Management Information System PDF

MANAGEMENT INFORMATION SYSTEM CHAPTER 1 - INTRODUCTION TO MANAGEMENT INFORMATION SYSTEM 1. DEFINITIONS - information technology (IT): any computer based tool that people use to work with information and support an organization’s information and information-processing...

MANAGEMENT INFORMATION SYSTEM CHAPTER 1 - INTRODUCTION TO MANAGEMENT INFORMATION SYSTEM 1. DEFINITIONS - information technology (IT): any computer based tool that people use to work with information and support an organization’s information and information-processing needs. For any technology to be considered IT it needs to be computer based, but also external hard rive, hardwares, also the apps on the computer are IT, but also brightspace… - Information systems (IS): an IS collects, processes, stores, analyzes and disseminates information for a specific purpose. When we say IS, we assume it is computer based, but it is not mandatory. We can think about the manual book-keeping. Libraries were known as the biggest information system. - Alternative definition of IS: “an integration of components–tasks, people, structure (or roles), and technology––for collection, storage and processing of data, to provide information, contribute to knowledge, and facilitate decision-making” - management information systems (MIS): is a business function just as marketing, finance, operations, and human resources. In organizations, this function is also referred to as IS or IT or Information services. This functional area “deals with planning for - and the development, management, and use of IT tools to help people perform all the tasks related to information processing and management”. - Business technology management (BTM): is just another name for IS, often used to refer to the academic discipline of IS. They both mean the same thing. - Digital transformation (DT): is the business strategy that leverages IT to dramatically improve employee, customer, and business partner relationships. This is not a discipline, not even IS. - Data: facts or observations representing events such as business transactions. - Information: data shaped into a form that is meaningful and useful to humans - Knowledge: created by analyzing information. May lead to action. 2. WHY SHOULD I STUDY INFORMATION SYSTEMS? - The informed user - you! - IT offers career opportunities. - Managing informations resources THE INFORMED USER-YOU! 1. You benefit more when you understand what is behind IT applications. 2. You will be aware of potential security issues and be more prepared to avoid them 3. You can recommend and help select IT applications 4. You will be aware of new technology 5. You understand how IT improves performance 6. Understanding IT is beneficial to entrepreneurs Example: it’s about business. Informed users are an important part of security. Questions: a. How did a hacker gain access to to Uber’s system? b. Define and discuss social engineering Carabelli Alomar Valentina 1   c. What steps should organizations take to better secure their systems against social engineering attacks? IT OFFERS CAREER OPPORTUNITIES IT is vital to modern business, providing many lucrative career opportunities: - programmers, business analysts, systems analysts and designers - Chief informations officer (CIO) - executive in charge of the IS function - Career opportunities will remain strong in the future MANAGING INFORMATION RESOURCES Managing information resources is difficult and complex because: - IS have an enormous strategic value to organizations - IS are very expensive to acquire, operate and maintain - Evolution of the MIS function within the organization Changing role of the IS department: traditional function of the MIS department and new (consultative) functions of the MIS department. TRADITIONAL FUNCTION OF THE MIS DEPARTMENT Managing systems development and systems project management Managing computer operations, including the computer center Staffing, training and developing IS skills Providing technical services Infrastructure planning, development and control NEW CONSULTATIVE FUNCTIONS OF THE MIS DEPARTMENT Initiating and designing specific strategic IS Incorporating the Internet and e-commerce into the business Managing system integration including Internet, intranets, and extranets Educating non-MIS staff about IT Educating MIS staff about the business Partnering with business-unit executives Managing outsourcing Proactively using business and technical knowledge to seed innovative IT ideas Creating business alliances with business partners 3. OVERVIEW OF COMPUTER-BASED INFORMATION SYSTEMS Types of computer based information systems: - data, information, knowledge - IT infrastructure - IT components - IT personnel - IT services Carabelli Alomar Valentina 2   IT components: Hardware, software, database, network, procedures (why procedures? Imagine a situation, there’s an emergency and we have to go to the hospital. We go to the ER, the receptionist views our health card, a triage nurse takes a look at us to evaluate the situation and then based on that, we go see a specialist. Banks also have their own procedures. When it comes to technology, we translate procedures in the form of coding), people MAJOR CAPABILITIES OF INFORMATIONS SYSTEMS TYPES OF COMPUTER-BASED INFORMATIONS SYSTEMS - breadth of support of IS - FAIS: functional area information systems. Accounting Finance Production & operations management Marketing HR - ERP AND TPS: two information systems support the entire organization: 1. enterprise resource planning (ERP) systems that provide communication among functional area IS 2. Transaction processing systems (TPS): support “real time” monitoring, collection, storage, and processing of data from the organization’s day to day operations - IOS: inter organizational information systems: supports many inter organizational operations. Examples of IOS: supply chain management and electronic commerce (e-commerce) systems Example: Lululemon’s success during and despite pandemic COVID-19 Pandemic Questions: what other digital initiatives Lululemon could employ on its website to enhance its revenue from online sales? How can Lululemon better employ social media platforms to increase brand awareness an/or customer satisfaction. - Support for organizational employees - Clerical workers - Knowledge workers - Functional area information systems - Business analytics or business intelligence - Expert systems - Dashboards Carabelli Alomar Valentina 3   4. HOW DOES IT IMPACT ORGANIZATIONS - It reduces the number of middle managers because it makes them more productive - IT changes the manager’s job: decision making is the most important managerial task. IT changes the way managers take decisions - IT provides near-real-time information - Managers have less time to make decisions - IT provides tools for analysis to assist in decision making - Will IT eliminate jobs? The competitive advantage of replacing people with IT and machines is increasing rapidly. Increasing the use of IT in business also: creates new job categories and requires more employees with IT knowledge and skills - IT impacts employees’ health and safety (job stress, long-term use of the keyboard). IT provides opportunities for people with disabilities - Speech-recognition for employees unable to type due to physical impairment - Audible screen tips for employees who are visually impaired 5. IMPORTANCE OF INFORMATION SYSTEMS TO SOCIETY - IT affects our quality of life: IT has changed the way we work. The lines between time at work and leisure time at home have become blurred. Surveys indicate employees take laptops and smartphones on vacation - Industrial Revolution is here now: industrial robots versus cobots, drones, autonomous vehicles - The emergence of cognitive computing: IBM Watson: IBM has labelled the type of processing demonstrated by Watson as cognitive computing. Watson has four primary capabilities: 1. The ability to understand human language, with all of its nuance and ambiguity 2. The ability to learn and absorb information 3. The ability to formulate hypotheses 4. the ability to understand the context of a question - IT used in healthcare to: - Make better/faster diagnoses - Streamline the process of researching and developing new drugs - To enhance the work of radiologists - Allow surgeons to use virtual reality to plan complex surgeries and use robots to remotely perform surgery - Allow doctors to discuss complex medical cases via videoconferencing Carabelli Alomar Valentina 4   CHAPTER 2 - ORGANIZATIONAL STRATEGY, COMPETITIVE ADVANTAGE AND INFORMATION SYSTEMS 2.1 BUSINESS PROCESSES A business process is an ongoing collection of related activities that create a product or service of value to the organization, its business partners, and/or its customers. The process involves three fundamental elements: (what are the key ingredients of a process) Inputs: materials, services, and information that flow through and are transformed as a result of process activities Resources: people and equipment that perform process activities Outputs: the product or a service created by the process If the process involves a customer, then that customer can be either internal or external to the organization. Successful organizations measure their process activities to evaluate how well they are executing these processes. Two fundamental metrics: - Efficiency: focuses on doing things well without wasting resources. For example, progressing from one process activity to another without delay or without wasting money or resources. - Effectiveness: focuses on doing things that matter. That is, creating outputs of value to the process customer—for example, high-quality products. CROSS FUNCTIONAL PROCESSES Many processes cross functional areas in an organization. For example, product development involves research, design, engineering, manufacturing, marketing and distribution. Many business processes, such as procurement and fulfillment, cut across multiple functional areas; that is, they are cross-functional business processes, meaning that no single functional area is responsible for their execution. For a cross-functional process to be successfully completed, each functional area must execute its specific process steps in a coordinated, collaborative way. Example at page 35 of the book. This is a rule based flowchart, that explains all the processes. INFORMATION SYSTEMS AND BUSINESS PROCESSES An information system (IS) is a critical enabler of an organization’s business processes. They facilitate communication and coordination among different functional areas. IS play a special role in three areas: Executing the process Capturing and storing process data Monitoring process performance EXECUTING THE PROCESS IS helps organizations execute processes efficiently and effectively. It also informs people when it’s time to complete a task, providing the necessary data to complete it, but sometimes also the means. CAPTURING AND STORING PROCESS DATA Processes create data such as dates, times, product numbers, quantities, prices… IS captures and stores these data, commonly referred to as process data or transaction data. Some of these data are generated outside or inside. Carabelli Alomar Valentina 5   For example, when a customer order