1. Unit 2 Using Information Technology to Engage in Electronic Commerce; Computer Use in an International Marketplace; & Ethical Implications of Information Technology MANAGEMENT INFORMATION SYSTEMS 1-1

2. Chapter 3 Using Information Technology to Engage in Electronic Commerce MANAGEMENT INFORMATION SYSTEMS 3-2

3. Electronic Commerce n Electronic commerce is the use of computers to facilitate the firm’s operations –internal (finance, marketing, manufacturing,...) –external (customers, suppliers, government,...) 3-3

4. Environmental Responsibilities of Functional Areas Customers Suppliers Stockholders Labor Unions Government Financial Community Global Community Competitors Finance Resources Services Manufacturing Marketing Human Information X X X X X X X X X X X X X X X 3-4

5. Electronic Commerce Benefits n Improved service, especially to customers n Improved relationships to suppliers and the financial community n Increased return on stockholder and owner investments 3-5

6. Electronic Commerce Constraints n High costs n Security concerns n Immature or unavailable software 3-6

7. New Electronic Commerce Era n Instead of specialized software, firms are designing systems to use Internet Browsers n Making a common interface for customers and electronic commerce partners 3-7

8. Selection of Electronic Commerce Strategy, Methodology, and Technology Business Intelligence Competitive Advantage Strategic Business Plan Enabling strategy Interorganiza- tional Electronic data interchange Enabling methodology System life cycle Business process redesign Enabling technology Direct connectivity Value-added networks The Internet 3-8

9. Business Intelligence (BI) n Evolved from simply gathering data about competitors to data gathering about all environmental elements 3-9

10. Data Collect data 2 Evaluate data Analyze data 4 Store intelligence Intelligence 5 Disseminate intelligence Intelligence The Five Basic Intelligence Tasks Data 3 1 3-10

11. External Databases n Important commercial databases that provide information on virtually any subject –LEXIS-NEXIS, DIALOG, DOWJONES.COM –Over 1,000 data service sites listed by YAHOO.COM n Less expensive to use database services than to perform research 3-11

12. Search Engines n Special computer programs that ask users for a word or group of words to be found at Internet sites n Yahoo, Excite, AltaVista, HotBot, Lycos, and Webcrawler are examples n Government databases 3-12

13. Extranets n Allow sharing of sensitive computer-based information using Internet technology n Limited to trusted suppliers and large customers n Security and privacy issues –Firewalls 3-13

14. Interorganizational System (IOS) n These link two or more firms so that they function as a single system to accomplish a common goal n Generate internal efficiency in addition to interorganizational efficiency n Provides customers with unique product features, reduced search-related costs, and raises the customer’s switching costs 3-14

15. Electronic Data Interchange (EDI) n Consists of direct computer-to-computer transmissions among multiple firms of data in a machine-readable, structured format n Typical linkages –Supply side –Customer side –Transaction set n Vendor stock replenishment (VSR) n Electronic Funds Transfer (EFT) 3-15

16. Electronic Data Interchange (EDI) Adheres to Standard Formats Suppliers The Firm Request for a price quote Price quote Purchase order Acknowledge P.O. receipt Invoice ANSI ASC X12 - North AmericaEDIFACT - International 3-16

17. Selected EDI Transaction Sets and Sample Invoice Data 104 Air Shipment Information 130 Student Educational Record (Transcript) 152 Statistical Government Information 300 (Booking Request) (Ocean) 311 Canadian Customs Information 810 Invoice Name Address Information Marking, Packaging, Loading Industry Code Quantity Currency Tax Information Pricing Information Item Physical Details Terms of Sale / Deferred Terms of Sale Carrier Detail Product / Item Description Invoice Shipment Summary Transaction Totals 3-17

18. Mapping Software Translates Data to and from Standard Formats Sending firm’s computer Application software Mapping software Standard EDI format Receiving firm’s computer Application software Mapping software 3-18

19. Degree of EDI Implementation n Level-one users –One or two transmission sets sent to limited trading partners n Level-two users –Many transaction sets transmitted to large number of trading partners n Level-three users –Many transaction sets transmitted to large number of trading partners and firm’s computer applications are tailored to EDI approach 3-19

20. Adoption Influences n Competitive pressure, this is reactive n Exercised power, this is proactive n Internal need, this is proactive n Top management support, this is both proactive and reactive 3-20

