Business Information Systems
Case Study of Catatech Industries
Table of Contents
Question1: Discuss how IT has changed value propositions and business models in e-Commerce.
Question 2:
2.1 Discuss the impact of competition on the e-Commerce strategic information systems plan of the company.
2.2 Discuss how this can be neutralised.
Question 3: Discuss the impact of e-Commerce on ethical, social and political issues?
Question 4: Discuss the lessons South African businesses can learn from this case study.
Question 5: What management issues are raised by knowledge management systems in e-Commerce? Use examples to discuss this in detail.
References
Question1: Discuss how IT has changed value propositions and business models in e-Commerce.
Intensifying competition in the global market supports the key role of information technology (IT) in driving organisational change (Porter 2001). Competitive advantage emerges from the ability to draw a wider market, especially with the saturation of local markets and increasing global demand. Business firms aiming to take a share of the global market have to adhere to change by adopting and integrating IT into business models and processes. (Leonardi 2007) Catatech Industries has been in operation for nearly a century but it continues to grow. To realise the opportunity of widening its global market reach, it needs to develop its IT capabilities not only at the business unit level but also at the corporate level to influence change in organisational culture. However, this is not an easy task and the CIO has to contend with the competing of retaining the business models of the company or the traditional way of doing things that allowed the company to grow or to rally for culture change biased towards IT to propel the company as a global market player. This dilemma and the likely resistance of stakeholders (Markus 2004), especially the board could be alleviated by focusing on the role of IT in revolutionising value propositions and business models in e-commerce. The positive impact on the firm together with the alignment of the company with e-commerce models could ease the change process in the company.
IT acts as catalyst for change and driver for competitive advantage. IT creates change by supporting innovative processes that in turn directs the organisation towards culture change. With IT processes in place, strategic changes emerge. The outcome of IT driven change could encompass restructuring, IT and other innovative competencies, and shifts in management practices. All these create and enhance value proposition for consumers. The benefits of IT to the organisation also redound to the benefit of consumers. (Markus 2004; Leonardi 2007)
IT benefits business firms in two major ways. First is by enhancing performance and productivity by enabling linkages across and within teams or working groups, departments, business units, and corporate headquarters through IT (Carlson 1999). Linkages via communication and information or knowledge sharing develop organisational streamlining that improves product and service features, product distribution, service delivery, and customer service. In the context of global business firms, such as Catatech Industries, streamlining of business processes supports the creation and reinforcement of a strong value proposition for its customers worldwide. Although there are certain unique value propositions in the different business units depending on the demand or needs of the local market, a sufficient degree of alignment across the business units is imperative to the enhancement of a consistent, strong and uniform value proposition. IT makes streamlining and alignment possible. In the case of Catatech Industries, the business units can retain autonomy in the specific means of reinforcing the organisation-wide value proposition.
Second is improvement in business processes. IT helped to develop various e-commerce models that allow business firms to improve internal processes to address stakeholder needs (Orlikowski 2000). E-commerce refers to the system that converts sourcing, selling, and buying into electronic processes. Engaging e-commerce means establishing models and relations that support effective procurement, production, retailing and promoting mechanisms. The core idea of e-commerce is optimising available and appropriate technology to enhance ways of communicating value proposition and meeting demand. IT has created a number of e-commerce models particularly business-to-consumers (B2C) such as online advertising, emails, website information sharing and retailing, and website customer service and feedback system. IT also created business-to-business-to-consumer (B2B2C) models such as retailing through distributors such as eBay and other auction sites, advertising through websites, forums, blogs, and other electronic venues, and electronic logistics by linking the ordering system of the company with logistics partners in shipping products to consumers. Engaging in IT would allow firms to establish electronic points of sales and customer service that enhances its value proposition. (Orlikowski 2000; Lee 2001) Catatech has a potential to expand its global operations as well as maintain and develop its competitive advantage especially with competitors capitalising on first mover advantage in the virtual market. However, to do this, the company needs to realise the importance of IT in creating, enhancing and reinforcing value propositions to reach out to the market as well as in building e-commerce models to support the electronic process or system competencies and needs of the company to operate globally.
Thus, IT improves business processes and organisational competencies and provides electronic systems and venues of reaching out to customers to create and enhance value proposition for customers in support of the goal of achieving competitive advantage.
Question 2: 2.1 Discuss the impact of competition on the e-Commerce strategic information systems plan of the company.
Competition is the context for the e-commerce strategic information systems plan of Catatech Industries. Knowledge of its closest competitors in terms of market share, potential for expansion, and relative positioning would comprise the bases of plans for information systems adoption. Competition also redirects or shifts information systems planning.
