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Using Information Systems for Strategic Purposes

Before participating in the Week 1 Discussion, Everyone

should watch the short video

What is an Information System?

This will help develop a common understanding of information systems.

As mentioned in this week’s reading,

Introduction to Information Systems

(reading is in the attachments) understanding how businesses use information technology effectively is a critical skill in today’s business world.  Often a position is established for the role of a business analyst, which may reside either within a functional department or the Information Technology (IT) department.  Throughout this course, you will be approaching a Case Study and series of staged assignments from the role of a Business Analyst in the IT Department.  Think of the business analyst role as the liaison between a functional department and IT who helps analyze business processes, gather requirements from key stakeholders, and identify technology solutions to benefit the business.  Aligning technology solutions or information systems to help the organization achieve its business strategy is an important part of maximizing the investment in IT.

To help you understand this role and the importance of information systems, this week’s discussion focuses on analyzing how a business uses an

information system

for

STRATEGIC

purposes. Each member of Group 1 should do some research, or draw from his or her own experience, and tell us about a company that used an

information system

for

STRATEGIC

purposes.  Please be sure to tell us what the strategy was that they were working toward.  There are many examples in the Course Content reading, but our discussion will be much richer if you select something that is not covered there. Be sure you’re not just discussing their business strategy but also including the use of information systems to enable that strategy.  Searching on a company’s mission and strategic goals can help you align the pieces.

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What is required:

Responses to initial postings should be specific and assess whether the posting accurately and sufficiently addresses the questions asked in the discussion topic.  Incorporating additional research will strengthen your participation. Explain your assessment as to why the information is or is not correct and/or complete, providing correct information to enhance the discussion.

