File: ch08, Chapter 8: Organizational Information Systems

True/False

1. The functional area information systems are the most fundamental information systems in the
organization.
Ans: False
Response: See page 240

2. Organizations typically must process thousands of transactions per day.

Ans: False
Response: See page 243

3. Transaction processing systems monitor, collect, store, and process data generated from all business
transactions.
Ans: True
Response: See page 243

4. Management information systems monitor, collect, store, and process data generated from all business
transactions.
Ans: False
Response: See page 243

5. Management information systems process data for input into the organizations databases.
Ans: False
Response: See page 243

6. The data processed by transaction processing systems provide the inputs for other organizational
information systems.
Ans: True
Response: See page 243

7. The data processed by management information systems provide the inputs for other organizational
information systems.

Ans: False
Response: See page 243

8. Transaction processing systems must be able to handle large variations in the volume of transactions.
Ans: True
Response: See page 243

9. The volume of transactions in any organization remains relatively constant.

Ans: False
Response: See page 243

10. Organizational transactions are high volume and repetitive.

Ans: True
Response: See page 243

11. Organizational transactions are typically low volume and repetitive.

Ans: False
Response: See page 243

12. Transaction processing systems must avoid errors because the data in the organizations database must
be correct.
Ans: True
Response: See page 243

13. In general, organizations try to automate data entry as much as possible.

Ans: True
Response: See page 243

14. In general, organizations manually enter TPS data to reduce errors to a manageable level.
Ans: False
Response: See page 243

15. Automating data entry is a process called source data automation.

Ans: True
Response: See page 243

16. In batch processing, the organization collects data from transactions as they occur, places them in
groups, and then processes them periodically.
Ans: True
Response: See pages 243-244

17. In online transaction processing, business transactions are processed online as soon as they occur.
Ans: True
Response: See pages 243-244

18. In batch processing, business transactions are processed online as soon as they occur.
Ans: False
Response: See pages 243-244

19. A management information system provides information to managers in the functional areas.
Ans: True
Response: See page 245

20. Functional information systems support the entire enterprise or major portions of it.
Ans: False
Response: See page 245

21. Functional systems support one department (functional area).

Ans: True
Response: See page 245

22. A transaction processing system typically provides information to managers in the functional areas.
Ans: False
Response: See page 245

23. A management information system supports the managerial tasks of planning, organizing, and
controlling operations.
Ans: True
Response: See page 245

24. Transaction processing systems mainly provide information in the form of reports.
Ans: False
Response: See page 245

25. Drill-down reports show a greater level of detail than is included in routine reports.
Ans: True
Response: See page 245

26. Exception reports show a greater level of detail than is included in routine reports.
Ans: False
Response: See page 245

27. Exception reports include only information that exceeds certain threshold standards.
Ans: True
Response: See page 245

28. Drill-down reports include only information that exceeds certain threshold standards.
Ans: False
Response: See page 245

29. Exception reports save time for managers.

Ans: True
Response: See page 245

30. Exception reports take more time to read than routine reports.
Ans: False
Response: See page 245

31. Managers who are analyzing differences in performance between business units would first ask for a
drill-down report.
Ans: False
Response: See page 245

32. Managers who are analyzing differences in performance between business units would first ask for a
comparative report.
Ans: True
Response: See page 245

33. Information systems can be function-specific.

Ans: True
Response: See page 247-248

34. Information systems can only be general, not function-specific.

Ans: False
Response: See page 247-248

35. Traditionally, information systems were designed within each functional area, to support the area by
increasing its internal effectiveness and efficiency.
Ans: True
Response: See page 248

36. Historically, the functional area information systems were developed independently of one another.
Ans: True
Response: See page 247

37. Historically, the functional area information systems were developed to be tightly integrated.
Ans: False
Response: See page 247

38. The term, information silos, refers to the functional area information systems being developed
independently of one another.

