Module 12
Managing Information Resources and
Technologies
Module Contents
• Introduction
• Module Objectives
• Business Use of the Internet:
• Customer value and Internet
• Fundamentals of electronic commerce
• The key terms and concepts defined
12.1 INTRODUCTION:
Business use of the Internet is moving from an electronic information exchange to a
broad platform for strategic business applications. Applications like collaboration among
business partners, researching competitors, providing customer and vendor support, and
buying and selling products and services have become major business uses of the
Internet. Studies show the strong growth of crossfunctional business applications, and
the emergence of applications in engineering, manufacturing, human resources, and
accounting.
12.2 OBJECTIVES
• Describe how information systems can have a strategic impact on a business and
give examples of information systems that create a competitive advantage for a
business.
• Describe the main types of electronic commerce.
• List the functions provided by electronic commerce systems.
• Explain why interorganizational systems are used in business alliances.
• Describe several ways that a business can participate in an interorganizational
system.
• Explain how an electronic data interchange system functions.
• Explain what global information systems are why international businesses need
them.
• Describe different forms that global information systems can take and how each
form relates to international business strategy.
• Explain what a strategic information system is an what types of information
systems are strategic.
• Describe how strategic information system opportunities can be identified in
business.
• Describe how strategic information system opportunities can be identified in
business.
12.3 BUSINESS USE OF INTERNET
The Internet is proving to be a versatile tool as an information technology platform on
which to base a variety of business strategies. Conceptually, business use of the Internet
can be group into a few major application categories:
1. Communications and collaboration
2. Electronic Commerce
3. Interactive marketing
4. Strategic Alliances
12.3.1 Communications and Collaboration:
The Internet, intranets, and extranets support realtime global communications and
collaboration among employees, customers, suppliers, and other business partners.
Internet features which enable internal and external business information to be
researched, solicited, disseminated, and shared include:
1. Interactive web sites
2. Email
3. Bulletin board systems
4. Discussion groups
5. Audio and videoconferencing
The Internet enables members of different organizations and people at different locations
to work together as members of virtual teams on business projects to develop, produce,
market, and maintain products and services.
Electronic Commerce
The Internet, the World Wide Web, and Internetbased technologies such as intranets and
extranets provide global links to a company=s customers and suppliers. This enables
electronic commerce applications marketing, buying, selling, and support of products
and services over these networks. Electronic commerce applications include:
1. Interactive order processing at company web sites
2. Electronic data interchange (EDI) of business transaction documents
3. Secure electronic funds transfer (EFT) payments systems.
Interactive Marketing
Because of the Internet, marketing a company and its products and services has become
an interactive process. A company=s web site can now offer more than hyperlinked
multimedia product catalogs and promotional material. The Internet and the Web enable
companies to create a dialog with customers through:
1. Online discussion groups
2. Bulletin boards
3. Electronic questionnaires
4. Mailing lists
5. Newsletters
6. Email exchanges
Thus, customers can be interactively involved in the development, marketing, sales, and
support of products and services, along with a company=s market researchers, product
designers, marketing and sales staff, and support specialists.
Strategic Alliances
The Internet enables companies to form strategic alliances with customers, suppliers,
consultants, subcontractors, and even competitors. Internet and extranet global links to
such business partners support network organizational structures and the formation of
virtual companies. The Internet enables global alliances of business partners to be
quickly formed to take advantage of market opportunities by interconnecting the unique
strengths of each partner into an integrated network of business resources and
capabilities.
FedEx and UPS
The World Wide Web is a key business battlefield for FedEx and UPS as they compete
for leadership of the express package delivery market. Both companies are:
1. Implementing a variety of electronic commerce and logistics management
applications using Internet, intranet, and extranet technologies.
2. Have set longrange business goals of doing all customer business interactions
and operations online using the Internet
12.3.2 Interactive Marketing
The Internet has made interactive marketing process possible. Some of the
characteristics of interactive marketing include:
1. Intranets and extranets and other networks may also be used to enable multilevel
interaction between a company=s marketing, development, and customer support
personnel, and its customers and prospective customers.
2. Goal of interactive marketing is to attract and keep customers who will become
partners with a business in creating, purchasing, and improving products and
services.
3. Customers are actively engaged in a networkenabled proactive and interactive
marketing experience.
