The Institute of Chartered Accountants of Bangladesh (ICAB)

Course Name: IT Application Session: March-May, 2012

Professional Stage (Application Level) Section No: 01
Course Teacher: Abdulla-Al-Mahmud FCA, FCS, FCMA, MBA, LL.B Lecture Synopsis-1

Chapter: Information technology strategy:

Strategy:
Strategy is a planned course of action undertaken to achieve the goals and objectives of an
organization.

Information technology strategy:

The process of determining an organization's long-term goals and then identifying the best
approach for achieving those goals is called the Information Technology Strategy.

Overall strategy:
The overall strategy of an organization is known as corporate strategy, but strategy may also be
developed for any aspect of an organization’s activities such as IT strategy, environmental
management or manufacturing strategy.
Corporate level strategy is concerned with:
 Reach;
 Competitive contact;
 Managing activities and business interrelationships;
 Management practices.

Four aspects of strategy:

Organizational strategy may have four aspects and they are:
 Scope of operations;
 Resource allocation;
 Competitive advantage;
 Synergy.
Scope of operations:
The first component encompasses the geographic locations and based on the location
organization offer different advantages to the customer to maximize the organizational
opportunities.
Resource allocation:
The second component of the global strategy-focuses on use of organizational resources so that a
organization can compete successfully in the chosen markets.
Competitive advantage:
This component of the strategy involves not only identifying existing or potential areas of
competitive advantage but also developing a plan for sustaining areas of competitive advantage.
Synergy:
Finally, global strategy should involve establishing a plan for the company that enables its various
functions and operations to benefit one another.

Organizational planning:
The components of fundamental organizational planning process consist of:
 team building, modeling and consensus;
 evaluating of an organization that has accomplished and the resources they have aquired;
 analyzing their business, economic, political and societal environment;
 anticipating and evaluating the impact of future developments;
 building a shared vision and deciding on goals that they want to achieve; and
 deciding actions to take to achieve their goals.
A plan is formally articulates the actions that are necessary to achieve goals. Thus, a plan is an
action statement. Plans lead to actions produce results and part of planning is learning from

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results. In this context, the planning process is followed by implementation. Strategic planning
deals with the development of an organizations mission, goals, strategics and policies.

Business IT planning:
The business/IT planning process focuses on discovering innovative approaches to satisfying a
company’s customer value and business value goals. This planning process leads to development
of strategies and business models for new e-business and e-commerce platforms, processes,
products and services. A company can develop IT strategies and IT architecture that supports
building and implementing their newly planned business applications. The business/IT planning
process has three major components:
Strategy development: Developing business strategies that support a company’s business vision.
For example, use information technology to create innovative e-business systems that focus on
customer and business value.
Resource management: Developing strategic plans for managing or outsourcing a company’s IT
resources, including IS personnel, hardware, software, data and network resources.
Technology architecture: Making strategic IT choices that reflect an information technology
architecture designed to support a company’s e-business and other business/IT initiatives.

Objective of an IT strategic plan:

The major objective of an IT strategic plan is to put in a place a roadmap that ensure IT’s direction
is linked to the organization’s business plans and overall strategy.

Six phases of IT strategic planning:

There are six phases of IT strategic planning and they are:
1) Business strategy and direction:
 Competitive force analysis;
 Balanced business scorecard;
 Change Readiness.
2) IT strength and weakness:
 Benchmarks and spending;
 The application portfolio;
 Skills and Infrastructure;
 Governance and control.
3) IT vision and strategy:
 Preferred future state;
 Strategic intent and imperative;
 Principles and strategies.
4) IT architectures:
 Application architecture;
 Data architecture;
 Network architecture;
 Organization architecture.
5) IT transition plan:
 Prioritized IT opportunity proposals;
 Time-phased project plan;
 Balanced resource utilization plan;
 Alternative funding scenarios.
6) On-going planning process:
 Opportunity screening and prioritization;
 Quarterly & annual revisions;
 Planning calendar;
 Budgeting and operational planning.

