INFORMATION SYSTEMS
FORMATION 2 EXAMINATION - AUGUST 2009
NOTES:
Section A - You are required to answer Questions 1 and 2.
Section B - You are required to answer any three out of Questions 3 to 6.
(If you provide answers to all of Questions 3 to 6, you must draw a clearly distinguishable line through the answer
not to be marked. Otherwise, only the first answers to hand for these four questions will be marked.)
TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.
INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.
Marks for each question are shown.
The pass mark required is 50% in total over the whole paper.
Start your answer to each question on a new page.
You are reminded that candidates are expected to pay particular attention to their communication skills
and care must be taken regarding the format and literacy of the solutions. The marking system will take
into account the content of the candidates' answers and the extent to which answers are supported with
relevant legislation, case law or examples where appropriate.
List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.
The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
INFORMATION SYSTEMS
FORMATION 2 EXAMINATION - AUGUST 2009
Time Allowed: 3 hours, plus 10 minutes to read the paper.
SECTION A
1.
Answer BOTH Question 1 and Question 2 in this Section.
(Both Compulsory)
Frank manages an import company, which employs over 50 people. The range of products imported are of a
kitchenware nature i.e. worktops, sinks, knife blocks, fruit juicers, coffee grinders etc. These products have a very
low mark up and, as a result, Frank makes his profits on the volume of products sold. His customer base is
comprised of large retail outlets (approximately 75% of his product sales) and the more traditional family-owned
hardware stores (the remaining 25%). He does not sell directly to the public. Frank’s sales have consistently
increased by an average of 15% over each of the last 4 years, including during the recent recession. This is
mainly due to the fact that he can still offer his imported products at competitive prices.
However, his actual profit has not increased correspondingly. The company’s information systems have been
operated manually since Frank took the company over from his father, almost nine years ago. These legacy
systems were originally developed in the early nineties and were written for his father by a software developer
who has since retired from the business and moved abroad. As a result, when he tries to look to the cause of his
static profit levels or do any sort of business analysis, e.g. product sales by retailer, he finds it difficult to gather
all the necessary information.
He has finally decided to introduce new information systems into the company and is looking to you, his
accountant, for help. He has realised that with your background, you have the necessary mix of financial, project
management and IT skills and can provide the help he needs to select and implement the required systems.
REQUIREMENT:
(a)
Describe how Information Systems could support three of the major functional areas of this business.
(b)
Explain to Frank how ‘enterprise analysis’ and ‘critical success factors’ are used to establish the essential
information requirements his business? Which approach is more suitable in this case?
(8 Marks)
(c)
2.
(9 Marks)
Identify and explain the four main areas that will contribute to the successful implementation of the new
Information Systems.
(8 Marks)
[Total: 25 Marks]
Write brief notes on ANY FIVE of the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Tangible and intangible benefits.
Information Systems Literacy.
Prototyping.
Levels of organisational change.
Data Protection Legislation.
Attributes of quality information.
Real options pricing models.
Page 1
Note: Each part carries 3 marks.
[Total: 15 Marks]
3.
SECTION B
(a)
(b)
(c)
Answer ANY THREE of the four questions in this Section.
What is a DSS and how does it provide value for a business?
(8 Marks)
What are the different decision-making levels and decision-making constituencies in organisations? How
do their decision-making requirements differ?
(6 Marks)
How do Executive Support Systems (ESS) enhance managerial decision making and provide value for a
business?
(6 Marks)
[Total: 20 Marks]
4.
(a)
(b)
(c)
What security problems can be created by employees?
(5 Marks)
Describe four types of Information Systems controls that could be employed by an organisation to make
their systems more secure and assess how they provide business value.
(8 Marks)
Describe the role of an MIS Auditor and explain how MIS auditing can enhance the control process.
(7 Marks)
[Total: 20 Marks]
5.
6.
(a)
Name, describe and give an example of the three major categories of electronic commerce.
(6 Marks)
(c)
Define the term ‘m-commerce’ and list and describe three types of m-commerce services.
(7 Marks)
(a)
What is customer relationship management? Why are customer relationship management systems so
important today?
(6 Marks)
(b)
(b)
(c)
Define the term ‘Intranet’. Outline the main benefits and possible drawbacks of using an Intranet in a
medium sized organisation.
(7 Marks)
[Total: 20 Marks]
How can the Internet and Internet technology facilitate supply chain management?
(6 Marks)
What is an enterprise system and outline the challenges and benefits of using enterprise systems in an
organisation.