Classmate Dave
The best personal example I can give is how the Air Force Recruiting
Service (AFRS) uses information systems strategically. I’ll discuss it in
three points. I’ll discuss how the Air Force uses external platforms, to
achieve a prime their target audience; Internal information systems, to
predict an areas potential for success; and the same system to predict
the Recruiter’s required actions to achieve the mission. The Air Force
uses multiple information systems to track multiple things, however the
cleverest uses come from how the AFRS uses external sources.
The AFRS uses external information systems platforms strategically to
assess potential applicants and advertise. As a recruiter, we took
extensive classes on how to use platforms such as Facebook, Twitter,
Instagram, Google accounts, and Linked in to reach and assess our
base. As an example, at the beginning of every school year I would
take the student list, another information system, provided by the
schools and work from top to bottom going through each students’
profiles and look for qualifications and potential. If I pulled up a profile
and the picture was my student with face tattoos, overweight, smoking
a joint I would cross them off the list and move on. That is the archaic
example. Now, on a more current level, the Air Force uses Geo
Tracking, because it’s deadly accurate despite the lies you hear in the
news, and we couple this technology with Geofencing and social
platforms. Ever been a passenger in a vehicle scrolling through your
timeline and notice an advertisement for a branch of service? Most
likely you were near a school, fitness center, or Recruiting stations and
your profile shows that you are within our target demographic. It
works like this. Say I have a target zone that I need to market and it’s
in an urban area (lends to population). I know that I can reach a
massive amount of people in a relatively small area. I would set up a
Geofence around a gym or college campus. Then, using Geo Tracking,
if your phone passes anywhere in my fenced area you are going to
see/hear an Air Force advertisement whether it’s on Facebook, Amazon,
Google, Pandora, IMDB or Spotify doesn’t matter. What is worse for
you is that there is no avoiding it. If you take your smart anything with
you anywhere, someone is tracking you and looking to influence your
decisions. So, the Air Force uses Geofencing, Geo Tracking, and
internet platforms to gather, asses, and market to potential applicants,
but how does the Air Force determine where?
The primary information system in the Air Force Recruiting Service is a
system called Air Force Recruiting Information Support System – Total
Force, we just call it AFRISS-TF or AFRISS. The Air Force has loaded
recruiting metrics into this data base that dates to at least 1989,
tracking past goaling measurements against every area. I could
research and area historically and see how the population has
increased or decreased over the years, primary sources of revenue,
unemployment rates, number of students versus how many graduated,
number of media outlets, first responders you name it, the data was at
my fingertips. I would take that information and compare it to past
forms of success, or “why did these applicants walk into my
office?”. Once I knew what got applicants into my office, I could exploit
that information by pushing that data up and have the Air Force fund
my marketing. The Air Force could then look at the area and assess the
potential for success and it would determine the amount of funding
and advertising required. That is looking only at the potential for
success of the area, however, we’re forgetting that the Recruiter
themselves has a role in this as well.
Performance of the Recruiter is the “X Factor” here. Every Recruiter will
have a different strength. You have some have bubbly outgoing
personalities that naturally draw a crowd; on the other hand, you have
some that are data machines and can market wisely from their chair,
but when you ask them to say “hi”, they clam up. AFRS leans on their
Flight Chiefs to assess the data in AFRISS against each Recruiter’s past
performance. A Flight Chief will pull reports on each of their
Recruiters. These reports include information such as: how many
school visits completed and students reached, how many media outlets
visited and population reached, how many articles printed and
delivered, how many appointments held, how many commitments from
appointments, how many qualified from commitments, and finally how
many qualified that contracted and shipped to Basic Military
Training. Using this information, the Flight Chief can tell the Recruiter,
with about a 10% margin of error, how many school visits or media
visits need to be accomplished, how many social media posts need to
be made, how many appointments need to be held, or just how many
people they need to talk to in order to achieve their mission. If a Flight
Chief does this with every Recruiter in their Flight, they’ll be a
successful Flight that contributes to their Squadron and so on up the
chain to the Air Force Recruiting Service level.
So strategically, the Air Force Recruiting Service uses information
systems to inspire, engage, and recruit the next generation of
Airmen. This is done by marketing through smart devices and external
social media platforms and utilizing AFRISS to track the historical
success of a Recruiter and area to predict requirements to achieve
future goals.
Classmate Iyiola
Greetings Professor and classmates,
Team Management Systems, Inc. is one firm that sprang to my mind.
They developed a program called “Acowin,” which I used daily in my
previous job. MSI, Inc. is the name of the firm where I worked. We were
an independent temperature control systems company that works with
local government and major property management companies.
“Satisfied Customers are Our Business” is our mission/vision.
Team Management Systems, Inc. designed ” Acowin ” software that
does just that. “Team Management” is a term used to describe the
management of My company may use the program to create work
orders from clients and deliver them to our field engineers. After the
work is finished, our engineers complete their service orders, which are
then converted into an invoice prepared and sent directly to our
clients. Also, if a project or task is not finished, the work order is given
to our clients as “tech notes,” which keep them informed about repairs
and installations. Time monitoring is also possible with the program,
which aids in the tracking of our field engineers. We can also use the
program to create Purchase Orders, which we submit to our vendors
when materials are required for work, and produce bids. This software
also helps us keep track of our customers’ locations and maintain an
accurate equipment list that the servicing engineer may edit or replace.
This program is ideal because we have government contracts on
massive structures and must keep our clients informed as the
construction develops.
References
Berdik, D., Otoum, S., Schmidt, N., Porter, D., & Jararweh, Y. (2021).
A survey on blockchain for information systems management and
security. Information Processing & Management, 58(1), 102397.
Cebeci, H. Ä°. (2021). Artificial Intelligence Applications in Management
Information Systems: A Comprehensive Systematic Review with
Business Analytics Perspective. Artificial Intelligence Theory and
Applications, 1(1).
Classmate Dino
Many companies use information systems strategically. Amazon,
Google, Facebook, Uber are examples. These companies have
leveraged IT to acquire market share. Amazon has a comprehensive
customer database. This database has helped Amazon make tailored
product suggestions and develop new services. Google’s search engine
uses information systems. This search engine helps Google dominate
online search and generate ad income. Facebook leveraged IT to build
a social networking platform. This platform has helped Facebook
connect individuals worldwide and generate ad money. Uber
developed a ride-sharing platform using IT. This platform has helped
Uber become a top ride-sharing company and generate significant
fares. These are some ways corporations have used IT strategically.
These companies gained a competitive advantage by leveraging
information systems. “The use of information systems has become
increasingly important for companies in today’s business world”. “A
company’s ability to effectively use information systems can give it a
competitive advantage in its industry”. One of the most important ways
in which information systems can be used for strategic purposes is in
the development of a comprehensive customer database. Amazon has
been particularly successful in this area. By collecting data on its
customers’ purchase history, Amazon has been able to offer
personalized product recommendations and to develop new products
and services that meet customer needs. This has allowed Amazon to
become one of the largest and most successful online retailers.
Another way in which information systems can be used for strategic
purposes is in the development of a comprehensive search engine.
Google has dominated the online search market due to its effective use
of information systems. Google’s search engine is able to quickly and
accurately process large amounts of data, which has allowed the
company to generate a large amount of revenue from advertising.
Information systems can also be used to develop a comprehensive
social networking platform.
Facebook has become the largest social networking platform in the
world due to its effective use of information systems. Facebook’s
platform has allowed the company to connect people from all over the
world and to generate a large amount of revenue from advertising.
Finally, information systems can be used to develop a comprehensive
ride-sharing platform. Uber has become a leading ride-sharing
company due to its effective use of information systems.
Uber’s platform has allowed the company to connect riders with drivers
and to generate a large amount of revenue from fares. These are just a
few examples of how companies have used information systems for
strategic purposes. By using information systems, these companies
have been able to gain a competitive advantage in their respective
markets. In conclusion, information systems can be used for a variety of
strategic purposes. By using information systems, companies can gain a
competitive advantage in their industry.
References
Kawaljeet Kaur Kapoor, K. T. (2017, November 6). Advances in Social
Media Research: Past, Present and Future. Retrieved from
link.springer.com: https://link.springer.com/article/10.1007/s10796017-9810-y
Zwass, V. (n.d.). Information System. Retrieved from Britannica.com:
https://www.britannica.com/topic/information-system
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Introduction to Information Systems in Organizations
Learning Resource
Introduction to Information Systems in
Organizations
As the course catalogue describes IFSM 300, this is an “overview of information systems,
their role in organizations, and the relationship between information systems and the
objectives and structure of an organization.” Information systems collect, organize,
process, and make available or distribute data. The systems involve people, technology,
and processes. Students in this class come from a variety of different majors and
disciplines; however, in today’s business and personal world, each of us is impacted by
information systems on a regular basis.
Many of you have been or will be involved in a project where processes are analyzed in
anticipation of incorporating or revising an information technology solution to increase
productivity and meet business needs. Even as a user within a functional department
(human resources, marketing, finance, etc.), you may be asked to test systems to ensure
they meet business requirements or otherwise be involved in technology implementation.
There may be a specific role or position of business analyst that can exist in a functional
department, or an Information Technology department, and is tasked with this type of
work. In addition, you may be inputting data into an information system and receiving
information from a system as part of your job responsibilities. Whatever your specific role
is, understanding how businesses use information technology effectively is a critical skill
in today’s business world.
IT management must be sensitive to the business and its needs, rather than being in awe
of or driven by technology. Conversely, business managers must be aware that systems
can and should be used in the business to solve problems and improve the various
functions, and that the advice of IT management is essential to the success of the
business. This also implies that business managers should be conversant with IT
terminology and its possible uses if they are going to achieve the maximum benefits of IT
systems. It is in the best interests of the organization that both business managers and IT
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managers recognize each other’s importance and strengths in maximizing systems’
effectiveness in solving problems. This will ultimately lead to better business solutions
enabled by IT that will lead to achievement of business goals and strategic objectives.
There is a clear relationship between information (derived from raw data), information
technology (the computer-based tools used to work with information), and people (you).
What is critical to keep in mind is that they all contribute (together) to supporting and