Benefits of IT strategic planning:

The benefits of developing an IT strategic plan and planning process include:
 The establishment of a sound decision making approach that organization realizes the
expected business benefits from technology;
 The mitigation of the risks surrounding IT investment decisions that could otherwise mean
costly-deployment of technologies, loss of competitive advantage and failure to realize the
full value of the firms investment in technology.

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Process of developing IT strategy:
Now a days, the use of information technology (IT) as a competitive weapon has become a
popular cliché; but there is still a marked lack of understanding of the issues that determine the
influence of information technology on a particular organization and the processes that will allow a
smooth coordination of technology and overall strategy.
Moreover, Information Technology (IT) is increasingly relied on to drive business profitability and to
achieve organizational goals day by day. So, it is very important for the IT strategy of an
organization to be developed in tandem with the overall strategy of the organization.
 Developing information technology (IT) strategy that supports and is supported by
business strategy is critical for generating business value in today’s organizations. In the
face of rapidly changing business conditions and continuously evolving IT, however,
organizations have yet to learn how to develop an effective IT strategy. So, the core
purpose in developing and IT strategy is to ensure that there is a strong and clear
relationship between investment decisions and the organizations overall strategies, goals,
and objectives.
 Developing a sound IT strategy can be very important for one simple reason and
organization defines the IT agenda incorrectly or partially correctly, it runs the risk that
significant organizational resources will be misdirected. Some and perhaps most,
resources may not be devoted to furthering strategically important areas. This risk has
nothing to do with how well and organization executes the chosen IT direction. Being on
time, on budget and on specification is of diminished utility if the wrong thing is being
done.
 Understanding the strategy of the organization is a must for developing an effective IT
strategy. If the IT strategy does not fit with the overall organizations vision, there will be
constant conflict. Top leadership will need to invest valuable time in articulating the
organizational vision and determining how IT will help with meeting and sustaining that
vision.
 While the organizational vision will drive the IT strategy, progressive-thinking leaders
should also be cognizant of how IT strategy can influence the organizational strategy.
Technology redefines opportunities and the choices executives make to exploit those
opportunities and establish new capabilities. As a result, organizations are able to evolve
current business models and, in some cases, build new ones.
 Effective strategy development is becoming vital for today’s organizations. As the impact
of IT has grown in organizations. IT strategy is finally getting the attention it deserves in
business. Nevertheless, most organizations are still in the very early stages of learning
how to develop an effective IT strategy and synchronize it with an overall business
strategy.
 Getting the balance right between the many different ways IT can be used to affect a
business is a constant challenge for today’s leaders. While there is, as yet, no well-
developed IT strategy development process, there appears to be general agreement on
certain critical success factors and the key elements involved. Over time, these will likely
be refined and better-integrated with overall business strategy development. Those who
learn to do this well without locking the enterprise into inflexible technical solutions are
likely to win big in today’s rapidly-evolving business environment.

Information technology architecture:

The IT architecture that is created by the strategic business/IT Planning process is a conceptual
design or bluprint that includes the following major components:
Technology platform: The Internet, intranets, extranets and other networks, computer systems,
system software and integrated enterprise application software provide a computing and
communications infrastructure or platform that supports the strategic use of information technology
for e-business, e-commerce, and other business/IT applications;
Data resources: Many types of operational and specialized databases, including data
warehouses and Internet/intranet databases store and provide data and information for business
processes and decision support;

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Applications architecture: Business applications of information technology are designed as an
integrated architecture of enterprise systems that support strategic business initiatives, as well as
cross-functional business processes.
IT organization: The organizational structure of the IS function within a company and the
distribution of IS specialists are designed to meet the changing strategies of a business. The form
of the IT organization depends on the managerial philosophy and business/IT strategies
formulated during the strategic planning process.

