StudyDaddy Information Systems Three questions in one document. This is an assignment at Masters level, please make good references (25 sources at least), using Harvard referencing system, no plagarism.Questions1) Explain the diffe

Three questions in one document. This is an assignment at Masters level, please make good references (25 sources at least), using Harvard referencing system, no plagarism.Questions1) Explain the diffe

2 Organizational Strategy, Competitive Advantage, and Information Systems LEARNING OBJECTIVES >>> 1. List and provide examples of the three types of business pressures, and describe one IT response to each one. 2. Identify the five competitive forces described by Porter, and explain how the Web impacts each one. 3. Describe the strategies that organizations typically adopt to counter the five competitive forces and achieve competitive advantage. 4. Define business –IT techno logy alignment, and describe the characteristics of effective alignment. OPENING CASE > Before the Stores Have you ever seen a commercial for something sold ―As Seen on TV‖ and forgotten the phone number?

Maybe you also heard about a Web site, tried to remember it, but just could not seem to get it right. Where would you start? How would you find that product that you wanted? Amar Kahbuni has the answer to your problems. In 2008, as a sophomore in college, he founded a company called Before the Stores. His strategy was simple: Sell ―As Seen on TV‖ products before they get into stores. However, rather than selling these products through commercials, Amar would capitalize on the commercials and sell them on the Web. He had s old items on the Web before, but to implement his new idea he would need a much more sophisticated order fulfillment system. And what college sophomore has time to develop this type of system? Amar found his answer with the Amazon Web store. He used the Fulfillment by Amazon (FBA) service offered to Amazon's business customers. This service provides businesses with an easy method of listing products, inventories, and prices; taking orders; accepting payment; and, ultimately, scheduling deliveries. In addi tion, Before the Stores would capitalize on two major markets: (1) the infomercials that often advertise these products and (2) Amazon's customer base. In fact, many people go to Amazon to try to find a product that they have heard about. Amar was going to make it easy for them to find his. Fortunately for Amar, his school — Babson College in Maryland — believed Before the Store would be a success. As a sophomore in 2008, Amar won the Business Plan Competition and a significant cash award.

However, only time wo uld tell if this venture would be successful. The results speak for themselves. Sales tripled from the third quarter of 2008 to the third quarter of 2009.

Then, during the 2009 holiday season, sales increased 300 percent over the same period in 2008. By the fourth quarter of 2009, Amar was shipping more than 1,500 orders per week through FBA. Amar's business, Before the Stores, was a success. Sources: Compiled from “ Before the Stores Finds Success with Amazon Services ,” Amazon Services Seller Success Story , accessed March 22, 2011; “ Incentive Targeting, Before the Stores LLC, Win Babson's 2008 Business Plan Competitions ,” Babson College Press Release , April 10, 2008. Questions 1. Provide specific examples of the services that Fulfillment by Amazon provided for Amar. 2. Provide specific examples of the value that Amar provides his customers. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. RUBY'S CLUB Ruben and Lisa have a vision that their club will provide a relaxing, community atmosphere, with good drinks and good music. However, they operate in a very competitive business environment and feel market pressure to be everything to everyone, even though that is not what they want to be. They feel pressure from their customers to be more technologically advanced, even though they do not see any competitive advantage from it. They also feel a tremendous responsibility in response to le gal and societal pressures to manage underage consumption of alcohol. However, they are not sure how to respond to these pressures while maintaining their desired atmosphere. >>>Over the years, they have learned that they not only compete with othe r clubs and local restaurants, but the threat of substitute products or services includes theaters, athletic events, parties, and anything else college students choose to do for entertainment. To gain and maintain a solid customer base, they feel they real ly need this community feel to their club, like the TV show Cheers , a place ―where everybody knows your name.‖ To achieve this, they are not quite sure what mix of music, drinks, information, networks, data, advertisements, controls, policies, and procedur es would position them where they want to be in the marketplace. Ruby's needs a solid strategy to accomplish Ruben and Lisa's vision. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. INTRODUCTION Information systems are critically important in helping organizations respond to business pressures and in supporting organizations' global strategy. As you study this chapter, you will see that any information system can be strategic , meaning that it can provide a co mpetitive advantage — if it is used properly. This chapter also demonstrates the incredible complexity of the information systems employed by a large, international company. As you see in this chapter's Closing Case 1, BP did an excellent job of revamping the information systems that support its business operations. However, the compa ny seemed to neglect those information systems that support its drilling operations, which are clearly just as strategic as the firm's business information systems. Competitive advantage is an advantage over competitors in some measure such as cost, quality, or speed; it leads to control of a market and to larger -than -average profits. Strategy and competitive advantage come in many forms. Amar Kahbuni found a niche where he could use exis ting electronic commerce (e - commerce) systems and advertising to create a competitive advantage. Capitalizing on Amazon's customer base and advertising from infomercials, he started a business that already had a market. He also enjoyed a distinct advantage over stores that ultimately sell these items because he provided an easy way for customers to find the product as soon as they heard about it on TV. Basically, he got to the customers first.

In addition, Amar had very little overhead because Amazon handle d the e -commerce side of his operation. He did not have to purchase, design, set up, or secure costly information systems. He only had to sign up — not set up — to put his business in operation because Amazon provided the infrastructure for his business. By th e way, Amazon is always looking for unique business ideas. What could you do with an Amazon store? Although there are many examples of companies that use technology in more expensive ways, Amar's example demonstrates that an entrepreneurial spirit and a so lid understanding of what IT can do for you will provide competitive advantages to sophomores in college just as they do for Wall Street CIOs. As you study this chapter, think of the small businesses in your area that are doing interesting things with popu lar technologies. Do any of them use Twitter in an interesting way? Facebook? Amazon? PayPal? If not, can you think of any businesses that would benefit from using these technologies? This chapter is important for you for several reasons. First, the busine ss pressures addressed here will impact your organization, but they also will impact you. As a result, you must understand how information systems can help you, and eventually your organization, respond to these pressures. In addition, acquiring competitiv e advantage is essential for your organization's survival. Many organizations achieve competitive advantage through the efforts of their employees. Therefore, becoming knowledgeable about strategy and how information systems impact strategy and competitive position will help you throughout your career. This chapter encourages you to become familiar with your organization's strategy, mission, and goals and to understand its business problems and how it makes (or loses) money. It will help you understand how information technology contributes to organizational strategy. Further, it is likely that you will be a member of business –IT committees that decide (among many other things) whether to adopt new technologies and how to use existing technologies more effec tively. After studying this chapter, you will be able to make immediate contributions in these committees when you join your organizations. In this chapter, you will see how information systems enable organizations to respond to business pressures. Next, you will learn how information systems help organizations gain competitive advantages in the marketplace. You conclude the chapter by discussing business –IT alignment — in other words, how the IT function in an organization supports its strategy. Copyri ght © 2012 John Wiley & Sons, Inc. All rights reserved. 2.1 Business Pressures, Organizational Responses, and IT Support Audio Mini -Lecture: Business Pressures, Organizational Responses, and IT Support Modern organizations compete in a challenging environment. To remain competitive they must react rapidly to problems and opportunities that arise from extremely dynamic conditions. In this section you examine some of the major pressures confronting modern organizations and the strategie s that organizations employ to respond to these pressures. Business Pressures The business environment is the combination of social, legal, economic, physical, and political factors in which businesses conduct their operations. Significant changes in any of these factors are likely to create business pressures on organizations. Org anizations typically respond to these pressures with activities supported by IT. Figure 2.1 illustrates the relationships among business pressures, organizational performance and responses, and IT support. You will learn about three major types of business pressures:

market, technology, and societal pressures. Figure 2.1 Business pressures, organizational performance and responses, and IT support. Market Pressures. Market pressures are generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers. Let's look more clos ely at each of these factors. Globalization. Globalization is the integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology. In his book The World Is Flat , Pulitzer Prize –winning author Thomas Friedman argues that technology is leveling th e global competitive playing field, thereby making it ―flat.‖ Friedman identifies three eras of globalization. The first era, Globalization 1.0, lasted from 1492 to 1800.

During this era, the force behind globalization was how much muscle, horsepower, wind power, or steam power a country could deploy. The second era, Globalization 2.0, lasted from 1800 to 2000. In this era, the force behind globalization was the emergence of multinational companies — that is, companies that had their headquarters in one count ry but operated in several countries. In the first half of this era, globalization was driven by falling transportation costs, generated by the development of the steam engine and the railroads. In the second half, the driving force was falling telecommuni cations costs resulting from the telegraph, telephones, computers, satellites, fiber -optic cable, and the Internet and World Wide Web. The modern global economy began to evolve during this era. Around the year 2000, the world entered Globalization 3.0. In this era globalization has been driven by the convergence of ten forces that Friedman calls ―flatteners.‖ Table 2.1 identifies these forces. TABLE 2.1 Friedman's Ten Flatteners • Fall of the Berlin Wall on November 9, 1989 • Shifted the world toward free -market economies and away from centrally planned economies • Led to the emergence of the European Union and early thinking about the world as a single, global market • Netscape goes public on August 9, 1995 • Popularized the Internet and the World Wide Web • Development of work -flow software • Enabled computer applications to work with one another without human intervention • Enabled faster, closer collaboration and coordination among employees, regardless of their location • Uploading • Empowered all Internet users to create content and put it on the Web • Led the transition from a passive approach to content to an active, participatory, collaborative approach • Outsourcing • Contracting with an outside company to perform a specific function that your company was doing itself and then integrating that work back into your operation (e.g., moving customer call centers to India) • Offshoring • Relocating an entire operation, or certain tasks, to another country (e.g., moving an entire manufacturing operation to China) • Supply chaining • Technological revolution that led to the creation of networks comprised of companies, their suppliers, and their customers, all of which could collaborate and share information for increased efficiency • Insourcing • Delegating operations or jobs within a business to another company that specializes in those operations (e.g., Dell hires FedEx to ―take over‖ Dell's logistics process) • Informing • The ability to search for information, best illustrated by search engines • The Steroids (computing, instant messaging and file sharing, wireless technologies, Voice - over -Internet Protocol (VoIP), videoconferencing, and computer graphics) • Technologies that amplify the other flatteners • Enable all forms of computing and collaboration to be digital, mobile, and personal According to Friedman, each era has been characterized by a distinctive focus. The focus of Globalization 1.0 was on countries, the focus of Globalization 2.0 was on companies, and the focus of Globalization 3.0 is on groups and individuals. As you look at Table 2.1 , note that nine of Friedman's ten flatteners directly relate to information technology (all except the fall of the Berlin Wall). These flatteners enable individuals to connect, compute, communicate, collaborate, and compete everywhere and anywhere, anytime and all the time; to access limitless amounts of information, services, and entertainment; to exchange knowledge; and to produce and sell goods and services. People and organizations can now operate without regard to geography, time, distance, or even language barriers. The bottom line? Globalization is markedly increasing compet ition. These observations make our discussion all the more important for you. Simply put, you and the organizations you join will be competing with people and organizations from all over a flat world. Let's consider some examples of globalization. Regional agreements such as the North American Free Trade Agreement (NAFTA), which includes the United States, Canada, and Mexico, have contributed to increased world trade and increased competition. Further, the rise of India and China as economic powerhouses has increased global competition. One important pressure that businesses in a global market must contend with is the cost of labor, which varies widely among countries. In general, labor costs are higher in developed countries like the United States and Japan than in developing countries such as China and El Salvador. Also, developed countries usually offer greater benefits, such as healthcare, to employees, driving the cost of doing business even higher. Therefore, many labor -intensive industries have moved t heir operations to countries with low labor costs. IT has made such moves much easier to implement. However, manufacturing overseas is no longer the bargain it once was, and manufacturing in the United States is no longer as expensive. For example, manufac turing wages in China doubled between 2002 and 2008, and the value of China's currency has steadily risen. ―IT's About Business 2.1 ‖ illustrates the problems that can arise when companies outsource their manufacturing processes overseas. The Changing Nature of the Workforce. The workforce, particularly in developed countries, is becoming more diversified. Increasing numbers of women, single parents, minorities, and persons with disabilities are now employed in all types of positions.

