Topic 2
1. Type of market
Perfect competition
All firms sell identical
product
Large number of firms
and are price taker
Price is defined by
equilibrium of supply
and demand in the
market
Demand is completely
elastic to price, a minor
increase in price will
result in zero demand
Producers and
consumers have perfect
information
No barriers to entry
all firms have identical
production function
2. e-business in each nature of firm
Monopolistic competition
Able to differentiate and earn profits
Monopolistic
oligopoly monopoly
competition
Can be either
Products are similar but
homogeneous or Homogeneous product
not identic
differentiated
Dominated by a few
Large number of firms firm and big enough to One seller
influence a market
Differentiation may
Not valuable for firms to
occur by advertising,
compete on price, as Price is determined by
branding, convenience
there will be no firm to earn the
of location, product
economic profit as firm maximum profit
quality, reputation of
will set to marginal cost
seller, etc
Demand is elastic, which Number of firms
means increase in price determine the structure High elasticity means
will result in reduction in of the market for higher monopoly power
demand products
Interdependence among
Product differentiation
few competitors. If one
can provide some
firm tries to raise the Perfect Information
degree of price setting
price, it will have no
power
market
Barrier to entry are high
No barriers to entry and only allow presence Blocked entry
of only a few company
if the price is too high, Equilibrium is a situation
consumer will choose where profits are zero.
-
similar products from Price competition is not
other designer a suitable strategy
Oligopoly Monopoly’s barrier to entry
E-business is often a source for the Economies of scale – nature of the
from investments to perform better
and increase efficiency against
competitors
use of similar resource in different
way to extract unique benefits from
the use of given resources
Investment in e-business add value
with the unique ability to exploit the
value offered by technology
To develop unique ways to exploit
potential e-business solutions.
As e-business easily replicable,
advantage is not permanent as
competitor can develop similar ways
of exploiting the value of e-business
solution
Competitive advantage is limited in
time
1. externality
- costs or benefits not transmitted through price.
determination of oligopolistic
competition
E-business investments generate long
lasting competitive advantage and
guarantee rents above the average
of the industry
the technological architecture used
to generate competitive advantage is
not easily accessible by all firms
because of the e-business
architecture it is owned by very firms
and protected by licenses or legal
agreements
Topic 4
production function of the product is
such that average costs decline with
increase in output
Location – it is the only firm in
isolated market
sunk cost – very high costs to
establish the business
protected by law and government –
actions to protect government
exclusivity in the provision of the
product & services
Degree of demand price elasticity
determines the monopolistic power
The higher the elasticity, the larger
the effect produced by price
discrimination
 - Costs or benefits which affects a party who did not choose to incur that costs or
benefits

2. Critical mass
- Level of adoption of a technology that generates a value for those adopting it
that is greater than or equal to the costs of adopting it.
- this is a key concept to understand competitive dynamics in digital economy and
strategic challenges that company face to successfully establish their presence in
this competitive environment
- if critical mass is not achieved, company will not be able to establish its presence
and to survive in a market that is affected by network effects

3. positive feedbacks
- once a firm generates network effects, it becomes more attractive for other
companies to develop complementary products and services that will make the
adoption of the technology even more valuable

4. lock-in
- companies must have a specific strategy to guarantee that their users or
customers do not easily migrate to other platform or substituted products

5. type of lock-in
- contractual commitments enforced by law
- durable purchases create associated with the life span of the technology
- brand specific training associated with the learning curve needed to get
acquainted with the functionality of the technology
- information and databases generate lock in as it is difficult to maintain data
quality
- specialized suppliers generate lock-ins as it is not easy to find alternatives
- loyalty programmes creates lock in as change suppliers may cause users to lose
benefits
6. path dependence
- set of decisions one faces for any given circumstances is limited by the decisions
one has made in the past

7. switching cost
- specific investments that users of technology that builds networks effects
encounter to overcome lock-in

8. transaction cost
- (Ronald coase 1937) economic equivalent of friction in physical systems. The
greater the friction, the more impeded the movement, and the higher the
transaction cost

9. Transaction costs is a function of

- Uncertainty – it will be reduced if all party have necessary information to
rationally assess the equity of the exchange
- Complexity - more information and behavioral related problem
- Bounded rationality – decisions made is limited by information available,
cognitive limitations, memory capacity and finite amount of time they have
- Information asymmetry – imbalance of power in transactions that may cause
market failure
- Opportunistic behavior - one party takes advantage of his superior knowledge by
not disclose such information to other party
- Coordination cost – higher cost correlated with volume of transactions

10. Transaction cost and ICT

- ICT can foster the efficiency of transactional process
- ICT factilitates transactional process, by supporting information flow
 - ICT reduces information asymmetry and increase the efficiency of the market
mechanism
- ICT can reduce the effect of opportunistic by increasing the monitoring of agent’s
behavior
- ICT allows information to be communicated in real time
- ICT enables easier matching between buyers and sellers
- ICT reduce transaction cost by decreasing coordination costs within the value
chain

11. Type of transaction cost

- Search cost – cost necessary to set up the minimal social unit for exchange. ICT
can lower search cost if increased amount of information is balanced by an equal
increase in ability to manage, process, and evaluate the information. Greater
information results in lower uncertainty but greater complexity
- Contracting cost – cost related to the negotiation of the terms of the trade and
drawing up the contract which regulates the exchange. ICT lower the costs of
executing the transaction that may include commission costs, costs physically
negotiating the terms of an exchange, costs of formally drawing up contracts
- Control costs and regulation costs – costs related to the implementation of the
contract under conditions of uncertainty, the policing of deviation from the
contracts, and the enforcement of sanction to restore conditions suitable to the
agreed terms. ICT can assist the process of monitoring and evaluation of quality
and providing quality certification

12. Intermediary and intermediation

- Intermediaries are defined as economic agents who lower transaction cost by
facilitate the execution of the economic activities along the value chain. It
reduced transaction costs by helping to gather information, evaluate alternative
options, negotiate and set up
13. ICT and disintermediation
 - ICT implementation enable economic agents to bypass third parties and directly
engage in economic activities with their counterparties. Creation of enhanced
sales network made customers deal directly with service providers

14. Infomediaries
- Search engines are intermediaries which reduce the cost of gaining access to
and using information.
- Search engines like google, yahoo and bing are information broker
- Autobytel.com and bizrate.com offer consumer to gather information about
products & companies before they purchase
- Tripadvisor plays a role of neutral entity providing unbiased information and
reviews about specific companies
- Tmnplc.com is email broker that provide vendors with consumer information
that will help the vendor develop and market products
- Google adwords offer advertising services which are based on audience behavior
in responding to ads

15. Tension between disintermediation and re-intermediation

- While ICT disintermediates intermediaries, it creates condition for the increased
need of new intermediaries
- ICT allows the processing, exchange and use of information in a more efficient
and effective way, and generating positive effects for information
communication, brokerage and integration, reducing transactional uncertainty.
- ICT reduces the need for traditional intermediaries that help the exchange
process by smoothing the information flow needed.

Chapter 5
1. Business models
- Pure play – companies that only operates online (Amazon). Have advantage of
being able to specialize in ebusiness and focus on their online offerings
- Clicks-and-mortar – companies that operates using both channels

2. Revenue models
- Catalogue model – goods or services are sold from an electronic catalogue. It can
be customized, based on past purchased, or self-configuration of products
- Subscription model – consumers pay monthly or annual subscription for
unlimited access
- Advertising model – revenue comes from advertiser, and is popular with services
achieving high numbers of users
- Fee-for-transaction model – used by brokers such as travel agents. Fee is paid by
the vendor but is typically built into the price that buyers pays

3. Recommendations and reviews

- Personal product recommendation, which are generated by software based on
individual consumer’s past purchases and consumer profile. Sense of
personalization appeals consumers as it avoids lots of irrelevant products and
services
- Consumer reviews provided by other customer (tripadvisor) are deemed as more
trustable as it creates an electronic ‘word of mouth’ from fellow consumers.

