Amit & Zott Value-Adding Domain Model - Assignment Example

E-Business Name Course Instructor’s Name May 16 2010 Question 1 A) Amit & Zott value-adding domain model Amit and Zott (2001) stated that numerous theoretical frameworks exists that foundation for possible sources of value creation. According to them, bringing together different researches that champion strategic management and entrepreneurship improves on e-business requirements. Nevertheless, Amit and Zott raise concerns regarding the amount of literature that discusses sources of value and thus they introduced their own model that hinges on four domains that are interdependent, which are: Efficiency –is commonly associated to transaction cost theory, and thus efficiency improves while the cost per transaction decreases. This means that efficiency in e-business can be obtained through comparing transaction cost between offline and online channels, or web shopping. Thus, the transaction costs could decrease because indirect and direct costs have decreased. This is because Internet facilitates sharing of information thus reduces in bargaining cost and customer’s search (Plunkett, 2006). Complementary – it means an act of presenting a bundle of products rather than presenting an individual product. This approaches chances the traditional view of profit maximization to that concentrates on customer value. Moreover, an increase in demand curve could be evident due to increase in cumulative demand. Lock-in – is an approach that consumer’s are unwilling to do business with other service providers. It means that unwillingness for consumers not to change transactional model that translates into customer’s retention and loyalty. This is due to familiarity that a customer emanates after learning how the website operates Novelty – refers to original and unique ideas that bring together the three model components into ensuring an organization has competitive advantage. B) Porter’s Value Chain vs. Amit & Zott model Michael Porter through its competitive advantage developed a value chain that would interrelate generic activities within an organization. His theory provided for primary value chain activities that included operations, inbound logistics, marketing, outbound logistics, and service, marketing and sales. The aim of this framework is to create value that supersedes the cost of providing service and product resulting in the generation of profit. Amit & Zott (2001) was based on the fundamentals of Porters value chain since Porter is a leading theorist in the fields of strategic management and entrepreneurship. Efficiency within an organization is based on transaction content, structure and governance. The transaction content defines how goods can be exchanged and the transaction cost associated. Thus, it brings into consideration features of the products and channels of exchange. The transaction structure is used influenced by adaptability, flexibility, actual transactions and scalability. The third factor that champions efficiency is the presence of governance that guide the way transaction is completed and how parties involved can communicate with each other. Generally, it means efficiency is achieved through ensuring the costs associated to transaction are minimized while ensuring the quality of service and products is maximized (Jelassi & Enders, 2008). Question 2 A) ERP within e-business strategies ERP is an integrated computer system that is used to manage both internal and external resources that includes financial resources, tangible assets, human resources and materials. This means that it is a computer architecture that facilitates the flow of information between different functions inside an organization and also enables connections with outside stakeholders (Plunkett, 2006). It generally means that it is a centralized database that consolidates business functions and operations into a uniform system environment, and thus enables fulfillment of organizational requirements. E-business and ERP complements each other into ensuring that optimum benefits are achieved for an organization, and also ensuring that competitive advantage can be obtained. The aim of e-business is to improve on revenue, marketing, improves on efficiency, support organization requirements, and create a platform that consumers learn organizational products and services (Jelassi & Enders, 2008). Some components that are associated to ERP and champions e-business strategies include reduction of software packages; utilizing different software may affect efficiency of an organization, ERP allows design engineering because it provides a platform that all products can be integrated, and it allows for integration of accounting requirements in that it brings into consideration profit, cost and revenue information . Generally, ERP components supports the requirements and aims of e-business ensuring that efficiency is championed throughout the organization and thus been able to access the benefits of competitive advantage. B) Role of balanced scorecards for the effective achievement of ERP objectives Balanced scorecard is a management system and strategic planning tool that is commonly utilized in business, government, industry, and other organizations across the world enabling aligning business activities to strategy and vision of the organization, to improve on external and internal communications, and thus monitoring organization performance based in a predetermined strategic goals. This means that it is an approach that focuses on different organization performance indicators that may also include customer perspectives into ensuring that the organization operates efficiently and optimally. Thus, the fundamentals held by balanced scorecards are championed by ERP systems. The balanced scorecard provides a foundation that allows for