(8 Marks)
[Total: 20 Marks]
END OF PAPER
Page 2
SUGGESTED SOLUTIONS
INFORMATION SYSTEMS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND
FORMATION 2 EXAMINATION - AUGUST 2009
Purpose: The case study question aims to be a written summary or syntheses of a real-life scenario. It requires
the candidate to isolate and think through the key issues involved against both theory and the larger comparative
environment. This case tests the candidates’ knowledge the various systems that can support different functional
areas. The candidates should be aware of how certain techniques are used to establish the essential information
requirements of a business. Finally, candidates should also be able to identify the factors that will lead to the
successful development and implementation of this system and how will the overall success of the completed
system be gauged.
Links: No major links on other topics or papers in Formation 1.
Options: The candidates answer may vary slightly form the answer format used below.
Essential Components: The candidates will demonstrate understanding of the main information systems used in
different parts of an organisation. The candidates should be able to explain specifically how and why enterprise
analysis and critical success factors are used in an organisation. Also, the candidates should understand the
concept of implementation when managing the organisational change surrounding a new information system.
SOLUTION 1
(a) Describe how information systems could support three of the major functional areas of this business.
No single system can provide all the information an organization needs. Even small firms have a collection
of different systems: e-mail systems, sales tracking systems, etc. Different systems can be described
through:
•
•
A functional perspective: Identifying systems by their major business function
A constituency perspective: Identifying systems in terms of the major organizational groups that
they serve
Candidates should refer to three of the four main types of information systems that serve different functional
systems and relate the answer to the case study. The four systems are described below:-
Sales and marketing information systems help the firm with marketing business processes (identifying
customers for the firm's products or services, developing products and services to meet their needs,
promoting products and services) and sales processes (selling the products and services, taking orders,
contacting customers, and providing customer support).
This system captures sales data at the moment the sale takes place to help the business monitor sales
transactions and to provide information to help management analyze sales trends and the effectiveness of
marketing campaigns.
Page 4
EXAMPLE OF A SALES INFORMATION SYSTEM
Manufacturing and production information systems deal with the planning, development, and
production of products and services, and controlling the flow of production.
OVERVIEW OF AN INVENTORY SYSTEM
This system provides information about the number of items available in inventory to support manufacturing
and production activities.
Finance and accounting information systems keep track of the firm's financial assets and fund flows.
Page 5
AN ACCOUNTS RECEIVABLE SYSTEM
An accounts receivable system tracks and stores important customer data, such as payment history, credit
rating, and billing history.
Human resources information systems maintain employee records, track employee skills, job
performance and training, and support planning for employee compensation and career development.
AN EMPLOYEE RECORD KEEPING SYSTEM
This system maintains data on the firm’s employees to support the human resources function.
9 Marks
(3 Marks for each IS in different functional area)
Page 6
(b)
Explain to Frank how ‘enterprise analysis’ and ‘critical success factors’ are used to establish the essential
information requirements his business? Which approach is more suitable in this case?
Candidates should describe both approaches and give their opinion as to the best choice of approach for
this company.
Both approaches attempt to gain a clear understanding of the organizations long- and short-term information
requirements. Both use interviews of managers to gain the information needed. And both rest ultimately on
the strategy of the company.
Enterprise analysis argues that the firm’s information requirements can only be understood by looking at the
entire organization in terms of organizational units, functions, processes, and data elements. The central
method used in the enterprise analysis approach is to take a large sample of managers and ask them how
they use information, where they get it, what their environments are like, what their objectives are, how they
make decisions, and what their data needs are. The results of this survey of managers are aggregated
subunits, functions, processes, and data matrices. The strength of enterprise analysis is in its complete
picture of the way the organization conducts its business. The weakness of the enterprise analysis is that
it produces so much data that it is expensive to conduct and difficult to organize and analyze. A further
weakness is that the enterprise analysis tends to look at the way existing information is used and not at the
fact that new approaches may be required.
(c)
The strategic analysis, or critical success factors, approach argues that organizations’ information
requirements are determined by a small number of critical success factors of managers. The premise of the
strategic analysis approach is that there are a small number of objectives and that managers can easily
identify them. The principal method used is the personal interview – three or four – with a number of top
managers to identify their goals and the resulting critical success factors. Systems are then built to deliver
information on these critical success factors. The strength of the CSF method is that it produces smaller
data sets than does enterprise analysis. The CSF method takes into account the changing environment with
which organizations and managers must operate. It is especially suitable for top management and for the
development of DSS and ESS. The method’s primary weakness is that the aggregation process and the
analysis of the data are art forms. There is no particularly rigorous way in which individual CSFs can be
aggregated into a clear company pattern. A second problem is that there is often confusion among
interviewees between individual and organizational CSFs. They are not necessarily the same. What can
be critical to a manager may not be important to the entire organization. Finally, the method is biased toward
top managers because they are generally the only ones interviewed.