E-commerce:
Electronic Commerce stands on E-commerce are the idea of doing business electronically over the
Internet. Paper driven business transactions are being re-engineered to capture the benefits of
doing business electronically. Electronic Commerce is the business environment in which
information for buying, selling and transportation of goods and services moves electronically from
computer to computer in an automated way. Information gathering, processing, manipulating and
distribution are common to trade and commerce no matter what the commodity or service is that is
being exchanged. It has many offshoots now, including E-business and E-tailing. It is being
projected as the next wave of the information technology application. Multinational companies are
betting their future on E-business.
In E-commerce, the first function is the creation of virtual shops and shopping malls, which exhibit
the products and services they want to sell. To facilitate selling, there has to be a way of paying
electronically, which then calls for security and identification systems. Electronic banks have to be
created, which allow people to deposit, withdraw and pay money just by pressing keys on a
computer in their home. Then there have to be a system of delivery goods: either on-line in the
case of information products or a physical delivery system in the case of hard products.
The high end of E-business is B2B (business to business) in which firms tie up resources. Some
companies are doing business with their dealers electronically. Orders, schedules, receipts,
invoices all can be delivered on-line. Thus, they can save on costs by managing their stocks and
inventories properly.
Some common business applications related to electronic commerce are:
E-mail;
 Enterprise connect management;
 Instant messaging;
 Newsgroups;
 Online shopping and order tracking;
 Online banking;
 Online office suites;
 Domestic and international payment system;
 Shopping cart software;
 Teleconferencing;
 Electronic tickets; etc.

Factors to consider in the decision process related to e-commerce applications:

The problems of e-commerce applications include reducing the time of data access so that huge
databases can be searched quickly, decreasing the cost of database design etc. There are eight
factors affecting e-commerce adoption:
 External influence;
 Government initiatives;
 Geographical condition;
 Political condition;
 Economic condition;
 Technology infrastructure;
 public awareness;
 Socio-cultural condition.

Decision making process of e-commerce:

Decision making process of e-commerce system includes:
 Strategic orientation;
 Integration;

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  Cooperation;
 Content/added value;
 Critical mass;
 Functionality;
 Feedback;
 Marketing;
 Trust;
 Technology.

Identifying risks in e-commerce:

A risk is anything that could hamper the achievement of an objective. The identified risks of e-
commerce can be categorized in the following ways:
 Information risk;
 Technology risk;
 Business risk.
Information Risk:
 Content on web page exposing web publisher to libel, defamation of character, slander;
 Copyright infringement and invasion of privacy suits stemming from posted textual content;
 Copyright infringement and invasion of privacy suits stemming from digital scanning and
morphing;
 Copyright, patent, or trade secret infringement violations by material used by web site
developers.
 After unauthorized access to a web site, online information about employees or customers
is stolen, damaged or released without authorization;
 Electronic bulletin boards containing defamatory statements resulting in liability or
embarrassment.
 Worldwide legal exposure resulting from use of creative material (e.g. names, likenesses)
that violates laws of countries outside of the home country.
 Credit card information intercepted in transit is disclosed or used for fraudulent purposes;
 Information that has been changed or inserted in transmission is processed leading to
erroneous results;
 Flight of intellectual property due to employees moving to competitors.
Technology Risk:
 Negligent errors or omissions in software design;
 Unauthorized access to a web site;
 Infecting a web site with computer viruses;
 Internet service provider (ISP) server crashes;
 Software error and omission risks causing unauthorized access;
 Software content risk that violates a copyright or is libelous;
 Third party intercepts credit card information in transit causing breeches in security for
online payments;
 Intercepting and copying or changing non-credit card information during transmission;
 Insufficient bandwidth to handle traffic;
 Obsolete hardware or hardware lacking the capacity to process required traffic;
 Risk due to excessive ISP outages or poor performance;
 ISP phone numbers being busy;
 ISP or home-company servers being down;
 Scant technical infrastructure to manage cycle time to develop, present, and process web-
based products;
 Risk of improperly integrating e-commerce system with internal databases;
 Risk of improperly integrating e-commerce system with internal operational processes;
 Risk due to poor web site design manifesting themselves in long response times;
 Inability of customer or supplier computers to handle graphical downloads.
Business Risk:
 Web page content exposes web publisher to libel, defamation of character, slander;
 Electronic bulletin boards containing defamatory statements resulting in liability;
 Worldwide legal exposure resulting from use of information in violation of home-country
laws;
 Using web sites to conduct illegal promotional games, such as a sweepstakes or contests;

