Escolar Documentos
Profissional Documentos
Cultura Documentos
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Nortel 10 years
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Intel 10 years
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CISCO 10 years
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Qualcomm 10 years
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Sun 10 years
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By the way
I can calculate the motion of heavenly bodies, but not the madness of people.
Isaac Newton after he lost 20,000 in the South Sea Bubble
IBM 10 years
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Microsoft 10 years
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Stock prices increase PE ratio increases dramatically Prices return to normal suddenly
(2001 76 IPOs)
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The Bubble
Lasted from the IPO for Netscape (Aug. 1995) Until after Y2K (year 2000)
Say, mid 1998 until mid 2000, about 24 months Nasdaq DOW S&P 500
All hit highs they have not reached since
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Paradigm Shifts
technology discontinuity customer need
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time
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Guess
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Remember
What is a Bubble? The Dot. Com bubble
Its consequences
Recent adjustments
Feb-13
Nortel bankrupt Sun Microsystems bought by Oracle EDS bought by HP Google Android, Chrome new software player?? RIM ??? HP ???
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Remember
IPO (Initial Public Offering) Venture capital PE Ratio
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End
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ADM 3713
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In the Beginning
Computers to 1945
Analog vs. digital .. Digital won
Computers 1945-1964
IAS, Urbana and the Illiac Tubes to transistors
Computers 1965-1982
Dominance of IBM Big Iron
Feb-13 ADM 3713 29
More Recently
1982 to 1995
LSI - Large Scale Integration chips
Made things smaller - microscopic
1996 to Present
Feb-13
The Web, search engines Outsourcing Applications over the Internet (cloud computing) Social computing, cell phones, etc.
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Also
Transition of the dominant player
IBM 7094
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S/360 40
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S/360 50
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A system
Feedback!
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A Computer System
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8 bits 1 byte
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Bytes
It turns out A byte is pretty small need to consider many of them
Feb-13
Kilo (1000s) Mega (millions) 1 MB 1 million bytes Giga (billions) 1GB 1 billion bytes Tera (trillions)
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Bytes
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Bytes
A single byte may represent an ASCII character E.g., an A a 1 a $ ASCII is a standard set of 256 codes used to represent numbers letters and a few other characters Unicode is a newer standard using 2 bytes important for multilingual data - 65,000 codes
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Bytes
One typewritten page is two KB (double spaced) If, each character (and space) is represented by an ASCII code, each takes one byte, 8 bits 500 pages are (about) one MB 500,000 pages are about one GB
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Note
B capital B means bytes b small b, means bits
KB a kilobyte, 1000 bytes 8000 bits
End
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Moores Law
ADM 3713
Scientists: Claude Shannon Paul Baran Gordon Moore Bob Metcalf Herb Grosch Eric Schmidt
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53
Herbert (Herb) Grosch Gordon Moore Robert (Bob) Metcalf Paul Baran Claude Shannon Ronald H. Coase Eric Schmidt
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A few people have made a lot of money from information technology Who has given away the most??
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Moores Law
Gordon Moore predicted in 1965 that the:
price/performance of microprocessors will double every 18 months
Moores Law
Firms, companies, industries that recognized Moores law have prospered.
Those that ignored it have disappeared!!
A few, that try to provide a distinctive product at a premium price (Apple) have survived
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The Intel family 8088, 80286, 80386, 80486, Pentium, Pentium II, Pentium III, Pentium IV, etc. (Core Duo, Quad) Appear 18 to 24 months apart. A very deliberate, successful, design and marketing strategy. Intel manages innovation
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Intel Processors
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Suppose. . .
Your business was manufacturing and marketing a product (or service) that decreased in cost by half every 18 months:
How could you possibly stay in business?
- suppose you were selling hamburgers?
E.g., PC manufacturers Long distance telephone providers (service) Disk drive manufacturers
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Suppose. . .
Your business was buying a component that was decreasing in cost this way
How would you price your product? How would you keep your margins? How could you leverage this price change to:
increase your market? develop new uses (innovation)?
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Suppose. . .
Your business was buying equipment or a service that was decreasing in cost this way
How can you exploit this to lower your costs and increase your profits? What do you have to do to say competitive?
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Some Strategies
Industries go through commoditization
Innovative products that commanded high prices at the beginning eventually become commodities Need to change strategies move to
Low cost, high volume create a demand
Examples
What have you bought
When it was new, innovative That is now a lot less expensive, a lot more common?
