Information Systems, Organizations, and Strategy

Chapter 3 Information Systems, Organizations, and Strategy 1) An adhocracy is a knowledge-based organization where goods and services depend on the expertise and knowledge of professionals. Answer: FALSE Objective: 3.1 2) From the point of view of economics, information systems technology can be viewed as a factor of production that can be substituted for traditional capital and labor. Answer: TRUE AACSB: Use of information technology CASE: Content Objective: 3.1 3) One type of competitive advantage Amazon was able to implement in selling books over the Internet was that of being a new market entrant. Answer: TRUE AACSB: Analytic skills CASE: Analysis Objective: 3.2 4) A firm can be said to have competitive advantage when they have higher stock market valuations than their competitors. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 5) The competitive forces model was created for today's digital firm. Answer: FALSE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 1 6) Customers are one of the competitive forces that affect an organization's ability to compete. Answer: TRUE Page Ref AACSB: Reflective thinking skills CASE: Content Objective: 3.2 7) A transparent marketplace means that there is high product differentiation. Answer: FALSE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 8) In an efficient customer response system, digital answering systems are used to monitor and respond to customer inquiries. Answer: FALSE AACSB: Use of information technology CASE: Content Objective: 3.2 9) Mass customization is a form of mass production. Answer: TRUE AACSB: Use of information technology CASE: Content Objective: 3.2 10) Strong linkages to customers and suppliers decrease switching costs. Answer: FALSE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 11) In the strategy of product differentiation, information systems are used to enable new products and services. Answer: TRUE AACSB: Use of information technology CASE: Content Objective: 3.2 2 12) The effect of the Internet has been to raise bargaining power over suppliers. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 13) In the age of the Internet, Porter's traditional competitive forces model is still at work, but competitive rivalry has become much more intense. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.2 14) In the value chain model, primary activities are most directly related to the production and distribution of the firm's products and services that create value for the customer. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.3 15) The value chain model classifies all company activities as either primary or support. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.3 16) The idea driving synergies is that when the output of some units can be used as inputs to other units, the relationship can lower cost and generate profits. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.4 17) The law of diminishing returns always applies to digital, as well as traditional companies. Answer: FALSE AACSB: Reflective thinking skills CASE: Content Objective: 3.4 3 18) In network economics, the more people that use Microsoft Office software and related products, the greater its value. Answer: TRUE AACSB: Reflective thinking skills CASE: Content Objective: 3.4 19) The term business ecosystem describes the interplay between the various organizational forces within a firm. Answer: FALSE AACSB: Reflective thinking skills CASE: Content Objective: 3.4 20) The use of Internet technologies allows companies to more easily sustain competitive advantage. Answer: FALSE AACSB: Use of information technology CASE: Content Objective: 3.5 21) As discussed in the chapter opening case, which of the four generic strategies to combat competitive forces formed the basis of e-Bay's growth strategy? A) low-cost leadership B) focus on market niche C) customer and supplier intimacy D) product differentiation Answer: D AACSB: Analytic skills CASE: Analysis Objective: 3.2 22) Which of the following would NOT be considered a disruptive technology? A) instant messaging B) e-mail C) Internet telephony D) PCs Answer: A AACSB: Analytic skills CASE: Analysis Objective: 3.1 4 23) The interaction between information systems and organizations is A) primarily guided by the decision making of middle- and senior-managers. B) a complex, two-way relationship mediated by factors such as the environment and organizational structure. C) driven by the microeconomic forces of capital and labor. D) successfully managed when the organization's existing culture and goals are seen as the driving force. Answer: B AACSB: Use of information technology CASE: Content Objective: 3.1 24) An organization is a A) stable, formal social structure that takes resources from the environment and processes them to produce outputs. B) formal, legal entity with internal rules and procedures that must abide by laws. C) collection of social elements. D) b and c E) a, b, and c Answer: E AACSB: Reflective thinking skills CASE: Content Objective: 3.1 25) How does the technical view of organizations fall short of understanding the full impacts of information systems in a firm? A) It sees information systems as a way to rearrange the inputs and outputs of the organization. B) It sees capital and labor as primary production factors. C) It sees the inputs and outputs, labor and capital, as being infinitely malleable. D) It sees the organization as a social structure similar to a machine. Answer: C AACSB: Analytic skills CASE: Evaluation Objective: 3.1 5 26) According to the ________ definition of organizations, an organization is seen as a means by which primary production factors are transformed into outputs consumed by the environment. A) microeconomic B) macroeconomic C) sociotechnical D) behavioral Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.1 27) All of the following are major features of organizations that impact the use of information systems EXCEPT for A) business processes. B) environments. C) goals. D) agency costs. Answer: D AACSB: Reflective thinking skills CASE: Content Objective: 3.1 28) Business processes are collections of A) informal practices and behaviors. B) formalized and documented practices. C) routines. D) rights and privileges. Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.1 29) Mintzberg's classification of organizational structure categorizes the knowledge-based organization where goods and services depend on the expertise and knowledge of professionals as a(n): A) entrepreneurial structure. B) divisionalized bureaucracy. C) professional bureaucracy. D) adhocracy. Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.1 6 30) A large bureaucracy existing in a slowly changing environment that produces standard products and is dominated by centralized management making is classified by Mintzberg as a ________ bureaucracy. A) machine B) professional C) divisionalized D) multidivisional Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.1 31) An example of a professional bureaucracy is a A) small startup firm. B) school system. C) mid-size manufacturing firm. D) consulting firm. Answer: B AACSB: Reflective thinking skills CASE: Content Objective: 3.1 32) The costs incurred when a firm buys on the marketplace what it cannot make itself are referred to as: A) switching costs. B) transaction costs. C) procurement. D) agency costs. Answer: B AACSB: Use of information technology CASE: Content Objective: 3.1 33) Which of the following statements is NOT true about information technology's impacts on business firms? A) It helps firms expand in size. B) It helps firms lower the cost of market participation. C) It helps reduce internal management costs. D) It helps reduce transaction costs. Answer: A AACSB: Use of information technology CASE: Content Objective: 3.1 7 34) According to agency theory, the firm is viewed as a(n): A) unified, profit-maximizing entity. B) task force organization that must respond to rapidly changing environments. C) entrepreneurial endeavor. D) "nexus of contracts" among self-interested individuals. Answer: D AACSB: Reflective thinking skills CASE: Content Objective: 3.1 35) According to Leavitt's model of organizational resistance, the four components that must be changed in an organization in order to successfully implement a new information system are A) environment, organization, structure, tasks. B) technology, people, culture, and structure. C) organization, culture, management. D) tasks, technology, people, and structure. Answer: D AACSB: Use of information technology CASE: Analysis Objective: 3.1 36) The ________ model is used to describe the interaction of external forces that affect an organization's strategy and ability to compete. A) network economics B) competitive forces C) competitive advantage D) demand control Answer: B AACSB: Reflective thinking skills CASE: Content Objective: 3.2 37) Which of the following is NOT one of the competitive forces? A) suppliers B) other competitors C) external environment D) customers Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.2 8 38) A manufacturer of deep-sea oil rigs may be least concerned about this marketplace force. A) product differentiation B) traditional competitors C) low number of suppliers D) new market entrants Answer: D AACSB: Analytic skills CASE: Evaluation Objective: 3.2 39) A substitute product of most concern for a cable TV distributor is A) satellite TV. B) broadcast TV. C) satellite radio. D) the Internet. Answer: A AACSB: Analytic skills CASE: Evaluation Objective: 3.2 40) Which of the following industries has a low barrier to entry? A) automotive B) computer chip C) restaurant D) airline Answer: C AACSB: Analytic skills CASE: Analysis Objective: 3.2 41) Which of the following can force a business and its competitors to compete on price alone? A) transparent marketplace B) high product differentiation C) poor process efficiency D) demand control Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.2 9 42) A firm can exercise greater control over its suppliers by having A) more suppliers. B) fewer suppliers. C) global suppliers. D) local suppliers. Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.2 43) Amazon's use of the Internet as a platform to sell books illustrates a tactical use of information services for A) low-cost leadership. B) product differentiation. C) focusing on market niche. D) strengthening customer intimacy. Answer: A AACSB: Analytic skills CASE: Analysis Objective: 3.2 44) The four major types of competitive strategy are A) low-cost leadership; substitute products and services; customers; and suppliers. B) low-cost leadership; product differentiation; focus on market niche; and customer and supplier intimacy. C) new market entrants; substitute products and services; customers; and suppliers. D) low-cost leadership; new market entrants; product differentiation; and focus on market niche. Answer: B AACSB: Reflective thinking skills CASE: Content Objective: 3.2 45) Wal-Mart's continuous replenishment system allows it to: A) provide mass customization. B) provide an efficient customer response system. C) strengthen customer intimacy. D) achieve economy of scale. Answer: B AACSB: Use of information technology CASE: Content Objective: 3.2 10 46) When a firm provides a specialized product or service for a narrow target market better than competitors, they are using a ________ strategy. A) product differentiation B) market niche C) mass customization D) process efficiency Answer: B AACSB: Reflective thinking skills CASE: Content Objective: 3.2 47) ________ is the ability to offer individually tailored products or services using the same production resources as bulk production. A) Mass customization B) Size customization C) Magnitude customization D) Dimension customization Answer: A AACSB: Use of information technology CASE: Content Objective: 3.2 48) An information system can enable a company to focus on a market niche through A) complex trend forecasting. B) tailoring products to the client. C) intensive product trend analysis. D) intensive customer data analysis. Answer: D AACSB: Use of information technology CASE: Content Objective: 3.2 49) Hilton Hotels' use of customer information software to identify the most profitable customers to direct services to is an example of using information systems to A) strengthen customer intimacy. B) differentiate their service. C) focus on market niche. D) increase efficiency. Answer: C AACSB: Use of information technology CASE: Content Objective: 3.2 11 50) Which industries did the first wave of e-commerce transform? A) air travel, books, bill payments B) air travel, books, music C) real estate, air travel, books D) real estate, books, bill payments Answer: B AACSB: Reflective thinking skills CASE: Content Objective: 3.2 51) To what competitive force did the printed encyclopedia industry succumb? A) positioning and rivalry among competitors B) low cost of entry C) substitute products or services D) customer's bargaining power Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.2 52) Internet technology A) makes it easy for rivals to compete on price alone. B) imposes a significant cost of entry, due to infrastructure requirements. C) increases the difference between competitors because of the wide availability of information. D) makes it easy to sustain operational advantages. Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.2 53) The Internet raises the bargaining power of customers by A) creating new opportunities for building loyal customer bases. B) making more products available. C) making information available to everyone. D) lowering transaction costs. Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.2 12 54) The value chain model A) categorizes five related advantages for adding value to a firm's products or services. B) sees the supply chain as the primary activity for adding value. C) categorizes four basic strategies a firm can use to enhance its value chain. D) helps a firm identify points at which information technology can most effectively enhance its competitive position. Answer: D AACSB: Use of information technology CASE: Content Objective: 3.3 55) The primary activities of a firm include A) inbound logistics, operations, outbound logistics, sales and marketing, and service. B) inbound logistics, operations, outbound logistics, technology, and service. C) procurement, inbound logistics, operations, technology, and outbound logistics. D) procurement, operations, technology, sales and marketing, and services. Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.3 56) The secondary activities of a firm include A) inbound logistics, technology, outbound logistics, sales and marketing, and service. B) inbound logistics, organization infrastructure, outbound logistics, technology, and procurement. C) organization infrastructure, human resources, sales and marketing, and technology. D) organization infrastructure, human resources, technology, and procurement. Answer: D AACSB: Reflective thinking skills CASE: Content Objective: 3.3 57) Benchmarking A) compares the efficiency and effectiveness of your business processes against strict standards. B) allows industry participants to influence industry-wide standards. C) is used to measure the speed and responsiveness of information technology. D) synchronizes the business processes of customers, suppliers, and trading partners. Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.3 13 58) The most successful solutions or methods for achieving a business objective are called A) value activities. B) best processes. C) core competencies. D) best practices. Answer: D AACSB: Reflective thinking skills CASE: Content Objective: 3.3 59) A collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively is called a(n) A) industry value chain. B) business ecosystem. C) value web. D) consortia. Answer: C AACSB: Use of information technology CASE: Content Objective: 3.3 60) How are information systems used at the industry level to achieve strategic advantage? A) by building industry-wide, IT-supported consortia and symposia B) by raising the bargaining power of suppliers C) by encouraging the entry of new competitors D) by enforcing standards that reduce the differences between competitors Answer: A AACSB: Use of information technology CASE: Content Objective: 3.3 61) If two organizations pool markets and expertise that result in lower costs and generate profits it is often referred to as creating A) a value web. B) a value chain. C) synergies. D) core competencies. Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.4 14 62) An example of synergy in business is A) Amazon's use of the Internet to sell books. B) JP Morgan Chase's merger with Bank One Corporation, which provided JP Morgan with a network of retail branches in new regions. C) Blockbuster combining traditional video rental with online video rental. D) Wal-Mart's order entry and inventory management system to coordinate with suppliers. Answer: B AACSB: Analytic skills CASE: Analysis Objective: 3.4 63) An information system can enhance core competencies by A) providing better reporting facilities. B) creating educational opportunities for management. C) allowing operational employees to interact with management. D) encouraging the sharing of knowledge across business units. Answer: D AACSB: Use of information technology CASE: Content Objective: 3.4 64) 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 output. This is referred to as A) the point of no return. B) the law of diminishing returns. C) supply and demand. D) network inelasticity. Answer: B AACSB: Use of information technology CASE: Content Objective: 3.4 65) Network economics A) applies the law of diminishing returns to communities of users. B) applies traditional economics to networked users. C) sees the cost of adding new members as inconsequential. D) balances the high cost of adding new members to a community against the lower cost of using network infrastructure. Answer: C AACSB: Reflective thinking skills CASE: Content Objective: 3.4 15 66) In network economics, the value of a commercial software vendor's software products A) increases as more people use them. B) decreases as more people use them. C) increases due to higher marginal gain in output. D) decreases according to the law of diminishing returns. Answer: A AACSB: Analytic skills CASE: Analysis Objective: 3.4 67) A virtual company A) uses the capabilities of other companies without being physically tied to those companies. B) uses Internet technology to maintain a virtual storefront. C) uses Internet technology to maintain a networked community of users. D) provides entirely Internet-driven services, or virtual products. Answer: A AACSB: Reflective thinking skills CASE: Content Objective: 3.4 68) AutoNation's analytic software that mines customer data with a goal of enabling the building of automobiles that customers actually want can be categorized as using information systems for which competitive strategy? A) low-cost leadership B) product differentiation C) focus on market niche D) customer intimacy Answer: D AACSB: Analytic skills CASE: Analysis Objective: 3.2 69) The emergence, for Amazon.com, of new competitors in the sphere of online shopping illustrates what disadvantage posed by the use of information systems to achieve competitive advantage? A) E-commerce is affected by the law of diminishing returns. B) Internet technologies are universal, and therefore usable by all companies. C) Internet shopping produces cost transparency. D) The Internet enables the production or sales of substitute products or services. Answer: B AACSB: Analytic skills CASE: Evaluation Objective: 3.5 16 70) You are consulting for a beverage distributor who is interested in determining the benefits it could achieve from implementing new information systems. What will you advise as the first step? A) Identify the business ecosystem the distributor is in. B) Implement a strategic transition to the new system. C) Perform a strategic systems analysis. D) Benchmark existing systems. Answer: C AACSB: Analytic skills CASE: Synthesis Objective: 3.5 71) ________ is a competitive strategy for creating brand loyalty by developing new and unique products and services that are not easily duplicated by competitors. Answer: Product differentiation AACSB: Reflective thinking skills CASE: Content Objective: 3.2 72) ________ is the ability to offer individually tailored products and services using the same production resources as mass production. Answer: Mass customization AACSB: Use of information technology CASE: Content Objective: 3.2 73) ________ are the expenses incurred by a customer or company in lost time and resources when changing from one supplier or system to a competing supplier or system. Answer: Switching costs AACSB: Reflective thinking skills CASE: Content Objective: 3.2 74) The ________ highlights the primary or support activities that add a margin of value to a firm's products or services where information systems can best be applied to achieve a competitive advantage. Answer: value chain model AACSB: Use of information technology CASE: Content Objective: 3.2 17 75) A(n) ________ activity is one that is directly related to the production and distribution of a firm's products or services. Answer: primary AACSB: Use of information technology CASE: Content Objective: 3.3 76) A(n) ________ activity is a part of the organization's infrastructure, human resources, technology, and procurement that makes the delivery of the firm's products or services possible. Answer: Support activities AACSB: Use of information technology CASE: Content Objective: 3.3 77) Sociotechnical changes affecting a firm adopting new information systems requiring organizational change can be considered ________. Answer: strategic transitions AACSB: Use of information technology CASE: Content Objective: 3.4 78) The ________ is a collection of independent firms that use information technology to coordinate their value chains to collectively produce a product or service for a market. Answer: value web AACSB: Use of information technology CASE: Content Objective: 3.3 79) A(n) ________ is an activity at which a firm excels as a world-class leader. Answer: core competency AACSB: Reflective thinking skills CASE: Content Objective: 3.3 80) A(n) ________ company uses networks to link people, assets, and ideas, enabling it to work with other companies