1. Introduction to Business 1 BUS-101 Instructor: Erlan Bakiev, Ph.D.

2. Information Technology and E-Commerce
Information represents one of the most intriguing challenges you'll face as a manager. Many companies now find themselves drowning in a ocean of data—but struggling to find the handful of crucial bits that can mean the difference between success and failure. This chapter explains how companies use information and how the Internet continues to change contemporary business. The chapter then takes you into the various types of information systems and the hardware, software, and networking components in those systems. The chapter concludes with a look at some of the most important technology-related issues you'll need to address as a manager or an entrepreneur.
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3. From Data to Information to Insight
Competitive Advantage
Data
(Facts & Statistics)
Insight
(Understanding)
Information
(Useful Knowledge)
The first step in turning information into a competitive advantage is understanding the difference between data (recorded facts and statistics), information (useful knowledge, often extracted from data), and insight (a deep level of understanding about a particular situation). The transformation from data to insight requires a combination of technology, information-management strategies, creative thinking, and business experience—and companies that excel at this transformation have a huge advantage over their competitors. In fact, entire industries can be created when a single person looks at the same data and information everyone else is looking at but sees things in a new way, yielding insights that no one has ever had before.
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4. Data versus Information
The table at the top represents sales data for a small company’s products (A, B, C, and D). In this form, the data are just statistics that answer no particular question and solve no particular problem. Therefore, the data is not considered to be information. When a manager queries the database to identify the average monthly sales for each product, he or she is asking for specific information. The sales data are used to generate a graph to illustrate the requested information. C
Products B A
Sales
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5. Information Flow
Businesses collect data from a wide array of sources, from checkout scanners and website clicks to telephone calls, research projects, and electronic sensors.
The figure above represents information flow in a typical manufacturing company. As you can imagine, a single customer order can generate hundreds of data points, from a credit card number to production statistics to accounting totals that end up on a tax form. Even a small business can quickly amass thousand or millions of individual data points; large companies such as UPS generate billions and even trillions of data points.
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6. The Order Fulfillment Process

7. Using Information Systems
Data
Mining
Warehouse
Base
Each day companies collect, generate, and store vast quantities of data (recorded facts and statistics) that are relevant to a particular decision or problem. However, data do not become information until they are used to solve a problem, answer a question, or make a decision.
In addition to the daily chores of sending out bills, ordering new parts, and everything else that keeps the company running, databases can also be used for data mining, a powerful computerized analysis technique that identifies previously unknown relations among individual data points.
Unfortunately, just like they found themselves with too much data, many companies now find themselves with too many databases—perhaps one in marketing, one in manufacturing, one in accounting, others in regional sales offices, and so on. To coordinate multiple databases, companies have two basic choices. The first is to create a virtual database, a smart program that knows how to dig information out of all those separate databases. The second is to create a data warehouse, which merges all the current and historical data from around the organization. Managers can also create smaller data marts from these warehouses, extracting subsets of information for specific purposes, such as marketing and sales
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8. Chief Information Officer
Relevant
Timely
Accurate
Cost Effective
Most large organizations employ a top-level manager, often called a chief information officer (CIO), whose job is to understand the company's information needs and to create systems and procedures to deliver that information to the right people at the right time.
These managers are expected to deliver quality information, which can be defined as relevant (the information delivered to each person relates directly to his or her needs), accurate (it's both current and free from errors), timely (delivered in time to make a difference), and cost effective (costs a reasonable amount of money compared to the value it offers).
Understand
Information Needs
Create Systems
and Procedures
Deliver High-
Quality Information
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9. Business Information Research and Development Planning and Control
Marketing
and Sales
Companies invest heavily in information for the simple reason that they can't live without it. Here's a small sample of the ways managers rely on information:
Research and development. In a sense, the cycle of information usage starts with understanding customer needs, then developing new goods and services to meet those needs.
Planning and control. Two of the most important functions of management are planning and control—deciding what to do, then making sure it gets done.
