2. What is an Information System?
Any organized combination of people,
hardware, software, communications
networks, and data resources that stores,
retrieves, transforms, and disseminates
information in an organization.
3. Types of Information
Technologies
• Computer Hardware Technologies
including microcomputers, midsize servers, and large
mainframe systems, and the input, output, and storage
devices that support them
• Computer Software Technologies
including operating system software, Web browsers,
software productivity suites, and software for business
applications like customer relationship management and
supply chain management
4. Types of Information
Technologies
• Telecommunications Network Technologies
including the telecommunications media, processors, and
software needed to provide wire-based and wireless access
and support for the Internet and private Internet-based
networks
• Data Resource Management Technologies
including database management system software for the
development, access, and maintenance of the databases of
an organization
6. What is E-Business?
Definition:
• The use of Internet technologies to work
and empower business processes, electronic
commerce, and enterprise collaboration
within a company and with its customers,
suppliers, and other business stakeholders.
• An online exchange of value.
7. Electronic Commerce:
Definitions and Concepts
• EC organizations
brick-and-mortar organizations
Old-economy organizations (corporations) that perform
most of their business off-line, selling physical products by
means of physical agents
virtual (pure-play) organizations
Organizations that conduct their business activities solely
online
click-and-mortar (click-and-brick) organizations
Organizations that conduct some e-commerce activities,
but do their primary business in the physical world
8. Electronic Commerce:
Definitions and Concepts
• Where EC is conducted
electronic market (e-marketplace)
An online marketplace where buyers and sellers meet to
exchange goods, services, money, or information
interorganizational information systems (IOSs)
Communications system that allows routine transaction
processing and information flow between two or more
organizations
intraorganizational information systems
Communication systems that enable e-commerce
activities to go on within individual organizations
9. Benefits of EC
Benefits to Organizations
• Global Reach
• Cost Reduction
• Supply Chain
Improvements
• Extended Hours
• Customization
• New Business Models
• Vendors’ Specialization
• Rapid Time-to-Market
• Lower Communication
Costs
• Efficient Procurement
• Improved Customer
Relations
• Up-to-Date Company
Material
• No City Business
Permits and Fees
• Other Benefits
10. Benefits of EC
Benefits to Consumers
• Ubiquity
• More Products and
Services
• Customized Products
and Services
• Cheaper Products and
Services
• Instant Delivery
• Information Availability
• Participation in
Auctions
• Electronic Communities
• No Sales Tax
11. Benefits of EC
• Benefits to Society
–
–
–
–
–
Telecommuting
Higher Standard of Living
Homeland Security
Hope for the Poor
Availability of Public Services
13. Value Chain (Michael Porter, 1985)
• A series of linked activities or processes in
an organization
• IT can improve these processes
14. Strategic Analysis
This is all about the analysing the strength of businesses'
position and understanding the important external factors that
may influence that position. The process of Strategic Analysis
can be assisted by a number of tools, including:
Five Forces Analysis - a technique for identifying the forces
which affect the level of competition in an industry
PEST Analysis - a technique for understanding the
"environment" in which a business operates
Scenario Planning - a technique that builds various credible
views of possible futures for a business
Market Segmentation - a technique which seeks to identify
similarities and differences between groups of customers or
users
SWOT Analysis - a useful summary technique for
summarising the key issues arising from an assessment of a
businesses "internal" position and "external" environmental
influences.
