Commonwealth of Learning Executive MBA/MPA Copyrights C1 Management Information Systems

Block 1 Introduction to MIS and Global Concepts of Electronic Business

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Contents 1 . OBJ ECTIV ES 4 2. OVERVIEW 5 3. REVIEW O Copyrights F ENTERPRISE CONCEPTS 7 3.1. Functional areas and business functions 8 3.2. Business processes and procedures 10 3.3. Impact of Information Technol ogy on business processes 13 3.4. Integration of business processes and information systems 13 4. INFORMATION SYSTEMS VERSUS INFORMATION TECHNOLOGY 15 4.1. Definitions 15 4.2. IS and IT strategies 15 5. IMPACT OF MIS ON ORGANISATIONS 17 5.1. Impact of MIS on the nature of work 17 5.2. Impact of IT on business functions 18 5.3. Impact of IT on industrial competition 18 5.4. Impact of IT on organisational strategy 19 6. EVOLUTION OF MANAGEMENT INFORMATION SYSTEMS 20 6.1. Three-era model of IT 20 7. IT AS A STRATEGIC RESOURCE 24 7.1. Technology as the enabler of e-business 25 8. THE NEW ECONOMY, THE INTERNET ECONOMY AND E-BUSINESS 27 8.1. The e-economy AIOU 27

8.2. The New Economy 28 8.3. The Internet Economy 29 8.4. e-business 31 8.5. e-business Impact 34

9. STRATEGIC APPLICATIONS OF IS AND E-BUSINESS 36 9.1. Bu siness-to -Business (B2B) 36 9.2. Business-to-Consumer (B2C) 36 9.3. Business-to-Government (B2G) 37 9.4. Busi Copyrights ness-to-Employee (B2E) 37 9.5. e-business Networks 38 10. SUMMARY 39 11. REFERENCES 40 11.1. Example Reports (web addresses may have been updated) 41 12. SUGGESTED ANSWERS TO ACTIVITIES 42

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1. Objectives After studying Block 1, you will be able to: 1. Identify common business functions and processes in an organisation and their relationship to MIS 2. Discuss the impact of IT on business 3. Copyrights Differentiate between information technology (IT), information systems (IS) and electronic business (e-business) 4. Describe the scope and nature of what is meant by information economy 5. Identify strategic MIS applications for e-business systems

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2. Overview

Welcom e to Block One of Management Information Systems . While it may seem at first as if there is a lot of work and reading for this unit, we hope that you will find that it is not as difficult as it seems when you first open the packages and see all the material. We have taken a fairly complex topic and broken it down into simple conceptual elements. This means that many words may be used to convey a simple concept. Increased volume Copyrights of words should mean increased speed of learning, however. When you have understood the point that is being made, you will more easily relate it to what you have already learnt and what you will learn next. In the long run, this ease of understanding will save you time. We also give you frequent self-testing activities. Your answers are not assessed, but writing them down should help you to apply these concepts to situations in your working life. We would expect you to spend time on the Internet to engage in some of these activities; if this is not already a routine matter for you, then you should plan to access the Web on scheduled sessions each week where you can attempt several activities at once. At the end of each Block You will find a case study which describes real applications of information systems in international organisations. Exploring the problems and issues faced within each of these organisations will help you both to understand the concepts introduced in each block and begin to think how you can apply these lessons in your own work environment. We provide seven cases in total over the course program and three of these form the basis for your assessment. We believe that it will help you to see this process in action if you start a simple notebook and make notes of the important new ideas that you come across at each stage. By putting things down in your own words you will find that they become clear and you will have an excellent revision guide to look at before you take your examination. A Word file on your computer would be an excellent choice for a notebook in this way it is easy to keep a backup and you can cut and paste interesting things or documents that you find while looking up Web references. Block One starts with some elementary definitions of information technology and information systems and relates these to their use in a business or public-sector enterprise. In order to examine these relationships we will briefly review the characteristics of such environments, outline the major functions of organisations and introduce the four generic management processes and specific business processes within particular functions. We then turn to the commonly accepted concepts of business objectives and goals. These concepts are used in turn to underpin the concepts of planning and strategy, various levels of strategycorporate, business and functionaland finally a synthesis of the two concepts in introducing strategic planning. It is important not to skip over these concepts, AIOU as they will be used later on without explanation. After this, we invite you to look at the impact of information technologies and information systems on organisations and provide sufficient detail to ensure that you are in possession of the basic understanding of technology to get the most from this course. It is important that you also understand the impact of new information and communication

technologies (ICT) on the global economy and the evolution of electronic business.

Lastly, we revisit the question of business and public-sector organisational strategy and introduce the idea of strategy planning for the e-business. The block ends with a summa ry, references, a case study and the suggested answers to the activity questions. Management Information Systems contains a lot of material for you to study, but you should also find it interesting and stimulating. Management Information Systems may be defined as a series of coordinated processes whereby an organisation establishes a long-range main plan of information technology-based application systemsincluding Copyrights those related to the Internetin order to achieve its objectives for supporting and enhancing the mission, objectives and strategies of the organisation. This is usually followed by putting in place the appropriate infrastructure for the implementation of these information systems strategic plans. In this unit, you will need to refer to the following case study as provided in Block 8 of your material: READING Case Study 1.1 CargoNet Transportation Community Network Limited. Centre for Asian Business, The University of Hong Kong

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3. Review of Enterprise Concepts In this section you will review the basic concepts of a business organisation in relation to Management Information Systems (MIS), particularly with respect to the nature of the business, its mission, goals and objectives, and its business environment. You need a very good understanding of the nature and characteristics of the business of an organisation before you can address the important issues of its business planning and Management Inform Copyrights ation Systems strategic planning processes. Every organisation has a purpose. This course does not assume that the purpose underlying all organisations is profit-related, as many non-profit or charitable organisations exist. Nevertheless, an organisation can be defined as a socio-technical system whereby people work coherently to accomplish specific goals that evolve from the organisations purpose. From a system s approach, organisations are open systems which means that they interact with the surrounding environment. For example, take a religious group in which the members have a common goal of discussing their beliefs and perhaps promoting them to non-members. The members comprise the social component of the organisation. The members gather regularly in the meeting room that serves as a catchment area for all people with a common aim. They interact with each other not only in the religious activities but also socially. They develop their friendship, and they share a common vision in seeing the group grow. In addition, the leaders of the group may aim at providing community leadership through organising other branches. The meeting rooms, notices, literature and activities represent the technical components of the organisation. An organisations purpose leads logically to a vision and a mission statement of the way in which the organisation plans to realise its stated purpose, and business organisations in particular usually set certain goals and objectives to guide their operations. For instance, the purpose underlying a software vending organisation is to sell software, but the vision of the software seller may be to become the most profitable company in the software industry. This will be achieved through top quality programmes and after-sales service (the mission). Goals or aims are general statements that say what is going to be done to serve the mission. Following on from these, the objectives are more specific statements usually set out in ways that allow us to measure them and so see whether we have got there or not. For instance, a mission might be to outsell the competitors in 2002; an objective might be to increase sales by 10% each month in 2002. A business organisation has a set of goals and objectives to be achieved. Hence, a business organisation should be structured in the most effective and efficient way to fully utilise its resourcescapital, human resources, knowledge in products and services, and both external and internal informationto achieve its strategic goals. Organisations can be structured in many ways, and there are many ways in which AIOU communication networks (and communication is the glue that holds an organisation together) can operate within them.

The structure of an organisation is usually depicted by its organisation chart, which identifies its management structure according to the organisational units, locations, functions and their reporting relationships. You find the (formal) reporting relationships or chain-of-command within the organisation from the organisation chart. You can see from the organisation chart whether an organisation is a centralised organisation (tall 7

structure) or decentralised organisation (flat structure). 1 Decision-making authority is usually tightly controlled by top management in a centralised organisation, but decision-making itself is often delegated to middle or lower management who are constrained by often exhaustive policy and procedure packages. Not all organisational decisions must be made every time at the top level top management pre-empts this need through delegation and regulation of certain types and levels of decision. 2 Wh Copyrights ile decision-making is often delegated to middle-level or lower-level management in a decentralised organisation, that does not mean that the top management does not make decisions. In fact, coordinating decision-making in flat organisations is essential, as no part can become greater than the whole. Decisions in the units of a decentralised organisation mu st be kept in line with the purpose, vision, mission, goals and objectives of the entire organisation. You may observe, however, that the departments in many flat organisations often operate in a tall mode, as many middle managers seem uncomfortable with decentralisation. What has been briefly described above represents some of the formal characteristics of organisations, but apart from formal structure and organisation, informal organisations based on personal interactions and relationships among employees (which are not shown by the organisation chart) also exist. An informal communication network called the grapevine, which carries gossip and other information throughout an organisation, often supports this. This has been a very brief snapshot of organisations. Rather than a still camera, perhaps the right instrument for capturing the dynamic nature of organisations would be a video camera. Organisations and the business environment in which they fight to achieve their purpose are not static. The purpose, vision, mission, goals, objectives, organisational structure, chain of command, and especially personnel (managers and subordinates) can change in response to changes in the environment. In a healthy business organisation, the only constant is changein ways of responding to the business environment at least.

