1. E-Business Applications

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

5. Roles of IS in Business

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

12. Exhibit 1.7 Limitations of EC

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

16. The Value Chain

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

23. Porter’s Five Competitive
Forces

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

28. Five Forces Model

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

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

40. Competitive Forces and
Strategies

41. Using IT for these strategies

42. Dealing with current rivals
• Tactics amongst rivals include……..
– price competition
– product introduction
– advertising/marketing
– after-sales service

43. Competitive Strategy Examples

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

47. How BPR differs from business
improvement

48. A cross-functional process

49. Reengineering order management

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

51. How IT helps a company be agile

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

53. A virtual company

54. Strategies of virtual companies

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.

59. Lecture 1 - End of Presentation