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Some Strategies
for Competitive Advantage
2. 3. 4. 5. 6.
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Differentiate (from your competitors) (better service) Focus (niche market, be best in a smaller market) Innovation (new features) Growth (increase market share) Alliances (concentrate on your core)
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Examples
Moores Law works for:
PCs Storage Cell Phone devices Printers Screens, monitors Long distance telephone service
Because they are based on microprocessors and the manufacturing technology that has spun off from them
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But
Moores Law doesnt seem to apply to software products
Why? What might change this? Moores law doesnt seem apply to services
consultants, integrators, web designers, etc.
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Top Philanthropists
9. Michael and Susan Dell $993 million 2. Bill and Melinda Gates (Foundation) $5,458 million 1. Gordon and Betty Moore (Foundation) $7,046
million
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Remember
What Moores Law says: prices drop by half every 18 months (or performance doubles) In stories, cases, and examples ask:
Does Moores Law affect the business?
If so, how (e.g., strategy, profits, competition)? Where? ( e.g., Operations, products)
What does the firm use that Moores Law doesnt apply to?
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An Example
Here is an early computer
What might it be used for? Why was it never popular? Why are Honeywell, Xerox, General Electric, Ford, RCA -- no longer in the computer business?
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End
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Hardware
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In the Beginning
Computers to 1945
Analog vs. digital .. Digital won
Computers 1945-1964
IAS, Urbana and the Illiac Tubes to transistors
Computers 1965-1982
Dominance of IBM Big Iron
Feb-13 ADM 3713 83
More Recently
1982 to 1995
LSI - Large Scale Integration chips The Internet e-mail, file transfer Application Providers
1996 to Present
Feb-13
The Web, search engines Outsourcing Applications over the Internet (cloud computing) Social computing, cell phones, etc.
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Also
Transition of the dominant player
IBM 7094
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S/360 40
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S/360 50
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A system
Feedback!
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A Computer System p. 91
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Simpler version p. 89
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8 bits 1 byte
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Bytes
It turns out A byte is pretty small need to consider many of them
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Kilo (1000s) Mega (millions) 1 MB 1 million bytes Giga (billions) 1GB 1 billion bytes Tera (trillions)
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Bytes
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Bytes
A single byte may represent an ASCII character E.g., an A a 1 a $ ASCII is a standard set of 256 codes used to represent numbers letters and a few other characters Unicode is a newer standard using 2 bytes important for multilingual data
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Bytes
One typewritten page is two KB (double spaced) If, each character (and space) is represented by an ASCII code, each takes one byte, 8 bits 500 pages are (about) one MB 500,000 pages are about one GB
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Note
B capital B means bytes b small b, means bits
KB a kilobyte, 1000 bytes 8000 bits
Memory
RAM (random access memory) (primary storage)
often 4 gigabytes 4 billion bytes Very fast
Flash memory - SD cards (4, 8, 32, gigabytes) slower but cheap cameras, sticks, etc. portable devices
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About Time
It turns out, a second is a long time
Need to talk about fractions of seconds Millisecond 1 thousandth Microsecond 1 millionth Nanosecond 1 billionth Light travels about 30 cm in 1 nanosecond
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Rates
Together, size and time measure rates
E.g., Megabytes per second MB/sec
Other terms:
Baud bit per second Bandwidth number of bits per second (through a given channel), e.g., from the Internet to your computer
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Feb-13
CPU Speeds
Measured in Megahertz (and Gigahertz) Millions (billions) of (clock) cycles per second A single arithmetic operation may take several cycles Advanced CPUs can overlap operations
E.g., dual core, quad core
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All these things depend on more transistors in a CPU Moores Law talked about: Cramming more components onto integrated circuits
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CPU Speeds
Newer CPUs have special instructions
E.g., Pentium III had special instructions for helping graphics and sounds. Pentium IV does more steps in parallel
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Types of Memory
Current PCs 1000 MB to 4000 MB of memory
Original PC had 64 KB
How many times larger is 1000 MB?
7. If a DVD holds 4.7 GB of data how long will it take to read it?
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Analog to Digital
reality is analog
Bits no size, colour or weight and can travel at the speed of light. Digitizing taking samples of an analog signal CDs take 44.1K per second. But each sample is 16 bits. Bandwidth number of bits per second (through a given channel). the channels capacity A CD needs 44.1 x 16 x 2 (stereo) =1.4 Mbps
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USB 2.0
(USB 3.0 now the current version)
USB has a bandwidth of 480 Mb/sec It can provide power for low power devices
How many bytes per second? How long does it take to transfer a 6 GB DVD?