to create products and services without being limited by traditional organizational boundaries or physical locations. Answer: virtual AACSB: Use of information technology CASE: Content Objective: 3.3 18 81) Differentiate between the technical and behavioral definitions of an organization. Answer: The behavioral definition of an organization is that it is a collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolution. The technical definition sees an organization as an entity that takes inputs from the environment and processes these to create products that are then consumed by the environment. The technical view sees capital and labor as interchangeable units, with the ability to rearrange these units at will, whereas the behavioral view sees that rearranging some aspects of the organization, such as an information system, will have important consequences and changes for the organization's other units. AACSB: Analytic skills CASE: Analysis Objective: 3.1 82) List three organizational factors that can prevent a firm in fully realizing the benefits of a new information system, and provide examples for each. Answer: Features of organizations include the organization's culture, politics, and structure. A new information system might be resisted by end users or by managers for political reasons because they are concerned about the political changes the system implies. For example, a new system might lessen the authority of a manager in overseeing the employees, and he or she may not want to relinquish this power. A new information system might challenge the organization's culture and be resisted for this reason. For example, an information system might allow students at a university to take self-managed courses, while the university's basic cultural assumptions include the concept that professors are the purveyors of knowledge. An information system, by allowing the distribution of knowledge, may be better used in a company with a flatter organization. A company with a highly stratified hierarchy may have difficulty adjusting its business processes and structures to an information system that does not follow the same business hierarchy of information. AACSB: Analytic skills CASE: Synthesis Objective: 3.1 19 83) You are advising the owner of Smalltown Computer, a new, local computer repair store that also builds custom computers to order. What competitive strategies could Smalltown Computer exert? Which ones will it have difficulty exercising? Answer: Low-cost leadership: Smalltown Computer may have difficulty competing against the warranty services or computer sales of major national computer manufacturers, such as Dell, but may be able to exercise low-cost leadership in comparison to any other local computer repair stores. Product differentiation: Although many national computer manufacturers sell customized computers to the individual, Smalltown computer may be able to differentiate their product by using superior components and adding more services to their product. Focus on market niche: Smalltown computer could determine a market niche geared to their advantage in being a local store with in-store technology support and assistance. Customer and supplier intimacy: Smalltown computer has an advantage in customer intimacy, in that it can develop relationships with local customers on a face-to-face basis. This advantage could be augmented to offset the low-cost leadership of national manufacturer's such as Dell. Because of much smaller production scales, Smalltown will probably not be able to exercise as much control over suppliers as Dell or other manufacturers. AACSB: Analytic skills CASE: Evaluation Objective: 3.2 84) You are consulting with the owner of Better Bodies, a national chain of gyms. What strategies might Better Bodies use in applying information services to achieve a competitive advantage? Answer: Better Bodies could use computers to monitor and evaluate health and fitness of members and customize workouts in product differentiation strategy. They could use information systems for sales and marketing data research in order to define a niche market that would bring greater profits. They could allow customers to review their health data and add additional information or view statistics to create customer intimacy. If the individual gyms are franchises, then a network could be used for franchisees to share data and research new sales tactics, etc. AACSB: Analytic skills CASE: Synthesis Objective: 3.2 20 85) The text describes Michael Porter's view of the Internet as somewhat negative. What negative influences does Porter see? Describe several positive influences the Internet has on business. Do these outweigh the negative influences? Answer: Answers will vary. An example of a possible answer is: Porter sees the Internet as creating ever more intense rivalry, through allowing new competitors to enter the market, and forcing competition on price alone, raising the bargaining power of customers, and dampening profits. Positive influences of the Internet would be lowering telecommunications costs, creating new opportunities for building brands and loyal customer bases, lowering costs of globalization. You could also view Porter's negative take on lowering the barrier to entry as a positive for new companies. The Internet's influence being negative or positive depends in part on the point of view from which the influence is being seen. For example, a telephone utility is impacted negatively by the emergence of Internet telephony, whereas other industries may be impacted positively either through the use of this technology or through