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E business applications


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E business applications

  1. 1. E-Business Applications
  2. 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. 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. 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. 5. Roles of IS in Business
  6. 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. 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. 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. 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. 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. 11. Benefits of EC • Benefits to Society – – – – – Telecommuting Higher Standard of Living Homeland Security Hope for the Poor Availability of Public Services
  12. 12. Exhibit 1.7 Limitations of EC
  13. 13. Value Chain (Michael Porter, 1985) • A series of linked activities or processes in an organization • IT can improve these processes
  14. 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. 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. 16. The Value Chain
  17. 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. 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 decisions Good, long-term relationships with suppliers
  19. 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. 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. 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. 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. 23. Porter’s Five Competitive Forces
  24. 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. 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. 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. 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. 28. Five Forces Model
  29. 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. 30. 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?
  31. 31. 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?
  32. 32. 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.
  33. 33. 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!!!
  34. 34. 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)
  35. 35. 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!!!!
  36. 36. 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
  37. 37. 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
  38. 38. 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
  39. 39. Competitive Forces and Strategies
  40. 40. Using IT for these strategies
  41. 41. Dealing with current rivals • Tactics amongst rivals include…….. – price competition – product introduction – advertising/marketing – after-sales service
  42. 42. Competitive Strategy Examples
  43. 43. 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
  44. 44. 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
  45. 45. 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
  46. 46. How BPR differs from business improvement
  47. 47. A cross-functional process
  48. 48. Reengineering order management
  49. 49. 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
  50. 50. How IT helps a company be agile
  51. 51. 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
  52. 52. A virtual company
  53. 53. Strategies of virtual companies
  54. 54. 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
  55. 55. 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
  56. 56. Knowledge issues • What is the problem with organizational knowledge being tacit? • Why are incentives to share this knowledge needed?
  57. 57. 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.
  58. 58. Lecture 1 - End of Presentation