21. Internal and Environmental Influences on EDI Adoption Environmental Influences Pressure Exercised Power Internal Influences Internal Need Top Management Support Competitors Trading Partners EDI 3-21

22. EDI Benefits n Direct –Reduced errors –Reduced costs –Increased operational efficiency n Indirect –Increased ability to compete –Improved relationships with trading partners –Improved customer service 3-22

23. EDI Direct and Indirect Benefits Indirect Benefits Direct Benefits Reduced Errors Increased Operational Efficiency Reduced Costs CompetitorsTrade Partners Competitors Increased Ability to Compete Improved Service Improved Relationships 3-23

24. A Challenge to EDI n Extensible markup language (XML) –Extension of HTML –Provides file formatting structure and means for describing data –Allows Web pages to perform many EDI functions 3-24

25. Electronic Commerce Technology n Direct Connectivity –Uses dial-up or private lines to connect n Value-Added Networks (VANs) –Circuit provided by vendor –Vendor provides additional services n The Internet –Global communications network 3-25

26. Internet Evolution n n Derived from the Advanced Research Projects Agency network (ARPANET) n n Designed to let computer-to-computer communications continue even during military attacks n n ARPANET joined with Computer Science Network (CSNET) and National Science Foundation Network (NSFNET) to form today’s Internet 3-26

27. Internet Evolution [cont.) n n During the 1970’s various other networks were connected n n This led to the 1980’s Internet concept which means each network can seamlessly interconnect with other networks n n Businesses began using the new Internet with workstations and local area networks n n The Internet has become a network of networks 3-27

28. Internet Evolution (cont.) n In 1989, Tim Berners-Lee of CERN came up with the hypertext concept n World-Wide Web is really the application of hypertext documents and other materials n Hypertext is conceptually a ‘speed dial’ feature in that a user points to and presses the hypertext link and the system automatically goes to that location 3-28

29. Key Web Terminology n Website n Hypertext link n Web page n Home page n Universal resource locator (URL) –Protocol –Domain name –Path n Browser n FTP (File Transfer Protocol) 3-29

30. Parts of a URL http://aisvm1.ais.com/abra7883/index.html hypertext transmission protocol domain name path (directory and file name on the web server ) hypertext markup language 3-30

31. Internet Client/Server Information Retrieval Systems n Gopher n Wide Area Information Servers (WAIS) n USENET Each of these predates the WWW and represents a major step forward in Internet Use 3-31

32. Terminal EmulatorPC or MacintoshUnix X11NextStep Addressing schema, Protocols, Format negotiation FTP News Gopher WAIS HTTP Gateway is HTTP server plus other application. Database, info system, etc. Internet Client/Server Architecture 3-32

33. Internet Security n Any resources linked to data communications have risk n Security by physically separating the Web site from the firm’s computer resources n Security by using passwords that allow access to computing resources n ‘Firewalls’ using routers, intermediary computers or application-level methods 3-33

34. An Application-Level Firewall ExternalServices Border Router IP Choke Protocol Filter Internal/External Service Gateway Internal Router Router Isolation Mechanism Internet Connectivity Supplier’s Network Internet Internal Network Incoming packets from the Internet pass through the connectivity supplier’s network to a router and to the organization The packet goes to a router box that duplicates the function of the external router Rather than routing the packet directly to its destination, the router redirects traffic through an external services host and an IP “choke” host The external services host runs desired apps such as E-mail interface The IP choke performs actual protocol filtering Traffic is sent through a gateway to a separate router box on the internal network, configured according to internal security policy 3-34

35. Intranet n Internet technology used for internal communications and applications n Used for many business applications requiring communication 3-35

36. Business Applications for the Internet n Marketing research n Competitive intelligence n Retailing applications n The future impact of the Internet on business is enhanced as the National Information Infrastructure programs become established 3-36

37. Successful Internet Use n Make sure your Web site is robust n Make sure your browser and database structure are both flexible and intuitive n Update often n Look beyond customers n Target content to specific users’ needs n Make the interface intuitive n Be in the right Web location n Create a sense of community n Get help if you need it 3-37

38. Summary n E-Commerce begins with business intelligence n Primary and secondary data comprise business intelligence n Reasons for IOS –Comparative efficiency –Bargaining power n Three levels of EDI 3-38

39. Summary [cont.] n Internet –Network of networks –Security concerns –Firewalls n Intranets n National information infrastructure 3-39