integration of finance, customer, learning & growth, and internal business process. Even though the four components are different, they are usually inter-dependent into ensuring an organization achieves competitive advantage. This means that the balanced scorecards facilities the requirements and objectives of ERP. For example, the goals of a balanced scorecard includes monitoring progress, improving processes, increased financial usage, enhancing information systems, and educating/motivating employees (Jelassi & Enders, 2008). Utilization of the balanced scorecards provides a means in which an organization can develop the ERP system so that it maximizes on the goals of ERP. Thus, the two processes complements each other ensuring that an organization achieve competitive advantage. Question 3 A) Why many business choose not to become e-business Some common reasons why businesses do not want to utilize the components of e-business include: Communication and tradition relations with consumers It takes a lot of time to be successful Sector limits Requirements of Internet technology Trust B) Evaluation of two reasons The two major reasons that many businesses do not require the use of e-business, and are expounded in this sector are trust and Internet technology. Trust – trust can be defined or presumed to be aimed at fulfilling ethical codes, policies, previous promises and law. This means that it does not involved vices, good character, or morals but based on predetermined requirements. Moreover, trust brings into consideration benevolence, fairness, honesty of another party. In the case of e-business, many consumers belief that purchasing a product over the Internet is not safe (Plunkett, 2006). This is based on the fact that consumers cannot se the actual person providing the product and thus may have issues purchasing a product; this understanding is also based on sector and product. Thus, an organization that lacks consumer’s trust may influence sales and overall success of an organization. For example, a consumer may be located in Australia and wants to purchase a dell laptop online, after accessing the dell website, the consumer may perceive that he may not get a fair deal or the product will not supplied to Australia. Thus, this ‘perception’ makes many organizations not to champion or employ the use of e-business. They see it as a threat towards the success of the business if a negative issue may arise during the process of product/payment exchange. Internet technology – another is issue that makes many organizations not to purse the benefits of e-business are costly information technology requirements. This is because an e-business may usually require resources that allow redefining the products and factors of online selling. Cost incurred may result from training personnel and upgrading computer systems. Moreover, other applications that include ERP (Enterprise Resource Planning) and Electronic Data Management (EDM) that are needed for maximization of internal business process are also expensive and thus beyond the reach of many organizations who aim to utilize e-business (Jelassi & Enders, 2008). For example, e-business requires centralization of data and high level of security, which means employing staff who understands these requirements resulting in increase in operational costs. Another major issue that is associated with information technology is that the business would require a website that functional well and stays up; it can be equated to a business or store that stays open. For example, if an organization that utilizes e-business goes offline because of any technical issues, it can cost the profits and may affect the reputation of the organization. This then translates into maintenance and repair costs. Because of expertise level that is required to repair and maintain the website and their information technology requirements would increase the operation costs and thus instead of pursuing e-business, many organizations usually shun it (Plunkett, 2006). Question 4 A) An e-business organization might be better-placed to outsource elements of their business activities than a conventional business An organization that utilizes e-business is in a better place to outsource its activities because of the structure and ideologies of an organization. Some of the factors that make an e-business based organization to be better placed to champion outsourcing include: Information technology – outsourcing provides a means in which organizations that are offshore can accomplish tasks without physical meeting with each other. The cost of physical travelling may be outrageous, which means that the use of information technology could decrease the pitfall. Moreover, an e-business has all the tools and equipments that allows for outsourcing such as centralized storage of data, security measures and sometimes they have good reputation because they have been in the e-business industry for sometime. On the other hand, a conventional business does not have access to information technology requirements and thus it may be expensive for them to start from scratch (Plunkett, 2006). Human resource and staff – e-business based organization has resources that better fulfills the requirements of outsourcing. A major concern to many organizations is human resource because of training and their competence towards the requirements of outsourcing and e-business (Chaffey, 2006). This means that an organization is used to changing requirements of e-business and introduction of outsourcing may be equated to the same fundamentals supported by daily e-business operations (Li, 2006). Generally, it is easier for an organization that operates e-business to purse outsourcing because of numerous factors that includes human resource and information technology. B) Arguments against