4. Interactive marketing depends on many of the capabilities of the Internet and the
World Wide Web to enable the interactive process.
Push versus Pull Marketing:
The interactive marketing process includes a choice between push or pull marketing
methods.
Pull technologies: Rely on the user to access the services of the Internet or the Web (or
intranets and extranets) using a web browser.
Push technologies: Rely primarily on software called Web broadcasters, or net
broadcasters. These tools can transmit a variety of information from the Web or other
sources to the users PC.
Merits of push technology include:
1. Save the user time and effort while providing prompt delivery of critical
information.
2. Information can be provided more selectively and efficiently than surfing the
Web, or exchanging Email, voice mail, or paper messages.
Points against push technology include:
1. Push information is distracting to users= work activities
2. Push information worsens users information overload
3. Push information hogs a company=s network bandwidth.
12.3.3 The Business Value of the Internet:
Business values that companies derive from their business applications on the Internet
include:
1. Substantial cost savings can arise because applications that use the Internet and
Internetbased technologies (like intranets and extranets) are typically less
expensive to develop, operate, and maintain than traditional systems.
2. The use of the Internet and the Web for interactive marketing and customer
service.
3. Generating revenue from the Internet through electronic commerce applications is
a growing source of business value.
Assessing Strategic Business Value:
One way to assess the business value of the Internet is by using the Internet strategy
matrix which emphasizes that a company should undertake an internal and external
assessment of itself and its environment to discover Internet applications that add
strategic business value to the organization. This may include steps such as:
1. Making an internal assessment of the organizations communications flows and
information resources to discover communication and information deficiencies
that could be improved by Internet technologies.
2. An external assessment should include an evaluation of the Internet activity of a
company’s competitors and business partners.
3. Assess the unmet needs of current and prospective customers that might be met
by Internetbased electronic markets.
The Internet can be viewed as having six strategic capabilities that support a variety of
key applications that can add business value to a company. These capabilities include:
1. Global dissemination
2. Interaction
3. Customization
4. Collaboration
5. Electronic commerce
6. Integration
12.3.4 Global Dissemination:
Global communications has become a fact of life in business. Email, electronic mailing
lists, World Wide Web sites, and other Internet services have made international
dissemination of information significantly faster, cheaper, and easier. Characteristics
include:
1. Increased cost savings and efficiency of global communications
2. Ability to reach, sell, and provide customer service to new or expanded
international markets.
Business Value: increased cost savings and efficiency of global communications, and the
ability to reach, sell, and provide customer service to new or expanded international
markets.
Interaction:
Interactive communications is another key capability of the Internet. This may take the
form of:
1. Interactive web sites
2. Discussion forums and chat groups
3. Interactive forms of customer orders, feedback, and technical support
4. Immediate Email responses to online queries and comments.
5. Fast, efficient feedback from customers and responses from customer support
specialists provide multiple opportunities to demonstrate a company=s
responsiveness to its customers.
Business Value: Helps a business build customer value and loyalty.
Customization:
The ability to automatically provide information and services customized to an individual
customer or user is a strategic business capability of the Internet, intranets, and extranets.
Characteristics include:
1. Ability to automatically provide information and services customized to an
individual customer or user.
2. Information can be accessed and disseminated from network servers on an
individual basis, depending on a variety of factors.
Business Value: Efficiency, low cost, and interactive target marketing to an individual
customer or prospect.
Collaboration:
The Internet, intranets, and extranets enable easy and efficient access to shared data and
other network resources. Characteristics include:
1. Project information at web sites can be easily shared using web browsers.
2. Groupware tools help coordinate projects and manage the information they store
on servers at crosslinked web sites.
Business Value: Enhances the collaboration process among teams, workgroups, and
business partners.
12.3.5 Electronic Commerce:
The Internet has become the technology platform for electronic commerce.
Characteristics include:
1. The Internet, along with intranets and extranets, link companies to their customers
and suppliers, and thus enables them to electronically market, buy, sell, and
support products and services.
Business Value: Lies in electronic commerce applications, which have opened up new
markets or make possible new products and services.
Integration:
The internetworked enterprise integrates its external online activities with its internal
business process. Characteristics include:
1. A company=s Internet web site can be linked by extranets to selected operational
databases stored on its intranet web servers. This provides more detailed, upto
date information that can be used to support electronic commerce applications.