IT is easing the integration of these employees into the traditional workforce. IT is also enablin g people to work from home, which can be a major benefit for parents with young children and for people confronted with mobility and/or transportation issues. Powerful Customers. Consumer sophistication and expectations increase as customers become more kn owledgeable about the products and services they acquire. Customers can use the Internet to find detailed information about products and services, to compare prices, and to purchase items at electronic auctions. Organizations recognize the importance of cu stomers and have increased their efforts to acquire and retain them. Modern firms strive to learn as much as possible about their customers to better anticipate and address their needs. This process, called customer intimacy , is an important component of customer relationship management (CRM), an organizationwide effort toward maximizing the customer experience. You will learn about CRM in Chapter 12 . IT's ABOUT BUSINESS 2.1 Sleek Audio The CEO of Sleek Audio ( http://sleek -audio.com ) was frustrated with a contract factory in Dongguan, China, that assembled the majority of his company's products. Not only did he have to travel to China every few months to troubleshoot quality flaws, but manufacturing problems in the factory threatened to bankrupt his company. In one case, Sleek Audio had to discard an entire shipment of 10,000 earphones because they were improperly welded, a mi stake that cost the company millions of dollars. Further, delivery delays caused by the factory's lax approach to deadlines forced Sleek Audio to spend huge amounts of money air -freighting products to the United States. As a result, the company had far too much money tied up in inventory that took months to arrive after the prototypes were developed. Sleek Audio decided to search for a manufacturing partner that possessed the necessary tools and expertise to produce their earphones. One was found in Dynamic Innovations ( www.d -inno.com ), located close to Sleek Audio's Palmetto, Florida, headquarters. One year later, Sleek Audio had a full -scale manufacturing operation that could be reached with a 15 -minute car ride rather than a 24 -hour flight. Each earphone costs roughly 50 percent more to produce in Florida than in China. Sleek Audio is happy to pay the premium, however, for the assurance that botched orders and shipping delays will not r uin the company. Based on enthusiastic customer response, Sleek Audio has projected 2011 to be its most profitable year ever. When Sleek Audio was considering how the company could return manufacturing to the States with its higher labor costs, company exe cutives realized that the only way to make the move feasible was to minimize the role of humans on the assembly line. This process meant redesigning products to take advantage of automated tools and robots. Sleek Audio's earphones featured plastic side pan els that the Chinese factory had to weld into place by hand. In the U.S. factory the company automated this process by replacing human labor with robots.

Managers redesigned the entire product around a solid aluminum center into which robots fit the speake r. This new assembly process requires neither welding nor human hands. Moreover, as you saw in Chapter 1, robots are becoming more skilled and less expensive. Questions 1. Which of Friedman's flatteners apply to Sleek Audio's decision to bring its manufacturing back to the United States? Support your answer. 2. Identify some potential negative implications of Sleek Audio's increasing reliance on robots in its manufacturing processes. Sources: Compiled from “ Bring Manufacturing Jobs Home! ” Deloitte Debates (www.deloitte.com ), 2011; R. Read, “ In Reverse of Offshore Trend, Oregon Manufacturing Thrives When High -Tech, High -Quality Products Are Needed ,” The Oregonian , September 18, 2010; T. George, “ U.S. Sourcing Firms Bid to Reverse Offshoring Trend ,” Nearshore Americas , April 8, 2010; B. Koerner, “ Made in the USA ,” Wired , March, 2011; “ Is Reverse Offshoring a Trend? ” Supply Chainer , October 25, 2008; J. Aitoro, “ Offshore Manufacturing: A Risky Proposition? ” CRN.com , June 25, 2007; http://sleek -audio.com , accessed March 21, 2011. Technology Pressures. The second category of business pressures consists of those pressures related to technology. Two major technology -related pressures are technological innovation and information overload. Technological Innovation and Obsolescence. New and improved technologies rapidly create or support substitutes for products, alternative service options, and superb quality. As a result, today's state -of-the -art products may be obsolete tomorrow. For example, how fast are new versions of your smartphone being released? How quickly are electronic versions of books, maga zines, and newspapers replacing traditional hard -copy versions? These changes force businesses to keep up with consumer demands. In-store comparison shopping is just one way customers are becoming more powerful. (Source: Studio Frank/Image Source Limited) Consider the Apple iPad ( www.apple.com/ipad ). Apple released the first iPad in April 2010 and sold 3 million of the devices in 80 days. Rather than taking time to enjoy its success, Apple made its iPad2 available for sale on March 11, 2011, only 11 months later. Information Overload. The amount of information available on the Internet doubles approximately every year, and much of it is free. The Internet and other teleco mmunications networks are bringing a flood of information to managers. To make decisions effectively and efficiently, managers must be able to access, navigate, and utilize these vast stores of data, information, and knowledge. Information technologies, su ch as search engines (discussed in Chapter 4) and data mining (discu ssed in Chapter 5), provide valuable support in these efforts. While this may be familiar, multitasking will become more complicated when your job depends on it. (Source: © Maria R.T. Deseo/PhotoEdit) Societal/Political/Legal Pressures. The third category of business pressures includes social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics.

This section will explain how all of these elements affect modern businesses. Social Responsibility. Social issues that affect businesses a nd individuals range from the state of the physical environment, to company and individual philanthropy, to education. Some corporations and individuals are willing to spend time and/or money to address various social problems. These efforts are known as organizational social responsibility or individual social responsibility . One critical social problem is the state of the physical environment. A growing I T initiative, called green IT, is addressing some of the most pressing environmental concerns. The following example illustrates how IT is instrumental in organizational efforts to ―go green.‖ EXAMPLE Companies Going Green Use Information Technology Companies are ―going green,‖ and IT professionals are facing increasing pressures to help their companies accomplish their environmental goals. Organizations consider IT to be a natural choice to lead their sustainability efforts, because IT touches every area of an organization. In a series of interviews, several IT executives listed four areas where IT is particularly valuable. Facilities design and management. Organizations are creating more sustainable work environments. Many organizations are pursuing Leadership in Energy and Environmental Design (LEED) certification from the U.S. Green Building Council, a nonprofit group that promotes the construction of environmentally friendly buildings. One impact of this development is that IT professionals are exp ected to help create green facilities. Consequently, IT personnel have to consider how their computing decisions impact sustainable design and, in turn, how the building's design impacts the IT infrastructure.

Green design influences the type of IT devices used and the locations where IT clusters personal computers, people, and servers. IT must become familiar with the metering and monitoring systems used in green buildings and the requirements of buildings' computerized infrastructure. Carbon management. As companies try to reduce their carbon footprints, they are turning to IT executives to develop the systems needed to calculate and track carbon throughout the organization and its supply chain, which can be global in scope. Therefore, IT employees need to become knowledgeable about embedded carbon and how to measure it in the company's products and processes. Consider, for example, application development. IT managers will have to ask whether an application will require new hardware to test and run, or how much additional server space (and thus energy) it will require — and how these issues translate into carbon output. International and U.S. state environmental laws. IT executives must deal with state laws and international regulations that impact everything from the IT products they buy, to how they dispose of them, to their company's carbon footprint. IT managers must understand environmental compliance issues so they can ask their vendors the right questions regarding specific state, national, and internat ional environmental standards before buying, deploying, and disposing of equipment. In short, IT managers must have an equipment strategy from cradle to grave. Energy management. IT executives must understand their entire organization's energy needs. They also need to establish a good relationship with the suppliers of their company's electrical utilities, for several reasons. First, energy management systems are becoming increasi ngly sophisticated. To employ these systems effectively and make intelligent consumption decisions, IT personnel must familiarize themselves with the system's complex monitors and sensors. Second, more utilities are developing an expertise in creating ener gy -efficient IT departments. IT managers should tap that expertise to improve their own departments' energy performance. Third, utilities are offering incentives to commercial customers who take certain energy conservation steps, such as enabling computer power management across their networks and designing energy -efficient data centers. Finally, utilities are offering variable rate incentives depending on when companies use electricity and how much they use. These issues require IT systems that can regulat e electricity use. Sources: Compiled from J. Matthews, “ For IT Managers, Going Green Can Save You Some Long Green ,” Forbes , March 31, 2011; A. Diana, “ 15 Green Tech Innovations ,” InformationWeek , January 5, 2011; A. Nguyen, “ Hire Green IT Managers Now, Forrester Urges ,” CIO , November 23, 2010; M. Pratt, “ How to Get Your Green IT Cred ,” Computerworld , September 2, 2010; C. Penttila, “ Why —and How —Your Company Should Go Green ,” InformationWeek , January 30, 2009; www.usgbc.org , accessed March 15, 2011. Continuing our discussion of social responsibility, social problems all over the world may be addressed through corporate and individual philanthropy. In some cases, questions arise as to what percentage of contributions actually goes to the intended causes and recipients and what percentage goes to the charity's overhead. Another problem that concerns contributors is that they often exert little influence over the selection of projects the ir contributions will support. As you see in ―IT's About Business 2.2 ,‖ the Internet can act as a facilitator of generosity. I T' s ABOUT BUSINE SS 2 .

2 The Internet Facilitates Generosity The Internet can facilitate acts of generosity and true connection. Consider, for example, a Web site such as PatientsLikeMe ( www.patientslikeme.com ), or any of the thousands of message boards dedicated to infertility, cancer, and various other ailments. People use these sites and message boards to obtain information about life -and -death decisions based on volunteered information, while also receiving much - needed emotional support from strangers. Sociologists contend that contributing to such communities helps people gain self -esteem by donating t heir time and experiences to people in need. People will most readily share information, followed by time, and then physical goods. Many Web sites help concerned individuals provide goods and services to others. These hubs translate the peer -to-peer princi ples of sharing from the virtual world to the real world. For example, CouchSurfing (www.couchsurfing.org ) has helped 2.3 million travelers find willing and free hosts throu ghout the world. What is the main reason that people allow strangers to sleep on their couch for free? The answer is that they give away something that has little marginal cost in exchange for the opportunity to meet people from all over the world. Let's l ook at some additional examples of Web sites that enable generosity. • GiftFlow ( www.giftflow.org ): GiftFlow is a virtual community where you can obtain things you need for free and find people who need the ―stuff‖ you have to give away.