Ans: True
Response: See page 247

39. Information silos led to tight integration among the organizations functional areas.
Ans: False
Response: See page 247

40. Information silos were particularly inefficient when business processes crossed functional boundaries in
an organization.
Ans: True
Response: See page 247

41. Information silos were particularly efficient when business processes crossed functional boundaries in
an organization.
Ans: False
Response: See page 247

42. Enterprise resource planning systems integrate the planning, management, and use of all organizational
resources.
Ans: True
Response: See page 248

43. Transaction processing systems integrate the planning, management, and use of all organizational
resources.
Ans: False
Response: See page 248

44. The major objective of enterprise resource planning systems is to tightly integrate the functional areas
of the organization and to enable seamless information flows across the functional areas.
Ans: True
Response: See page 248

45. The major objective of management information systems is to tightly integrate the functional areas of
the organization and to enable seamless information flows across the functional areas.

Ans: False
Response: See page 248

46. A business transaction is a set of related steps or procedures designed to produce a specific outcome.
Ans: False
Response: See page 249

47. Business processes may be located within one functional area, or may span multiple functional areas.
Ans: True
Response: See page 249

48. ERP software includes a set of interdependent software modules, linked to a common database, that
provide support for the business processes in the functional areas.
Ans: True
Response: See page 249

49. ERP software includes a set of dependent software modules, each with its own database, that provide
support for the business processes in the functional areas.
Ans: False
Response: See page 249

50. The business processes in ERP software are typically defined by the company using the software.
Ans: False
Response: See page 249

51. The business processes in ERP software are typically predefined by the best practices that the ERP
vendor has developed.
Ans: True
Response: See page 249

52. Best practices are the most successful solutions or problem-solving methods for achieving a business
objective.
Ans: True
Response: See page 251

53. The leading ERP software vendor is SAP.

Ans: True
Response: See page 250

54. Enterprise resource planning software is relatively simple to implement.

Ans: False
Response: See page 250

55. Companies often need to change existing business processes to fit the format of ERP software.
Ans: True
Response: See page 250

56. Enterprise resource planning software typically requires a company to fit its business processes to the
software.
Ans: True
Response: See page 250

57. Enterprise resource planning software fits easily with a companys business processes.
Ans: False
Response: See page 250

58. Customer relationship management is an enterprisewide effort to acquire and retain customers.
Ans: True
Response: See page 251

59. Enterprise resource management is an enterprisewide effort to acquire and retain customers.
Ans: False
Response: See page 251

60. In one-to-one marketing, a company must be willing and able to change its behavior toward each
specific customer, based on what it knows about that customer.
Ans: True

Response: See page 251

61. In one-to-one marketing, a company does not have to change its behavior toward different customers,
but can treat them all as royalty.
Ans: False
Response: See page 251

62. The basic idea of CRM is to treat different customers differently.

Ans: True
Response: See page 251

63. The basic idea of CRM is to treat all customers in the same excellent way.
Ans: False
Response: See page 251

64. It can cost many times more to acquire a new customer than to retain an existing customer.
Ans: True
Response: See page 251

65. It costs about the same to acquire a new customer and to retain an existing customer.
Ans: False
Response: See page 251

66. CRM involves only sales and marketing.

Ans: False
Response: See page 251

67. Smart companies encourage customer participation in product development.

Ans: True
Response: See page 251

68. Smart companies discourage customer participation in product development, due to higher costs.

Ans: False
Response: See page 251

69. CRM means that a company should interact with its customers as a group.
Ans: False
Response: See page 252

70. CRM means that a company should interact with its customers individually.
Ans: True
Response: See page 252

71. CRM is designed to maximize the lifetime customer value for an organization.
Ans: True
Response: See page 253

72. A customer touch point is a method of interaction with a customer, such as telephone, e-mail, a help
desk, conventional mail, a Web site, and/or a store.
Ans: True
Response: See page 253

