I S 300 Midterm
Why is outsourcing able to happen now?
"This" is able to happen because of information technology
Enterprise Resource Planning System (ERP)
A cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company. Internal consolidation for a fragmented problem. Consolidates databases into a centralized one.
Touch points
A method of interaction with a customer, such as telephone, email, customer service desk, conventional mail, web site, or retail store
Increased richness
A reason e-commerce is different: the internet increases the depth, detail, and scope of information (Ex: online shopping is multi-dimensional...you have pictures, zoom, description, customer reviews)
e-commerce
"This" strengthens and expands revenue because it lets your business sell brand new things in brand new ways. It also helps you sell existing things in new ways. Ex: MLB got more revenue when they expanded to "this" because of video streaming of games, ads on MLB.com, ticket sales online, memorabilia sales online, video games, and FANTASY BASEBALL
Digital markets
"this" enables: -price discrimination -dynamic pricing -disintermediation
Digital markets
"this" reduces: -information asymmetry -search costs -transaction costs -menu costs
Social technology
A reason e-commerce is different: user-generated content
DSS
Gives you cost-minimizing and optimizing arrangements; aggressive analysis; gives you a recommendation
Zara's profitability and profit margin is...
High. Because it's revenues are high (quantity, selling fast, high price) and costs are low (no advertisement spending, low manuf. costs, low inventory cost)
An organizational level has three levels of systems:
Three levels of systems for this: 1) Strategic level systems at the top of the pyramid 2) Management level systems in the middle 3) Operational level systems at the bottom
Three qualities of Zara's consumer purchasing behavior
Three qualities of this: buy more, impulse buy, come back more often
Three systems of CRM
Three systems of "this": 1) Customer service 2) Marketing 3) Sales
Operational Level systems
Transaction processing systems (TPS) corresponds with "this" on the organizational structure
**Trends in information technology capital investment:
Trends in "this": 1) During the 2008 recession, IT investment still grew 2) IT investment was more stable than total investment 3) Half of total investment is IT, which is the biggest investment 4) Both IT investment and total investment curves fluctuate together because the ups and downs of IT investment resulted because of the fluctuations from total investment 5) IT investment grew from 30% to 52% between 1980 and 2008
*The technology dimension of IS has 5 components:
1) Hardware 2) Software 3) Storage 4) Communications technology 5) Networks
universal standards
A reason e-commerce is different: communication between different systems are seamless (Ex: building a website is the same for everyone)
Personalization/customization
A reason e-commerce is different: individualized commerce (Ex: if you go to Amazon, it has recommendations for you)
Interactivity
A reason e-commerce is different: more interactions with customers
Information density
A reason e-commerce is different: reduces information cost and information asymmetry (asymmetry is a bad thing...symmetry means buyer and seller have same amount of information...people can search for more info because of e-commerce)
Ubiquity
A reason e-commerce is different: shopping can take place anywhere
Global reach
A reason e-commerce is different: the internet increases the number of customers across national boundaries
IT*
A subject studying technology and the management & process of information especially in large organizations. -how computers store information -business computer professionals=IT specialists -software technology departments=IT department
IS*
A system that collects and processes data (information) and provides it to managers at all levels for decision making, planning, program implementation and control -MUCH more than technology -Refers to business discipline that studies the management/development/analysis of IT in a business environment
Global outsourcing has done "what" from 1991 to 2004
It has increased from 40% to 80%
Supply chain execution systems
Manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner
Management level systems
Management Information Systems (MIS) and Decision Support systems (DSS) corresponds with "this" on the organizational structure
Offshoring
Outsourcing to a different country.
MIS
Takes input from a variety of TPS. Compiles data for you to read better; passive; puts everything on the table for you;
Target market of Zara (3 qualities)
Target market of "this": fashion-minded, young, city dweller
Cost transparency
When it's easier to compare costs online because the cost of something in a physical store is opaque
**Why online prices should be lower
Why online prices should be "this": Advantages of regular shopping: 1) Affective processing (images, sounds, smells) vs. cognitive faculties (price and feature comparison) 2) Transaction costs: visible vs invisible 3) Delayed gratification: high and low
Manufacturing and production deals with...
assembling the product, checking for quality, and producing the bills of materials
There is a growing interdependence between a firm's information systems and its...
business capabilities. Changes in strategy, rules, and processes require changes in hardware, software, and telecommunication. What the firm wants to do depends on what its systems will permit it to do.
Information technology shapes new options in...
business strategy
Information technology supports and enables...
business strategy
Brand premium
willingness to pay more for a well-known brand than a not well-known brand. This gets lower and lower because of the internet.
Retail e-commerce grew
"This" has grown since 1995. Since 2010, it has been growing 12% annually.