is received by email, the person taking the order must enter the data. If the order is received through the firm’s website, then all customer details are captured by the IS. The data captured by the IS can provide immediate feedback (ex: the IS can use the data to create a receipt) MONITORING PROCESS PERFORMANCE The IS indicates how well a process is executing. It performs this role by evaluating information about a process. This information can be created at either the: - instance level (specific task) - Process level (process as a whole) Not only can the is help monitor a process, but it can also detect problems with the process. How? It compares the information with a standard to determine if the process is performing within expectations. If the process indicates that the process is not meeting the standards, then the company assumes that some type of problem exists. Monitoring business processes, then, helps detect problems with these processes. Often, these problems are really symptoms of a more fundamental problem. ROBOTIC PROCESS AUTOMATION Robotic process automation (RPA) is a system that enables enterprises to automate business processes and tasks that historically were carried out by employees. Companies that employ RPA develop software “robots” - known as bots - that automate the steps in a business process. Example: pizza hut 2.2 BUSINESS PROCESS REENGINEERING, BUSINESS PROCESS IMPROVEMENT, BUSINESS PROCESS MANAGEMENT Excellence in executing business processes is widely recognized as the underlying basis for all significant measures of competitive performance in an organization. Following measures: - customer satisfaction: result of optimizing and aligning business processes to fulfill customers’ need - Cost reduction: result of optimizing operations and supplier processes - Cycle and fulfillment time reduction: result of optimizing manufacturing and logistics processes - Quality: result of optimizing the design, development, and production processes - Differentiation: result of optimizing the marketing - Productivity: result of optimizing each individual’s work processes To become more competitive, business needed to radically redesign their business processes to reduce costs and increase quality. Information technology is the key enabler of such change. This radical redesign, called business process reengineering (BPR), is a strategy for making an organization’s business processes more productive and profitable. The key to BPR is for enterprises to examine their business processes form a “clean sheet” perspective and then determine how they can best reconstruct those processes to improve their business functions. Many business found this strategy too difficult and so they began to organize for around business processes rather then individual tasks. The result was a less radical, less disruptive and more incremental approach, called business process improvement (BPI). Carabelli Alomar Valentina 6   BPI focuses on reducing variation in process outputs (eg the finished product) by searching for the root causes of the variation in the process itself or among the process inputs. BPI is usually performed by teams of employees that include a process expert as well as other individuals who are involved in the process. Six Sigma is a popular methodology for BPI initiatives. Its goal is to ensure that the process has no more than 3.4 defects per million outputs by using statistical methods to analyze the process. A successful BPI project generally follows five phases (DMAIC): 1. Define phase: team uses graphical process diagram to document the existing “as is” process activities, process resources, and process inputs and outputs 2. Measure phase: team identifies relevant process metrics, such as time and cost, to generate one output and collects data to understand how metrics evolve over time. 3. Analysis phase: team examines the “as is” process diagram and the collected data to identify problems with the process 4. Improve phase: team identifies possible solutions for addressing the root causes of the problem, maps the resulting “to be” process alternatives, and selects and implements the most appropriate solution. 5. Control phase: team establishes process metrics and monitors the improved process after the solution has been implemented BPI VERSUS BPR Although BPI initiatives do not deliver the huge performance gains promised by BPR, many organizations prefer them because they are less risky and less costly. BPI projects tend to be performed more from the bottom p, in contrast to BPR projects, which involve top-down change mandates. To sustain BPI efforts over time, organizations can adopt business process management (BPM), a management system that includes methods and tools to support design, analysis, implementation and continuous optimization of core business processes. Important components of BPM are process modeling and business activity monitoring. BPM begins with process modeling, which is a graphical depiction of all of the steps in a process. It helps employees understand the interactions and dependencies among people involved in the process. Business activity monitoring (BAM) is a real-time approach for measuring and managing business processes. Companies use it to monitor business processes, identify failures or exceptions and address these failures in real time. BPM activities are often supported by business process management suites (BPMS), an integrated set of applications that includes a repository of process information such as process maps and business rules, tools for process modeling. Another promising emerging trend is social BPM. This technology enables employees to collaborate using social media tools on wired an mobile platforms. Carabelli Alomar Valentina 7   2.3 BUSINESS PRESSURES, ORGANIZATIONAL RESPONSES, AND INFORMATION TECHNOLOGY SUPPORT BUSINESS PRESSURES The business environment is the combination of social, legal, economic, physical, and political factors in which businesses conduct their operations. Significant changes in any of these factors are likely to create business pressures on organizations. Organizations typically respond to these pressures with activities supported by IT. MARKET PRESSURES Market pressures are generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers. Let’s look more closely at each of these factors. Globalization: integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology. Today, individuals around the world are able to connect, compute, communicate, collaborate, and compete everywhere and anywhere, anytime, and all the time. One important pressure that businesses in a global market must contend with is the cost of labour, which varies significantly among countries. In general, labour costs are higher in developed countries such as Canada, the United States, and Japan than in developing countries such as Bangladesh and El Salvador. In addition, developed countries usually offer greater benefits, such as health care, to employees, driving the cost of doing business even higher. The changing nature of workforce: it’s becoming more diversified: increasing numbers of women, single parents, minorities, and people with disabilities are now employed in all types of positions, Powerful customers: customer sophistication and expectations increase as customers become more knowledgeable about the products and services they acquire. Organizations recognize the importance of customers and have increased their efforts to acquire and retain them. TECHNOLOGY PRESSURES The second category of business pressures consists of those pressures related to technology. - technological innovation: new and improved technologies rapidly create or support substitutes for products, alternative service options, and superb quality. One manifestation of technological innovation is “bring your own device (BYOD).” BYOD refers to the policy of permitting employees to bring personally owned mobile devices (laptops, tablet computers, and smartphones) to the workplace and to use those devices to connect to the corporate network as well as for personal use. - Information overload: the amount of information available on the internet doubles approximately every year, and much of it it’s free SOCIETAL, POLITICAL AND LEGAL PRESSURES SOCIAL RESPONSIBILITY One critical social problem is the state of the physical environment. A growing IT initiative, called green IT, addresses some of the most pressing environmental concerns. IT is instrumental in organizational efforts to go green in three areas: 1. Facilities design and management: organizations are creating more environmentally sustainable work environments Carabelli Alomar Valentina 8   2. Carbon management: they are turning to IT executives to develop the system needed to monitor carbon throughout the organization and its supply chain, which can be global in scope 3. International and Canadian environmental laws Digital divide refers to the wide gap between those individuals who have access to information and communications technologies and those who do not. This gap exists both within and among countries. COMPLIANCE WITH GOVERNMENT REGULATIONS Another major source of business pressures is government regulations regarding health, safety, environmental protection, and equal opportunity. Businesses tend to view government regulations as expensive constraints on their activities. PROTECTION AGAINST CRIMINAL ACTIVITIES Computer systems can be used to create fraudulent or fictitious transactions that are used to steal funds from banks or other organizations, or to engage in identity theft. Biometric screening systems can include the collection of fingerprints, photos, and iris and retina scans that ties into government databases and watch lists to check the identities of those entering the country. These systems are now operational at most Canada–U.S. border crossings and major international ports of entry by air, sea, and land. ETHICAL ISSUES Ethics relates to general standards of right and wrong. Information ethics relates specifically to standards of right and wrong in information processing practices. Ethical issues are very important because, if handled poorly, they can damage an organization’s image and destroy its employees’ morale. ORGIZATIONAL RESPONSES Organizations are responding to the various pressures just discussed by implementing IT in different ways such as strategic systems, customer focus, make-to-order and mass customization, and e-business. STRATEGIC SYSTEMS Strategic systems provide organizations with advantages that enable them to increase their market share and profits to better negotiate with suppliers and to prevent competitors from entering their markets. Many information systems are so strategically important that, if they are inadequate or fail altogether, the organizations using them are at risk of failing as well. CUSTOMER FOCUS Organizational attempts to provide superb customer service can make the difference between attracting and retaining customers versus losing them to competitors. Numerous IT tools and business processes have been designed to keep customers happy. For example Amazon. MAKE TO ORDER AND MASS CUSTOMIZATION Make to order is a strategy of producing customized (make to individual specifications) products and