40. Chapter 4 Computer Use in an International Marketplace MANAGEMENT INFORMATION SYSTEMS 4-40

41. The Multinational Corporation (MNC) n Parent company and group of subsidiaries n Operates across –Products –Markets –Nations –Cultures 4-41

42. Each Subsidiary Has Its Own n Geography n Goals n Policies n Procedures 4-42

43. Special Need for Information Processing in an MNC n Influenced by internal and external conditions n Seeks to minimize environmental uncertainty –Uncertainty - Difference between information required andinformation possessed n Requires ‘good’ use of information technology to achieve desired performance 4-43

44. Types of MNC Organizational Structure Classifications n Each structure requires its own information processor n Worldwide functional divisions –Organized along functional lines –Marketing in subsidiary reports to marketing in parent company –Strategic planning done at top executive level –Data that integrates operations does not exist at lower levels 4-44

45. MNC Classifications (cont.) n International regions –International division separate from domestic division n Geographic regions –Each region responsible for its subsidiaries –No communication between regions –Communication coordinated by parent company 4-45

46. MNC Classifications (cont.) n Worldwide product divisions –Product division responsible for operations worldwide –Helps recognize product specific needs 4-46

47. Need for Coordination in an MNC n Greater need than domestic companies n Companies unable to gain strategic control of their worldwide operations and manage them in a globally coordinated manner will not succeed in the emerging international economy n Resources are widely distributed 4-47

48. Need for Coordination in an MNC (cont.) n Improvements in information technology and methodology have made global coordination somewhat easier n Still, coordination is big challenge 4-48

49. Advantages of Coordination in an MNC n Flexibility in responding to competitors n Ability to respond in one country to a change in another n Ability to keep abreast of market needs around the world n Ability to transfer knowledge between units in different countries 4-49

50. Advantages of Coordination in an MNC (cont.) n Reduced overall costs of operation n Increased efficiency and effectiveness in meeting customer needs n Ability to achieve and maintain diversity in firm’s products, their production, and distribution 4-50

51. Global Business Strategies n Multinational strategy n Global strategy n International strategy n Transnational strategy 4-51 All use global information systems (GISs) in various ways

52. HQ Loose controls; strategic decisions remote Financial reporting flows Multinational Strategy 4-52

53. HQ Tight controls; centrally driven strategy One-way flows, goods, information, and resources Global Strategy 4-53

54. Assets, responsibilities decentralized HQ International mentality Formal control systems International Strategy 4-54

55. Transnational Strategy Complex controls; high coordination skills,coordinated strategic decision process Heavy flows; materials, people information, technology Distributed capabilities, resources and decision making HQ 4-55

56. Global Business Drivers (GBD) n Joint resources n Flexible operations n Rationalized operations n Risk reduction n Global products n Scarce supplies n Corporate customers 4-56

57. GBDs Cautions n All GBDs do not apply to all MCNs n Drivers have many influences –Industry –Country –Own characteristics –Business units within firm n Provide vehicle for mapping out SPIR 4-57

58. Global Information Systems (GISs) Implementation Problems n Politically imposed constraints –Hardware purchases and imports –Data processing –Data communications »Transborder data flows (TDF) n Operational data n Personal data n Electronic funds transfer n Technical and scientific data 4-58

59. Global Information Systems (GISs) Implementation Problems (cont.) n Technological problems –Unreliable power –Slow telecommunications –Software copyrights and blackmarket products n Lack of support from subsidiary managers –View corporate office as an ‘outsider’ –Drag heels to improve local profitability 4-59

60. GIS Implementation Strategies n Multinational strategy –Development teams derived from subsidiaries n Global strategy –Development teams derived from parent location 4-60

61. GIC Implementation Strategies (cont.) n n International – –Development teams can travel from parent to subsidiaries n n Transnational strategy – –Development team includes members from both parent and subsidiaries 4-61

62. Transnational Strategy n Link the GIS to business strategy n Define the information resources n Provide for data sharing n Consider the cultural environment Caution: the tasks and issues listed above are issues to be addressed, not steps to always be followed in strict sequence 4-62

63. Computing Around the World n Group Support Systems (GSS) in Africa –Top management influences –Computing literacy –Referent power –Oral communication preference –Satisfaction with use 4-63

64. Group Support Systems (GSS) n Systems that typically support problem solvers meeting in groups settings n Also called group decision support systems (GDSS) n An expansion of the DSS area 4-64

65. Factors Influencing Acceptance of GSS Endorsement by Top Management Satisfaction with Use Oral Communication Preference Referent Power Computer Literacy Acceptance of GSS + + + - - 4-65