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Digital signals are a stream of bits, on and off, 1s and 0s. Analog signals usually get distorted when they are transmitted or stored. Digital signals can be reproduced perfectly
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Problem
A CD can hold about 72 minutes of music. How many bytes is this?
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Answer
72 min. x 60 = 4,320 seconds
4,320 x 1.4 = 6,048 Mb 6,048 / 8 = 756 MB
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End
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Software
(Chapter 3 pp. 102-108, TB pp.463)
ADM 3713
Software
The set of instructions that tell a computers CPU what to do
E.g.
Read a number from memory Read another number Add the two numbers together Store the result in memory
Software
Writing instructions is called programming or coding The code is in a language all imperative verbs There are many different languages and dialects It is slow, tedious and expensive
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Types of Software
Two broad categories
Application software System software (the operating system)
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Types pp.105-107
Systems software
operating systems (O/S)
Windows, Unix, MacOS, Linux, Android telecommunications software and services Database Management Systems (DBMS)
Application software
word processing vs. more specific applications
Project Management running an ATM
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Buying accessories, software, services etc. not from the OEM you are said to be dealing with a third party
First party you Second party OEM, your primary vendor Third party another vendor
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Definition: O/S a program that manages the resources of a computer, e.g., memory, CPU, printers, disk drives, network, etc.
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E.g., Mouse
Needs to react immediately, O/S, gives this a high priority, ability to interrupt other functions
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Software Products
7. Very difficult to specify the design, difficult to control the development.
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Software Products
8. Market may be difficult to define, can vary from very narrow and specific to very broad. Sometimes, vertically integrated, sometimes wide (horizontal). E.g., a Word Processor or a WP for lawyers
Feb-13
Some firms target or are embedded in a specific industry, e.g., manufacturers of printing presses, aircraft, specialty services This is called a vertical market
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Software Issues
Costs Software is Expensive!
ERP software starts at $100,000
may cost $50 or $100 million to implement in a large firm
Cost CICS $20,000 per month, on one machine in one room used by dedicated terminals (IBM had 20,000 customers)
Upgrades to Windows $50 x 2,000 $100,000 every couple of years but more difficult to deploy Difficult to control costs, difficult to allocate costs
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Today
Very few companies write computer programs for their own use. Usually they buy programs (applications) from specialized vendors
Database companies e.g., Oracle Application companies
E.g., PeopleSoft, J.D. Edwards (now both part of Oracle)
Enterprise companies e.g., SAP (SystemAnalyse und Programmentwicklung), IBM $500,000 and up ($50,000,000 or so)
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ASPs value
You rent the use of software, as you need it, this may give you:
1. Predictable pricing 2. No up-front capital expenditure 3. Rapid deployment
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Most of these issues will come up again They are fundamental management problems Software and hardware for an enterprise are the means of production In a bit business they are vital
Managers must make good choices
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Note
Keep Your Software up-to-date Learn how to use it
Use your word processor its not just a typewriter Use your spreadsheet its not just a pocket calculator Use their help
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End
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But,Software
1. Doesnt cost anything or take any time to replicateit doesnt weigh anything 2. Has the property (Metcalfs Law) that the larger the market the more the market grows
Feb-13
I.E., you prefer to use the same software that your supplier and your customers use One software product, e.g., MS Windows, can become ubiquitous
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Free?
Open-source software
Publicly available and free Source code may be available Sometimes distributed as freeware or shareware
With an optional fee Sometimes a complete version has a fee Dont confuse with limited time free trials
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End
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Network Basics
What is the Internet?
Chapter 3 pp.109-118 TB pp. 467- 487
ADM 3713
Internet
Some material here More material later focusing on the web and e-commerce
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Thomas Watson said The world will need about five computers
He was out byhow many!
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Definitions
Protocol (p. 480, p.110)
a standard that specifies the format of data as well as the rules to be followed during transmission
Ethernet p. 480
Optical fibre cables p. 473 Unshielded twisted pair p. 473 Router p. 482
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Definitions
Bandwidth p.110
The diameter of the pipe
How much data (bits) can be sent down a wire per second? The larger the pipe, the more can be sent
Measured in bits per second (bps) or bytes per second (Bps)e.g., 100Mbps is 100 million bits per second the bandwidth in the classrooms
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Definitions
Switched circuits
A networking technique that sets up a physical connection between two parties, for the duration of the session. (This is the phone system).