2. Intranets promote the integration of crossfunctional business processes within a
company.
Business Value: Arises from efficiencies and innovations that make possible in internal
and external business processes.
12.4 CUSTOMER VALUE AND THE INTERNET
For many companies, the chief business value of the Internet lies in its ability to:
1. Help them keep customers loyal
2. Anticipate customers future needs
3. Respond to customer concerns
4. Improve customer service
The focus on customer value recognizes that quality, rather than price has become the
primary determinant in a customer’s perception of value. From a customer’s point of
view, companies that:
1. Consistently offer the best value are able to keep track of their customers=
individual preferences
2. Keep up with market trends
3. Supply relevant information attractively, anytime, anywhere, in a variety of media
4. Provide customer services tailored to individual needs.
Customers want and expect companies to communicate with them and service their needs
over the Internet. The Internet has become a strategic and comparatively lowcost
opportunity for companies large and small to offer fast, responsive, highquality service
tailored to individual customer preferences.
Internet and Internet technologies help make customers the focus of a business. For
example:
1. Create new channels for interactive communications within a company with
customers, and the suppliers, business partners, and others in the external
environment.
2. Enable continual interaction with customers by most business functions and
encourages crossfunctional collaboration with customers in product
development, marketing, delivery, service, and technical support.
3. Business functions throughout the enterprise can contribute to effective customer
response to requests. This encourages the creation of crossfunctional discussion
groups and problemsolving teams dedicated to customer involvement, service
and support.
12.5 FUNDAMENTALS OF ELECTRONIC COMMERCE
Electronic commerce is more than just buying and selling products online. Instead, it
encompasses the entire online process of developing, marketing, selling, delivering,
servicing, and paying for products and services purchased by internet worked, global
virtual companies of customers, with the support of a worldwide network of business
partners.
Electronic commerce systems rely on the resources of the Internet, intranets, extranets,
and other computer networks. Electronic commerce can include:
1. Interactive marketing, ordering, and payment processes on the World Wide Web
2. Extranet access of inventory databases by customers and suppliers
3. Internet access of customer records by sales reps and customer service
4. Involvement in product development via Internet newsgroups and Email
exchanges.
12.5.1 Foundations of Electronic Commerce
The Internet, intranets, and extranets provide vital electronic commerce links between the
components of a business and its customers, suppliers, and other business partners. This
allows companies to engage in three basic categories of electronic commerce
applications:
1. Businesstoconsumer
2. Businesstobusiness
3. Internal business processes
BusinesstoConsumer:
In this form of electronic commerce, businesses must develop attractive electronic
marketplaces to entice and sell products and services to customers. Examples include:
1. Companies may offer multimedia web sites that provide virtual storefronts and
virtual shopping malls.
2. Interactive order processing
3. Secure electronic payment systems
BusinesstoBusiness:
This category of electronic commerce involves both electronic business marketplaces and
direct market links between businesses. Examples include:
1. Many companies offer the business community a variety of marketing and
product information on the World Wide Web.
2. Companies rely on electronic document interchange (EDI) via the Internet or
extranets for direct computertocomputer exchange of business transaction
documents with their business customers and suppliers.
Internal Business Processes
All business functions and many business processes are affected by electronic commerce
activities. For example:
1. Many internetworked enterprises are customerdriven and marketdriven.
2. Organizations continually monitor and evaluate online information about their
customers, suppliers, and competitors from their web sites and discussion groups.
3. Information available via intranets to all business functions is used to shape the
company’s product development, marketing programs, customer service, and
competitive strategies.
Electronic Commerce Technologies:
Electronic commerce technologies include:
1. Information technologies
2. Telecommunications technologies
3. Internet technologies
Electronic commerce can be viewed as depending on six layers of technology:
1. Application services
2. Broker and data management
3. Interface services
4. Secure messaging
5. Middleware services
6. Network infrastructure
12.5.2 Electronic Commerce Applications:
The Internet presents businesses, entrepreneurs, and investors with a wideopen economic
model on which to base electronic commerce. Some of the key characteristics of the
economic model for electronic commerce on the Internet include:
1. Barriers to entry are low
2. Market niches abound
3. Revenue sources are many
4. No one owns the market
5. The same technology is available to everyone
6. Access is becoming universal
7. There is room for teams of successful players
12.5.3 BusinesstoConsumer Commerce:
Electronic commerce on the Internet between businesses and consumers is accelerating
the impact of information technology on consumer behaviour and business processes and
markets.