How does an MIS manager fit into this dynamic model of organisations? 3.1. Functional areas and business functions A business organisation often includes functional areas such as administration, human resources, finance, MIS (management information systems), production, marketing, sales and purchasing. An enterprise (or business) function is a group of activities and processes put in place to support a specific part of the mission of the enterprise, and each activity or process is usually supported by a set of procedures. Be warned that enterprise functions may appear to be the basic building blocks of a AIOU business enterprise, yet the business structure may not be based upon them. Is a citys commerce based upon the number of buildings that can fit into its grid of roadways? Obviously not, yet the roadways permit many of the exchanges that commerce depends upon. In the same way, enterprise functions must be performed, no matter how the business organisation is structured. The focus should be on what is done by the functions rather than how or where it is done. In this section, you will become familiar with looking at a business in this way by reviewing an outline of what is meant by the functions grouped under the different headings of marketing, human resources, finance, 8

management information systems, production and purchasing. 1. Marketing is a functional area that takes care of marketing research to identify and determ ine what products and services customers want. The marketing department must therefore act in close liaison with the production department. It starts, plans and follows through with new products and services. This is supported by advertising and promotional programmes working together with advertising and public relations agencies and the media. Marketing specialists are employed in an increasing number Copyrights of public enterprises. In government, research and evaluation projects, often by independent contractors, provide a similar perspective. 2 Human resources is a functional area that provides services in support of the following enterprise functions: recruitment, selection, training, appraisal and promotion of staff. It also admi nisters staff records, payment and reward systems, and fringe benefits and makes sure that the work practices stay within the limits laid down by Ordinance. This department defines and revises job specifications and, when needed, hires new staff. Human resources departments in medium and small organisations often perform the administration function, but administration could be a

separate department in large organisations. That function is responsible for all support services that include clerical, typing, filing, maintenance of the office accommodation, transportation, reception, telephone, telex, facsimile and communications systems, collection and delivery of documents, security, advertising and other activities that are necessary for ensuring the smooth running of the organisation. In certain organisations, administration may have to deal with all relevant legal matters, MIS, purchasing, insurance and share registrations. 3 Finance is a functional area responsible for financial enterprise functions such as financial accounting, management accounting, and sometimes corporate finance and investment management. The financial accounting section handles bookkeeping, maintenance of audit trails, balance sheets, and profit and loss statements. Annual closing of books and liaison with the companys auditor also form part of the responsibilities of financial accounting. Management accounting undertakes all tasks relating to management reporting of labour and material costing, allocation of overhead expenditure, job and process costing, cost-volume-profit analysis, budgeting, variance analysis, capital investment decisions and organisation controls. For big corporations such as railways, bus transportation companies and telecommunications corporations, the finance department also undertakes responsibilities in corporate finance and investment of surplus funds. On one hand, the corporate finance section raises capital for the corporation at the lowest possible AIOU costs. This could be achieved through public flotation, rights issue, bonds, debentures, term loans and other financial instruments in the foreign exchange, money and capital markets. On the other hand, surplus funds can be deposited at a bank with a minimal return. Alternatively, funds can be invested in the financial market to reap more profit; this is the investment strategy of big corporations like Jardine Matheson, which operates a dealing room within the company. 4 MIS is a functional area charged with the responsibilities of developing, maintaining 9

and the smooth running of computer systems that capitalise IT to achieve organisational objectives. Such computer systems are classified into strategic planning, management control and tactical planning, and operational control systems. 5 The Sales department sells whatever products and services are produced by the business

organisation. It forecasts the sales volume by products and builds up a sales force that provides the best coverage in all the sales territories. The sales manager should maintain a close link with the production department as well as with Copyrights advertising and public relations agencies and the media. 6 Production is a functional area responsible for enterprise functions such as quality assurance and production operations (in producing goods and services that meet the stipulated quality standards). It should ensure the effective and efficient utilisation of the production plant to meet custom ers orders, maintain an optimal level of work in progress and minimise the rejects level. 7 Purchasing is a functional area responsible for the sourcing, supply and logistics of goods and raw materials that meet the stipulated cost, quality and inventory policy requirements while matching the production schedule. A final comment about line and staff relationships in functional areas. The seven functional areas above have been described mainly from a staff perspective, but functional area managers can make decisions; that is, they have a line function too. They can make decisions affecting their own block or department. Enterprise functions, then, are the basic building blocks of an enterprise and they must be present, regardless of whether the organisational structure is functional, divisional or matrix. Enterprise functions are usually grouped under different functional areas such as human resources, finance, marketing and MIS. Each enterprise function consists of business processes that are supported by their respective business procedures. 3.2. Business processes and procedures It is conventional management belief, especially in companies run by professional managing groups rather than founding entrepreneurs, that all business organisations should have a pre-defined set of goals and objectives, and that it is the job of managers to make sure that the goals and objectives of the company are realised. The performance of managers is measured by the extent to which business organisations can meet their goals and objectives; that is, can realise their mission and, perhaps, vision. Managers need to carry out certain tasks or processes in order to achieve these ends. The enterprise functions can be subdivided into business processesprocesses that form the basic functions of a business manager. The following four processes are considered generic management processes: planning, organising, directing and controlling. Planning AIOU Planning is determining and deciding who is going to do what by when, or perhaps planning is what is going to be done when by whom. Planning charts the course for an organisation in a rapidly changing business environment, and planning steers the organisation from where it is now to where it wants to go. Hence, the first step in a planning process is the definitiona clear understandingof goals. Sometimes goals are 10

not available; then, you should delineate goals from the corporate mission statement or corporate goals and objectives. Objectives must be targets that are measurable within a certain time frame. For instance, one of the objectives of a distributor of printers might be to achieve a 25% market share in the laser printer market sector in Asia in the next financial year. Having defined the goals and objectives, you should then formulate strategy by taking into account competitors and external business, economics and political information. Copyrights Hence, you should conduct a SWOT (Strength, Weakness, Opportunity and Threat) analysis by capitalising on the strength of the organisation and exploiting opportunities in the marketplace while minimising the risk that could arise due to the weaknesses of the organisation and threats in the outside environment. Further details of a SWOT analysis are dealt with under the topic strategy planning process later in this unit . Managers should usually plot mo re than one strategy, so they need to evaluate possible strategies using various methodologies; for instance, by assigning weights to different parameters before tallying and ranking the scores. Then they have to select from the possibilities. Most of the time, they cannot find the best strategy because the best in a business context normally means the optimal alternative under a particular set of circumstances. Keep in mind, though, especially if you work in a so-called decentralised (flat) organisation, that any planning decisions you make could significantly influence the operations (and planning) of other functional areas. Planning is not an isolated business processmore often than not, it must be a collaborative function. Organising Having formulated a plan, managers must not only organise themselves in order to accomplish the objectives but also organise the activities of their subordinates. Such organising includes obtaining necessary resources like finance and equipment, and organising and scheduling their time. Organising is assessing what task is to be achieved by when, breaking the task into smaller units, the sub-tasks, and allocating the sub-tasks to subordinates with definite completion dates. In the words of business organisations, a manager must develop an action plan which essentially coordinates and orchestrates the entire project on paper to allow the task to be completed on time. Keep in mind that organising may require the support of other functional areas such as Human Resources (HR). For example, if you were planning to expand or retool your department,

you might need HR to perform the following enterprise functions: recruiting, training and performance appraisal of employees in support of your plan. Therefore, HRs planning mu AIOU st be formulated, in part, based on your plans. Recruiting the right person is no easy task. It involves matching the applicants personality profile, character, values, beliefs, qualifications and experience, upbringing and skill set with both the job specification and the corporate culture. You usually interview to sel There are several dimensions in training, which include job-related training and 11

induction courses. Job-related training could be on-the-job training within the organisation, or it could be special training courses offered by an outside training company. In-house induction courses aim to familiarise the new employee with the comp anys rules and regulations, policies, environments and corporate culture. Performance appraisal is conducted regularly for employees who are evaluated on the extent to which they achieve certain mutually agreed objectives. They are given a total score that is a reflection of their performance during the period. The score is also a basis Copyrights for salary increases and promotion. This example of the relationship between your department and HR should underline for you how important it is that activities within organisations be co-ordinated so that all departments can plan and organise their own business processes. Directing The next step after organising is directing. Directing means implementing or executing the plan, having organised and deployed personnel in an appropriate structure. The leader leads, motivates, delegates and coordinates in order to complete the task. It is often argued that a leader is born but the leadership that a manager possesses can be trained through management development and training programmes such as an MBA (Master of Business Administration) degree. Motivation, by contrast, requires an indepth analysis of the factors that might motivate an employee. A competent manager should be able to motivate his or her subordinates to consistently perform beyond past capabilities. Perhaps, delegation is most important in directing. One may be able to complete a small task entirely alone. But the leader who is responsible for completing a task on time is also given the authority to discharge the responsibility. The allocation of sub-tasks to subordinates is called delegation. How to delegate is an art, though. A manager must take into account how critical the sub-task is, the capability of the subordinate, the

subordinates work history, motivating factors and the completion date. Clearly, responsibility is passed on from the superior to subordinates. However, the superior is still held responsible and is still accountable. Controlling As soon as managers have implemented a plan, they need to know the extent to which they have done what they set out to do; that is, find out what the gap is and then take action to bridge the gap. Controlling is the process of setting a standard, measuring the actual performance, and reviewing the variance, which is the difference between the actual and the standard. If the variance is beyond the pre-defined tolerance level, some adjustments or remedial actions mu AIOU st be arranged. The standard could be a capital budget, sales volume or defect level. Managers typically check how far they have kept in line with the predicted (or hoped-for) amount of outcome and then add corrective actions to get performance back in line with expectations. Because this happens over and over again, this process is known as iterative control. Here is a brief review of the foregoing comments about business processes. Apart from 12

the generic management processes, business processes are usually specific to particular functions. A business enterprise function is a group of activities and processes for supporting a specific part of the mission of the enterprise. A business process is a specific ordering of work activities across time and place, with a beginning, an end, and clearly identified inputs and outputsa structure for action. Each process is supported by a set of specifically designed procedures. 3.3. Imp Copyrights act of Information Technology on business processes An important process of information systems strategic planning is to establish the integration of business processes and information systems. The idea of business process re-engineering (BPR), [which you will come across under similar names such as business process re-design, etc.,] has been a hot topic for much of the 1980s and 1990s, but has now seen its more useful insights incorporated into the adaptation of business to e-business that we are seeing today. Michael Hammer was an early and excellent spokesman for the BPR movement because he understood and taught that for an established business to take advantage of new technology and systems infrastructures, it cannot stick the new tools in place to support old ways of doing things. These old ways

evolved in response to available technology and do not use the potential of the new tools. The designers of BPR thus laid the way for thinking about the transition to e-business when they set down their mission in the following terms: 1. evaluate core business activities; 2. consider business processes cross-functionally; 3. re-design radically, dont just tinker; and 4. aim for sharp improvements in performance levels. Multinational companies like American Express and CitiCorp have been famous in successfully applying BPR to improve their business processes to gain competitive advantages. Companies such as Cisco, Dell, Federal Express and Amazon have been the successor wave to push these ideas further into e-business transformation. 3.4. Integration of business processes and information systems An important process of information systems strategic planning is to establish the integration of business processes and information systems. We emphasise the need for a thorough and comprehensive understanding of the business processes prior to the planning and implementation of IS. IS developments are usually based on business models as perceived by the systems analyst(s) and major users. The business model is a logical representation of the group of integrated business processes. The business model approach is considered an im AIOU portant start for reviewing an organisations major functions, businesses processes and existing IS and data requirements. In the planning, analysis and design of MIS, managers must usually review organisational and departmental mission statements, business goals, functions, processes and procedures. Changes to business functions and processes may also affect the organisational structure. Today, with the availability of networking and databases, business process redesign and cross-functional integration are common practices. These 13

practices build infrastructure and linkages among functions and processes. Such changes must agree with the organisational mission and business strategy. Now try Activity 1.1. Activity 1.1 1 Copyrights Identify the major functions within a functional area (e.g., finance, human resources, marketing, etc.) within your own organisation, or department if your organisation is very large (such as the government or a bank). 2 Describe the business (enterprise) functions and the major processes and procedures within that functional area. 3