15. The Value Chain
• A framework for identifying core
competencies
– Inside the firm
– In the supply chain
• Can be used to
– Identify strengths and weaknesses
– Identify sources of competitive advantage
– Identify market opportunities
17. Primary Activities and Factors for Assessment
Inbound
Logistics
Soundness of
material and
inventory
control
systems
Efficiency of
raw material
warehousing
activities
Operations
Outbound
Logistics
Productivity of Timeliness and
equipment
efficiency of
compared to
delivery of
that of key
finished goods
competitors
and services
Appropriate
Efficiency of
automation of
finished goods
production
warehousing
processes
activities
Effectiveness
of production
control systems
to improve
quality and
reduce costs
Efficiency of
plant layout
and work-flow
design
Marketing & Sales
Customer
Service
Effectiveness of
market research to
identify customer
segments & needs
Innovation in sales
& promotion
Evaluation of
alternate
distribution
channels
Motivation and
competence of sales
force
Development of
image of quality and
a favorable
reputation
Extent of brand
loyalty among
customers
Extent of market
dominance within
the market segment
or overall market
Means to solicit
customer input
for product
improvements
Promptness of
attention to
customer
complaints
Appropriateness
of warranty and
guarantee
policies
Quality of
customer
education and
training
Ability to
provide
replacement parts
and repair service
18. Secondary Activities and Factors for Assessment
Firm
Infrastructure
Capability to
identify new
product market
opportunities and
potential
environmental
threats
Quality of the
strategic planning
system to achieve
corporate objectives
Coordination and
integration of all
value chain
activities
Ability to obtain
relatively low cost
funds for capital
expenditures and
working capital
Timely & accurate
information on
general and
competitive
environments
Human
Resource
Effectiveness of
procedures for
recruiting,
training, and
promoting all
levels of
employees
Appropriateness
of reward systems
Relations with
trade unions
Levels of
employee
motivation and
job satisfaction
Technology
Development
Success of R&D
activities in leading
to product and
process innovations
Quality of working
relationship between
R&D personnel and
other departments
Timeliness of
technology
development
activities in meeting
critical deadlines
Qualifications &
experience of
laboratory
technicians and
scientists
Ability of work
environment to
encourage creativity
and innovation
Procurement
Development of
alternate sources for
inputs to minimize
dependence on a
single supplier
Procurement of raw
materials on timely
basis at lowest
possible cost and at
acceptable levels of
quality
Development for
criteria for lease-vs.buy decisions
Good, long-term
relationships with
suppliers
19. Technologies in the Value Chain
Information System Technology
Planning and Budgeting Technology
Office Technology
FIRM
INFRASTRUCTURE
Training Technology
Motivation Research
Information Technology
HUMAN
RESOURCE
MANAGEMENT
Product Technology
Computer-Aided Design
Pilot Plant Technology
TECHNOLOGY
DEVELOPMENT
Software Development Tools
Information Systems Technology
Information Systems Technology
Communication System Technology
Transportation System Technology
PROCUREMENT
•Transportation
Technology
•Material Handling
Technology
•Storage and
Preservation
Technology
•Communication
System Technology
•Testing Technology
•Information
Technology
INBOUND
LOGISTICS
•Basic Process
Technology
•Materials
Technology
•Machine Tools
Technology
•Materials Handling
Technology
•Packaging
Technology
•Testing Technology
•I/nformation Tech.
OPERATIONS
•Transportation
Technology
•Material Handling
Technology
•Packaging
Technology
•Communications
Technology
•Information
Technology
•Multi-Media
Technology
•Communication
Technology
•Information
Technology
•Diagnostic and
Testing Technology
•Communications
Technology
•Information
Technology
OUTBOUND
LOGISTICS
MARKETING
AND SALES
SERVICE
20. The Internet Value Chain
Internet
Capability
Benefits
to
Company
Opportunity
for
Advantage
Marketing and
Product
Research
Data for
market
research,
establishes
consumer
responses
Enhance
Efficiency
Sales and
Distribution
Support and
Customer
Feedback
•Low cost
distribution
•Reaches new
customers
•Multiplies
contact points
•Access to
customer comments online
•Immediate response to
customer
problems
Create New
Business
Opportunities
Maintain Valuable
Customers and
Relationships
21. Customer Competition Connectivity
External Drivers
High
Low
Strategic Positioning of Internet
Technologies
Global Market
Penetration
Product and Services
Transformation
Strategy
E-Commerce Website
Value-added IT Services
E-Business; Extensive
Intranets and Extranets
Solution
Cost and
Efficiency
Improvements
Performance
Improvements in
Business
Effectiveness
E-Mail, Chat Systems
Intranets and Extranets
E-Business Processes Connectivity
Internal Drivers
High
22. Customer-Focused E-Business
Let customers
place orders
directly
Let customers
check order history
and delivery status
Build a
community
of customers,
employees,
and partners
Customer
Database
Give all
employees a
complete view
of customers
Let customers
place orders thru
distribution
partners
Transaction
Database
Link Employees
and distribution
partners
24. Porter 5 forces analysis
The Porter 5 forces analysis is a framework for business management developed
by Michael Porter in 1979. It uses concepts developed in Industrial Organization
(IO) economics to derive 5 forces that determine the attractiveness of a market. It is
also known as FFF (Fullerton's Five Forces).