73. A customer touch point is a method of customer payment, such as cash, check, or online payment.
Ans: False
Response: See page 253

74. Properly designed CRM systems provide a single, enterprisewide view of each customer.
Ans: True
Response: See page 253

75. Properly designed CRM systems provide a different view of each customer for each functional area in
the organization.
Ans: False
Response: See page 253

76. CRM systems should provide each customer with a single point of contact within the enterprise as well
as a unified view of the enterprise.
Ans: True
Response: See page 253

77. CRM systems should provide each customer with a single point of contact in each functional area of the
firm.
Ans: False
Response: See page 253

78. Sales force automation help salespeople focus on the most profitable customers.
Ans: True
Response: See page 253

79. Cross-selling refers to the marketing of complementary products to customers.

Ans: True
Response: See page 253

80. Up-selling refers to the marketing of complementary products to customers.

Ans: False
Response: See page 253

81. Up-selling is the marketing of higher-value products or services to new or existing customers.
Ans: True
Response: See page 253

82. Cross-selling is the marketing of higher-value products or services to new or existing customers.
Ans: True
Response: See page 253

83. Bundling is a type of cross-selling in which a combination of products is sold together at a lower price
than the combined costs of the individual products.
Ans: True
Response: See page 253

84. If a salesperson tries to sell you a luxury car when you are looking for a compact car, he is engaging in
cross-selling.
Ans: False
Response: See page 253

85. Frequently asked questions are the simplest and least expensive tool for dealing with repetitive
customer questions.
Ans: True
Response: See page 254

86. A supply chain is the flow of materials, information, money, and services from raw material suppliers,
through factories and warehouses, to the end customers.
Ans: True
Response: See page 255

87. A supply chain includes the organizations and processes that create and deliver products, information,
and services to end customers.
Ans: True
Response: See page 255

88. The goal of SCM systems is to reduce friction along the supply chain.
Ans: True
Response: See page 255

89. Friction manifests itself along a supply chain as increased time, increased inventory, increased costs,
and decreased customer satisfaction.
Ans: True
Response: See page 255

90. One goal of supply chain management is to increase cycle time.

Ans: False
Response: See page 255

91. One goal of supply chain management is to decrease inventories.

Ans: True
Response: See page 255

92. SCM systems are a type of interorganizational information system.

Ans: True
Response: See page 255

93. SCM systems are located only within an organization.

Ans: False
Response: See page 255

94. It is complicated to design an effective interorganizational information system.

Ans: True
Response: See page 255

95. Cultural differences complicate the design of a global IOS.

Ans: True
Response: See page 255

96. Cultural differences do not complicate the design of a global IOS because computer technology is
standard over the entire world.
Ans: False
Response: See page 255

97. Localization is the process of companies using different names, colors, sizes, and packaging for their
overseas products and services.
Ans: True
Response: See page 255

98. Multicultural diversity is the process of companies using different names, colors, sizes, and packaging
for their overseas products and services.
Ans: False

Response: See page 255

99. Information technology infrastructures differ from country to country.

Ans: True
Response: See page 256

100. Information technology infrastructures are relatively similar from country to country.
Ans: False
Response: See page 256

101. Legal systems differ considerably among countries.

Ans: True
Response: See page 256

102. Legal systems are relatively similar from country to country.

Ans: False
Response: See page 256

103. Sourcing or procurement takes place in the upstream segment of the supply chain.
Ans: True
Response: See page 256

104. Sourcing or procurement takes place in the downstream segment of the supply chain.
Ans: False
Response: See page 256

105. Packaging, assembly, or manufacturing takes place in the internal segment of the supply chain.
Ans: True
Response: See page 256

106. Distribution or dispersal takes place in the downstream segment of the supply chain.
Ans: True

Response: See page 256

107. Distribution or dispersal takes place in the internal segment of the supply chain.
Ans: False
Response: See page 256