Marketing and sales. Thanks to technology, marketing and sales have evolved from "gut feel" activities to scientific, information-driven functions.
Communication and collaboration. Throughout the organization, employees, managers, and teams of every size and shape rely on information to communicate and collaborate.
Communication
and Collaboration
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10. Business and the Internet
Accelerate Commerce
Erase Borders
Boost
Communication
Control Costs
Simplify Research
Promote
Collaboration
No single technology in recent decades has reshaped the business world as much as the Internet has—and continues to do.
As you move into (or back into) the business world, you'll find the Internet being put to use all over the place, in virtually every part of many companies. As a business professional, manager, or entrepreneur, you can expect to use the Internet in a variety of beneficial ways: to accelerate commerce, erase borders, control costs, enhance communication and collaboration, and simplify research.
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11. Accelerating Commerce
Business-to-Business
Consumer-to-Consumer
Mobile Commerce
Business-to-Consumer
Thousands of companies, from solo entrepreneurs working in their sweatpants to multinational corporations, are now engaged in this electronic commerce, or e-commerce. E-commerce offers tremendous advantages for both buyers and sellers.
Referred to as B2C, e-tailing, or electronic retailing, business-to-consumer e-commerce involves interactions and transactions between a company and consumers, with a strong focus on selling goods and services and marketing to consumers.
Known as B2B, business-to-business e-commerce involves a company and its suppliers, distributors, manufacturers, retailers, and other corporate customers, but not individual consumers.
Consumer-to-consumer e-commerce (often called C2C) involves consumers who sell products directly to each other using the Internet as the intermediary. Online auctions are the most dominant form of C2C.
Mobile commerce, commonly referred to as m-commerce, is the conduct of e-commerce by using wireless Internet access and wireless handheld devices, such as cell phones, palm pilots, personal digital assistants, and pagers to transact business.
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12. Cutting Costs Searching for Best Prices Managing Inventory
Telecommuting
Recruiting and
Training
In addition to generating revenues, Internet technology helps companies cut costs.
Companies are using the Internet to search for the best prices for parts and materials from domestic and international suppliers.
They are using electronic marketplaces and auction sites to manage inventories more effectively.
They are saving costs by allowing employees to telecommute and work from remote locations.
They are using the Internet to cost-effectively recruit and train employees.
They are reducing costly travel expenses by substituting Internet-based videoconferences for in-person meetings.
They are using the Internet to reduce the costs of publishing, processing, distributing, and storing paper-based information by converting information into an electronic format and placing it on company websites, intranets, and extranets.
Reducing
Travel Expenses
Distributing
Information
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13. Erasing Borders Email Instant Messaging Virtual Meetings Telecommuting
One of the Internet's most profound changes has been its ability to erase borders between departments, between companies, and even between countries. Thanks to , instant messaging, and a variety of virtual meeting technologies that let groups conduct meetings online, people across town or across the country can work together more efficiently. Not only does this ability offer more flexibility in employment, since employees have more freedom to live where they want to live and companies can hire people who may not want to move, but it helps companies address the costs, security concerns, and productivity losses that are a part of air travel these days. Online meetings are also a common part of telecommuting, working at home while staying in touch with the office via information technology.
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14. Enhancing Communication and Collaboration
and instant messaging
Mail server lists and newsgroups
Intranets and extranets
Virtual workspaces
Blogs and wikis
Internet telephone service
You may already be familiar with some of the many other Internet tools that businesses use to communicate and collaborate:
If you live by and instant messaging (IM), which provides real-time text conversations between computers, you already know how effective these two tools can be.
Both mail server lists and newsgroups are frequently used by people in professional specialties who need to stay up to date with industry developments or get advice from peers.
Intranets, websites accessible by employees only, carry a wide range of information, from production-line updates to health insurance sign-up forms. Extranets are a similar concept but allow trusted outside business partners to log on as well employees.