4. Fake consumer reviews

- Vendor either pay consumers to provide (glowing) false reviews of their products
or services or fake (harmful) reviews of the competition

5. Price comparison sites

 - Price comparison sites compare prices of particular goods being charged by
different shops. It reduces the information asymmetry between retailer and
consumer as no consumer like to feel cheated by paying too much.

6. Flash sales & collective buying

- Retailers offers large discount for very short period (flash sales) and typically
broadcast by email to members who pay a subscription for membership
- Collective buying involves grouping consumers together and buying in bulk to
achieve large discount (eg. Groupon)

7. B2C value proposition – content

- Massive amount of information about products and services can be incorporated
into the website
- The information must be more detailed, up-to-date, accurate, and layered so
consumers can see greater level of details for the item. This may include
photograph that can be enlarged, and rotated so the consumer has various view
- This will then support the buying process

8. B2C value proposition – choice

- Without physical constraint of conventional shops, retailers can offer a much
wider variety of products or services, relying on huge warehouses to manage
inventory, and increase consumer choice.

9. B2C value proposition – cost reduction

- Online retailer can reduce their transaction costs and pass some of this savings
to consumers, thus explains their ability to offer significant discounts online as
there is no cost of maintaining conventional shops.

10. B2C value proposition – customization

 - Retailer can customize their websites to individual consumers based on their
customers profile and previous purchase. as this remove irrelevant options, it
makes buying process more efficient and reduce transaction costs
- It can allow personalized, closely targeted promotions as part of marketing, and
if being done well, it improves relationship and trust between consumer and
retailer. But if it becomes intrusive, personalization can breach consumer’s
privacy and trust

11. B2C value proposition – community

- Consumer can focus on community around products and services, where
consumers can discuss strength, offerings, as well as issue that might arise with
the company
- Companies use social technology such as forums and social networks as a device
to gather information on their customers and their preference. But fake reviews
and other types of internet misbehavior may obliterate any sense of community

12. B2C value proposition – convenience

- Online buying gives consumer the ability to choose, buy, and use products
anytime and anywhere. They save the cost and hassle of travelling to the store
and parking and they may gain from offers of free delivery.
- Convenience can be further improved by well designed, easy to use websites and
it will lead to a significant reduction in transaction costs for consumers.

13. Digital products – music case

- Traditional value chain comprised the artist being signed to record company
who recorded music, manufactured and marketed the disc.
- Record company reaped high profit from selling the disc to the retailer and
customer. However, artist complained at being cheated out of their royalties by
record companies, small retailers felt exploited by terms and conditions
imposed by record companies and consumers felt aggrieved at having to pay
high prices for CDs
 - This market was transformed in 1999 with arrival of Napster file sharing service,
whereas consumer could exchange digital music filed free of change but was
soon taken down due to copyright infringements.
- iTunes was launched by Apple on 2003, which undercut the price of CDs and
offering immediate electronic delivery. By 2008, iTunes was the biggest music
retailer and much of traditional music industry has been decimated with
numerous conventional retailers closing.
- Spotify launched its music streaming in 2008, offering wide selection of music for
a relatively inexpensive subscription.
- In the cloud services like spotify and iTunes offer cost savings, immediacy,
mobility, wide choice of music and storage space
- However, music we ‘own’ remains at a distance that based on continued
subscription, and supplier’s ability to retain the licenses for those particular
songs
- Nowadays, it would be more difficult for artist to be signed by record company as
their funds are declined, and new artist are expected to do their own distribution
and marketing
- Distribution typically through net-labels which are platforms for online
distribution and promotion of music released for free makes artist easier to
enter the market but achieving massive popularity becomes even more difficult

14. Shopping to shoppers

- A leisure, social& family activity
- Exercise and sensory stimulation
- Source of status and authority
- Key part of identity construction
- Opportunity to examine goods
15. Barriers to purchasing online
- Online vendors are more anonymous and increasing uncertainty. Uncertainty
increases transaction costs
- Consumers may be uncertain about products/ service
- Reviews by other consumers, and online tracking of orders are available and
often possible to return products, but this adds to the hassle of the purchase
- Distribution of physical products can be problematic. Waiting all day for a
delivery that doesn’t arrive is a turn-off
- Related question of trust has been discussed but points out to whether the
consumer perceives the vendor to be competent, reliable and honest
- Mechanism, such as authentication, brand reputation, membership of trade
organization can increase level of trust but anonymous website may instill less
trust
- Poorly designed websites can increase transaction costs by lengthening
purchasing process, or failing to notify whether a transaction has taken place
- Intrusion of privacy through profiling, and sharing of personal data

16. Advantage of conventional shops

- Instant gratification, compared to waiting for something to be delivered
- Failed delivery may be due to either vendor or consumer may add hassles and
transaction costs for both parties will not occur in conventional shops
- Conventional shops are seen as more efficient, convenient and pleasant
- If the location is strategic, customer acquisition can be cheaper as it can draw
from passing shoppers
- Well trained shop assistants can be very skilled at persuading consumer to
spend
- Conventional shops have inherent advantage for selling luxury items, high touch
goods and unfamiliar products
- Conventional shops may receive better terms as they can act as a showroom for
goods
17. Consumer buying behavior
- Consumer may be seeking hedonic value of adventure, social interaction,
gratification, new ideas, etc and this may partly account for the popularity of
traditional shopping markets

18. Omni-channel retailing

- The synergy for both online and conventional shopping of closer integration of
the channels involve optimizing the common shared infrastructure
- Such strategy is aimed at producing cost savings, differentiated customer
segments and improved trust
- this has been widely adopted with conventional shops building up an online
operation as well as some pure-play online retailers opening conventional stores
as a showroom for their products. Consumer can inspect the products in the
store and order online and vice versa
- many retailers offer consumers the option to locate and reserve item in a store
and collect them within 48 hours. Variant of this click and collect allows
consumers to collect item from most convenient local shop
- companies such as apple and Disney imagined conventional shops as attractive
entertainment hub, providing interactive display, product inspection, after-sales
service and leisure in their own right

19. channel conflict and cannibalization

- biggest risk of multi-channel operation occurs when new online sales channel
does not attract new business but cannibalizes an existing channel. This is costly
as maintain 2 channels are more expensive than operating one.

20. The sharing economy

- E-business technology has facilitated the sharing economy of sharing, swapping,
renting, bartering, renting of product instead of ownership.
- It offers benefits of access to products without the cost and hassle of
investment, storage and maintenance. It is environment friendly as well
 - Such business model is being implemented by Uber, Airbnb which have grown
exponentially as they offer cheaper alternative.
- Their growth has been fueled by network and consumer confidence has grown
based on ratings and reviews

21. B2C problems

- Unproven business model – any business has to have a reliable revenue stream
and eventually make profits
- Discount environment – consumers expects discounts and bargains from B2C,
large sales volumes and strict cost control are needed
- Cost-efficiency problems – B2C is not necessarily efficient and cost effective
compared to traditional retail. Consumer will expect attractive websites,
superior support, and distribution networks and these are not cheap
- There is not always a global market – different countries have different cultures,
preferences, and regulations, such that there will be no best seller product
applicable anywhere
- Security and privacy overheads – B2C retailers have to maintain high levels of
website security to prevent customer details being accessed legally

22. B2C key success factors

- Innovation – in order to encourage customers to switch away from conventional
channels, B2C operations must offer something extra and innovative
- Understanding Shoppers – B2C must build good understanding of customer
segmentation and their needs, expectations and purchase behavior
- Understanding the product and the industry – B2C retailers must have good
understanding of product and services they are offering
- Understanding the technology – B2C retailers must be expert in all aspects of
hardware and software, especially in understanding the limitations and
vulnerability of particular components
 Chapter 5

