Strategic Information Management Opportunities - Essay Example

Strategic Information Management (Degree for which this dissertation is being submitted) Submitted in part fulfillment of the Date of Submission Every business is an information business. _ PHILIP EVANS AND THOMAS S. WURSER Blown to Bits: How the New Economists of Information Transforms Strategy (2000) Abstract Internet marketing is a term that can be used to label the potential of information technology (IT) and the Internet, and the impact on marketing. Internet marketing is perhaps the single most important new development in technology in the entire history of marketing, particularly in its ability to leap over distance. It is clear that marketing is undergoing a revolution as a result of the explosion of information technology and the World Wide Web. This assignment will review the opportunities offered by e-commerce systems to enable organizations to enjoy more effective supply chain management and will cover basic elements of the new technological environment and the technological changes impact due to e-commerce Opportunities offered by e-commerce systems to enable organizations to enjoy more effective supply chain management 1. Introduction The following paper describes the various e-business strategies that can be employed for effectiveness approach to promote business online and opportunities offered by e-commerce systems to enable organizations to enjoy more effective supply chain management. However, with the advancement of technology that is taking place and the incremental amount of businesses going online, many business organizations are also interested in starting online operations as well. The new emerging companies are interested in going online and making the business a click and effective business. With access to the internet, the companies exposed to larger target market. They would be able to sell their products to the target market outside of the political and state boundaries of their local region. This will significantly impact the operations of the business, which will expand and can then go global in the long run. However, in order to be able to start a business or a retail option online, the new companies will have to brand itself and its products to stand out from the competition. In this regard, the new companies can use their current image of the business and leverage it to build the same high class and high quality product oriented approach and effective supply chain management for the online business. 2. E-Commerce - its Effectiveness to Promote Business Online "E-Commerce is defined as selling goods and services over the Internet, both businesses to consumer (B2C), consumer to consumer (C2C), and business to business (B2B), the latter is sometimes also referred to as e-business". 2.1 The death of Distance Distance was, in the pre modern world, a variable of the greatest marketing significance. As the real estate maxim has it, the three rules of real estate valuation are location, location, location. In global marketing, strategies and practice reflected the importance of distance. The most important variable impacting trade behavior, for example is the distance. The primary trading partners of every county are the proximate neighbors: for the United States they are Canada and Mexico, for Canada and Mexico it is the United States. For France it is Germany, and for Germany it is France, and so on around the world. There has always been a positive correlation between trade and proximity. However, the internet is totally independent of distance. Electrons traveling at the speed of light get to anywhere in the world in the same time and at the same cost. An e-mail send, does not make a difference in time or cost whether the mail is addressed to next door neighbor or to someone halfway around the world. The same thing is true of a Web site: The location of the site does not affect the cost or speed of access. For the first time in history, the world has become a level playing field. Anyone, anywhere in the world can communicate with anyone else in the world in real time with no premium charged for distance. These long-standing historical patterns of trade are a reflection of the importance of physical distance in global marketing. The improvement of transportation and communications technologies has been a major driver pushing the world toward greater globalization. Costs have come down and service has improved steadily and dramatically since the end of World War II. The Internet and IT have been major new drivers of globalization since the beginning of the 1990s. A Web presence is instantly global. The global reach of credit card issuers, package delivery services, and the Internet has created a whole new level of possibilities for global retail and business-to-business marketing by even the smallest firms. For example, until the Internet, the aftermarket for motorcycle accessories was fragmented by country. The only way an accessory would cross national boundaries was if the manufacturer set up marketing and distribution operations in overseas or foreign markets. Today, this is no longer necessary. Motorcycle Consumer News, a reader-sponsored magazine, which does not accept paid advertising, reviews new accessories and products for motorcyclists. For the past year, the magazine has included reviews of product are marketed in other countries with the telephone number, and Web and e-mail addresses of the manufacturer. Readers of the magazine anywhere in the world can communicate directly with the supplier, who can receive payment via credit card with card authorization and ship anywhere in the world via express delivery. The dramatic decline in communications and shipping costs and the decline of both tariff and non tariff barriers to trade have opened up world markets to companies that were formerly too small to participate in world markets. 