Chapter Fourteen Information Technology for Business Strategy and Electronic Commerce.
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Transcript of Chapter Fourteen Information Technology for Business Strategy and Electronic Commerce.
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Chapter FourteenChapter Fourteen
Information Technology for Business Strategy and Electronic Commerce
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1999 Addison Wesley Longman 14.2
Chapter Outline
• Information Technology to Support Business Strategy
• Intranets, Extranets, and Electronic Commerce
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1999 Addison Wesley Longman 14.3
Strategy Concepts
• Managers need to understand the environment before deciding how best to use information technology.
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1999 Addison Wesley Longman 14.4
Strategy Concepts
• A competitive forces model is used to understand environmental influences affecting the organization.
• The model includes five external threats.
• Managers can develop a better strategy by identifying the interaction of these factors in their industry.
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1999 Addison Wesley Longman 14.5
Types of Strategies
• A strategy is an organization’s intention to pursue a set of activities over the long term to attain its goals.
• There are three basic strategies:– Cost leadership– Differentiation– Innovation.
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1999 Addison Wesley Longman 14.6
Cost Leadership Strategy
• Used when managers want to provide high-quality products at the lowest cost in the industry.
• Company may also help customers and suppliers reduce their costs.
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1999 Addison Wesley Longman 14.7
Differentiation Strategy
• Used when managers focus on developing superior products that are particularly valued by customers and are perceived as different from competitors’ products.
• May include novel design features which are useful to customers.
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1999 Addison Wesley Longman 14.8
Innovation Strategy
• The focus is on finding new ways to restructure business processes for developing, producing or distributing products.
• Company may enter new market, expand into global markets, or diversify.
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1999 Addison Wesley Longman 14.9
Focus on Time: Quick Response Strategy
• Company may provide products or services faster than competitors.
• Company responds to customer demands more quickly.– Some companies have reduced
time required to design and manufacture a product by 50%.
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1999 Addison Wesley Longman 14.10
Strategic Information Systems
• An information system crucial to the company’s competitive success.
• Information technology (IT) is valuable when it can be used to create market barriers.
• Information technology can create switching costs for customers or suppliers.
• IT can change the balance of power in supplier relationships.
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1999 Addison Wesley Longman 14.11
Strategic Information Systems
• Information technology can create new products and services.
• IT allows product customization.
• Information technology can change the basis of competition in the industry.
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1999 Addison Wesley Longman 14.12
Information Technology Supports Value Chain Model
• Managers must decide where in the value chain information technology can be used to support the company’s competitive strategy.
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1999 Addison Wesley Longman 14.13
Information Technology Supports Value Chain Model
• Particular value chain activities can be streamlined or redesigned to enhance and reduce cost.
• Managers can improve performance by improving efficiency or effectiveness.
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1999 Addison Wesley Longman 14.14
Competing on Efficiency
• There are at least five ways information technology can improve efficiency:– Empowering people– Eliminating waste– Using the best known way to do the work– Automating work– Integrating value chain activities within the
company and with other organizations.
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1999 Addison Wesley Longman 14.15
Competing on Effectiveness
• Help the customer purchase the product.• Assure that the product fits the
customer’s needs.• Make the product easier to
use.• Make the product easier
to maintain.
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1999 Addison Wesley Longman 14.16
Interorganizational Information Systems
• An interorganizational information system uses information technology to enable a company to share data and exchange transactions with other companies electronically.
• A business alliance is a cooperative arrangement between two or more businesses with complementary capabilities.
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1999 Addison Wesley Longman 14.17
Business Alliances
• Calyx & Corolla’s product delivery is based on organizing and maintaining a network of business relationships rather than on manufacturing or service capabilities.
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1999 Addison Wesley Longman 14.18
Electronic Data Interchange
• EDI is the direct, computer-to-computer exchange of standardized, common business transaction documents such as purchase orders and invoices between business partners, suppliers, and customers.
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1999 Addison Wesley Longman 14.19
Electronic Data Interchange
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1999 Addison Wesley Longman 14.20
Electronic Data Interchange
• 92% of companies surveyed recently had EDI links with their customers.
• 81% had EDI links with their suppliers.
• Lack of compatible standards among EDI systems requires modification of many EDI systems before they can communicate with one another.
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1999 Addison Wesley Longman 14.21
International Information Systems
• Any information system that supports international business activities is called an international information system.
• Networks and telecommunications technology have made it economically feasible for more companies to do business internationally.
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1999 Addison Wesley Longman 14.22
International Information Systems
There are four basic configurations for a company to operate internationally:– Multinational– Global– Transnational– Exporting and
importing.
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1999 Addison Wesley Longman 14.23
Issues in Developing an International Information System
• Some companies do not allow personal data about employees to leave the country.
• Some countries have nonexistent or poorly enforced software copyright laws.
• Some countries have poorly maintained and aging telecommunications infrastructures.
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1999 Addison Wesley Longman 14.24
Intranets, Extranets, and Electronic Commerce
• Electronic commerce (e-commerce) is sharing business information, maintaining business relationships, and conducting business transactions through the use of telecommunications networks.