Packet switching
Technology that breaks blocks of data into small, fixed bundles and routes them through the available communications channels. (This is the Internet).
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The Internet:
Combines
Computers Telecommunications
Is a redesign of
How signals can move How people can connect to one another The value (or cost) of communicating
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Formal definition
A global information system that:
Is logically linked together by a globally unique address space based on the Internet Protocol (IP) or its subsequent extensions/follow-ons; Is able to support communications using the Transmission Control Protocol/Internet Protocol (TCP/IP) Provides, uses or makes accessible, either publicly or privately, high-level services layered on the communications and related infrastructure described . . .
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Open Architecture
Each distinct network would stand on its own and no internal changes would be required to connect it to the Internet Communications would be on a best effort basis Networks would be connected by routers (black boxes) no information would be retained about individual packets No global operations control
Feb-13 ADM 3713 180
Whats Important
1. Globally unique address space 2. Based on the Internet protocol (IP) 3. Able to support TCP/IP
4. Provides services layered on the communications infrastructure
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. . . Every public and private network that has agreed to exchange communication using TCP/IP it is a standard
This includes big, backbone networks, local campus LANs, and your house or apartment
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Needs a router
Feb-13 ADM 3713 185
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Packets
TCP/IP defines the details (this is the older version)
1,444 bytes
48 bytes
This is data
Feb-13
TCP defines handling, segmentation, reassembly, concatenation, separation and recovery of packets
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Routers
Routers can route packets around a blockage Packets for one message may:
Go along different routes Arrive out of order
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So
Packets are sent to their destination with the assistance of routers (This is the IP part)
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Textbook
Has a simplified diagrams
pp. 483 p. 114
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Packet switched
Always on No call Time not a factor Customers are not distinguishable purpose of data is not known
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Telecos
Dont like the Internet, want to control it like a telephone system
Intelligence in a central office the handset is dumb Services in the central office, e.g., call waiting, 911, the central office is owned by the service provider Control the services,
prevent Skype force users to their brand, charge for different services and volume of use
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Client or Server
People use the machines on their desks (or in their hands). These are normally the client machines.
Services are provided by (usually) larger machines on the network that run unattended (in the backroom or anywhere on the Internet). These are the server machines.
Feb-13 ADM 3713 205
Client/Server
Shares processing between the desktop and the backroom Allows the firm to centralize control of information, the database(s) on the server Allows employees customers, suppliers local use and analysis at the desktop
Anywhere..
Feb-13 ADM 3713 206
Examples of Services
E-mail receiving, sending (use the SMTP
protocol)
Web servers (use the HTTP protocol) Database servers for the firms data (use the
SQL language)
File systems (use the FTP protocol) Authentication (use the SSL protocol)
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Examples of IP Services
As compared to applications
TCP/IP services:
E-mail receiving, sending Web servers Authentication Security and encryption File systems Database servers
Feb-13 ADM 3713
Applications:
You Tube Facebook Amazon E-Bay SaaS (cloud computing)
208
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.203 unicorn
Internet
.7 jupiter
Feb-13 ADM 3713
.49 mars
dns
web mail
213
Neotrace
16 hops
197 ms return
131.202.53.114 204.146.80.99 CA*Net design
Feb-13 ADM 3713 214
Fiber
Good points
Cheap Dielectric High capacity (fast) (incredibly high)
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Coax (copper)
(59U)
Fiber (glass)
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Fiber (Fibre)
Many orders of magnitude faster than copper and wireless Cheaper WDM allows the capacity to increase
Adds lambdas
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Free?
Book: Free: The Future of a Radical Price
By Chris Anderson
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Paradigm Shift?
Circuit switching Packet switching
function
Paradigm Shifts
technology discontinuity customer need
Feb-13
time
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Convergence
Cell phones and the wireless Internet Fixed wireless to the home? Fibre to the home? TV
Questions?
What threats does Aliant face?
What threats does Rogers face? CRTC controls telecommunication policy in Canada FCC controls telecommunication policy in the USA
Feb-13 ADM 3713 229
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IP utilities on your PC
(Laptop, Tablet?, Smartphone?)