Shared workspaces are "virtual offices" that give everyone on a team access to the same set of resources and information: databases, calendars, project plans, IM and exchanges, shared reference materials, and team-created documents.
Blogs are web-based logs or journals first used by web enthusiasts but now embraced as a communication tool by many companies.
In the same way that blogs allow an individual to communicate online, a wiki allows teams to write collaboratively online ("wiki" is Hawaiian for "quick").
Internet telephone service (also known as Internet telephony or by the technical term VoIP) converts voice to digital data for transmission across the Internet.
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15. Simplifying Research Search Engines Web Directories Meta-Search
Online
Databases
Search engines are Internet tools that identify and screen resources. Also called spiders or crawlers, the engines travel the Web automatically, find new sites, and place a copy of these Webpages in their database. When a Web surfer enters key search words, the engine scans its index and returns the addresses of all documents that match those words. Each search engine has qualities that distinguish it from the others, and not all search engines operate in the same way. For all the ease and power they offer, search engines have three disadvantages that could affect the quality of your research.
The process that search engines use to find and present lists of web pages is computerized, with no human editors involved to evaluate the quality of the content you find on these pages.
Search engines can't reach the content held in limited-access collections, such as the back issues of many newspapers, magazines, and professional journals.
Various search engines use different techniques to find, classify, and present pages, so you might be able to find certain pages through one engine but not through another.
Web directories address the first major shortcoming of search engines by using human editors to categorize and evaluate websites. You often find more Websites than when you use a directory; however, directories often yield more-precise results.
Online databases address the second shortcoming of search engines by offering access to the newspapers, magazines, and journals that you're likely to need for many research projects.
Metacrawlers or metasearch engines address the third shortcoming of search engines by formatting your search request for the specific requirements of multiple search engines and then telling you how many hits each engine was able to find for you.
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16. Types of Online Searching
Keyword Searches
Boolean Operators
Natural Language
Forms-Based Searches
The most basic form of searching is a keyword search, in which the engine or database attempts to find items that include all of the words you enter. A Boolean search expands on this capability by using search operators that let you define a query with greater precision. Common operators include AND (the search must include both words before and after the AND), OR (it can include either or both words), or NOT (the search ignores items with whatever word comes after NOT).
To overcome the perceived complexity of Boolean searches, some search engines and databases offer natural language searches, which let you ask questions in normal, everyday English.
Recently, search engines such as Google, Yahoo!, and AllTheWeb have implemented forms-based searches that help you create powerful queries without the need to learn any special techniques.
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17. Effective Searching Read Instructions Observe Details Review Options
Vary Search Terms
Adjust the Scope
To make the best use of any search engine or database, keep the following points in mind:
Read the instructions. Unfortunately, there is no universal set of instructions that apply to every search tool, and search engines in particular are in a constant race to add new capabilities.
Pay attention to the details. Details can make all the difference in a search.
Review the search and display options carefully. Some sites and databases let you make a variety of choices to include or exclude specific types of files and pages from specific sites.
Try variations of your terms. If you can’t find what you’re looking for, try abbreviations (CEO, CPA), synonyms (man, male), related terms (child, adolescent, youth), different spellings (dialog, dialogue), and singular and plural forms (woman, women).
Adjust the scope of your search if needed. If a search yields little or no information, broaden your search by specifying fewer terms.
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18. Really Simple Syndication
News Aggregators
(RSS)
Monitor
Competitors
Reach
Customers
You can use Really Simply Syndication (RSS) to automatically collect new material from multiple websites (including blogs) without the time-consuming chore of repeatedly visiting every site looking for fresh content. By using a news aggregator, you can have new content delivered to your computer as frequently as every hour. Businesspeople who need to monitor competitors or industry developments can save hours of time with RSS, and companies that want to reach potential customers and other audiences can easily publish their messages by making it RSS-compatible.
Be careful about signing up for too many RSS feeds, though; many first-timers find themselves inundated by more new material than they can ever hope to read.