engaging in Internet telephony as a business. AACSB: Analytic skills CASE: Evaluation Objective: 3.2 86) Value chain analysis is useful at the business level to highlight specific activities in the business where information systems are most likely to have a strategic impact. Discuss this model, identify the activities, and describe how the model can be applied to the concept of information technology. Answer: The value chain model identifies specific, critical leverage points where a firm can use information technology most effectively to enhance its competitive positions. Exactly where can it obtain the greatest benefit from strategic information systems? What specific activities can be used to create new products and services, enhance market penetration, lock in customers and suppliers, and lower operational costs? This 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. • Primary activities are most directly related to the production and distribution of the firm's products and services that create value for the customer. Primary activities include: inbound logistics, operations, outbound logistics, sales and marketing, and service. • 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). AACSB: Analytic skills CASE: Analysis Objective: 3.3 21 87) How is the concept of core competency relevant to Smalltown computer, a local computer repair store that builds custom computers? Give examples. Answer: A core competency is an activity for which a company is a world leader, and from this perspective, Smalltown Computer does not have a core competency, as there are thousands of similar firms with longer track records. However, it might be good business practice for Smalltown Computer to define its core competencies in ways that differentiate its products from those of competitors and enable it to provide superior service or products. In defining a core competency, the business management can then determine ways to enable employees to understand and reach higher levels of quality production and service. For example, Smalltown Computer might define a core competency as being able to advise customers as to the types of system they really need, and Smalltown Computer could engage in knowledge gathering activities to help employees assess customer need. AACSB: Analytic skills CASE: Evaluation Objective: 3.4 88) How is Internet technology useful from a network economics perspective? Give examples. Answer: In network economics, the cost of adding a participant in the network is negligible, while the gain in value is relatively much larger. The Internet itself is an example of a successful implementation of network economics the more people participate, the more valuable and essential a commodity it is. If a company were to provide a service through the Internet such as a project management application, the costs to the company of adding another user are small (as the software infrastructure or application is already built), and the more users are signed up the more profit is made. AACSB: Analytic skills CASE: Analysis Objective: 3.4 22 89) Define and describe a business ecosystem. Give an example of a business ecosystem. Answer: A business ecosystem is a collection of loosely coupled but interdependent industries (suppliers, distributors, technology manufacturers, etc.) that provides related services and products. It is similar to a value web, except that cooperation takes place across many industries rather than many firms. Business ecosystems can be characterized as having one or a few keystone firms that dominate the ecosystem and create the platforms used by other niche firms. Keystone firms in the Microsoft ecosystem include Microsoft and technology producers such as Intel and IBM. Niche firms include thousands of software application firms, software developers, service firms, networking firms, and consulting firms that both support and rely on the Microsoft products. Another example of an business ecosystem is the mobile Internet platform. In this ecosystem there are four industries: device makers (Apple iPhone, RIM BlackBerry, Motorola, LG, and others), wireless telecommunication firms (AT&T, Verizon, T-Mobile, Sprint, and others), independent software applications providers (generally small firms selling games, applications, and ring tones), and Internet service providers (who participate as providers of Internet service to the mobile platform). AACSB: Analytic skills CASE: Analysis Objective: 3.3 90) Describe in detail the major factors to determine when performing a strategic systems analysis. Answer: One major factor is the structure of the industry the firm is in. For example, what competitive forces are at work in the industry, and what is the basis for competition? What is the nature and direction of change in the industry, and how does the industry use IT. A second major factor is determining the firm and industry value chains. For example, how is the company creating value for the customer? Are best practices being used and core competencies leveraged? Is the industry supply chain or customer base changing, and what will the effect be? Can the firm benefit from strategic partnerships or value webs? And where in the value chain will information systems provide the greatest value to the firm. The third major factor to consider is has the firm aligned IT with its business strategy and goals. Have these goals been correctly stated or defined? Is IT improving the right business processes and activities in accordance with the firm's goals? Are we using the right metrics to measure progress? AACSB: Analytic skills CASE: Analysis Objective: 3.5 23