108. The flow of goods and information in a supply chain can be bi-directional.
Ans: True
Response: See page 256

109. All supply chains must have three flows: materials, information, and financial.
Ans: False
Response: See page 257

110. The bullwhip effect refers to erratic shifts in orders up and down the supply chain.
Ans: True
Response: See page 257

111. The inventory effect refers to erratic shifts in orders up and down the supply chain.
Ans: False
Response: See page 257

112. If each entity along a supply chain makes inventory decisions with an eye to its own interest above
those of the supply chain, this is known as just-in-case inventory.
Ans: True
Response: See page 257

113. If each entity along a supply chain makes inventory decisions with an eye to its own interest above
those of the supply chain, this is known as just-in-time inventory.
Ans: False
Response: See page 257

114. In the past, companies have pursued vertical integration as a potential solution to supply chain
management problems.
Ans: True
Response: See page 258

115. In the past, companies have pursued horizontal integration as a potential solution to supply chain
management problems.
Ans: False
Response: See page 258

116. Vertical integration occurs when a company buys its suppliers.

Ans: True
Response: See page 258

117. Horizontal integration occurs when a company buys its suppliers.

Ans: False
Response: See page 258

118. The most common solution to supply chain management problems is building inventories.
Ans: True
Response: See page 258

119. The most common solution to supply chain management problems is vertical integration.
Ans: False
Response: See page 258

120. Vendor-managed inventory occurs when a retailer does not manage the inventory for a particular
product, but rather the supplier handles the inventory.
Ans: True
Response: See page 259

121. Electronic data interchange is a communication standard that enables the electronic transfer of routine
documents between business partners.
Ans: True

Response: See page 259

122. EDI primarily transfers messages about repetitive business transactions.

Ans: True
Response: See page 259

123. EDI primarily transfers messages about unique business transactions.

Ans: False
Response: See page 259

124. EDI requires formatting standards.

Ans: True
Response: See page 259

125. In EDI, computers communicate with computers.

Ans: True
Response: See page 259

126. It is relatively simple to make quick changes with EDI.

Ans: False
Response: See page 259

127. EDI can easily be used with existing business processes.

Ans: False
Response: See page 260

128. Sometimes, business processes must be restructured to accommodate EDI.

Ans: True
Response: See page 260

129. Extranets use virtual private network technology to make communication over the Internet more
secure.

Ans: True
Response: See page 262

Multiple Choice

1. Organizational transactions are typically _____ volume, _____, and therefore _____ to computerize.
a) low, repetitive, difficult
b) high, repetitive, easy
c) high, different, difficult
d) low, different, easy
e) high, different, easy
Ans: b
Response: See page 243

2. Characteristics of transaction processing systems include which of the following?

a) efficiently handle high volume
b) avoid downtime
c) maintain privacy
d) avoid errors
e) all of the above
Ans: e
Response: See page 243

3. Which of the following is not a characteristic of a transaction processing system?

a) small amounts of data are processed
b) sources of data are mainly internal
c) low computation complexity
d) high level of accuracy, data integrity, and security
e) high level of detail
Ans: a
Response: See page 243

4. Which of the following is not a characteristic of a transaction processing system?

a) large amounts of data are processed
b) sources of data are mainly external
c) low computation complexity
d) high level of accuracy, data integrity, and security
e) high level of detail
Ans: b
Response: See page 243

5. Which of the following is not a characteristic of a transaction processing system?

a) large amounts of data are processed
b) sources of data are mainly internal
c) low computation complexity
d) high level of accuracy, data integrity, and security
e) high level of summarization
Ans: e
Response: See page 243

6. Which of the following is not a function of management information systems?

a) provides information to managers in the functional areas
b) supports the managerial tasks of planning, organizing, and controlling operations
c) provides information mainly in the form of reports
d) provides data from business events to the corporate database
Ans: d
Response: See page 245

7. _____ reports are produced at scheduled intervals.

a) ad hoc
b) routine
c) drill-down
d) key-indicator
e) exception
Ans: b
Response: See page 245

