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SOLUTIONS FOR CHAPTER 3
Each end-of-chapter question in the Solutions Manual is tagged to correspond with AACSB, AICPA
and CISA standards, allowing professors to more easily manage the task of reporting outcomes to these
professional and accrediting bodies. Please see the corresponding spreadsheet file for the tagging
information.
Discussion Questions
DQ 3-1 The business environment is increasingly demanding the use of OLRT systems for
more up-to-date information. Identify one business process and the environment
in which it would be used as an example of why immediate mode processing is so
critical. Be prepared to explain your answer to the class.
ANS. Your students’ answers will vary greatly on this rather open-ended discussion
question. As an example to use in class, you might consider something like the
DQ 3-2 Consider a business that you patronize. Could it operate without automated
information systems? Why or why not?
ANS. Your students’ answers will vary greatly depending on the specific situation they
select for discussion. However, we expect that the answer will generally be “no.”
DQ 3-3 Consider your favorite fast food chain restaurant. How do you think this
restaurant might use OLTE to improve its business event data-processing
activities? Explain.
ANS. Your students’ answers will vary greatly depending on the specific situation they
2 Solutions for Chapter 3
DQ 3-4 How could (or does) your university bookstore use technology to improve
customer interactions with students, faculty, and staff?
ANS. The bookstore is a retail business with some unique customers. Faculty select
materials for a course, and then the bookstore orders the quantity perceived to be
sellable. Technology used on other businesses can be adopted, as well as unique
solutions to facilitate communication. A few examples include the following:
DQ 3-5 What do you perceive to be the advantages and disadvantages of conducting
business on the Internet? Be prepared to explain your answer.
ANS. Some of the key advantages (in no order of importance) that might be included in
your answer are the following:
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DQ 3-6 Why is it important to have standards, such as X12 and EDIFACT, when
conducting EDI transactions and other forms of e-business? Is there a downside
to using standards?
ANS. Without standards, there is little difference between EDI and sending e-mail
orders. For example, organizations must have intelligent software or humans
DQ 3-7 How does Internet EDI differ from traditional EDI in process? In
result?
Process: Traditional EDI, includes the use of VAN’s, which include
4 Solutions for Chapter 3
DQ 3-8 Discuss the benefits of SOAs to the growth of e-business.
ANS. Connectivity to networks is ubiquitous. The number and types of devices that are
network compatible is constantly increasing. To take advantage of these devices
and market to their users, product providers must be capable of communicating
DQ 3-9 Why has the Internet caused such an explosion in e-business when EDI has been
available for decades?
ANS. A number of issues can be raised to explain this particular phenomenon. We
discuss a few of these briefly here:
very accessible to a large number of customers (or potential customers).
DQ 3-10 One of Amazon.com’s marketing strengths is the capability to collect and analyze
customer purchase data. How does this add value to the company? From the
customer’s perspective, is value added?
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ANS. Amazon.com can use customer purchase relationships to identify products that
may interest customers. Simplistically, if Customer A buys Books X, Y, and Z,
DQ 3-11 Some potential e-business customers have security concerns regarding online
purchases. How do Internet security certifications attempt to address these
concerns?
ANS. Assurance services, such as CPA WebTrust, provide the vendor with a certificate
(seal) to display on a Web site. The consumer can click on the certificate to
Short Problems
SP 3-1 ANS. The answers will probably begin with cost/benefit. Additional answers will
depend on each student’s ability to think beyond the obvious.
• Cost/benefit: A small business may not generate enough sales/cash to support
even a low-end system.
6 Solutions for Chapter 3
SP 3-2 ANS. Most businesses have altered business activities as communication technology
has evolved. In the past, meetings to bring together managers of branches spread
all over the country had to be held face-to-face. With the widespread use of the
telephone, these meetings began to take place via conference calls. Similarly, e-
SP 3-3 ANS. Students will likely provide a variety of examples. One example of a business
that has expanded and improved through the development of its value chain is a
music provider such as iTunes. In the past, music stores have had to keep a huge
inventory of CDs to meet the vast range of musical tastes of their customers.
SP 3-4 ANS. Students will likely provide a variety of situations. In a business such as an
antique furniture store, periodic processing is sufficient to support the business
process. When a customer buys a piece of furniture, it is unnecessary to
immediately update all of the financial data to reflect this sale. Since the
inventory is “one-of-a-kind” and transaction volume is relatively lower than
some other businesses, the managers do not need constantly updated inventory
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SP 3-5 The students solutions will vary. One example business would be an antique
store. The local-only model generally limits the customers to “driving
distance”. That customer limitation also limits the size of the facility and
inventory levels. When moving to an Internet presence, essentially the
Problems
Note: Because several problems in Chapter 3 are open-ended, solutions are not provided to some,
and for others the answers are general guidelines rather than specific solutions.
P 3-1 ANS. Frequently, Web sites have information on how they process orders, including
security and privacy information. The information is frequently available through
a section entitled “About the company,” “Privacy,” or some other name.
P 3-2 ANS. One primary concern of cloud computing is the risks that are introduced,
which need to be managed. A primary risk is a company gives up control of
the technology. That risk manifests in lack of transparency, vendor “lock–in”,
8 Solutions for Chapter 3
P 3-3 ANS. Typically, e-mail to communicate with customers would be valid for most
businesses. Using e-mail to capture business data is more difficult. If the business
P 3-4 ANS. The venture will likely need to reach a geographically distributed customer base,
with rapid, current information and product delivery. One example that comes to
P 3-5 ANS. Students could include a number of issues in their papers including the use of EDI
P 3-6 ANS. A number of issues can be raised in this discussion. We discuss a few of these
briefly here:
• All written homework, research papers, and cases could be transmitted to the
instructor in electronic form.
• Quizzes and exams could be loaded electronically to allow the student to
complete and transmit answers to the instructor in electronic form.
P 3-7 ANS. The solution will be dependent on the individual market the student chooses.
P 3-8 ANS. The following is a sample of the data available on these sites.
Personal Information:
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CIA.GOV
• Gathers no personal information other than information you provide
AMAZON.COM
• Personal information gathered
• Provided by customer:
o information in profile
o items purchased and in wish list
o transaction information (address, credit card number, etc.)
o and so on
Privacy Statements, Encryption, Cookies:
CIA.GOV
• Does not, under any circumstances, share any information it collects with third parties
AMAZON.COM
• Shares personal information with:
10 Solutions for Chapter 3
o its subsidiaries, which must either be subject to Amazon.com’s privacy policy or
follow practices that are at least as protective as Amazon.com’s
P 3-9 ANS. Students may find many organizations that fit the example. If they have trouble
finding a batch company, direct them to segments in a business that operates in
batch mode. A few examples are listed here:
P 3-10 ANS. The solution will be dependent on the business the student chooses. For an option,
you may assign a specific business to a student (or group, or class). Many
businesses (usually low-volume and/or having a highly variable product) operate
using e-mail and attachments. EDI and Internet commerce work best in high-
volume, standard product environments.
P 3-11 ANS. Reasons for the limited acceptance of CPA WebTrust may include the following:
• Engagement requirements: There is a major commitment to the process of
certification and renewal of the certificates. It is not a “pay-the-fee-and-be-
certified” service.
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