1. Marketing
- Providing the right product, at the right price, in the right place at the right time
to the right person using the right communication for the right return

2. Customer segmentation
- Identification of different groups within target market to develop different
product offerings and communications
- Segmentation is made possible through market research, whereby companies
collect data on customers through surveys, focus group etc

3. Targeting and segmentation

- Psychographic – attitudes to risk and value when buying
- Value – assessment of current or historical value and future value
- Life cycle stage – position in life cycle
- Behavior – search term entered into search engine, responsiveness to offers,
purchase history
- Relationship with company – new contacts, existing customers, lapsed customers
- Demographic segmentation – B2C (age, sex, geographical location), B2B
(company size, industry served, individual members of decision-making unit)

4. Marketing mix
- Product, price, placement, promotion
5. Customer lifecycle
- Customer selection - types of customers to target which ties with market
segmentation
- Customer acquisition – forming relationship with new customers involves
appropriate marketing communication
- Customer conversion – value proposition development. Create appropriate site,
content, and offerings
- Customer retention and extension – strategies business employs to keep
customers from discontinuing the use of a certain product or service. Objective is
to intensify the business relationship by providing additional offerings

6. Marketing application of CRM

- Automating the sales force
- Managing customer service effort
- Managing sales processes
- Managing marketing campaigns
- Analysis

7. CRM when being done well and poorly

- (+) gather customer data responsively, identify most valuable customers, and
increase customer loyalty through customization
- (-) implementing CRM before there is a customer strategy in place, rolling CRM
before changing the organization to match, assuming more CRM technology is
better, and stalking customers

8. Strategic agility
- Concept associated with knowledge management theory to develop a sound
process for reviewing marketplace opportunities and threats and selecting the
appropriate
- The capability to innovate and gain competitive advantage by monitoring
changes within organization marketplace and to efficiently evaluate alternative
strategies to implement
9. Fog of the future
- Creating long-term vision are flawed as knowledge of the future is always
imperfect, and marketplace conditions are changing continuously
- Having a clear long-term vision, isn’t practical in most industries, thus company
should keep vision fuzzy but current priorities clear

10. Click ecosystem

- Describe customer behavior of online visitors between search engines, media
sites, etc to organization and its behavior. Prospects and customers will seek
search engines to find products, services, brands, and entertainment
- Search engines acts as distribution system which connect searchers to different
intermediary sites, so the flow of visits between sites can be understood by
marketer

11. Online market ecosystem

- Describe customer behaviour or flow of online visitors between search engines,
media sites, etc
- Facebook has developed Facebook API to enable exchange of data between
websites and application. This will allow site owners to incorporate information
about consumer facebook interaction into their reach
- Google has developed Android ecosystem for search marketing and mobile

12. 6 types of digital media channels

- Search engine marketing – placing message on a search engine to encourage
click through to a website when user type a keyword. Eg. SEO (use of keywords
helps users finds what they want and understanding key phrases enables
marketers to target users), and google ads (allows advertisers to bid to appear on
the right-hand side of the screen of information retrieved)
- Online PR – maximizing favorable mentions and interactions with company’s
brand products or websites using third-party sites such as social networks
- Online partnership – creating and managing long-term arrangements to promote
online services on third-party websites
 - Interactive advertising – use of online ad such as banner and rich media ads to
achieve brand awareness
- Opt-in email marketing – renting email lists or placing ads in third party e-
newsletter or use of in-house list for customer activation and retention
- Social media marketing – encouraging customer communications on a company
own site or social presence

13. Multichannel and omnichannel marketing

- Customer communications and product distribution are supported by
combination of digital and traditional channels.
- Multichannel marketing defines how marketing channel should integrate and
support each other in their proposition development and communication
- Omnichannel – importance of social media and mobile-based interactions in
informing purchase

14. Online revenue contribution object

- Product or service they offer
- Market sector they are in
- Digital channel they want to exploit

15. Main difference between online and offline marketing - Interactivity

- instead of company pushing a message to a customer, customers can now
interact with companies online by seeking out information themselves

16. Main difference between online and offline marketing - Intelligence

- internet facilitates the new way of collecting data on customer preferences and
perceptions in much greater detail. Customer profiling allows seller to focus
their marketing effort and is widely seen as being very effective in increasing
sales
17. Main difference between online and offline marketing – individualization
- Personalization involves the individualization of content and can use different
variables to tailor content, including customers’ preferences, time or date,
upcoming events, but it is costly, and user needs to log-in
- Mass customization focuses on tailoring marketing content at the group level.
Ie. By recommending similar products according to what customers in the same
marketing

18. Main difference between online and offline marketing – Integration

- Advertising involves attracting and sustaining customer’s attention in order to
persuade them to purchase a product or service
- Branding is the process of creating and evolving successful brands
- Affiliate marketing is a commission-based arrangement where referring sites
receive a commission on sales or leads by merchants. Advertiser does not pay
until product has been purchased or a lead generated (zero risk advertising)
- Viral marketing – preexisting social network to increase brand awareness or
sales through self-replicating viral processes. it involves the creative materials
(the creative message or offer and how is spread), seeding (identifying websites,
blogs, or people to send email), and tracking (monitor effect to assess the return
from the cost of developing the viral agent and seeding)
- Online advertising – allows advertiser to bid to appear on the screens of
information retrieved and based on pay per click
- Search engine – algorithms to decide which web pages are relevant to certain
search terms. Marketers will try to improve the position of a company in search
engine result listings
- Multi-channel intergration – with different ways of marketing in online and
offline channels, and targeting newer and more specific customer segments,
comes what has been called the proliferation challenge
- dynamic pricing – dynamic adjustment of prices depending on the value that
customer assign to the good.
19. Main difference between online and offline marketing – industry restructuring
- Disintermediation and re-intermediation

20. Main difference between online and offline marketing – independence of location
- Electronic media introduce the possibility of increasing the reach of company
communications to the global market, and opens up opportunities to sell to
international market
 Chapter 7
1. B2B
- B2B e-commerce involves the sale of goods and services between businesses. It
enables an enterprise to form electronic relationship with their distributors,
suppliers and other partners

2. B2B strategies and facilitations

- B2B strategies is either application of IT to preexisting relationship or creation of
new marketplace using IT support system
- B2B helps to reduce search cost, transaction costs, and act as virtual
marketplaces where suppliers are connected to buyers

3. B2B marketplace orientations

- Supplier oriented market – supplier of the goods invests in ICT to create new
business opportunities. Associated with large powerful suppliers like Dell
- Buyer oriented market – Buyers invests in ICT to create a procurement platform
to make supplier provide the demand easier
- Intermediary oriented market – third party invests in ICT to create a neutral
marketplace where buyer and seller can trade

4. Biased v neutral marketplace

- Bias e-marketplace – the electronic marketplace favors the buyer or seller
- Neutral e-marketplace – the electronic marketplace does not favor the buyer or
seller
5. Aggregation v matching
Aggregation is best when
Bringing together a large number of buyers and
sellers under one roof to reduce transaction costs
by creating possibility of one-stop shopping
The cost of processing of an order is high relative
to cost of item
Buyer and suppliers are highly fragmented
Unpredictable demand
Buyer are not sophisticated enough to understand
dynamic pricing mechanism
Most purchasing is done on basis of pre negotiated
contracts
Meta catalogue can be created
Matching is best when
Bringing together buyer and seller to negotiate
price on a dynamic and real time basis
Products are commodities or near-commodities
Massive trading volumes
Products can be traded sight unseen
Purchasing is done on a spot
Logistics and fulfilment can be conducted by third
parties
Demand and prices are volatile

6. E-procurement
- Electronic integration and management of all procurement activities including
purchase request, authorization, ordering, delivery and payment between a
purchaser and supplier

7. Type of e-procurement
- Systematic sourcing – negotiated contracts with regular suppliers
- Spot sourcing – fulfilment of an immediate need, typically a commoditized item