NewsGator
NewzCrawler
Bloglines
FeedDemon
Pluck
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19. Business Information Systems
Operations
Information
Management
Support
All these Internet capabilities work best when they are used in the context of business systems—that is, as integrated solutions to business problems, rather than as discrete pieces of technology. Over the years, the collective label for these technologies and processes has changed; what used to be called data processing is now called information systems (IS) or, more recently, information technology (IT).
The types of information systems used by a company generally fall into two major categories: operations information systems and management support systems. Each category typically corresponds to business operations at specific levels of the organization.
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20. Transaction Processing
Operational Systems
Transaction Processing
Systems Control
Office Automation
Customer Relations
Operations information systems include transaction processing systems, process and production control systems, and office automation systems. These systems typically support daily operations and decision making for lower-level managers and supervisors.
Much of the daily flow of data into and out of the typical business organization is handled by a transaction processing system (TPS), which captures and organizes raw data and converts these data into information. Common transaction processing systems takes care of customer orders, billing, employee payroll, inventory changes, and other essential transactions.
Operations information systems are also used to make routine decisions that control operational processes. Process control systems monitor conditions such as temperature or pressure change in physical processes. These systems use special sensing devices that take measurements, enabling a computer to make any necessary adjustments to the process. Production control systems are used to manage the production of goods and services by controlling production lines, robots, and other machinery and equipment.
Office automation systems (OAS) include any type of operations information system that helps you execute typical office tasks. Office automation systems range from a single personal computer with word-processing software to networks of computers that allow people to send electronic mail and share work among computers.
Customer relationship management systems aim to capture, organize, and capitalize on all the interactions that a company has with its customers, from marketing surveys and advertising through sales orders and customer support.
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21. Management Support Systems
Knowledge Management
Management
Information
Decision
Support
Executive
Information
Professional and managerial systems are designed to help managers make decisions. A variety of such systems are available that allow users to analyze data, identify business trends, and make forecasts.
A management information system (MIS) provides managers with information and support for making routine decisions. An MIS takes data from a database and summarizes or restates the data into useful information such as monthly sales figures, daily inventory levels, product manufacturing schedules, employee earnings, and so on. This information is generally organized in a report or graphical format, making it easier for managers to read and interpret.
A decision support system (DSS) assists managers in solving highly unstructured and non-routine problems through the use of decision models and specialized databases. Compared with an MIS, a DSS is more interactive (allowing the user to interact with the system instead of simply receiving information), and it usually relies on both internal and external information.
Similar in concept to a DSS is an executive information system (EIS), which helps executives make the necessary decisions to keep the organization moving forward. An EIS usually has a more strategic focus than a DSS, and it is used by higher management to plan for the future.
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22. Business System Technology
Hardware
Software
Networks
Now that you have an idea of how businesses manage information, it's time to take a closer look at the role hardware, software, and networks play in the information management process.
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23. Computing Hardware Equipment Computers Input Clients Processing
Servers
Hardware is the tangible equipment used in a computer system, such as disk drives, keyboards, modems, printers, scanners, PDAs and so on. Hardware falls into three categories: input, processing, and output.
Computers themselves come in a variety of shapes and sizes but generally fall into the categories of clients (desktops, laptops, PDAs, and other end-user devices) and servers (the more powerful computers that run many business systems). Corporate data centers often employ mainframe computers as well, a general term for any large computer system.
Output
Mainframes
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24. Computer Applications
Computing Software
Operating System
Computer Applications
Apple Macintosh
Linux
Unix
MS Windows
Word Processing
Spreadsheets
Desktop Publishing
Database
Hardware is of little value without software, the programmed instructions that direct the activity of the hardware. Software comes in two main varieties:
Application software. This is the outermost layer of software in a system, the software that you see as a user on your computer, PDA, cell phone, or other device.
System software. This class of software operates between the hardware and the application software, so it's not usually seen by regular business users. The most common type of system software is the operating system, the layer of software that directly manages the hardware in a system.