2.2 Communication E-mail is a major new communications tool that supplements the fax and telephone to eliminate the barrier of distance. It is instant, cheap, free to most users, and insensitive to time zone. One can read e-mail when wish regardless of time zone consideration. E-mail is a marketing communications tool that offers unprecedented power for one-on-one messages for both B2B and B2C communications. Remarkably, it has emerged .as a universal communications tool in a mere five years 2.3 Targeting the individual customer: beyond segmentation The aim of marketing segmentation has always been to create a unique value offer for as many customers as possible. Before the Internet, this meant, in practice, creating an offer for a segment of the market that was an aggregation of customers. Almost over night, the World Wide Web has emerged as a powerful new tool for accomplishing what in the past was only a theoretical possibility in marketing: creating marketing programs that target a segment of one. With the Internet, that theoretical possibility has become a reality. Indeed, the whole notion of segmentation has to be reconsidered. Segmentation was a goal in marketing because it was too expensive to address the individual customer. With the available tools of the Internet and IT, it is now possible to respond the individual customer regardless of where the customer is located. 2.4 Relationship marketing Another major thrust of marketing in recent years has been relationship marketing. The Internet has opened up immense new possibilities for creating a relationship with global customers, potential customers, suppliers, and channel members. The end of segmentation means that marketers can now focus on delivering value to the individual customer. The best way to do this is to create a win-win relationship with the customer. The company should offer the customer a unique value, and serving the customer should be profitable for the company. The relationship should be mutually beneficial. Whenever the benefit is one sided, the relationship is threatened. 2.5 Interactivity Before the emergence of the Internet and IT, communications between companies and their customers were generally limited to one-way communications. Companies made offers, and customers voted in the marketplace. The possibility of an interactive relationship between customers and prospects has now emerged. This is particularly true for online retailers who can use customer purchase behavior information to uniquely tailor communications to their customers. A customer who purchases sun screen skin protection from an on-line retailer can be advised of other products that also provide sun protection. 2.6 Speed to market Globalization has unfolded in stages. The first stage was the move of companies to make sure that their products were sold in global markets. Before the Internet and IT created a new world of instant global communications, the pace of information and company communications traveled slowly. Products were introduced in one country at a time or at best one region at a time. Today, that has changed. 3. THE DEVELOPMENT OF E-COMMERCE Technology, particularly information and communication technology (ICT), is more than merely an enabler. It has become the basis for an entirely new business model. Starting with electronic data exchange (EDI, i.e., the transfer of standardized data between corporations), the Internet has undergone a metamorphosis from a medium primarily used to advertise a product or service to an e-commerce platform combining information, transactions, dialogue, and exchange. In short, the Internet has given birth to an entirely new business model and opened completely novel opportunities for global marketing. 3.1 New technologies change the rule of competition In addition to the increasing volatility, the move from an industrial e-economy also presents the global marketer with a new set of business rules. The new economy will force companies to adopt some new game plans. Among the most important follows: Secure a dominant market position s quickly as possible Form alliances based on their potential for market access and synergies Anticipate very high startup investments Defined positions through an ongoing process of innovations 4 Supply Chain Supply chain management strives to increase aggressive administration by organizing the internal activities within a company and effectively combining them with the external operations of all the suppliers which include basic materials, contractors, customer deliveries, and all third-party resources. "Supply chain management works to bring the supplier, the distributor, and the customer into one cohesive process" (Laudon and Laudon, 2001; Youngdahl 2000). The idea behind supply chain management is to combine the total chain of global production which includes; the manufacturers, suppliers, transporters, warehouses, retailers, and customers that are involved in a charismatic and constant stream of information, products, and funds. Supply chain management is a network that demonstrates how each unit connects and interacts with each other to become better business partners for the prosperity for each individual business. The supply chain of the companies would be the same as that is being used by the traditional business. The companies would only be employing e-business strategies relevant for selling to the customers. The procurement and supply chain processes would remain the same. However, in the future when the e-business strategy is relevant to the B2C market, it will be successful in the long term, and the business will focus on going online with its supply chain as well. This would mean that the company will be forming strategic alliances with their suppliers and will be making use of integrative technology. The JIT system will ensure efficient and cost effective transfers and delivery of materials and services from the suppliers into the business. Opportunities offered by e-commerce systems to enable organizations to enjoy more effective supply chain management. For global marketers, one of the most dramatic and relevant effects of technological changes has been the "death of distance." As Frances Caimcross of the Economist puts it "The death of distance as a determinant of the cost of communications will probably be he single most important economic force shaping society in the first half of the [21st] century. It will alter, in ways that are only dimly imaginable, decisions about where people live and work, concepts of national borders, patterns of international trade. Its effect will be as pervasive as those of the discovery of electricity." Some effects are already emerging in the shape of a reconfiguration of the value chain. ICT (Information and communication technology) permits an organizational structure in which not all parts of the value chain need to be physically present in each country, although they maybe viewed as virtually present from the perspective of suppliers and customers. A major part of the attractiveness and dynamics of the new technological environment stems from the ability to "modularize," "segment," or "fragment" the value chain into small and distinct customer-oriented