improving business processes to achieve business success. Investments in technology and
information systems are worthless if they do not support or contribute to the business’s
success. The processes are the business activities of the organization. In order for those
processes to work, information is needed. Information, therefore, becomes the lifeblood
of the organization. It is one of the most important assets in an organization, and the
primary way that people get information is through information technology. Information
technology in and of itself is not useful unless it delivers the right information to the right
people at the right time. Since people, information, and information technology (in that
order of priority) are inextricably linked, if one fails, they all fail.
So, we will begin our study of “Information Systems in Organizations” with developing an
understanding of the business environment. We will use the term business to represent a
variety of organizational types: government entities, nonprofit organizations, educational
institutions, and general businesses, both large and small. The concepts apply in all of
those environments. As you approach each week’s work, you should read the assigned
items in the order presented. They are grouped by topic to aid your understanding of the
topic and to prepare you to demonstrate your learning when it comes time to complete
the assignments.
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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What Is an Information System?
Learning Resource
What Is an Information System?
Introduction
If you are reading this, you are most likely taking a course in information systems, but do
you even know what the course is going to cover? When you tell your friends or your
family that you are taking a course in information systems, can you explain what it is
about? Sometimes when students are asked what they think an information system is,
they give answers such as “computers,” “databases,” or “Excel.” These are good answers,
but definitely incomplete ones. The study of information systems goes far beyond
understanding some technologies. Let’s begin our study by defining information systems.
Defining Information Systems
Almost all programs in business require students to take a course in something called
information systems. But what exactly does that term mean? Let’s take a look at some of
the more popular definitions, first from Wikipedia and then from a couple of textbooks:
“Information systems (IS) is the study of complementary networks of hardware and
software that people and organizations use to collect, filter, process, create, and
distribute data (“Information Systems,” 2012).
“Information systems are combinations of hardware, software, and
telecommunications networks that people build and use to collect, create, and
distribute useful data, typically in organizational settings (Valacich & Schneider,
2010).
“Information systems are interrelated components working together to collect,
process, store, and disseminate information to support decision making,
coordination, control, analysis, and visualization in an organization (Laudon &
Laudon, 2012).
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As you can see, these definitions focus on two different ways of describing information
systems: the components that make up an information system and the role that those
components play in an organization. Let’s take a look at each of these.
The Components of Information Systems
Many students understand that an information system has something to do with
databases, spreadsheets, computers and e-commerce. And they are all right, at least in
part: information systems are made up of different components that work together to
provide value to an organization.
Information systems are made up of five components: hardware, software, data, people,
and process. The first three, fitting under the category technology, are generally what
most students think of when asked to define information systems. But the last two,
people and process, are really what separate the idea of information systems from more
technical fields, such as computer science. In order to fully understand information
systems, students must understand how all of these components work together to bring
value to an organization.
Technology
Technology can be thought of as the application of scientific knowledge for practical
purposes. From the invention of the wheel to the harnessing of electricity for artificial
lighting, technology is a part of our lives in so many ways that we tend to take it for
granted. As discussed before, the first three components of information systems—
hardware, software, and data—all fall under the category of technology. Each will be
discussed in more detail in later sections, but we will take a moment here to introduce
them so we can get a full understanding of what an information system is.
Hardware
Information systems hardware is the part of an information system you can touch—the
physical components of the technology. Computers, keyboards, disk drives, iPads, and
flash drives are all examples of information systems hardware.
Software
Software is a set of instructions that tells the hardware what to do. Software is not
tangible—it cannot be touched. When programmers create software programs, what they
are really doing is simply typing out lists of instructions that tell the hardware what to do.
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There are several categories of software, with the two main categories being operatingsystem software, which makes the hardware usable, and application software, which does
something useful. Examples of operating systems include Microsoft Windows on a
personal computer and Google’s Android on a mobile phone. Examples of application
software are Microsoft Excel and Angry Birds.
Data
The third component is data. You can think of data as a collection of facts. For example,
your street address, the city you live in, and your phone number are all pieces of data. Like
software, data is also intangible. By themselves, pieces of data are not really very useful.
But aggregated, indexed, and organized together into a database, data can become a
powerful tool for businesses. In fact, all of the definitions presented at the beginning of
this section focused on how information systems manage data. Organizations collect all
kinds of data and use it to make decisions. These decisions can then be analyzed as to
their effectiveness and the organization can be improved. The reading, Data and
Databases, will cover their uses in organizations.
Networking Communication: A Fourth Technology Piece?
Besides the components of hardware, software, and data, which have long been
considered the core technology of information systems, it has been suggested that one
other component should be added: communication. An information system can exist
without the ability to communicate—the first personal computers were stand-alone
machines that did not access the internet. However, in today’s hyper-connected world, it
is an extremely rare computer that does not connect to another device or to a network.
Technically, the networking communication component is made up of hardware and
software, but it is such a core feature of today’s information systems that it has become
its own category.
People
When thinking about information systems, it is easy to get focused on the technology
components and forget that we must look beyond these tools to fully understand how
they integrate into an organization. A focus on the people involved in information systems
is the next step. From the frontline help-desk workers, to systems analysts, to
programmers, all the way up to the chief information officer, the people involved with
information systems are an essential element that must not be overlooked.
Process
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The last component of information systems is process. A process is a series of steps
undertaken to achieve a desired outcome or goal. Information systems are becoming more
and more integrated with organizational processes, bringing more productivity and better
control to those processes. But simply automating activities using technology is not
enough; businesses looking to effectively utilize information systems do more. Using
technology to manage and improve processes, both within a company and externally with
suppliers and customers, is the ultimate goal. Technology buzzwords such as “business
process reengineering,” “business process management,” and “enterprise resource
planning” all have to do with the continued improvement of these business procedures
and the integration of technology with them. Businesses hoping to gain an advantage over
their competitors are highly focused on this component of information systems.
The Role of Information Systems
Now that we have explored the different components of information systems, we need to
turn our attention to the role that information systems play in an organization. From our
definitions above, we see that these components collect, store, organize, and distribute
data throughout the organization. In fact, we might say that one of the roles of
information systems is to take data and turn it into information, and then transform that
into organizational knowledge. As technology has developed, this role has evolved into
the backbone of the organization. To get a full appreciation of the role information
systems play, we will review how they have changed over the years.
The Mainframe Era
From the late 1950s through the 1960s, computers were seen as a way to more efficiently
do calculations. These first business computers were room-sized monsters, with several
refrigerator-sized machines linked together. The primary work of these devices was to
organize and store large volumes of information that were tedious to manage by hand.
Only large businesses, universities, and government agencies could afford them, and they
took a crew of specialized personnel and specialized facilities to maintain. These devices
served dozens to hundreds of users at a time through a process called time-sharing.
Typical functions included scientific calculations and accounting, under the broader
umbrella of “data processing.”
In the late 1960s, the Manufacturing Resources Planning (MRP) systems were introduced.
This software, running on a mainframe computer, gave companies the ability to manage
the manufacturing process, making it more efficient. From tracking inventory to creating
bills of materials to scheduling production, the MRP systems (and later the MRP II
systems) gave more businesses a reason to want to integrate computing into their
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processes. IBM became the dominant mainframe company. Nicknamed “Big Blue,” the
company became synonymous with business computing. Continued improvement in
software and the availability of cheaper hardware eventually brought mainframe
computers (and their little sibling, the minicomputer) into most large businesses.
The PC Revolution
In 1975, the first microcomputer was announced on the cover of Popular Mechanics: the
Altair 8800. Its immediate popularity sparked the imagination of entrepreneurs
everywhere, and there were quickly dozens of companies making these “personal
computers.” Though at first just a niche product for computer hobbyists, improvements in
usability and the availability of practical software led to growing sales. The most
prominent of these early personal computer makers was a little company known as Apple
Computer, headed by Steve Jobs and Steve Wozniak, with the hugely successful “Apple II.”
Not wanting to be left out of the revolution, in 1981 IBM (teaming with a little company
called Microsoft for their operating-system software) hurriedly released their own version
of the personal computer, simply called the “PC.” Businesses that had used IBM
mainframes for years to run their businesses finally had the permission they needed to
bring personal computers into their companies, and the IBM PC took off. The IBM PC was
named Time magazine’s “Man of the Year” for 1982.
Because of the IBM PC’s open architecture, it was easy for other companies to copy, or
“clone” it. During the 1980s, many new computer companies sprang up, offering less
expensive versions of the PC. This drove prices down and spurred innovation. Microsoft
developed its Windows operating system and made the PC even easier to use. Common
uses for the PC during this period included word processing, spreadsheets, and databases.
These early PCs were not connected to any sort of network; for the most part they stood
alone as islands of innovation within the larger organization.
Client-Server
In the mid-1980s, businesses began to see the need to connect their computers together
as a way to collaborate and share resources. This networking architecture was referred to
as client-server because users would log in to the local area network (LAN) from their PC
(the “client”) by connecting to a powerful computer called a “server,” which would then
grant them rights to different resources on the network (such as shared file areas and a
printer). Software companies began developing applications that allowed multiple users to
access the same data at the same time. This evolved into software applications for
communicating, with the first popular use of email appearing at this time.
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This networking and data sharing all stayed within the confines of each business, for the