services. The business problem is how to manufacture customized goods efficiently and at a reasonably low cost. Part of the solution is to change manufacturing processes from mass production to mass customization. Carabelli Alomar Valentina 9   Im mass production, a company produces a large quantity of identical items. Example: Henry ford’s model T. Ford’s policy of offering a single product for all its customers eventually gave way yo customer segmentation, in which companies provide standard specifications for different consumer groups, or segments. For example, clothes manufacturers, who design their products in different sizes and colors to appeal to different customers. The next step was configured mass customization, in which companies offer features that allow each shopper to customize their product or service with a range of components. In the current strategy, known as mass customization, a company produces a large quantity of items, but it customizes them to match the needs and preferences of individual customers. E-BUSINESS AND E-COMMERCE Conducting business electronically is an essential strategy for companies that are competing in today’s business environment. Electronic commerce describes the process of buying, selling, transferring, or exchanging products, services, or information through computer networks, including the internet. E-business: in addition to the buying and selling of goods and services, e-business also refers to servicing customers, collaborating with business partners, and performing electronic transactions within an organization 2.4 COMPETITIVE ADVANTAGE AND STRATEGIC INFORMATION SYSTEMS A competitive strategy is a statement that identifies a business’s approach to compete, its goals, and the plans and policies that will be required to carry out those goals (Porter, 1985). A competitive strategy focuses on achieving a desired outcome when competitors want to prevent you from reaching your goal. When you create a competitive strategy, you must plan your own moves, but you must also anticipate and counter your competitors’ moves. Through its competitive strategy, an organization seeks a competitive advantage in an industry. That is, it seeks to outperform its competitors on a critical measure such as cost, quality, and time- to-market. Competitive advantage is increasingly important in today’s business environment. Companies’ core business has remained the same. That is, information technologies simply offer tools that can enhance an organization’s success through its traditional sources of competitive advantage. Strategic information systems (SISs) provide a competitive advantage by helping an organization to implement its strategic goals and improve its performance and productivity. PORTER’S COMPETITIVE FORCES MODEL Michael Porter’s competitive forces model is the best-known framework for analyzing competitiveness. Companies use porter’s model to develop strategies to increase their competitive edge. Porter’s model identifies five major forces that can endanger or enhance a company’s position in a given industry. Every competitive organization, no matter how large or small, or which business it is in, is driven by these forces. Carabelli Alomar Valentina 10   Significantly, Porter (2001) concludes that the overall impact of the Web is to increase competition, which generally diminishes a firm’s profitability. Let’s examine the five forces: 1. The threat of entry of new competitors: an entry barrier is a product or service feature that consumers have learned to expect from organizations in a certain industry. The threat that new competitors will enter your market is high when entry is easy and low when there are significant barriers to entry (example of entry barrier: admission to the bar to practice law). For most firms, the web increases the threat that new competitors will enter the market because it sharply reduces traditional barriers to entry, such as the need for a sales force or a physical storefront. In some cases the web increases barriers to entry. This scenario occurs primarily when customers have come to expect a nontrivial capability from their suppliers. 2. The bargaining power of suppliers: supplier power is high when buyers have few choices about whom to buy from and low when buyers have many choices. organizations would rather have more potential suppliers so that they will be in a stronger position to negotiate price, quality, and delivery terms. 3. The bargaining power of customers (buyers): buyer power is high when buyers have many choices about whom to buy from and low when buyers have few choices. Loyalty programs reduce buyer power: they reward customers based on the amount of business they conduct with a particular organization. 4. The threat of substitute products or services: if there are many alternatives to an organization’s products or services, then the threat of substitutes is high. Conversely, if there are few alternatives, then the threat is low. Information based industries experience the greatest threat from substitutes. Any industry in which digitized information can replace material goods (e.g., music, books, software) must view the internet as a threat because the internet can convey this information efficiently and at low cost and high quality. Even when there are many substitutes for their products, however, companies can create a competitive advantage by increasing switching costs. Switching costs are the costs, in money and time, imposed by a decision to buy elsewhere. For example, contracts with smartphone providers typically include a substantial penalty for switching to another provider until the term of the contract expires 5. The rivalry among existing firms in the industry: the threat from rivalry is high when there is and intense competition among many firms in an industry. The threat is low when the competition involves fewer firms and is not as intense (when I see my competitor’s new system online, I will rapidly match its features to remain competitive. The result is fewer differences among competitors, which leads to more intense competition in an industry). Established companies can also gain a competitive advantage by allowing customers to use data from the company’s products to improve their own performance. Competition is also being affected by the extremely low variable cost of digital products. That is, once a digital product has been developed, the cost of producing additional units approaches zero PORTER’S VALUE CHAIN MODEL To identify specific activities in which they can use competitive strategies for greatest impact, they use his value chain model. A value chain is a sequence of activities through which the organization’s inputs, whatever they are, are transformed into more valuable outputs, whatever they are. A value chain model identifies points at which an organization can use information technology to achieve a competitive advantage. Carabelli Alomar Valentina 11   The activities conducted in any organization can be divided into two categories: primary activities and support activities - primary activities relate to the production and distribution of the firm’s products and services. These activities create value for which customers are willing to pay. - Support activities do not add value to the firm’s products or services, rather, as their name suggests, they contribute to the firm’s competitive advantage by supporting primary activities. Manufacturing companies typically perform five primary activities in the following sequence: 1. Inbound logistics (inputs): the incoming materials are processed (in receiving, storage …) in activities called inbound logistics 2. Operations (manufacturing and testing): the materials are used in operations, in which value is added by turning raw materials into products. 3. Outbound logistics (storage and distribution): these products are prepared for delivery (packaging, storing and shipping) in the outbound logistics activities. 4. Marketing and sales sell the products to customers, increasing product value by creating demand for the company’s products 5. Services: finally the company performs after-sales service for the customer, such as warranty service or upgrade notification Support activities consist of the following: 1. The firm’s infrastructure (accounting, finance and management) 2. Human Resources management 3. Product and technology development 4. Procurement A firm’s value chain is part of a larger stream of activities, which porter calls value system: it includes the suppliers that provide the inputs necessary to the firm along with their value chains. After the firm creates products, these products pass through the value chains of distributors all the way to the customers. STRATEGIES FOR COMPETITIVE ADVANTAGE Organizations continually try to develop strategies to counter the five competitive forces identified by Porter. It is important to note that an organizations’s choice of strategy involves trade-offs. Companies must select a strategy and then stay with it, because a confused strategy cannot succeed. This selection, in turn, decides how a company will use its information systems. There are 5 strategies for competitive advantage: 1. Cost leadership strategy —> produce products and services at the lowest cost in the industry 2. Differentiation strategy —> offer different products, services or product features than your competitors 3. Innovation strategy —> introduce new product and services, add new features to existing products and services, or develop new ways to produce them 4. Operational effectiveness strategy —> improve the manner in which a firm executes its internal business processes so that it performs these activities more effectively than its rivals. such improvements increase quality, productivity, and employee and customer satisfaction while decreasing time to market 5. Customer orientation strategy —> concentrate on making customers happy. Web-based systems are particularly effective in this area because they can create a personalized, one-to- one relationship with each customer Carabelli Alomar Valentina 12   BUSINESS-INFORMATION TECHNOLOGY ALIGNMENT The best way for organizations to maximize the strategic value of IT is to achieve the holy grail of organizations: business-information technology alignment, which is the tight integration of the IT function with the organization’s strategy, mission and goals. The IT function directly supports the organization’s business objectives. There are six characteristics of excellent alignment: 1. Organizations view IT as an engine of innovation that continually transforms the business 2. Organizations view their internal and external customers and their customer service function as supremely important. 3. Organizations rotate business and IT professionals across departments and job functions. 4. Organizations provide overarching goals that are completely clear to each IT and business employee. 5. Organizations ensure that IT employees understand how the company makes (or loses) money. 