GiftFlow connects community organizations, businesses, governments, and neighbors in a network of reciprocity, where they can share resources, meet one another's needs, and coordinate their efforts to build a better world. • OurGoods ( www.ourgoods.org ): OurGoods enables creative people to help one another produce independent projects. More work is accomplished in networks of shared respect and shared resources than in competitive isolation. • Sparked ( www.sparked.com ): Sparked is an online ― microvolunteering‖ Web site where large and small organizations list opportunities for people looking to volunteer. • Thredup ( www.thredup.com ): Thredup is a Web site where parents trade children's clothing and toys. • Collaborative Consumption ( www.collaborativeconsumption.com ): This Web site is an online hub for discussions about the growing business of sharing, resale, reuse, and barter (with many links to Web sites engaged in these practices). • Kiva ( www.kiva.org ): Kiva is a nonprofit enterprise that provides a link between lenders in developed countries and entrepreneurs in developing countries. Users pledge interest - free loans rather than tax -deductible donations. Kiva directs 100 percent of the loans to borrowers. • DonorsChoose ( www.donorschoose.org ): DonorsChoose is an education -oriented Web site that functions entirely within the United States. Users make donations rather than loans. The Web site addresses the huge problem of underfunded public schools. Questions 1. Discuss why people will give away their time and knowledge for free. 2. Describe the various ways in which the Internet can facilitate generosity. Sources: Compiled from A. Kamenetz, “ The Case for Generosity ,” FastCompany , March, 2011; N. Ferraro, “ Lending and Philanthropy in the Internet Age ,” InformationWeek , February 2, 2008; www.g iftflow.org , www.ourgoods.org , www.sparked.com , www.thredup.com ,http://blog.p2pfoundation.net , ww w.collaborativeconsumption.com , www.kiva.org ,www.donorschoose.org ; accessed July 31, 2011. Still another social problem that affects modern business is the digital divide. The digital divide refers to the wide gap between those who have access to information and communications technology and those who do not. This gap exists both within and among countries. Many government and international organizations are trying to close the digital divide. As technologies develop and become less expensive, the speed at which the gap can be closed will accelerate. A well -known project is the One Laptop per Child (OLPC) project (http://one.laptop.org ). OLPC is a nonprofit association dedicated to research to develop a very inexpensive laptop — a technology that aims to revolutionize how the world can educ ate its children. The first generation of inexpensive laptops appeared in 2007 with a price of $188, which was too high. The second generation of the laptop was scrapped because the price remained too high. The next generation of inexpensive laptops will b e a touchscreen tablet computer for schoolchildren in the developing world that uses less power than a light bulb and is unbreakable, waterproof, and one -half the thickness of an iPhone. This computer will be a single sheet of plastic, and have a projected price of $75. Compliance with Government Regulations. Another major source of business pressures is government regulations regarding health, safety, environmental protection, and equal opportunity. Businesses tend to view government regulations as expensi ve constraints on their activities. In general, government deregulation intensifies competition. In the wake of 9/11 and numerous corporate scandals, the U.S. government passed many new laws, including the Sarbanes -Oxley Act, the USA PATRIOT Act, the Gramm -Leach -Bliley Act, and the Health Insurance Portability and Accountability Act (HIPAA). Organizations must be in compliance with the regulations contained in these statutes. The process of becoming and remaining compliant is expensive and time consuming. I n almost all cases, organizations rely on IT support to provide the necessary controls and information for compliance. Protection Against Terrorist Attacks. Since September 11, 2001, organizations have been under increased pressure to protect themselves ag ainst terrorist attacks. In addition, employees who are in the military reserves have been called up for active duty, creating personnel problems. Information technology can help protect businesses by providing security systems and possibly identifying pat terns of behavior associated with terrorist activities, including cyberattacks (discussed in Chapter 7). An example of protection against terrorism is the Department of Homeland Security's US -VISIT program. US -VISIT is a network of biometric -screening systems, such as fingerprint and ocular (eye) scanners, that ties into g overnment databases and watch lists to check the identities of millions of people entering the United States. The system is now operational in more than 300 locations, including major international ports of entry by air, sea, and land. Ethical Issues. Ethi cs relates to general standards of right and wrong. Information ethics relates specifically to standards of right and wrong in information -processing practices. Ethical issues are very important because, if handled poorly, they can damage an organization's image and destroy its employees' morale. The use of IT raises many ethical issues, ranging from monitoring e -mail to invading the privacy of millions of customers whose data are stored in private and public databases. (Chapter 6 covers ethical issues in detail.) Clearly, then, the pressures on organizations are increasing , and organizations must be prepared to take responsive actions if they are to succeed. You will learn about these organizational responses in the next section. Organizational Responses Organizations are responding to the various pressures just discussed by implementing IT such as strategic systems, customer focus, make -to-order and mass customization, and e -business. This section explores each of these responses. Strategic Systems. Strategic systems provide organizations with advantages that enable them t o increase their market share and/or profits, to better negotiate with suppliers, and to prevent competitors from entering their markets.

As an example, the IT department at Procter & Gamble (P&G; www.pg.com ) developed a virtualized environment that the company uses for product design work, product placement research, and consumer feedback studies. P&G utilizes virtual reality models to test design ideas for the next breakthroughs in products suc h as diapers and cosmetics. Within these ―cyberworlds,‖ P&G can rapidly test product performance as well as consumer responses to various kinds of ingredient and packaging choices. Customer Focus. Organizational attempts to provide superb customer service can make the difference between attracting and keeping customers and losing them to competitors. Numerous IT tools and business processes have been designed to keep customers happy. Consider Amazon, for example. When you visit Amazon's Web site anytime aft er your first visit, the site welcomes you back by name and presents you with information on books that you might like, based on your previous purchases. In another example, Dell guides you through the process of buying a computer by providing information and choices that help you make an informed buying decision. Make -to -Order and Mass Customization. Make -to-order is a strategy of producing customized (made to individual specifications) products and services. The business problem is how to manufacture customized goods efficiently and at a reasonably low cost. Part of the solution is to change manufacturing processes from mass production to mass customization. In mass production, a company produces a large quantity of identical items. In mass customization , it also produces a large quantity of items, but it customizes them to fit the needs and preferences of individual customers. Mass customization is simply an attempt to perform make -to-order on a large scale. Bodymetrics ( www.bodymetrics.com ) is an excellent example of mass customization with men's and women's jeans. EXAMPLE Well -fitting jeans are notoriously difficult to find. To address this problem, Bodymetrics developed a ―body scanner‖ that scans the customer's body, captures more than 150 measurements, and produces a digital replica of his or her size and shape. This scan is then used to provide three services: made JtoJ measure jeans, body Jshape jeans, and online virtual try JonK With made JtoJmeasure jeans, the scan is used to create a pattern for the jeans, which are hand tailored to the exact lines and contours of the customer's body. The jeans are ready in three to six weeks, at which time the customer has a final fitting with a Bodymetrics tailor. Based on its experience with made JtoJmeasure jeans, Bodymetrics has identified three body shapes: straight, semi Jcurvy, a nd curvy. Body Jshape jeans are specifically designed to fit these different body shapes. After customers are scanned, a Bodymetrics jeans expert helps them determine their body shapes. Customers can then instantly purchase jeans matching their body shapes off the rack in the store. The online virtual try Jon allows customers who have been scanned to try on jeans virtually on their own bodies without physically trying on jeans in a dressing room. The service creates an avatar (a three - dimensional graphical representation), which has an amazing resemblance to the customer. Then, the customer can pick various styles of jeans and ―virtually see‖ what the jeans look like on her or his avatarK Sources: Compiled from “ The First Time I Had a Bodymetrics Scan ,”http://howfayeseesit.wordpress.com , March 23, 2011; L. Talbot, “ Bodymetrics: What's Your Jean Shape? ” http://lisatalbot.blogspot.com , February 2, 2011; Asmita, “Custom -Fit Jeans with Bodymetrics ,” www.styleguru.com , January 18, 2007 ( Note: StyleGuru is a promotional blog.); R. Young, “ Turning Tailoring Over to a Computer ,” International Herald Tribune , January 15, 2007; www.bodymetrics.com , accessed March 1, 2011 . E-Business and E -Commerce. Doing business electronically is an essential strategy for companies that are competing in today's business environment. Electronic commerce (EC or e -commerce) describes the process of buying, selling , transferring, or exchanging products, services, or information via computer networks, including the Internet. E-business is a somewhat broader concept. In addition to the buying and selling of goods and services, e -business also refers to servicing customers, collaborating with business partners, and performing electronic transac tions within an organization. (Chapter 9 focuses extensively on this topic. In addition, e -commerce applications appear throughout the book.) You now have a general overview of the pressures that affect companies in today's business environment and the responses that organizations choose to manage these pressures. To plan for the most effective responses, companies formulate strategies. In the new digital economy, these strategies rely heavily on information technology, especially strategic information systems. You examine these topics in the next section. BEFORE YO U G O ON . . . 1. What are the characteristics of the modern business environment? 2. Discuss some of the pressures that characterize the modern global business environment. 3. Identify some of the organizational responses to these pressures. Are any of these responses specific to a particular pressure? If so, which ones? RUBY'S CLUB QUESTIONS 1. How could IT help Ruby's comply with legal requirements and social responsibilities surrounding the sale of alcohol? 2. Drinks and music never become obsolete, right? How could Ruby's lack of IT create the environment that makes them appear obsolete? 3. The sheer number of possibilities are creating ―overload‖ for Ruben and Lisa before they even adopt any specific IT. How can technology be used to help them make a decision about the IT they choose to adopt? Stu den t Ac tivit y 2 .