most part. While there was sharing of electronic data between companies, this was a very
specialized function. Computers were now seen as tools to collaborate internally, within
an organization. In fact, these networks of computers were becoming so powerful that
they were replacing many of the functions previously performed by the larger mainframe
computers at a fraction of the cost. It was during this era that the first Enterprise
Resource Planning (ERP) systems were developed and run on the client-server
architecture. An ERP system is a software application with a centralized database that can
be used to run a company’s entire business. With separate modules for accounting,
finance, inventory, human resources, and many, many more, ERP systems, with Germany’s
SAP leading the way, represented the state of the art in information systems integration.
The World Wide Web and E-Commerce
Invented in 1969, the internet was confined to use by universities, government agencies,
and researchers for many years. The internet’s rather arcane commands and user
applications made it unsuitable for mainstream use in business. One exception to this was
the ability to expand email outside the confines of a single organization. While the first
email messages on the internet were sent in the early 1970s, companies that wanted to
expand their LAN-based email started hooking up to the internet in the 1980s. Companies
began connecting their internal networks to the internet in order to allow communication
between their employees and employees at other companies. It was with these early
internet connections that the computer truly began to evolve from a computational
device to a communications device.
In 1989, Tim Berners-Lee developed a simpler way for researchers to share information
over the network at CERN laboratories, a concept he called the World Wide Web (CERN,
n.d.). This invention became the launching point of the growth of the internet as a way for
businesses to share information about themselves. As web browsers and internet
connections became the norm, companies rushed to grab domain names and create
websites.
In 1991, the National Science Foundation, which governed how the internet was used,
lifted restrictions on its commercial use. In 1994, eBay and Amazon.com were established,
two true pioneers in the use of the new digital marketplace. A mad rush of investment in
internet-based businesses led to the dot-com boom through the late 1990s, and then the
dot-com bust in 2000. While much can be learned from the speculation and crazy
economic theories espoused during that bubble, one important outcome for businesses
was that thousands of miles of internet connections were laid around the world during
that time. The world became truly “wired” heading into the new millenium, ushering in the
era of globalization.
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As more companies were expected to be connected to the internet, the digital world also
became a more dangerous place. Computer viruses and worms, once slowly propagated
through the sharing of computer disks, could now grow with tremendous speed via the
internet. Software written for a disconnected world found it very difficult to defend
against these sorts of threats. A whole new industry of computer and internet security
has arisen.
Web 2.0
As the world recovered from the dot-com bust, the use of technology in business
continued to evolve at a frantic pace. Websites became interactive; instead of just visiting
a site to find out about a business and purchase its products, customers wanted to be able
to customize their experience and interact with the business. This new type of interactive
website, where you did not have to know how to create a web page or do any
programming in order to put information online, became known as web 2.0. Web 2.0 is
exemplified by blogging, social networking, and interactive comments being available on
many websites. This new web-2.0 world, in which online interaction became expected,
had a big impact on many businesses and even whole industries. Some industries, such as
bookstores, found themselves relegated to a niche status. Others, such as video rental
chains and travel agencies, simply began going out of business as they were replaced by
online technologies. This process of technology replacing a middleman in a transaction is
called disintermediation.
As the world became more connected, new questions arose. Should access to the internet
be considered a right? Can I copy a song that I downloaded from the internet? How can I
keep information that I have put on a website private? What information is acceptable to
collect from children? Technology moved so fast that policymakers did not have enough
time to enact appropriate laws, making for a Wild West–type atmosphere.
The Post-PC World
After 30 years of the PC being the primary computing device used in most businesses,
sales of the PC are now beginning to decline as sales of tablets and smartphones are
taking off. Just as the mainframe before it, the PC will continue to play a key role in
business, but will no longer be the primary way that people interact and do business. The
limited storage and processing power of these devices is being offset by a move to “cloud”
computing, which allows for storage, sharing, and backup of information on a massive
scale. This will require new rounds of thinking and innovation on the part of businesses as
technology continues to advance.
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The Eras of Business Computing
Operating
System
Era
Hardware
Applications
Mainframe
(1970s)
Terminals
connected to
mainframe
computer.
Timesharing(TSO) on
MVS
Custom-written
MRP software
PC (mid-1980s)
IBM PC or
compatible.
Sometimes
connected to
mainframe
computer via
expansion card.
MS-DOS
WordPerfect,
Lotus 1-2-3
Client-Server
(late 80s to early
90s)
IBM PC “clone”
on a Novell
Network.
Windows for
Workgroups
Microsoft Word,
Microsoft Excel
World Wide Web
(mid-90s to early
2000s)
IBM PC “clone”
connected to
company intranet.
Windows XP
Microsoft Office,
Internet Explorer
Web 2.0 (mid2000s to present)
Laptop connected
to company WiFi.
Windows 7
Microsoft Office,
Firefox
Post-PC (today
and beyond)
Apple iPad
iOS
Mobile-friendly
websites, mobile
apps
Can Information Systems Bring Competitive Advantage?
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It has always been the assumption that the implementation of information systems will, in
and of itself, bring a business competitive advantage. After all, if installing one computer
to manage inventory can make a company more efficient, won’t installing several
computers to handle even more of the business continue to improve it?
In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned
this assumption. The article, entitled “IT Doesn’t Matter,” raised the idea that information
technology has become just a commodity. Instead of viewing technology as an investment
that will make a company stand out, it should be seen as something like electricity:
managed to reduce costs, ensure that it is always running, and be as risk-free as possible.
As you might imagine, this article was both hailed and scorned. Can IT bring a competitive
advantage? It sure did for Walmart.
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What Is an Information System?
What Is an Information System?
Registered trademark of Wal-mart
Walmart is the world’s largest retailer, earning $15.2 billion on sales of $443.9
billion in the fiscal year that ended on January 31, 2012. Walmart currently serves
over 200 million customers every week, worldwide (Walmart, 2012). Walmart’s rise
to prominence is due in no small part to its use of information systems.
One of the keys to this success was the implementation of Retail Link, a supplychain management system. This system, unique when initially implemented in the
mid-1980s, allowed Walmart’s suppliers to directly access the inventory levels and
sales information of their products at any of Walmart’s more than 10,000 stores.
Using Retail Link, suppliers can analyze how well their products are selling at one or
more Walmart stores, with a range of reporting options. Further, Walmart requires
the suppliers to use Retail Link to manage their own inventory levels. If a supplier
feels that their products are selling out too quickly, they can use Retail Link to
petition Walmart to raise the levels of inventory for their products.
This has essentially allowed Walmart to “hire” thousands of product managers, all of
whom have a vested interest in the products they are managing. This revolutionary
approach to managing inventory has allowed Walmart to continue to drive prices
down and respond to market forces quickly.
Today, Walmart continues to innovate with information technology. Using its
tremendous market presence, Walmart can require suppliers to immediately
implement technology, which becomes a business standard.
Summary
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What Is an Information System?
In this section, you have been introduced to the concept of information systems. We have
reviewed several definitions, with a focus on the components of information systems:
technology, people, and process. We have reviewed how the business use of information
systems has evolved over the years, from the use of large mainframe computers for
number crunching, through the introduction of the PC and networks, all the way to the
era of mobile computing. During each of these phases, new innovations in software and
technology allowed businesses to integrate technology more deeply.
We are now to a point where every company is using information systems and asking the
question: Does it bring a competitive advantage? Every business person should
understand what an information system is and how it can be used to bring a competitive
advantage. And that is the task we have before us.
Study Questions
1. What are the five components that make up an information system?
2. What are three examples of information system hardware?
3. Microsoft Windows is an example of which component of information
systems?
4. What is application software?
5. What roles do people play in information systems?
6. What is the definition of a process?
7. What was invented first, the personal computer or the internet (ARPANET)?
8. In what year were restrictions on commercial use of the internet first lifted?
When were
eBay and Amazon founded?
9. What does it mean to say we are in a “post-PC world”?
10. What is Carr’s main argument about information technology?
References
CERN (n.d.). The birth of the web. Retrieved from
http://public.web.cern.ch/public/en/about/web-en.html
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What Is an Information System?
Information Systems. In Wikipedia. Retrieved from
http://en.wikipedia.org/wiki/Information_systems_(discipline)
Laudon, K. & Laudon, J.P. (2012). Management information systems, 12th ed., Upper
Saddle River, NJ: Prentice-Hall.
Valacich, J., & Schneider, C. (2010). Information systems today—Managing in the digital
world, 4th ed. Upper Saddle River, NJ: Prentice-Hall.
Walmart. (2012). 2012 annual report.
Licenses and Attributions
Chapter 1: What Is an Information System
(https://www.saylor.org/site/textbooks/Information%20Systems%20for%20Business%20
and%20Beyond.pdf)
from Information Systems for Business and Beyond by David T.
Bourgeois is available under a Creative Commons Attribution 3.0 Unported
(https://creativecommons.org/licenses/by/3.0/)
license. © 2014, David T. Bourgeois.
UMGC has modified this work and it is available under the original license.
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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Business Strategy
Learning Resource
Business Strategy
This section presents a high-level overview of the strategic planning process for business.
All companies want to formulate technology solutions that effectively support the
business and its objectives. To do so, the company must first understand its business
model, the fundamentals of its business type (manufacturing, finance, service, etc.), and its
strategy. Only once the company has understood these, should it begin to focus on its
systems. Information systems are only tools that are used to support a business;
therefore, if the tools are not aligned with business requirements, then its resources (time,
money, and people) may be wasted, triggering an undesirable outcome.
Many businesses establish an overall mission or vision statement—Why are we in
business? Following is a list of companies with their mission statements:
Amazon—”to be earth’s most customer-centric company, to build a place where people
can come to find and discover anything they might want to buy online.” (Amazon Jobs,
2018)
Marriott—”to be the world’s favorite travel company” (Marriott Investor Relations).
Google—“to organize the world’s information and make it universally accessible and
useful” (Google.com, 2018).
As you can see, these mission and vision statements are very broad and overarching;
however, to achieve these, organizations need more specifics with actionable areas to
accomplish to help support the mission/vision. In order to define the goals and objectives,
first organizations scan the environment looking at several factors, such as competition,
business environment, customers, employees, and location. This analysis helps identify
threats and opportunities. A frequent tool used in business is SWOT Analysis: identifying
Strengths, Weaknesses, Opportunities and Threats. The section Does IT Matter? also
looks at further methods to analyze the competitive environment.