6. Organizations create a vibrant and inclusive company culture. Many organizations fail to achieve this type of close alignment. In a survey, approximately 27% of the IT and business executives who participated agreed that their organization had adequate alignment between IT and the business. business executives often know little about information technology, and IT executives understand the technology but may not understand the real needs of the business. One solution to this problem is to foster a collaborative environment in organizations so that business and IT executives can communicate freely and learn from each other. Without effective IT governance, there are many things that could go wrong. Information systems might not meet organizational business objectives, or systems could be error-prone, over budget, or hard to use. If security was poor, data and programs could be damaged or copied by unauthorized individuals Carabelli Alomar Valentina 13   CHAPTER 5 - DATA AND KNOWLEDGE MANAGEMENT 5.1 MANAGING DATA THE DIFFICULTIES OF MANAGING DATA Because data are processed in several stages and often in multiple locations, they are frequently subject to problems and difficulties. 1. The amount of data is increasing exponentially with time. Many historical data must be kept for a long time, and new data are added rapidly. 2. Data are scattered throughout the organizations and they are collected by many individuals using various methods and devices. Organizations use information systems for processes like transaction processing, supply chain management, and customer relationship management. These systems often result in duplicated data across departments, such as marketing and customer service, leading to inconsistent information known as data silos. Data silos occur when data is isolated within one group and is not easily accessible by others, hindering insights and obstructing a unified view of business data. This can delay digital transformation. A key solution to breaking down data silos is cloud data management. 3. Data are generated from multiple sources: internal sources, personal sources, and external sources. Some of these data sources are in the form of data streams, which are data that are continuously generated by: Point-of-sale data. Collects data in real time, such as the name, product identification number and unit price of each item, the sales tax on that amount Clickstream data: data that visitors and customers produce when they visit a website and click on hyperlinks. Clickstream data include the terms that the visitor to the website entered into a search engine to reach that website Social media data: data collected from individuals’ activity on social media websites, including Facebook, YouTube, LinkedIn, Twitter, and many others (likes, shares, ratings…) Sensor data: data collected by wireless sensors embedded in objects that communicate without human interaction. These sensors monitor physical and environmental conditions like temperature, sound, pressure, and movement 4. New sources of data such as blogs, podcasts, tweets… are constantly being developed and the data these technologies generate must be managed. 5. Data are subject to data rot, which refers primarily to problems with the media on which the data are stored. Over time, temperature, humidity, and exposure to light can cause physical problems with storage media and thus make it difficult to access data. 6. Data security, quality and integrity are critical, yet they are easily jeopardized. 7. Two factors complicate data management: 1. Data overload: Companies are overwhelmed by growing amounts of unstructured data, requiring effective management strategies to remain profitable. 2. Federal government regulations (Bill 198) requires companies to account for how information is being managed within their organizations. 8. Big data Carabelli Alomar Valentina 14   DATA GOVERNANCE Data governance is an approach to managing information throughout an organization, involving formal processes and policies to ensure data is handled consistently. It establishes clear rules for creating, collecting, managing, and protecting information, aiming to make data accessible, transparent, and useful for authorized users from its entry until it is deleted. One strategy for implementing data governance is master data management, a process that spans all of an organization’s business processes and applications. It gives companies the ability to store, maintain and and synchronize a consistent, accurate, and timely “single version of the truth” for the company’s master data. Master data refers to core data sets, such as customers, products, and employees, that are used across an organization's information systems. It differs from transactional data, which captures individual business activities. Transactional data, which are generated and captured by operational systems, describe the business’s activities, or transactions, while master data are applied to multiple transactions and they are used to categorize and evaluate the transactional data. 5.2 THE DATABASE APPROACH From the mid-1950s, organizations managed their data in a file management environment. But this soon evolved because organizations automated their functions one application at a time. Each application required its own data, which were organized in data file. A data file is a collection of logically related records. In a file management environment, each application has a specific data file related to it, which contains all the data records the application requires. Using databases eliminated many problems that arose from previous methods of storing and accessing data, such as file management systems. Database systems minimize the following problems: 1. Data redundancy: same data stored in multiple locations 2. Data isolation: applications cannot access data associated with other applications 3. Data inconsistency: various copies of the data do not agree Database systems also maximize the following benefits: 1. Data security: Because data are “put in one place” in databases, there is a risk of losing a lot of data at one time. Therefore, databases must have extremely high security measures in place to minimize mistakes and deter attacks. 2. Data integrity: Data meet certain constraints; for example, there are no alphabetic characters in a Social Insurance Number (SIN) field. 3. Data independence: Applications and data are independent of one another; that is, applications and data are not linked to each other, so all applications are able to access the same data. Carabelli Alomar Valentina 15   THE DATA HIERARCHY Data are organized in a hierarchy, starting with bits and ending with databases. A bit is the smallest unit a computer can process and is either a 0 or 1. Eight bits form a byte, which represents a single character, like a letter, number, or symbol. A group of characters, such as a word or ID number, is called a field. For instance, in a university's system, a student's name would be in the "name" field, and their Social Insurance Number in the "Social Insurance Number" field. Fields can also hold other data types, like images or multimedia. A record is a logical grouping of related fields, such as a student's name, courses, dates, and grades. In Apple iTunes, a song is a field in a record, with other fields like title, price, and album. A collection of related records forms a data file or table, like all records for a specific course. Moving up the hierarchy, related files form a database. For example, the student course file can be grouped with files on students' personal histories and finances to create a student database. THE RELATIONAL DATABASE MODEL A Database Management System (DBMS) is a set of programs that help users create and manage databases. It allows organizations to add, delete, modify, and analyze data stored in the database. Users can access data through built-in query and reporting tools or specific applications. DBMSs also ensure data integrity, manage security and user access, and recover data in case of system failure. Since databases are crucial for business operations, they must be properly managed. The relational database model uses two-dimensional tables to organize data. Instead of storing all records and attributes in one large table (a flat file), which would create too much data redundancy, a relational database is made up of multiple related tables. Each table has records in rows and attributes in columns. In order to be valuable, a relational database must be organized so that users can retrieve, analyze and understand the data they need. A key to designing an effective database is the data model. A data model is a diagram that represents entities in the database and their relationships. An entity is a person, a place, a thing, or an event about which an organization maintains information. Entities can typically be identified in the user’s work environment. A record generally describes an entity. An instance of an entity refers to each row in a relational table, which is a specific, unique representation of the entity. Each characteristic or quality of a particular entity is called an attribute. Every record in the database must contain at least one field that uniquely identifies that record so that it can be retrieved, updated, and sorted. This identifier field (or attribute) is called the primary key. In some cases, locating a particular record requires the use of secondary keys. A secondary key is another field that has some identifying information but typically does not identify the record with complete accuracy. Carabelli Alomar Valentina 16   A foreign key is a field (or group of fields) in one table that uniquely identifies a row of another table. A foreign key is used to establish and enforce a link between two tables. Organizations must manage huge quantities of data. Such data consist of structured and unstructured data and are called Big Data: structured data are highly organized in fixed fields in a data repository such as a relational database Unstructured data refers to data that do not reside in a traditional relational database (email messages, videos, images, audio files) 5.3 BIG DATA Big data is a collection of data that is so large and complex that is difficult to manage using traditional management systems. Big Data is about predictions that come from applying mathematics to huge quantities of data to infer probabilities. Consider these examples: the likelihood that an email message is spam The likelihood that the typed letters “teh” are supposed to be “the” The likelihood that the direction and speed of a person jaywalking indicates that he will make it across the street in time Big Data is challenging to define, but it generally refers to large, diverse data sets that require advanced processing to improve decision-making and business operations. Gartner defines Big Data as high-volume, high-velocity information needing new processing methods. The Big Data Institute describes it as data sets that are varied, fast, and include structured, unstructured, and semistructured data, which don't fit into traditional databases and require sophisticated systems for processing. Big Data typically includes: 1. Traditional enterprise data (e.g., customer info, transactions). 2. Machine-generated data (e.g., sensors in devices, logs). 3. Social data (e.g., social media and feedback). 