1 Objective: There is a fair amount of theory in this section. The activity brings that theory to their current lives. Information overload will be an important issue for students to recognize and respond to. Chapter Connection: This relates to the text discussion the role of IT in an organization. Prerequisites: You should have read Section 2.1 before doing this activity. Activity: Review these three videos from IBM. These videos highlight how businesses are responding to the vast amounts of data that are available to them and that they have collected, as well as how information load is a personal issue. Why Data Matters: Extracting Insights, Making Better Decisio ns www.youtube.com/watch?v=sSSLYIURzmE Why Data Matters: Context Reveals Answers www.youtube.com/watch?v=ipxRA7ira4c&feature=channel Why Data Matters: Age of Analytics www.youtube.com/watch?v=EWL312zbEKg&feature=channel Then review this video from CNN on Digital Information Overload . http://video.search.yahoo.com/video/play?ei=UTF -8&fr=ie8&fr2=tab - web&p=information+overload&vid=219545994802&dt=1281640588&l=361&turl=http%3A%2 F%2 Fts3.mm.bing.net%2Fvideos%2Fthumbnail.aspx%3Fq%3D219545994802%26id%3Da335d270b50ef 0234261a993620dcdf0%26bid%3DSKMMjnJGZuG9Wg%26bn%3DThumb%26index%3Dch1%26u rl%3Dhttp%253a%252f%252fwww.c nn.com%252fvideo%252f%253f%252fvideo%252fus%252f2010%252f08%252f12%2 52fnr.informat ion.overload.cnn&rurl=http%3A%2F%2Fwww.cnn.com%2Fvideo%2F%3F%2Fvideo%2Fus%2F201 0%2F08%2F12%2Fnr.information.overload.cnn&tit=Digital+information+overload&sigr=12a6egts3 &newfp=1 Deliverables: Consider and provide answers to the following que stions: 1. Reflect on the amount of data that bombards you daily. How do you filter it? How much time do you use reacting to it? 2. How has technology changed the way you receive, store, share, and find data? 3. Think about a recent decision you made, such as which colleges to apply to. Consider all your sources for data (Web, print, friends/family, interviews, tours, surveys, rankings) and the elements of data you collected (cost, location, size, program of study , etc.). How did you organize the data? Filter them? Analyze them? Quiz Questions: 1. Which of the following is classified as data? (a) Facebook posts (b) Book purchase (c) Your name (d) Surveillance video (e) All of the above 2. When making a business decision, you look at all the available data. (a) True. (b) You look at what you can find, piece by piece, until you reach the deadline by which the decision must be made. (c) You look at sources of data and prioritize your search based on th e sources. (d) You set a time limit for accessing data and then use what you have and your instinct. 3. None of the above. Discussion Questions: 1. The book and videos talk about information overload. Is there such a thing as too much information? 2. Is technology driving information, or is information driving technology? 3. How can technology help an information worker? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. 2.2 Competitive Advantage and Strategic Information Systems Audio Mini -Lecture: Competitive Advantage and Strategic Information Systems A competitive strategy is a statement that identifies a business's approach to compete, its goals, and the plans and policies that will be required to carry out those goals. 1 A strategy, in general, can apply to a desired outcome, such as gaining market share. A competitive strategy focuses on achieving a des ired outcome when competitors want to prevent you from reaching your goal. Therefore, when you create a competitive strategy, you must plan your own moves, but you must also anticipate and counter your competitors' moves. Through its competitive strategy, an organization seeks a competitive advantage in an industry. That is, it seeks to outperform its competitors in a critical measure such as cost, quality, and time -to-market. Competitive advantage helps a company function profitably with a market and gener ate larger -than - average profits. Competitive advantage is increasingly important in today's business environment, as you will note throughout the book. In general, the core business of companies has remained the same. That is, information technologies simply offer tools that can enhance an organization's success through its traditional sources of competitive advantage, such as low cost, excellent customer service, and superior supply chain management. Strategic information systems (SISs) provide a competitive advantage by helping an organization to implement its strategic goals and to improve its performance and productivity. Any information system that helps an organization gain a competitive advantage or reduce a competitive disadvantage qualifies as a strategic information system. Porter's Competitive Forces Model The best -kno wn framework for analyzing competitiveness is Michael Porter's competitive fo rces model .2 Companies use Porter's model to develop strategies to increase their competitive edge. Porter's model also demonstrates how IT can make a company more competitive. Porter's model identifies five major forces that can endanger or enhance a company's position in a given industry. Figure 2.2 highlights these forces. Although the Web has changed the nature of competition, it has not changed Porter' s five fundamental forces. In fact, what makes these forces so valuable as analytical tools is that they have not changed for centuries. Every competitive organization, no matter how large or small, or what business it is in, is driven by these forces. Thi s observation applies even to organizations that you might not consider competitive, such as local governments. Although local governments are not for -profit enterprises, they compete for businesses to locate in their districts, for funding from higher lev els of government, for employees, and for many other things. Figure 2.2 Porter's competitive forces model. Significantly, Porter concludes that the overall impact of the Web is to increase competition, which generally diminishes a firm's profitability. 3 Let's examine Porter's five forces and the ways that the Web influences them. 1. The threat of entry of new competitors. The threat that new competitors will enter your market is high when entry is easy and low when there are significant barriers to entry. An entry barrier is a product or service feature that customers have learned to expect from organizations in a certain industry. A competing organization must offer this feature in order to survive in the marketplace. There are many types of entry barriers. Consider, for example, legal requirements such as admission to the bar to practice law or a license to serve liquor, where only a certain number of licenses are available. Suppose you want to open a gasoline station. To compete in that industry, you would have to offer pay -at-the -pump service to your customers. Pay -at-the -pump is an IT -based barrier to entering this market because you must offer it for free. The first gas station that offered this service gained first -move advantage and established barriers to entry. This advantage did not last, however, because competitor s quickly offered the same service and thus overcame the entry barrier. For most firms, the Web increases the threat that new competitors will enter the market because it sharply reduces traditional barriers to entry, such as the need for a sales force or a physical storefront. Today, competitors frequently need only to set up a Web site. This threat of increased competition is particularly acute in industries that perform an intermediation role , which is a link between buyers and sellers (for example, stoc k brokers and travel agents), as well as in industries where the primary product or service is digital (for example, the music industry). In addition, the geographical reach of the Web enables distant competitors to compete more directly with an existing f irm. In some cases the Web increases barriers to entry. This scenario occurs primarily when customers have come to expect a non -trivial capability from their suppliers. For example, the first company to offer Web -based package tracking gained a competitive advantage from that service. Competitors were forced to follow. 2. The bargaining power of suppliers. Supplier power is high when buyers have few choices from whom to buy and low when buyers have many choices. Therefore, organizations would rather have more potential suppliers so they will be in a stronger position to negotiate price, quality, and delivery terms. The Internet's impact on suppliers is mixed. On the one hand, it enables buyers to find alternative suppliers and to compare prices more e asily, thereby reducing the supplier's bargaining power. On the other hand, as companies use the Internet to integrate their supply chains, participating suppliers prosper by locking in customers. 3. The bargaining power of customers (buyers). Buyer power is high when buyers have many choices from whom to buy and low when buyers have few choices. For example, in the past, there were few locations where students could purchase textbooks (typically, one or two campus bookstores). In this situation, stud ents had low buyer power. Today, the Web provides students with access to a multitude of potential suppliers as well as detailed information about textbooks. As a result, student buyer power has increased dramatically. In contrast, loyalty programs reduce buyer power. As their name suggests, loyalty programs reward customers based on the amount of business they conduct with a particular organization (e.g., airlines, hotels, and rental car companies). Information technology enables companies to track the act ivities and accounts of millions of customers, thereby reducing buyer power. That is, customers who receive ―perks‖ from loyalty programs are less likely to do business with competitors. (Loyalty programs are associated with customer relationship managemen t, which you will study in Chapter 12 .) 4. The threat of substitute products or services. If there are many alternatives to an organization's products or services, then the threat of substitutes is high. If there are few alternatives, then the threat is low. Today, new technologies create substitute products ve ry rapidly. For example, customers today can purchase wireless telephones instead of land -line telephones, Internet music services instead of traditional CDs, and ethanol instead of gasoline in cars. Information -based industries experience the greatest thr eat from substitutes. Any industry in which digitized information can replace material goods (e.g., music, books, and software) must view the Internet as a threat because the Internet can convey this information efficiently and at low cost and high quality . Even when there are many substitutes for their products, however, companies can create a competitive advantage by increasing switching costs. Switching costs are the costs, in money and time, of a decision to buy elsewhere. For example, contracts with smart phone providers typically include a substantial penalty for switching to another provider until the term of the contract expires (quite often, two years). This switching cost is monetary. As another example, when you buy products from Amazon, the company develops a profile of your shopping habits and recommends products targeted to your preferences. If you switch to another online vendor, it will take time for t hat company to develop a profile of your wants and needs. In this case, the switching cost involves time rather than money. 5. The rivalry among existing firms in the industry. The threat from rivalry is high when there is intense competition among m any firms in an industry. The threat is low when the competition is among fewer firms and is not as intense. In the past, proprietary information systems — systems that belong exclusively to a single organization — have provided strategic advantage to firms in highly competitive industries. Today, however, the visibility of Internet applications on the Web makes proprietary systems more difficult to keep secret. In simple terms, when I see my competitor's new system online, I will rapidly match its features in order to remain competitive. The result is fewer differences among competitors, which leads to more intense competition in an industry. To understand this concept, consider the highly competitive grocery industry, where Walmart, Kroger, Safeway, and other companies compete essentially on price. Some of these companies have IT -enabled loyalty programs in which customers receive discounts and the store gains valuable business intelligence on customers' buying preferences. Stores use this business intelligence in their marketing and promotional campaigns. (You will learn about business intelligence in Chapter 5.) Grocery stores are also experimenting with wireless technologies such as radio -frequency identification (RFID, discussed in Chapter 10 ) to speed the checkout process, track customers through the store, and notify customers of discounts as they pass by certain products. Grocery companies also use IT to tightly integrate their supply chains for maximum efficiency and thus reduce prices for shoppers. Competition also is being affected by the extremely low variable cost of digital products. That is, once a digital product has been developed, the cost of producing additional ―units‖ approaches zero. Consider the music industry as an example. When artists record music, their songs are captured in digital f ormat. Producing physical products, such as CDs or DVDs, with the songs on them for sale in music stores involves costs. The costs in a physical distribution channel are much higher than the costs involved in delivering the songs over the Internet in digit al form. In fact, in the future companies might give away some products for free. For example, some analysts predict that commissions for online stock trading will approach zero because investors can access the necessary information via the Internet to mak e their own decisions regarding buying and selling stocks. At that point, consumers will no longer need brokers to give them information that they can obtain themselves, virtually for free. Porter's Value Chain Model Organizations use the Porter competitiv e forces model to design general strategies. To identify specific activities in which they can use competitive strategies for greatest impact, they use Porter's value chain model (1985). The value chain model also identifies points where an organization can use information technology to achieve competitive advantage (see Figure 2.3 ). Figure 2.3 Porter's value chain model. According to Porter's value chain model, the activities conducted in any organization can be divided into two categories: primary activities and support activities. Primary activities relate to the production and distribution of the firm's products and services. These activities create value for which customers are willing to pay. Next, you are going to learn about the value chain of a manufacturing company. Keep in mind that other types of firms, such as transportation, health care, education, retail, and others, have different value chains. The key point is that every organization has a value chain: a sequence of activities through which the organization's inputs, whatever they are, are transformed into more valuable outputs, whatever they are. In a manufacturing company, for example, primary activities involve purchasing materials, processing the mater ials into products, and delivering the products to customers. Companies typically perform five primary activities: Inbound logistics (inputs) Operations (manufacturing and testing) Outbound logistics (storage and distribution) Marketing and sales Services Primary activities usually take place in a sequence from 1 to 5. As work progresses in the sequence, value is added to the product in each activity. Specifically, the following steps occur: 1. The incoming materials are processed (in receiving, storage, and so on) in activities called inbound logistics. 2. The materials are used in operations, where value is added by turning raw materials into products. 3. These products are prepared for delivery (packaging, storing, and shipping) in the outbound logistics activities. 4. Marketing and sales sell the products to customers, increasing product value by creating demand for the company's products. 5. Finally, the company performs after -sales service, such as warranty service or upgrade notification, for the customer, adding further value. The primary activities are buttressed by support activities . Unlike primary activities, support activities do not add va lue directly to the firm's products or services. Rather, as their name suggests, they contribute to the firm's competitive advantage by supporting the primary activities. Support activities consist of the following: 1. The firm's infrastructure (ac counting, finance, management) 2. Human resources management 3. Product and technology development (R & D) 4. Procurement Each support activity can be applied to any or all of the primary activities. In addition, the support activities can also support one another. A firm's value chain is part of a larger stream of activities, which Porter calls a value system. A value system , or an industry value chain , includes the suppliers that provide t he inputs necessary to the firm along with their value chains. After the firm creates products, these products pass through the value chains of distributors (which also have their own value chains), all the way to the customers. All parts of these chains a re included in the value system. To achieve and sustain a competitive advantage, and to support that advantage with information technologies, a firm must understand every component of this value system. Strategies for Competitive Advantage Organizations co ntinually try to develop strategies to counter the five competitive forces identified by Porter. You will learn about five of those strategies here. Before we go into specifics, however, it is important to note that an organization's choice of strategy inv olves trade -offs. For example, a firm that concentrates only on cost leadership might not have the resources available for research and development, leaving the firm unable to innovate. As another example, a company that invests in customer happiness (cust omer -orientation strategy) will experience increased costs. Companies must select a strategy and then stay with it, because a confused strategy cannot succeed. This selection, in turn, decides how a company will utilize its information systems. A new infor mation system that can improve customer service but will increase costs slightly will be welcomed at a high -end retailer such as Nordstrom but not at a discount store like Walmart. You learn about the most commonly used strategies in the following paragrap hs. Figure 2.4 provides an overview of these strategies. 1. Cost leadership strategy. Produce products and/or services at the lowest cost in the industry. An example is Walmart's automatic inventory replenishment system, which enables Walmart to reduce inventory storage requirements. As a result, Walmart stores use flo or space only to sell products, and not to store them, thereby reducing inventory costs. 2. Differentiation strategy. Offer products, services, or product features that are different from those of your competitor. Southwest Airlines, for example, has differentiated itself as a low - cost, short -haul, express airline. This has proved to be a winning strategy for competing i n the highly competitive airline industry. Also, Dell has differentiated itself in the personal computer market through its mass -customization strategy. 3. Innovation strategy. Introduce new products and services, add new features to existing product s and services, or develop new ways to produce them. A classic example is the introduction of automated teller machines (ATMs) by Citibank. The convenience and cost - cutting features of this innovation gave Citibank a huge advantage over its competitors. Li ke many innovative products, the ATM changed the nature of competition in the banking industry. Today an ATM is a competitive necessity for any bank. 4. Operational effectiveness strategy. Improve the manner in which internal business processes are executed so that a firm performs these activities better than its rivals. Such improvements increase quality, productivity, and employee and customer satisfaction while decreasing time to market. 5. Customer -orientation strategy. Concentrate on making customers happy. Web -based systems are particularly ef fective in this area because they can provide a personalized, one -to-one relationship with each customer. Figure 2.4 Strategies for Competitive Advantage. BEFORE YO U G O O N . . . 1. What are strategic information systems? 2. According to Porter, what are the five forces that could endanger a firm's position in its industry or marketplaces? 3. Describe Porter's value chain model. Differentiate Porter's competitive forces model and his value chain model. 4. What strategies can companies use to gain competitive advantage? RUBY'S CLUB QUESTIONS 1. In a college town, how strong is the threat of substitute entertainment? 2. Ruben and Lisa's vision for Ruby's is to create a relaxing, community atmosphere. Which strategy do you think best suits their desire? Cost Leader, Differentiator, Innovator, Operational Effectiveness, or Customer Orientation? 3. Which is more powerful for Ruby's: the bargaining power of suppliers or the bargaining power of customers? Student Activity 2.2 Objectives: Students should recognize how Porter's competitive forces play out in business today and begin to understand how technology might play a part. Chapter Connection: This relates to the text discussion on Porter's competitive forces model. Prerequisites: You should have read Section 2.2 before doing this activity. Activity: Customers must see a consistent difference between your product/service and those of your competitor. This difference needs to be obvious to your customers, and it must influence their purchasing decision. Porter's model lists five competitive forces that organizations need to consider: threat of entry of new competitors, bargaining power of suppliers, bargaining power of customers, threat of substitute products or services, and r ivalry among existing firms in the industry. This textbook lists five strategies for competitive advantage: cost leadership, differentiation, innovation, operational effectiveness, and customer orientation. Walmart is known for its low prices. It is diffic ult to compete against Walmart on price, so any new competitors need to provide some other competitive advantage to attract customers. Suppliers have no bargaining power — they either do it Walmart's way or lose the business. Walmart maintains its prices are already low so customers have no bargaining power. The notion of a substitute product does not really exist; a substitute store — maybe. But Walmart maintains that when compared to its competition's stores, its prices are still lower. The company uses techn ology to manage its inventory so that it gets just -in-time (JIT) shipments from its suppliers, thereby cutting costs since the inventory is sold almost immediately. Walmart uses technology to improve and enhance the operations in its stores, signaling when stock is low on shelves and speeding up checkout, to name just two examples. Walmart maintains a customer orientation in the stores with its culture to greet people as they walk into the store, and to do whatever is necessary to satisfy a customer. Its customer orientation is also evident on its retail Web site. Deliverables: It is hard to think about how these translate to smaller businesses. But give it a try. Bennett runs a BBQ restaurant called B's BBQ, which also includes a catering and delivery service. Explain how Bennett might use technology to respond to each of the five competitive forces.