A graphical representation of Porters Five
Forces
25. Turning threats into advantage
• Organisations within the same industry:
– Have same suppliers as rivals
– Have same customers as rivals
– Face same threats of
• New products being developed
• New firms/ organisations starting up in
competition
• Awareness of this can help organisations:
– Improve its competitive position
– Make it less vulnerable to attack
26. Firm-Level Strategy:
Core Competencies
• Core Competencies – an activity in which
the firm excels
– Created based on experience and research
– Ex., best logistics, best customer service, best
optic technology manufacturer
27. Industry-Level Strategy:
Five Forces Model (Michael Porter, 1980)
•
•
•
•
•
Buyer Power
Supplier Power
Threat of Substitutes
Threat of New Entrants
Rivalry among Firms
29. Porter’s model
• Allows the development of a competitive
strategy
• Suggests 5 main forces may be decisive in
helping shape the outcome:
–
–
–
–
–
Suppliers
New Entrants
Substitutes
Buyers
Industrial competitors
30.
31. The Power of Suppliers
• Using the models of market structures developed in Unit 4
assess whether the supplier of your main input has more
market power than your organisation.
– Are they the only suppliers of the input?
– How many other potential suppliers exist?
– Is the input more homogeneous than unique?
– Are there any substitutes available?
– Would there be switch costs?
– On a spectrum of 1-10 where does you bargaining power lie
relative to your main supplier?
32. The Power of Customers
• Customers bargaining power increases if……….
– they buy in large volumes
– the product is homogeneous
– there are many more suppliers
– product represents a substantial fraction of their total costs
• Do you have many customers, a few or one (ie monopsony)?
• In the light of the above assess the bargaining power of your main
customers.
• How does this affects the behaviour of your organisation?
33. The threat of substitute products
• Substitutes often come into the market rapidly, especially
when high profits are being made ie high profits act as an
incentive to develop substitutes. Watch R&D.
• Equally in the public sector governments eager to cut cost
will look for substitute services eg increasing shift towards
voluntary sector provision.
34. The threat of substitute products
• How many substitute products/services have appeared in
your industry in the last 5 years?
• What are they? How different are they?
• Were they introduced by your organisation or others?
• Which organisation in your industry does the most Research
and Development?
• What happens to price, profits and market share when
substitutes are introduced?
• Assess the potential threat!!!
35. Threat of new entrants
•
•
New entrants bring increased capacity to the industry and are
often backed by substantial resources eg Virgin
New entrants can be deterred by ‘barriers to entry’ (Remember in
the theory of perfect competition there are no barriers to entry).
– The main barriers are………
• Economies of scale
• Patents
• Product differentiation
• Capital requirements – both financial and specialist equipment
• Skills
• Access to distribution channels
• Reaction/strategic decisions of incumbents (eg all undercut new entrant)
• Government policy (eg statuary monopoly – but remember these can be
relaxed to allow new entrants)
36. Threat of new entrants
• When was the last time a new entrant entered your market?
• Was it a surprise or in response to changes in the market,
expiry of a patent, or changes in government policy eg
deregulation?
• Are they still there?
• How did they affect the existing participants?
• Using the above information plus your knowledge of barriers,
(overleaf) assess the potential threat of new entry!!!!