(8 Marks)
(3 Marks each approach x 2 + 2 marks most suitable)
Identify and explain to Frank, the four main areas that will contribute to the successful implementation of the
new accounting system.
•
The role of users in the implementation process
•
The degree of management support for the implementation efforts
•
The level of complexity and risk of the implementation project
•
The quality of management of the implementation process
Issues that might contribute to project failure are:
•
The techniques for estimating the length of time required to analyse and design systems are poorly
developed.
•
It is assumed that all will go well when in fact it rarely does. (Murphy is alive and well and resident in
your organisation!)
•
Not enough credence is given to the fact that building systems often involves tasks that are
sequentially linked, cannot be performed in isolation, and require extensive communications and
training.
•
Adding more workers, especially untrained ones, does not necessarily enhance the operation.
•
Problems are not reported in a timely fashion. No one wants to be the bearer of bad tidings.
(8 Marks)
(4 main issues x 2 marks each)
Page 7
Tutorial Notes:
Purpose: Responses for each sub question are expected to include a few sentences and possibly bullet points.
This limit simulates a real life scenario in which accuracy, brevity and clarity is called for and also hopefully
prevents candidates from spending a disproportionate amount of time on each sub-question. When answering a
sub-question, candidates might use purposeful illustrations based upon aspects of the scenario.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates may select five from seven questions. Answers may vary slightly from those given below.
Essential Components: Candidates should demonstrate knowledge of the topics. Their definitions should be
expanded upon and should demonstrate a competent understanding of each topic and how each adds or affects
business value.
SOLUTION 2
(a)
3 Marks
(2 Marks Definition, 1 Mark Business Value)
Tangible and intangible benefits
Benefits come in two types. Tangible benefits are those that can be measured and assigned some kind of
number or dollar value. Intangible benefits are benefits that can not be measured or even quantified.
Tangible Benefits
Tangible benefits are ones that can be measured and ideally quantified in dollars. For example:
•
A sales training program increased sales by 2 percent.
•
A customer service program increased customer satisfaction survey results by 10 percent.
•
A safety training program reduced the number of accidents over one year by 30 percent.
•
A quality control program reduced defects by 20 percent.
•
A software training program reduced calls to the help desk by 30 percent.
•
A communication training program increased the ratings of managers by their direct reports by 10
percent.
These examples all show very real, measurable, tangible results. To get valuable return on investment
information, however, these results must be turned into dollar values.
Intangible Benefits
These types of benefits are the ones that are usually assumed to result from a training program, but are
difficult or impossible to measure. Although specific dollar values can not be attached to intangible benefits,
they are still important to discuss and to document. Examples of intangible benefits from specific training
programs might include:
•
An increase in morale and employee engagement resulting from new hire orientation training.
•
Improvements in teamwork resulting from diversity training.
•
Additional sensitivity and a more professional workplace resulting from sexual harassment training.
•
Less stress among students who complete conflict management training.
•
Less anxiety after completing a change management program.
(b)
Information Systems Literacy
Information systems literacy, the understanding of information systems, includes a behavioural and technical
approach to understanding the broader organization, management, and information technology dimension
of systems and their power to provide solutions. Computer literacy narrowly focuses on the use of computer
hardware and software to process raw data. Computer literacy focuses primarily on knowledge of
information technology. Information literacy includes a broader awareness of how information technology
combined with behavioral approaches can be used to solve business problems and create information that
is useful to the business and its employees. The field of management information systems (MIS) tries to
achieve this broader information systems literacy.
Page 8
(c)
Prototyping
Prototyping is the process of building an experimental system quickly and inexpensively for demonstration
and evaluation so that end users can better define information requirements. The prototype is a preliminary
model that is refined until it meets end-user requirements. The process of repeating the steps to build a
system over and over again is called an iterative process. Prototyping is more explicitly iterative than the
conventional life cycle and it actively promotes system design changes.
The
1.
2.
3.
4.
four-step model of the prototyping process consists of the following:
Identify the user's basic requirements
Develop a working prototype
Use the prototype
Revise and enhance the prototype
THE PROTOTYPING PROCESS
The process of developing a prototype can be broken down into four steps. Because a prototype can be
developed quickly and inexpensively, systems builders can go through several iterations, repeating steps 3
and 4, to refine and enhance the prototype before arriving at the final operational one.