Further develop your answers into strategies. Quiz Questions: 1. B's BBQ decides to focus on the threat of substitution. Which of the following uses of technology will not minimize the threat of substitution? (a) Online ordering (b) Texting daily specials to B's BBQ customers (c) Bar codes on the delivery bags that keep the order warm during delivery (d) Customer's last order recall when a customer calls in an order (e) Accepting online payments for catering orders 2. B's BBQ decides to allow catering customers to order online. Which of Porter's competitive forces is this attempting to minimize? (a) Threat of entry of new competitors (b) Bargaining power of buyers (c) Threat of substitute products or services (d) Bargaining power of suppliers (e) Rivalry among existing firms 3. A new Mexican restaurant opens up around the corner from B's BBQ. Bennett realizes that he needs to do something to keep B's BBQ in his customers' minds when they are going out to eat. Which of the following uses of technology will minimize this rivalry? (a) Update B's BBQ menu on the company's Web site with some new pictures of the inside (b) Send a coupon to the customers that haven't been in for the last month (c) Put a netbook on the counter so customers can sign up to receive weekly newsletters via e -mail (d) B and C only (e) All of the above 4. Which areas of the value chain should Bennett review in order to support an operational effectiveness strategy? (a) Procurement (b) Operations (c) Inbound logistics (d) Outbound logistics (e) All of the above Discussion Questions: 1. After reviewing the competitive forces with the company's value chain, how does a company use the analysis of the results? 2. How does a company decide which strategy or strategies to use? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. 2.3 Business – IT Alignment Audio Mini -Lecture: Business –IT Alignment The ―holy grail‖ of organizations is business –IT alignment, or strategic alignment. Business –IT alignment (which we will call alignment) is the tight integration o f the IT function with the strategy, mission, and goals of the organization. That is, the IT function directly supports the business objectives of the organization. There are six characteristics of excellent alignment: • Organizations view IT as an engine of innovation that continually transforms the business, often creating new revenue streams. • Organizations view their internal and external customers and their customer service function as supremely important. • Organizations rotate business and IT professionals across departments and job functions. • Organizations provide overarching goals that are completely clear to each IT and business employee. • Organizations ensure that IT employees understand how the company makes (o r loses) money. • Organizations create a vibrant and inclusive company culture. Unfortunately, many organizations fail to achieve this type of close alignment. In fact, according to a McKinsey & Company survey on IT strategy and spending, only 16 percent of the IT and business executives who participated agreed that their organization had adequate alignment between IT and the business. 4 Given the importance of alignment, why do so many organizations fail to imple ment this policy? The major reasons are these: • Business managers and IT managers have different objectives. • The business and IT departments are ignorant of each other's expertise. • Communication is lacking. Put simply, business executives know little about information technology, and IT executives understand the technology but do not understand the real needs of the business. The good news is that some organizations ―get it right.‖ ―IT's About Business 2.3 ‖ illustrates alignment at two companies: Progressive and Zappos. In fact, both companies maintain that business and IT are virtually indistinguishable in their strategy and operations. IT's ABOUT BUSINESS 2.3 Progressive Progressive ( www.progressive.com ) markets itself as an insurance provider that offers choices to customers. Its mission is to make insurance easy to shop for, buy, and own. The insurer uses highly automated underwriting software, and it presents data to customers in an easily understandable way. The company's exclusive IT -enabled online Name Your Price application allows customers to choose the price they would like to pay for insurance and then see the coverage they can buy for that price. After entering basic car and driver information, shoppers are offered a customized insurance package that includes the limits and deductibles that are available within that price range. Shoppers can also manipulate an online dial to change various options, and the application instantl y responds with information about how such changes will affect the price. Progressive also allows customers to comparison -shop on its Web site, where they can find out what Allstate, State Farm, and other competitors charge for the same coverage. To provid e this transparency for its customers, Progressive developed software that allows the company to quickly extract pricing data filed with government regulators. The software allows Progressive managers to read a state regulatory filing, spot the key data, a nd determine a rating algorithm for competitors' rates. Zappos Zappos ( www.zappos.com ) is a major reseller of clothing, beauty aids, and accessories. The company's primary business plat form is an enterprise data warehouse (discussed in Chapter 3) that e ssentially contains all of the company's data: Web site traffic, marketing data, merchandising analytics, and so on.

This system handles the new business as Zappos expands its product and service offerings. For example, when Zappos expanded into selling lu ggage, it had to set up a special place at its distribution center to store the new items, because suitcases take up much more room than shoes. On the IT side, the company needed to reconfigure its data warehouse to reflect that change. In another example, if a customer goes to zappos.com for a pair of red Clarks sandals in size 8, he or she can see all of the Clarks sandals available in stock. If the customer goes to www.clarks.com , he or she will be able to find all of the same information just as quickly. The reason for this is that a Zappos unit called Powered by Zappos built and runs the Clarks We b site. Launched in 2009, Powered by Zappos is a revenue -producing business application created by the Zappos IT department. Questions 1. Consider the cases of Progressive and Zappos. What does it mean that the business strategy and information technology go hand in hand (that is, neither comes before the other)? 2. Provide specific examples of problems that could occur at Progressive and Zappos if the firms' business strategy and information technology are not aligned. Sources: Compiled from M. Betts, “ 10 Megatrends Affecting Corporate IT Through 2020 ,”Computerworld , March 7, 2011; C. Babcock, “ Enterprise Architects' Role in Aligning IT with Business ,” InformationWeek , February 18, 2011; E. Sperling, “ How CIOs See the World ,”Forbes , December 20, 2010; T. Wallgum, “ Absolute Alignment: How One CIO Remains in Lock -Step with the Business ,” CIO , November 16, 2010; J. Scott, “ Don't Just Build Business -IT Alignment, Map It ,” CIO , July 26, 2010; J. King, “ Beyond Alignment ,” Computerworld , M ay 24, 2010; T. Wallgum, “ CVS IT Chief on the Remedy for Business -IT Alignment ,” CIO , March 29, 2010; www.progressive.com , www.zappos.com , accessed March 19, 2011. BEFORE YO U G O O N . . . 1. What is alignment? 2. Give examples of alignment regarding student systems at your university. (Hint: What are the ―business‖ goals of your university with regard to student registration, fee payment, grade posting, etc.?) RUBY'S CLUB QUESTIONS 1. It seems like Ruby's is in a good position to create strategic IT alignment because the club can build its IT from the ground up to support its strategy. To gain alignment, do you think it is better to build from scratch or to have an existing system that is just being updated? 2. How do you think alignment could play a role in creating the desired atmosphere for Ruby's Club? Student Activity 2.3 Objective: This activity aims to bring some relevance to the material in this section. Students need to understand business strategy, the nature of alignment, and why IT has to be in alignment with the business strategy. Chapter Connection: This activity deals with the concepts covered in Section 2.3 , which is very short but at a very high level. Prerequisites: You sho uld have read Section 2.3 before doing this activity. Activity: Watch this video to gather some insights into how business and IT goals should be aligned: www.youtube.com/watch?v=jY1V7uBlTDM Walmart has a very tigh t alignment between its business strategy and its IT strategy and we can see evidence of that as consumers. Do some online research on how Walmart uses technology. Deliverables: Provide answers to the following questions: 1. How has Walmart used IT to transform the business? 2. How does Walmart support customers and customer service? Quiz Questions: 1. Walmart uses technology to: (a) Order inventory (b) Work with suppliers (c) Cut down transportation costs (d) Stay in touch with customers (e) All of the above 2. Alignment means: (a) Business decisions are made by IT. (b) IT sets its own goals and milestones. (c) The structure and goals of IT support the business strategy. (d) All the VPs are at the same level in the organization chart. (e) Managers all agree. Discussion Questions: 1. How is technology aligned with the way you perform your job or attend school? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. What's in IT for ME? FOR ALL MAJORS All of the functional areas of any organization are literally composed of a variety of business processes.