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  Risks related to payment to web site developers and disputes between developers and
clients;
 Lack of maintenance on existing web pages;
 Impact on business due to intellectual property lost due to employees moving to
competitors;
 Changes in supplier relationships re: data access, data ownership, distribution strategy,
and marketing tactics;
 Changes in customer relationships re: data access, data ownership, distribution strategy,
and marketing tactics;
 Products out-of-stock due to poor communication with operations;
 High shipping costs required for distribution;
 Inconvenient return policies—lack of coordination with physical system;
 Excessive dependence on ISP to support firm’s business strategy;
 Inability to manage cycle time for developing, presenting, and processing web-based
products;
 Risk due to unprotected domain names which are usurped by other organizations;
 Improperly integrating e-commerce systems with internal operational processes;
 Insufficient integration of e-commerce with supply chain channels.

Typical risks to e-commerce systems:

The following risk may be found in e-commerce system:
 Risk to corporate information and intellectual property from internal staff and trading
partners;
 Hacker exploitation of errors in software application design, technical implementation or
systems operation;
 Website defacement;
 Denial-of-service attacks.

Major advantage of e-commerce:

E-commerce offers the following major direct advantages:
 Improved productivity;
 Cost savings;
 Streamlining business processes;
 Better customer services; and
 Opportunities for new businesses.
Improved productivity: Using e-commerce significantly reduces the time required to create,
transfer and process a business transactions between trading partners. Human errors like
duplications of records are largely eliminated with the reduction of data entry and recently in the
process. This improves the speed and accuracy.
Cost savings: Research has estimated that doing business on the Internet can result in cost
savings of about 50% to 10% of sales. This cost can stem from efficient communication, quicker
turnaround time and closer access to markets.
Streamlining business processes: Costs savings are amplified, when business go a step further
and adapt their internal processes and back-end legacy systems to take advantage of electronic
commerce. Business process can be made more efficient with automation.
Better customer services: With electronic commerce, there is better and more efficient
communication with customers. Customers can enjoy the convenience of shopping at any hour,
anywhere in the world.
Opportunities for new business: Businesses over the Internet have a global customer reach.
There are endless possibilities for business to exploit and expand their customer base.
E-Commerce also offers the competitive advantage of
 Broader market reach;
 Increased efficiency and accuracy through automated order processing;
 Inventory control;
 Billing;
 Shipping and so forth better customer services;
 Instant communications with consumers and trading partners;
 Improved profit margins through automated supply chain management;
 Better forecasting of customer need;
 Reduced labor costs;

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  Lower overall costs; etc.

E-commerce success factors:

Some of the key factors for success in e-commerce are given below:
 Selection and value;
 Performance and service;
 Look and feel;
 Advertising and incentives;
 Personal attention;
 Community relationships;
 Security and reliability.

Disadvantages of e-commerce:
The main disadvantage of e-commerce is the lack of a business model, lack of trust and key public
infrastructure, slow navigation on the internet, the high risk of buying unsatisfactory products and
most of all lack of security. The disadvantages and limitations of e-commerce can be classified as
technological and non-technological.
Technological: The e-commerce system itself, there is no universally accepted standard for
quality, security and reliability. The software of e-commerce development tools are always evolving
and have difficulties in integrating the Internet and e-commerce software with parts of the existing
applications and databases.
Non-technological: The lack of trust is one of the main reason for which customers are unwilling
to accept e-commerce due to privacy and security concerns. Another drawback is the presence of
hackers.

Limitations of e-commerce:
The limitations regarding e-commerce can be explained in the following two ways:
Technical limitation:
 Costs of a technological solution;
 Some protocols are not standardized around the world;
 Reliability for certain processes;
 Insufficient telecommunications bandwidth;
 Software tools are not fixed but constantly evolving;
 Integrating digital; and non digital sales and production information;
 Access limitations of dial-up, cable, ISDN, wireless;
 Difficulty in integrating e-commerce infrastructure with current organizational IT system.
Non technical limitation:
 Customer fear of personal information being used wrongly
 Privacy issues
 Customer expectations unmet
 Rules and regulations
 Security and privacy
 vulnerability to fraud and other crimes
 Lack of trust and user resistance
Fear of payment information being unsecure
 Tactile limitations
 many businesses face cultural and legal obstacles
 legal issues outstanding such as jurisdiction
 legal environment has many new and conflicting laws
 cultural obstacles
 linguistic challenges
 Limitations of support services
 Financial cost
 Sourcing tech support in foreign languages
 Lack of critical mass in certain market areas for seller and buyers
 Accessibility outside of urban/ suburban and areas effects universality
 Higher employee training required to be click and mortar
 People’s resistance to change
 People not used to faceless/ paperless/ non-physical transactions

