Chapter 2.1, 2.2, 2.

3 (Topic: Functional Business Systems)

Short Questions:

1. Provide some examples of business process from different functional areas. (p-76)

Ans: 1. Manufacturing and production: Assembling the product, checking for quality,
Producing bills of materials. 2. Sales and marketing: Identifying customers, making
customers aware of the product, Selling the product. 3. Finance and accounting: Paying
creditors, creating financial statements, Managing cash accounts. 4. Human resources:
Hiring employees, Evaluating employees’ job performance, Enrolling employees in
benefits plans.

2. How do information systems improve business processes? (p-77)

Ans: Information systems improve business processes.

 Automating system that were manual.

 Change flow of information.

 Replace sequential steps with parallel steps.

 Eliminate delays in decision making.

3. Draw the diagram of Order Fulfillment Process with IS. List the benefits. Ans:

4. Define different types of Information systems with examples of questions that can be
answered from each type of IS. Ans:

 TPS (Transaction processing systems): A transaction processing system is a

computerized system that performs and records the daily routine transactions,
necessary to conduct business, such as sales order entry, hotel reservations,
payroll, employee record keeping, and shipping.

Example: How many parts are in inventory? What happened to Mr. Smith’s
payment?

 MIS (Management information systems): MIS Designates a specific category of

information systems serving middle management. MIS provide middle managers
with reports on the organization’s current performance. This information is used
to monitor and control the business and predict future performance.
 Example: Compare total annual sales figures for specific products to planned
targets.

 DSS (Decision support systems): DSS focus on problems that are unique and
rapidly changing, for which, the procedure for arriving at a solution may not be
fully predefined in advance.

Example: What would happen to our return on investment if a factory schedule

were delayed for six months?

 ESS (Executive support systems): ESS address non-routine decisions requiring

judgment, evaluation, and insight because there is no agreed-on procedure for
arriving at a solution.

Example: What will employment levels be in five years?

5. Define the followings: Enterprise Applications, Enterprise Systems, Supply Chain

Management systems, Customer Relationship Management Systems, Knowledge
Management Systems, Intranets, Extranets. Ans:

 Enterprise Applications: Enterprise Applications are systems that span

functional areas, focus on executing business processes across the business
firm, and include all levels of management.

 Enterprise Systems: Enterprise Systems integrate business processes in

manufacturing and production, finance and accounting, sales and marketing,
and human resources and management into a single software system.

 Supply Chain Management systems: Supply Chain Management systems

help firms to manage relationships with their suppliers. (These systems help
suppliers, purchasing firms, distributors, and logistics companies share
information about orders, production, inventory levels, and delivery of
products and services so they can source, produce, and deliver goods and
services efficiently)

 Customer Relationship Management Systems: Customer Relationship

Management Systems help to manage firm’s relationships with their
customers. CRM systems provide information to coordinate all of the
business processes that deal with customers in sales, marketing, and service
to optimize revenue, customer satisfaction, and customer retention. This
information helps firms identify, attract, and retain the most profitable
customers; provide better service to existing customers; and increase sales.

 Knowledge Management Systems: Knowledge Management Systems enable

organizations to better manage processes for capturing and applying
knowledge and expertise.

 Intranets: Intranet refers to an internal network, in contrast to the Internet,

which is a public network linking organizations and other external networks.

 Extranets: Extranets are company Web sites that are accessible to authorized
vendors and suppliers, and are often used to coordinate the movement of
supplies to the firm’s production apparatus.

6. Draw the diagram to show the relationship between organization and types of IS. List
the inputs, process, and outputs of different types of IS used in Domino’s case as
discussed in class.

7. What is collaboration? Discuss the importance of collaboration and teamwork. (p-88

and 89)
 Ans: Collaboration is working with others to achieve shared and explicit goals.
Importance of collaboration and team work:

 Changing nature of work.

 Changing organization of the firm.

 Changing scope of the firm.

 Changing culture of work and business.

 Emphasis on innovation.

 Growth of professional work.

Chapter 3.1, 3.2, 3.3

Short Questions:
1. Define the followings: Organization, Principle of Efficiency, Transaction Cost theory, Agency
theory.