8. Benefits of e-procurement
- Shortening or reduction in purchasing cycle time and cost
- Improved control over budget
- Reduction in administrative errors
- Enabling improvement in buyer’s productivity
- Driving down price through standardization of products
- Better management of information
- Greater integration of payment systems

9. Potential options for improving purchasing processes

- Improvement of end-to-end trading cycles by reducing cycle time, improved
workflow of internal procurement process, or online bidding in e-auctions
- Use more efficient and cheaper connectivity
 - Connectivity to external sources
- Sourcing, by identifying new sources
- Content management, eg. Private catalogues, public catalogues, internal
inventory management, etc
- Connectivity to internal system and source of information
- Payment system
- Multimedia and improvement in localized supply chain mechanism
10. Problems and risks of e-procurement
- Security concerns regarding the channel of communication, payment, and
identity
- Organizational risks, such as not making strong enough case to promote e-
procurement strategies in the company
- Technological risks, lack of integration among B2B and internal systems can
create pools of information that are not used
- Business risks, such as loss of preferential terms from traditional supplier which
through B2B make those same terms available to competitors

11. Procurement facilities

- Accounts payable – ability to archive payment history and check past payments,
what is due, due dates, and payment history
- Cooperative raw material acquisition – facility that pools resources and
information on best priced raw materials
- Product catalogue compilation tool – collect information on all a supplier’s
products to create a catalogue
- Request for quote application – ability to create online request for quote
- Supplier profile – gives customers a complete and useful profile of information
on the supplier and help customer to make decisions about which supplier to
work with

12. Type of application of e-procurement

- E-sourcing – finding new potential suppliers
- E-tendering – screening suppliers
 - E-informing – qualification of suppliers for suitability
- E-reverse auction – buy goods at lowest price
- E-MRO and web based ERP software – manage process of creating, and
approving purchasing requisitions, placing order and receiving the goods

13. Supply chain

- Flow of information, materials, goods, and services from raw material suppliers
through manufacturers and warehouses to final consumer

14. Supply chain management (SCM)

- Optimization of materials and information flows along networks of suppliers and
customers and closely related to logistics and operations management

15. Problems of traditional supply chain

- Slow response time
- Excessive inventories being held just in case and costly
- Poor coordination and customer service
- Cannot support a wide range of products
- Uncertainty in forecasting
- Encounter shrinkage and waste

16. Key processes in SCM

- Production planning
- Inventory management
- Distribution management
- Processing customer orders
- Purchasing and procurement

17. Differentiation of supply chains by lee

- Efficient supply chains -supply and demand uncertainty are low
- Risk-hedging supply chains – supply uncertainty is the main problem, firms need
to maintain shared pool of stocks
 - Responsive supply chains – demand uncertainty is the main problem; firm needs
to be flexible in responding to sudden changes in demand
- Agile supply chains – both supply and demand are uncertain

18. Push and pull supply chain model

- Push models Involve manufacturers developing products, which they then try to
market
- Pull models focus on what customer need, incorporating their requirements into
product development and distribution

19. Vertical integration v virtual integration

- Vertical integration is the extent to which supply chain activities are undertaken
and controlled within the organization
- Virtual integration is the majority of supply chain activities are undertaken and
controlled outside the organization by third parties

20. Value chains and value networks

- Value chain describe what organization can do to add value to goods or services.
value adding activities can be taken internally, within organization’s boundary
or externally, where activities are performed by supply chain partners. Value
stream focuses on increasing the efficiency of tasks involved in adding value,
during the development and launch of a new product
- Value networks refers to the relationship between a company and its external
partners for the execution of the company’s core activities and support
processes. Value network emphasizes on the electronic interconnectedness
between partners, enabling real-time information exchange.

21. Vendor managed inventory

- Suppliers manages inventories / orders, not retailers
 - Benefit include reduced inventory and faster replenishment and improved
collaboration in areas like joint promotions
- Potential drawbacks include loss of autonomy and increase dependence on the
supplier

22. Third party logistics

- Outsourcing of part of all of the logistics activities by a company that used to
perform such activities in-house. This includes, transportation, warehouse, order
entry, customs clearance, reverse logistics, product labelling, fleet management,
transportation management

23. Advantage of 3PL

- Outsourcing to external expert increase the satisfaction of customers
- It can provide access to international distribution networks
- Enables risk sharing with external agent
- Provide access to state of art technology
- Allow inventory reduction
- More flexibility to cope with changing demand

24. Disadvantage of 3PL

- Loss inhouse expertise
- Logistics can be a core competency that is better not outsourced
- Overdependence on external expertise can lead to loss of control
- It can cause a breakdown of responsiveness to customer needs
- Inability to provide customized products through a breakdown of
communication channels between client company and customers
- Contracts are prone to be abused
- Cost reduction promises are often not met
- Inability to form sustainable and trusting relationship between 3PL, provider,
and clients
25. ICT can be used to increase the efficiency of information flow by delivering more
information for better management of key supply chain processes by
- Order and procurement requirements from sales, consumptions and demand
forecast for future inventory requirements
- Data relating to current level of inventory, calculation of stocks
- Distribution information for shipments such as location, timing, quantities,
tracking of shipment status and product receipts
- Production planning relating to demand forecasts and computation of based on
total procurement quantity from distributor

26. EDI
- Electronic interchange of formatted data between computer applications using
agreed message standards
- Comprises of software, message standards, reliable 3rd party value added
networks, organizations
- Standardizations is important as senders and receivers of message had to be
using same formats and product codes
- Benefit of EDI is improved communication speed, uniformity, accuracy, cost
savings
- EDI facilitated global supply chain management, reduced uncertainty and
improved customer service
- Improved trading relationship, acting as a vehicle for collaboration between
trading partner

27. ERP
- Serve to integrate the various common function (accounting, production,
human resources) and data of an organization
- ERP allows an organization to manage order processing process, inventory
management, distribution management, procurement management,
production planning and demand forecasting processes

28. RFID
 - Automatic identification without direct human intervention allows significantly
larger amount of data to be stored on the products (serial number, colour, size,
price) leading to better intelligence along the supply chain
- Tags increase inventory visibility for partners and improve response time to
customer demands and market trends
- Permits asset tracking, reduce shrinkage, allows partner to locate and remove
faulty goods quickly
- RFID can facilitate item-level tracking, tags are stored in each individual product
- Increase intelligence along supply chain in terms of theft detection, stock
monitoring, and product customization

29. Recent pressure and uncertainty to supply chain

- Higher concern regarding environmental sustainability and increased demand
in transparency in sourcing (i.e. Particular fish stocks are threatened with
overfishing and environmentally conscious customer want to know where the
fish is being caught from)
- There is demand for Fairtrade goods where producers (developing countries) are
guaranteed fair prices for their produce
- Concern about environmental damage caused to the atmosphere by flying
planeloads of fresh flowers from Africa to Europe for valentine’s day
- Social and political concerns where consumer will avoid cheap clothing
manufactured in low-wage sweatshops of Bangladesh or occupied territories of
Palestine
 Chapter 8

1. Pricing strategies
- Different pricing strategies to maximize companies’ revenues in short and long
term, therefore companies have to position themselves in competitive
environment to respond and anticipate competitors move

2. Fixed pricing
- Does not make any discrimination against buyers, volumes of products
purchased, and time of the purchases. Every item is sold at the same price

3. Penetration pricing
 - Companies exploit the potential of prices below market average to conquer a
new market. This helps customers to bear the cost of switching from existing
supplier to a new one
- Once new entrant has gained a large share, it will raise prices to avoid long term
losses (short term financial losses). This strategy needs to guarantee long term
returns and the price should be at least higher than average and marginal costs
- This is possible if products have a long lifecycle that guarantees large volumes
overtime, and companies will recover initial loss over the long terms.
- Penetration pricing can be used by companies that want to defend their position
from potential entrants

4. Loss leader
- Exploits the attractiveness of low-cost products to increase the selling of more
lucrative products
- Specific products are sold below cost to encourage the sales of other – profitable
products. Strategy works when the low-cost offers drive the consumption of
more profitable products
- This strategy is implemented by supermarkets whereas low price products
attract customers that also shop for high price products. Profits generated by
high price products cover the losses generated by products sold below cost
- Usually implemented by online websites that want to draw traffic by exceptional
offer to generate revenues from the sales of products that are not under offer.
5. Price leadership
- A party can set prices so it is very difficult for rivals to compete on price, and is
being set so that if competitors fix a price that is too high they will lose market
share, but if they set price too low, the price leader would match the price and
force smaller rival out of market
- Leader then will fix the price that every other business participating in the
market must follow. Ie. Amazon, whereas any competitors that want to compete
needs to offer products and delivery at the same level as amazon.