4. Images from devices like cameras and scanners. CHARACTERISTICS OF BIG DATA Big Data has three distinct characteristics: volume, velocity, and variety. These characteristics distinguish Big Data from traditional data: 1. Volume: Big Data involves massive amounts of information. For example, sensors in a jet engine can generate 10 terabytes of data in just 30 minutes, and multiple sources like smart meters and industrial sensors add to this volume. 2. Velocity: The speed at which data flows into organizations is rapidly increasing. Quick data processing enables companies to act on customer interactions in real-time, such as recommending products based on browsing history 3. Variety: Unlike traditional, structured data, Big Data comes in many forms—such as satellite images, audio streams, and social media posts—that change quickly and are unstructured or semistructured. ISSUES WITH BIG DATA big data can come from untrusted sources: Big Data's variety means it comes from diverse sources, both internal and external, like emails, social media, and customer databases. However, Carabelli Alomar Valentina 17   the reliability of external sources, such as unverified Tweets, can be questionable, as the information may be false or misleading. Big data is dirty: Dirty data refers to inaccurate, incomplete, or duplicate data, such as misspellings or repeated information like retweets. For example, a company analyzing social media might find that positive posts about a competitor are twice as frequent. However, this could be due to the competitor pushing its press releases to multiple outlets or encouraging people to retweet, inflating the numbers artificially. Big data changes, especially in data streams: Organizations must be aware that data quality in an analysis can change, or the data themselves can change, because the conditions under which the data are captured can change MANAGING BIG DATA Bit data makes it possible to do many things that were previously much more difficult. Many organizations began managing data by integrating isolated information systems, known as information silos, into a centralized database environment. They then developed data warehouses to support decision-making. Once this was done, their focus shifted to broader information management practices. As you have seen in this chapter, traditional relational databases such as Oracle and MySQL store data in tables organized into rows and columns. Recall that each row is associated with a unique record, and each column is associated with a field that defines an attribute of that account Massively parallel processing is the coordinated processing of an application by multiple processors that work on different parts of the application, with each processor utilizing its own operating system and memory PUTTING BIG DATA TO USE Modern organizations must manage Big Data and gain value from it. They can employ several strategies to achieve this objective: making big data available: Making Big Data accessible to relevant stakeholders can help organizations create value. In the public sector, open data—publicly available data—can be used by individuals and organizations to launch new businesses and address complex problems Enabling organizations to conduct experiments: big data allows organizations to improve performance by conducting controlled experiments. For example, Amazon constantly experiments by offering slightly different looks on its website. This example shows how A/B testing, powered by Big Data, helps companies like Etsy improve user experience and boost sales. Etsy tested two versions of a webpage—one with additional product images and one with the original setup. The page with more images led to customers viewing and purchasing more products. The experiment revealed that increasing calls to action (CTAs) can drive higher engagement and sales, allowing Etsy to make data-driven decisions for better business outcomes. Micro segmentation of customers: segmentation of a company’s customers means dividing them into groups that share one or more characteristics. Creating new business models: companies can use Big Data to create new business models. A transportation company used Big Data from sensors on its trucks to monitor vehicle usage, driver performance, and maintenance needs. By analyzing this data, the company improved Carabelli Alomar Valentina 18   truck maintenance and driver skills. Sharing the data with its insurance carrier allowed for more accurate risk analysis, resulting in a 10% reduction in insurance premiums due to enhanced safety measures. Organization can analyze more data: Organizations can sometimes analyze entire datasets instead of relying on random sampling, which can be less effective. While random sampling is generally useful, it has limitations, such as the difficulty of achieving true randomness. Systematic biases during data collection, like political polls conducted via landlines that exclude younger, cellphone-only users, can lead to inaccurate results. BIG DATA USED IN THE ORGANIZATION’S FUNCTIONAL AREAS Human Resources: Big Data has transformed human resources at RBC by enhancing workforce planning, hiring, training, and employee engagement. RBC analyzes both traditional HR data (e.g., employee demographics, performance) and business data (e.g., sales, customer feedback) to optimize HR practices. Through data analysis techniques like modeling and simulations, RBC forecasts outcomes and predicts HR shortages. Additionally, Big Data helps identify managers who need development and those better suited for non-managerial roles, improving overall managerial effectiveness. Product development: Big Data helps companies like Ford capture customer preferences and design new products. Instead of conducting expensive market research, Ford used text-mining algorithms to analyze over 10,000 online mentions about turn indicators. This analysis led to the introduction of the "three-blink" indicator in the 2010 Ford Fiesta and its eventual use in most Ford models. Although some users struggled to adjust, many appreciated it, and the text-mining approach gave Ford deeper insights than traditional methods would have. Operations: companies have been using information technology to make their operations more efficient. Aldo Group uses Big Data analytics to optimize inventory and order fulfillment for digital orders from its website, mobile app, or in-store. Instead of focusing only on delivery distance, Aldo analyzes multiple factors to decide the best location to ship from, ensuring popular products stay in stock and reducing excess inventory. This strategy has lowered wasted stock and boosted in-store conversion rates by up to 12% by keeping inventory available for local demand. Marketing: Marketing managers have long used data to better understand their customers and to target their marketing efforts more directly. Today, Big Data enables marketers to craft much more personalized messages. 5.4 DATA WAREHOUSES AND DATA MARTS Successful companies thrive by using data efficiently to respond quickly to market changes. Managers and analysts need easy access to corporate data for decision-making, but accessing this information can be complex, especially with transactional databases. The example of a bookstore manager trying to analyze profit margins over time highlights the difficulty of running complex queries. This challenge is why organizations build data warehouses and data marts, which are optimized for querying large datasets. the text outlines three key reasons why organizations build data warehouses and data marts: 1. Data organization: While transactional databases contain the needed information, they aren't organized for easy retrieval, making complex queries time-consuming and potentially degrading performance Carabelli Alomar Valentina 19   2. Update processes: Transactional databases require frequent updates, which involve extra processing. In contrast, data warehouses are read-only, avoiding the extra processing since they don’t require updates. 3. Accessing data: Transactional databases are designed to retrieve individual records, while data warehouses are optimized to access large groups of related records, improving efficiency in data analysis A data warehouse is e repository of historical data that are organized by subject to support decision makers within the organization. But this is very expensive. A data mart is a low-cost, scaled-down version of a data warehouse that is designated for the end- user needs is a strategic business unit or an individual department. This can be implemented faster that data warehouses (less than 90 days). Characteristics of data marts and warehouses: 1. Organized by business dimension or subject: Data in warehouses/marts are organized by subjects like customer, product, or region, unlike transactional systems which are organized by business processes (e.g., order entry). 2. Use online analytical processing (OLAP): While transactional databases focus on online transaction processing (OLTP) for efficiency, data warehouses/marts use OLAP for analyzing accumulated data to support decision-making. 3. Integrated: Data from multiple sources are combined and integrated around specific subjects (e.g., customer data), providing a unified view. 4. Time variant: Warehouses/marts store historical data over long periods, enabling the detection of trends and long-term relationships. 5. Nonvolatile: Data cannot be altered by users, ensuring historical accuracy. Updates are done through IT-controlled processes. 6. Multidimensional: Data are stored in more than two dimensions (often as a data cube), unlike relational databases, which use two-dimensional tables. The data in data warehouses and marts are organized by business dimensions, which are subjects such as product, geographic area, and time period that represent the edges of the data cube A GENERIC DATA WAREHOUSE ENVIRONMENT The environment for data warehouses and marts includes the following: Source systems that provide data to the warehouse or mart Data-integration technology and processes that prepare the data for use Different architectures for storing data in an organization’s data warehouse or data marts Different tools and applications for a variety of users. Metadata (data about the data in a repository), data quality, and governance processes that ensure that the warehouse or mart meets its purposes Carabelli Alomar Valentina 20   SOURCE SYSTEMS Organizations often develop Business Intelligence (BI) capabilities in response to specific business challenges or "pain points." These challenges drive the need for information, BI applications, and data from source systems. Data requirements can range from a single source system (for a data mart) to hundreds of systems (for an enterprise-wide data warehouse). Modern organizations have many source systems to choose from, including operational/ transactional systems, ERP systems, website data, and third-party data. A growing trend is to incorporate diverse data types, such as RFID sensing data. These systems often use different software and data formats (e.g., relational or hierarchical databases). Equivalence between relational and multidimensional databases Many source systems that have been in use for years contain “bad data” and are poorly documented. Data-profiling software should be used at the beginning of a warehousing project to better