Ans:

 Organization: An organization is a stable, formal social structure that takes resources

from the environment and processes them to produce outputs. This technical definition
focuses on three elements of an organization. Capital and labor are primary production
factors provided by the environment. The organization (the firm) transforms these inputs
into products and services in a production function.

 Principle of Efficiency: maximizing output using limited inputs.

 Transaction Cost theory: Transaction cost is the costs incurred when a firm buys on the
marketplace what it cannot make itself. According to transaction cost theory, firms and
individuals seek to economize on transaction costs, much as they do on production
costs.

 Agency theory: According to agency theory, the firm is viewed as a “nexus of contracts”
among self-interested individuals rather than as a unified, profit-maximizing entity.

2. What are the Features of organization? Define each of them. (personal note: not included in
the questions posted by sir)

Ans: There are Four features of Organization.

1. Routine and Business Processes

2. Organizational politics

3. Organizational Culture

4. Organizational Environment

3. What is Disruptive Technology? Why is it tricky? (P-119)

Ans: Disruptive technologies are substitute products that perform as well as or better (often
much better) than anything currently produced. Disruptive technologies are tricky because firms
that invent disruptive technologies as “first movers” do not always benefit if they lack the
resources to exploit the technology or fail to see the opportunity.

4. How does IT flatten organizations? (P-123)

Ans: The shape of organizations flattens because professional workers tend to be self-
managing, and decision making should become more decentralized as knowledge and
information become more widespread throughout the firm.

5. Why is understanding organizational resistance to change important while implementing new

information systems? (P-124)

Ans: Because organizational resistance to change is so powerful, many information technology

investments flounder and do not increase productivity. Indeed, research on project
implementation failures demonstrates that the most common reason for failure of large
projects to reach their objectives is not the failure of the technology, but organizational and
political resistance to change.

6. Briefly describe five competitive forces from Porter’s Competitive Forces Mode.

1Ans: 1. Traditional Competitors: All firms share market space with other competitors who are
continuously devising new, more efficient ways to produce by introducing new products and
services, and attempting to attract customers by developing their brands and imposing
switching costs on their customers.

2. New Market Entrants: In a free economy with mobile labor and financial resources, new
companies are always entering the marketplace. For instance, it is fairly easy to start a pizza
business or just about any small retail business, but it is much more expensive and difficult to
enter the computer chip business.

3. Substitute Product and Services: In just about every industry, there are substitutes that your
customers might use if your prices become too high. For instance, an Internet music service
that allows you to download music tracks to an iPod or smartphone has become a substitute
for CD-based music stores.

4. Customers: The power of customers grows if they can easily switch to a competitor’s
products and services, or if they can force a business and its competitors to compete on price
alone in a transparent marketplace where there is little product differentiation, and all prices are
known instantly (such as on the Internet).

5. Suppliers: The market power of suppliers can have a significant impact on firm profits,
especially when the firm cannot raise prices as fast as can suppliers.

7. Briefly describe four generic strategies for dealing with competitive forces.

Ans: low-cost leadership, product differentiation, focus on market niche, and strengthening
customer and supplier intimacy.

1. low-cost leadership: Use information systems to achieve the lowest operational costs
and the lowest prices. The classic example is Walmart. By keeping prices low and
shelves well stocked using a legendary inventory replenishment system, Walmart
became the leading retail business in the United States.

2. Product differentiation: Use information systems to enable new products and services,
or greatly change the customer convenience in using your existing products and
services. For instance, Nike sells customized sneakers through its NIKEiD program on its
Web site. Customers are able to select the type of shoe, colors, material, outsoles, and
even a logo of up to eight characters. (The ability to offer individually tailored products
or services using the same production resources as mass production is called mass
customization.)
3. Focus on market niche: Use information systems to enable a specific market focus, and
serve this narrow target market better than competitors.

4. Strengthening customer and supplier intimacy: Use information systems to tighten

linkages with suppliers and develop intimacy with customers. Strong linkages to
customers and suppliers increase switching costs (the cost of switching from one
product to a competing product), and loyalty to your firm.