Identify what MIS exist (if any) to support these areas

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4. Information Systems versus Information Technology 4.1. Definitions In order for information to flow from its source to an individual who can use it, some Copyrights d to collect, to store and then to move the information within an organization. Thus, an information system (IS) can be defined as a set of procedures that collects or retrieves, processes, stores and disseminates information to support organizational decision-making and control. Many organizations have information systems that are entirely manual. Such systems are a subset of a wider class of systems, computer-based information systems, which rely on information technology as well as humans for their operational functions. Information systems need not be necessarily computer-based but often are. The determining factor is whether an information system can be improved by including IT-based processing capability. If a manual system can perform a task efficiently and without error, there may be little reason to use IT. Managers more commonly find that the volume of work grows, procedures increase in complexity, or activities become more inter-related and/or dispersed geographically. Then the introduction of IT can make improvements. Therefore, all subsequent references to information systems in this course refer to these computer-based systems. Management Information Systems (MIS) means the whole network of systems which support the organisation to manage their business affairs. MIS can be used interchangeably with IS. Information technology (IT) refers to a powerful collection of elements which include

computer hardware, software, telecommunication networks, workstations, robotics and smart chips. As IT is also at the root of information systems, often there is confusion between IS and IT. To clarify, information systems are applications having functionalities which can be exploited by the business, and information technology provides capabilities which enable these applications. For example, telecommunication is the technology that enables a computer to communicate with a remote terminal. This communication function could be used by an organization by placing these terminals at customers sites thereby allowing customers to use an organizations computer for a variety of purposes such as order entry or inquiring order status. Thus, information systems are the ends and information technology is the means. Managers and planners of Information Systems cannot afford to lose sight of the underpinning technologies. Two reliable recipes for disaster are too little grasp on the capabilities of technology, or too great a reliance on unreliable technology. 4.2. IS and IT strategies AIOU Because of the interrelationship between IT capabilities, IS functionalities, and information use, an organization has a great range of choices concerning what it will accomplish through IT and how these tasks will be done. Organizations, therefore, need to make their choices in the form of IS and IT strategies to ensure gains from their IT investments. Like business strategy, the terms IS strategy and IT strategy refer to the direction in 15

which the organization wants to go. Often the managers involved in the strategy formulation are confused between IS and IT. This confusion exists partly because of the loose terminology of planning and strategy, partly because organizations are still learning how to plan IT, and partly because senior management tends to be concerned about both technology policy issues and business needs, and about both planning information resources and controlling them. However, this delineation between IS and IT, or between applications and delivery, is valuable during the strategy formulation process. The issue of what should an organization do with the technology is termed IS strategy, whilst the question of how Copyrights they do it is termed IT strategy. Thus, it should be clear to you now that IS strategy is concerned primarily with aligning IS development with business needs and with seeking strategic advantage from it. By contrast, IT strategy is concerned primarily with technology policies: it tackles questions of architecture, including risk attitudes, vendor policies and technical standards. In this context, IT architecture refers to the technology framework which guides the organization in

satisfying its business and management information systems needs. It is the blueprint that defines the technical computing, information management and communications platform of the organization, the structures and controls that define how that platform can be used, and the categories of applications that can be created upon the platform. The IT architecture provides an overall picture of the range of technical options available to an organization, and as such, it also implies the range of business options. It includes the hardware and software used to manage information and communication; the tools used to access, package, deliver and communicate information; the standards, models and control framework; and the overall configuration that integrates the various components. Activity 1.2 A bank decides to provide access to any three of a customers accounts through its automatic teller machines to its customers, so that with these accounts they can transfer, withdraw or deposit money. Would you classify this as an IS strategy or IT strategy? Why? This is a fairly important and fundamental section, so here is a summary. Information systems (IS) are computer-based systems for collecting, retrieving, processing, storing and/or disseminating information to support organizational decision making and control. Information technology (IT) represents the technological infrastructure, including computer hardware, software, telecommunication networks, workstations, robotics and smart chips, that provides the capabilities for the information systems. IS strategy refers to what AIOU an organization should do with the technology, whereas the question of how they do it is IT strategy.

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5. Impact of MIS on organisations MIS exerts a strong influence on organisations because it can affect both production and coordination, where production refers to the task of producing goods or services. A major research programme, called Management in the 1990s, was initiated at the Sloan School of Management at the Massachusetts Institute of Technology (MIT) in 1984 to examine the impact of IT on organisations. The findings of the research were: Copyrights IT enables fundamental changes in the way work is done.

 IT enables the integration of business functions at all levels within and between organisations. IT enables shifts in the comp etitive climate in many industries. IT presents new strategic opportunities for organisations that reassess their missions and operations. Successful applications of IT require changes in management and organisational structure. A major challenge for management in the 1990s would be to lead their organisations through the transformation necessary to prosper in the globally competitive environment. We describe below MISs impact on work, business functions, industrial competition and organisational strategy. 5.1. Impact of MIS on the nature of work The extent to which MIS has an impact on a persons work depends on how much of the work is based on information. This information may be related to production work, which is the work done to produce goods and services, or to coordinative work, which involves working in conjunction with others. MISs high potential impact on production work is obvious if we break production into its three constituent elements: Physical production, which is affected by robotics, process control instrumentation and intelligent sensors; Information production, which is affected by computerisation of the standard clerical tasks such as accounts receivable, billing, etc.; Knowledge production, which is affected by computer-aided design/computer-aided ma AIOU nufacture (CAD/CAM) tools, customised workstations for specific work such as new software and new legislation. As an enabler of connectivity IT has a high impact on the economics and functionality of the coordination process. This impact can be easily seen in three areas: Distance can be shrunk to almost zero through electronic communications. Elapsed time can be shrunk toward zero or tasks can be shifted to a more convenient 17

point, as in the case of airline reservation systems, which could be used worldwide all the time. Organisational memory can be maintained (through a database) over time and can be shared among many users.

In addition to production and coordination, IT also affects management work, especially with respect to its direction and control aspects. As for direction, it involves sensing Copyrights changes in the external environment, which is easily facilitated by IT-based systems such as an executive support system or a customer feedback system. For control, IT helps in tracking an organisations performance and analysing the variance against the plan or pre-set standards. 5.2. Imp act of IT on business functions Enhanced connectivity and information accessibility through IT has permitted an any information, at any time, anywhere, and any way one wants to look at it philosophy in a cost-effective manner. Thus, boundaries of organisations are becoming more permeable; and where work gets done, when, and with whom is changing. This has enormously speeded up the flow-of-work in and around the organisation. In turn, this has permitted possible integration in many areas such as: Teams within the organisation. For example, design, engineering and manufacturing people can be connected together through local and/or global networks to work as a team focusing on one product, as done by Xerox. End-to-end links between organisations. For instance, a suppliers shipping department can be connected to the buyers purchasing department for business transactions. This shifts the boundary of the organisation out to overlap with others, thus creating a virtual organisation. Electronic alliances. An organisation may perform one stage or part of a manufacturing or design task and subcontract either a specific task or the whole stage to another (electronically linked) organisation. Electronic markets. Here, coordination within a few or all organisations gives way to an open market. For example, travel agents can reserve seats electronically from all major carriers, and therefore can look for a best price for the customer. Thus the reservation system acts like an electronic market. 5.3. Impact of IT on industrial competition AIOU At the industry level, IT has a unique impact on the competitive climate by permitting a high degree of simultaneous competition and collaboration between organisations. Take auto maker X, for example, which requires the clerical staff of its suppliers to use Ts electronic communications system for paperless ordering. The more suppliers who conduct transactions over this system, the lower its cost per transaction. Thus suppliers compete with other suppliers and at the same time collaborate with them by sharing the same communication links!

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Another unique impact of IT on competitiveness concerns the importance of standards. It is now important for an organisation to know when to support standards and when to try to pre-empt competitors by establishing a proprietar y de facto standard. 5.4. Imp act of IT on organisational strategy Even before you study Porters five-force model in Block Two, you can take advantage of the m Copyrights odel to look at the impact of IT on organisational strategies, because it identifies five areas of risk and of opportunity. Opportunities Risks New entrant To build barriers To lower entry barriers Customers To build in switching costs To increase customers power Rivalry To change basis of competition To change basis of competition Suppliers To change the balance of power To increase suppliers power Substitutes To generate new products To generate new products Table 1.1 Impacts of IT on organisational strategies The innovation of Frequent Flier Points Systems illustrates the double impact of IT. These systems resulted from IT-driven strategies allowing airlines to collect data on clients and their airline bookings through a centralised MIS. The points system radically altered the balance of power in the industry. Instead of straightforward competition based on price or service, airlines now faced clients expectation of added value from loyalty programs. On the supply side, the system erected a fresh barrier to new entrants. On the demand side, it exacted a switching cost: customers choosing another airline would forfeit their points. Effectively this program gave American Airlines some two years of lead in the battle for customer capture and retention. To be efficient as an MIS manager, you need to understand the technologies available to you in the form of your IT platform. To summarise again: IT exerts a strong influence on organisations. It changes the way work is done, whether it is production, coordinative or managerial work. It integrates business functions at all levels and gives rise to organisational team AIOU

s, electronic alliances and electronic markets. It permits a high degree of simultaneous collaboration and competition in the industry. It presents new strategic opportunities and changes organisational structure. IT, therefore, poses a major challenge for management in the 1990s to catalyse the necessary transformation of their organisation.