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25. Networking Computers Central Servers Multiple Servers Peer-to-Peer
Geographic Coverage
A network is a collection of specialized hardware and software that links computers together to share data and information. Networks come in a variety of configurations, some with a single, central server, others with multiple servers that coordinate their activities, and peer-to-peer networks, in which multiple client computers share information directly or collaborate on large computing tasks. Networks can also be wired, wireless, or a combination of both. Networks are generally classified by range of geographic coverage:
A local area network (LAN) connects computers within a limited local range, such as within a single department or single building.
A wide area network (WAN) covers larger areas, up to entire countries.
A municipal area network (MAN) typically covers a city or a town and surrounding areas.
The Internet is actually a network of networks spanning the entire globe.
Local Area
Network (LAN)
Wide Area
Network (WAN)
Municipal Area
Network (MAN)
The Internet
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26. Current Networking Issues
Digital Convergence
Wireless Connections
Bandwidth
Current developments in the area of networking are dominated by three issues: bandwidth, wireless, and convergence.
Bandwidth is simply a measure of the speed of a network connection. Broadband is a rather vague term used to describe higher-speed network connections. Bandwidth is a concern both for the connections that individual users and companies have with the Internet and for the overall speed of the Internet itself.
Internet companies offering phone service, cable TV companies offering Internet service, satellite TV companies offering phone service, phone companies offering TV service, electrical utilities offering Internet service, software companies getting into the TV and movie business, Internet-enabled kitchen appliances, cell phones that play music and video games—if this all sounds chaotic, welcome to digital convergence, the tendency for digitally oriented goods and services that were once separate to combine into new forms.
By combining mobility with the power of networked information, wireless promises to change business and daily life as much as just about anything in the history of technology.
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27. Types of Wireless Connections
Wireless fidelity (Wi-Fi)
WiMAX
Global positioning system (GPS)
Bluetooth
Short messaging service (SMS)
Third generation (3G)
Radio Frequency Identification (RFID)
You might encounter dozens of different wireless technologies, but here are the most significant from a business perspective:
You may already be using Wi-Fi (short for wireless fidelity), which is a wireless alternative for LANs, around your campus or in the thousands of coffee shops, airports, and other locations that provide wireless hotspots.
Designed for higher bandwidth and wider range than Wi-Fi, WiMAX provides wireless broadband connections to the Internet.
The Global Positioning System (GPS) uses a ring of satellites around the earth to precisely identify locations virtually anywhere on the planet.
Bluetooth is a short-range wireless technology for connecting digital devices, such as sending documents from a PDA to a printer or exchanging phone books between cell phones, without connecting a cable.
Short Messaging Service (SMS) is the technical name of the text messaging capability now available on many cell phones.
3G stands for a collection of "third-generation" mobile phone systems that promise data transmission rates high enough to enable music downloads and other features.
Radio frequency identification (RFID) tags (see Chapter 2) combine a memory chip with a tiny antenna; these tags can be scanned by wireless reading devices.
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28. Technology Issues for Managers
Total Cost of
Ownership
Employee
Training
Productivity
Monitoring
The Human
Touch
Property Rights
Information
Overload
Privacy
and Security
As you already know from your experiences as a student and a consumer, technology can deliver some amazing benefits, and every year seems to bring new technical miracles. As a business manager or entrepreneur, you can capitalize on all these benefits as well, but you'll also be responsible for a variety of legal and ethical issues, as well as making sure that technology serves your business and your customers, not the other way around. These issues include ensuring privacy and security, protecting property rights, guarding against information overload, monitoring productivity, managing total cost of ownership, helping your employees develop the necessary technical skills, and maintaining the human touch in interactions with both employees and customers.
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29. Ensuring Privacy and Security
Malicious Software
Security Breaches
Data Security
Managers need constant vigilance these days to make sure their computer systems remain secure and that data on them remain private.