Regardless of your major, you will be involved in a variety of business processes from your first day on the job. Some o f these processes you will perform by yourself, some will involve only your group or department, and others will involve several (or all) of the organization's functional areas. It is important for you to be able to visualize processes, understand the inpu ts and outputs of each process, and identify the ―customer‖ of each process. These capabilities will enable you to make the organization's business processes more efficient and effective. This task generally involves incorporating information technology in the process. It is also important for you to appreciate how each process fits into your organization's strategy. All functional areas in any organization must work together in an integrated fashion in order for the firm to respond adequately to business p ressures. These responses typically require each functional area to utilize a variety of information systems. In today's competitive global marketplace, the timeliness and accuracy of these responses is even more critical. Closely following this discussion , all functional areas must work together for the organization to gain competitive advantage in its marketplace. Again, the functional areas use a variety of strategic information systems to achieve this goal. You have seen why companies must be concerned with strategic advantage. However, this chapter is particularly important for you for several reasons. First, the business pressures you have learned about impact your organization, but they also impact you as an individual. Thus, it is critical that you understand how information systems can help you, and eventually your organizations, respond to these pressures. In addition, achieving competitive advantage is essential for your organization's survival. In many cases, you, your team, and all your colleague s will be responsible for creating a competitive advantage. Therefore, having general knowledge about strategy and about how information systems impact the organization's strategy and competitive position will help you in your career. You also need a basic knowledge of your organization's strategy, mission, and goals, as well as its business problems and how it makes (or loses) money. You now know how to analyze your organization's strategy and value chain, as well as the strategies and value chains of your competitors. You also have acquired a general knowledge of how information technology contributes to organizational strategy. This knowledge will help you to do your job better, to be promoted more quickly, and to contribute significantly to the success o f your organization. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. >>> SUMMARY 1. List and provide examples of the three types of business pressures and describe one IT response to each. > Market pressures: An example of a market pressure is powerful customers. Customer relationship management is an effective IT response that helps companies achieve customer intimacy. > Technology pressures: An example of a technology pressure is infor mation overload. Search engines and business intelligence applications enable managers to access, navigate, and utilize vast amounts of information. > Societal/political/legal pressures: An example of a societal/political/legal pressure is social resp onsibility, such as the state of the physical environment. Green IT is one response that is intended to improve the environment. 2. Identify the five competitive forces described by Porter, and explain how the Web impacts each one. > The threat of entry of new competitors: For most firms, the Web increases the threat that new competitors will enter the market by reducing traditional barriers to entry. Frequently, competitors need only to set up a Web site to enter a market. The Web can al so increase barriers to entry, as when customers come to expect a nontrivial capability from their suppliers. > The bargaining power of suppliers: The Web enables buyers to find alternative suppliers and to compare prices more easily, thereby reducing suppliers' bargaining power. From a different perspective, as companies use the Web to integrate their supply chains, participating suppliers can lock in customers, thereby increasing suppliers' bargaining power. > The bargaining power of customers (buyers): The Web provides customers with incredible amounts of choices for products, as well as information about those choices. As a result, the Web increases buyer power. However, companies can implement loyalty programs where they can use the Web to m onitor the activities of millions of customers. Such programs reduce buyer power. > The threat of substitute products or services: New technologies create substitute products very rapidly, and the Web makes information about these products available a lmost instantly. As a result, industries (particularly information -based industries) are in great danger from substitutes (e.g., music, books, newspapers, magazines, software). However, the Web also can enable a company to build in switching costs, which w ill result in costing customers time and/or money to switch from the company to a competitor. > The rivalry among existing firms in the industry: In the past, proprietary information systems provided strategic advantage for firms in highly competitive industries. The visibility of Internet applications on the Web makes proprietary systems more difficult to keep secret. Therefore, the Web makes strategic advantage more short lived. 3. Describe the strategies that organizations typically adopt to counter the five competitive forces in order to achieve competitive advantage. > Cost leadership strategy: Produce products and/or services at the lowest cost in the industry. > Differentiation strategy: Offer different products, services, or product features. > Innovation strategy: Introduce new products and services, put new features in existing products and services, or develop new ways to produce them. > Operational effectiveness strategy: Improve the manner in which internal business processes are executed so that a firm performs similar activities better than its rivals. > Customer -orientation strategy: Concentrate on making customers happy. 4. Define alignment, and describe the characteristics of effective alignment. Alignment is the tight integration of the IT function with the strategy, mission, and goals of the organization. There are six characteristics of effective alignment: > Organizations view IT as an engine of innovation that continually transf orms the business. > Organizations view customers and customer service as supremely important. > Organizations rotate business and IT professionals across departments and job functions. > Organizations provide clear, overarching goals for all employees. > Organizations ensure that IT employees understand how the company makes (or loses) money. > Organizations create a vibrant and inclusive company culture. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. >>> CHAPTER GLOSSARY business environment The combination of social, legal, economic, physical, and political factors in which businesses conduct their operations. business –IT alignment The tight integration of the IT function with the strategy, mission, and goals of the organization. business processes Related activities that produce a product or a service of value to the organization, its business partners, and/or its customers. competitive advantage An advantage over competitors in some measure such as cost, quality, or speed; leads to control of a market and to larger -than -average profits. competitive forces model A business framework devised by Michael Porter, that analyzes competitiveness by recognizing five major forces that cou ld endanger a company's position. digital divide The gap between those who have access to information and communications technology and those who do not. e-business Buying and selling of goods and services as well as servicing customers, collaborating wi th business partners, and performing electronic transactions within an organization. electronic commerce (EC or e -commerce) The process of buying, selling, transferring, or exchanging products, services, or information via computer networks, including the Internet. entry barrier Product or service feature that customers expect from organizations in a certain industry; an organization trying to enter this market must provide this product or service at a minimum to be able to compete. globalization The int egration and interdependence of economic, social, cultural, and ecological facets of life, enabled by rapid advances in information technology. individual social responsibility See organizational social responsibility. make -to-order The strategy of produ cing customized products and services. mass customization A production process in which items are produced in large quantities but are customized to fit the desires of each customer. organizational social responsibility Efforts by organizations to solve various social problems. (also called individual social responsibility) primary activities Business activities related to the production and distribution of the firm's products and services, thus creating value. strategic information systems (SISs) Syste ms that help an organization gain a competitive advantage by supporting its strategic goals and/or increasing performance and productivity. support activities Business activities that do not add value directly to a firm's product or service under consider ation but support the primary activities that do add value. value chain model Model that shows the primary activities that sequentially add value to the profit margin; also shows the support activities. value system Includes the producers, suppliers, dis tributors, and buyers, all with their value chains. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. >>> DISCUSSION QUESTIONS 1. Explain why IT is both a business pressure and an enabler of response activities that counter business pressures. 2. What does a flat world mean to you in your choice of a major? In your choice of a career? Will you have to be a lifelong learner? Why or why not? 3. What might the impact of a flat world be on your standard of living? 4. Is IT a strategic weapon or a survival tool? Discuss. 5. Why might it be difficult to justify a strategic information system? 6. Describe the five forces in Porter's competitive forces model, and explain how the Internet has affected each one. 7. Describe Porter's value chain model. What is the relationship between the competitive forces model and the value chain model? 8. Discuss the idea that an information system by itself can rarely provide a sustainable competitive advantage. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. >>> PROBLEM -SOLVING ACTIVITIES 1. Surf the Internet for information about the Department of Homeland Security. Examine the available information, and comment on the role of information technologies in the department. 2. Experience customization by designing your own shoes at www.nike.com , your car at www.jaguar.com , your CD at www.easternrecording.com , your business card at www.iprint.com , and your diamond ring at www.bluenile.com . Summarize your experiences. 3. Access www.go4customer.com . What does this company do, and where is it located? Who are its customers? Which of Friedman's flatteners does this company fit? Provide examples of how a U.S.

company would use its serv ices. 4. Enter Walmart China ( www.wal -martchina.com/english/index.htm ). How does Walmart China differ from your local Walmart (consider products, prices, services, etc.)? Describe these differences. 5. Apply Porter's value chain model to Costco ( www.costco.com ). What is Costco's competitive strategy? Who are Costco's major competitors? Describe Costco's business model. Describe the tasks that Costco must accomplish for each primary value chain activity. How would Costco's information systems contribute to Costco's competitive strategy, given the nature of its business? 6. Apply Porter's value chain model to Dell ( www.dell.com ). What is Dell's competitive strategy? Who are Dell's major competitors? Describe Dell's business model. Describe the tasks that Dell must accomplish for each primary value chain activity. How would Dell's information systems contribute to Costco's competitive strategy, given the nature of its business? 7. The market for optical copiers is shrinking rapidly. It is expected that by 2010 as much as 90 percent of all duplicated documents will be done on computer printers. Can a company such as Xerox Corporation survive? (a) Read about the problems and solutions of Xerox from 2000 –2010 atwww.fortune.com , www.findarticles.com , and www.google.com . (b) Identify all the business pressures on Xerox. (c) Find some of Xerox's response strategies (see www.xerox.com , www.yahoo.com , and www.google.com ). (d) Identify the role of IT as a contributor to the business technology pressur es (e.g., obsolescence). (e) Identify the role of IT as a facilitator of Xerox's critical response activities. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. >>> TEAM ASSIGNMENTS 1. (a) Create an online group for studying IT or a part of IT that interests you. Each member of the group must have a Yahoo e -mail account (free). Go to Yahoo! Groups ( http://groups.yahoo.com ) and at the bottom see a section titled ―Create Your Own Group.‖ Step 1: Click on ―Start a Group Now.‖ Step 2: Select a category that best describes your group (use the Search Group Categories, or use Browse Group Categories tool). You must find a category. Step 3: Describe the purposes of the group and give it a name. Step 4: Set up an e -mail address for sending messages to all group members. Step 5: Each member must join the group (select a ―profile‖); click on ―Join this Group.‖ Step 6: Go to the Word Verification Section; follow the instructions. Step 7: Finish by clicking ―Continue.‖ Step 8: Select a group moderator. Conduct a discussion online of at least two topics of interest to the group. Step 9: Arrange for messages from the members to reach the moderator at least once a week. Step 10: Find a similar group (use Yahoo's ―Find a Group‖ and make a connection).

Write a report for your instructor. (b) Now follow the same steps for Google Groups. (c) Compare Yahoo Groups and Google Groups. 2. Divide the class into teams. Each team will select a country government and visit its official Web site (e.g., United States, Australia, New Zealand, Singapore, Norway, Canada, the United Kingdom, the Netherlands, Denmark, Germany, and France). For example, the official Web portal for the U.S.

government is www.usa.gov . Review and compare the services offered by each country. How does the United States stack up? Are you surprised at the number of services offered by countries through Web sites? Which country offers the most services? The least? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. CLOSING CASE 1 > Double Trouble for BP >>> BP'S FIRST PROBLEM In 2008, CEO Tony Hayward of BP ( www.bp.com ) informed his top 500 managers that the giant oil company had become a serial underperformer. Among the audience was Dana Deasy, BP's chief information officer (CIO). Deasy understood that BP's IT group would have to do a much better job of supporting the CEO's goals: to restore revenue growth across the enormous (annual revenues of some $300 billion) company, to refocus the behavior of the company around high performance and accountability, and to reduce the complexity of the organization. The IT group ha d become bloated, passive, unfocused, and unconcerned with performance and accountability. Deasy wanted to eliminate $800 million in expenses from BP's overall IT budget of $3 billion, to cut in half the number of IT vendors, to evaluate BP's 4,200 IT empl oyees, to reduce the 8,500 software applications in use at BP worldwide, and to transform the IT function from a cost center into a business -driven, strategic weapon. Confronted with a vast sprawl in people, budget, priorities, requirements, business objec tives, and suppliers, Deasy committed to a three -year overhaul of every facet of BP's IT operations. >>> THE SOLUTION TO BP'S FIRST PROBLEM Deasy made BP's IT employees his first priority. Significantly, only 55 percent of his IT personnel were actually BP employees. The rest consisted of some 1,900 contractors. Deasy cut 1,000 full - time contractor positions, reducing BP's reliance on outsiders. In addition, in his first 11 months as CIO, Deasy replaced 80 percent of the top IT leadership within the organiz ation. Deasy then hired IBM to conduct comprehensive assessments of the top 1,000 IT employees (excluding the remaining contractors). This assessment identified talent gaps as well as inherent strengths. The most pressing issues were the organizational location of the IT function, project and portfolio management, and vendor management. In his next move, Deasy mandated that the CIO for each BP business unit work for the business unit leader while also reporting to Deasy in a matrix arrangement. Deasy made accountabilit y the first priority for those CIOs — that is, their primary responsibility was to help the business units use IT effectively to drive new revenue and reduce costs. Deasy then set out to reduce the number of IT vendors. Not only was BP currently contracting with more than 2,000 vendors, but the 20 largest vendors accounted for only 30 percent of IT spending.