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6. Evolution of Management Information Systems 6.1. Three-era model of IT The earliest information systems were developed in the early 1960s. During the last 30 years, the field of IT has changed very significantly. It now represents a different set of aims, means and responsibilities than was typical in organisations in the 1970s, or in the Copyrights 1980s. To understand this philosophical change, we may divide this period into three eras of IT and study how this shift has taken place. These eras are: 1. Data processing (DP) era (1960s onwards) 2. Management information system s (MIS) era (1970s onwards) 3. Strategic information systems (SIS) era (1980s onwards) Managing and controlling IT in an organisation in these three eras involves different approaches, many of which are determined by the applications possible and undertaken. The essential characteristics of the three eras are summarised below. Data processing (DP) era This era is dominated by information systems that have as their primary function the processing of predefined (business) transactions to produce fixed-format reports on schedule. Their principal use is to automate the basic business processes of the organisation. Typical transactions handled by these systems are payroll records, customer orders and purchase orders. In addition, these systems could also provide predefined exception reports based on the transactions processed. As these systems processed the transaction data of the organisations without producing much management information, they are called data processing systems (DPS), which also explains why this era is called the data processing era. As these systems mainly processed business transaction data, they are also referred to as transaction processing systems. In this initial period of fast growth, the main objective was to replace the manual systems with the automated ones. Data processing application opportunities were identified by

inspection: by observing the performance of routine tasks and concluding that computers could be programmed to perform them. With experience, systems were also developed in other areas such as manufacturing, marketing and purchasing. Data processing systems were adequate when the environmental challenge was to deploy the newly arrived information (mainly computer) technology to automate manual operations, to develop efficient applications that could reduce or avoid organisational costs. But these systems, apart from processing the transaction data, did not meet the information needs of ma AIOU nagers and professionals, as the systems were incapable of producing ad hoc reports on demand. Management information systems (MIS) era The primary function of information systems developed in this era, called management information systems, was to provide two new capabilities to the users: enquiry i.e., 20

flexible data base access initiated by ad hoc user requests (for searching an item of information) and analysis i.e., flexible user-driven processing (such as generating what if scenarios for testing implications of planning models). These capabilities were mainly useful for ma nagers and professionals in satisfying their information needs. That is why these systems are called management information systems. During the last decade, the use of management information systems by managers and professionals has grown exponentially, stimulated by the increasing supply of Copyrights sophisticated software tools for end-user computing available on mainframes, micros and through outside time-sharing services. The tasks that use management information systems are often ill-defined. While some MIS do automate tasks previously performed manually (such as sales analysis and job scheduling), others reflect creative applica tions often developed by end-users. Another reason for end-user computing has been the availability of innovative software such as spreadsheets, fourth generation languages (4GLs) and financial planning packages such as IFPS. The emergence of these systems has given another direction to information management business. Unlike DPS, MIS depend primarily on time-sharing and, more recently, on powerful microcomputer technology. Target users for MIS are managers and professionals rather than the clerical and supervisory level staff. Also, unlike DPS, these systems are aimed at supporting the managers and professionals rather than replacing them by automating their tasks. The systems supporting specific decisions have come to be known as decision support systems (DSS). These systems are not simply to provide higher

quality information from the use of decision models and data bases. Rather they are meant to improve the quality of the managerial decision process itself. Similarly, the systems which are specifically designed for top management (executives) have been called executive information systems (EIS). Nowadays, EIS are being introduced at an increasing rate. Many organisations throughout the world such as Philip Morris, Medicare, and banks either have them or will have them in the near future. There are two reasons for this worldwide growth of EIS. Firstly, modern IT makes these systems both more powerful and more palatable than the old paper-based MIS. Secondly, EIS accommodate the accelerating pace of business and the simultaneous need to make organisations more flexible by reducing layers of management. In general, there is a trend now to systems that combine features of DSS, EIS, and conventional MIS and which are often called management support systems (MSS). Unlike DPS, which have an efficiency focus, the main pay-off of these systems is in enhancing the effectiveness of their users. The development of these systems obviously needs systems analysts who are not only trained in IT but also skilled in business disciplines such as finance, strategic planning, logistics and marketing. Many of them also have backgrounds in management science and operations research. AIOU Strategic information systems (SIS) era Strategic information systems (SIS) are systems that are used to support or shape the competitive strategy of the organisation: its plan for gaining or maintaining competitive advantage or reducing the advantage of its competitors (Wiseman 1988). Frequently, such 21

systems extend beyond the bounds of the organisation itself to its customers or clients, suppliers and competitors. Thus, the use of telecommunications is often central to the implementation of an SIS. An SIS has three characteristics (McNurlin and Sprague 1989, p. 59): 1. It significantly changes business performance as measured by one or more key indicators. Whereas a DPS or an MIS/MSS might provide a 30% return on investm Copyrights ent, an SIS can return 10 times that amount. 2. An SIS contributes to attaining a strategic goal. If a system is one of the few components that is critical to the successful attainment of a business goal, such as increasing the sales volume of a product by a specified percentage, then it is an SIS. 3. A system is an SIS if it fundamentally changes the way the company does business, or the way it competes, or the way it deals with its customers or suppliers, as for

example by opening up a new distribution channel for a companys products or services. A strategic information system was installed when supermarkets such as TESCO (UK) Parkn Shop (US) and Wellcome (HK) developed their cyberstores on the Internet and thus created a new distribution channel. An SIS differs from other systems in two other ways (McNurlin and Sprague 1989). SIS development will not conform to conventional system development life cycles. When a new service or product is being created, the IS to support it (the SIS in question) cannot be completely specified and added to the way the firm does business. An SIS will generally change the focus of IS development from its function to its use. What becomes critical here is the use of IT to support or shape strategy rather than the capability to process transactions or do query and analysis. SIS planners should, therefore, discover application opportunities through reflection, by thinking about how the use of IT can enable the organisation designed at the outset. Such contemplation requires that an SIS be created first as a prototype, tested on a small scale by the customers, and then iteratively developed into full scale. Another difference is that user-manager (and perhaps customer) involvement is crucial in SIS development because it changes the way the business operates. A strategic information system may be either a DPS or an MIS (or MSS). The dimension which makes a system strategic is its direct support or shaping of the competitive strategy of the organisation. An SIS is a new information management product line. It targets new user groups providing new benefits that are not delivered by either DPS or MIS in their traditional forms. It links the IS effort directly to the business, securing a comp AIOU etitive edge by finding, getting and keeping clients. An SIS frequently requires the activities of the IS development to be extended. It may require new hardware and software as well as additional personnel and an organisational and cultural change. An organisation will rely heavily on an SIS to satisfy its competitive goals.

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These strategic information systems have three essential characteristics: (a) they significantly change the business performance of the firm; (b) they contribute to attaining a strategic goal; and (c) they fundamentally change the way the company does business or the way it competes. Copyrights A strategic information system may be either a data processing system or a management

information system (or management support system). The dimension which makes a system strategic is that it directly supports or shapes the competitive strategy of the organisation It may be re-emphasised here that these eras do not actually represent sequential relationships in time; i.e., it is not that the DP era ended when the MIS era started nor that the MIS era ended when the SIS era started. In fact, the era derives its name from the state-of-the-art IT systems available at that time. As such, during the MIS era, MIS was the state-of-the-art but still some (rather many) organisations continued to use DPS and, thus, stayed back in the DP era. Similarly, even now in the SIS era, there are many organisations which are still in the MIS, or even in the DP, era! Activity 1.3 A garment manufacturing company has the strategic goal of no stockouts. It has many retail outlets distributed throughout Asia. Their outlet counters have POS terminals connected to their central computer system. They track the movements of various products from different retail outlets and decide outlet stock replenishment strategy for each individual outlet based on the movement of products, so that the fast-moving items are never out-of-stock. What would be the impact of this inventory tracking on the organisational strategy? In which era should the company be placed?

AIOU

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7. IT as a strategic resource In recent years, the role of IT within organisations has changed significantly as more and more organisations have built and used SIS. (That is why we call the present period the SIS era!). Many organisations have recognised that IT offers the capability to redefine the boundaries of markets and structural characteristics, alter the fundamental rules and basis of competition, redefine business scope, and provide a new set of competitive weapons. It is, therefore, im Copyrights perative that the traditional role definition of IT be changed to reflect a more central, strategic role for IT within management. This emerging new role of IT within organisations is the result of two concurrent and perhaps equally powerful forces, technology push and competitive pull.