processes. ICT facilitates the coordination between these modules in largely nonhierarchical systems and increases the scope for outsourcing specific modules. Closely related to the modularization within companies is the transformation of linear value chains into multidimensional networks. For the customer, it is often not transparent which part of a transaction is carried out by which particular member of the network. For example, the customer usually des not know which reservation system a travel agency uses to book a flight. Indeed, mot often the customer does not care as long as the required goods or services are delivered as requested. What appears to emerge under the new technological regime is a network of specialists, which permits participants to focus on their respective core values. The intermediaries as networks of specialists [Source: Adaptd from Paul F Nunes and Brian S pappas, " Der Vermittler auf Suche nach Reichtum und Gluck," outlook, Anderson Consulting, Heft1, 1998, p.55] 4.1 Context Suppliers Context suppliers, also called portals, support the use of the electronic channel both for customers and suppliers. Their key functions are to offer access to the channel and reduce the complexity of the electronic environment. Among the most important context providers are Internet on-line services such as America Online, Web browsers such as Netscape Communicator and Microsoft Explorer, or search engines such as Yahoo! and Lycos. In 1998, the top nine portals generated approximately 15 percent of all Internet traffic. However, their growth appears to be slowing down and it has been estimated that by 2003, the Internet traffic flowing through the top nine portals will plateau at 20 percent. 4.2 Sales Agents Sales agents support suppliers primarily through offering high-quality address banks of potential customers. Metro mail provides an example. It offers suppliers carefully sifted address banks of potential customers that typically contain a wealth of information about customer preferences, demographics, and other data. One of the latest services is referred to as the "firefly technique." It helps companies to target consumer groups and provide special product offerings based on profiles of musical and reading preferences. 4.3 Purchase Agents n the customers' side, electronic purchase agents help the Internet shopper to find he desired goods or services. Auto-By-Tel, for example, is a service that helps customers finds the right car for the right price. Similarly, search robots such as Price SCAN permits consumers to find the best price on thousands of computer hardware and software products. Such programs automatically travel the Web and gather data from magazine, ads and vendor catalogs. Web robots are also sometimes referred to as Web crawlers or spiders. 4.4 Market Makers Market makers are mediators that bring together buyers and sellers aid increase market efficiency. Typical examples are the numerous auction sites that have sprung up on the Web. According to its Web site, Onsale, for example, had more than 160,000 visitors per day and in excess of 1 million registered users. And the need to innovate can also be felt in this part of the supply chain. eBay, with some 5.6 million registered users as the world's leading person-to-person on-line trading community, recently announced the availability of pagers featuring "eBay a-go-go," a new service that allows users to receive updates on their ebay auctions via pagers. 4.5 Payment and Logistic Specialists Currently, one of the main stumbling blocks for the use of electronic markets continues to be the means of payment via the Internet. However, the development of efficient electronic payment systems is advancing rapidly. It is expected that by the year 2005, some 30 percent of all consumer payments will be based on digital payment systems. In the meantime, traditional credit card companies such as VISA are managing the transfer of payments and the associated risks. The box "PenOP: Signing Up for E-Commerce" provides some insights on how a British company helps to overcome one of the last hurdles facing a paperless business culture, namely the need for a signature on documents. Physical distribution via the Internet is only possible for software products or information services (e.g., investor, stock market, and database information). All other products have to be shipped via traditional-channels. Nevertheless the Internet and the Web offer a completely new view of the traditional distribution function. Although physical distribution was one of the core functions for the traditional retail/commerce systems, this aspect can be unbundled and outsourced using international distribution experts (e.g., UPS). Moreover, the logistic functions of warehouses get outsourced to logistic experts and software companies. 5. Opportunities Offered By E-Commerce Systems The main advantages and opportunities offered by e-commerce systems to an organization are: 1. Increase in sales: the internet tends to provide the business with various means of increasing the sales of the business online. This is mostly based on the fact the operations of the internet are very cost effective as compared to traditional businesses. The internet offers a new sales channel for the business which can be pursued to support the traditional channels. These channels pertain to mail order catalogues, sales personnel and point of sale promotion. The internet also provides the business with access to a new market. This increase in the market for the business increases the revenue and number of sales per unit of the business as well. 2. Reduction in costs: The business is able to reduce its costs as the cost of operating and executing transactions online and through the internet is much less as compared to the traditional method. The virtual nature of the transaction decreases the number of employees and bulky equipment needed. This decreases the costs of the assets of the company and a much lower investment can result in higher revenues. 3. Customer service: The companies will also be able to improve its customer service, as it will be able to provide highly customized services through a personal communication platform. This will provide the company with a strategic advantage over its competitors that are within their market. Aside from this, the business would also be able to collect information about their customers and store it in a database. Using a simple CRM software, data analysis can be performed on the system which would highlight the future trends that can be expected in the demand patterns by from the customers. 