6. Price skimming
- Price strategy for company that have exclusive or protected access to a given set
of resources and firm will earn extra profit by setting price far above average
market and extract maximum profit.
- This follows a specific condition of protection granted by patents of copyright
which makes offered products unique.
- as there is no substitute, customers must pay the extra price. And this only
works in short term as in long term, there will always be competitors to offer
substitute products and following a penetration pricing to cannibalize the
product

7. premium or prestige price

- strategy used for goods whose consumption is driven by status or quality driven
expectation. The high price is set to attract quality or status driven consumers
that target the offered goods (Veblen goods)

8. Price lining
- Strategy used when demand is elastic at different price point and inelastic at
another point. There are different clusters of aggregate demands at different
price points.
- Companies use different versions of the same products at different prices. By
offering different configuration of the products at substantially different prices,
companies can exploit customer’s different expectations and willingness to pay
9. odd-even pricing
- common price strategy based on psychological price perception, whereas
number “1” Is more appealing to buyers and $9.99 seemed to be far cheaper
than $10

10. dynamic pricing

- the ability to fully exploit customers’ differences and hence generate higher
profit for those companies that can exploit their strategies
- with increase in uncertainty and volatility of the market, it is more valuable to
exploit those opportunities offered by dynamic pricing
- dynamic pricing itself leads to increase in price uncertainty and makes it more
important to be able to respond to market changes
- in digital market dynamic pricing is more common and fixed pricing is deemed
as very ineffective and inefficient

11. segmented pricing

- consists of making price variation based on the number of units sold. Different
units of output are offered at different prices

12. first degree differentiation

- price differ from person to person
- unit of good is sold to individual who values it most highly
- producer needs specific information to determine the maximum willingness to
pay for each customer
- information and communication technology are valuable support to implement
this strategy
- first degree differentiation is able to extract the entire consumer surplus from
the market and generate highest revenues for seller (ie. Airlines, auctions, Ebay)

13. Second degree price differentiation

 - Called as non-linear pricing, means producer sells different unit of output for
different prices but to individual who buys the same number of products pays
the same amount of money
- Prices depends number of products purchased
- Second degree doesn’t require the firm to know individual customer’s
preferences for its successful implementation as it creates price discrimination
on volumes that are purchased.

14. Third degree differentiation (segmented pricing)

- Offering different prices to different groups, but product sold to a given person
sells for the same price, and differentiation is achieved by exploiting differences
in customer valuations
- Customer clustering can be made on the basis of their geographic location or on
another specific characteristic (ie. Different price to businesses, private
customer, students). Microsoft office is one of the company that implements
third degree differentiation price

15. Negotiations: auctions

- Auctions offer dynamic price solution that are favourable to the buyers and
achieving perfect discrimination in pricing determination

16. Bidding process

- Bidding process shapes the market in favor of one of the party involved in the
exchange

17. Forward auction (English auctions)

- Start at minimum price, set a minimum increment and bidders keep increasing
their bid until one is left or auction reached timeout.
- Very effective to fulfil first degree price discrimination

18. Reverse auction (Dutch auction)

 - Start at a high price, then reduced at fixed time intervals until bidder buys. This
process is much faster than English auction but leads to first degree price
discrimination (ie. Pricefalls)

19. ICT and dynamic prices

- ICT can help to better understand market dynamics and optimize price settings.
- ICT can increase the amount and speed at which information is collected and
processed and leads to increase the knowledge of the market, customer
preference and better pursue of dynamic pricing strategies
- ICT reduce the cost of scanning and monitoring environment and reduce the
cost of using dynamic pricing

20. Inventory based models

- ICT help companies to fix dynamic price that reflect the level of inventory.
When inventory is high, price is low and vice versa.
- Companies can optimize the use of their procurement strategies and
accommodate the demand.
- if inventory is low, high prices reduce the demand and vice versa
- mostly used by large supermarkets to manage their stock and increase revenues

21. data driven models

- ICT exploits data available about customer preferences and buying patterns to
fix optimal dynamic prices using data mining and big data analytics. The data
will be processed to know company cost structure to optimize price
determination
- Used mostly by online businesses to set prices based on their knowledge of
customer preferences and needs.

22. Machine learning models

- ICT can automate the price setting mechanism.
 - Sellers can learn buying preference and patterns and using algorithms to
dynamically price their offerings (ie. Financial industry)

23. Simulation model

- Use of prototype system or any other way of mimicking the dynamics of the
system to help decision makers to decide how to fix price
- Models are used to set prices based on the expectations of customer’s
responses and Often used to change and adapt.
 Chapter 9
1. Organizational forms
- Large organization suffer from structural problems that caused a slow-moving
for change and lack of innovation
- Complex internal organization with numerous departments and hierarchies is
costly to run and breed low employee morale and have difficulty in maintaining
effective relationship with both trading partners and customers.

2. Socio-technical systems theory

- Leavitt’s Diamond (Leavitt, 1964), provides a useful model of the pressures of
change which consist of people, processes, technology and structure and
managers must act to keep these components in equilibrium with each other and
environment to interact with fast-changing business, social, technology, and
legal environment

3. Function of organizational form

- Create framework within which the activities and processes can be planned,
organized, directed, and controlled
- Provide a basis for the division of work and responsibility
- provide formal reporting relationship, level of authority and spans of control
- serve as social structure as friendship develop within and between work groups
- in many countries where people spend most of their time working, their
workspace becomes their social arena
4. traditional organizational forms
- favored form was bureaucratic hierarchy which comprised a complex, multi-
structure where jobs were tightly compartmentalized and based on job function
- for public sector, it was well ordered as all manager and employee know what
their responsibilities and duties and suit placid environment
- for large multinational companies which these structures would be replicated all
around the world with extra layer of the same structure, makes it very rigid and
slow to operate with high overhead costs as even minor decisions has to be
passed by a few levels of hierarchy. collaboration within branches was inefficient
and costly
- such structure is not suited in dynamic environment as they cannot cope with
changes
- a variant of this form is strategic business unit where hierarchy is broken into
separate structure of product line, or matrix organization where everyone
reported to at least 2 managers

5. problems of bureaucratic hierarchies

- slow, rigid, costly to operate and often develop into silos
- poor horizontal communication and collaboration both internally and externally
- unable to deal with increased information intensity and networks of relationship

6. pressures for change – nature and content of work

- transformational jobs – job in extractive industries (mining, agriculture) and
manufacturing
- transactional jobs – low-level clerical jobs that are easily automatable
- tacit jobs – management, consulting, and knowledge work, usually involving
complex interaction that require high degree of judgement
7. pressure for change – changes in organization
- organization man has given way to networked person
- command and control have been replaced by emphasis on interaction
- long familiar vertical hierarchies are regrouped into amorphous teams
- salary man who work for 8 hours a day has been replaced by mobile connected
knowledge worker who rely on IT
- growth in professional service firms such as consultants, lawyers and
accountants
- large companies pursuing joint ventures with small businesses, entrepreneur,
and universities or engaging in open source development
- these developments create huge demand for information, communication, and
connectivity

8. pressure for change – social changes

- younger people from generation Y are different to baby boomers as they have
different values and expectations in terms of responsibility and involvement in
work
- younger generation tend to be less loyal to companies, detached from
institutions, preferring to switch jobs frequently, do not easily fit into the
culture of bureaucratic hierarchies, familiar with IT and these changes have been
facilitated by technological developments in ICTs

9. pressure for change – outsourcing

- outsourcing facilitated with lower transaction costs achieved from
implementation of ICTs. It allows organization to focus on their core
competences and outsource activities where third parties provide greater
competence.
- It offers benefit for cost-efficiency, the provision of specific expertise, and
synergy between client and provider
10. Risk of outsourcing
- Organization may face a loss of control, in addition to reduction in internal
capability which leads to client may lose the possibility of bringing the
processes back-in-house
- Excessive transaction cost would cut the proposed cost savings and client
organizations may lack the new coordination capabilities needed to make
outsourcing arrangements work.