Ipconfig /all
Tells you your IP address (and MAC address)
ping
Tells you whether an address is active (and whether or not your machine is working)
tracert
lists the nodes to a destination
arp
Most recently accessed IPs
nslookup
Resolves IP numbers and names
Feb-13 ADM 3713 231
End
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1. Mediating Technology
Connects people
B2B, B2C, etc, Facilitates exchange (cf. a bank) Two-way (not one way, like TV or radio)
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2. Universality
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3. Network Externalities
The more users the better: increases value Metcalfs Law: value of something is number of users N N2
N = 10 then value = 100 N = 20 then value = 400 N = 1000 then value = 1,000,000
The reverse is true if a new technology (say, a new cell phone technology) doesn't take off, it has low value (and profit).
Feb-13 MBA 6106 237
4. Distribution Channel
bit Products digital products music, life insurance, stock trades Information Replacement
Disintermediation (e.g., travel agency, stock broker) Extension
Price drops may be enough to increase market (also a mediating technology)
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5. Time Moderator
Shrink time
Information and bit products are available immediately
Enlarge time
24 x 7 availability E-mail delivered when read
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6. Information Asymmetry
When one party in a transaction knows more than another.
E.g., real estate brokers know more about the housing market than the typical seller or buyer E.g., a car dealer knows more about his costs than a car buyer This term also comes from Economics
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Examples
Term Life Insurance
The term life premiums have dropped $1 billion in USA Vendors had an information monopoly, the Internet reduced this
Coffins?
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9. Creative Destroyer
Barriers to entry are low, substitute products and services are available
1. Brand-new industries have been created 2. Transforms the structure, conduct, performance of existing industries 3. Competitive advantage in existing industries (and new ones) can be enhanced
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Remember
Transaction costs are incurred during the process of buying or selling, on top of the PRICE of whatever is changing hands. If these costs can be reduced, the PRICE MECHANISM will operate more efficiently. Agency costs the costs of managing the business
E.g., Rent for facilities, accounting and legal costs
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Explicit knowledge
Coded, verbalized, specified
End
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Eric Schmidt
Schmidts Law
ADM 3713
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Eric Schmidt
When the network becomes as fast as the backplane, the computer hollows out
Fast means bandwidth
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Remember
Moores Law
And its consequences
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End
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ADM 3713
Layers
1. Application (+ Presentation + Session) 2. Transport 3. Network 4. Data Link 5. Physical
Feb-13 MBA 6106 260
Curiously
This is an abstract model to enable engineers to build the Internet, but
Each layer has turned out to be a business opportunity!!
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Value
Value Network
The various firms using the Internet to create value for the customers
Profit Sites
Specific types (or places where) of value is created and examples of firms that operate at that spot
Feb-13 MBA 6106 265
I Users
1. E-Commerce
Real money for real products and services
2. Content aggregators
Feb-13
II Communications Services
6. Backbone Operators
Control the Internet Provide access to the web
Feb-13
III Suppliers
9. Content Creators
Developers and owners of intellectual capital Provide application and system software
Feb-13
Examples
Feb-13
MBA 6106
Examples
Ditech.com
mortgages
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In cases
What properties of the Internet are important? What layers are important and What value sites show up?
End
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ADM 3713
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Telecommunication is:
Global, inexpensive, accessible
But
Some parts of the world are not in the Information Society Not just because of where they live, but also:
How they live (attitudes) Their government (politics)
Economic Changes
Increases in international trade, development of global financial systems and currency, and outsourcing of labor
Cultural Changes
Increased multiculturalism through TV and movies; international travel and immigration; ethnic foods; Facebook, FarmVille, Twitter, and YouTube
Technological Changes
Low-cost computing platforms and communication technologies; e-mail, Skype, and instant messaging; lowcost global telecommunications infrastructure; global patent and copyright enforcement
Opportunities p. 18
Due to:
Falling transportation costs Falling telecommunication costs
Leads to:
Reaching new markets Managing a global workforce
Challenges p. 19
Governments
Political system
E.g., Autarky (the opposite of Globalization)
Geoeconomic
Time zones, infrastructure reliability, expertise
Cultural
Social organizations, advertising
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291
What is a system?
A group of components that interact to achieve some purpose
With these characteristics
1. Input 2. Processing 3. Output
4. Feedback 5. Control
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a System
Input
Process
Output
Feedback/ Control
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An Information System
network Input Process Output
Store Data
Feedback/ Control
Store Data
Store Data
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Raw facts
Represent events E.g. sales from a cash register
Organized data
Meaningful to people E.g. sales trends, comparison of sales by brand
299
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What Is MIS?