The technology push force has emerged partly because of significant improvement in the price-performance ratio of IT and partly due to increased connectivity capabilities over time. The other force, competitive pull, has emerged because markets are becoming highly competitive and the traditional sources of competitive advantages are diminishing as competitors strive to attain parity with one another. Often there is a need to distinguish between strategic use of information and strategic use of information technology. Some organisations have used IT to achieve strategic objectives taking advantage of technological advances (King, Grover and Hufnagel 1989). For example, suppose an organisation determines that relations with its customer enterprises could be strengthened by placing computer terminals in each customer location, facilitating order placement as well as providing a means of advance price and availability checking. While this information was previously made available to customers by phone on request, it is now provided instantly via telecommunication links. Customers are thereby tied into the firm in a way that makes it more difficult for them to change suppliers. In this case, it is the information technology and not the information itself (since the same information was available previously) which is the key factor in achieving improved customer relations (and thus meeting the firms strategic objective). Many organisations do use information itself, rather than IT, as a strategic resource. For instance, an organisation might have a strategy of expansion through acquisition of related businesses. Having identified criteria for evaluating potential acquisition, the organisation now scans a commercial database to identify acquisition prospects that meet the criteria. In doing so, they are using new information or using available information in new ways to widen the range of firms that are considered and to make better strategic acquisition choices. In this case, therefore, it is the use of important new information or of available information in new ways that is the key to success. Although IT facilitates the processing of this information, the strategic advantage does not come from IT (as in the earlier case). The primary distinction between these two approaches lies in the source of the added value. In the first exam AIOU ple, the introduction of IT increased the value of existing information by providing easier and faster access. In the second, the information itself provided a strategic advantage through the new uses to which it is put. In some situations, both IT and information can be used as a strategic resource. For example, an airline (such as American Airlines) already pursued the use of IT by putting computer reservation terminals into travel agencies. Then it began to use the detailed information that it thereby obtained on supply and demand for various routes to manage 24

optimally the availability of low-price seats on each of its flights. This efficiency ensures that it will capture much of business travellers demand for high-priced unrestricted tickets while also filling otherwise-empty seats with low-priced tickets that are sold with restrictions of timing, penalties for changing reservations, and so on. (This strategy is now called yield management by airlines.) In these ways, the airline used both IT and information for getting strategic advantage. 7.1. T Copyrights echnology as the enabler of e-business It is generally accepted that systems strategies do not typically begin from a starting point of technological capability. It is more usual to define the business problem or objective, and then cast around for tools to reach that objective. In the case of e-business, however, traditional thinking appears to drop by the wayside at times. E-commerce applications and integration within new business paradigms or models are not necessarily like other systems. In many cases e-business applications are simply technical fixes to identified business ends, as in the case of: Electronic Data Interchange used to process large batches of routine invoices and payments; and Internet solutions used to replace telephone sales as a way of taking orders from customers. But for many companies looking at the opportunities of e-business, it isnt the existence of the technology that creates the business opportunity: it changes an existing markets profitability or defines a new market. As business strategists intending to develop e-business systems, we must know what these technologies are and what technology can do. The three technologies at the base of it all are: Electronic Data Interchange (EDI). This is the automated transfer of data between computer systems according to agreed structured messaging formats. This process, although expensive to install and maintain (requiring the leasing of proprietary software and private network facilities), has streamlined supply logistics for large businesses. It has decreased trade cycle times and the cost of stock, and provided a high base standard for inter-organisational systems. It is pulling smaller companies into e-communications because they benefit by linking in with these systems. Electronic markets. This is an emerging opportunity for firms to redefine the way they look at competition and cooperation, as electronic markets are bringing together competitors in trading systems that provide mutual advantage. Internet-enabled e-commerce and e-business. The new reach of business to consumer trade (B2C) and increasingly effective supply chain transactions (Business to AIOU Business, or B2B) using Internet tools is arousing intense espousal and intense distrust. There are those who see a new economy dawning with different rules of business applying to the Internet economy, and others who see the whole thing as a creation of a few journalists and market entrepreneurs making money out of a gullible public. Whatever your view, the increasingly powerful and inexpensive tools of computing and the public Internet are making a range of opportunities materialise, and no business strategy can afford to overlook their potential.

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The three areas above indicate strategic constructs underlying the rest of this course, and they translate into e-business applications by means of strategic planning which is detailed in the remaining units of this course. For each business situation, the results are different, but the ten elements below indicate a mixed bag of desirable outcomes that corporations and other entities seek because of their individual needs and circumstances: Product promotion: Web sites are increasingly adopted as sophisticated alternatives to paper-based product promotion and information media. Unlike mass marketing tools, We Copyrights b pages can be customised and created on the fly for different customers and enquirers. New sales channel: Many have attempted using the Internet as a new sales channel, often finding that channel conflict and other problems defeat the efficient use of this channel. Although the advantages of not needing physical space near a buyer is tempting, the efficient model for this modern mix of telesales and direct marketing has yet to be demonstrated for all categories of goods and services. Perhaps it may never be as important as its advocates suggest, yet it will be an increasingly important component of any marketing mix. Direct savings: Online sales have the potential to cut space and staff costs through the use of publicly accessed networks. Increasingly capable and reliable systems are allowing demonstrated efficiencies to arise, particularly in B2B commerce, although B2C commerce has yet to find its feet in this area. Time to market: Important cost-cutting measures include speeding up the time to market of goods, then achieving an efficient order replenishment cycle. We shall be looking closely at examples under the headings of supply chain management. Customer service: e-business tools, such as Internet-driven call centres, can provide an information-rich environment for customers and provide for enhanced relationships. This is specifically addressed below under Customer Relationship Management (CRM) initiatives. Brand image: Some believe that the Internet gives a new direction and importance to brand management, but this benefit has yet to be demonstrated, as much research shows that brand positioning transfers from offline to online activity better than in the other direction. Organisational learning: While putting new systems in place, enterprises have the opportunity to capture and order organisational knowledge and skills as never before. Product development: the information-rich interactions that are now possible between manufacturer and user are now providing information that can direct the research and

development of new products. The hold of traditional intermediaries is being redefined. New business m AIOU odels: If strategic planning is to grasp the potential of new tools and create a new e-business environment, it must seek to identify new business models for the development of overall strategies. Just as a start-up business has more channels to market through e-business, so existing businesses have an opportunity to redefine themselves and restructure.

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8. The New Economy, the Internet Economy and e-business 8.1. The e-economy In this new millennium, there is a general feeling that things have changed, that there is a Copyrights new social and economic reality. In particular, this expectation applies to the world of business, transformed as it has been by a number of powerful forces such as globalisation and the advent of the Internet. There is a sense that the world of business is significantly different from its state just 20 years ago. This perspective gives rise to terms such as new economy, information economy, digital economy, and so on. These terms suggest, rather im precisely, that we have a new business reality, and that the role of ICT and the Internet are significant features, perhaps even defining features or characteristics, of that new business reality. Two broad constructs help to structure and make some sense of this new reality if they are defined and thought about clearly: namely the new economy and the Internet economy. This block introduces these notions as fundamental constructs for the rest of the course. There is a sense in which trends such as globalisation and the effective use of increasingly more powerful and reliable ICT have transformed the national economies of the USA and Europe to such an extent that when referring to say, the contemporary US economy, we could meaningfully talk about something called the new economy. A separate construct refers to the economy that is clustered around the Internet and the new electronic commerce or e-business phenomenon. Finally, there has been a significant restructuring of organisations, since e-business intensifies collaborations among multiple organisations with several complex economic, strategic, social and conflict management issues as well as major organisational and technological factors. This new business paradigm is one where:

 core business processes may need to be rethought and redesigned new organisational forms and inter-organisational forms may need to be developed the emphasis will be on collaboration rather than competition within the virtual market. The most fundamental elements of doing business are changing and a totally new business environment is emerging, thanks to such phenomena as: the World Wide Web mass customisation comp AIOU ressed product life cycles new distribution channels new forms of integrated organisations. In such an environment, responsive organisations quickly become virtual because the costliest parts of their infrastructure no longer lend themselves to measurement by height, 27

length, weight, or other physical dimensions. Such organisations will have a considerable impact on all aspects of business strategy in the 21st century. This block examines the World Wide Web and the other mentioned phenomena and sets the scene for the rema ining units where you will explore the nature and rationale of e-business markets, new e-business models and strategies for co-opetition,* and strategies for designing, transitioning and managing ICT-driven business opportunities. *A term coined by Novell founder Ray Noorda, coopetition was originally used of a business Copyrights cooperating with its competitor. The term has been elaborated to mean business strategies preferring win/win over win/lose outcomes 8.2. The New Economy You may ask what econom ic rules prevail in the new economy. There is speculation earnings and profits, low unemployment, relatively high productivity, low inflation and a soaring old economy rules and principles no longer apply, at least with the same force. Amidst such speculation is a view that stronger productivity growth now allows the US economy to grow faster without inflationary pressures. There is also the view that in the short run, a trade-off between inflation and unemployment has changed so that low unemployment and low inflation

can coexist. Other speculation looks at the sources of growth in the US economy and identifies factors such as computerisation and globalisation as driving forces changing the nature of the old economy. Connected to the pre-eminent role given to IT and its potentially transforming power has been the important role given to knowledge as a new form of capital, along with the roles of knowledge management, research and innovation as factors creating wealth. Another feature of the new economy is the increasingly important role of the service sector. Indeed, Pine and Gilmour (1999) see the service economy evolving into what they call an experience economy. They trace the evolution of economies from an agrarian-based economy through an industrial economy through to a service economy and thence to the emergence of an experience economy. Each economic stage has all the elements of preceding and succeeding stages, but the focus and emphasis is different. The contemporary economies of the developed world can be seen to be new in terms of their emphasis on producing and delivering services and the emerging idea of staging complete experiences for consumers. Of course, modern new economies examined along this plane are only different in degree from the older economies of 20 years ago, but this difference in degree could be seen as a strand of newness in the new economy. As you already notice, the nature of the new economy has many and varied aspects of novelty. Throughout the course, your readings AIOU will show that these are given different degrees of emphasis by different thinkers. Economists are examining the new IT-based organizations and the economic world they shape but have come to no agreement yet on whether there are new economic laws to be discovered, or whether the old economy macroeconomic principles and technical relationships still apply. For some it is a given that, while technology may change, economic laws do not. Perhaps no definite views are yet possible. As you will see, the potential for new business and organizational forms resulting from a still-developing set 28

of technologies has yet to be properly mapped out, and we are all still learning. The term information economy has come to mean the broad, long-term trend toward the expansion of information- and knowledge-based assets and value relative to tangible assets and products associated with agriculture, mining, and manufacturing. The term digital economy refers specifically to the recent and still largely unrealised transformation of all sectors of the economy by the computer-enabled digitisation of information. (Brynjolfsson and Kahin, 2000 ) Copyrights Activity 1.4 Consider the answers to the fo llowing questions:

 What are the business drivers that are shaping modern business environments? What is the nature of these business drivers or pressures and what are their effects on contemporary business organizations? 8.3. The Internet Economy There is, however, another definition of the information economy or digital economy, as the Internet economy. This notion revolves around the set of Internet-based organisations, the dot-coms and others involved in e-commerce. An explicit characterisation of the Internet economy is provided by a group of researchers at the University of Texas at Austin's Centre for Research in Electronic Commerce. They view the Internet economy as those firms engaged in e-commerce together with those firms that provide, implement and maintain the infrastructure for e-commerce. They see the Internet economy as a structure with four layers: Layer 1 The Internet Infrastructure Indicator Layer 2 The Internet Applications Infrastructure Indicator Layer 3 The Internet Intermediary Indicator Layer 4 The Internet Commerce Indicator Layer 1 The Internet Infrastructure Indicator This consists of the telecommunications companies, Internet Service Providers, Internet Backbone Carriers, last mile access companies, security vendors and manufacturers of end-user networking equipm AIOU ent all of which are prerequisites for the Web and proliferation of Internet-based electronic commerce. Examples of companies include Cisco, Lucent, Dell, Qwest, AOL, Axent and Corning. Layer 2 The Internet Applications Infrastructure Indicator This consists of the software products and services necessary to facilitate Web 29

transactions and transaction intermediaries. It includes the consultants and service companies who design, build and maintain all types of web sites from portals to full ecommerce sites. Examples of companies include Netscape, Microsoft, Adobe, Scient, Sylvan Prom

etric, Opera, Oracle, Macromedia. Layer 3 The Internet Intermediary Indicator Copyrights This consists of intermediary services such as web development, electronic market makers or market intermediaries. Essentially they facilitate the meeting and interaction of buyers and sellers over the Internet and act as catalysts in the process through which investments in the infrastructure and application layers are transformed into business transactions. Examples of companies include VerticalNet, E*trade, TravelWeb.com, Zdnet, Yahoo, Doubleclick Laye r 4 The Internet Commerce Indicator This consists of all the companies conducting e-business across a wide variety of vertical industries (excluding those already included in Layer 3). Examples of companies include e-tailers, manufacturers selling online, free-subscription-based companies, airlines selling online tickets, online entertainment and professional services. These four layers comprise a complete e-economy with characteristics such as inputs, outputs, size, value added, efficiency and labour productivity. Table 1.1 shows the growth experienced in each layer from 1998-1999 and overall revenues in $US billions. Table 1.3. 1998 % growth 1999%growth Growth Overall Layer 1 27 40 50 Layer 2 14 22 61 Layer 3 11 17 52 Layer 4 16 37 127 64 108 68 Annual revenues $301 $507

The Internet economy is growing at a very fast rate, but a realistic assessment of its growth rate is only possible if you understand the different component parts and can m AIOU easure separate results over time to tie these into policy decisions.

Activity 1.5 Consider the answers to the following questions:

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What is meant by the terms: New Economy, Information Economy, Digital Economy, Internet Economy? Wh at are the characteristics of the above economies? Do these economies exist to the same extent in the westernised world and less developed economies? What differences are there and how does this impact on business strategy? Copyrights 8.4. e-business One spectacular aspect of the transformi ng role of ICT in business has been the rise of ebusiness that has followed the advent of the Internet. The Internet has meant that business organisations have been connected to both other business organisations and to mass markets of consumers via computer networks. Worldwide there are over 400 million people connected to the Internet, over 150 million of these in the USA. This connectivity has allowed goods and services to be bought and sold over computer networks. In the distributed over the Internet. With other goods and services, the goods are purchased and paid for over the Internet and distributed by logistics carriers to business addresses and consumers homes. Such online buying, selling, and paying for goods and services constitute electronic commerce or e-business. The emergence of e-business has led to dramatic redefinitions of the nature of an organization. Complex business networks working together along the value chain are defined by their ability to get products to market with the widest range of consumers at

the cheapest cost and fastest speed. This, in turn, has led to a completely different set of problems for the management of such structures with complex interrelationships, changing paradigms for intermediation, and an emphasis on collaborative competition. Today's business executive needs to have a framework for understanding such relationships in order to evaluate strategic opportunities in the global marketplace. We have found that in Information Management projects, where there is a need to analyse or construct large systems, it is useful to structure them as a hierarchy of several levels in which the lower ones provide the support platform for the higher. In the case of e-business supporting inter-organisational systems, such a hierarchy may usefully be viewed as displayed in the table below: Meta Level Level Function Examples

Products & 7 Electronic Marketplaces Electronic auctions, brokerages, Structures AIOU and Electronic dealerships, and direct search Hierarchies markets

Inter-organisational supply chain management 6 Products & Systems Consumer services over distance retailing, banking, stock broking,

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etc.

Information and entertainment on demand: educational services, feebased content sites

Supplier-customer linkages

Online marketing

Electronic benefit systems Copyrights

Intranet & extranet collaboration Services 5 Enabling Services Online catalogues, directories, smart agents

Smart card systems, e-money

Digital authentication services

Digital libraries, copyright protection services

Traffic audit 4 Secure Messaging EDI, Electronic Funds Transfer, email Technology- 3 Hypermedia/Multimedia World Wide Web with Java Based Object Management Infrastructure 2 Communications Utilities Value Added Networks and Internet 1 Wide Area Guided and Wireless Media Telecommunications networks Infrastructure Table 1.3 The Hierarchical Framework of E-commerce We can use this table to view the e-business as made up of three levels: Technology-based infrastructure: the hardware and software making up the ICT to deliver functionality over networks Services: all messaging activities Products and structures: the provision of goods and services together with intra- and inter-organisational information sharing and the creation of electronic supply chains and marketspaces. Let us look at these in a little more detail. Technology- Based Infrastructure Supporting this framework are three basic levels. The first is the global network of telecommunications networks linking public and private networks through a com AIOU puter-controlled switching system. The potential for interorganisational strategies extends as far as the reach of these media. Differences in regional and national penetration of these networks is, and will be for the foreseeable future, a result of government policies, funding and control strategies together with private sector belief in their profitability.

ICT capabilities are made available for business use in two important ways. The first available system was that of privately constructed and leased networks, the Value Added 32

Networks (VANs). These were constructed to make available services over and above those offered by the common carriers (then almost entirely state-run and regulated monopolies, created for voice transmission) and to make a profit in the process. The second has arrived with the development of the Internet from a government-sponsored and research medium into todays principal inexpensive vehicle for e-business. The separate software-based layer of the Internet known as the World Wide Web has resulted in the possibility of a single distributed, worldwide, hyperlinked database with Copyrights password-protected and private networks (intranets and extranets) linked to it. The Web is a medium for the distribution, presentation and sale of information-based objects. As a platform-independent service it has been enhanced by recent developments in platform independent programming languages, such as Java, further enhancing its utility. Nevertheless, dont overlook the fact that as a separate and software-based layer, the web can and ma y be replaced in the future by an information management mechanism that would better meet the demands of very large-scale use of the global network of networks. Services The service level provides for the transfer of messages and enabling services for business. Using a suite of protocols developed for the free sharing of information, this level is robust and inexpensive. The downside is that, unlike proprietary EDI systems, this level lacks such features as inbuilt security, confidentiality, authentication and similar services demanded by commerce. This issue is currently being addressed by such means as cryptography, Internet tunnelling, and the development of protocols such as the Secure Electronic Transaction (SET) layer issuing from credit-card companies. E-mail is the most pervasive tool of the Internet and a cost-cutting measure that is generally the first to be appreciated by business. While issues of e-mail contracts, confidentiality, evidentiary value and such like are yet to be fully resolved, this tool is expected to retain its prime position in the business repertoire. More activity is under way in the area of enabling services: tools for searching, price comparison, and customising information delivery and receipt, together with electronic money initiatives and e-banking. This service area is changing so rapidly, no written commentary could be up to date: you are advised to conduct Web searches on topics of particular interest throughout this course. However, this is a good place for examining the possible

implications of e-money. E-money in its various forms is expected to become a substitute for credit and debit instruments and also for bank notes and coins at considerable expense to the handling agencies such as banks, finance houses and government controlled agencies. E-money has considerable social implications beyond this, since it does not have the obvious anonymity of cash. There are also the security and legal implications and, of course, the auditing and tax im AIOU plications of electronic transfers. Within the global context we must also recognise that the majority of consumers are not currently web-enabled and so there may be far-reaching implications for social and economic reform in the less developed countries of the world. Products and Structures A lot of interest and publicity surrounds consumer-oriented applications of e-business.

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Companies such as Amazon, (booksellers), Dell (computer retailers), CDNow (music sellers), Discover Brokerage Direct (securities transactions) and Security First National Bank (banking services) are frequent visitors to the business and popular press. In terms of traditional profit over earnings (P/E ratio), none of these firms is exciting, yet their market capitalisation during 1999/2000 suggested that Internet-based stocks are perceived, rightly or wrongly, as gaining value in other ways. (This is despite the Dot.Com crash of 2000/2001 which can be viewed as a necessary market correction). Copyrights Alongside the overtly commercial sector, information for entertainment purposes (infotainment) on demand is another growing sector. From news corporations (CNN, The Times of London, etc.) to Web versions of paper magazines (Hotwired) and purely electronic journals, magazines and newsletters, the Web is awash with information available in both push and pull formats. The boundaries of information and entertainment are blurring, as are those between comme rcial and not-for-profit sites. Unfortunately, while enthusiasm and experimentation are rampant, no clear models for success have yet emerged. The linkages between businesses (B2B) and between business and consumer (B2C) along the traditional supply chain are perhaps clearer, as well as being the fastest-growing area of e-business. This exciting area is attracting the most attention as new configurations of the supply chain model are enabled by ICT, giving rise to the pervasive practice of implementing intra- and inter-organisational networks to fashion new supply chains and giving rise to the new

organisational forms which will be discussed throughout this course. 8.5. e-business Impact Although it captures public attention, the use of electronic tools and Internet technologies to sell and promote commodities to end users is in its infancy. BusinesstoConsumers transactions, or B2C trading, still constitutes a very small proportion of the total economy, whichever way it is measured. Figures from the US Department of commerce show that for the third quarter of 2000, online retail sales in the US amounted to US$6.373 billion. This represented only 0.78% of total retail sales. Thus, whatever the significance of e-commerce, it is not significant because of the size of the phenomenon. Furthermore, in terms of remote shopping, we have had TV shopping and catalogue shopping well before the turn of the century, but it could be argued that these forms of retailing, although similar to Internet based retailing, captured public imagination and media attention much less than online retailing. Just why this is the case is not easy to pin down, but computers have always been seen as a modern or avant-garde technology. Many would argue that professional investors and venture capitalists imaginations have also been captured by the new e-commerce possibilities. Many spectators of this phenomenon have watched with amazement as investment dollars have poured into the new dot-comsor Internet-based retailers and service providers, even as these companies continue to ma AIOU ke not solid profits but rather steady losses. After several years of hype and gravity-defying stock prices, this particular unreal strand of the new economy seems to be taking a sudden and stern correction toward reality and sobriety. In fact, at the beginning of the year 2001, the question was whether the reaction to the dot-com excesses of the so-called new economy would in fact be an over-correction. It could punish not only lacklustre dot-coms with little or no business performance but also some apparently healthy and indeed innovative technology-based firms.