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This analysis can result in organizations defining business goals and objectives and the
specific actions needed to be successful. When these objectives are defined,
opportunities can be identified to use information technology to help reach those
objectives.
It’s important that technology support the business objectives rather than drive the
objectives. For example, looking back at Amazon’s mission statement, specific goals and
objectives would need to be defined (e.g., How can customer-centric be increased?). One
approach is customizing the user experience so customers feel valued and that Amazon
really “knows” them. A strategic goal might be to maximize the customer’s experience
through personalization of the online shopping experience. With technology, information
regarding customers’ browsing and shopping habits can be stored and retrieved when a
customer returns to the Amazon site, prompting with messages such as “Hello John—
Recommended Links for You” or “John—Buy it Again,” followed by a list of recent
purchases John has made. The benefits of the information technology can be increased
sales and increased customer loyalty, which give Amazon a competitive advantage in the
online retail arena.
This information would then be documented for everyone in the company to understand
and be able to do their part to support the business strategy. For example, Amazon might
document as follows:
Mission/Vision: Our vision is to be earth’s most customer-centric company, to build a
place where people can come to find and discover anything they might want to buy
online.
Business Strategy (derived from the Mission/Vision): to be earth’s most customer-centric
company, to build a place where people can come to find and discover anything they
might want to buy online.
Technology Support: A robust online shopping system would accommodate millions
of customers and products and focus on the individual customer’s searches and
buying habits.
Competitive Advantage: Availability of millions of products would increase sales, and
a focus on the customer would increase customer loyalty.
Strategic Goal 1: Increase customer-centricity by maximizing the customer’s experience
through personalization of the online shopping experience.
Objective: Provide customer with at least five other items they might be interested in
based on previous purchases by the end of the first quarter.
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Technology Support: The system would store each customer’s purchases and retrieve that
information when the customer returns to the Amazon site, and present a message such
as “Hello, John – Recommended for you” with icons of several items related to his recent
purchases.
Strategic Goal 2: Increase the number of items available.
Objective: Add 10% more items to the inventory.
Technology Support: The system would provide the ability to store and retrieve items for
display to customers.
To achieve success, an organization should translate its high-level mission into specific
objectives so it can align its technology support to those objectives. The alignment can
provide clear direction and enable all levels of the organization to work towards
maximizing their investments in information technology.
References
Amazon Jobs (2018). Retrieved from https://www.amazon.jobs/en/working/workingamazon
Google.com/About. (n.d.). Retrieved from https://www.google.com/about/
Marriott. (2018). Marriott investor relations: Frequently asked questions. Retrieved from
https://marriott.gcs-web.com/investor-faqs
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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Does IT Matter?
Learning Resource
Does IT Matter?
Introduction
For over 50 years, computing technology has been a part of business. Organizations have
spent trillions of dollars on information technologies. But has all this investment in IT
made a difference? Have we seen increases in productivity? Are companies that invest in
IT more competitive? In this reading, we will look at the value IT can bring to an
organization and try to answer these questions. We will begin by highlighting two
important works from the past two decades.
The Productivity Paradox
In 1991, Erik Brynjolfsson wrote an article, published in the Communications of the ACM,
entitled “The Productivity Paradox of Information Technology: Review and Assessment.”
By reviewing studies about the impact of IT investment on productivity, Brynjolfsson was
able to conclude that the addition of information technology to business had not
improved productivity at all—the “productivity paradox.” From the article, he does not
draw any specific conclusions from this finding and provides the following analysis
(Brynjolfsson, 1991):
Although it is too early to conclude that IT’s productivity contribution has been subpar, a
paradox remains in our inability to unequivocally document any contribution after so
much effort. The various explanations that have been proposed can be grouped into four
categories:
1. Mismeasurement of outputs and inputs,
2. Lags due to learning and adjustment,
3. Redistribution and dissipation of profits, and
4. Mismanagement of information and technology.
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In 1998, Brynjolfsson and Lorin Hitt published a follow-up paper entitled “Beyond the
Productivity Paradox” (Brynjolfsson & Hitt, 1998). In this paper, the authors utilized new
data that had been collected and found that IT did, indeed, provide a positive result for
businesses. Further, they found that sometimes the true advantages in using technology
were not directly relatable to higher productivity, but to “softer” measures, such as the
impact on organizational structure. They also found that the impact of information
technology can vary widely between companies.
IT Doesn’t Matter
Just as a consensus was forming about the value of IT, the internet stock market bubble
burst. Just two years later, in 2003, Harvard professor Nicholas Carr wrote his article “IT
Doesn’t Matter” in the Harvard Business Review. In this article, Carr asserts that as
information technology has become more ubiquitous, it has also become less of a
differentiator. In other words, because information technology is so readily available and
the software used so easily copied, businesses cannot hope to implement these tools to
provide any sort of competitive advantage. Carr goes on to suggest that since IT is
essentially a commodity, it should be managed like one: low cost, low risk. Using the
analogy of electricity, Carr describes how a firm should never be the first to try a new
technology, thereby letting others take the risks. IT management should see themselves as
a utility within the company and work to keep costs down. For IT, providing the best
service with minimal downtime is the goal.
As you can imagine, this article caused quite an uproar, especially from IT companies.
Many articles were written in defense of IT; many others in support of Carr. Carr released
a book based on the article in 2004, entitled “Does IT Matter?”
Probably the best thing to come out of the article and subsequent book was that it
opened up discussion on the place of IT in a business strategy, and exactly what role IT
could play in competitive advantage, which is addressed in this reading.
Competitive Advantage
What does it mean when a company has a competitive advantage? What are the factors
that play into it? While there are entire courses and many different opinions on this topic,
let’s go with one of the most accepted definitions, developed by Michael Porter (2001) in
his book Competitive Advantage: Creating and Sustaining Superior Performance. A
company is said to have a competitive advantage over its rivals when it is able to sustain
profits that exceed average for the industry. According to Porter, there are two primary
methods for obtaining competitive advantage: cost advantage and differentiation
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advantage. So the question becomes: how can information technology be a factor in one
or both of these methods? In the sections below, we will explore this question using two
of Porter’s analysis tools: the value chain and the five forces model. We will also use
Porter’s analysis in his 2001 article “Strategy and the Internet,” which examines the impact
of the internet on business strategy and competitive advantage, to shed further light on
the role of information technology in competitive advantage.
The Value Chain
In his book, Porter describes exactly how a company can create value (and therefore,
profit). Value is built through the value chain: a series of activities undertaken by the
company to produce a product or service. Each step in the value chain contributes to the
overall value of a product or service. While the value chain may not be a perfect model for
every type of company, it does provide a way to analyze just how a company is producing
value. The value chain is made up of two sets of activities: primary activities and support
activities. We will briefly examine these activities and discuss how information technology
can play a role in creating value by contributing to cost advantage, differentiation
advantage, or both.
Porter’s Value Chain
Series of activities that contribute to the overall value of a product or service
The primary activities are the functions that directly impact the creation of a product or
service. The goal of the primary activities is to add more value than they cost. The primary
activities are:
Inbound logistics: These are the functions performed to bring in raw materials and
other needed inputs. Information technology can be used here to make these
processes more efficient, such as with supply-chain management systems, which
allow the suppliers to manage their own inventory.
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Operations: Any part of a business that is involved in converting the raw materials
into the final products or services is part of operations. From manufacturing to
business process management (covered in Business Processes), information
technology can be used to provide more efficient processes and increase innovation
through flows of information.
Outbound logistics: These are the functions required to get the product out to the
customer. As with inbound logistics, IT can be used here to improve processes, such
as allowing for real-time inventory checks. IT can also be a delivery mechanism itself.
Sales/Marketing: The functions that will entice buyers to purchase the products are
part of sales and marketing. Information technology is used in almost all aspects of
this activity. From online advertising to online surveys, IT can be used to innovate
product design and reach customers like never before. The company website can be
a sales channel itself.
Service: The functions a business performs after the product has been purchased to
maintain and enhance the product’s value are part of the service activity. Service can
be enhanced via technology as well, including support services through websites and
knowledge bases.
The support activities are the functions in an organization that support, and cut across, all
of the primary activities. The support activities are:
Firm infrastructure: This includes organizational functions such as finance,
accounting, and quality control, all of which depend on information technology; the
use of enterprise resource planning (ERP) systems (to be covered in The People in
Information Systems) is a good example of the impact that IT can have on these
functions.
Human resource management: This activity consists of recruiting, hiring, and other
services needed to attract and retain employees. Using the internet, HR
departments can increase their reach when looking for candidates. There is also the
possibility of allowing employees to use technology for a more flexible work
environment.
Technology development: Here we have the technological advances and innovations
that support the primary activities. These advances are then integrated across the
firm or within one of the primary activities to add value. Information technology
would fall specifically under this activity.
Procurement: The activities involved in acquiring the raw materials used in the
creation of products and services are called procurement. Business-to-business ecommerce can be used to improve the acquisition of materials.
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This analysis of the value chain provides some insight into how information technology
can lead to competitive advantage. Let’s now look at another tool that Porter developed—
the “five forces” model.
Porter’s Five Forces
Porter developed the “five forces” model as a framework for industry analysis. This model
can be used to help understand just how competitive an industry is and to analyze its
strengths and weaknesses. The model consists of five elements, each of which plays a role
in determining the average profitability of an industry. In 2001, Porter wrote an article
entitled ”Strategy and the Internet,” in which he takes this model and looks at how the
internet impacts the profitability of an industry. Below is a quick summary of each of the
five forces and the impact of the internet.
Porter’s Five Forces Model
Five elements that determine an industry’s competitiveness and average profitability
Threat of substitute products or services: How easily can a product or service be
replaced with something else? The more types of products or services there are that
