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Chapter 3

ITM 207 Chapter Notes - Chapter 3: Digital Photography, E-Commerce Payment System, Ebay

Information Technology Management
Course Code
ITM 207
Mosey Nicholas J

of 2
Agency theory, 72- Economic theory that views the firm as a nexus of contracts
among self-interested individuals who must be supervised and managed
Benchmarking, 85- involves comparing the efficiency and effectiveness of your
business processes against strict standards and then measuring performance against
those standards
Best practices, 85- best practices are usually identified by consulting companies,
research organizations, government agencies, and industry associations as the most
successful solutions or problem-solving methods for consistently and effectively
achieving a business objective.
Business ecosystem, 89- Loosely coupled but interdependent networks of suppliers,
distributors, outsourcing firms, transportation service firms, and technology
Competitive forces model, 76- This model provides a general view of the firm, its
competitors, and the firm’s environment.
Core competency, 87- activity at which a firm excels as a world-class leader
Disruptive technologies, 70 - are substitute products that perform as well as or
better (often much better) than anything currently produced. The car substituted for the
horse-drawn carriage; the word processor for typewriters; the Apple iPod for portable CD
players; digital photography for process fi lm photography.
Efficient customer response system, 78- system that directly links consumer
behaviour back to distribution, production, and supply chains
Electronic payment system, 79- For instance, Google continuously introduces new
and unique search services on its Web site, such as Google Maps. By purchasing
PayPal, an electronic payment system,in 2003, eBay made it much easier for customers
to pay sellers and expanded use of its auction marketplace.
Mass customization, 79- Nike sells customized sneakers through its NIKEiD program
on its Web site. Customers are able to select the type of shoe, colours, material,
outsoles, and even a logo of up to eight characters. Nike transmits the orders via
computers to specially equipped plants in China and Korea. The sneakers cost only $10
extra and take about three weeks to reach the customer. This ability to offer individually
tailored products or services using the same production resources as mass production is
called mass customization.
Network economics, 88- Business models based on a network may help fi rms
strategically by taking advantage of network economics. In traditional economics—
the economics of factories and agriculture—production experiences diminishing returns.
The more any given resource is applied to production, the lower the marginal gain in
output, until a point is reached where the additional inputs produce no additional outputs.
This is the law of diminishing returns, and it is the foundation for most of modern
Organization, 66- is a stable, formal social structure that takes resources from the
environment and processes them to produce outputs. This technical definition focuses
on three elements of an organization.
Primary activities, 84- are most directly related to the production and distribution of
the firm’s products and services, which create value for the customer. Primary activi-ties
include inbound logistics, operations, outbound logistics, sales and marketing, and
Product differentiation, 78- Efficient customer response system. Use information
systems to enable new products and services, or greatly change the customer
convenience in using your existing products and services.
Routines, 67- sometimes called standard operating procedures—are precise rules,
procedures, and practices that have been developed to cope with virtually all expected
Strategic transitions, 92- A movement from one level of sociotechnical system to
another. Often required when adopting strategic systems that demand changes in the
social and technical elements of an organization
Support activities, 85- Support activities make the delivery of the primary activities
possible and consist of organization infrastructure (administration and management),
human resources (employee recruiting, hiring, and training), technology (improving
products and the production process), and procurement (purchasing input).
Switching costs, 80- The expense a customer or company incurs in lost time and
expenditure of resources when changing from one supplier or system to a competing
supplier or system
Transaction cost theory, 72- Economic theory stating that firms grow larger because
they can conduct marketplace transactions internally more cheaply than they can with
external firms in the marketplace
Value chain model, 84- highlights specific activities in the business where competitive
strategies can best be applied (Porter, 1985) and where information systems are most
likely to have a strategic impact. This model identifies specific, critical leverage points
where a firm can use information technology most effectively to enhance its competitive
position. The value chain model views the firm as a series or chain of basic activities that
add a margin of value to a firm’s products or services. These activities can be
categorized as either primary activities or support activities
Value web, 86- Customer-driven network of independent firms that use information
technology to coordinate their value chains to collectively produce a product or service
for a market
Virtual company, 88- also known as a virtual organization, uses networks to link
people, assets, and ideas, enabling it to ally with other companies to create and
distribute products and services without being limited by traditional organizational
boundaries or physical locations. One company can use the capabilities of another
company without being physically tied to that company.
The virtual company model is useful when a company finds it cheaper to acquire
products, services, or capabilities from an external vendor or when it needs to move
quickly to exploit new market opportunities and lacks the time and resources to respond
on its own.