A triad of interrelationships exist between electronic commerce and technology,
consumer behaviour and choice, and business processes and marketplace competition.
The wideopen economic model of the Internet and the fast pace of change in Internet
technologies are fundamental contributors to the development of electronic commerce
applications between businesses and consumers.
Retailing on the Web
A basic fact of Internet retailing is that all web sites are created equal. No site is any
closer to its customers. This makes it vital that businesses find ways to keep customers
coming back to their stores. The key to this goal is to optimize factors such as:
1. Performance and service efficiency
2. Personalization
3. Socialization
4. Look and feel of the site
5. Offering incentives to purchase
6. Security
12.5.4 BusinesstoBusiness Commerce
Businesstobusiness electronic commerce is the wholesale side of the commercial
process. The interrelationships with other businesses needed to build and sell a product
make up a network of business relationships that is called the supply chain. Electronic
commerce systems like electronic data interchange (EDI), and business management
processes like supply chain management seek to reengineer and streamline traditional
supply chain processes.
Supply Chain Management:
Supply chain management (SCM) is a management concept which integrates the
management of supply chain processes. The goal of SCM is to:
1. Cut costs
2. Increase profits
3. Improve performance in relationships with customers and suppliers
4. Develop valueadded services that give a company a competitive edge
The components of supply chain management include:
1. Supplier management
2. Inventory management
3. Distribution management
4. Channel management
5. Payment management
6. Financial management
7. Sales force management
Wholesaling on the Web:
Wholesale electronic commerce and supply chain management rely on many different
information technologies, most of which can be implemented on the Internet, the World
Wide Web, and corporate intranets and extranets. These include:
1. Email
2. Electronic business forms
3. Bulletin board systems
4. Electronic data interchange
5. Electronic funds transfers
6. Web sites with multimedia marketing information and product catalogs
7. Interactive order processing systems
Electronic Data Interchange:
Electronic data interchange (EDI) involves the electronic exchange of business
transaction documents over computer networks between trading partners (organizations
and their customers and suppliers). Data representing a variety of business transaction
documents are electronically exchanged between computers using standard document
message formats. Characteristics of EDI include:
1. EDI software is used to convert a company=s own document formats into
standardized EDI formats as specified by various industry and international
protocols.
2. Formatted transaction data are transmitted over network links directly between
computers, without paper documents or human intervention.
3. Besides direct network links between the computers of trading partners, third
party services are widely used.
4. EDI eliminates the printing, mailing, checking, and handling by employees of
numerous multiplecopy forms of business documents.
Benefits of the business use of EDI include:
1. Reduction in paper, postage, and labour costs
2. Faster flow of transactions
3. Reductions in errors
4. Increases in productivity
5. Support of justintime (JIT) inventory policies
6. Reductions in inventory levels
12.5.5 Electronic Payments and Security
Payments for the products and services purchased is an obvious and vital step in the
electronic commerce transaction process. Concerns of electronic payments and security
include:
1. The nearanonymous electronic nature of transactions taking place between the
networked computer systems of buyers and sellers, and the security issues
involved.
2. Electronic payment process is complex because of the wide variety of debit and
credit alternatives and financial institutions and intermediaries that may be part of
the process.
Electronic Funds Transfer:
Electronic funds transfer (EFT) systems are a major form of electronic commerce
systems in banking and retailing industries. EFT systems use a variety of information
technologies to capture and process money and credit transfers between banks and
businesses and their customers.
Secure Electronic Payments on the Internet:
When you make an online purchase on the Internet, your credit card information is
vulnerable to interception by network sniffers, software that easily recognizes credit card
number formats. Several basic security measures are being used to solve this security
problem. They include:
1. Encrypt (code and scramble) the data passing between the customer and merchant
2. Encrypt the data passing between the customer and the company authorizing the
credit card transaction
3. Take sensitive information offline
Security methods developed include:
1. Secure Socket Layer (SSL) automatically encrypts data passing between your
web browser and a merchant=s server.
2. Digital Wallet you add security software addon modules to your web browser.
This enables your browser to encrypt your credit care data in such a way that only
the bank that authorizes credit card transactions for the merchant can see it.