Prototyping is most useful when some uncertainty exists about user requirements or a design solution. It is
especially valuable for the design of the end-user interface of an information system such as on-line display
and data entry screens. End-user involvement means that the system is more likely to fill user requirements.
However, rapid prototyping can gloss over essential programming and documentation steps, or be poorly
designed for large quantities of data.
Page 9
(d)
Levels of organisational change
Four kinds of structural organizational change which are enabled by information technology are:
•
Automation: Enables employees to perform their tasks more efficiently and effectively
•
Rationalization of procedures: The streamlining of standard operation procedures, eliminating obvious
bottlenecks, so that automation can make operating procedures more efficient
•
Business process reengineering: Analyzes, simplifieds, and redesigns business processes with a
mind to radically reduce business costs
•
Paradigm shift: A radical reconceptualization of the nature of the business and the nature of the
organization
(e)
Data Protection Legislation
The Data Protection Act defines a legal basis for the handling of information relating to living people. It is
the main piece of legislation that governs protection of personal data in the different countries. Although the
Act does not mention privacy, in practice it provides a way in which individuals can enforce the control of
information about them. Most of the Act does not apply to domestic use, for example keeping a personal
address book. This act is used by many companies & organisations in the United Kingdom.
(f)
Compliance with the Act is overseen by an independent government authority. The Data Protection Act is a
large Act, and has a reputation for complexity. Whilst the basic principles are honoured for protecting privacy,
interpreting the act is not always simple. Many companies, organisations and individuals seem very unsure
of the aims, content and principles of the DPA. Some hide behind the Act and refuse to provide even very
basic, publicly available material quoting the Act as a restriction.
Attributes of quality information
Quality information is that which, when used, `adds value'. Research suggests that information should
possess numerous attributes. The attributes which `add value' and together underpin quality of information
are examined below.
Relevant for purpose: Information should always be relevant to the issue being considered. It is often the
case that memos, reports and schedules contain irrelevant sections, which can have an adverse effect on
the understanding of the issue by the user.
Completeness: It is desirable that all information required for decision-making is made available. There must
be close co-operation between the information provider and the end user.
Page 10
Accurate for purpose: Managers rely on information to effectively manage their `value adding' activities. For
example, to satisfy the VAT regulations, a VAT invoice must be accurate to the nearest penny.
Reputable source: For information to be used effectively by managers, the users must have confidence in
its source. This would be supported by the fact that the source was reliable in the past and that there is a
good and clear channel of communication between the provider and the user of the information.
(g)
Real options pricing models
In some cases, not all of the benefits of making this investment can be established in advance. Real options
pricing models (ROPMs), which apply the same techniques for valuating financial options to systems
investments, are useful for evaluating highly uncertain information system investments. In real options
theory, the value of the IT project (real option) is a function of the value of the underlying IT asset (present
value of expected revenues from the IT project), the volatility of the value in the underlying asset, the cost
of converting the option investment into the underlying asset, the interest rate at which the company could
invest the same amount of money as the investment without any risk, and the options time to maturity
(length of time the project can be deferred). The disadvantages of this model are primarily in estimating all
the key variables, especially the expected cash flows from the underlying asset, and changes in the cost of
implementation.
Page 11
Tutorial Notes:
Purpose: To test the candidates on the ways information systems such as DSS and ESS help individual managers
make better decisions when the problems are non-routine and constantly changing. This question will also test the
candidate’s knowledge of the different stages in the decision making process.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates will not be able to vary too much from the format of answers given below.
Essential Components: The candidates need to demonstrate an understanding of DSS, MIS and GIS as well as
showing their knowledge of the decision making process.
SOLUTION 3
(a)
What is a DSS and how does it provide value for a business?
A management information system is especially helpful for handling routine management tasks. For nonroutine decision-making, many managers use another type of system called a decision support system
(DSS). As the name implies, a DSS is a computer system that supports managers in decision-making tasks.
In the broadest sense a utilised spreadsheet program, could be designed for DSS purposes. After all,
managers everywhere use spreadsheets to find answers to "What if?" questions and make decisions based
on these sample scenarios. However, most managers reserve the term decision support system for a more
specialised kind of software designed to create mathematical models of business systems. DSS can be
described as s set of well-integrated, user-friendly computer based tools. From a management point of view
there are four major functions of DSS, which include; What if Analysis, Model building, goal seeking and
graphical analysis.