understand the data. Organizations need to address other source systems as well. Many organizations maintain multiple systems that contain some of the data. These enterprises need to select the best system as the source system. Carabelli Alomar Valentina 21   DATA INTEGRATION In addition to storing data in their source systems, organizations need to extract the data, transform them, and then load them into a data mart or warehouse. This process is often called ETL, although the term data integration is increasingly being used to reflect the growing number of ways that source system data can be handled. Data extraction can be performed either by handwritten code such as SQL queries or by commercial data-integration software. Most companies employ commercial software. After the data are extracted, they are transformed to make them more useful. Data from different systems may be integrated around a common key, such as a customer identification number. Organizations adopt this approach to create a 360-degree view of all of their interactions with their customers. For example bank. Customers can engage in a variety of interactions: visiting a branch, banking online, using an ATM, obtaining a car loan, and more. The systems for these touch points are typically independent of one another. To obtain a holistic picture of how customers are using the bank, the bank must integrate the data from the various source systems into a data mart or warehouse. Finally, data are loaded into the warehouse or mart during a specified period known as the “load window. This window is becoming smaller as companies seek to store ever-fresher data in their warehouses. For this reason, many companies have moved to real-time data warehousing, where data are moved using data-integration processes from source systems to the data warehouse or mart almost instantly STORING THE DATA Organizations can choose from a variety of architectures to store decision-support data. The most common architecture is one central enterprise data warehouse, without data marts. Another architecture is independent data marts. These marts store data for a single application or a few applications, such as marketing and finance. The independent data mart architecture is not particularly effective. Although it may meet a specific organizational need, it does not reflect an enterprise-wide approach to data management another data warehouse architecture is the hub and spoke. This architecture contains a central data warehouse that stores the data plus multiple dependent data marts that source their data from the central repository. The dependent data marts store the data in a format that is appropriate for how the data will be used and for providing faster response times to queries and applications Despite their many benefits, data warehouses and data marts have some limitations. An emerging solution is a data lake or a data lakehouse. Carabelli Alomar Valentina 22   METADATA Maintaining metadata in a data warehouse is essential for both IT staff and users. IT personnel need details on data sources, table structures, refresh schedules, and usage metrics, while users rely on metadata for data definitions, report tools, distribution info, and help desk contacts. This ensures smooth operation and easy access to the data. DATA QUALITY Data quality in the warehouse must meet users' needs for trust and usage. Many organizations find poor data quality in source systems, which needs improvement before use in the warehouse. Data- cleansing software can help, but a better long-term solution is improving data quality at the source system level, with business owners responsible for implementing necessary changes. GOVERNANCE To ensure BI meets their needs, organizations must implement governance, involving people, committees, and processes. Effective BI governance includes a senior-level committee to align BI with business strategies, prioritize projects, and allocate resources. A middle-management committee oversees BI projects to ensure alignment with company goals, while lower-level operational committees handle tasks like creating data definitions and resolving data issues. Collaboration between business users and IT personnel is essential at all levels. 5.5 KNOWLEDGE MANAGEMENT Data, information, knowledge are vital assets for the organization. Industry analysts estimate that most of a company’s knowledge assets are not housed in relational databases; instead, they are dispersed in email, word-processing documents, spreadsheets… Knowledge management (KM) is a process that helps organizations manipulate important knowledge that comprises part of the organization’s memory, usually in an unstructured format. Knowledge is information that is contextual, relevant, and useful. Simply put, knowledge is information in action. Example: The bulletin listing courses is considered **data**. When you use that data to create your semester schedule, the result is **information**. **Knowledge** includes understanding factors like your work schedule, major, social activities, and faculty characteristics, which influence how you build your schedule. Explicit knowledge deals with more objective, rational, and technical knowledge. In an organization, explicit knowledge consists of the policies, procedural guides, reports, products, strategies, goals, core competencies, and IT infrastructure of the enterprise. It’s the knowledge that has been codified in a form that can be distributed to others or transformed into a process or a strategy. Tacit knowledge is the cumulative store of subjective or experiential learning. In an organization, tacit knowledge consists of an organization’s experiences, insights, expertise, know-how, trade secrets, skill sets, understanding, and learning. It also includes the organizational culture, which reflects the past and present experiences of the organization’s people and processes, as well as the organization’s prevailing values Carabelli Alomar Valentina 23   Knowledge management systems (KMSs) refer to the use of modern information technologies— the internet, intranets, extranets, and databases—to systematize, enhance, and expedite knowledge management both within one firm and among multiple firms. KMSs are intended to help an organization cope with turnover, rapid change, and downsizing by making the expertise of the organization’s human capital widely accessible. Organizations can gain numerous benefits from Knowledge Management Systems (KMSs). The primary advantage is making best practices easily accessible to employees, which enhances overall organizational performance. For example, sharing tacit knowledge from experienced account managers helps train new hires more effectively. Additional benefits include better customer service, more efficient product development, and improved employee morale and retention. The implementation of effective Knowledge Management Systems (KMS) faces several challenges 1. Encouraging Knowledge Sharing: Employees must be willing to share their tacit knowledge, which requires a supportive organizational culture that rewards contributions. 2. Maintaining the Knowledge Base: Organizations need to continuously update their knowledge base by incorporating new information and removing outdated content. 3. Resource Investment: Companies must be prepared to invest the necessary resources to manage and maintain these operations effectively. Creating a culture that fosters knowledge sharing, maintaining relevant content, and investing in resources are essential for successful KMS implementation. A functioning KMS follows a cycle that consists of six steps: 1. Create knowledge. Knowledge is created as people determine new ways of doing things or develop know-how. Sometimes external knowledge is brought in. 2. Capture knowledge. New knowledge must be identified as valuable and be presented in a reasonable way. 3. Refine knowledge. New knowledge must be placed in context so that it is actionable. This is where tacit qualities (human insights) must be captured along with explicit facts. 4. Store knowledge. Useful knowledge must then be stored in a reasonable format in a knowledge repository so that other people in the organization can access it. 5. Manage knowledge. Like a library, the knowledge must be kept current. Therefore, it must be reviewed regularly to verify that it is relevant and accurate. 6. Disseminate knowledge. Knowledge must be made available in a useful format to anyone in the organization who needs it, anywhere and anytime. Carabelli Alomar Valentina 24   CHAPTER 7 - E-BUSINESS AND E-COMMERCE 7.1 OVERVIEW OF E-BUSINESS AND E-COMMERCE DEFINITIONS AND CONCEPTS Electronic commerce: process of buying, selling, transferring or exchanging products, services or information through computer networks, including the Internet. Electronic business: is much a broader concept. In addition to the buying and selling of goods and services, e-business refers to servicing customers, collaborating with business partners, and performing electronic transactions within an organization. Degree of digitalization: extent to which the commerce has been transformed from physical to digital. The product can be either physical or digital, and the delivery agent can also be either physical or digital. In traditional commerce, both dimensions are physical. Purely physical organizations are referred to as brick-and-mortar organizations. In contrast, in pure EC all dimensions are digital. Companies engaged only in EC are considered virtual organizations. All other combinations that include a mix of digital and physical dimensions are considered partial EC. Clicks-and-mortar organizations conduct some e-commerce activities, but their primary business is carried out in the physical world. Example: Purchasing a shirt at Walmart Online or a book from Amazon.ca is an example of partial EC because the merchandise, although bought and paid for digitally, is physically delivered by, for example, UPS or Canada Post. In contrast, buying an e-book from Amazon.ca or a software product from GetApp.ca constitutes pure EC because the product itself and its delivery, payment, and transfer are entirely digital. We use the term electronic commerce to denote both pure and partial EC. TYPES OF E-COMMERCE E-commerce can be conducted among various parties. - business to consumer electronic commerce (B2C): the sellers are organizations, the buyers are individual - Business-to-business electronic electronic commerce (B2B): both the sellers and the buyers are business organizations. - Consumer-to-consumer electronic commerce (C2C): an individual sells products or services to other individuals. The major strategies for conducting C2C are auctions and classified ads. - Business-to-employee (B2E): an organization uses EC internally to provide information and services to its employees. - E-government: is the use of internet technology in general and e-commerce in particular to deliver information and public services to citizens, business partners and suppliers - Mobile commerce (m-commerce): the term m-commerce refers to e-commerce that is conducted entirely in a wireless environment. - Social commerce: delivery of electronic commerce activities and transaction through social computing - Conversational commerce: type of electronic commerce that uses natural language processing to engage in various means of conversation (ex: messaging app) Carabelli Alomar Valentina 25   MAJOR E-COMMERCE MECHANISMS Businesses and customers can buy and sell on the internet through a number of mechanisms, including electronic catalogues and electronic auctions. electronic catalogues consist of a product database, a directory and search capabilities, and a presentation function. An auction is a competitive buying and selling process in which prices are determined by competitive bidding. E-auctions generally increase revenues for sellers by broadening the customer base and shortening the cycle time of the auction. There are two types of auctions: 1. Forward auctions: sellers solicit bids from many potential buyers. Sellers place items for auction on websites, and buyers bid continuously for them. The highest bidder wins the items. 