4. Competitor advantage: By making use of the internet, based technologies can help to develop and operate an e-business. The Companies would be able to establish competitive pressure on its competitors in the market. The barriers of entry in the industry will be increased, allowing the company to enjoy a decreasing level of competition in the niche segment. Evolutions in Business Context and strategies From To Market share Strategic control Technology as an enabler Technology as a driver Seller-centric market Buyer-centric markets Physical assets Knowledge assets Vertical integration based on size Vertical integration based on speed Decreasing return to scale Increasing return to scale Firm-centric marketing strategies Network-centric marketing strategies 6 E-Business Strategies The following section provides the various e-business strategies and tools that will be employed by Companies in the short and long term. More stress has been placed on the strategies that would be put in place prior and during the launch of the online operation. 6.1 The EDI strategy It would be feasible for the business to have an online operation as well as a showroom-based operation. This is because the shop option of the business would provide the customers with the image and ambiance necessary to brand the business and its products. The company will make use of EDI technology in the form of subscription and partnership with monetary management agencies like Pay Pal. The customers will be able to select the products they want to order and purchase by adding them to the shopping cart and submitting a simple order form. The order form will prompt the customer for a type of payment service. These would include a money draft, credit card and pay pal services. The other type of payment services that would be provided to the customer would include e-cash, credit cards, digital checks, and the use of smart cards. The customers will also be able to track their orders though their mobile phones by accessing the internet and the website through the internet options on their cell phone. Orders for the products can also be placed through the customers mobile phones. The fraud management for the payment facility would be outsourced to the payment service/application providing company who had developed the detailed anti-fraud strategy for their clients. 6.2 ERP Systems: The company will not be investing in an ERP system, as the information being stored and handled by the business would be very limited. However, for focusing on the customer orientation factor, the strategy the company will buy is an off the shelf CRM software, which will be integrated in the online option to keep track of old customers and retaining them while striving to attract new ones. The business will also make use of relational databases and a data warehouse, in which it will store the information pertaining to the customer's records. Upload software like SQL server would be used by the business, which would enable the business to store the information being entered through the websites by the customers into the data repositories. 6.3 Security Measures The business will be more at risk from hackers and external parties when it would be employing the online option for its operations. The business would, as a result makes use of encryption to safeguard the information pertaining to customer accounts and credit card information in its data repository. Aside for this, the data will be under password protection in the data repository. Access to the data on the data repository would be provided through a portal based interface. This interface would require user login and password to be entered. The top management of the company will be allowed to have access to the critical information stored in the data repository while the middle management will be allowed to only have access to the routine and non critical information stored on the database. Implementing read and write restrictions on the data can help to make the restriction of the information that is accessible by the users. In order to provide against the threat of hackers and external security threats, the companies will be making use of firewalls and information protection software to prevent the hackers from getting access to the information of the business stored on the services and the data repositories. 7. Conclusion Business and marketing analyses, running concurrently with the technical development of new-product ideas, may use ICT in the form of data mining to identify where there is a likely demand for the new product from existing customers. Finally, simulated test markets again speed up the new-product development process. The rapid advances in information technology are profoundly affecting the way marketing is conducted. Over the last couple of years, the market has seen the introduction of e-commerce but acceptance of these electronic solutions has been variable. More certainty surrounds the use of the Internet as a means of providing on-demand technical information, support and service in supply chain management. Companies that can use that resource to their advantage - without becoming distracted by technology for technology's sake - are in the best position to become market leaders. E-commerce in supply chain management has not only opened up additional distribution and communication channels and enabled precise targeting, customization, and interaction, but it has also given rise to fundamental new business models. Technological changes have also empowered customers by proving more transparency, allowing them to propose their own prices and offering a platform for dealing directly with each other at auction sites. References From Books: Frances Cairncross, "The Death of Distance," Economist: Special Report on Telecommunications, 30 September 1995, p. SS5. Georg Kristoferitsch, Digital Money, Electronic Cash, Smart Cards: Chancen and Risiken des Zahlungsverkehrs via Internet (Wien: iJberreuter, 1998) Jerry Wind and Vijay Mahajan. "Digital Marketing," p.6. Paul F Nunes and Brian S pappas, " Der Vermittler auf Suche nach Reichtum und Gluck," outlook, Anderson Consulting, Heft1, 1998, p.55 PHILIP EVANS AND THOMAS S. WURSER Blown to Bits: How the New Economists of Information Transforms Strategy (2000) Warren J Keegam,(2006) Global marketing management, Patience Hall of India Private Limited. 262-269 Websites: www.ebaycom/index.html, cited 30 August 2007 www.ebay.com/index.html, cited 30 August 2007 Read More