8. _____ reports contain special information not found in routine reports.

a) ad hoc
b) summary
c) drill-down
d) key-indicator
e) exception
Ans: a
Response: See page 245

9. _____ reports show a greater level of detail than is included in routine reports.
a) ad hoc
b) routine
c) drill-down
d) key-indicator
e) exception
Ans: c

Response: See page 245

10. _____ reports include only information that exceeds certain threshold standards.
a) ad hoc
b) routine
c) drill-down
d) key-indicator
e) exception
Ans: e
Response: See page 245

11. The characteristics of ERP systems include which of the following?

a) integrate the planning, management, and use of all resources of the organization
b) provide information necessary to control the business processes of the organization
c) include a set of interdependent software modules
d) may force companies to change existing business processes to fit predetermined business processes of
the ERP package
e) all of the above
Ans: e
Response: See pages 248-250

12. The characteristics of ERP systems include all of the following except:
a) integrate the planning, management, and use of all resources of the organization
b) provide information necessary to control the business processes of the organization
c) include a set of interdependent software modules
d) typically fit an organizations existing business processes
e) are expensive and time-consuming
Ans: d
Response: See pages 248-250

13. If you buy a science fiction book from Amazon.com, the companys software will automatically
recommend similar books bought by other readers. This is an example of:
a) cross-selling
b) up-selling
c) one-to-one marketing
d) viral marketing
e) permission marketing
Ans: a
Response: See page 253

14. The goals of supply chain management include which of the following?
a) reduce uncertainty and risks along the supply chain

b) reduce inventory levels

c) reduce cycle time
d) improve customer service
e) all of the above
Ans: e
Response: See page 255

15. Which of the following is not a goal of supply chain management?

a) reduce uncertainty along the supply chain
b) increase inventory levels
c) reduce cycle time
d) improve customer service
e) improve business processes
Ans: b
Response: See page 255

16. Which of the following is not a goal of supply chain management?

a) reduce uncertainty along the supply chain
b) decrease inventory levels
c) increase cycle time
d) improve customer service
e) improve business processes
Ans: c
Response: See page 255

17. IOSs result in all of the following except:

a) reduced costs of routine business transactions
b) improved quality of information flow
c) reduced errors
d) increased cycle time
e) eliminated paper processing
Ans: d
Response: See page 255

18. _____ connect two or more companies in two or more countries.

a) global systems
b) virtual systems
c) management information systems
d) transaction processing system
e) B2B trading systems
Ans: a
Response: See page 255

19. Designing a global IOS is complex because of differences in which of the following?
a) cultures
b) information infrastructure
c) politics
d) localization
e) all of the above
Ans: e
Response: See pages 255-256

20. Which of the following does not affect designing a global IOS?
a) cultures
b) chip technology
c) economies
d) localization
e) politics
Ans: b
Response: See pages 255-256

21. _____ consists of the objects, values, and other characteristics of a particular society.
a) legal environment
b) political environment
c) culture
d) localization
e) religious environment
Ans: c
Response: See page 255

22. General Motors attempted to market a car named Nova (meaning no go in Spanish) in Spanishspeaking countries, with very poor results. This is an example of:
a) legal difference
b) political difference
c) cultural difference
d) localization difference
e) marketing difference
Ans: d
Response: See page 255

23. The flows in the supply chain consist of which of the following?
a) materials
b) information
c) financial
d) all of the above

e) none of the above

Ans: d
Response: See page 256

24. Packaging, assembly, or manufacturing take place in which segment of the supply chain?
a) upstream
b) internal
c) downstream
d) none of the above
Ans: b
Response: See page 256

25. Distribution or dispersal takes place in which segment of the supply chain?
a) upstream
b) internal
c) downstream
d) none of the above
Ans: c
Response: See page 256