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Activity 1.6 Establishing an e-business is a fairly complex venture and involves many considerations such as international legislation, taxation and legal jurisdictions. To get some idea of these issues. Let us assume that you are interested in establishing a trading centre in Hong Kong; go to www.offshore-e-com.com and search for Hong Kong. You should review all the information provided on this site and then answer the following questions: Wh

Copyrights at is Digital 21? What is the Cyberport and who are the players? What are some of the main reasons why a company would locate their e-business in Hong Kong? Briefly review how Hong Kong comp ares against Bermuda with respect to tax-efficient e-commerce, against Andorra for facilities and against Cyprus for facilities. Rank these four centres as effective e-commerce offshore bases. Regardless of how we view the future of the new economy it is undoubtedly true to say that e-business is here with us now and the most fundamental elements of doing business are changing and a totally new business environment is emerging. This no longer comprises the online born-on-the-net organisations and others who are migrating their businesses to participate in online markets. The market now facilitates the emergence of e-consortia where groups of organisations are allied together to create a stronger online force. Within these groupings, organisations may choose to focus on different categories normally classified as Business to Business (B2B), Business to Consumer (B2C), Business to Government (B2G) and Business to Employee (B2E). We will look at more detailed categories of these in the next section.

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9. Strategic Applications of IS and e-business 9.1. Business-to-Business (B2B) As stated in the previous section, most of e-commerce falls into this category as does the use of IS and ICT for inter-organisational systems (IOS) transactions and electronic transactions between organisations. Many organisations still use EDI systems to facilitate Copyrights these transactions within a specific industry group. The growth of the B2B market has resulted in the creation of e-hubs or B2B hubs where businesses can purchase multiple components from multiple suppliers. These hubs can also be referred to as portals and fall into

industries and the horizontal portal (sometimes described as a hortal) providing a set of services across a single industry. Kaplan and Sawhey (2000) further distinguish these groupings into four classifications, firstly by classifying purchases into manufacturing inputs or operating inputs and secondly by classifying how products and markets are bought. Manufacturing inputs are usually highly specialised and so tend to be sourced from vortals, whereas operating or maintenance (MRO) inputs are more general and frequently sourced from horizontal portals. Companies will also have different sourcing strategies either through systematic sourcing, which implies long term negotiated contracts, or spot sourcing where the aim is to fulfil an immediate need at the lowest possible cost. Table 1.4 Portal Classifications (Kaplan and Sawhey (2000) How Businesses Buy Operating Inputs Manufacturing Inputs MRO Hubs Catalog Hubs horizontal markets that vertical markets that Systematic Sourcing enable systematic sourcing enable systematic sourcing of operating inputs of manufacturing inputs

e.g., ProcureNet e.g., PlasticsNet.com Yield Managers Exchanges horizontal markets that vertical markets that enable enable spot sourcing of spot sourcing of Spot Sourcing manufacturing inputs manufacturing inputs

e.g., CapacityWeb.com e.g., e-steel

What Businesses Buy Each of these B2B categories operates in a different way and has a very different array of products, services and players. We will look again at these different markets in Block Two. AIOU 9.2. Business-to-Consumer (B2C) These are retailing transactions with individual shoppers such as those offered at Amazon.com. These can offer a variety of different services for consumers such as information updates, comparison shopping, online chats and consultations. Increasingly 36

these sites are focusing on customer information-rich services and developing e-communities. This is a very important aspect we will return to in Units Two and Six. E-businesses need to differentiate their products, and creating added value on their site is one of the most important strategies they can adopt. Check out www.familywonder.com for an example of how these B2C sites evolve. Such consumer-driven sites are not restricted to B2C but can also be C2C or even C2B. Typically these sites may be auction sites where consumers are selling their property Copyrights (such as cars) directly to the consumer, mirroring classified adverts in newspapers (see www.classified2000.net). Individuals will also sell products or services to businesses, such as their own skills for employment or consultancy work. 9.3. Business-to-Government (B2G) Many businesses supply services to government and government agencies. Increasingly they interact through a two-way e-procurement process where a government portal will offer contracts for goods and services and electronic tenders will then be returned by the businesses. We are also seeing the emergence of e-government, as government works to deliver its services to citizens online. Increasingly, governments see the web as the basis for more effective distribution of community services, and countries such as UK have invested significant resources in government online. There has also been a flowering of third-party providers of e-government services such as Communities Online http://www.communities.org.uk/, a UK organisation providing ICT support, networking and advice to community groups, government and public sector organisations, voluntary bodies and projects concerned with bridging the digital divide. It has played a major part in disseminating good practice, running online forums and developing links with community

networking bodies worldwide. This whole area raises issues such as equity of access to social services, digital divides (the haves and the have-nots in relation to Internet access across the world) and even questions relating to the desirability of e-democracy as electronic voting becomes a real possibility. 9.4. Business-to-Employee (B2E) Here we refer to all the intra-business activities usually provided on intranets. These may involve exchange of goods or services, information dissemination, online training and staff development programmes or community building exercises. Typically these are restricted to authorised employees and are specific, corporate and proprietary. However, e-business networks have affected the scope of intranets. Typical intranet activities are being extended to extranets to allow sharing in authorised groups from collaborating companies. Increasingly, these activities are being extended into the realm of knowledge management with greater empowerment of information workers and the development of a learning organisation. An example of this is the Knowledge Curve Intranet developed by AIOU Coopers and Lybrand as a service to company consultants and corporate tax professionals. It was then integrated with the Tax News Network (TNN), an extranet for tax consultants providing an interactive information source on the constantly changing tax laws and regulations. This is available to 75,000 employees and consultants worldwide through a Lotus Notes Domino system.

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9.5. e-business Networks These very different business modelsB2B, B2C, and so onare all opportunities that can be pursued by an organisation wishing to exploit IS for competitive advantage. These systems transcend normal organisational boundaries and encompass both intra- and inter-organisational systems. Increasingly we see networks of organisations interlinked with each other. Boundaries are fluid, and economic value behaves very differently. Sawhney and Parikh (2001) suggest that there are four new value propositions that should be Copyrights considered in the digital economy:

organisations developing plug-in modules across all the activities above so that they can fit easily into as many business value chains as possible

Planning and managing such systems requires an integrated multi-dimensional approach across the e-business and the development of new business process models. The models are not mutually exclusive. However, selecting appropriate business models requires an organisation to assess its core competencies and develop an appropriate strategy in the emarketspace. One such approach is for organisations to analyse the chain of activities which they commonly perform and the relationships they have with other organisations along this chain. This is commonly described as the Value Chain, and we will explore this concept in some depth in Units Two and Four when we look at a number of proposed approaches to the development of the strategy-focused organisation. Activity 1.7 Search the web for locally based examples of each of these four different business models (B2B, B2C, B2G, B2E). See if you can identify the answers to the following questions: 1. How many alliances are involved in the model? 2. Who are the key players? 3. What services are offered? Select an example of a B2C model operating an online store (if you cant find a local one then we suggest you try a well known international site such as Amazon.com). Evaluate AIOU this site against the three questions above and then consider: Is there a specific business strategy driving this online store? What strategies could you suggest for the future? What alliances might they develop?

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10. Summary This block has offered the basic definitions you need for understanding the concepts of MIS and the impact of IT on the new e-business environment. Some of these concepts may still appear to be strange to you and so, to give them context, we suggest you now study the case study provided in your reader. This is a typical example of a co-operative initiative to develop a single trading portal for a national community. CargoNet had many problem Copyrights s, but these were not unique to Hong Kong. These problems are typical of new e-business initiatives. A list of references is provided here, should you want to study further in this area. We

also direct you to useful websites where you can get international statistics and global reports. In the following study blocks you will be looking in detail at how you might develop an MIS strategy for your own organisation, how you can develop global information systems and conduct e-business in the global marketplace and how IT will transform your organisation. You will also be considering the skills you need to manage this transformation. Activity 1.8. Case AnalysisCargoNet Now turn to the case study reading for this unit. You should read this thoroughly and then investigate their website before you answer the following questions. CargoNet Transportation Community Network Limited http://www.arena.com was established in 1994 with the aim of developing e-commerce services tailored to the trade and transport community in Hong Kong and southern China. This is a typical example of a cooperative strategy, in this case between HIT, EDS, CSSL, Traxon Asia, Kenwa and Haffa. You should examine their site and identify what each of the joint partners provides to the strategic alliance. What is the key resource that the company is selling? How would you advise them for future strategy?