11. New organizational forms (NOFS)

- Usually based on smaller, flatter, network structure, ambiguous with fuzzy
boundaries
- Some people may not be full-time members and they join and leave as
requirement changes
- Adhocracies built on bricolage (diversified people), include dynamic cross-
functional teams of experts to solve a problem, whereas they may appoint
external consultant to internal team
- this blurring boundary makes individual work for a number of firms
- organization construct structures that are between markets and hierarchies to
get the best of both world
- outsourcing, alliances, franchising and joint ventures are being facilitated by
technology to improve coordination
- strategies of offshoring production, research and development, involve shifting
the activity to another part of the world on cheaper labor costs relying on IT for
coordination.
- Digital infrastructure have become important as a market structure for
organizing whereas amazon, uber, apple IOS provide standard API process that
allow small organization to connect easily to electronic market
12. New organizational forms components
- Networks – knowledge workers are able to create and leverage information to
increase competitive advantage through collaboration of small and agile self-
directed team
- Platform – workers are organized around goals, campaigns, and projects in open
space
- Shamrocks – core of essential executives and workers are supported by external
contractor. First part represent core staff of the organization and they are highly
trained professionals who form the senior management. Second part consists of
contractual staff and they work within broad guideline set by organization but
have high degree of flexibility and power. Last parts describe the consultancy
- Adhocracies – highly organic structure with little formalization of behavior. job
specialization based on formal training. Low standardization of procedures, and
roles are not clearly defined

13. Virtual organization

- Highly dynamic network organization
- Requirements are split from the satisfiers and linked through ICT switch. ICT
enables new form of organizing and create & coordinate virtual organisation
- No common workplace, security of employment, self-sufficient production line.
Project is performed regardless of physical location
- Member are usually decentralized, market-based e-lancer, and will remain as
they are providing useful function and leave at the end of the project

14. Shared principles of membership in NOFS

- Goals, priorities, rewards
- Trust, responsibility and accountability
- Technology and culture
- Work, expertise, core competence, decision making
15. Virtual teams and offshoring
- Rise of globalization has offered companies attractive opportunities for shifting
work overseas, where labor costs are much lower. (ie. Software development in
india)
- Outsourcing the activity to a separate company and set up facilities in places like
India and taken the activity concerned off-shore

16. Problems of virtual teams

- Differing cultures – involve differing working style, approaches to learning,
authority, deadlines
- Collaboration and coordination – relatively straightforward to share explicit
knowledge (through documents), tacit knowledge (not written down) is more
difficult at a distance
- Building trust between members of a team thousands of miles apart, as there is
lack of shared physical presence and socialization
- Minor misunderstanding or cultural niceties can build up to major proportions
when the only communication is asnychoronous across time and space.
- Excessive dependence upon technological infrastructure. If documents being
exchanged are large, bandwidth become problematic

17. New organizational forms, supported by ICTs

- Provide coordination with locations around the world and making offshoring an
increasing relevant option
- New, small and dynamic companies emphasize on technological innovation
- As they are recognize as a source of economic growth, they also suffer from high
failure rate and secure jobs are no longer safe.

18. Growth of start-ups is facilitated by

- Cheap building blocks in terms of hardware, software, digital platforms
- Finance and lean development methodologies
- Incubators and accelerators to grow the company
19. Open source development, crowdsourcing, sharing economy
- The creator of open source software must make the source code visible and
available so that other interested developers (and others) can use, read and
modify the code. Other developer must provide source code and other freedoms
of visibility to anyone interested in the modified software.
- The more people that can see, read and modify the code the better the
software will be, which in turn will benefit all users (for more details see
Raymond, 2001). Thus, there is an importance to encourage many people to
contribute to the code base.
- The tricky element of open source production is how to manage a group of
people that rarely meet face-to-face, so that they all work on the same software
in a productive and gainful manner over time (see Ljungberg, 2000).
- communication in open source production is carried out via some form of
technology, such as discussion forums, email, etc.

20. open source community

- communicate via technology with mutual goal of creating software.
- Have a flatter, decentralised structure and leadership models ranging from
highly democratic to dictatorship
- Control community member with version control software
- Strong social element to control which is applied through ‘flaming’ of
developers, ridicule and tough peer review of bug fixes
- Dynamic and changing as developers enter and leave the community freely
- Independent of physical location of developer. Anyone with skills and bug fixes
can contribute
- A culture and work ethic built on reputation and trust relationship
21. Problems associated with open source
- Building trust between developers is a long-term phenomenon and is tricky
- Keeping the community together through technology is not straightforward,
and can create alienation in developers who are not part of the core team
- the peripheral developers have to work long and hard to be noticed and fit into
the community
- promotion is not straightforward in open source production. It is based on
merit, trust and long-term expertise building
- role of technology in open source production and developer promotion
differentiate it from traditional organization.
- Communities are dynamic that the induction process of open source production
needs to match this approach
- Crucial concern of open source community is to gain a critical mass of developer.
- While traditional organization employees are paid as salary, same thing does not
apply in open source production as developers work for the love of technology,
and a desire to fix a problem.

22. Open source and companies

- There is increase interest from commercial companies in open source software
as there is promise of cutting costs with low license costs and potential for ideas
from a large population of developers
- Traditional companies working with open source community creates a form
where it is difficult to recognize where the company ends, and community starts
- Company employees are instructed to help the community develop software
and, in many cases, open source community members are given full-time
position in the company
- Collaboration is key for company and community to harness greater innovation

23. Beyond software development

- Concept of open production has expanded to open innovation such that
companies actively seek ideas and partnership from universities, entrepreneurs,
etc to develop new products and services
 - This makes open source more relevant as the ideas of sharing, governance
patterns, control and communication are being translated to areas other than
software production

24. Crowdsourcing
- Organization seek to public to leverage wisdom of the crowd in their search for
ideas, information, and content (eg. Wikipedia)
- Crowdvoting sometimes employed by firms as input to their product
development processes
- Crowdfunding used by organization to generate investment funding for new
ventures
- Main idea is to take advantage of e-business technology to harness the ideas and
enthusiasm of the crowd to produce relevant and popular products and services
- Participation, democracy and innovation expands the boundaries to produce
new organizational form where ideally everyone benefits.

