Strategic Implications of Information Technology on Overstock

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Introduction

In the global economy today, it’s not business as usual anymore. Businesses are spending millions of dollars on Information Systems software, hardware and communication equipment. The current tide has forced traditional firms to redesign their business operation for survival. This is in a bid to swiftly “respond to rapidly changing customer demand, reduce inventories to the lowest possible levels, and achieve higher levels of operational efficiency, especially in the supply chain” (Laudon & Laudon, 2008) E-commerce firm, Overstock would not have been conceived without extensive investments in Information systems. The firm business strategies revolve around information systems. Overstock achievement of business objective in the next three years will largely depend on what its system will be able to accomplish. There is a need for continued investment in information systems if the firm is to increase its market share; which calls for fierce competition with already well established e-commerce firms like Amazon and e-bay.

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Overstock Key Strategic Business Objectives

According to Kenneth Laudon, Management information systems helps companies achieve “Operational excellence, provide new products and services, customer and supplier intimacy, improved decision making, competitive advantage and survival” (Laudon & Laudon, 2008). If overstock is to improve efficiency in its business operation and achieve higher profitability, managers will have to use information system and technologies as the best tools to achieve this objective.

Information systems and adaption of latest technologies is not an option if Overstock wants to provide new products and services in the next three year. The firm’s competitive advantage will depend mainly on how it expands its service and product offering to respond to consumer’s unique demand. The likelihood of a customer returning to Overstock site to purchase another product will largely depend on how well the customer is served. Likewise, suppliers will provide vital input if they feel that overstock is engaged to their contributions. This will lead to increased revenues and profits. To achieve this objective, Overstock will have to continue redesigning their information systems so that they capture customer preference and tastes and the supplier’s inputs. This creates customer and supplier intimacy, leading to increased revenues and high profits.

Overstock managers need to have the right information “at the right time to make informed decision” (Laudon & Laudon, 2008). The firms cannot afford to operate on a guesses, forecasts and luck which mostly lead to poor response, miscalculations and loss of customers. Information systems will enable Overstock managers to have access to synchronized data from the market place when making decision. Achievement of the above objectives will give overstock competitive advantage. With increased government regulation and statues, that creates legal requirements in regards to records handling, overstock, will benefit from information systems and technologies to achieve this objective, which is a key to business survival.

Information System

Overstock operation involves multiple specialized processes, carried out by different people at different level of the business organization. This results in different kind of business Information Systems need in the smooth running of Overstock e-commerce business. These systems include Corporate Applications, Information security, Executive Information System, Expert Systems, Artificial Intelligence, Decision support system, Groupware, Intranet /Extranets etc.

Corporate Applications

Getting all the systems in Overstock to work together will be determined by the nature and robustness of Corporate Applications. Corporate applications “span functional areas focus on executive business processes across the business firms and include all levels of management” (Laudon & Laudon, 2008). Corporate applications will help Overstock to be more productive and flexible through seamless coordination of business processes and integration of major processes. This will result to efficient management of available resources and strong customer service. The performance and success of Overstock will not rely on one single Application system but rather on combination of different application system all which work together to enhance the performance of the firms as a whole. This systems includes enterprise system, Knowledge Management system, customer relationship management systems, and supply chain management system.

Enterprise Systems

Using Enterprise System, Overstock managers will be in a position to easily assemble data they “need for a comprehensive, overall picture of the organization’s operation” (Laudon & Laudon, 2008) Data collected by Overstock accounting, sales, human resource and marketing will be kept in Central repository in the Enterprise System. This information, which was previously fragmented, will be easily shared within the firm making all parts of Overcome operation to work together with a clear objective.

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Supply Chain Management systems (SCMS)

One of the main pedestals of Overstock business operation is the suppliers. Without a reliable supply chain, the firms operations will come to a halt. This creates a need for a robust Supply Chain Management system. The information provided by this system help suppliers, logistic companies, distributors and purchasing firms to “share information about orders, production, inventory levels, and delivery of products” (Oz, 2008). This way, Overstock can source and deliver goods efficiently. A weak Supply Chain Management system, which lack accurate information, will lead to overstock inability to move products to customers.

Customer Relationship Management Systems (CRMS)

Overstock success depends with how well the firm attract and retain customers. In this regards, there is a need for Customer Relationship Management Systems that manages Overstock’s relationship with customers. Efficient CRMS will provide information that will help coordinate all business processes that directly deal with customers in “sales, marketing, and service to optimize revenue, customer satisfaction, and customer retention” (Laudon & Laudon, 2008). The information captured by these systems will help Overstock “Identify, attract and retain the most profitable customers and provide better service to existing customers” (McLeod & Sche, 2006)and ultimately increase sales.

Knowledge Management system

Business firm knowledge data base is the driving forces that lead to firm’s success or failure. Overstock needs a strong Knowledge Management system that collects relevant knowledge and experience in the firm. These systems will then make this knowledge to be available whenever it’s needed to support the firm’s operations. Overstock success will to some extents depend with the current unique, knowledge that the firm possess. Knowledge manage systems need to capture this knowledge and use it for long term strategic benefits.

Information Security

Being an e-commerce firm, Overstock face many challenges in regards to information security. Most of the data handled by the firm is in electronic form, making it more vulnerable. The potential for abuse, fraud and unauthorized access to Overstock Systems is not limited to a single point but rather can occur at any point where the internet is accessed. The firm deal with sensitive confidential customers information, and as such, information security must be a central consideration in all business operations.

