Chapter Nine

Information Technology and E-Commerce

© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/IrwinIntroduction to Business

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Learning Objectives

1. Distinguish between data, information, and knowledge and identify the characteristics of useful information.

2. Explain the relationship between IT, competitive advantage, and profitability.

3. Discuss five major IT applications used by companies today to build competitive advantage.

4. Identify the major hardware and software components of IT and E-Commerce and describe how they have evolved over time.

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Information Technology and Profitability

• Information - a set of data, facts, numbers, and words

that has been organized in such a way that it provides its users with knowledge

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Information Technology and Profitability

• Knowledge - what a person perceives, recognizes,

identifies, or discovers from analyzing data and information

• Learning - an increase in the store or stock of people’s

expertise or knowledge

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Information, Knowledge, and Learning

Figure 9.1

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Information Technology and Profitability

• Information technology - the many different kinds of computer and

communications hardware and software and the skills of their designers, programmers, managers, and technicians who create and manage it

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Question?

What is managing information to achieve a better fit between a company’s business model and the forces in its environment?

A. Organizational cultureB. Organizational learningC. EruditionD. Business model balancing

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Information Technology and Profitability

• Organizational learning - managing information and knowledge to

achieve a better fit between a company’s business model and the forces in its environment

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Useful Information and Knowledge

• Complete • Accurate and reliable

• Relevant• Timely

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Characteristics of Useful Information

Figure 9.2

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Useful Information and Knowledge

• Information overload - a situation in which managers have to

process so much information it actually reduces their understanding of a situation

• Real-time information - information that is constantly updated

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Gaining a Competitive Advantage with IT

• Superior productivity• Superior quality• Superior innovation• Superior customer responsiveness

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IT and Competitive Advantage

Figure 9.3

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Major Information Technology Applications

• Chief information officer - the top manager of a company’s IT function

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Major Information Technology Applications

• Transaction processing systems• Knowledge management systems• Expert systems and artificial intelligence• Enterprise resource planning systems• E-commerce systems

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Five Major IT Applications

Figure 9.4

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Transaction Processing Systems

• Transaction processing systems - an IT system designed to collect, record,

and manipulate the data related to a company’s day-to-day business operations

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Knowledge Management Systems

• Knowledge management systems - an IT system that analyzes the information

collected from the TP system but filters and analyzes it to make it more useful to managers

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Knowledge Management Systems

• Best practices - the set of skill-based competencies that

allow a particular function to perform at its optimal level

• IT consultants - expert employees who use their knowledge

and learning to solve their customers’ IT problems

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Expert Systems and Artificial Intelligence

• Expert systems - an advanced IT system that can reason

through a company’s information, diagnose problems, and suggest solutions

• Artificial intelligence - an IT system that reasons and learns like a

human being

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Enterprise Resource Planning Systems

• Enterprise resource planning systems- multimodule applications software

packages that coordinate all of a company’s functional activities

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Primary and Secondary Value-Chain Functions

Figure 9.5

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E-Commerce Systems

• E-Commerce - trade that takes place between companies,

and between companies and individual customers via the Internet (or other IT systems)

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Question?

What is a company’s internal system of computers and Web sites accessible only by its employees?

A. WebB. InternetC. EthernetD. Intranet

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E-commerce Systems

• B2B marketplace - an industry-specific trading platform set up

to connect buyers and sellers using the Internet

• Intranet - a company’s internal system of computers

and Web sites accessible only by its employees

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Types of E-Commerce

Figure 9.6

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Hardware Components of IT and E-Commerce

• Legacy systems• Mainframe computers• Microprocessors and personal computers• Network computers: servers and clients• The world wide web and the Internet• Wired and wireless broadband technology

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Legacy Systems

• Legacy systems - the hardware and software components of

a company’s IT system at any one point in time

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The World Wide Web and the Internet

• Router - hardware and software that electronically

transfers data between networks to its intended destination, such as a specific web page or computer

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The World Wide Web and the Internet

• Ethernet - a local area communication technology that

transmits information between computers at speeds of between 10 and 100 million MBPs using coaxial or fiber optic cable

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Figure 9.7

Four Levels of IT and

Computing

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Wired and Wireless Broadband Technology

• Broadband technology - a type of communications hardware that

allows for the rapid transmission of vast amounts of information

• Wi-Fi - a type of Ethernet technology that allows

computer users to access the Internet wirelessly

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Software Components of Information Technology

• PC software• Networking software• Computer security software• Wireless hand-held software• IT and business occupation

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Software Components of Information Technology

• Best-of-breed solution - the highest performing IT hardware or

software application currently available for managing a particular information processing or multimedia task

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PC Software

• Industry standard - a predominant type of technology used in

an industry - other technologies must be compatible with

the industry standard to be widely adopted

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Computer Security Software

• Firewall - software that gives a company’s computers

safe access to the Internet but blocks computers from outside the firm from gaining access to the company’s intranet

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Computer Security Software

• Hackers - people who seek to invade a company’s

databases and steal the information for malicious or illegal reasons

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Protecting the Intranet by a Firewall

Figure 9.8

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Computer Security Software

• Computer virus - software code deliberately written to harm

hardware and software and corrupt files and databases

See a current list of virus threats

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Video: Hillerich & Bradsby

• The company faced a crucial decision – to implement a system of connected stand alone computers or to start over moving toward supply chain management that integrated all functions within a central database.

• Which of the major applications of information technology did Hillerich and Bradsby turn to? Why?