Supply chain
A network of organizations and business processes for procuring raw materials, transforming into products, and distributing them to customers; materials, information, and payments flow through in different directions; coordination of business processes to speed information, product, and fun flows up and down a supply chain to reduce time and inventory costs
Mobile commerce (m-commerce)
A category of e-commerce: Buying and selling on handheld devices
Consumer-to-consumer (C2C)
A category of e-commerce: Individuals using the web for private sales or exchange (eBay.com)
Business-to-business (B2B)
A category of e-commerce: Sales of goods and services to other businesses (grainger.com, alibaba.com)
Business-to-customer (B2C)
A category of e-commerce: retailing of products and services directly to individual customers (walmart.com)
Organizational assets
A complimentary asset that includes culture, business model, processes, and IS development
Managerial assets
A complimentary asset that includes management support, innovation, teamwork, and training
Social assets
A complimentary asset that includes society's investment, laws and regulations, internet, education, and IT services
Software
A component of the technology dimension of IS: detailed preprogrammed instructions (Ex: Microsoft office)
Networks
A component of the technology dimension of IS: links computers to share data or resources
Hardware
A component of the technology dimension of IS: physical equipment (Ex: computer)
Storage
A component of the technology dimension of IS: physical media for storing data and the software (Ex: flash drive)
Communications technology
A component of the technology dimension of IS: transfers data from one physical location to another (Ex: bluetooth)
Upgrading the IT system for Zara would help with these two things:
Agility and flexibility
Supply Chain Management System (SCM)
An enterprise application that helps businesses manage relationship with their suppliers
Customer Relationship Management (CRM) System
An enterprise application that helps firms manage relationship with customers
E-tailer
An internet business model: An online retail store for goods (Amazon, Newegg.com)
Transaction broker
An internet business model: Facilitates online transactions (eTrade.com, Expedia.com)
Market creator
An internet business model: Provides a trading platform for individuals and firms (eBay, craigslist.org)
Community provider
An internet business model: Provides an online community to focused groups (Facebook, Instagram)
Content provider
An internet business model: Provides digital content (WSJ.com, ESPN.com)
Portal
An internet business model: Provides initial point of entry to Web, specialized content, services (Yahoo, MSN.com)
Service Provider
An internet business model: Provides online services, including search service (PayPal, flickr.com, dropbox)
Supply chain management systems
Automate flow of information between company and supply chain partners
Benefits of ERP
Benefits of "this": -Decision support and KM: provides vital cross-functional information on business performance quickly to managers to significantly improve their ability to make better decisions in a timely manner -Enterprise agility: ERP breaks down the walls of business processes, information systems, and info resources -Quality and Efficieny: ERP creates a framework for integrating and improving a company's internal business processes that results in significant improvements in quality/efficiency of customer service, production, and distribution -Cost saving: reduces transaction processing costs and hardware, software, and IT support staff costs
*Benefits of CRM
Benefits of "this": -Increased customer satisfaction -More effective marketing (lower marketing costs) -Lower costs for customer acquisition and retention -Increased revenue (identify most profitable segments) -Reduce churn rate -Realizing customer lifetime value
e-commerce
Buying and selling electronically
*Categories of e-commerce
Categories of "this": Business-to-customer (B2C) Business-to-business (B2B) Consumer-to-consumer (C2C) Mobile commerce (m-commerce)
Challenges of ERP systems
Challenges of "this": -Difficult to build (changes in operations) -Technology (complexity, time consuming, costly) -Centralized organizational coordination and decision making (not best way for all firms to operate...Ex: companies with a flat hierarchy structure)
Social marketing cons
Cons of "this": -misses non-social segments, doesn't work with serious type people, polarizing (opinions are exaggerated on the internet), only works with certain products
Costs of ERP
Costs of "this": Reengineering: 43% Hardware: 15% Data Conversions: 15% Training: 15% Software: 15%
What's the most valuable part of an organization?
Data...it's irreplaceable
Direct impacts of cost transparency
Direct impacts of "this": -Low profits (AT&T vs. Sprint) -Services and products as commodities (Ameritrade, E-trade vs. Merrill Lynch) -Customer loyalty (P&G) -Reputation damage by price unfairness (auto industry in 1970s)
Amazon
E-commerce started in 1995 with who?
Strategic level systems
Executive support systems (ESS) corresponds with "this" on the organizational structure
CRM facts
Facts about "this": -It costs more to sell to a new customer than an existing one because of transaction costs -The typical dissatisfied customer tells 8-10 ppl -Profits can be increased 85% by increasing customer retention by 5% -Customer relationships have been traditionally tricky to manage -Social media implications
**Four major business functions:
Four major "this": 1) Manufacturing and production 2) Sales and marketing 3) Finance and accounting 4) Human resources
Functions of SCM systems
Functions of "this": -decide when and what to produce, store, and move -rapidly communicate orders/product design -track the status of orders/shipment -check inventory availability and monitor inventory levels -reduce inventory, transportation, and warehousing costs -plan production based on actual customer demand
*Functions of CRM
Functions of this: -Manages ways used by firms to deal with existing and potential new customers -Capture customer data from various sources -Consolidates customer data and provides analytical tools for answering questions -Provides a unified view of customer across the company -Distribute customer information to various systems and customer touch points
Supply chain planning systems
Generate demand forecasts for a product (demand planning) and help develop sourcing and manufacturing plans for that product
2.4 billion
How many internet users worldwide?