Security threat must be minimized at all levels of operation. This means that Overstock must put in place Information system and use latest technologies that protect the firm’s information from unauthorized access. Information security systems must be able to withstand disruptions, attacks and malicious software. Besides this attacks, Overstock must put in place an email monitoring system to minimize the risk of employees stealing the firms operation secrets, confidential customer information’s and financial data which could end up in the hands of authorized people and competitors.

One of the primary concerns to e-commerce is Denial-of-Service-Attack, where hackers “flood a network server or web server with many thousands of false communications or request of services to crash the network” (Dean, 2006). In the event of such attacks to Overstock servers, the website will most likely shut down. This will make it hard for legitimate customers to access the website or make purchases. Overstock System must be robust enough to withstand such attacks.

Executive Information System (EIS)

For Overstock senior managers to be in a position to effectively address strategic issues, and long-term trends, there is need for strong Executive Information Systems. Using EIS, senior manager will be in a position to know the products that customer will be demanding most in the next three years, long term trends in e-commerce and where the firm will fit in future. EIS will continue to play a key role in addressing “non routine decisions requiring judgment, evaluation, and insight because there is no agreed-on procedure for arriving at a solution” (Oz, 2008)

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Overstock executive information system must make use of data from internal systems and eternal events such as competitor’s strategy, changes in taxations and government anticipated regulations. EIS “compress, filter and track critical data, displaying the data of greatest importance to senior managers” (Laudon & Laudon, 2008). Overstock CEO must be able to access minute to minute analysis of the firm’s financial position as measured by cash flow, inventory, working capital etc.

Expert Systems

According to Kenneth Laudon “Expert Systems are intelligent technique for capturing tacit knowledge in a very specific and limited domain of human expertise” (Laudon & Laudon, 2008). Overstock need to have fully functional experts systems that capture the knowledge of the best, experienced employee. When collected, this knowledge will be organized in a software system for use by other workers. A fully incorporated experts systems will help Overstock operate and make critical business decision with fewer people.

In this regards, all knowledge available within the firm from employee in all department must be modeled in a way that a computer understand and stored in a knowledge base. Customers with issues whose solution can be found on the database must be able to access the system and get the right information with reduced human intervention. This will help lower the cost of operations and maximization of resources.

Decision Support Systems (DSS)

Overstock middle managers needs a reliable DSS that helps in controlling, monitoring, administrative duties and decision making. These systems are critical because they help managers to know how the firm is performing. The e-commerce is rapidly changing; as such the use of DSS by middle manager can help them focus on “problems that are unique and swiftly changing for which the procedure for arriving at a solution may not be fully predefined in advance” (Laudon & Laudon, 2008). Decision Support System will continue to be an integral part of Overstock business strategy. Information from online transaction processing system, external source such as competitor product pricing etc are needed on continuous bases in order for managers to analyze and make realist decisions.

Groupware

As Overstock continues to grow, there is a continued need for information sharing between various departments and workgroups. Employees need to share ideas on a continuous basis. Groupware or collaborative software then becomes vital to the firm’s operations. Using shareware, Overstock staff will share information in both real-time and at different times. They will also need to share information even when they are working form different locations. Emails, videophones, chat and newsgroup must be redesigned, enhanced and fully supported a part of groupware. Overstock stands to benefit because groupware will “facilitate communications, enable telecommuting, cut down on travel costs, and facilitate group problem solving” (Foraker, 2010).

Intranets and Extranets

The flow of information between overstock, supplier, and customer is critical to the success of the firm. This makes Intranets and extranets as important as other systems in that they “increase integration and expedite the flow of information within the firm” (Laudon & Laudon, 2008). Overstock really on intranets on a daily basis to distribute information to employee. On the other hand, the firm makes use of extranets to extend to suppliers and other authorized users that need to access the firm information.

Customers who make purchase from Overstock e-commerce site should be able to track the products online. The firms Information system should be able to provide accurate information and the shipping status of the product. Delivery companies also need to access customer shipping information from Overstock information Systems for accurate shipping and delivery. Such external queries need to be done in a safe way that doesn’t compromise the integrity of the firm’s information system. These two technological platforms will continue to play a significant role in the realization of the firm’s objective.

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Conclusion

The rapidly changing customer’s demand, the need to reduce inventory to the lowest possible levels and the desire achieve higher levels of operational efficiency calls for redesigning and re-evaluation of business strategies. Most companies are turning to information technologies as the vehicle through which they achieve these objectives. Being an e-commerce business, Overstock business concept would not have been conceivable without investment in information technology. In this regards, the success of firm in the next three years will largely depend with how well the firm adapt new technology and keep its Information systems up to date.

The nature of Overstock is such that, its business operations involves many different processes, different sets of employee skills and different level of business organizations. There is no one single system that can handle all these operations. This creates a need for specialized, robust individual information system systems to handle all these processes. These Systems include Corporate Applications, Information security, Executive Information System, Expert Systems, Decision support system, Groupware, Intranet and Extranets etc. These systems will continue to play a critical role in overall success of Overstock. They systems must be modeled in a way such that they provide managers, staffs, customer and suppliers with accurate information that supports critical decision making.

Works Cited

Dean, T. (2006). Network+ Guide to Networks. Boston: Thomson Course Technology.

Foraker, F. (2010). Introduction to Collaborative Software. Web.

Laudon, K., & Laudon, J. (2008). Management Information Systems. New Jersy: Pearson Prentice Hall.

McLeod, R., & Sche, G. (2006). Management information systems. Charlotte: Prentice Hall.

Oz, E. (2008). Management Information Systems. Florence: Cengage Learning,.

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