• E-commerce is more than technology.
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1999 Addison Wesley Longman 14.25
How the Internet Is Changing Business
• It is estimated that $8 billion worth of business was conducted over the Internet in 1997.
• It is estimated that this number will grow to $333 billion by 2002.
• Companies can reduce infrastructure costs.• Companies can save transaction costs.
– Banking transaction costs 60 cents with an ATM, versus 13 cents on the Internet.
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1999 Addison Wesley Longman 14.26
Stages of Using the Internet for Business
• Phase one: The company adopts email as a communication tool.
• Phase two: The company creates a public Web site.
• Phase three: The company develops a private intranet.
• Phase four: The company uses the Internet to conduct business transactions with customers, suppliers and other organizations.
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1999 Addison Wesley Longman 14.27
Intranets to Support Internal Business Processes
• Using Internet technology as the basis of information system design has several benefits:– Platform neutrality– Open standards– Reduction in hardware and software costs– Ease of installation– Minimal user training– Dramatic improvement in company communications.
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1999 Addison Wesley Longman 14.28
Characteristics of an Intranet
• Network - LAN or WAN• Computer(s) with
server software• Computer(s) with client
software• Communications
software (e.g. TCP/IP)• Firewall software
protects against unauthorized users.
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1999 Addison Wesley Longman 14.29
How an Organization Can Use an Intranet
• Companies can provide access to important information.
• Intranets facilitate teamwork and collaboration.
• Firms use intranets to conduct internal business transactions.
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1999 Addison Wesley Longman 14.30
Extranets to Connect Business Alliances
• An extranet is a private interorganizational information system connecting the intranets of two or more companies in a business alliance.
• Secure private networks are expensive but secure.
• Public networks are inexpensive but insecure.• Virtual private networks are economical and
moderately secure.
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1999 Addison Wesley Longman 14.31
Secure Private Network
• Intranets are connected physically with private leased telephone lines.
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1999 Addison Wesley Longman 14.32
Public Network
• Relatively inexpensive with low security, protected only by firewalls and user login procedures.
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1999 Addison Wesley Longman 14.33
Virtual Private Network
• Relatively economical and good security because data are coded.
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1999 Addison Wesley Longman 14.34
How Businesses Use Extranets
• Increasing the speed of business-to-business transactions
• Reducing errors on intercompany transactions
• Reducing costs of telecommunications
• Increasing the volume of business with partners
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1999 Addison Wesley Longman 14.35
How Businesses Use Extranets
• Exchanging business-to-business documents (similar to EDI)
• Checking on inventory and order status from suppliers
• Collaborating with business partners on joint projects.
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1999 Addison Wesley Longman 14.36
Connecting With Customers on the Internet
• A customer with Internet access can use a Web browser to conduct an entire purchasing transaction on-line.
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1999 Addison Wesley Longman 14.37
Characteristics of Effective Internet Sites
• Offer high-speed transactions
• Have a large, up-to-date product selection
• Are easy to use
• Allow secure transactions
• Provide after-sale features.
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1999 Addison Wesley Longman 14.38
Connecting to the Internet
• Companies may need to:– Increase size and
speed of the network’s internal cabling
– Install additional servers and routers
– Install Web server software.
• The Internet service provider (ISP) chosen should provide high-quality, reliable Internet connections at reasonable cost.
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1999 Addison Wesley Longman 14.39
Business Issues Relevant to the Web Site
• Is the Web site helping meet corporate goals?• How should the content be designed so a
user can find desired information easily?• How will interactive features be used to
provide feedback about the site, including suggestions for improvement?
• Should the company host its Web site or contract with another company?
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1999 Addison Wesley Longman 14.40
Ethical Issues of Electronic Commerce
• It is recommended that companies publish their electronic commerce policy on their Web site, including the following:– A clear, explicit statement of the organization’s
privacy policy– A policy statement addressing situations in which
a person’s permission must be secured before that person’s ID, photo, ideas, or communications are used or transmitted
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1999 Addison Wesley Longman 14.41
Ethical Issues of Electronic Commerce
– A clear statement of how the company will inform customers of the intended uses of personal information gathered during an on-line transaction
– A statement that addresses issues of ownership with respect to network postings and communications
– A policy stating how the company monitors user behaviors on the Web site, and when such information might be used by the company.
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1999 Addison Wesley Longman 14.42
After reading this chapter, you should be able to:
• List several strategies business organizations use to succeed in a competitive environment
• Discuss how a business organization can use information technologies to counter competitive forces in the environment
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1999 Addison Wesley Longman 14.43
After reading this chapter, you should be able to:
• Describe how a business organization can use information technologies to compete effectively by improving efficiency and by improving its products and services
• Describe the characteristics of information systems that support business-to-business arrangements, nationally and internationally
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1999 Addison Wesley Longman 14.44
After reading this chapter, you should be able to:
• Describe electronic commerce and the phases a company goes through using the Internet for business
• Describe the purpose, characteristics, and uses of intranets and extranets
• Describe the use of public Web sites for supporting business-customer transactions