IT vs. IS
IT: application of technology in business environment IS: broader concept than just technology...has a behavioral component
Outsourcing
Letting someone else do something that you can't or they are better at. Results: speed faster, quality better, cost cheaper, risk lower, focus on important things
Most popular HTML editors"
Most popular "this": -Microsoft Expression Web -Adobe Dreamweaver -Google sites
*Internet business models
Market Creator Service Provider Community Provider Portal E-tailer Content provider Transaction broker (they don't have to be exclusive...a business can have multiple models)
Customer centricity
Maximizing the value of every customer interaction
Push-based model
Production master schedules based on forecasts of demand for products, and products are "pushed" to customers Customers purchase what is on shelves.
Social marketing pros
Pros of "this": -wider reach, cheaper, better targeting, more relevant and personal, faster implementation, more ideas, more involvement from customers
Reasons for Amazon selling textbooks first:
Reasons for Amazon selling "this" first: -selling to students who are early adopters of new technology -steady demand for "this"...it's robust and less affected by economic downtown -not a lot of competition -inventory and transportation costs are low -profit margin is high -item standardization (all you need is an ISB #)
*Reasons for cost transparency
Reasons for this: -Information: more info about prices, features, and quality on internet (proprietary info is now available, price comparison is easy) -Brand premium: internet technology lowered the risk that buyers paid for inferior brands before -Price floor: buyer-led pricing and reverse auction allow buyers to see price floor easily -Rational shopping: less impulse buy -New objectives: customer base vs. profit
Revenue options for e-commerce
Revenue options for "this": Commerce (sales, transaction fees) Content (subscription fees, registration fees) Community (advertising fees, membership fees) Infrastructure (software sales, license, maintenance, install)
*Six strategic business objectives of IT:
Six strategic business objectives of "this": 1) Operational excellence (UPS) 2) New products, services, and business models (Spotify) 3) Customer and suppler intimacy (JCPenney and TAL) 4) Improved decision making (Verizon) 5) Competitive advantage (Walmart) 6) Survival (Citibank and ATMs)
Pull-based model
Supply chain is driven by actual customer orders or purchases (Zara, pizza)
TPS
Supports operational activities and transactions
ESS
Supports the job of executives; it's like the dashboard of an organization: monitors the performance of the firm; takes information from MIS and DSS; helps senior management tackle and address strategic issues
Depreciation
The longer you hold onto something, the more its value will go down (Ex: computer products, trendy fashion items)
Two challenges and opportunities for customers in terms of CRM
Two challenges and opportunities for customers in terms of "this": -they are more involved (JetBlue) -they are more empowered (consumer vigilantes)
Customer lifetime value (CLTV)
The difference between revenues and expenses minus the cost of promotional marketing used to retain an account
Churn rate
The number of customers who stop using or purchasing products or services from a company
Anonymity
The one exception for prices being lower online
Housing cost
The physical cost of holding something. Products that are costly to house: perishable foods, big products, special handling (gas), and valuable products
These things have to be done using a push-based model
These things have to be done using "this" model: fruit, produce, meat, etc.
MIS and DSS
These two systems serve the monitoring, controlling, decision-making, and administrative functions
Zara's taste for fashion (3 components)
This company's taste for fashion: changes constantly, hard to predict, hard to influence
**The Leavitt Diamond
This graph shows how business processes, organizational form, and requisite people skills are affected when IT is introduced.
Downstream
This part of the supply chain deals with orders, return requests, repair and service requests, and payments. It includes the distributor, retailer, then customer
Upstream
This part of the supply chain deals with the suppliers and their suppliers by tiers
*Three complimentary assets:
Three "blank" assets: 1) Organizational assets 2) Managerial assets 3) Social assets
*Three findings by Brynjolfsson and Smith about price sensitivity
Three findings by Brynjolfsson and Smith about "this": 1) prices online < conventional store 2) Price fluctuation online > conventional store 3) Price dispersion online > conventional store
**Variation in ROI of IT
Variations in these two things: -there's not quite a correlation between ROI and IT stock -It's dependent on COMPLIMENTARY ASSETS -The same investment in Europe and US will lead different returns
Textbooks
What did Amazon first sell and focus on?
Excel Solver
What to include in "this": -include relationships -specify optimization target -list constraints -solve!
Information systems are more than...
computers
Sales and marketing deals with...
identifying customers, making customers aware of the product, selling the product
Human resources deals with...
hiring employees, evaluating employees job performance, and enrolling employees in benefits plans
Zara's reliance on forecasting is...
light
Zara's spending...
light
Zara's durability...
low
e-business
managing a firm electronically (no brick and mortar). E-commerce is a subset of this.
Three dimensions of IS that shape the systems:
organization, management, and information technology
An organization's information system uses it's input (information) to lead to an...
output (strategy, new models, etc.)
Zara's location...
prime
Finance and accounting deals with...
paying creditors, creating financial statements, and managing cash flow