To make this arrangement more manageable, BP put 65 percent of it s annual global IT spending — about $1.5 billion — up for rebid in one year. As a result of the bidding process, BP eliminated 1,200 IT vendors and saved the company $900 million over the next five years. Deasy also aggressively reworked vendor relationships i n the area of application development and maintenance. In this area, BP had been using some 50 vendors, most of whom refused to talk with one another for fear of losing their share of BP's business. BP rebid multiyear application development and maintenanc e contracts totaling about $2 billion and ended up with just 5 vendors. These vendors handle all of the work according to a standard operating model. Deasy predicts some $500 million in savings from this effort alone. As one of SAP's largest customers, BP created a team focused on standardizing project delivery and management of SAP applications around the world. BP's goal was to deliver new SAP capabilities 50 percent faster and 40 percent cheaper than under the existing system. >>> THE RESULTS Deasy and h is team accomplished their goals in two years instead of three. BP realized $800 million in IT savings, a 60 percent reduction in the number of vendors, a significant reduction in the number of applications, and an overhaul of the IT reporting structure in the business units. However, the two major benefits may well have been these: • The top -to-bottom changes in IT personnel, where long -time generalists were replaced with technology specialists or business -domain experts. • The profound overhaul of the IT organization's culture, where Deasy changed the passive, inwardly focused, financially irresponsible, and unaccountable philosophy to a culture with a sense of purpose centered on business growth and success, excellence, and relentless improvement and innovation. >>> BP'S SECOND PROBLEM In April 2010, just as BP was beginning to profit from its IT innovations, the company's Deepwater Horizon oil well, located in the Gulf of Mexico, exploded, resulting in the largest marine oil spill in the history of the petroleum industry. The well took three months to cap, during which time oil continued to pour into the gulf. The explosion was inve stigated by the Oil Spill Commission, an authority created by President Barack Obama. The key verdict of the commission was that BP's monitoring IT systems on the Deepwater Horizon oil platform had failed to provide automatic warning alerts. Instead, the s ystem had relied on engineers who had to manually monitor and analyze complex data from the well for long periods of time. Because the engineers had to perform so many simultaneous functions over long work days, they needed much more support from BP's auto mated systems. The commission further charged that BP had ignored the results of the OptiCem cement modeling software implemented by Halliburton, the cement contractor. OptiCem had indicated that more stabilizers were needed to support the underwater cemen t work. The commission also criticized Halliburton for failing to share data from tests on its cement mix with BP. In addition to these problems, BP also failed to take advantage of social networking to open a clear line of communication with people living along the coast bordering the Gulf of Mexico and around the world. BP could have used social media sites such as Facebook, YouTube, and Twitter to report on the problem and explain what steps the company was taking to cap the spill and contain the damage. Just a couple of decades ago, companies had time to devise strategies to deal with disasters. An excellent illustration is the Tylenol poisoning crisis of 1982, when seven Chicago residents died after they ingested Tylenol capsules laced with cyanide. Experts concluded that somebody had tampered with the capsules after they had been packaged and distributed. The drug's manufacturer, Johnson & Johnson, immediately shut down distribution and recalled all of the capsules that were on the market. Next, the company reintroduced Tylenol to the market packaged in a tamper - resistant pill container. This entire process, for which Johnson & Johnson received widespread acclaim, took several weeks. In contrast, in today's world of viral videos, bloggers, and social networks, companies cannot wait even a few days to generate a public response. >>> THE SOLUTION (?) TO BP'S SECOND PROBLEM In addition to technological efforts to cap the spill, BP spared no expense on public relations. For example, it spent huge sums of m oney to buy Google ads, which routed people to BP's relatively inaccurate Web site. Reports from Reuters asserted that BP was buying Google ads ―so its own Web site would rank higher or even at the top of the list of advertisements that appear with search results when Internet users search on terms such as oil spill , volunteer , and claims . The BP Web site contained press releases and photographs of people involved in the oil cleanup. Notably missing were any pictures of the oil spill itself, of oil -drenched wetlands, or of animals dying from the effects of the spill. >>> THE RESULTS It took three months, but BP was able to cap the spill. However, scientists said that the damage from the oil would continue for many years. At the end of 2010, the U.S. governme nt launched a $21.1 billion lawsuit against BP and its drilling partners, alleging that they had ―failed… to use the best available and safest drilling technology‖ to monitor pressure in the well. Other lawsuits are pending. Eventually, BP CEO Tony Hayward resigned his position on October 1, 2010. Questions 1. Describe BP's first problem, which involved the firm's IT function. Discuss BP's solution to this problem. 2. Discuss BP's handling of its second problem: the well -head explosion. 3. Why did BP believe that its business information systems were of strategic importance to the firm (in the company's first problem), but that its drilling information systems were not of comparable strategic importance? Provide examples to support your answ er. SOURCES : Compiled from L. King, “ BP Oil Spill IT Systems Lacked Key Alarms ,”Computerworld , January 6, 2011; S. Mufson, “ BP, Transocean, Halliburton Blamed by Presidential Gulf Oil Spill Commission ,” Washington Post , January 5, 2011; D. Bates, “ BP Accepts Blame for Gulf of Mexico Spill After Leaked Memo Reveals Engineer Misread Pressure Reading ,” London Dailymail , August 30, 2010; S. Gaudin, “ BP, in Crisis Mode, Misses Social Networking Target ,” Computerworld , June 15, 2010; P. Gralla, “ BP's Disaste r Containment Plan —Throw Plenty of Money at Google ,” Computerworld , June 11, 2010; S. Power, R. Gold, and N. King, “Staffing Levels on Deepwater Horizon Are Questioned ,” Wall Street Journal , June 8, 2010; B. Evans, “ BP's IT Transformation ,” InformationWeek , March 8, 2010; T. Kaplan, “ The Tylenol Crisis: How Effective Public Relations Saved Johnson & Johnson ,” New Jersey Bell Journal , 1983; www.bp.com , accessed March 22, 2011. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. CLOSING CASE 2 > Two Financial Giants Merge >>> THE PROBLEM On December 31, 2008, two giant financial institutions announced a merger, as Wells Fargo (www.wellsfargo.com ) completed its $15 billion acquisition of Wachovia ( www.wachovia.com ). The combined c ompany became the second -largest bank in the United States, with 2008 sales of $1.3 trillion, 300,000 employees, 10,400 branch and office locations, and 12,300 ATMs in North America. For the merger to be successful, the two companies had to merge their peo ple and technology as well as their financial assets. In particular, from an IT perspective, the merger required a major network integration to combine both banks' operations. When two giant financial firms merge, they have to consider more than just integ rating their financial cultures. They have to consider their IT cultures as well. For example, what happens if one bank maintains a highly decentralized IT approach in which each individual business unit has its own IT policies, and the other bank has a ce ntralized approach? In addition, financial institutions use IT to strategically differentiate themselves from their competitors. As one financial consultant explained, ―Banks have their brands, and those brands are delivered by their IT structure.‖ Thus, W ells Fargo and Wachovia faced the added challenge of melding their distinctive identities into a new identity. >>> THE SOLUTION The major initiative of the entire IT integration was to select and implement the best existing application in a business area, regardless of which bank already used that application. In this way the newly formed bank focused on business outcomes rather than technology. The overall goal of the transition team was customer retention — that is, customers were to experience no disruptio n in services during the merger process. The transition team members realized that they were integrating disparate IT teams, where every team member had his or her individual preferences regarding the systems they were using. The challenge was to get all e mployees to focus on the overall goal, which was to evaluate which systems would best serve the new bank's customers. The integration process was intricate because the two companies were using more than 4,000 IT systems in total. The transition team's stra tegy was to choose one business process (business processes are discussed in detail online in ―Plug IT In 1‖), select the most appropriate application for that process, and then made certain that all of the employees who were involved in that process knew how to use that application. Consider the mortgage lending and on line banking business processes. • The Wells Fargo mortgage lending application was superior in scalability, meaning that it could accommodate the increased processing needs generated by the merger. At the time of the merger, Wells Fargo was struggling to fill the demands created by the mor tgage refinancing boom. In fact, the bank added 10,000 employees just to handle those orders. The Wells Fargo application was superior to the Wachovia application in handling that demand and conducting secure transactions, so the transition team used it. • Wells Fargo's online banking applications were also found to be superior to Wachovia's.