(8 Marks)
(4 Marks – Definition + 4 Marks – Business Value)
(b)
What are the different decision-making levels and decision-making constituencies in organisations? How do
their decision-making requirements differ?
The key elements of an organization are its people, structure, business processes, politics, and culture. An
organization coordinates work through a structured hierarchy and formal standard operating procedures.
Managerial, professional, and technical employees form the upper levels of the organization's hierarchy
while lower levels consist of operational personnel.
LEVELS IN A FIRM
Business organizations are hierarchies consisting of three principal levels: senior management, middle
management, and operational management. Information systems serve each of these levels. Scientists and
knowledge workers often work with middle management.
Page 12
Senior management makes long-range strategic decisions and ensures the firm's financial performance.
Middle management carries out the plans of senior management and operational management monitors the
firm's daily activities. Knowledge workers such as engineers and scientists design products and create and
distribute new knowledge for the organization. Data workers such as secretaries process the organization's
paperwork. Production or service workers produce the products or services.
Experts are employed for the major business functions: the specialized tasks performed by organizations,
which consist of sales and marketing, manufacturing and production, finance and accounting, and human
resources.
An organization coordinates work through its hierarchy and business processes. These processes may be
documented and formal, or informal, unwritten work processes, such as how to handle a telephone call.
Each organization has a unique culture, or fundamental set of assumptions, values, and ways of doing
things, that are accepted by most of its members. Parts of an organization's culture can be found in its
information systems. For example, UPS's organizational focus on customer service can be found in the
package tracking system available to customers. Information systems may also reflect the organizational
politics or conflicts that result from differing views and opinions in an organization.
Information systems are also a key component in the ability of management to make sense of the
challenges facing a company and in management's ability to create new products and services, manage the
company, and even re-create the organization from time to time.
(6 Marks)
(3 Marks – Level + 3 Marks – Requirements)
(c)
How do Executive Support Systems (ESS) enhance managerial decision making and provide value for a
business?
Executive support systems (ESS) help managers make unstructured and semi structured decisions. ESS
focus on the information needs of senior management and combine data from both internal and external
sources. The ESS creates a generalised computing and communications environment that can be focused
on and applied to a changing array of problems. The ESS can help senior executives monitor organizational
performance, track activities of competitors, spot problems, identify opportunities, and forecast trends.
(6 Marks)
(3 Marks – Definition + 3 Marks – Capabilities)
Page 13
Tutorial Notes:
Purpose: To test the candidate’s knowledge of the security problems caused by employees. .This question will
specifically examine the candidate’s knowledge of important tools and technologies and controls for safeguarding
information resources and the role of the MIS Auditor.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates will not be able to vary from the format of answers given below.
Essential Components: The candidates need to demonstrate an understanding of the vulnerability of systems
and potential threats in today’s business environment, specifically by insiders. The candidates need to
demonstrate a specific understanding of the controls that can be employed to protect an information system. They
should also demonstrate a detailed knowledge of the role of the MIS Auditor in the overall area of organisational
security.
SOLUTION 4
(a)
What security problems can be created by employees?
The largest financial threats to businesses actually come from insiders, either through theft and hacking or
through lack of knowledge. Malicious intruders may sometimes trick employees into revealing passwords
and network access data through social engineering.
Employees can also introduce faulty data or improperly process data. This is also known as administrative
error. Administrative error is difficult to deal with because it isn’t caught until too late, and the consequences
may be disastrous. Also, administrative error can occur at any level and through any operation or procedure
in the company.
Not following security procedures in relation to receiving external information, emails, internet use etc.
(b)
(5 Marks)
(4 Points x 1Mark + 1 Mark overall)
Describe four types of information systems controls that could be employed by an organisation to make their
systems more secure and assess how they provide business value.
For protection, a company must institute good security measures, which will include firewalls, investigation
of personnel to be hired, physical and software security and controls, antivirus software, and internal
education measures. These measures are best put in place at the time the system is designed, and careful
attention paid to them. A prudent company will engage in disaster protection measures, frequent updating
of security software, and frequent auditing of all security measures and of all data upon which the company
depends. Full protection may not be feasible in light of the time and expenses involved, but a risk analysis
can provide insights into which areas are most important and vulnerable. These are the areas to protect
first:
•
•
•
Input controls check the data for accuracy and completeness when they enter the system. There are
specific input controls for input authorisation, data conversion, data editing, and error handling.
Processing controls establish that data are complete and accurate during updating. Run control totals,
computer matching, and programmed edit checks
Output controls ensure that the results of computer processing are accurate, complete, and properly
distributed.