can meet a particular need, the less profitability there will be in an industry. For
example, the advent of the mobile phone has replaced the need for pagers. The
internet has made people more aware of substitute products, driving down industry
profits in those industries being substituted.
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Bargaining power of suppliers: When a company has several suppliers to choose
from, it can demand a lower price. When a sole supplier exists, then the company is
at the mercy of the supplier. For example, if only one company makes the controller
chip for a car engine, that company can control the price, at least to some extent.
The internet has given companies access to more suppliers, driving down prices. On
the other hand, suppliers now also have the ability to sell directly to customers.
Bargaining power of customers: A company that is the sole provider of a unique
product has the ability to control pricing. But the internet has given customers many
more options to choose from.
Barriers to entry: The easier it is to enter an industry, the tougher it will be to make
a profit in that industry. The internet has an overall effect of making it easier to
enter industries. It is also very easy to copy technology, so new innovations will not
last that long.
Rivalry among existing competitors: The more competitors there are in an industry,
the bigger a factor price becomes. The advent of the internet has increased
competition by widening the geographic market and lowering the costs of doing
business. For example, a manufacturer in Southern California may now have to
compete against a manufacturer in the South, where wages are lower.
Porter’s five forces are used to analyze an industry to determine the average profitability
of a company within that industry. Adding in Porter’s analysis of the internet, we can see
that the internet (and by extension, information technology in general) has the effect of
lowering overall profitability (Porter, 2001). While the internet has certainly produced
many companies that are big winners, the overall winners have been the consumers, who
have been given an ever-increasing market of products and services and lower prices.
Using Information Systems for Competitive Advantage
Now that we have an understanding of competitive advantage and some of the ways that
IT may be used to help organizations gain it, we will turn our attention to some specific
examples. A strategic information system is an information system that is designed
specifically to implement an organizational strategy meant to provide a competitive
advantage. These sorts of systems began popping up in the 1980s, as noted in a paper by
Charles Wiseman entitled “Creating Competitive Weapons From Information Systems”
(Wiseman & MacMillan, 1984).
Specifically, a strategic information system is one that attempts to do one or more of the
following:
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deliver a product or a service at a lower cost;
deliver a product or service that is differentiated;
help an organization focus on a specific market segment; or
enable innovation.
Following are some examples of information systems that fall into this category.
Business Process Management Systems
In their 2003 book, IT Doesn’t Matter—Business Processes Do , Smith and Fingar argued
that it is the integration of information systems with business processes that leads to
competitive advantage. They then go on to state that Carr’s article is dangerous because it
gave CEOs and IT managers the green light to start cutting their technology budgets,
putting their companies in peril. They go on to state that true competitive advantage can
be found with information systems that support business processes. In the reading,
Business Processes, we will focus on the use of business processes for competitive
advantage.
Electronic Data Interchange
One of the ways that information systems have participated in competitive advantage is
through integrating the supply chain electronically. This is primarily done through a
process called electronic data interchange, or EDI. EDI can be thought of as the
computer-to-computer exchange of business documents in a standard electronic format
between business partners. By integrating suppliers and distributors via EDI, a company
can vastly reduce the resources required to manage the relevant information. Instead of
manually ordering supplies, the company can simply place an order via the computer and
the next time the order process runs, it is ordered.
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Manual Order Process
Graphic comparison of the manual order process
Order Process with EDI
Graphic comparison of the order process with electronic data exchange (EDI)
Collaborative Systems
As organizations began to implement networking technologies, information systems
emerged that allowed employees to begin collaborating in different ways. These systems
allowed users to brainstorm ideas together without the necessity of physical, face-to-face
meetings. Utilizing tools such as discussion boards, document sharing, and video, these
systems made it possible for ideas to be shared in new ways and the thought processes
behind these ideas to be documented.
Broadly speaking, any software that allows multiple users to interact on a document or
topic could be considered collaborative. Electronic mail, a shared Word document, social
networks, and discussion boards would fall into this broad definition. However, many
software tools have been created that are designed specifically for collaborative purposes.
These tools offer a broad spectrum of collaborative functions. Here is just a short list of
some collaborative tools available for businesses today:
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Google Drive. Google Drive offers a suite of office applications (such as a word
processor, spreadsheet, drawing, presentation) that can be shared between
individuals. Multiple users can edit the documents at the same time and threaded
comments are available.
Microsoft SharePoint. SharePoint integrates with Microsoft Office and allows for
collaboration using tools most office workers are familiar with. SharePoint is covered
in more detail in the reading, Networking and Communication.
Cisco WebEx. WebEx is a business communications platform that combines video
and audio communications and allows participants to interact with each other’s
computer desktops. WebEx also provides a shared whiteboard and the capability for
text-based chat to be going on during the sessions, along with many other features.
Mobile editions of WebEx allow for full participation using smartphones and tablets.
Atlassian Confluence. Confluence provides an all-in-one project-management
application that allows users to collaborate on documents and communicate
progress. The mobile edition of Confluence allows the project members to stay
connected throughout the project.
IBM Lotus Notes/Domino. One of the first true “groupware” collaboration tools,
Lotus Notes (and its web-based cousin, Domino) provides a full suite of collaboration
software, including integrated email.
Decision Support Systems
A decision support system (DSS) is an information system built to help an organization
make a specific decision or set of decisions. DSSs can exist at different levels of decisionmaking with the organization, from the CEO to the first-level managers. These systems
are designed to take inputs regarding a known (or partially known) decision-making
process and provide the information necessary to make a decision. DSSs generally assist a
management-level person in the decision-making process, though some can be designed
to automate decision making.
An organization has a wide variety of decisions to make, ranging from highly structured
decisions to unstructured decisions. A structured decision is usually one that is made
quite often, and one in which the decision is based directly on the inputs. With structured
decisions, you know the decision that needs to be made once you know the necessary
information. For example, inventory reorder levels can be structured decisions: Once our
inventory of widgets gets below a specific threshold, automatically reorder 10 more.
Structured decisions are good candidates for automation, but we don’t necessarily build
decision support systems for them.
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An unstructured decision involves a lot of unknowns. Many times, unstructured decisions
are decisions being made for the first time. An information system can support these
types of decisions by providing decision-makers with information-gathering tools and
collaborative capabilities. An example of an unstructured decision might be dealing with a
labor issue or setting policy for a new technology.
Decision support systems work best when decision-makers are making semi-structured
decisions. A semi-structured decision is one in which most of the factors needed for
making the decision are known, but human experience and other outside factors may still
play a role. A good example of an semi-structured decision would be diagnosing a medical
condition (see sidebar).
As with collaborative systems, DSSs can come in many different formats. A nicely
designed spreadsheet that allows for input of specific variables and then calculates
required outputs could be considered a DSS. Another DSS might be one that assists in
determining which products a company should develop. Input into the system could
include market research on the product, competitor information, and product
development costs. The system would then analyze these inputs based on the specific
rules and concepts programmed into it. Finally, the system would report its results, with
recommendations and/or key indicators to be used in making a decision. A DSS can be
looked at as a tool for competitive advantage in that it can give an organization a
mechanism to make wise decisions about products and innovations.
Isabel—A Health Care DSS
DSSs are best applied to semi-structured decisions, in which most of the needed
inputs are known, but human experience and environmental factors also play a role.
A good example that is in use today is Isabel, a health-care DSS. The creators of
Isabel explain how it works:
Isabel uses the information routinely captured during your workup, whether
free text or structured data, and instantaneously provides a diagnosis checklist
for review. The checklist contains a list of possible diagnoses with critical
“Don’t Miss Diagnoses” flagged. When integrated into your EMR system,
Isabel can provide “one click” seamless diagnosis support with no additional
data entry (http://www.isabelhealthcare.com/home/ourmission).
Investing in IT for Competitive Advantage
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In 2008, Brynjolfsson and McAfee published a study in the Harvard Business Review on
the role of IT in competitive advantage, entitled “Investing in the IT That Makes a
Competitive Difference.” Their study confirmed that IT can play a role in competitive
advantage, if deployed wisely. In their study, they draw three conclusions (McAfee &
Brynjolfsson, 2008):
First, the data show that IT has sharpened differences among companies instead of
reducing them. This reflects the fact that while companies have always varied widely
in their ability to select, adopt, and exploit innovations, technology has accelerated
and amplified these differences.
Second, good management matters. Highly qualified vendors, consultants, and IT
departments might be necessary for the successful implementation of enterprise
technologies themselves, but the real value comes from the process innovations that
can now be delivered on those platforms. Fostering the right innovations and
propagating them widely are both executive responsibilities that can’t be delegated.
Finally, the competitive shakeup brought on by IT is not nearly complete, even in the
IT-intensive US economy. We expect to see these altered competitive dynamics in
other countries, as their IT investments grow.
Information systems can be used for competitive advantage, but they must be used
strategically. Organizations must understand how they want to differentiate
themselves and then use all the elements of information systems (hardware,
software, data, people, and process) to accomplish that differentiation.
Summary
Information systems are integrated into all components of business today, but can they
bring competitive advantage? Over the years, there have been many answers to this
question. Early research could not draw any connections between IT and profitability, but
later research has shown that the impact can be positive. IT is not a panacea; just
purchasing and installing the latest technology will not, by itself, make a company more
successful. Instead, the combination of the right technologies and good management,
together, will give a company the best chance of a positive result.
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Study Questions
1. What is the productivity paradox?
2. Summarize Carr’s argument in “Does IT Matter?”
3. How is the 2008 study by Brynjolfsson and McAfee different from previous
studies? How is it the same?
4. What does it mean for a business to have a competitive advantage?
5. What are the primary activities and support activities of the value chain?
6. What has been the overall impact of the internet on industry profitability?
Who has been the true winner?
7. How does EDI work?
8. Give an example of a semi-structured decision and explain what inputs would