2. Reverse auction: one buyer, usually an organization, wants to purchase a product or a service. The buyer posts a request for a quotation (RFQ) on its website or on a third-party site. The RFQ provides detailed information on the desired purchase. Interested suppliers study the RFQ and then submit bids electronically. An electronic storefront is a website that represents a single store. An electronic mall, also known as a cybermall or an e-mall, is a collection of individual shops consolidated under one internet address. Electronic storefronts and electronic malls are closely associated with B2C electronic commerce An electronic marketplace (e-marketplace) is a central, virtual market space on the Web where many buyers and many sellers can conduct e-commerce and e-business activities ELECTRONIC PAYMENT MECHANISMS Electronic payment mechanisms enable buyers to pay for goods and services electronically, rather than writing a cheque or using cash. Electronic cheques (e-cheques), which are used primarily in B2B, are similar to regular paper cheques. A customer who wishes to use e-cheques must first establish a chequing account with a bank. Then, when the customer buys a product or a service, they email an encrypted electronic cheque to the seller. The seller deposits the cheque in a bank account, and the funds are transferred from the buyer’s account into the seller’s account. Electronic credit (or debit) cards allow customers to charge online payments to their credit (or debit) card account. These cards are used primarily in B2C and in shopping by small and medium- sized enterprises Carabelli Alomar Valentina 26   Purchasing cards are the B2B equivalent of electronic credit cards. In some countries, purchasing cards are the primary form of payment between companies. Stored-value money cards allow you to store a fixed amount of prepaid money and then spend it as necessary. Each time you use the card, the amount is reduced by the amount you spent. EMV smart cards contain a chip that can store a large amount of information as well as a magnetic stripe for backward compatibility. EMV cards can be physically swiped through a reader, inserted into a reader, or read over a short distance using near-field communications BENEFITS AND LIMITATIONS OF E-COMMERCE 7.2 BUSINESS-TO-CONSUMER (B2C) ELECTRONIC COMMERCE ELECTRONIC STOREFRONTS AND MALLS Electronic retailing (e-tailing) is the direct sale of products and services through electronic storefronts or electronic malls, usually designed around an electronic catalogue format and auctions. EC offers a wide variety of products and services, including unique items, often at lower prices. The name given to selling unique items is “the long tail.” The long tail describes the retailing strategy of selling a large number of unique items in small quantities. Electronic storefront is a website that represents a single store. Each storefront has a unique uniform resource locator (URL), or internet address, at which buyers can place orders. Large businesses have dedicated teams of professionals in charge of building and maintaining their electronic storefronts Electronic mall, also known as a cybermall, or an e-mall, is a collection of individual shops grouped under a single internet address ONLINE SERVICE INDUSTRIES One of the most pressing EC issues relating to online services is disintermediation. Disintermediation refers to the process in which intermediaries, or middlemen, are eliminated from a supply chain or service process. This typically occurs when the intermediary's primary function, such as providing information, can be automated or handled more efficiently by technologies like e- marketplaces and portals. When these platforms provide the same information directly and often for free, intermediaries who rely mostly on this function are no longer necessary, resulting in their removal from the system. Carabelli Alomar Valentina 27   The other function of intermediaries, which Is performing value-added services, can only be partially automated. The Web helps these employees in two situations: (1) when the number of participants is enormous, as with job searches; and (2) when the information that must be exchanged is complex. FINANCIAL TECHNOLOGY (FINTECH) Fintech is an industry composed of companies that use technology to compete in the marketplace with traditional financial institutions and intermediaries in the delivery of financial services, which include banking, insurance, real estate, and investing. There are many services offered by fintech: - lending: person-to-person (P2P) lending platforms use machine learning technologies and algorithms to save individuals and businesses time and money and help them access a line of credit. - Trading and investing: Robo-advisers create relatively straightforward asset allocation portfolios based on customers’ ages and risk tolerance. Robo-analysts use sophisticated algorithms to make trading and investing a more automated online experience - Personal finance: Fintech companies are trying to make personal finance more transparent and more affordable. Mobile apps and online platforms are now helping individuals and businesses develop a budget, find a loan, file their taxes, and inves - Funding: fintech companies are developing platform to make the process of transferring and exchanging money internationally simpler, faster and less expensive. these companies range from 2P2 currency exchanges to mobile apps. - Mobile banking: refers to the service that banks and other financial institutions provide to their customers that enables them to conduct a range of transactions by using an app on their mobile devices - Internet banking: instead of using an app, customers use the internet. All of the transactions are conducted through the financial institution’s website - Online securities trading: Millions of do-it-yourself investors use computers to trade shares, bonds, and other financial instruments BLOCKCHAIN A ledger records a business’s summarized financial information as debits and credits and displays their current balances. A blockchain is a decentralized, distributed, encrypted, secure, anonymous, tamper-proof, unchangeable, and often public digital ledger consisting of transactions bundled into blocks. Blocks contain details such as transaction timestamps and a link to the previous block The blockchain records transactions across many computers so that blocks cannot be altered retroactively without all subsequent blocks being altered as well. Nodes are the computers that support a blockchain network and keep it operating smoothly. Nodes are operated by individuals or groups of people who contribute money toward buying powerful computer systems. There are two types of nodes: - Full nodes keep a complete copy of the blockchain ledger, which is a record of every single transaction that has ever occurred. - Lightweight nodes download only a fraction of the blockchain. A miner is a type of node that creates block in the blockchain. Miners compete to add blocks to the blockchain by solving the Proof-of-Work (PoW) algorithm. They append a random number (nonce) to the block’s hashed contents and rehash them repeatedly until they find a hash value that meets Carabelli Alomar Valentina 28   the network's target. Once the correct hash is found, it is broadcast to the network, where nodes validate the transactions in the block. If the transactions are valid and unique, the block is added to the blockchain. The successful miner is rewarded with Bitcoin and transaction fees. Blockchain ensures that digital assets are verified and prevents double-spending. However, it faces issues like hacking (e.g., 51-percent attacks) and anonymity, which can enable illegal activities. While cryptocurrency is its most famous use, blockchain has many other applications. BITCOIN Blockchain is the technology behind Bitcoin, acting as a ledger to track ownership of digital tokens, while Bitcoin itself is the digital currency. Bitcoin operates as a decentralized cryptocurrency, relying on blockchain and cryptography for validation. The Bitcoin network is a peer-to-peer payment system, where users exchange Bitcoins by sending encrypted, digitally signed messages through Bitcoin wallet software. THE MUSIC INDUSTRY The shift to digital music and the rise of streaming platforms like iTunes, Spotify, and Pandora have revolutionized how people purchase and consume music. This transition to streaming has introduced challenges related to rights management, copyright enforcement, and royalty payments, prompting the music industry to reevaluate how artists and creators are compensated. With blockchain, each song file can have its royalty and licensing rights contained in the file. Each download can automatically trigger micropayments to the artist, who can get paid first instead of last. SUPPLY CHAINS Blockchain technology can enhance transparency in supply chains by tracking raw materials as they move through each stage, making it easier to trace them back to their source. In logistics, it can provide a detailed record of a transport container's journey, documenting who authorized and moved it, and when, ensuring a clear and trustworthy audit trail. ONLINE ADVERTISING Advertising aims to influence buyer-seller transactions, with traditional methods like TV and newspapers offering impersonal, one-way communication. Direct response marketing, such as telemarketing, personalizes the approach by contacting individuals directly, but it can be costly and intrusive. Online advertising, however, has transformed the process by being media-rich, dynamic, and interactive. It offers several advantages: low-cost updates, global reach, lower expenses compared to traditional ads, and the ability to target specific audiences with interactive content. Advertising is sold based on impressions, or the number of times that people view an ad. - Banner: electronic billboards containing a short text, graphics, video clips, or sound to promote a product or a vendor. - Pop-up ad: an Internet ad that appears in front of the current browser window. - Pop-under ad: an Internet ad appears underneath the active window; when users close the active window, they see the ad. - Spamming indiscriminate distribution of electronic ads without the permission of the receiver. - Permission marketing: asks consumers to give their permission