Page 14
Specifically, candidates may refer to :
•
Firewalls prevent unauthorised users from accessing internal networks. They protect internal systems
by monitoring packets for the wrong source or destination, or by offering a proxy server with no access
to the internal documents and systems, or by restricting the types of messages that get through, for
example, e-mail. Further, many authentication controls have been added for Web pages as part of
firewalls.
•
Intrusion detection systems monitor the most vulnerable points in a network to detect and deter
unauthorised intruders. These systems often also monitor events as they happen to look for security
attacks in progress. Sometimes they even can be programmed to shut down a particularly sensitive
part of a network if it receives unauthorised traffic.
•
Antivirus software is designed to check computer systems and drives for the presence of computer
viruses. Often the software can eliminate the virus from the infected area. To be effective, antivirus
software must be continually updated.
(8 Marks)
(4 X 2 Marks each types + Business Value)
(c)
Describe the role of an MIS Auditor and explain how MIS auditing can enhance the control process.
An MIS audit identifies all of the controls that govern individual information systems and assesses their
effectiveness. To accomplish this, the auditor must acquire a thorough understanding of the operations,
physical facilities, telecommunications, control systems, data security objectives, organisational structure,
personnel, manual procedures, and individual applications of the company.
The auditor usually interviews key individuals, who use and operate a specific information system,
concerning their activities and procedures. Application controls, overall integrity controls, and control
disciplines are examined. The auditor traces the flow of sample transactions through the system and
performance tests, using, if appropriate, automated audit software.
The audit itself lists and ranks all control weaknesses and estimates the probability of their occurrence. It
then assesses the financial and organisational impact of each threat. It includes a section for notifying
management of such weaknesses and for management’s response. Management is then expected to
devise a plan to counter the significant weaknesses
(7 Marks)
(4 Marks – Requirements & Role + 3 Marks – Audit)
Page 15
Tutorial Notes:
Purpose: To test candidates on the electronic commerce and how it has changed consumer retailing and
business-to-business transactions. This question will examine how Intranet technology has brought new
opportunities and challenges to businesses. Finally, the question will test the candidate’s knowledge of mobile
commerce.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates will not be able to vary too much from the format of answers given below.
Essential Components: The candidates need to demonstrate a thorough understanding of electronic commerce
and analyse the various benefits and challenges an organisation-wide intranet can bring to an organisation. The
candidate will also need to define mobile commerce and explain the applications used in an organisation.
SOLUTION 5
(a)
Name, describe and give an example of the three major categories of electronic commerce.
The three major types of electronic commerce are business-to-consumer (B2C), business-to-business
(B2B), and consumer-to-consumer (C2C). Business-to-consumer involves retailing products and services to
individual shoppers. Barnes and Noble.com is an example of business-to-consumer electronic commerce.
Business-to-business involves the sale of goods and services among businesses. Millpro.com provides
business-to-business electronic commerce. Consumer-to-consumer involves consumers selling directly to
consumers. An example of consumer-to-consumer electronic commerce is eBay.com.
Electronic commerce transactions can also be classified based on the participants’ physical connections to
the Web. Participants can use wired networks or mobile commerce.
(6 Marks)
(2 marks each category x 3)
(b)
Define the term ‘Intranet’. Outline the main benefits and possible drawbacks of using an Intranet in a
medium sized organisation.
Explanation of the term ‘Intranet’. Outline the main benefits and possible drawbacks of using an Intranet in
a medium sized organisation.
•
•
•
Internal network that uses Internet technology
Typically has connections to the Internet through Gateway Computers (protected by firewalls)
Intranets are used for ‘Internet style’ transfer of information, but within a particular organisation or
‘community’
Benefits/Uses:
•
It is the least expensive way to set up a multimedia hypertext system
•
User training is minimal, because web browsers provide a standard, simple and intuitive user interface
•
It can use existing hardware and system software
•
It can integrate information from different sources into a common view.
•
Publish information to staff (policy manuals, newsletters, etc.)
•
Individual department/employee Web pages
•
Gathering data - time reports, schedules, customer visits
•
Allows remote access to business
•
Interactive apps - polling for opinions
•
Training (e-Learning)
•
Integration with corporate data (prices, product info and sales stats accounting, asset tracking, etc.)
•
Video conferencing? VoIP?