37. Five Competitive Strategies
• Cost Leadership
–
–
–
–
Become low-cost producers
Help suppliers or customers reduce costs
Increase cost to competitors
Example, Priceline uses online seller bidding so buyer
sets the price
• Differentiation Strategy
– Develop ways to differentiate a firm’s products from its
competitors
– Can focus on particular segment or niche of market
– Example, Moen uses online customer design
38. Competitive Strategies (cont.)
• Innovation Strategy
– Find new ways of doing business
• Unique products or services
• Or unique markets
• Radical changes to business processes to alter the fundamental
structure of an industry
– Example, Amazon uses online full-service customer systems
• Growth Strategy
–
–
–
–
Expand company’s capacity to produce
Expand into global markets
Diversify into new products or services
Example, Wal-Mart uses merchandise ordering by global
satellite tracking
39. Competitive strategies (cont.)
• Alliance Strategy
– Establish linkages and alliances with
• Customers, suppliers, competitors, consultants and
other companies
– Includes mergers, acquisitions, joint ventures,
virtual companies
– Example, Wal-Mart uses automatic inventory
replenishment by supplier
44. Advantage vs. Necessity
• Competitive Advantage – developing products,
services, processes, or capabilities that give a
company a superior business position relative to
its competitors and other competitive forces
• Competitive Necessity – products, services,
processes, or capabilities that are necessary simply
to compete and do business in an industry
45. Five Forces Model
The Five Forces Model explains factors that determine competitiveness. The five
forces model is used to determine the relative attractiveness of an industry.
Examples of using the Five Forces Model include:
•Buyer Power – there is lots of competition among hotels given the huge number of
hotels available in most markets. Many hotel chains have followed the airline idea
of loyalty programs which give points for each stay.
•Supplier Power – to decrease supplier power is to locate alternative sources of
supply. The business to business marketplace on the Internet can do this.
Information is power.
•Threat of substitute products or services – business professionals can be threatened
when new technology is used – tax preparer or financial services professional can
be replaced by simple software packages for tax preparation or financial planning
•Threat of new entrants – many dotcoms fell victim to this. An entry barrier can be
used to make it more difficult for competitors to jump into the business.
•Rivalry among existing competitors – IT can help make companies more efficient
46. Business Process Reengineering
• Called BPR or Reengineering
– Fundamental rethinking and radical redesign
– Of business processes
– To achieve improvements in cost, quality,
speed and service
• Potential payback high
• Risk of failure is also high
50. Agility
• Agility is the ability of a company to prosper
– In a rapidly changing, continually fragmenting
– Global market for high-quality, high-performance,
customer-configured products and services
• An agile company can make a profit with
– Broad product ranges
– Short model lifetimes
– Mass customization
• Individual products in large volumes
52. Virtual Company
• A virtual company uses IT to link
–
–
–
–
People,
Organizations,
Assets,
And ideas
• Creates interenterprise information systems
– to link customers, suppliers, subcontractors and
competitors
55. Knowledge Creation
• Knowledge-creating company or learning
organization
– Consistently creates new business knowledge
– Disseminates it throughout the company
– And builds in the new knowledge into its
products and services
56. Two kinds of knowledge
• Explicit knowledge
– Data, documents and things written down or
stored on computers
• Tacit knowledge
– The “how-to” knowledge which reside in
workers’ minds
• A knowledge-creating company makes such
tacit knowledge available to others
57. Knowledge issues
• What is the problem with organizational
knowledge being tacit?
• Why are incentives to share this knowledge
needed?
58. Knowledge management techniques
Source: Adapted from Marc Rosenberg, e-Learning: Strategies for Delivering Knowledge in the Digital Age
(New York: McGraw-Hill, 2001), p.70.
The Value Chain is one way to help identify core competencies in your business.
The value chain is a systematic approach to examining the development of competitive advantage. It was created by Michael E. Porter in his book, Competitive Advantage (1980). The chain consists of a series of activities that create and build value. They culminate in the total value delivered by an organization. The 'margin' depicted in the diagram (next slide) is the same as added value. The organization is split into 'primary activities' and 'support activities.
The Value Chain Model can also be used to strategically position a company’s Internet-based applications to gain competitive advantage. The Internet Value Chain Model shown outlines several ways that a company’s Internet connections with its customers could provide business benefits and opportunities for competitive advantage. The model suggests that company-managed newsgroups and chat rooms can be used to support market research, product development and direct sales. Likewise a company’s Internet-enabled connection with its suppliers can be used to support online shipping and scheduling. Multimedia catalogs can also be used to support E-Commerce. All together the model indicates how Internet technologies might be applied to help a firm gain competitive advantage in the marketplace.