66. Computing Around the World (cont.) n Strategic Decision Support System (SDS) in Switzerland –SDS helps managers understand business strategy and its implications –Tools and models –Cases –Tutorials –Applications 4-66

67. International Computer Use in Perspective n Great deal of attention given to GIS in past few years n GIS built on solid foundation n Cultural differences can influence computer work n A better understanding of GIS is required 4-67

68. Summary n MNC –Four organizational structures –Coordination is the key –Multitude of problems n GIS –Implementation strategies –Consider culture n U.S. is leader in computer use 4-68

69. Chapter 5 Ethical Implications of Information Technology MANAGEMENT INFORMATION SYSTEMS 8/E Raymond McLeod and George Schell Copyright 2001 Prentice-Hall, Inc. 5-69

70. Socially Conscionable Citizens n Morals –Traditions of right and wrong n Ethics –Suite of guiding beliefs, standards, or ideals that promote an individual or community n Laws –Formal rules of conduct that a sovereign authority imposes on its citizens 5-70

71. Pirated Software n Software that is illegally copied and then used or sold –35% in U.S. –92% in Japan –99% in Thailand n Some cultures encourage sharing 5-71

72. Laws Lag Behind n First computer crime –In 1966, a programmer used computer code to keep his checking account from being flagged as overdrawn. –When the bank discovered the crime the programmer could not be charged with a computer crime because no computer crime law existed. –He was charged with making false bank records. 5-72

73. U.S. Computer Legislation n Freedom of Information Act of 1966 –Gave citizens and organizations the right to access data held by the federal government n Fair Credit Reporting Act of 1970 –Dealt with handling of credit data n Right to Federal Privacy Act of 1978 –Limited government’s ability to search bank records 5-73

74. U.S. Computer Legislation (cont.) n Small Business Computer Security and Education Act (1984) –Advises Congress on matters relating to computer crime against small businesses n Counterfeit Access Device and Computer Fraud and Abuse Act –Makes it a crime to gain unauthorized information pertaining to national security or foreign relations and provides other protection 5-74

75. U.S. Computer Legislation (cont.) n In 1986, Electronic Communications Privacy Act was rewritten to cover digital, data, and video communications –Included special section on email n Computer Matching and Privacy Act of 1988 –Restricts government’s right to match computer files for the purpose of determining eligibility for government programs or identifying debtors 5-75

76. Imposing an Ethics Culture n Corporate credo –Succinct statement of values a firm seeks to uphold n Ethics programs –System of multiple activities designed to provide employees with direction in carrying out corporate credo n Tailored corporate codes –Codes of ethics for a particular organization or industry 5-76

77. 2. Establish ethics programs 3. Establish corporate ethics code 1. Establish corporate credo Top-level Management Imposes the Ethics Culture In a Top-down Manner An Ethics Culture 5-77

78. Example of a Corporate Credo Commitment to customer: The first commitment is to provide our customers with quality products and services that are innovative and technologically responsive to their current requirements at appropriate prices. To perform these tasks with integrity requires that we maintain confidentiality and protect customer privacy, promote customer satisfaction, and serve customer needs. We strive to serve qualified customers and industries that are socially responsible according to broadly accepted community and company standards. 5-78

79. Ethics Audit n Internal auditor meets with a manager for the purpose of learning how the manager’s unit is carrying out the corporate credo 5-79

80. Computer Ethics n Analysis of the nature and social impact of computer technology as well as corresponding formulation and justification of policies for the ethical use of such technology 5-80

81. Responsibility for Computer Ethics n CIO holds primary responsibility n CIO Must: –Be aware of how the computer is affecting society –Do something about this by formulating policies to ensure technology is being used in the right way 5-81

82. Importance of Computer Ethics n Logical malleability –Ability to program computer to do anything you want it to do n The transformation factor –Computers can change the way things are done n The invisibility factor –Invisible programming –Invisible complex calculations –Invisible abuse 5-82

83. Rights to the Computer n Right to computer access n Right to computer skills n Right to computer specialists n Right to computer decision making 5-83