•
Inexpensive (relatively)
•
Easier to keep users up to date
•
Effective use of distributed computer resources
•
Training easy (for ‘net’ users)
Page 16
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
add-on applications (including multimedia) available
Expected growth is 4 times that of Internet itself (Avison & Shah 2004)
Intranet Open standards
Platform independence and portability
Consistent and reliable platforms
Support for multiple data sources and types
Process distribution and scalability
Ease of use (consistent and friendly user interfaces)
The universal client provides a common interface to all services
Shorter development times and reduced costs
Collaboration
Development tools that are integrated through the use of open standards
Reduces certain business costs
Removes 9 to 5 access to information
Communications infrastructure
Disadvantages of Intranets
•
Security concerns (easy to hack)
•
Bandwidth
•
Measuring ROI (Return On Investment)
•
Constant change
•
Information needs to be continuously updated
•
Technical support needed to maintain system
Intranet benefits include connectivity from most computing platforms, can be tied to internal corporate
systems and core transaction databases, can create interactive applications with text, audio, and video,
scalable to larger or smaller computing platforms as requirements change, easy-to-use, universal Web
interface, low start-up costs, richer, more responsive information environment, and reduced information
distribution costs.
Organisations are using intranets to create enterprise collaboration environments. Regardless of location,
intranets allow organisational members to exchange ideas, share information, and work together on
common projects and assignments.
Figure 4.8 provides examples of how intranets are used in the functional areas. In sales and marketing,
intranets help oversee and coordinate the activities of the sales force. The sales force can obtain updates
on pricing, promotions, rebates, customers, or information about competitors. The sales force can also
access presentation and sales documents, which they can customise for specific customers. In the human
resources area, intranets keep employees informed of company issues and policies, allow employees to
access and update their personnel records, and take online competency tests. Further, job postings and
internal job information can be made available to employees. Employees can enroll in health care, benefit
plans, or company training seminars. In finance and accounting, intranets provide an online, integrated view
of financial and accounting information in an easy-to-use format. In the manufacturing area, intranets
integrate complex information across the plant floors or many plants, particularly in managing work flow and
process control.
(7 Marks)
(2 Marks – Definition, 2 Marks – Benefits, 2 Marks – Drawbacks + 1 Mark overall)
Page 17
(c)
Define the term ‘m-commerce’ and list and describe three types of m-commerce services.
M-commerce uses the Internet for purchasing goods and services as well as for transmitting messages
using wireless mobile devices. It is especially well-suited for location-based applications, such as finding
local hotels and restaurants, monitoring local traffic and weather, and providing personalised location-based
marketing. Mobile phones and handhelds are being used for mobile bill payment, banking, securities
trading, transportation schedule updates, and digital music and game downloads.
Wireless technology helps businesses stay more easily in touch with customers, suppliers, and employees
and provides more flexible arrangements for organising work. Companies can save on wiring offices and
conference rooms by using wireless networks because they do not have to pull cables through walls.
Wireless networks also make additions, moves, and changes much easier.
Wireless technology has also been the source of new products, services, and sales channels in a variety of
businesses. Wireless technology increases productivity and worker output by providing anytime, anywhere
communication and access to information, including the information resources of the Internet. Wireless
communication helps businesses stay more easily in touch with customers, suppliers, and employees, and
provides more flexible arrangements for organising work.
Wireless technology increases productivity and worker output by providing anytime, anywhere
communication and access to information, including the information resources of the Internet. Employees
can make productive use of formerly wasted slices of time between larger tasks.
Describe three wireless applications in business. Give examples.
Mobile applications are having a significant impact on customer relationship management (CRM), supply
chain management (CRM), and health care.
•
•
•
Mobile CRM applications provide additional support for sales and service activities at the point of
customer interaction.
Mobile wireless technology facilitates supply chain management by capturing data on the movement
of goods as these events take place and by providing detailed, immediate information as goods move
along supply chain partners. Radio frequency identification (RFID) systems provide a powerful
technology for this purpose.
Mobile technology is improving health care by delivering essential information to physicians and
nurses who constantly move from place to place and capturing patient information for electronic
record systems at the point of creation.
(7 Marks)
(2 Marks – Definition + 5 Marks – Applications)
Page 18
Tutorial Notes:
Purpose: To test the candidate’s knowledge of how a company can implement Enterprise Systems to provide
value for its business. They must assess how the internet can facilitate supply chain management and the
candidate must examine how Customer Relationship Management systems provide value for businesses and
describe how they work.
Links: No major links on other topics or papers in Formation 1.
Options: Candidates may vary slightly from the format of answers given below.
Essential Components: Candidates should demonstrate an understanding of Enterprise Systems. Candidates
should also demonstrate an understanding of the supply chain and customer relationship management (CRM).
SOLUTION 6
(a)
What is customer relationship management?