be necessary to provide assistance in making the decision.
9. What does a collaborative information system do?
10. How can IT play a role in competitive advantage, according to the 2008 article
by Brynjolfsson and McAfee?
References
Brynjolfsson, E. (1991). The productivity paradox of information technology: review and
assessment. Communications of the ACM, 36(12), 66-77.
Brynjolfsson, E., & Hitt, L. (1998). Beyond the productivity paradox. Communications of
the ACM, 41(8), 49–55.
McAfee, A., & Brynjolfsson, E. (2008, July – August). Investing in the IT that makes a
competitive difference. Harvard Business Review. Retrieved from
https://hbr.org/2008/07/investing-in-the-it-that-makes-a-competitive-difference
Porter, M. (2001). Strategy and the internet. Harvard Business Review, 79(3), Retrieved
from http://hbswk.hbs.edu/item/2165.html
Smith, H. & Fingar, P. (2003). IT doesn’t matter—Business processes do . Tampa, FL:
Meghan-Kiffer Press.
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Wiseman, C., & MacMillan, I. C. (1984). Creating competitive weapons from information
systems. Journal of Business Strategy, 5(2), 42.
Licenses and Attributions
Chapter 7: Does IT Matter?
(https://www.saylor.org/site/textbooks/Information%20Systems%20for%20Business%20
and%20Beyond.pdf)
from Information Systems for Business and Beyond by David T.
Bourgeois is available under a Creative Commons Attribution 3.0 Unported
(https://creativecommons.org/licenses/by/3.0/)
license. © 2014, David T. Bourgeois.
UMGC has modified this work and it is available under the original license.
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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Globalization and the Digital Divide
Learning Resource
Globalization and the Digital Divide
Globalization is the term used to refer to the integration of goods, services, and culture
among the nations of the world. Globalization is not necessarily a new phenomenon; in
many ways, we have been experiencing globalization since the days of European
colonization. Further advances in telecommunication and transportation technologies
accelerated globalization. The advent of the worldwide internet has made all nations nextdoor neighbors. The internet has wired the world. Today it is just as simple to
communicate with someone on the other side of the world as it is to talk to someone next
door.
The new era of globalization allows any business to become international. Some of the
advantages include the following:
The ability to locate expertise and labor around the world. Instead of drawing
employees from their local area, organizations can now hire people from the global
labor pool. This also allows organizations to pay a lower labor cost for the same
work based on the prevailing wage in different countries.
The ability to operate 24 hours a day. With employees in different time zones all
around the world, an organization can literally operate around the clock, handing off
work on projects from one part of the world to another. Businesses can also keep
their digital storefront (their website) open all the time.
A larger market for their products. Once a product is being sold online, it is available
for purchase from a worldwide consumer base. Even if a company’s products do not
appeal beyond its own country’s borders, being online has also made the product
more visible to consumers within that country.
In order to fully take advantage of these new capabilities, companies need to understand
that there are also challenges in dealing with employees and customers from different
cultures. Some of these challenges include:
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Infrastructure differences. Each country has its own infrastructure, many of which
are not of the same quality as the US.
Labor laws and regulations. Different countries (even different states in the United
States) have different laws and regulations. A company that wants to hire employees
from other countries must understand the different regulations and concerns.
Legal restrictions. Many countries have restrictions on what can be sold or how a
product can be advertised. It is important for a business to understand what is
allowed.
Language, customs, and preferences. Every country has its own (or several) unique
culture(s), which a business must consider when trying to market a product there.
Additionally, different countries have different preferences. For example, in some
parts of the world, people prefer to eat their french fries with mayonnaise instead of
ketchup; in other parts of the world, specific hand gestures (such as the thumbs-up)
are offensive.
International shipping. Shipping products between countries in a timely manner can
be challenging. Inconsistent address formats, dishonest customs agents, and
prohibitive shipping costs are all factors that must be considered when trying to
deliver products internationally.
Digital Divide
As the internet continues to make inroads across the world, it is also creating a separation
between those who have access to this global network and those who do not. This
separation is called the digital divide and is of great concern. The digital divide can occur
between countries, regions, or even neighborhoods. In many US cities, there are pockets
with little or no internet access, while just a few miles away high-speed broadband is
common. Solutions to the digital divide have had mixed success over the years. Many
times, just providing internet access and/or computing devices is not enough to bring true
internet access to a country, region, or neighborhood. Organizations must evaluate this
potential issue as they seek to operate in different geographical areas to determine
whether technology solutions are readily accessible and usable to their target audience.
Licenses and Attributions
Chapter 11: Globalization and the Digital Divide
(https://www.saylor.org/site/textbooks/Information%20Systems%20for%20Business%20
and%20Beyond/Textbook.html#_Chapter_11:_Globalization)
from Information Systems
for Business and Beyond was adapted by The Saylor Foundation and is available under a
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Creative Commons Attribution 3.0 Unported (https://creativecommons.org/licenses/bync-sa/3.0/)
license. © 2014, David T. Bourgeois. UMGC has modified this work and it
is available under the original license.
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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How Organizations Use Information Systems Strategically
Learning Resource
How Organizations Use Information Systems
Strategically
So far you’ve learned about what is meant by information system and how IT matters in
organizations, as well as how businesses align their strategy with the use of information
technology. It’s important to keep in mind that organizations have basically two ways to
increase profits—either raise prices or reduce expenses (or a combination of the two).
Organizations can’t just focus on money coming in because there are expenses that must
be paid out of that income resulting in a net income (Gross Income â‚‹ Expenses = Net
Income). Even governmental agencies and nonprofit companies need to take in money
(governmental budgets, taxpayers, donations, etc.), pay the expenses incurred in achieving
the organization’s mission, and have money left over to reinvest in the business.
In the section Does IT Matter?, the concept of the value chain was presented. Each of the
five primary areas of the value chain along with the support activities (frequently referred
to as back-office functions) provide opportunities to improve profitability and identify
where technology can help improve processes. Each business would define specifically
what its primary activities are and then analyze where there are opportunities within each
area.
Porter’s Value Chain
Series of activities that contribute to the overall value of a product or service
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Does IT Matter? also introduced Porter’s Five Forces, a framework to help organizations
assess its environment. Understanding how the five forces impact the organization can
help organizations determine where to focus to increase their competitive advantage. For
example, if operating in a highly competitive environment (many companies offering the
same or very similar products or services), then the company could establish a strategy to
provide its goods and services at a lower cost or to target a specific market niche. When a
company has decided its strategy, then it’s time to look at how to achieve that strategy.
Here’s where the use of information technology and information systems can come into
play. Improving the ability to deliver goods and services at a lower cost or in a unique way
can be enabled by information systems.
Licenses and Attributions
Chapter 7: Does IT Matter? (https://bus206.pressbooks.com/chapter/chapter-7-does-itmatter/)
from Information Systems for Business and Beyond by David T. Bourgeois is
available under a Creative Commons Attribution 3.0 Unported
(https://creativecommons.org/licenses/by/3.0/)
license. © 2014, David T. Bourgeois.
UMGC has modified this work and it is available under the original license.
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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Business Strategy
Learning Resource
Business Strategy
This section presents a high-level overview of the strategic planning process for business.
All companies want to formulate technology solutions that effectively support the
business and its objectives. To do so, the company must first understand its business
model, the fundamentals of its business type (manufacturing, finance, service, etc.), and its
strategy. Only once the company has understood these, should it begin to focus on its
systems. Information systems are only tools that are used to support a business;
therefore, if the tools are not aligned with business requirements, then its resources (time,
money, and people) may be wasted, triggering an undesirable outcome.
Many businesses establish an overall mission or vision statement—Why are we in
business? Following is a list of companies with their mission statements:
Amazon—”to be earth’s most customer-centric company, to build a place where people
can come to find and discover anything they might want to buy online.” (Amazon Jobs,
2018)
Marriott—”to be the world’s favorite travel company” (Marriott Investor Relations).
Google—“to organize the world’s information and make it universally accessible and
useful” (Google.com, 2018).
As you can see, these mission and vision statements are very broad and overarching;
however, to achieve these, organizations need more specifics with actionable areas to
accomplish to help support the mission/vision. In order to define the goals and objectives,
first organizations scan the environment looking at several factors, such as competition,
business environment, customers, employees, and location. This analysis helps identify
threats and opportunities. A frequent tool used in business is SWOT Analysis: identifying
Strengths, Weaknesses, Opportunities and Threats. The section Does IT Matter? also
looks at further methods to analyze the competitive environment.
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This analysis can result in organizations defining business goals and objectives and the
specific actions needed to be successful. When these objectives are defined,
opportunities can be identified to use information technology to help reach those
objectives.
It’s important that technology support the business objectives rather than drive the
objectives. For example, looking back at Amazon’s mission statement, specific goals and
objectives would need to be defined (e.g., How can customer-centric be increased?). One
approach is customizing the user experience so customers feel valued and that Amazon
really “knows” them. A strategic goal might be to maximize the customer’s experience
through personalization of the online shopping experience. With technology, information
regarding customers’ browsing and shopping habits can be stored and retrieved when a
customer returns to the Amazon site, prompting with messages such as “Hello John—
Recommended Links for You” or “John—Buy it Again,” followed by a list of recent
purchases John has made. The benefits of the information technology can be increased
sales and increased customer loyalty, which give Amazon a competitive advantage in the
online retail arena.
This information would then be documented for everyone in the company to understand
and be able to do their part to support the business strategy. For example, Amazon might
document as follows:
Mission/Vision: Our vision is to be earth’s most customer-centric company, to build a
place where people can come to find and discover anything they might want to buy
online.
Business Strategy (derived from the Mission/Vision): to be earth’s most customer-centric
company, to build a place where people can come to find and discover anything they
might want to buy online.
Technology Support: A robust online shopping system would accommodate millions
of customers and products and focus on the individual customer’s searches and
buying habits.
Competitive Advantage: Availability of millions of products would increase sales, and
a focus on the customer would increase customer loyalty.
Strategic Goal 1: Increase customer-centricity by maximizing the customer’s experience
through personalization of the online shopping experience.
Objective: Provide customer with at least five other items they might be interested in