84. Rights to Information n Right to privacy n Right to accuracy n Right to property n Right to access 5-84

85. Social Contract of IS The computer will not be used to unduly invade a person’s privacyThe computer will not be used to unduly invade a person’s privacy Every measure will be taken to ensure the accuracy of computer processingEvery measure will be taken to ensure the accuracy of computer processing The sanctity of intellectual property will be protectedThe sanctity of intellectual property will be protected The computer will be made accessible to society so that its members can avoid the indignities of information illiteracy and deprivationThe computer will be made accessible to society so that its members can avoid the indignities of information illiteracy and deprivation 5-85

86. Ethics and the CIO n Perceptions of the CIO’s Ethics –Do not take advantage of opportunities to act unethically –Ethics breeds success –Firms and managers have social responsibilities –Managers back up their ethics beliefs with action 5-86

87. The CIO is Influenced by a Hierarchy of Factors Office of the CIO Laws Corporate ethics culture Socialpressure Professional codes of ethics Personalpressures 5-87

88. CIOs Usually Do Not Act Unethically There are many opportunities for 47.5 37.7 MIS managers in my company to engage in unethical behavior. MIS managers in my company 19.7 80.3 engage in behaviors that I consider to be unethical. Question Agree Disagree 5-88

89. Ethics and Success Percent Percent Percent Percent Question Agree Disagree Successful MIS managers in my company are generally more ethical than unsuccessful managers. 73.8 13.1 In order to succeed in my company it is often necessary to compromise one's ethics. 18.0 75.4 Successful managers in my company withhold information that is detrimental to their self-interest. 21.3 50.8 5-89

90. Ethics (cont.) Percent Percent Percent Percent Question Agree Disagree Successful managers in my company make rivals look bad in the eyes of important people in my company. 23.0 59.0 Successful managers in my company look for a scapegoat when they feel they may be associated with failure. 23.0 67.2 Successful managers in my company take credit for the ideas and accomplishments of others. 16.4 75.4 5-90

91. Corporate Social Responsibility Percent Percent Percent Percent Question Agree Disagree The socially responsible manager must occasionally place the interests of society over the interests of the company. 68.9 21.3 The fact that corporations have great economic power in our society means that they have a social responsibility beyond the interests of the shareholders. 96.7 3.3 As long as corporations generate acceptable shareholder returns, managers have a social responsibility beyond the interests of shareholders. 70.5 16.4 5-91

92. Achieving an Ethical Computer Operation 1. Formulate a code of conduct. 2. Establish rules of procedure relating to such issues as personal use of computer services and proprietary rights to computer programs and data. 3. Make clear the sanctions that will be taken against offenders-such as reprimands, termination, and civil action. 4. Recognize ethical behavior. 5-92 Parker’s 10-Step Action Plan

93. Achieving an Ethical Computer Operation (cont.) 5. Focus attention on ethics by means of such programs as training sessions and required reading. 6. Promote computer crime laws by keeping employees informed. 7. Keep a formal record that establishes accountability of each information specialist for her or his actions, and also minimizes the temptations for violations by means of such programs as ethics audits. 5-93 Parker’s 10-Step Action Plan

94. Achieving an Ethical Computer Operation (cont.) 8. Encourage the use of rehabilitation programs that treat ethics violators in the same way that corporations show concern for the recovery of alcoholics or drug offenders. 9. Encourage participation in professional societies. 10. Set an example. 5-94 Parker’s 10-Step Action Plan

95. Ethics Perspective n Severe social problems exist because government and business organizations have failed to uphold the highest ethical standards in computer use –Invasion of privacy –Software piracy n CIOs can make a difference 5-95

96. An Information Services Code of Conduct n Conduct all activities in a manner that precludes any form of dishonesty n Avoid any act that compromises integrity n Avoid any act that might create a dangerous situation n Not use alcohol or drugs while at work 5-96 See Figure 5.4

97. An Information Services Code of Conduct (cont.) n Maintain courteous and professional relations with users, associates, and supervisors n Adhere to the no-solicitation rule and any other employment policy 5-97 See Figure 5.4

98. An Information Services Code of Conduct (cont.) n Protect confidentiality of sensitive information about the organization’s competitive position, trade secrets, or assets n Exercise sound business practice in the management of such company resources such as personnel, computer use, outside services, travel, and entertainment 5-98 See Figure 5.4

99. Summary n Morals, laws, and ethics govern behavior n Early years –No computer laws –Easy to bypass regulation n Executives impose ethical culture n Computer ethics require executive to put proper policies in place 5-99

100. Summary [cont.] n Society places importance on computer ethics –Logical malleability –Transforming ways of living –Processes are hidden from view n Societal rights in relation to the computer 5-100