Wells Fargo's customers constantly commented on how easy these applications were to use and how intuitive the interface was. To ensure that employees remained as productive as possible during the merger, Wells Fargo provided ongoing support for nearly all of the 4,000 applications the two pre -merger banks used. A group from the transition team oversaw the transition to new, best -of-breed applications. At Wells F argo, the focus is on providing a level of service that today's customers demand. The bank, with more than 48 million customers, has made mobility a key component of its business. For example, it now offers banking services through mobile channels: text ba nking, a mobile browser, and specialized smart phone applications. Nearly 25 percent of the customers who bank online also use mobile banking to check balances, make transfers, and pay bills. Further, customers who use text banking send about two dozen mes sages per month. Also, Wells Fargo is combining physical and virtual tools. For instance, customers can have ATM receipts sent to their e -mail addresses rather than receiving paper. >>> THE RESULTS The bottom line? In 2010, Wells Fargo posted a second -quarter profit of $2.5 billion, a third - quarter profit of $3.34 billion, and a fourth -quarter profit of $3.4 billion. Questions 1. Provide two specific examples of why it was so important for Wells Fargo and Wachovia to integrate their informat ion systems so as to ensure the success of the merger. 2. Provide two specific examples of difficulties the companies experienced in integrating their information systems. SOURCES: Compiled from S. Greengard, “ Mobile Means Business ,” Baseline Magazine , January 28, 2011; K. Nash, “ 2011 State of the CIO ,” CIO , January 1, 2011; D. McCafferty, “ Joining Two Financial Giants ,” Baseline Magazine , September 1, 2009; www.wellsfargo.co m,www.wachovia.com , accessed February 15, 2011. Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. RUBY'S CLUB INTERNSHIP ASSIGNMEN TS Ruben and Lisa seriously need to understand their market. To help them, search the Web in your local area for bars, clubs, theaters, restaurants, and athletic events, then analyze the types of entertainment Ruby's Club will compete against. Rate each as to whether the strategy is cost leadership, differentiation, innovation, operational effectiveness, or customer orientation. Make notes about how each communicates with its customers. Does it use Facebook? Twitter? E -mail? Traditional mail? Flyers on c ampus? How do they advertise themselves to their customers? Finally, provide Ruben and Lisa (submit to your instructor) a competitive grid that outlines the competition and provide suggestions on how to accomplish Ruben and Lisa's vision (relaxing communit y atmosphere) by some combination of the above mentioned strategies. Be sure to discuss alignment in your submission. SPREADSHEET ACTIVITY Objective: Strategic information systems are designed to help create some type of competitive advantage. This activity teaches you that something as simple as sorting and filtering within a spreadsheet can be a form of a strategic information system in that it will help make strategic decisions. Chapter Connection: Porter's five forces are demonstrated in this activity. The two most focused on are the bargaining power of customers and industry rivalry. These will be evaluated in the activity by working with multip le pages within one workbook. Each page will provide a different comparison that will provide new/different information. Prerequisites: There are no prerequisites for this activity. Activity: There are many factors that play a role in determining the final cost of a product. There are even more decisions that play into which options are chosen for a given product. Often, strategic information systems are used to help create competitive advanta ge. The recreational vehicle (RV) industry is no exception. Companies try to fit as many options into a camper as they can without dramatically increasing the weight, sacrificing the durability of the unit, or driving manufacturing costs so high that the price is uncompetitive. Industry innovations quickly become standard, customer desires change as gas prices go up and down, and businesses are left to sort everything out.Go to www.screencast.com/t/JxuKQTOS and watch the video about sorting and filtering within spreadsheets. It will explain the process and how something this simple can be used to help make strategic decisions. Then open the starter file for this activity. It includes a customer survey regarding RV options and customer pref erences as well as a list of competitive offerings and prices.Then sort and filter the information based on criteria given to you by your professor. By sorting and filtering, you are creating information from your data (the raw facts). You will then use th is information to make strategic business decisions to help your RV company create a competitive advantage within the marketplace. Deliverables: The final product will be a spreadsheet filtered to show rank of the organization among different criteria r elative to their competition. Once you have filtered and ranked the data, you will make suggestions as to the best course of action that will provide the strongest possible competitive advantage for the company. This recommendation will come in the form of a business letter. Quiz Questions: 1. True or False? Unsorted data are helpful to strategic decision makers. 2. When raw facts are organized, sorted, filtered, or otherwise processed, you have created: a. Data b. Information c. Knowledge d. Decisions e. Competitive advantage 3. True or False? Spreadsheets, though somewhat rudimentary compared to the elaborate strategic information systems available, are still capable of supporting strategic decisions. 4. True or False? When data are filtered, they are erased from the spreadsheet. 5. True or False? When data are sorted, they are only sorted within their own column. Discussion Questions: 1. Too often, information systems are viewed as complicated computer programs that are difficult to understand. However, spreadsheets can provide much of the needed functionality. At what point is it cost effective to purchase a more legitimate program than t o use simple tools found within a spreadsheet? 2. Given the fact that information systems are there to support decisions, why do you think many opt for more expensive systems than the relatively easy -to-use spreadsheet? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved. DATABASE ACTIVITY: CREATING TABLES Objective In this activity, you will learn how to create Access tables from an existing design. The construction of any database begins with creating its data tables. If you can't create tables, you can't create a database. Even if you use a database that someone else has created, knowing where the tables come from will help you understand what you can do with it and why it sometimes behaves in ways that you might otherwise not expect. The database has to be designed first, of course. You will do that in the Chapter 3 activity if your instructor assigns it. Here we've done the design for you, so you can ―get your hands dirty‖ early in the course. Chapter Connection Competitive advantage and strategic information systems depend on high -quality data. The tables in a database determine what can be done with it. Understanding how its tables determine what a database can do will help you figure out what strategic systems your company can develop, or how its databases must change to support the systems it needs. Prerequisites None. Activity: 1. In this activity, which you will find online, you will create a database of university departments and courses from scratch. You will create database tables, tell Access how they are related to each other, and enter data into them. You will use similar tables in future Access activities. The following database diagram (a type of diagram called an entity -relationship diagram , as you will learn in Chapter 3) describes part of the data for a university. Specifically, this part of the database will store data about four entities : departments, courses, students and grades. The lines in the diagram tell us that: • Each department can have several courses, but might not have any. • Each course belongs to exactly one department. • Each course can have several students, but might not have any. (This would be a temporary situation when registration starts.) • Each student in the course receives one grade. • Each student can take several courses , but might not be registered for any (yet). • Each course gives that student one grade. This information is contained in four tables. You will create the two on the left of the ERD, the Department and Course tables. The first, the department table, will contain the same data that we see here on a spreadsheet: 2. To create the department table, start by launching Access. Click ―Blank Database‖ at the upper left of the ―Available Templates‖ section of its opening window. At the lower right, name this database Activity2.accdb (or as your instructor specifies). Then click ―Create.‖ 3. You will see the Datasheet view of the new table, with no data. You could start by entering column names and data in this view. If you do this, Access will make assumptions about your data. Its assumptions are usually correct, but they are wrong o ften enough to cause problems that are easier to avoid now than fix later. There are also things you cannot do in this view. So, switch to Design view by clicking the ―Drafting Tools‖ icon at the top left corner. Usage Hint: Most Access objects can be manipulated in three, four, or more views. The icon shows the view that Access designers thought you are most likely to want next. If you want a different view, you can click the triangle under the drafting tools icon to drop down a menu of icons, or click on one of the icons at the bottom right corner of the window, which shows all available views. 4. Before changing views, Access requires you to name your new table. Name it DeptTbl and click ―OK.‖ The ending ―Tbl‖ identifies it as a table, disting uishing it from other things called ―Dept‖ (such as, for example, a department list) that you might create later. Usage Hint: Some people put the letters that identify the object type at the start of its name: TblDept, for example. That action groups objects of each type in an alphabetical list. Here, it is a matter of personal preference unless your instructor specifies otherwise. This project will put them at the end. 5. Access has already created the first field of your table, a unique identifier called ―ID.‖ It was not on the spreadsheet, but a true database needs it. The AutoNumber data type will assign a different number to every department, ensuring you will be able to tell them apart even if two have the same name. (This is why schools give students unique ID numbers.) In a database, such a unique identifier is called a primary key . Access indicates primary keys by keys to the left of their names. Change the name of th is field from ID to DeptID, to avoid later confusion with primary keys of other tables. 6. Enter the name of the next column, DeptName, below DeptID. If you tab to the next field, you will see that Access automatically sets its data type to Text. Sinc e department names are text strings, leave that alone. You can describe it in the third column if you want. (Your instructor may have requirements for this.) Usage Hint: Both these names begin with ―Dept.‖ This helps us tell department names from studen t or instructor names outside the context of their tables. 7. The next row, which will become the next column of the table in Datasheet view, gives the three -letter prefix that applies to that department's courses. Call it DeptPrefix. It is of data type Text, too. In the Description column, enter ―Three upper -case letters.‖ This will help people who use the database know what to enter there. 8. The fourth column of the database table will say how many square feet of office space the department uses. So, in the fourth row, enter the name DeptSpace. This time, click the down arrow at the right of its Data Type field to drop down a menu of data types. Select Number. Usage Hint: You can also key in the word ―Number.‖ As soon as you enter ―n‖ Access will complete the word, since no other data types start with that letter. 9.

The fifth data column will say when the department was created. (This is needed because university tradition calls for departments to march into graduation ceremoni es in order of creation, oldest first.) Call this field DeptCreated. Change its data type to Date/Time. In the Field Properties pane in the lower part of the window, click the blank area to the right of the word ―Format.‖ In the menu of date/time formats t hat drops down, select Medium Date. At this point your table definition should look like this: 10 . Now, click on the Datasheet icon at the top left of the window to return to Datasheet view and enter data. Access will prompt you to save the table. Answer ―Yes.‖ (Answering ―No‖ would leave the table in Design view.) Usage Hint: If you're defining a large data table, do not wait until it is all done to save your work. Click the File ribbon tab and choose Save, or click the diskette icon at t he top left of the window, every few minutes. 11 . In Datasheet view, click in the first row under DeptName to begin entering data for the first department. Enter the name ―English,‖ the prefix ―ENG,‖ an area of 2,500 square feet, and a creation date of September 2, 1894. Access automatically gave the first department a DeptID of 1. Your table should now look l ike this: 12 . When you see this, you realize that the area should be formatted with a comma after the thousands digit. Select the DeptSpace column, or any data in it. Make the Fields ribbon tab active, and select Standard format from the Format pull -down menu in the Formatting section. Usage Hint: Another way to do this is to click the Apply Comma Number Format icon (looks like a comma) in the Formatting section. That format also puts two decimal places after the integer part of the number. We do not want decimal places here, so click the Decrease Decimals icon (shows two zeroes with an arrow pointing to one zero) twice to get rid of them. Usage Hint: A third option is to return to Design view, select DeptSpace, click in the Format row of the Field Properties panel, click the down arrow at the far right of that row to pull down the menu of formats, and select Standard format. Then return to Datasheet view. That is overkill for comma formatting, but you need to do it if the option you want is not in the ribbon. 13.

Continue to add the remainder of the data shown in the preceding spreadsheet. If your instructor gives you different or ad ditional requirements, follow them. 14.

Now create the Course table, as shown in the following spreadsheet. Start by clicking the Create tab above the ribbon. In that ribbon click the leftmost icon, Table. Then continue as before, naming this table CourseTbl. Include a primary key, even though it is not shown in the spreadsheet. Be sure to give the CourseDept field data type Number, to match the Autonumber data type of the primary key in DeptTbl. Select data types for the other fields based on your u nderstanding of their content. (A real database, rather than showing the instructor's name here, would have a link to a faculty table.) 15.

The key characteristic of a database, that differentiates it from a file with information about one real -world entity, is that the tables in it are associated with each other. Look at the Course table. It does not show directly that the first course is taught by the English department. It does, however, contain the department key ―1.‖ That key identifies a row in t he Department table. That row gives us the prefix ENG to create the complete identifier ―ENG 307,‖ the full name of the department (―English‖) if we need it, and anything else we want to know about the department. Creating a column with department codes in the Courses table makes it possible for Access to connect the two tables. But what if we enter, say, 55 into a CourseDept field when we mean 5? Access will gladly accept the data, but later it will not be able to find a department to match it. That is bec ause it does not know, yet, that these two fields are meant to match. Now we have to tell it to make that connection. To do that, first close the tables, saving them if prompted. Then, click the Database Tools tab on the ribbon. On that ribbon click ―Relat ionships,‖ left of center. In the Show Tables dialogue box, shift -click the unselected table to select both of them, then click Add and close the box. 16.

To tell Access about the connection, drag CourseDept in the Course table onto DeptID in the Depa rtment table. You will see a dialogue box with a check -box to ―Enforce Referential Integrity.‖ This means that Access will check that every CourseDept in the Course table matches an existing DeptID in the Department table: It will not let you assign a cour se to Department 55 unless Department 55 exists. Check this box and click Create. If you carried out the previous steps correctly, you will see a line between these two data fields. It will have a ―1‖ by DeptTbl and a ∞ (infinity) symbol by CourseTbl. This means the two are in a many -to-one relationship: a department can have many courses, but each course is in only one department. It should look like this: If this did not happen, the most common reasons are these: • You got a line between the two, but there are no symbols at its ends. You did not check ―Enforce Referential Integrity.‖ Double -click the line to edit it (or right -click and select Edit Relationship), check the box, and OK the change. • “The database engine could no t lock table „[name]' because it is already in use by another person or process.” A table is still open. Cancel the request, bring the open table to the front by clicking its tab, close it (saving if asked), and repeat. • “Microsoft Office Access can' t create this relationship and enforce referential integrity.” At least one CourseDept does not match a DeptID. Check that CourseDept is of data type Number and all values in that column are correct.

If you used data from this activity, check your tables a gainst the data here. If you used other data, such as your instructor's, check the tables against that data. If you used your own, confirm that all CourseDept values match DeptID values.

Then repeat the process. Deliverab les: Your database file with the two preceding tables, their data, and the relationship. Usage Hint: : Access 2010 can gives database files the file name extension .mdb (works with any recent Access release) or .accdb (works with Access 2007 and later). While it is open, Access 2 010 creates a temporary file having the same name but extension .laccdb. This lock file prevents other programs from changing a database while it is in use. It goes away when you close the database. If you submit a database while it is open, it is easy to submit the lock file by mistake. The easiest way to avoid that error is to close the database first. If you send it while it is open, be sure you send the right file. A lock file will be of no use to your instructor. Quiz Questions: 1. True or False? If a field has data type AutoNumber, it will never have the same value in two rows of the table. 2. Which of the following is not a valid Access data type? a. Text b. Date/Time c. Color d. Number 3. True or False? You must use the Description field in a table's Design view to describe what each field of the table is for. 4. True or False? To enter data into a table, you use Datasheet view. Discussion Questions: 1. A primary key, such as DeptID in this activity, identifies a single row of a database table uniquely. It must meet two conditions: Every row of the table has to have one, and they must all be different.

Would the three -letter prefix that a department uses for its courses be a suitable primary key? Why or why not? 2. Use Access online help and/or the search engine of your choice to learn the difference between Text and Memo data types. Explain, to a nontechnical reader, when to use each. 3. Suppose the English department changes its name to English Literature and its course prefix to ENL. The Department table is updated to reflect these changes. What changes must be made to the Course table in order to update all the course listings? Copyright © 2012 John Wiley & Sons, Inc. All rights reserved.

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