Teaching Tips
This slide relates to the material on pp. 64-67.
For Internet technologies to be used strategically applications must be correctly positioned. The strategic positioning matrix shown can be used to help a company optimize the strategic impact of Internet Technologies.
The matrix recognizes two major drivers:
Internal Drivers. The amount of connectivity, collaboration and use of IT within a firm.
External Drivers. The amount of connectivity, collaboration and use of IT by customers, suppliers, business partners, and competitors.
Cost and Efficiency Improvements. When there is a low amount of connectivity, collaboration and use of IT within the company and by customers and competitors, a firm should focus on improving efficiency and lowering costs by using Internet technologies to enhance communications between the company and its customers and suppliers.
Performance Improvement in Business Effectiveness. When there is a high amount of internal connectivity, but external connectivity by customers and competitors is still low, a firm should focus on using Internet technologies like intranets and extranets to make major improvements in business effectiveness.
Global Market Penetration. When there is a high degree of connectivity by customers and competitors and low internal connectivity, a firm should focus on developing Internet-based applications to optimize interactions with customers and build market share.
Product and Service Transformation. When a company and its customers, suppliers, and competitors are extensively networked, Internet technologies should be used to develop and deploy products and services that strategically reposition it in the marketplace.
Teaching Tips
This slide corresponds to Figure 2.4 on p. 52 and relates to material on pp. 52-54.
There are other key strategies enabled by IT that can be used to enable a business to become successful and to maintain their success. These will be discussed on the next slides.
A key strategy for becoming a successful E-Business is to maximize customer value. This strategic focus on customer value recognizes that quality rather than price becomes the primary determinant in a customer’s perception of value. A Customer-Focused E-Business, then, is one that uses Internet technologies to keep customer loyal by anticipating their future needs, responding to concerns, and providing top quality customer service.
As the slide indicates, such technologies like intranets, the Internet, and extranet websites create new channels for interactive communications within a company, with customers, and with suppliers, business partners, and others in the external business environment. Thereby, encouraging cross-functional collaboration with customers in product development, marketing, delivery, service and technical support.
A successful Customer-Focused E-Business attempts to ‘own’ the customer's total business experience through such approaches as:
Letting the customer place orders directly, and through distribution partners
Building a customer database that captures customers' preferences and profitability, and allowing all employees access to a complete view of each customer.
Teaching Tip: Encourage your students to describe the characteristics of a profitable customer. What makes a particular customer valuable to a specific business?
Letting customers check order, history and delivery status
Nurturing an online community of customers, employees, and business partners.
Teaching Tips
This slide corresponds to Figure 2.10 on p. 61 and relates to the material on pp. 59-61.
To counter the threats of competitive forces
Often use the Internet as the foundation for such strategies
Order management consists of several business processes
Crosses the boundaries of traditional business functions
An agile company often uses the Internet to integrate and manage business processes while providing the processing power to treat masses of customers as individuals
This company is using the Internet, intranet and extranets to link to business partners
This creates interenterprise information systems to link customers, suppliers, subcontractors and competitors
Flexible and adaptable virtual workgroups
A company facing a new market opportunity might not have the time or resources to develop the manufacturing and distribution infrastructures, the competencies or the IT needed. By forming a virtual company with an alliance with others it can quickly provide the solution needed.
To have lasting competitive advantage, a company must be a knowledge creating company or learning organization
Tacit knowledge is often some of the most important information within a firm. But its not recorded anywhere since it’s in the employee’s mind.
Issues:
What if the person who has the knowledge leaves the company?
What if someone in another part of the company could use the expertise?
How do you know who knows what you need to know?
How do you find what you need to know
Company wastes money “re-inventing the wheel”
Unless people are given incentive to share the knowledge,
They won’t want to spend time doing something that they are not rewarded for
They will worry about losing their status of having the expertise
Three levels of techniques, technologies, and systems that promote the collection, organization, access, sharing and use of workplace and enterprise knowledge
Create techniques, technologies, systems and rewards for getting employees to share what they know.