Management Information Systems MIS is the development and use of information systems that help businesses achieve their goals and objectives Key elements:
Development and use Information systems Business goals and objectives
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Ask Questions
How can I apply information technologies in a business environment to help my organization focus on top-line competitive advantage? How can I apply information technologies in a business environment to help my organization focus on bottom-line competitive advantage?
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Ask Questions
What will a system do for you? 1. What is the purpose? 2. What will using it enable us to do? 3. What goal can we accomplish through its use? 4. Will it aid us in reaching our objectives?
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Ask Questions
These are the questions you should ask as you read business cases
For example in 7-11
Business of IT and IS
Business is changing because of advances in IS and IT
Mobility devices will change what it means to go to work Industries are undergoing significant change because of the shifts in technology
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However
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End
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Chapter 2
In Chapter 2
ENABLING ORGANIZATIONAL STRATEGY THROUGH INFORMATION SYSTEMS Decisions Organizational Decision-Making Levels Organizational Functional Areas
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Making Decisions
In IT/IS decisions must be made all the time
What technology to acquire? What technology to get rid of? Who to choose as a supplier? How much to pay?
The IT/IS part of the firm makes these types of decisions all the time and participates in larger decisions
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Managers Roles
(all very important to IT managers)
Interpersonal Roles
Figurehead, leader, liaison
Informational Roles
Monitor, disseminator, spokesperson, analyzer
Decisional roles
Entrepreneur, disturbance handler, resource allocator, negotiator
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Making Estimates
an important part of the decision process
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Only in the past few years have the IT part of the firm been given a role in strategy
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Examples of IT Decisions
Major Initiatives (big Systems) Supply Chain Management (SCM)
Automates tracking inventory and information among business processes and across companies
IT Decisions
From the IT point of view, strategic direction of the firm includes (for example):
To what degree is the firm going to participate in e-commerce? What is the firms policy about outsourcing? Is the firms strategy to grow its market? Is the firms strategy to be a low cost producer? Is the firm moving to global operations?
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These lead to
Decisions such as choosing:
Appropriate database design and products Network design and suppliers Software products ERP, CRM, SCM systems
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Decisions
Decision Structure: Structured
We know what information we need That information is accessible Decision rules are clear
Semi-structured
One or more of the three previous characteristics are not met to some degree
Unstructured
All three characteristics are not met to a large degree
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Problem Structure
Usually we assume:
People know what they need and want People can tell us what they need and want What they want doesnt change
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Problem Structure
But:
People may not know exactly what they want
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Problem Structure
Learning takes place
wants, needs change (looks like people are changing their minds) This also creates semi-structured situations
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Example
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Operational Level
2-331
IS used to:
optimize processes, and understand causes of performance problems.
Functional managers
Managerial Level
2-333
Managers decisions
Semistructured Moderately complex Time horizon of few days to few months
Executive Level
2-335
IS is used to:
obtain aggregate summaries of trends and projections, and provide KPIs across the organization.
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Examples
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Rational Model
Can be used to analyze structured, semistructured and unstructured situations Note the similarity to a system
Input, output, feedback and control
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Develop an idea then go around and try to sell it within the firm
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Total
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Summary
Types of decisions
Structured Semi-structured Unstructured Repetitive
Decisions in Cases
What types of decisions are being made?
Structured, unstructured, semi-structured
Did the decision makers consider the strategic direction of the firm?
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Selecting a PC
Choose the characteristics How important is each characteristic?
Weight them (1 to 5)
Choose possible brands (or models) How closely does each brand match the characteristics?
Assign a %
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Selecting a PC
Score
Multiply the weight by the % and add
Debate, reflect
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355
How much do you tell the prospective vendor about your process?
The characteristics? The Weights?
Non-disclosure agreements
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In a case
Give examples of
Data, information Types of decision making, decision levels Decision making steps
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Competitive Advantage
(N.B. dont confuse with comparative advantage)
Competitive Advantage providing a product or service in a way that customers value more than what your competition is able to do.