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Categories of electronic commerce:
There are many ways to classify electronic commerce transactions. One is by looking at the nature
of the participants in the electronic commerce transactions. The three major electronic commerce
categories are business-to-consumer (B2C) e-commerce, business-to-business (B2B) e-
commerce and consumer-to-consumer (C2C) e-commerce.
Business-to-consumer (B2C) e-commerce: It involves retailing products and services to
individual shoppers. In this form of electronic commerce, business must develop attractive
electronic marketplaces to entice and sell products and services to customers. For example, many
companies offer e-commerce websites that provide virtual storefronts and multimedia catalogs,
interactive order processing, secure electronic payment systems and online customer support.
BarnesandNoble.com, which sells books, software and music to individual consumer is an
example of B2C e-commerce.
Business-to-business (B2B) e-commerce: Beyond individual consumer transactions, e-
commerce has given companies an entirely different way to conduct business. Using powerful
Websites and online databases, companies not only sell goods to individual customers, but also
track inventory, order products, send invoices and receive payments. Using e-commerce
technologies (ranging from standard networks to supercomputers), companies are rapidly forming
online partnerships to collaborate on product designs, sales and marketing campaigns and more.
By giving one another access to their private networks, corporation partners access vital
information and work together more efficiently.
Although millions of consumer transactions take place each day on the Web, business-to-business
(B2B) transactions actually account for most of the money that is spent online. As its name implies,
a business-to-business transaction is takes place between companies, here consumers are not
involved. The concept of B2B transactions did not arrive with the Internet. In fact companies were
doing business electronically long before the rise of the Web, by using private networks and
computer systems to handle transactions. But Internet technologies have made the process
easier, more efficient and available to virtually all businesses. Any financial transactions between
two companies can be considered a B2B transaction and probably can be handled over the
Internet. For examples:
 A store orders an out-of-stock product from a distributor;
 A car manufacturer orders parts from a wide range of suppliers;
 A stock broker buys shares for a client by using an electronic exchange;
 A bank requests credit information from a major credit reporting agency; etc.
Milacron's Web site for selling machinery, mold bases and related tooling, supplies and services to
companies engaged in plastics processing is an example of B2B e-commerce.
Consumer-to-consumer (C2C) e-commerce: It involves consumers selling directly to
consumers. For example, eBay, the giant Web auction site enables people to sell their goods to
other consumers by auctioning the merchandise off to the highest bidder. Thus participating in or
sponsoring consumer or business auction is an important e-commerce alternative for B2C or B2B
e-commerce. Electronic personal advertising of products or services to buy or sell by customers at
electronic newspaper sites, customer e-commerce portals or personal websites is also an
important form of C2C e-commerce.
Another way of classifying electronic commerce transactions is in terms of the participants'
physical connection to the Web. Until recently, almost all e-commerce transactions took place over
wired networks. Now mobile phones and other wireless handheld digital appliances are Internet
enabled to send text messages, access Websites and make purchases. Companies are offering
new types of Web-based products and services that can be accessed by these wireless devices.
The use of handheld wireless devices for purchasing goods and services from any location has
been termed mobile commerce or m-commerce. Both business-to-business and business-to-
consumer e-commerce transactions can take place using m-commerce technology.