26. Problems along the supply chain include which of the following?
a) poor customer service
b) high inventory costs
c) loss of revenues
d) increased cycle times
e) all of the above
Ans: e
Response: See page 257

27. Which of the following is not a problem along the supply chain?
a) poor customer service
b) high inventory costs
c) loss of revenues
d) decreased cycle times
e) extra cost of expediting shipments
Ans: d
Response: See page 257

28. The _____ is erratic shifts in orders up and down the supply chain.
a) demand forecast effect
b) supply forecast effect

c) bullwhip effect
d) inventory effect
e) customer coordination effect
Ans: c
Response: See page 257

29. The bullwhip effect comes from which of the following?

a) poor demand forecast
b) price fluctuations
c) order batching
d) rationing within the supply chain
e) all of the above
Ans: e
Response: See page 257

30. Which of the following is not responsible for the bullwhip effect?
a) poor demand forecast
b) price fluctuations
c) order batching
d) rationing within the supply chain
e) poor supply forecast
Ans: e
Response: See page 257

31. Possible solutions to supply chain problems include which of the following?
a) vertical integration
b) building inventories
c) information sharing
d) all of the above
Ans: d
Response: See page 258

32. Which of the following is not a possible solution to supply chain problems?
a) vertical integration
b) building inventories
c) information sharing
d) horizontal integration
Ans: d
Response: See page 258

33. _____ is the strategy of purchasing upstream suppliers in order to ensure availability of supplies.

a) horizontal integration
b) vertical integration
c) just-in-time inventory management
d) supply chain integration
e) customer order integration
Ans: b
Response: See page 258

34. The major components of EDI include which of the following?

a) EDI translators
b) business transactions messages
c) data formatting standards
d) all of the above
Ans: d
Response: See page 259

35. The benefits of EDI include which of the following?

a) data entry errors are minimized
b) length of messages is shorter
c) messages are secured
d) fosters collaborative relationships
e) all of the above
Ans: e
Response: See page 259

36. Which of the following is not a benefit of EDI?

a) data entry errors are minimized
b) length of messages is longer
c) messages are secured
d) fosters collaborative relationships
e) reduced cycle time
Ans: b
Response: See pages 259-260

37. The limitations of EDI include which of the following?

a) it is inflexible
b) business processes may have to be restructured
c) it is expensive, with high ongoing operating costs
d) multiple EDI standards exist
e) all of the above
Ans: e
Response: See pages 259-260

38. Which of the following is not a limitation of EDI?

a) it is inflexible
b) business processes may have to be restructured
c) it is expensive, but ongoing operating costs are low
d) multiple EDI standards exist
e) difficult to make quick changes
Ans: c
Response: See pages 259-260

39. The FedEx extranet that allows customers to track the status of a package is an example of which type
of extranet?
a) a company and its dealers, customers, and/or suppliers
b) an industrys extranet
c) joint venture
d) B2B exchange
e) B2C exchange
Ans: a
Response: See page 262

40. The Bank of America extranet for commercial loans links lenders, loan brokers, escrow companies, title
companies, and others. This is an example of which type of extranet?
a) a company and its dealers, customers, and/or suppliers
b) an industrys extranet
c) B2C exchange
d) B2B exchange
e) joint venture
Ans: e
Response: See page 262

Short Answer

1. Differentiate between transaction processing systems and management information systems.

Response: See pages 243-248

2. Describe the various reports that can be obtained from functional area information systems.
Response: See pages 245-246

3. Define enterprise resource planning systems and discuss why they were developed.
Response: See pages 248-249

4. Describe customer relationship management systems.

Response: See pages 251-254

5. Describe interorganizational information systems and global IOSs.

Response: See pages 255-256

6. Describe the three flows in a supply chain.

Response: See page 256

7. Describe the three segments of a supply chain.

Response: See page 256

8. What is the bullwhip effect?

Response: See page 257

9. Define EDI and how it works.

Response: See pages 259-261

10. Describe the three main types of extranets.

Response: See page 262