Malware, short for malicious software, is the term applied to computer programs that are designed to disrupt websites, destroy information, or enable criminal activity. Viruses are invasive programs that reproduce by infecting legitimate programs; worms are a type of virus that can reproduce by themselves. Another variety, Trojan horses, allow outsiders to hijack infected computers and use them for purposes such as retransmitting spam . Many viruses and worms are able to wreak havoc because computer owners haven't bothered to install available security patches in their software or haven't installed firewalls, security products (hardware or software) that block access to intruders.
Information technology products are also vulnerable to a wide range of security breaches and sabotage attacks, in which individual systems are invaded for potentially malicious or criminal purposes. For instance, a new variety of malware known as spyware sneaks onto computers with the intent of capturing passwords, credit card numbers, and other valuable information. Chances are you've already met spyware's less-malicious cousin, adware, which creates pop-up ads on your computer screen. These worries are in addition to good old-fashioned hacking, in which someone electronically breaks into a computer network.
Data security is also a part of a larger ethical question that all companies face regarding consumer and employee privacy. Businesses have the responsibility to ensure that private information in its control stays private, but they also need to address some tough questions regarding the information they should collect in the first place. Web cookies, small data files that record aspects of your web sessions, are a good example of this dilemma. Inside the organization, an even wider range of techniques are being used to monitor employee behavior. For instance, a significant number of companies—30 percent, according to one recent survey—now automatically monitor employee .
Whether it's human issues such as background checks on new hires and ongoing security training or technical issues such as firewalls, encryption, or disaster recovery plans, all managers need to devote time and energy to potentially harmful side effects of information technology.
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30. Protecting Property Rights
Digital Products
Digital Rights
Management (DRM)
Intellectual Property
Digital technology has also increased concerns over the protection of both digital products (including software and entertainment products available in digital format) and intellectual property, a term that covers a wide range of creative outputs with commercial value, such as design ideas, manufacturing processes, brands, and chemical formulas.
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31. Promoting Productivity
Information Overload
Categorize Information
Control SPAM
Visualize Data
Misuse of Technology
Minimize Lawsuits
Monitor Access
Protect Systems
Avoiding information overload is a key part of the larger challenge of ensuring the overall productivity of your organization in its use of information technology.
Spam is more than an annoyance for business; it's a massive headache that wastes billions of dollars every year. Information technology departments spend time and money trying to filter it out, employees waste time deleting it, and a business can even lose its service entirely if a spammer takes over an unprotected PC.
Think carefully before you start collecting any data. Separate the information you really need to have from the information that is merely nice to have. Then analyze the needs of each decision maker to identify what information each person needs and the best way to present it. Fortunately, new tools such as data visualization, presenting data in visual formats, help by showing trends and relationships that are difficult to see in plain numerical data.
How employees use information technology is another important productivity issue. The Internet and are key parts of what has been called the "information technology paradox," in which tools designed to save time can waste as much time as they save. So many employers are concerned about productivity losses from personal use of the Internet and at work that thousands now place restrictions on how employees can use them. And it's not merely a productivity issue, either; employee misuse of information technology can expose a company to a lawsuits over such matters as sexual harassment and expose systems to malicious software.
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32. More Technology Issues
Total Ownership Cost
Training Employees
The Human Touch
The true costs of information technology are a concern for every company. The total cost of ownership (TCO) of IT systems, which includes the purchase costs of hardware, software, and networking plus expenses for installation, customization, training, upgrades, and maintenance, can be three to five times higher than the purchase price.
With the pervasiveness of information technology, virtually everyone from the mailroom to the executive suite is expected to have some level of skills with information technology. When you plan a new information technology project, make sure that user skills receive as much attention as the hardware, software, and networking.
In spite of technology’s efficiency and speed, it is by no means the complete solution for many business challenges or even the right solution in some cases. Even in the best circumstances, technology can’t match the rich experience of person-to-person contact. Moreover, all human beings need to connect with other people, and as technological options increase, people seem to need the human touch even more.
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