Electronic data interchange:

Electronic data interchange (EDI) is a direct computer-to-computer exchange of data. The data
found in business documents, such as purchase invoices or bills of lading are transmitted from one
computer to another over a telecommunication network. EDI is replacing the physical exchange of
documents and can save time and money by eliminating the need for rekeying data, thereby

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reducing input errors, eliminating unnecessary handling and copying of documents and increasing
the productivity of employees. An EDI transaction is simply an exchange of flat files between
trading partners that have established a communication link.
In a word EDI can be defined as "The transfer of electronic data from one organization’s computer
to another, the data being structured in a commonly agreed format so that it is directly usable by
the receiving organization's computer system”. The message by the sender’s applications software
is translated into the agreed EDI format and placed on the network by the network access
software. This electronic data is sent to the mailbox facility of the EDI service provider. Here it is
stored until received by the retriever's network access software. Frequently, the services of a
value-added network (VAN) may also be required. EDI software may be implemented on a variety
of platforms, from PCs to mainframe computers such as Hewlett-Packard's HP 3000, DEC's VAX
6000 and IBM's AS/400 and ES/9000 mainframes.
EDI is not a new technology. It got its formal start in the transportation industry as early as 1975,
the grocery industry followed with an EDI project in 1978. Those are needed to implement EDI on
a PC is a modem, a printer and EDI software. In the simplest form of EDI, transactions are typed
directly into the PC and they can be printed at the other end. But the true power of EDI can be
achieved when EDI software is integrated with internal systems that handle only information
relating to manufacturing, marketing, accounting, finance and other functional areas.

Cost of implementing EDI: The costs associated with implementing EDI fall into six general
areas: software, hardware, VAN charges, software Interface, program maintenance and process
reengineering. Some estimates of these costs are provided below: these costs can vary
significantly from one organization to the next.
Software: EDI software can range from $500 for PC to $100,000 for mainframes. Annual software
maintenance typically costs 10 percent to 15 percent of the purchase price;
Hardware: Costs vary depending on the type of computers used;
VAN charges: Users should expect from $25 to $200 in VAN startup costs. Monthly fees of $3 to
$50 and use fees of 10 cents to 50 cents per 1,000 characters transmitted or received are usual in
the industry;
Software interface: Integrating EDI software with existing applications can be expensive, because
it often requires the development of a customized interface. This is one of the primary reasons
smaller firms often reluctant to implement full-blown EDI systems;
Program maintenance: These costs include software maintenance, technical support and
personnel training; they vary from one organization to another;
Organizational changes: A significant (and sometimes hidden) cost of EDI implementation is the
change that it creates in an organization. Quite often these changes raise the fundamental
question, "Why do we do business the way we do?" The answers may lead to significant (and
costly) organizational changes and such costs are difficult to estimate.

Benefits of EDI: EDI is a powerful technology because it can create partnerships where none
existed and can replace sluggish bureaucracies with responsive organizations. It is one of the
most successful efforts in recent years to reduce operating costs and increase worker productivity.
In some cases, it has changed the relationship between suppliers and customers from one of
caution and mistrust to one of cooperation and collaboration. EDI is so powerful that it is viewed as
a glue technology that binds businesses together in the value chain from raw materials to finished
products.
The benefits of EDI may be divided into three groups: direct, indirect and strategic. Direct benefits
include decreased operating costs and increased productivity. Indirect benefit comes from using
EDI to re-engineer business practices. EDI enables businesses to identify and implement the most
efficient way to conduct business. Finally EDI can yield strategic benefits in the marketplace.
Further more EDI ensures:
 The speed, with which an inter-organizational transaction is processed, is minimized;
 The paperwork of transaction processing is eliminated;
 The costs of transaction processing are reduced, as much of the need for human
interpretation and processing is removed;
 Reduced human involvement and reduces error.

Enterprise resource planning (ERP):

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ERP is the technological backbone of e-business, an enterprise-wise transaction framework with
links into sales order processing, inventory management and control, production and distribution
planning and finance. Enterprise resource planning is a cross functional enterprise system driven
by an integrated suite of software modules that supports the basic internal business processes of a
company. For example, ERP software for a manufacturing company will typically process the data
from and track the status of sales, inventory, shipping and invoicing as well as forecast raw
material and human resource requirements.
ERP gives a company an integrated real-time view of its core business processes, such as
production, order processing and inventory management tied together the ERP application
software and a common database maintained by a database management system. ERP systems
track business resources (such as cash, raw materials and production capacity) and the status of
commitments made by the business (such as customer orders, purchase orders, and employee
payroll), no matter which department (manufacturing, purchasing, sales, accounting etc.) has
entered the data into the system.