25. Internal use of crowdsourcing by companies

- Crowdsourcing need not to be directed externally at the public, in example, IBM
uses crowdsourcing software in its innovation jams where it approaches
thousands of employees across the globe for ideas and opinions
- Crowdsourcing provides a mechanism to harness the valuable input of each
individual employees

26. Problems with crowdsourcing

- Seen as exploitation of private individuals who receive insufficient reward for
their valuable contribution
- Inherent unreliability of this output
 - Individual may contribute while the toic is fashionable, but soon shift away as
fashion change
- Enthusiast may not be representative of the market as a whole and organisations
risk tailoring their services to the eccentric and quirky

27. Tensions associated with crowdsourcing

- Tension between competition and collaboration. Participants may be rewarded
for their individual effort, but serious innovation requires collaboration between
different people and groups
- Evolution of ideas takes time as they rarely emerge fully formed and crowd
members normally spend little time on their efforts
- Innovation often involves a process of creative abrasion, individuals argue and
discuss the various aspects of ideas. This works better when people know each
other well but crowd normally consists of strangers

28. Sharing economy (the gig economy)

- A phenomenon of present-day societies, facilitated by e-business technology
- Consumer can take advantage of cheap and other deliveries, accommodation,
and handymen
- Suppliers are not employees of the portal but are treated as self-employed
contractors
- This offers people the flexibility to work when, where and how often they want
to
- Usually the condition of employment excludes holidays, sick pay, pensions, and
other benefits
- If contractors falls sick, he or she has to continue working, provide a substitute,
or face a financial penalty
- Competition between rival portals has seen rates of pay fall as well
29. Problems associated with sharing economy
- As self-interest and economic power triumph over the collective good as
producers are not fairly rewarded and sometimes resources are wrecked.
- These services often raise problems for local regulators of such services
 - For example, hotel regulation seems irrelevant as people argue that my Airbnb
sofa does not constitute a hotel, but fire safety remains an important concern
- Airbnb short term rental add further pressure to already stressed housing market
- Risks of unlicensed drivers have not been solved as well

30. Teleworking and mobile working

- Prime example of the use of ICTs to change the jobs of millions of workers
- It increased the flexibility and accessibility of staff
- This involves working at home, either full time or part time and is an idea that
has been around for many years, with early pilot projects dating as far back as
1976
- The principle is to use networking IT to send work and information to employees

31. Advantages of teleworking

- Less time and energy wasted in commuting
- Cost savings by avoiding having to provide each employee with office space
- Increased individual productivity and autonomy
- Less office politics
- Allows parents of young children or carers of the elderly to continue working

32. Mobile working

- Widespread introduction of wireless networks, 3G/4G mobile phones and
laptops has dramatically increased the number of potential workplaces.
- Consultants and salespeople have become nomads, working in client sites,
hotels, and airports
- Companies have introduced hot-desking, where individual offices have been
scrapped and staff reserve office in advance if they intend to come to the office
- Individual offices have been replaced with additional meeting rooms or coffee
bars

33. Benefits of mobile working

 - Ubiquity – the opportunity to work anytime, anywhere; which can be seen as
flexible freedom
- Personalization (identification, including location)
- Convenience
- Advantage of being able to work more closely with clients and trading partners

34. Risks associated with mobile working

- Negative impact on the work/life balance through encouraging working excessive
hours, as well as increasing the stress, alienation and depersonalization of jobs.
- Evenings and weekends can be constantly disrupted by messages and emails
from the office demanding immediate attention in a climate where employees
are expected to be always available
- There is risk of finding oneself working all the time, everywhere and most people
adjust it by switching off their devices when they do not want to be disturbed
- Managers often feel that it is more difficult to control their staff and this lack of
control will leads to a danger that manager try to exert too much or too little
control over their staff
- Company may insist on employees logging in every hour, resulting in a very
constrained and disempowered environment, while too little control, employees
may feel neglected and their effort underappreciated
- Employee’s lack of traditional organizational visibility may dent their career and
promotion prospect
- Network is down and difficulty of real-time communication between different
timezone would be another issue, as employees are often expected to be
available for conference at odd times of the day and night
- Motivational problem where staff are accustomed to working with their
colleague in the same room, and people may feel alienated
- Loss of traditional cultural divide between home and work
35. Use of social technologies within the organization
- Social technologies (web 2.0) include social networks, blogs and wikis, podcasts

36. Internal and external use of social technology

 - Apart for being used to improve relationship with customers and trading
partners, social technologies can be invaluable for internal coordination
- Through efficient and effective provision of information, communication, and
interaction, it provides a flatter, and flexible form of organization, improved
internal and external collaboration, and new ways of working and innovating

37. Benefits of social technology

- Improved access to knowledge and solution and ideas through greater
interactivity
- Increased knowledge of customers and markets through the sharing of
information
- Reduced operational, collaboration, and communication costs
- Breaking down of barriers, reduced travel, sharing resources
- Increased staff satisfaction as these technologies are friendlier than traditional
ICTs
- Improved recruitment and training

38. Implementing internal social technology

- Organization need to develop policies that produce an organizational culture
condusive to such changes such as giving users freedom to discover what works
in their context
- Enable users to capture value from experimenting with the technologies and
allowing new internal communities to emerge from free collaboration and a
culture of participation. Such approach should be compared to the traditional
one of banning facebook in workplace
- Organisations need to develop capabilities that support the creation of attractive
content, dissemination of that content to relevant employees and alignment of
the new technologies with values and strategies of the organization
- Managers may worry that internal and external social networking means not
working, and may give an impression that employees are fiddling with facebook
rather than working
 - Informal conversational style favoured by social technologies may lead to the
leakage of confidential information, thus introduction of social technologies
requires a careful and sensitive understanding of the organizational context and
the user population

39. Problems with new organizational form

- Individual/ psychological – issues of lost job security and increased stress,
alienation and depersonalization resulted in difficulty in retaining staff
- Organizational – NOFS offer a certain ambiguity which can be very useful in
providing flexibility but can lead to confusion and conflict
- Conventional reward systems and career structures may be sacrificed, leading to
frustration and dissatisfaction for staff
- Unclear lines of authority with changes in accountability, evaluation and planning
responsibilities
- Implication for managers – they suffer from increased role complexity with the
danger of trying to impose too much or too little control. There is a need for
manager to develop new coordinating skills, rather than supervising one
- Technological dependence – if technology fails, organization could be thrown
into chaos
- Context dependence – depends upon the staff, organizational culture and the
timing of change, such that what works in one context may not work in another

Chapter 10

1. Importance of e-business security (smith & McKeen, 2009)

 - Organization depend on these systems for their day to day operations. Their
trading partners and their customers rely on these systems being secure
- Information contained within the systems is valuable and confidential, including
banking and other details of their customers
- Threats become more prevalent and more sophisticated, as it is increasingly
difficult to counter and require constant vigilance and regular security fixes and
updates
- Today’s system is ‘open’ and vulnerable to loss or damage
- Globalization and global sourcing allow the possibility of more threats, especially
where they involve different organizational and national security cultures
- Globalization involves different legal jurisdictions, making legal redress more
complex and expensive
- Increasing use of contractors, instead of full-time employees results in less
loyalty to company, ie. Edward snowden, contractor for US NSA when he leaked
a huge amount of top-secret emails
- Shift to cloud computing meaning data processing is performed using remote,
complex and non-transparent services
- IOT suggests that home appliances and civic utilites may well become targets for
security attacks once they are connected to internet
- Mobile networks are currently less secure than terrestrial ones

2. Consequences of bad e-business security

- Negative media publicity and loss of public confidence
- Increased uncertainty and a drop-in trust, leading to increased transaction cost
- Loss of business
- Decline in share price
- Fines and other regulatory consequences
- Legal proceedings and settlements
- Increased surveillance and interference from regulator
- E-business security risk dampens an organization’s ability to compete and the
associated uncertainty
- Security procedures and additional management increases transaction cost
 - IS security is now an increasingly worrying management problem

3. Goals of information system security

- Integrity – guaranteeing that data are not modified without authorization
- Confidentiality – ensuring that only authorized individuals have access to the
information resources being exchanged
- Availability – guaranteeing that information is available when it is needed
- Non-repudiation – guaranteeing that someone cannot deny his or her
participation in a transaction
- Authenticity – ensuring that data and transactions are genuine

4. Risk management – decision theoretic (risk analysis) approach

- Identification, assessment and prioritization of risks, and the most common
approach
- Involved the quantification of risk in financial terms, R = P x C , whereas r = risk, p
= probability of occurrence and c = cost of exposure
- Organization can rank the risks and prioritise controls
- Not easy to assess probabilities, and subjective assessment based on hunches is
unlikely to be very reliable. Actual cost of exposure may not be easy to calculate