based on previous purchases by the end of the first quarter.
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Technology Support: The system would store each customer’s purchases and retrieve that
information when the customer returns to the Amazon site, and present a message such
as “Hello, John – Recommended for you” with icons of several items related to his recent
purchases.
Strategic Goal 2: Increase the number of items available.
Objective: Add 10% more items to the inventory.
Technology Support: The system would provide the ability to store and retrieve items for
display to customers.
To achieve success, an organization should translate its high-level mission into specific
objectives so it can align its technology support to those objectives. The alignment can
provide clear direction and enable all levels of the organization to work towards
maximizing their investments in information technology.
References
Amazon Jobs (2018). Retrieved from https://www.amazon.jobs/en/working/workingamazon
Google.com/About. (n.d.). Retrieved from https://www.google.com/about/
Marriott. (2018). Marriott investor relations: Frequently asked questions. Retrieved from
https://marriott.gcs-web.com/investor-faqs
© 2022 University of Maryland Global Campus
All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity
of information located at external sites.
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Does IT Matter?
Learning Resource
Does IT Matter?
Introduction
For over 50 years, computing technology has been a part of business. Organizations have
spent trillions of dollars on information technologies. But has all this investment in IT
made a difference? Have we seen increases in productivity? Are companies that invest in
IT more competitive? In this reading, we will look at the value IT can bring to an
organization and try to answer these questions. We will begin by highlighting two
important works from the past two decades.
The Productivity Paradox
In 1991, Erik Brynjolfsson wrote an article, published in the Communications of the ACM,
entitled “The Productivity Paradox of Information Technology: Review and Assessment.”
By reviewing studies about the impact of IT investment on productivity, Brynjolfsson was
able to conclude that the addition of information technology to business had not
improved productivity at all—the “productivity paradox.” From the article, he does not
draw any specific conclusions from this finding and provides the following analysis
(Brynjolfsson, 1991):
Although it is too early to conclude that IT’s productivity contribution has been subpar, a
paradox remains in our inability to unequivocally document any contribution after so
much effort. The various explanations that have been proposed can be grouped into four
categories:
1. Mismeasurement of outputs and inputs,
2. Lags due to learning and adjustment,
3. Redistribution and dissipation of profits, and
4. Mismanagement of information and technology.
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In 1998, Brynjolfsson and Lorin Hitt published a follow-up paper entitled “Beyond the
Productivity Paradox” (Brynjolfsson & Hitt, 1998). In this paper, the authors utilized new
data that had been collected and found that IT did, indeed, provide a positive result for
businesses. Further, they found that sometimes the true advantages in using technology
were not directly relatable to higher productivity, but to “softer” measures, such as the
impact on organizational structure. They also found that the impact of information
technology can vary widely between companies.
IT Doesn’t Matter
Just as a consensus was forming about the value of IT, the internet stock market bubble
burst. Just two years later, in 2003, Harvard professor Nicholas Carr wrote his article “IT
Doesn’t Matter” in the Harvard Business Review. In this article, Carr asserts that as
information technology has become more ubiquitous, it has also become less of a
differentiator. In other words, because information technology is so readily available and
the software used so easily copied, businesses cannot hope to implement these tools to
provide any sort of competitive advantage. Carr goes on to suggest that since IT is
essentially a commodity, it should be managed like one: low cost, low risk. Using the
analogy of electricity, Carr describes how a firm should never be the first to try a new
technology, thereby letting others take the risks. IT management should see themselves as
a utility within the company and work to keep costs down. For IT, providing the best
service with minimal downtime is the goal.
As you can imagine, this article caused quite an uproar, especially from IT companies.
Many articles were written in defense of IT; many others in support of Carr. Carr released
a book based on the article in 2004, entitled “Does IT Matter?”
Probably the best thing to come out of the article and subsequent book was that it
opened up discussion on the place of IT in a business strategy, and exactly what role IT
could play in competitive advantage, which is addressed in this reading.
Competitive Advantage
What does it mean when a company has a competitive advantage? What are the factors
that play into it? While there are entire courses and many different opinions on this topic,
let’s go with one of the most accepted definitions, developed by Michael Porter (2001) in
his book Competitive Advantage: Creating and Sustaining Superior Performance. A
company is said to have a competitive advantage over its rivals when it is able to sustain
profits that exceed average for the industry. According to Porter, there are two primary
methods for obtaining competitive advantage: cost advantage and differentiation
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advantage. So the question becomes: how can information technology be a factor in one
or both of these methods? In the sections below, we will explore this question using two
of Porter’s analysis tools: the value chain and the five forces model. We will also use
Porter’s analysis in his 2001 article “Strategy and the Internet,” which examines the impact
of the internet on business strategy and competitive advantage, to shed further light on
the role of information technology in competitive advantage.
The Value Chain
In his book, Porter describes exactly how a company can create value (and therefore,
profit). Value is built through the value chain: a series of activities undertaken by the
company to produce a product or service. Each step in the value chain contributes to the
overall value of a product or service. While the value chain may not be a perfect model for
every type of company, it does provide a way to analyze just how a company is producing
value. The value chain is made up of two sets of activities: primary activities and support
activities. We will briefly examine these activities and discuss how information technology
can play a role in creating value by contributing to cost advantage, differentiation
advantage, or both.
Porter’s Value Chain
Series of activities that contribute to the overall value of a product or service
The primary activities are the functions that directly impact the creation of a product or
service. The goal of the primary activities is to add more value than they cost. The primary
activities are:
Inbound logistics: These are the functions performed to bring in raw materials and
other needed inputs. Information technology can be used here to make these
processes more efficient, such as with supply-chain management systems, which
allow the suppliers to manage their own inventory.
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Operations: Any part of a business that is involved in converting the raw materials
into the final products or services is part of operations. From manufacturing to
business process management (covered in Business Processes), information
technology can be used to provide more efficient processes and increase innovation
through flows of information.
Outbound logistics: These are the functions required to get the product out to the
customer. As with inbound logistics, IT can be used here to improve processes, such
as allowing for real-time inventory checks. IT can also be a delivery mechanism itself.
Sales/Marketing: The functions that will entice buyers to purchase the products are
part of sales and marketing. Information technology is used in almost all aspects of
this activity. From online advertising to online surveys, IT can be used to innovate
product design and reach customers like never before. The company website can be
a sales channel itself.
Service: The functions a business performs after the product has been purchased to
maintain and enhance the product’s value are part of the service activity. Service can
be enhanced via technology as well, including support services through websites and
knowledge bases.
The support activities are the functions in an organization that support, and cut across, all
of the primary activities. The support activities are:
Firm infrastructure: This includes organizational functions such as finance,
accounting, and quality control, all of which depend on information technology; the
use of enterprise resource planning (ERP) systems (to be covered in The People in
Information Systems) is a good example of the impact that IT can have on these
functions.
Human resource management: This activity consists of recruiting, hiring, and other
services needed to attract and retain employees. Using the internet, HR
departments can increase their reach when looking for candidates. There is also the
possibility of allowing employees to use technology for a more flexible work
environment.
Technology development: Here we have the technological advances and innovations
that support the primary activities. These advances are then integrated across the
firm or within one of the primary activities to add value. Information technology
would fall specifically under this activity.
Procurement: The activities involved in acquiring the raw materials used in the
creation of products and services are called procurement. Business-to-business ecommerce can be used to improve the acquisition of materials.
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This analysis of the value chain provides some insight into how information technology
can lead to competitive advantage. Let’s now look at another tool that Porter developed—
the “five forces” model.
Porter’s Five Forces
Porter developed the “five forces” model as a framework for industry analysis. This model
can be used to help understand just how competitive an industry is and to analyze its
strengths and weaknesses. The model consists of five elements, each of which plays a role
in determining the average profitability of an industry. In 2001, Porter wrote an article
entitled ”Strategy and the Internet,” in which he takes this model and looks at how the
internet impacts the profitability of an industry. Below is a quick summary of each of the
five forces and the impact of the internet.
Porter’s Five Forces Model
Five elements that determine an industry’s competitiveness and average profitability
Threat of substitute products or services: How easily can a product or service be
replaced with something else? The more types of products or services there are that
can meet a particular need, the less profitability there will be in an industry. For
example, the advent of the mobile phone has replaced the need for pagers. The
internet has made people more aware of substitute products, driving down industry
profits in those industries being substituted.
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Bargaining power of suppliers: When a company has several suppliers to choose
from, it can demand a lower price. When a sole supplier exists, then the company is
at the mercy of the supplier. For example, if only one company makes the controller
chip for a car engine, that company can control the price, at least to some extent.
The internet has given companies access to more suppliers, driving down prices. On
the other hand, suppliers now also have the ability to sell directly to customers.
Bargaining power of customers: A company that is the sole provider of a unique
product has the ability to control pricing. But the internet has given customers many
more options to choose from.
Barriers to entry: The easier it is to enter an industry, the tougher it will be to make
a profit in that industry. The internet has an overall effect of making it easier to
enter industries. It is also very easy to copy technology, so new innovations will not
last that long.
Rivalry among existing competitors: The more competitors there are in an industry,
the bigger a factor price becomes. The advent of the internet has increased
competition by widening the geographic market and lowering the costs of doing
business. For example, a manufacturer in Southern California may now have to
compete against a manufacturer in the South, where wages are lower.
Porter’s five forces are used to analyze an industry to determine the average profitability
of a company within that industry. Adding in Porter’s analysis of the internet, we can see
that the internet (and by extension, information technology in general) has the effect of
lowering overall profitability (Porter, 2001). While the internet has certainly produced
many companies that are big winners, the overall winners have been the consumers, who
have been given an ever-increasing market of products and services and lower prices.
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