Strategic planning for the adoption of information systems contributes in enhancing managerial understanding and assessment of organisational development and factors for success (Laartz, Monnoyer & Scherdin 2003). This process assists in the achievement of timely decisions and development of viable strategic plans. (Henry & Lau 2000) However, decisions on the e-commerce adoption depends on the business firm’s knowledge of its competitive environment in terms of relative positioning, performance, market base, market share, products and services, and other determinants of competitiveness. This is because the adoption of e-commerce targets competitive advantage. (Ward & Peppard 2002) As such, the importance of e-commerce adoption and the immediacy of developing the strategic information systems plan depend on the assessment and interpretation of competition. In the case of Catatech Industries, its awareness of competitors and evaluation of the relative competitiveness of industry players including the company would determine the decision of top executives to support the development of the strategic information systems plan. If the board perceives competition in e-commerce as inconsequential then they would likely scrap the plan but if they view e-commerce competition in the industry as strong, then top executives are likely to support the plan. It is up to the CIO to present an accurate and comprehensive analysis of e-commerce competition in the industry to gain support for the plan.
In real business application, strategic information systems planning could have components including strategic prerequisites, directions and other elements (Henry & Lau 2000). As in other areas of strategic planning, this begins with the identification of needs or issues requiring resolution. These needs could encompass the level of transaction processing or the level of information and support systems. The success of the strategic information systems plan depends on the extent that it meets needs. (Ward & Peppard 2002) Even in this early stage of planning, competition is already an influential force because this determines the present and future needs of the company and the issues that it needs to address. This means that before even commencing with planning per se, Catatech Industries should have assessed competition and identified the needs it has to address. Again, since the top executives are conservative in making radical decisions, the responsibility to translate e-commerce competition into needs falls in the hands of the CIO. After determining needs, the next step is the identification and prioritization of objectives, resource planning, implementation procedures, and assessment measures (Ward & Peppard 2002). All these depend on the needs being met by the plan that are in turn based on the assessment of e-commerce competition. In addition, understanding of competition is a continuous process so that the company may have to readjust its plans with a changing competitive environment.
2.2 Discuss how this can be neutralised.
Competition impact the strategic information systems plan in two ways. One is by influencing needs and the other is by signalling possible changes in the plan. Counteracting the impact of competition on the strategic information systems plan requires an understanding of competition and the flexibility to changes in the competitive environment. Gaining an understanding of competition could be through competitive intelligence by gaining vital information on competitors and analysing these to draw conclusions in support of strategies for competitive advantage (Ward & Peppard 2002). Another is by using models such as the five forces model that considers barriers to entry in the e-commerce market, rivalry or impact of competitors, impact of suppliers, changing demands of customers, and existence and impact of substitutes (Porter 1998). Other models are also available especially for global operations that consider political, economic, social, technological, legal, and environmental factors of the competitive environment (Ward & Peppard 2002). By thoroughly understanding competition, the company can enhance the success of its strategic information systems plan. Developing adjustability to the changing impact of competition necessarily involves culture change (Sims 2002) to support appreciation of IT and e-commerce in business processes and work completion. By realising the importance of IT in supporting competitive advantage, members of the organisation are sure to develop awareness of developments in competition and analytical competencies in determining the impact of these changes on its information systems or e-commerce initiative.
Question 3: Discuss the impact of e-Commerce on ethical, social and political issues?
E-commerce revolutionised business by creating a virtual market and widening the reach of firms but created ethical, social and political issues that co-occurs with it. This means that engagement of business firms, such as Catatech Industries, in e-commerce necessitates the consideration of these ethical, social and political issues in decision-making and planning to ensure success. Four general issues encompass the impact of e-commerce on ethical, social and political factors.
First is information management relative to protection of privacy because of widely available information in the Internet. Information management is an ethical issue because it involves the dilemma of the gathering, sharing and utilising information on competitors (Camp 2000). In the case of emails spamming evolved as an ethical issue under information management. Business firms with websites requiring registration and with online payment systems are likely to gain data on the names, emails, contact number or even address of individuals engaging these electronic processes. Decisions of firms to use information and emailing for advertising and promotions led to spamming that often inconvenience customers. The constant barrage of unwanted emails only developed negative attitudes on the part of consumers. As such, most providers of email service established anti-spamming features.
Second is exercise of property rights. The Internet, which is the foundation of e-commerce, is very fluid in providing access to information, products and services, and anything in demand. Due to limited controls, this makes it difficult to exercise property rights. The concept of property is that the owner holds exclusive right to the appropriation of that property, whether this are material products, services, ideas and systems, or anything subject to ownership. However, e-commerce can weaken property rights with the Internet providing opportunities to circumvent these rights. (Camp 2000) This is an ethical issue because it involves the decision on whether to obtain and use other people’s property for personal gain without getting the permission from the owner or gaining from its use. This is also a legal issue expressed in cyber crimes and piracy of property covered by intellectual property rights.
Third is regulation of e-commerce as a means of addressing cyber crimes and violation of intellectual property rights (Hall 2001). This is a political issue involving the decision of lawmakers on whether to subject e-commerce to statutory regulations, the scope and limits of regulation, the processes of implementation, and the judicial body with jurisdiction. Laws regulating e-commerce continue to change reflecting efforts to determine the place of regulation in the Internet. These changes affect how business firms engage in e-commerce.