Benefit and challenges of ERP:

ERP systems can generate significant business benefits for a company. Many other companies
have found major business value in their use of ERP in several basic ways:
Quality and efficiency: ERP creates a framework for integrating and improving a company's
internal business processes that results in significant improvements in the quality and efficiency of
customer service, production and distribution.
Decreased costs: Many companies report significant reductions in transaction processing costs
and hardware, software and IT support staff compared to the nonintegrated legacy systems that
were replaced by their new ERP systems.
Decision support: ERP provides vital cross-functional information on business performance
quickly to managers to significantly improve their ability to make better decisions in a timely
manner across the entire business enterprise.
Enterprise agility: Implementing ERP systems breaks down many former departmental and
functional walls or "silos" of business processes, information systems and information resources.
This results in more flexible organizational structures, managerial responsibilities and work roles,
and therefore a more agile and adaptive organization and workforce that can more easily capitalize
on new business opportunities.

Identifying business/IT strategies:

Internet technologies, e-business and e-commerce applications can be used strategically for
competitive advantage, as this text repeatedly demonstrate. However, in order to optimize this
strategic impact, a company must continually assess the strategic value of such applications. The
major competitive advantages are as follows:
Cost and efficiency improvements: This quadrant represents a low amount of Internet company,
customer and competitor connectivity and use of IT via the Internet and other networks. So one
recommended strategy would be to focus on improving effeciency and lowering costs by using the
Internet and the World Wide Web as a fast, low-cost way to communicate and interact with
customers, suppliers, and business partners. The use of e-mail, chat systems, discussion groups,
and a company website are typical examples.
Performance improvement in business effectiveness: Here a company has a high degree of
internal connectivity and pressures to substantially improve its business processes, but external
connectivity by customers and compititors is still low. A strategy of making major imrpovements in
business effectiveness is recommended. For example, widespread internal use of Internet-based
technologies like intranets and extranets can substantially improve information sharing and
collaboration within the business and with its trading partners.
Global market penetration: A company that enters this quadrant of the matrix must capitalize on
a high degree of customer and competitor connectivity and use of IT. Developing e-business and
e-commerce applications to optimize interation with customers and build market share is
recommended. For example, e-commerce websites with value-added information services and
extensive online customer support would be one way to implement such a strategy.
Product and service transformation: Here a company and its customers, suppliers, and
competitors are extensively networked. Internet-based technologies including e-commerce
websites and e-business intranets and extranets, must now be implemented throughout the
company’s operations and business relationships. This enables a company to develop and deploy

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new Internet- based products and services that strategically reposition it in the marketplace, Using
the Internet for electronic commerce transaction processing with customers at company websits
and e-commerce auctions and exchanges for suppliers and typical examples of such strategic e-
business application.
Implementing business change:
Implementation activities include managing the introduction and implementation of changes in
business processes, organizational structures, job assignments and work relationships resulting
from business/IT strategies all applications such as e-business initiatives, reengineering projects,
supply chain alliances and the introduction of new technologies. Companies use change
management tactics such as user involvement in business/IT planning and development to reduce
end user resistance and maximize acceptance of business changes by all stakeholders.

Strategic Information System (SIS):

A system that delivers information products and services that play a direct and prominent role in
helping the firm achieve its strategic goals. Researchers have classified information systems into
three categories:
 Systems that support business functions, such as accounting, marketing, and
manufacturing information systems;
 Systems that support strategic planning, such as DSS and EIS;
 Systems that are part of a firm’s strategy.

Benefit of the strategic information system:

Strategic information system makes benefit both the organization and the customer which are
decribed below:
Benefits to the organization:
 Increased market share;
 Reduction of processing costs;
 Ability to charge higher prices because of value-added component;
 Increase in profit margins.
Benefits to the customer:
 Increased customer satisfaction;
 Increased customer control;
 Reduction in transaction costs (such as shipping and handling costs, merchandise returns,
and recording).

Characteristics of strategic information systems:

There are three Characteristics commonly found in all strategic information systems. They are as
follows:
 Telecommunications as a central part of an SIS;
 Reliance on a number of vendors for providing information technologies;
 Cooperation among a number of organizations.

The End

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