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359
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361
Knowledge-level
Support knowledge and data workers
Flow of Information
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363
Flow of Information
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Granularity
Information at the bottom of the organization has a lot of detail or high granularity - operational staff collect detailed data
Important because operational staff also need specific, detailed instructions
The Problem
It is difficult for information to move sideways in an organization Information (and data) moves up and down with accounting, within manufacturing, within sales and marketing relatively easily The functional areas of the firm tend to act like silos
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Identify the systems Show the activities Information flows Resources Facilities Information
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End
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Chapter 2
Decisions
Types of decisions Decision making
Organization Structure
Levels Functional Areas
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Concepts
1. 2. 3. 4. Productivity and Business Value Industry Analysis Porters Five Forces Model The Generic Strategies
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Why?
Why do firms spend money on IT?
Sometimes $100s of millions . . .
E.g., Hershey Chocolates, Quantum Disks, Oxford Health, TransCanada Pipelines, Dell Computers, Province of New Brunswick, Sobeys, etc.
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1. What is an Industry?
An industry is made up of firms competing for the same business. McDonalds competes with Wendys, Burger King, Taco Bell other fast food outlets. This is the fast food industry
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An Industry
Dell competes with IBM, HP/Compaq, Gateway, Toshiba, Sony, etc. This is the PC industry
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An Industry
Ford competes with GM, Chrysler, Honda, etc. This is the automobile industry
There is a different industry (even though some of the players are the same) for heavy trucks.
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But
Dell doesnt compete with Taco Bell or Ford They are in different industries
Always think about what industry a firm is in who are its competitorsuseful in other courses
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In an industry. . .
Some firms make above average margins (profits)
These are the successful firms These have competitive advantage (not the same as
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385
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388
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390
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In an Industry
A successful firm
Devises strategies to counter the five forces By doing so, earns above average margins
Gives them competitive advantage in their industry higher margins
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Buyer Power
Price sensitivity
Is the buyer always looking for a lower price?
Buyer information
The more information the buyer has the more power
Buyer concentration
Do you have a lot of buyers or are you dependent on just a few?
Substitute products
Does the buyer need your product? can he use something else?
Backward integration
Can the buyer make what you sell him?
Buyer volume
Is your product a small item to the buyer? If so, you have more power
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Buyer Power
Threats from Buyers. . .
Force down prices Bargain for higher quality or more services Playing competition against one another
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Supplier Power
Differentiation of inputs (few alternative sources) Switching costs Substitute inputs Supplier concentration Importance of volume Cost relative to industry Threat of forward integration (relative to backward integration)
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Supplier Power
Threats from suppliers:
Raise prices Reduce quality or services
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400
Inter-industry Rivalry
Intensity of rivalry Product differences Brand identity Switching costs Information complexity
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1. Cost Leadership
Use information technology to lower your costs not your profits. Offer your products to the market and make an above industry average margin
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2. Differentiation
Being unique in the industry
Providing addition service or features at a competitive price Provide more value to the buyer (consumer benefit) IT can be significant
E.g., Caterpillar keeping track of the location of spare parts
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3. Focus
on a select group of customers
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4. Focus
on a wide segment of the industry
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Locking in suppliers
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Establish alliances
Establish standards Promote product awareness
Reducing costs
Increased profitability
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End
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ADM 3713
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Strategy Concepts
1. 2. 3. 4. 5.
