Transcript Lecture 14

Chapter Fourteen
Information Technology for Business
Strategy and Electronic Commerce
Chapter Outline
• Information Technology to Support
Business Strategy
• Intranets, Extranets, and Electronic
Commerce
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Strategy Concepts
• Managers need to understand the environment
before deciding how best to use information
technology.
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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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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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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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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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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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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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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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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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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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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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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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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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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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Business Alliances
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• Calyx & Corolla’s
product delivery is
based on
organizing and
maintaining a
network of
business
relationships rather
than on
manufacturing or
service
capabilities. 14.17
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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Electronic Data Interchange
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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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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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International Information
Systems
There are four basic
configurations for a
company to operate
internationally:
–
–
–
–
Multinational
Global
Transnational
Exporting and
importing.
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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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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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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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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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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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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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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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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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Secure Private Network
• Intranets are connected physically with
private leased telephone lines.
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Public Network
• Relatively inexpensive with low security,
protected only by firewalls and user login
procedures.
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Virtual Private Network
• Relatively economical and good security
because data are coded.
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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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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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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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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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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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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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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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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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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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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-tobusiness arrangements, nationally and
internationally
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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
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