Why are customer relationship management systems so important today?
Customer relationship management: business and technology discipline that uses information systems to
coordinate all of the business processes surrounding the firm’s interaction with its customers in sales,
marketing, and service.
Importance of customer relationships: Globalisation of business, the Internet, and electronic commerce
have put more power in the hands of customers. Companies are realising that their only enduring
competitive strength may be their relationships with their customers. Some say that the basis of competition
has switched from who sells the most products and services to who “owns” the customer, and that customer
relationships represent the firm’s most valuable asset.
Companies with effective customer relationship management systems can realise many benefits, including
increased customer satisfaction, reduced direct marketing costs, more effective marketing, and lower costs
for customer acquisition and retention. Information from CRM systems can increase sales revenue by
identifying the most profitable customers and segments for focused marketing, cross-selling, and up-selling.
(b)
Customer relationship management systems help firms maximise the benefits of their customer assets.
These systems capture and consolidate data from all over the organisation and then distribute the results
to various systems and customer touch points across the enterprise. Customer relationship management
systems can be classified as operational or as analytical. Operational CRM refers to customer-facing
applications, such as sales force automation, call center and customer service support, and marketing
automation. Analytical CRM refers to customer relationship management applications dealing with the
analysis of customer data to provide information for improving business performance. Benefits include
increased customer satisfaction, reduced direct marketing costs, more effective marketing, and lower costs
for customer acquisition and retention.
(6 Marks)
(3 Marks – Definition, 3 Marks – Business Value)
How can the Internet and Internet technology facilitate supply chain management?
Before the Internet, supply chain coordination was hampered by the difficulties of making information flow
smoothly among disparate internal supply chain systems. Today, using intranets and extranets, all members
of the supply chain can instantly communicate with each other, using up-to-date information to adjust
purchasing, logistics, manufacturing, packaging, and schedules. The Internet provides a standard set of
tools that are used by companies all over the world to coordinate global supply chains that include
participants from many countries
Internet technology also makes it possible to move from sequential supply chains, where information and
materials flow sequentially from company to company, to concurrent supply chains, where information flows
in many directions simultaneously among members of a supply chain network. Ultimately, the Internet could
create a "digital logistics nervous system" throughout the supply chain to permit simultaneous,
multidirectional communication of information about participants' inventories, orders, and capacities.
Page 19
The future Internet-driven supply chain operates like a digital logistics nervous system. It provides
multidirectional communication among firms, networks of firms, and e-marketplaces so that entire networks
of supply chain partners can immediately adjust inventories, orders, and capacities.
The business value of supply chain management systems includes:
•
•
•
(c)
Streamlined supply chain and accurate information
Reduced supply chain costs
Increased sales through accurate product availability
(6 Marks)
(4 points x 1.5 Marks each)
What is an enterprise system and outline the challenges and benefits of using enterprise systems in an
organization.
Enterprise systems focus on integrating the key internal business processes of the firm. Enterprise software
is used by enterprise systems and is a set of integrated software modules for finance and accounting,
human resources, manufacturing and production, and sales and marketing that allows data to be used by
multiple functions and business processes.
Enterprise software consists of a set of interdependent software modules that support basic internal
business processes. The software allows data to be used by multiple functions and business processes for
precise organisational coordination and control. Organisations implementing this software would have to
first select the functions of the system they wished to use and then map their business processes to the
predefined business processes in the software. Some of the business processes supported by enterprise
software include financial and accounting processes, human resources processes, manufacturing and
production processes, and sales and marketing processes.
Benefits include creating an enterprise-enabled organisation, providing firm wide knowledge-based
management processes, providing a unified information system technology platform and environment, and
enabling more efficient operations and customer-driven business processes. Challenges include a daunting
implementation process, surviving a cost-benefit analysis, inflexibility, and realising strategic value.
Page 20
Companies can use enterprise systems to support organisational structures that were not previously
possible or to create a more disciplined organisational culture. They can also improve management
reporting and decision making. Furthermore, enterprise systems promise to provide firms with a single,
unified, and all-encompassing information system technology platform and environment. Lastly, enterprise
systems can help create the foundation for a customer-driven organisation.
Enterprise applications are very difficult to implement successfully. They require extensive organisational
change, large new software investments, and careful assessment of how these systems will enhance
organisational performance. Management vision and foresight are required to take a firm- and industry-wide
view of problems and to find solutions that realise strategic value from the investment.
(8 Marks)
(2 Marks – Definition + 6 Marks – Advs & Disadvs (3 of each))
Page 21