals only. Encryption is an example of data security control
which uses special keys to transform digital data into a scrambled code before they are
transmitted and decode the data when they are received. The data security controls may also
make use of authentication methods which are based on one of the factors such as password or
pin, smart card or identification devices (www.slideshare.net).

Implementation controls

These involve the auditing of systems development at various points in order to ensure that the
process is properly controlled and managed. The auditing systems examine the management
controls within an information technology infrastructure. The evaluation determines if the
information systems are safeguarding assets, maintaining data integrity, and operating effectively
to achieve organizational goals or objectives. The audit should look for the use of controls and
quality assurance techniques for program development, conversion, and testing and for complete
and thorough system, user, and operations documentation. The main aim of the audit is to
evaluate if the computer systems are available all times, if the information systems are disclosed
to authorized users only, and also if the information provided is accurate and reliable. By so

100
doing the audit hopes to assess the risks to the company valuable assets thereby establishing
methods to minimize those risks. Without the audit, many errors are likely to be encountered

(https://en.wikipedia.org/wiki/Information_technology_audit#Purpose).

Administrative controls

These are formalized rules and procedures, and control disciplines which are responsible for
ensuring that the organization’s general and application controls are properly executed and
enforced. These include segregation of functions, written policies and procedures and the
supervision. The segregation functions ensure that job functions are designed in such a way that
minimizes the risk of errors and fraudulent manipulation of the organizations’ assets. With the
segregation functions, the people who are responsible for operating systems are not the ones who
initiate the transactions that change the assets. Supervision of personnel involved in control
procedures ensures that the controls for an information system are performing as intended. With
supervision, weaknesses can be spotted, errors corrected, and deviations from standard
procedures can also be identified. In other words administrative controls define the human
factors of security determine which users have access to what resources and information.
(http://paginas.fe.up.pt/~als/mis10e/learniingtrakchapters/MIS_10E_CH08_LT1.pdf).

APPLICATION CONTROLS

Lord, (2016) explained that, application control is a security practice that blocks or restricts
unauthorized applications from executing in ways that put data at risk. The control functions
vary based on the business purpose of the specific application, but the main objective is to help
ensure the privacy and security of data used by and transmitted between applications. The
purposes of application controls are to ensure that all input data is accurate, complete,
authorized and correct. They also ensure that data is processed as intended, all data stored is
accurate and complete, all output is accurate and complete. The application controls are mainly
classified as input controls, processing controls and output controls (www.theiia.org).
(application software – word processing and payroll programme).

Input Controls

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These are mainly used to check the integrity of data entered into the business application. There
are specific input controls for input authorization, data conversion, data editing, and error
handling. The input authorization ensures that input is properly authorized. The Data conversion
ensures that input is properly converted into computer transaction without errors as it is
transcribed from one form to another (www.slideshare.net).

Processing controls

They establish that Data is accurate and complete on processing. It also Checks on totals to catch
errors, Compare to master records to catch errors or Field validation on update. The processing
controls provide automated means to ensure processing is complete, accurate, and authorized.
The major processing controls include run control totals, computer matching and edit checks.
Run control totals balance the total of transactions processed with total number of transactions
input or output. Computer matching, matches input data with information held on master or
suspense files and notes unmatched items for investigation. The edit checks Programmed
routines that can be performed to edit input data for errors (www.theiia.org).

Output controls

These ensure that the results of computer processing are accurate, complete, and properly
distributed. They include, balancing output totals with input and processing totals, reviews of the
computer processing logs to determine that all of the correct computer jobs were executed
properly for processing, audits of output reports to make sure that totals, formats, and critical
details are correct and reconcilable with input. They also include formal procedures and
documentation specifying authorized recipients of output reports, checks, or other critical
documents (Bhattacharjee and Purkayastha, 2015).

Firewalls

Firewalls are another form of control that minimizes the dangers in information systems. This
screens all network traffic for proper passwords and other security. It only allows authorized
transmissions in and out of the network. Firewalls have become an essential component of

102
organizations connecting to the Internet. Firewalls can deter, but not completely prevent,
unauthorized access (hacking) into computer networks (www.slideshare.net).

Other controls include E-Mail Monitoring. These ensure that Internet and other online e-mail
systems are one of the favourite avenues of attack by hackers for spreading computer viruses or
breaking into networked computers.

Conclusively, the information availability should be controlled and should be available to all
authorized persons when they need it. It should be unavailable to unauthorized persons. In
addition to that, continuous process to manage the information should be in place. The
Information security involves confidentiality, integrity, availability and traceability.

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