3. Secure Electronic Transaction (SET) software encrypts a digital envelope of
digital certificates specifying the payment details for each transaction.
4. Offline take credit card and other sensitive information offline by using an 800
number to set up an account which includes your credit card information and E
mail address. Prior to approval of a credit transaction, you must respond to an E
mail inquiry on whether you want to pay for the product or service.
5. Micropayment Systems create digital currency or digital tokens called ecash
for making payments that are too small for credit card transactions. Encryption
and authentication techniques are used to generate strings of data that can be
handled like currency for making cash payments.
12.6 THE KEY TERMS AND CONCEPTS DEFINED
1. Business Uses of the Internet Categories of ways in which companies are using
the Internet for business include: communications and collaboration, electronic
commerce, interactive marketing, and strategic alliances.
2. Business Value of the Internet Internet using organizations are deriving business
value from their Internet applications in areas such as: cost savings, customer
service, marketing, and revenue generation.
3. Customer Value of the Internet Customers want and expect companies to
communicate with them and service their needs over the Internet. The continual
interaction with customers encourages crossfunctional collaboration with
customers in product development, marketing, delivery, service, and technical
support.
4. Electronic Commerce In this form of electronic commerce, businesses must
5. BusinesstoBusiness develop attractive electronic marketplaces to entice and sell
products and services to customers.
6. Electronic Commerce This category of electronic commerce involves both
7. BusinesstoConsumer electronic business marketplaces and direct market links
between businesses.
8. Electronic Commerce The Internet presents businesses, entrepreneurs, and
9. Economic Model investors with a wideopen economic model on which to base
electronic commerce.
10. Electronic Commerce Electronic commerce can be viewed as depending on six
11. Technology Architecture layers of technology: application services, brokerage
and data management, interface services, secure messaging, middleware services,
and network infrastructure.
12. Electronic Data Interchange The electronic transmission of source documents
between the computers of different organizations.
13. Electronic Funds Transfer The development of banking and payment systems
that transfer funds electronically instead of using cash or paper documents such as
checks.
14. Electronic Payment Systems Alternative cash or credit payment methods using
various electronic technologies to pay for products and services in electronic
commerce.
15. Interactive Marketing A dynamic collaborative process of creating, purchasing,
and improving products and services that builds close relationships between a
business and its customers, using a variety of services on the Internet, intranets,
and extranets.
16. Pull Marketing Marketing methods that rely on the use of web browsers by end
users to access marketing materials and resources at Internet, intranet, and
extranet web sites.
17. Push Marketing Marketing methods that rely on web broadcasting software to
push marketing information and other marketing materials to end users=
computers.
18. Retailing on the Web The key goal of retailing on the Web is to optimize factors
such as performance and service efficiency, personalization, socialization, the
look and feel of the site, offering incentives to purchase, and security.
19. Security of Electronic Several basic security measures are being used to solve
20. Commerce security problems: (1) encrypt (code and scramble) the data passing
between the customer and merchant, (2) encrypt the data passing between the
customer and the company authorizing the credit card transaction, or (3) take
sensitive information offline.
21. Supply Chain The network of business processes and interrelationships among
businesses that are needed to build, sell, and deliver a product to its final
customer.
22. Supply Chain Management Integrating management practices and information
technology to optimize information and product flows among the processes and
business partners within a supply chain.
23. Virtual Communities Groups of people with similar interests who meet and
share ideas on the Internet and online services and develop a feeling of belonging
to a community.
24. Virtual Companies A form of organization that uses information technology to
link the people, assets, and ideas of a variety of business partners, no matter
where they may be located, in order to exploit a business opportunity.
25. Virtual Shopping Malls An online multimedia simulation of a shopping mall
with many different interlinked retail web sites.
26. Virtual Storefronts An online multimedia simulation of a retail store shopping
experience on the Web.
27. Virtual Teams A team whose members use the Internet, intranets, extranets, and
other networks to communicate, coordinate, and collaborate with each other on
tasks and projects, even though they may work in different geographic locations
and for different organizations.
28. Wholesaling on the Web Wholesaling on the Web involves information
technologies such as Email, electronic business forms, bulletin board systems,
electronic data interchange, electronic funds transfers, web sites with multimedia
marketing information and product catalogs, interactive order processing systems,
and so on.