to voluntarily accept online advertising and e-mail. - Viral marketing: “check this out" messages, influencers Carabelli Alomar Valentina 29   As a result of these problems with online advertising, many web users are employing ad-blocking software, called ad blockers, to prevent online advertising. ISSUES IN E-TAILING Despite e-tailing’s increasing popularity, many e-tailers continue to face serious issues that can restrict their growth. channel conflict: it occurs when companies that sell directly to customers online face tension with their traditional distributors. This can happen because online sales might undermine or bypass the distributors' role, potentially alienating them. To avoid such conflicts, some companies, like Walmart and Home Depot, focus their e-commerce sites on providing product information rather than emphasizing direct online sales. Multichannelling: is the process of integrating a company's online (clicks) and offline (bricks- and-mortar) channels. Instead of separating the two, this approach allows companies to create a more cohesive experience for customers, leveraging both channels while reducing costs and increasing synergy. Showrooming: is when customers visit a physical store to examine a product but then use their smartphones to research and often purchase it from a competitor's online store. This practice creates challenges for brick-and-mortar retailers, like Target and Best Buy, while benefiting online retailers such as Amazon and eBay. Order fulfillment: refers to the process of managing the tasks involved in completing a customer’s purchase in e-commerce. This includes locating the products, packing them, arranging for swift delivery, collecting payment, and handling returns of unwanted or defective items. It presents challenges for e-tailers as it encompasses multiple logistical and customer service activities. It is very difficult to accomplish these activities both effectively and efficiently in B2C, because a company has to ship small packages to many customers and do it quickly Personalized pricing: is the practice of pricing items at a point determined by a particular customer’s perceived ability to pay. The optimal outcome of personalized pricing for the merchant is maximizing the price that each customer will pay. As a result of analyzing Big Data, retailers are developing increasingly sophisticated personalized pricing algorithms. That is, they can find the optimal, profit-maximizing price of a good or a service for a particular customer 7.3 BUSINESS-TO-BUSINESS (B2B) ELECTRONIC COMMERCE In business-to-business (B2B) e-commerce, both buyers and sellers are business organizations. SELL-SIDE MARKETPLACES In the sell-side marketplace model, organizations sell their products or services to other organizations electronically from their own private e-marketplace website or from a third-party website. The key mechanisms in the sell-side model are forward auctions and electronic catalogues that can be customized for each large buyer. The sell-side model is used by hundreds of thousands of companies. The seller can be either a manufacturer, a distributor or a retailer. The seller uses EC to increase sales, reduce selling and advertising expenditures, increase delivery speed, and lower administrative costs Carabelli Alomar Valentina 30   BUY SIDE MARKETPLACE The buy-side marketplace is a model in which organizations attempt to procure needed products or services from other organizations electronically. A major method of procuring goods and services in the buy-side model is the reverse auction. Procurement is the overarching function that describes the activities and processes needed to acquire goods and services. It involves the activities necessary to establish requirements, conduct sourcing activities such as market research and vendor evaluation, and negotiate contracts. Procurement by using electronic support is referred to as e-procurement. E-procurement uses reverse auctions, particularly group purchasing. In group purchasing, multiple buyers combine their orders so that they constitute a large volume and therefore attract more seller attention ELECTRONIC EXCHANGES Electronic marketplaces (e-marketplaces), called public exchanges or just exchanges, are independently owned by a third party, and they connect many sellers with many buyers. Public exchanges are open to all business organizations. Vertical exchanges connect buyers and sellers in a given industry. Vertical e-marketplaces offer services that are particularly suited to the community they serve. These exchanges are frequently owned and managed by a consortium, a term for a group of major players in an industry Horizontal exchanges connect buyers and sellers across many industries. Carabelli Alomar Valentina 31   CHAPTER 3 - ETHICS AND PRIVACY 3.1 ETHICAL ISSUES Ethics refers to the principles of right and wrong that individuals use to make choices that guide their behaviour. There are many sources for ethical standards. There are 5 widely used standards: - utilitarian approach: an ethical action is the one that provides the most good or does the least harm. The ethical corporate action would be the one that produces the greatest good and does the least harm for all affected parties - Rights approach: ethical action is the one that best protects and respects the moral rights of the affected parties. Moral rights can include the rights to make one’s own choices about what kind of life to lead, to be told the truth, not to be injured, and to enjoy a degree of privacy - Fairness approach: ethical actions treat all human beings equally, or, if unequally, then fairly, based on some defensible standard - Common good approach: this approach argues that respect and compassion for all others are the basis for ethical actions. It emphasizes the common conditions that are important to the welfare of everyone - Deontology approach: the morality of an action is based on whether that action itself is right or wrong under a series of rules rather than on the consequences of that action ETHICS IN THE CORPORATE ENVIRONMENT Many companies and professional organizations develop their own codes ethics. A code of ethics is a collection of principles intended to guide decision making by members of the organization. Different codes of ethics are not always consistent with one another. Therefore, an individual might be expected to conform to multiple codes. Fundamental tenets of ethics include: responsibility means that you can recognize, interpret and act upon multiple principles and values according to ethical standards Accountability is an acknowledgment of responsibility and the acceptance of being answerable for the results of a system or behavior and its potential impacts Liability is a legal concept that gives individuals the right to recover the damages done to them by other individuals, organizations or systems Unethical actions are not always illegal, such as a legal foreclosure by a bank, which can still raise ethical concerns. High-profile corporate scandals like those at Enron, WorldCom, and Tyco involved fraudulent accounting practices, prompting laws like the Sarbanes-Oxley Act and similar regulations in Canada. Other unethical behaviors include Wells Fargo creating fake customer accounts to meet quotas and Avast selling customer data collected through browser extensions. Meta (Facebook) faced accusations of prioritizing profit over ethics, allowing harmful activities on its platform, and failing to protect internal documents. Technological advancements have also raised ethical concerns around data collection, privacy, and intellectual property. Carabelli Alomar Valentina 32   ETHICS AND INFORMATION TECHNOLOGY All employees have a responsibility to encourage ethical uses of information and information technology. This may mean a new way of doing business to ensure respect for users and of private data within information technology. Many of the business decisions you will face at work will have an ethical dimension. Consider the following decisions that you might have to make: HRM Should organizations monitor employees’ Web surfing and email? MKT Should organizations sell customer information to other companies? HRM Should organizations audit employees’ computers for unauthorized software or illegally downloaded music or video files? The diversity and ever-expanding use of IT applications have created a variety of ethical issues. These issues fall into four general categories: privacy, accuracy, property, and accessibility. Privacy issues involve collecting, storing, and disseminating information about individuals. Accuracy issues involve the authenticity, fidelity, and correctness of information that is collected and processed. Property issues involve the ownership and value of information. Accessibility issues revolve around who should have access to information and whether they should pay a fee for this access. 3.2 PRIVACY Privacy is the right to be left alone and to be free of unreasonable personal intrusions. Information privacy is the right to determine when, or to what extent, information about you can be gathered or communicated to others. Privacy rights apply to individuals, groups and institutions. Privacy can be interpreted quite broadly. However, court decisions in many country have followed two rules fairly closely: - The right of privacy is not absolute. Privacy must be balanced against the needs of society. - The public’s right to know supersedes the individual’s right of privacy. On an average day, data about you are generated in many ways: surveillance cameras located on toll roads, on other roadways, in busy intersections, in public places, and at work; credit card transactions; telephone calls; banking transactions; queries to search engines; and government records (including police records). These data can be integrated to produce a digital dossier, which is an electronic profile of you and your habits. The process of forming a digital dossier is called profiling. Carabelli Alomar Valentina 33   ELECTRONIC SURVEILLANCE Electronic surveillance is rapidly increasing, particularly with the emergence of new technologies. Electronic surveillance is conducted by employers, government and other institutions. surveillance cameras track you at airports, subways, banks, and other public venues. Inexpensive digital sensors are also now everywhere. They are incorporated into laptop webcams, video-game motion sensors, smartphone cameras, utility meters, passports, and employee ID cards. Technologies such as low-cost digital cameras, motion sensors, and biometric readers are helping to increase the monitoring of human activity A special problem arises with smartphones that are equipped with global positioning system (GPS) sensors. These sensors routinely geotag photos and videos, embedding images with the longitude and latitude of the location shown in the image. Another example of how new devices can contribute to electronic surveillance is facial recognition technology. This technology can now match faces even in regular snapshots and online images. Photo tagging is the process of assigning names to images of people. Facial recognition software then indexes facial features. Once an individual in a photo is tagged, the software searches fo