Fourth is public safety or welfare, which comprises a social issue in e-commerce. The wide market reach of the Internet supported the entry even of small business firms including those that pose a threat of safety and security (Hall 2001). While e-commerce enabled networking, which is an important business tool, through chatting, messaging, emailing and websites hopping, these have also supported the proliferation of activities that pose a threat of public safety. Many websites on pornography and cyber prostitution emerged and these even get high ratings in terms of traffic and links. Recruitment of terrorists and solicitation of terrorist funds happen through the e-commerce tools.
Question 4: Discuss the lessons South African businesses can learn from this case study.
South African business firms can learn a number of things from the case study. These lessons focus on defining the place of IT and e-commerce in business success and strategies in the effective engagement in e-commerce.
One important lesson is building knowledge and trust at various levels to develop appreciation of the importance of e-commerce in the business success of international firms. Catatech Industries operates as a conservative company relative to IT and e-commerce. Although it has engaged in e-commerce, this was only at the level of the business units. This could be subject to interpretation as the hesitance of headquarters in Madrid to engage fully in e-commerce at the corporate level. The company’s CIO has trouble in obtaining board approval for IT initiatives. This could be explained by the concerns of the company on the impact of IT initiatives at the corporate level largely due to a limited knowledge of e-commerce and the impact on work and continuity of employment. The company was not even aware of the emergence of competitors in the virtual market that affects the global expansion of the company. Another explanation is the lack of trust in automated transactions, especially since the company sold products through knowledgeable sales personnel. Many South African firms experience the same thing. These firms express interest in IT and e-commerce but hesitate in the actualisation stage (Molla & Licker 2004). By enriching the knowledge and experience of South African business firms on e-commerce and reinforcing trust on the part of personnel as well as consumers through secure online systems and ethical practice, the success of information systems.
Another lesson is the important role of leaders in signalling direction towards e-commerce. The perspective of leaders over IT reflects in the policies applied in the company. The leaders of Catatech Industries are adamant or unconcerned about industry trends in e-commerce with the business unit in the United States expressing active involvement in e-commerce. If Catatech Industries want to expand in the global market, it has to pay proper recognition to the role of e-commerce. Similarly, many leaders of business firms in South Africa also exhibit a similar relaxed attitude towards e-commerce even if these firms have the capital to invest in IT. Even if a number of firms engaged in e-commerce the benefit to consumers are limited. E-commerce efforts need to be linked to competitive goals and integrated in strategic planning.
A last lesson is the importance of e-commerce guidelines to guide engagement of firms in a manner that ensures customer satisfaction and welfare. Being part of the European Union supported the engagement of Spain in adoption and development of policies on e-commerce to guide business firms in engaging in IT to support business processes (Sebastian, Rodriguez & Mateos 2001). However, the fact that Catatech Industries has not considered e-commerce at the corporate level despite being an international company could be because of limited guidelines from industry standards and best practices or from regulatory bodies. South Africa also needs to develop e-commerce policies to increase security in electronic transactions and protect consumers in order to help build IT capabilities of business firms (Molla & Licker 2004). South African business firms engaging in IT play an important role in advocating policy development.
Question 5: What management issues are raised by knowledge management systems in e-Commerce? Use examples to discuss this in detail.
Knowledge management systems in e-commerce give rise to a number of management issues. These issues revolve around the management and utilisation of information. To succeed in e-commerce initiatives, business firms need to address these issues.
One issue relates to the need for skills and tools for effective knowledge management encompassing data collection, data processing, interpretation of information, and dissemination. There is a difference between data, information and knowledge requiring different levels of skills and tools. Business firms should be able to develop competencies for these to achieve effective knowledge management systems able to support e-commerce. Data is the raw form, information has been analysed and interpreted, and knowledge is information able to cause change by either providing the area and means for change or changing perspectives to influence indirectly action. (Malhotra 2000) In the case of Catatech Industries, knowing that there are already direct competitors already involved in e-commerce is not enough. However, if personnel do not have enough skills to transform data into skills using models (five forces, PESTLE, etc.) and software, then it will never turn to knowledge that supports strategic action.
Another issue is streamlining the system of information sharing across the levels of the organisation. One purpose of e-commerce is the enrichment of the knowledge of the company over its status and position at the business unit and corporate levels through information sharing, and knowledge management support this. Nevertheless, for global firms, knowledge management systems should be uniform. (Malhotra 2000) An example is a single website for Catatech Industries but including links to the pages for the different business units in different countries. There would also be a centralised ordering, payment and feedback system accessible to the various business units. This would allow the company to consider gain knowledge at the corporate and business unit levels.
Last issue is building effective communications. Knowledge spurs action only if properly communicated. (Malhotra 2000) An example is the different modes of communication for top executives and business unit managers. On one hand, top executives require information at the strategic level so that communication should be in terms of the overall performance of the company and the different business units, competitors, changes in demand and the issues linked to the information that requires decision-making. On the other hand, business unit managers require information that supports what they have to do, how to do it, when and where to do it, and how to measure success. The CIO or the information departments needs to keep track of the flow and transfer of what information to who and how.
References
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