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Value Creation and Capture The Value Chain Industry Analysis The Five Forces The Four generic strategies
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IT and Productivity
Productivity is
Hard to define Difficult to measure
Productivity IT allows a company to make either more output from the same inputs, and/or to make better output and/or to make the output faster than before the technology roughly speaking
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Value Creation
(not in book)
Consumer Benefit
All the characteristics that a consumer values in a product or service Characterized by the price the consumer is willing to pay
Costs
All the expenses that are incurred in providing a product for the consumer
Value Created
The difference between the Consumer Benefit and the Costs
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Value
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Capturing Value
Producer Surplus (or Margin)
Profits the firm generates from selling a product or service
Consumer Surplus
Difference between what the consumer is willing to pay (the maximum benefit) and the price actually paid
Value
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Summary
Consumer Benefit what the consumer is willing to pay Costs all the expenses in providing the good or service Value Created (Consumer Benefit minus Costs)
Made up of
Producer Surplus the profits the firm generates Consumer Surplus the consumer benefit minus what
they actually paid
Industry structure
Some industries are more profitable than others
effectiveness some firms offer new or improved goods or services that the customer values doing the right things
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Primary Activities
Primary activities are activities in which value is added directly to the product Primary activities include the following (five):
1.Inbound logistics 2.Operations 3.Outbound logistics 4.Marketing and sales 5.Service
Stages accumulate costs and add value to product Net result is total margin of the value chain And consumer benefit as well
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2. Operations (manufacturing)
a. In-house production b. Assembly, testing c. Maintenance and operation of the plant
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4. Outbound Logistics
a. Order processing, shipping
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Support Activities
Support activities support the primary activities Support activities include the following (four)
1.Firm infrastructure 2.Human resources 3.Technological development 4.Procurement
Contribute indirectly to production, sales, and service Add value and costs but:
Produce margin that is difficult to calculate Produce consumer benefit that is difficult to measure
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Value chain
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Evaluate (quantify)
Successful firms within an industry:
Evaluate their value chain business processes Align the processes of the value chain with their strategy
Low cost - focus on activities that lower costs - enhance the producer surplus Differentiation focus on activities that enhance the consumer surplus create value for the consumer
E.g. outbound logistics, R & D, After-sales service
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Value Chain
IT and E-business may add value through each stage in the value chain
Improves communication at the interfaces Reduces costs
Even traditional businesses may be information intensive, (insurance, banking, government), then IT can add great value
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Value Chain
The value chain can provide a framework to design and implement a firms strategy:
Lower the costs at the interfaces Reduce supplier and buyer power Reduce the threat of new entrants Reduce the impact of substitutes
Business Processes
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Collaboration
FedEx, UPS
Outsourcing, offshoring
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End
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B2C EC
business to consumer electronic commerce ADM 3713
Includes events leading up to the purchase and after sale service But, still requires sound business fundamentals and principals
Otherwise the Bubble
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Concepts for EC
Properties of the Internet Vertical vs. Horizontal Markets Merchant vs. Non-merchant portals or Marketplaces Procurement vs. Purchasing Bit products vs. hard goods Niche products vs. Mainstream products Information (a bit product) as a salable commodity Advertising as a EC product
Databases
Data is stored in a table structure A table has rows and columns The table represents an entity e.g., students Each row represents a unique occurrence of the entity e.g. a person Each column represents an attribute of the entity e.g, colour, sex, size
Databases
Within the table, each row must be unique
The field (or fields) within a row that makes it unique is the Key field
Databases
Tables can be connected (related) by the key fields
Fig. 5.1
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Keep in mind
The Properties of the Internet (handout)
Compare this to the table in the text (and the accompanying text) p. 146
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Note
Non-merchant companies are also called
Marketplaces Portals
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Fig. 5.3
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B2Cs Advantages
Closely associated with the Internets properties:
1. 2. 3. 4. 5. 6.
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World wide reach 24/7 Low cost Intelligence is at the edge Unlimited capacity Some products are bit products
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B2Cs Problems
How to recreate an in store experience
1. 2. 3. 4. 5. Helpful service Security, privacy and trust handling the goods - delivery Information Payments
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To what extent
Do these firms
L.L. Bean www.llbean.com Lee Valley www.leevalley.ca Amazon www.amazon.com Roots www.roots.ca Canadian Tire
address the problems? use the advantages of the Internet and E-commerce?
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Whats going on here? How can some of these firms make money selling weird things??
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The book industry has known for decades, there's virtue in nichesbooks that aren't for everyone, but really thrill those they are for. The trick is finding a way to make a business in niches this mass of niches is called the Long Tail, the land of the relatively low-selling items. Publishers tend to focus on the head of the curve, where the hits are, and forget most of the rest.
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It's demanded by the constraints of the physical world: limited shelf space, limited channels, limited screens. But now distribution methods have virtually unlimited capacity, from the digital products on iTunes to the combination of online catalogues and overnight delivery pioneered by Amazon.com. Thanks to these extraordinarily efficient channels, mass markets are shifting to millions of niches
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Electronic commerce lets you make money from the long tail
Amazon I Tunes Lee Valley Etc.
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Long-tail products don't replace hits (very popular items), they replace the monopoly of hits enforced by the limitations of physical retail space.
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But
Some say
In B2C e-commerce, as a general rule, the best merchandise to sell is either commoditylike, digital, or a combination of the two.
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B2C
Illus. 4-18 Benefits EC web site rules Google and Searches
B2B
Illus. Market places Vertical Horizontal Auctions (illus)
Topics
Databases EC and B2C vs. B2B Review properties of the Internet
Business strategies (illus.) Disintermediation vs. reintermediation
E-Government
End