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11. References Broadbent, M, Weill, P, and St. Clair, D (1999) The implications of information technology infrastructure for business process redesign, MIS Quarterly, June 15982. Burn, J. M., Marshall, P, and Barnett, M. L. (2002). E-Business Strategies for Virtual Organisations. Butterworth Heinneman. Copyrights Davidow and Malone (1992) The Virtual Corporation: Structuring and Revitalising the Corporation for the 21st Century, HarperCollins Publishers, New York Davenport, T.H. (1997) Information Ecology: Mastering the Information and Knowledge Environment, Oxford University Press, New York Deise, M. V., Nowikow, C., King, P. and Wright, A. (2001) Executive's Guide to E-Business from Tactics to Strategy. PriceWaterhouseCoopers. Dickson, G, DeSanctis, G. (2000) Information Technology and the Future Enterprise:

New Models for Managers, Prentice Hall New Jersey. Farmoomand, A. CargoNet Transportation Community Network Limited. Centre for Asian Business, The University of Hong Kong Foster, M J (1993) Scenario planning for small businesses, Long Range Planning, 26(1): 12329. Goldman, S.L., Nagel, R.N. and Preiss, K. (1995) Agile Competitors and Virtual Organisations: Strategies For Enriching the Customer, Van Nostrand Reinhold, New York, USA Greiner, R. and Metes, G. (1996). Going Virtual: Moving Your Organisation into the 21st Century. Englewood Cliffs, NJ: Prentice Hall. Igbaria, M (1999) The Driving Forces in the Virtual Society, Communications of ACM, 42(12) Kaplan, R. S. and Norton, D. P. (2001). The Strategy Focused Organisation, Harvard Business School Press. Kare-Silver, M. de (1998) Strategy in Crisis: Why Business Urgently Needs a Completely New Approach, New York University Press, New York, USA Kare-Silver, M. de (1998) e-Shock- Electronic Shopping Revolution: Strategies for Retailers and Manufaturers, American Management Association (AMACOM), New York Kanter, J (1992) Business models and information systems architecture, Managing with Information AIOU , Prentice Hall, 5073. Kaplan, S. and Sawhney, M. (2000). E-Hubs: The New B2B Marketplaces, Harvard Business Review, May-June, 97-103. Pine, B.J. and Gilmore, J.H. (1998) Welcome to the experience economy. Harvard Business Review, 76(4): 97-105

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Plant, R. (2001). eCommerce formulation of strategy. Financial Times/Prentice Hall. Porter, M. E (1985). Competitive Advantage. New York, Free Press. Seybold, P.B (1998) Customers.com - How to Create a Profitable Business Strategy for the Internet and Beyond. Times Business, Random House, USA Shapiro, C. and Varian, H.R. (1998) Information Rules: A Strategic Guide to the Network Econom Copyrights y, Harvard Business School Press, Boston, USA. Stiroh, K. (1999) Is there a new economy? Challenge; Armonk; Jul/Aug 1999, 82-101.

Tapscott D. (1998) Growing up Digital: The Rise of the Net Generation, McGraw-Hill, New York. Tapscott, D., Lowy, A. and Ticoll, D. (eds) (1998) Blueprint to the Digital Economy: Creating Wealth in The Era of E-Business, McGraw-Hill, New York. van Hooft, F.P.C., Stegwee, R.A., (2001) E-Business Strategy: how to benefit from a hype, Logistics Information Management Vol 14, No pp 44-53 11.1. Example Reports (web addresses may have been updated) US Department of Commerce (1999) The Emerging Digital Economy II, URL: http://www.ecommerce.gov/ede US Department of Commerce (1998) The Emerging Digital Economy, URL: http://www.ecommerce.gov/emerging.htm Falling Through The Net: Defining the Digital Divide (1999). [online] Available: http://www.ntia.doc.gov/ntiahome/digitaldivide/. OECD (1997, 1998, 2000). Information Technology Outlook; Electronic Commerce [online] Available: http://www.oecd.org/

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12. Suggested answers to activities Activity 1.1 Describe the business (enterprise) functions and the major processes and procedures Identify the major functions within a functional area (e.g. finance, human resources, Copyrights marketing, etc.) within your own organisation, or department if your organisation is very large (such as the government or a bank). This is all contained in the text and supplemented by any management book. For a sm all business, although all the functions must be present, there may be very few people and so they perform various functions. If you work for a large company it will be interesting to

compare your view of the structure with theirs, ask someone to comment on Activity 1.2 A bank decides to provide access to any three of a customers accounts through its ATMs to its customers, so that with these accounts they can transfer, withdraw or deposit money. Would you classify this as an IS strategy or IT strategy? Why? Notes We must wonder why the bank chose the bank would have simply stated that only certain sorts of accounts could be accessed. IT considerations concern data transmission and communications links and capabilities, access control and permitted access. In other words, the technology framework on which the bank runs might play a part in this decision. In this sense this certainly concerns IT. If the capability to give this access is not in place without alteration of the underlying technology, then there would have to be an IT strategy or plan to install modifications to achieve this end. But although the decision to provide this capability requires certain technical issues to be resolved, perhaps even restructuring everything so that the offer is made good, it doesnt seem like much of an IT strategy on its own. At best it is an IT tactic or supporting move, because to even put the possibility in these terms assumes that there have been IT strategies which have put in place the general data handling and ETC systems that would support this activity. Of course, if this plan had been put forward in 1950, then it would AIOU have been an IT strategy. Half a century ago, if this policy had lent itself to being envisioned at all, almost everything needed to implement it would have needed to be put in place. So, do we consider this an IS strategy? Well, it certainly affects the systems which the bank uses to keep records of what customers do and want to do with funds. But, although it alters how the bank interacts with the customer, it may do nothing to alter or affect systems already in place to convert the customers demands into action at some speed or 42

other. If the strategy had been put in the terms of saying that the bank will implement systems to allow the customer to take over certain functions that had previously been performed by bank staff, then we might look at this move as part of an overall strategy. You ma y have other ideas, and lots will be relevant here, but I suggest that to consider this simple policy move a strategy is to give a grand term it does not merit. Lets call it a business initiative, or even an experiment in customer relations, and keep planning, strategy and other overarching

terms for the larger perspective. In itself, one traffic Copyrights accident does not make chaos on the roads and the decision to close libraries a quarter of an hour earlier is not a major government change in educational initiative; so lets leave exaggeration to politicians and journalists and keep a sense of proportion in our work. Activity 1.3 St ockout Replacements This organisation is tracking inventory and is therefore reacting to business. While this is highly necessary, the organisation is still in an MIS era for IT development. In order to be more strategic, the organisation should have an automatic forecasting model for stock replenishment. They should also be developing strategies for new products in differentiated markets around Asia. Activity 1.4 examples of drivers l

ency fluctuations, Asian countries emerging from Asian crisis-effects Activity 1.5 discussion points Many thinkers are challenging the idea that there really is a new economy, and you should form your own opinion on this after reading some external references. (For exam AIOU ple, the paper by Stiroh is useful.) Most commentators agree that there is a change of some kind, but the old economic rules might still apply. Your block provides descriptions of the other three terms, but you should consider other associated issues such as the Digital Divide. You might want to look at the following item: Falling Through The Net: Defining the Digital Divide (1999). [online] Available: 43

http://www.ntia.doc.gov/ntiahome/digitaldivide/. Finally, you should do some research on infrastructure facilities for ICT in your local environm ent and also consider demographics and economic factors. How successfully could you

run an e-business from your current location? Copyrights Activity 1.6 discussion points All the answers to this set of questions can be found on this website. You are encouraged to explore additional websites related to your own local environment. Remember that changes in the e-business communities happen daily and so the main market players may be different. You should bookmark im portant sites and review them often.

Activity 1.7 examples of models It should be quite easy for you to find B2B and B2C models. You are likely to have less access to B2G and B2E. For government-to-business sites, try entering a government service agentHong Kongs www.tdctrade.com would be a good start. Look at your own organisation and see what B2E services are offered. A good technique is to look at consultancy sites. Companies such as DeLoittes or McKinsey are excellent sources for company cases and best practices. As well, large corporations such as IDC (www.idc.com) provide excellent resources for this. The case we will be using in this unit se questions. Later in the course, you will look at FedEx, which gives an excellent example of B2B, B2C, B2G and B2E. B2C Model Use your knowledge of business functions and processes to identify the activities involved at each stage on the process of providing a product to a customer. How many of these are online? Can the customer complete the transaction? Are suppliers involved? How do these interact? What about logistics of distribution? could the online store do to make their website more attractive to customers? (We will be returning to Amazon.com as a major case study later in the course, so just acquaint yourself at this stage). AIOU Use your own organisation to consider all thes do these highlight for e-business?

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Case Study 1.1 CargoNet To get the best out of these cases, you should give yourself several hours altogether to read the case in detail and investigate the websites. Remember that you are being asked for your opinion here, and there is no right or wrong answer. It will help you if you draw up some diagrams and trace the organisational interactions against business processes. Copyrights There is a long history behind CargoNet, and you might find it interesting to read some of the news releases dating back to the late 80s! You will find these identified under the Tradelink name. Another interesting comparison can be made with the Singapore Tradenet model.

Case Study 1.1 is given in Block 8 of you study material.

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Document Outline
1. Objectives 2. Overview 3. Review of Enterprise Concepts 3.1. Functional areas and business functions 3.2. Business processes and procedures Planning Organising Directing Controlling 3.3. Impact of Information Technology on business processes 3.4. Integration of business processes and information systems 4. Information Systems versus Information Technology 4.1. Definitions 4.2. IS and IT strategies 5. Impact of MIS on organisations 5.1. Impact of MIS on the nature of work 5.2. Impact of IT on business functions 5.3. Impact of IT on industrial competition 5.4. Impact of IT on organisational strategy 6. Evolution of Management Information Systems 6.1. Three-era model of IT Data processing (DP) era Management information systems (MIS) era Strategic information systems (SIS) era 7. IT as a strategic resource 7.1. Technology as the enabler of e-business 8. The New Economy, the Internet Economy and e-business 8.1. The e-economy 8.2. The New Economy 8.3. The Internet Economy Layer 1 The Internet Infrastructure Indicator Layer 2 The Internet Applications Infrastructure Indicator Layer 3 The Internet Intermediary Indicator Layer 4 The Internet Commerce Indicator 8.4. e-business Technology- Based Infrastructure Services Products and Structures 8.5. e-business Impact 9. Strategic Applications of IS and e-business 9.1. Business-to-Business (B2B) 9.2. Business-to-Consumer (B2C) 9.3. Business-to-Government (B2G) 9.4. Business-to-Employee (B2E) 9.5. e-business Networks 10. Summary Activity 1.8. Case Analysis CargoNet 11. References 11.1. Example Reports (web addresses may have been updated) 12. Suggested answers to activities Activity 1.3Stockout Replacements