outsourcing as an ERP strategy Some of the arguments against outsourcing as an ERP strategy includes: Managerial control loss – Agreeing with another organization to perform certain task or entire departmental functions means that the control and management of that department is turned over to the new company. Thus, the new organization may not be driven by the same mission and standards that the original company had in mind; the new company will only be driven with the aim of making profit. Hidden costs – most of the contracts that are signed with outsourcing company covers the details of service provision. Any other charges that are not within the contract are covered by the organization. Moreover, other hidden costs include employing a lawyer to review and analyze the contractual obligations because the outsourcing company’s role is writing contracts and thus the organization may be disadvantaged when the negotiations begins or ends (Chaffey, 2006). Threats to confidentiality and security – information are an important requirement that makes businesses to operate effectively. Some information such as medical records and payroll details when sent to n outsourcing company may be affected by threats associated with confidentiality been compromised. Threats may also result in cases associated with sharing proprietary company knowledge and data, and thus should be placed into consideration before such initiatives takes place. Problems associated with quality – the company that deals with outsourcing is interested in profit since the contract will be fixed on price. Thus, the only strategy that can be utilized to increase profits is to decrease on expenses. This means as long as the outsourcing company meets the requirements of contract, the fundamentals of the contract are upheld e.g. paying for their services. Moreover, outsourcing the organization tasks means that it decrease the chances of responding to chances in the business environment (Li, 2006). Question 5 A) The main reasons for the development of customer relationship management (CRM) software in e-business Properly managing and maintaining a CRM in e-business results in important factors that sustains the way business is accomplished. Some of the main reasons encouraging utilization of CRM includes: Provision of better service to consumers – CRM is associated with numerous strategic advantages when addressing and fulfilling the requirements of customers through such as personalization of relationships (Plunkett, 2006). Moreover, CRM has a provision of maintaining customer profiles, and hence ensures that consumers are treated individual rather than as a group. Other factors that are associated with this approach includes adjustment of service based on changing consumer requirements, understanding and improving responsiveness that decreases agitation of consumer and improves on customer loyalty, and ensures a clear follow up of products can easily be achieved. Increase in consumer revenues – utilization of CRM data ensures that marketing campaign are carried in a way that those consumers who had purchased a particular product cannot be targeted again (Chaffey, 2006). It generally means that it co-ordinates effectively the requirements of marketing and it also ensures that customer retention is encouraged through introduction of loyalty programs. Discovering new consumers – introduction of CRM provides a means in which potential consumers can be identified. Through facilities such as maintaining tracks of existing clientele means that the business can be in a better position to identify target consumers and devise strategies to concentrate on that target. In addition, CRM systems allows for up-selling and cross-selling, and thus helps to gain better requirements of customers and hence anticipate their purchases (Chaffey, 2006). Employees’ efficiency and effectiveness – utilization of CRM systems ensures that deals can be completed faster and easier. This is possible through quicker and more efficient responses to the consumer requirements. This means that the turnaround time is drastically reduced resulting in optimum services translating into effectiveness of an organization (Jelassi & Enders, 2008). B) The limitations of CRM systems within e-business Even though, CRM is associated with numerous benefits towards e-business, some common limitations of this technology include: Loss of records – some customer information may be saved in remote Internet connections. Ad these Internet connections may be provided on certain company’s domain. This means that the CRM has no control of its data and any complication reported may resulted in the company been unable to retrieve the records (Plunkett, 2006). Moreover, the type and capacity of CRM applications may determine whether the company would succeeded or not. Generally, this problem can be solved through utilization of local back up system. Overhead costs are associated with running certain local CRM application Training is another limitation that a company aiming to utilize CRM has to content with. References Amit, R. & Zott, C. 2001.Value creation in e-business. Strategic Management Journal, vol. 22, no. 6/7, pp. 493-520 Chaffey, D. 2006. E-business and e-commerce management: strategy, implementation, and practice, 3rd Ed. New York: Financial Times Prentice Hall. Jelassi, T. & Enders, A. 2008. Strategies for e-business: creating value through electronic and mobile commerce, 2nd Ed. New York: FT Prentice Hall Publishers. Li, F. 2006. What is e-business?: how the internet transforms organizations. New York: Wiley-Blackwell Publishers. Plunkett, J. 2006. Plunkett's outsourcing and offshoring industry Almanac 2007 (E-Book): Outsourcing and offshoring industry market research, statistics, trends and leading companies. New York: Plunkett Research, Ltd. Read More