5. Risk management – game-theoretic approaches

- Use game theory to analyse the problem, by considering the motives and
objective of the attackers, and the interaction between attackers and firms with
the understanding that the attackers are likely to alter their attack strategies in
response of defensive controls
- Each side recognizes the others constraints and it involved deterrence theory
which takes into account the probability of being caught and level of punishment

6. Aims of security controls to counteract the variety of security threats

 Detect - Weak links & intrusions

 Deter - By instituting good practice
 Correct - Potential problems & validate
 Prevent – Unauthorised incursions
 Tolerate & mitigate – Those that slip through
 Recover – Return system to normal operation
 Examples of controls
 Environmental - Fire alarms, careful choice of location for IT centres
 Equipment - Secure equipment against damage and theft
 Logistical – Control access to buildings using identity cards
 Legal/financial – Compliance and audit procedures
 Software - Virus detectors and virus killers; software firewalls
 Data & Communications – Message and data encryption
 Personnel – Careful hiring and firing procedures; user authentication

7. Three layers of information security

 Computer security layer – Securing the computer involves ensuring that machines
are installed with up-to-date anti-virus software. It can also involve the regular
backing-up of data in the case of data loss or computer failure.
 Network security layer – Company intranets should be secured using appropriate
network architectures, including the use of firewalls.
 Internet security layer – Encrypting data as it is sent along the public internet is a
fundamental aspect of information security. This includes the use of digital
signatures, which are a method of proving that a message is from a particular
sender and also that is has not been tampered with in transit.

8. Human and organisational aspects

 One of the major concerns regarding technological models of information security is

the weak emphasis placed on human, organisational and social factors.
 For example, while a good encryption system might be in place for employees to
secure sensitive data, they might simply ignore it or choose not to use it because it
is too cumbersome.
 These models neglect the socio-technical dimensions of e-business security

9. User authentication – with something you possess

 Use of tokens or ID cards by employees.

 Enter a code from a secure token that generates random codes at regular intervals.
 Employees trying to access rooms in company buildings where sensitive
information is stored on servers are regularly required to authenticate themselves
using an access card.

 The main problem is that they are easily lost and can be used by unauthorised
agents.
 Anyone who gains possession of the token or ID card has the right to access the
system or facility, which creates a weakness in the authentication process.

10. User authentication – with something you know

 Include the use of passwords, personal identification numbers (PINs) and

cryptographic keys.
 These are things that a person knows, rather than something they physically
possess (until they write them down, of course, which they usually are not supposed
to do!).
 Problems with passwords - easily shared and easily forgotten
 One way to do this is to combine two or more means of authentication, such as a
user token plus a PIN. This is called two- factor authentication.

11. User authentication – with something you are or something you do

 A very secure solution is provided by authentication technologies which rely on

users’ unique bodily characteristics.
 Biometrics can be either physiological (that is, measurements of the body) or
behavioural (that is, measurements of a human’s actions).
 Physiological measurements include facial recognition, fingerprinting, handprint
recognition, vein pattering, iris patterning and even DNA profiling.
 Behavioural biometrics include measuring signatures, keystroke dynamics (that is,
the uniqueness of someone’s typing), gait (how someone walks) and speech or
voice.
 Costs and technical problems still affect the diffusion of these solutions.

12. Security threats – human and non-human

 Willison and Warkentin (2013) distinguish between external and internal threats
and between human and non- human threats.
 External threats are typically emanated from hackers or rogue agents, motivated by
criminal, ideological or political desires.

13. Human external threats

 Denial of service attacks – Malicious users flood a system with so many requests
(i.e. data packets) that it overloads and fails. These attacks are common, and when
a company’s site is attacked it can result in reputational harm, along with
monetary loss.
 Web page hijacking – Fake copies of trusted websites are created and used to
redirect web users to malicious websites. This technique is commonly used by
spammers.
 Phishing – Trying to fraudulently acquire information such as usernames,
passwords and credit card details from users by pretending to be a trustworthy
partner (such as a bank, online payment broker, helpdesk, etc.).
  Botnets – Involves hijacking large numbers of computers connected to the internet,
for the purposes of creating a zombie network that can be used to send spam or
propagate viruses.

• Malware – Stands for ‘malicious software’, which is designed to install itself on a

computer without the user’s permission.
Malware includes

 adware -unwanted software that generates advertisements on the computer

screen
 spyware - which secretly collects information about the user and sends it to other
computers,
 hijackers - which take control of different parts of the web browser, such as the
default home page and search bar and unwanted toolbars in the browser.

14. Non-human external threats

 Viruses – Computer programs that can install themselves on a computer and

propagate through a network.
 Worms –Spread without human intervention.
 Trojan horse – A type of malware that pretends to perform a desirable function but
in fact grants system access to unauthorised users.
 Rootkits – Programs that enable backdoor access to a computer, usually without
the user’s knowledge.
 Other non-human external threats include natural disasters, such as hurricanes and
tsunamis, which can obviously wreck computer systems.
 Identity Theft/Phishing
 Spyware

15. Internal threats

 Internal threats also include human ones, in the shape of users (employees and
contractors), and non-human ones (hardware and system failures).
 User threats are either malicious or unintentional and made directly through
internal machines or through personal devices or social media.
 Negative organisational atmosphere, often leading to feelings of injustice or
disgruntlement among employees.
 Employees may form an intention to abuse.
 Organisations should focus on atmosphere, deterrence and prevention of
employee IT abuse.
16. Managing e-business security

 Despite the risks of intentional employee abuse, the most frequent problems
emerge from unintentional employee behaviour leading to security breaches.
 Employees writing their passwords on ‘post-it’ notes and sticking them onto their
desks or printers, carelessly giving out passwords, leaving computers unattended
and office doors open and accidentally bringing in viruses on their personal
machines or USB sticks.
 Staff may be aware of the risks they individually pose but they often seem
unconcerned and usually unmotivated.
 They typically dislike excessive controls and resent any interference in how they do
their jobs.
 There is often a mismatch between security values and users’ values.
 Many users, such as doctors, salesmen, bankers and journalists have highly stressful
jobs, where they need to focus very much on the task in hand with little regard for
‘extraneous’ security distractions

17. User security management

 Security becomes ‘second nature’ behaviour.

 Mixture of formal and informal controls
 Excessive control tends to breed adverse reactions but too loose control can lead
to security procedures being ignored.
 Harsh sanctions for unintentional misbehaviour may be counter-productive but
appeals based on fear may be ignored.
 Provide careful education to staff to develop the understanding of the
organisation’s vulnerability and the potential consequences of breaches,
throughout the organisation.
 This requires careful management at all levels: strategic, operational and technical
plus also a combination of ‘carrot’ and ‘stick’: rewarding good security behaviour
but penalising misbehaviour (after an appropriate number of warnings).

18. Information systems security is a complex management problem

 aSenior managers need to locate responsibility (ownership) of risks and controls

throughout the organisation.
 At the strategic level, they need to provide leadership, governance and sponsorship
for the effort, as well as determining some form of metrics to measure progress
and effectiveness.
 At the managerial and operational levels the organisation must implement
whatever policies, procedures and standards are necessary to meet legal and
regulatory demands.
 Programme management requires audit and compliance, while user security
management requires the provision of awareness and training programmes.
 Business continuity planning needs to be addressed so that there is a fall-back
position if things go really wrong.
 At the technical level, sufficient technology protection needs to be applied and
maintained.
 Cost of safeguards should not exceed the risks.
 Security should not be so tight that users/customers are discouraged from using
the system.
 Too much emphasis on control may inhibit the flexibility and creativity required for
an organisation to flourish. There is thus a need for the careful design and
implementation of adaptive security mechanisms.