Online Brief 1.1
Environmental Business Pressures
The following are the major environmental pressures. Powerful Customers. Consumer sophistication and expectations increase as customers become more knowledgeable about the availability and quality of products and services. On the Web, consumers can now easily ﬁnd detailed information about products and services, compare prices, and buy at electronic auctions. As we mentioned earlier, in some cases buyers can even name the price they are willing to pay. Therefore, consumers have considerable power (Zureik and Mowshowitz, 2005). Companies need to be able to deliver information quickly to satisfy these customers. Customers today also want customized products and services, with high quality and low prices. Vendors must respond, or lose business. For example, a large department store in Japan offers refrigerators in 24 different colors, with a delivery time of just a few days. Dell Computer will take an order over the Internet for a computer, made to speciﬁcations of your choice, and will deliver that computer to your home within 3 to 7 days. And Nike will let you design your own sneakers online and will make and ship them to arrive at your home in two weeks (nike.com). Finally, automakers are selling build-to-order cars whose conﬁguration is done on the Internet (see jaguar.com). The old saying “The customer is king” has never before been so true. The importance of customers has created competition over customers. This competition forces organizations to increase efforts to acquire and retain customers. An enterprisewide effort to do just that is called customer relationship management (CRM) . This topic will be addressed in detail in Chapter 8. (see en.wikipedia.org/wiki/customer_relationship_management)
The market pressures that organizations feel come from a global economy and strong competition, the changing nature of the workforce, and powerful customers. (These are shown in a tan color in Figure 1.6.) Global Economy and Strong Competition. Within the last 20 or so years, the foundation necessary for a global economy has taken shape. This move to globalization has been facilitated by advanced telecommunication networks and especially by the Internet. Regional agreements such as the North American Free Trade Agreement (NAFTA; composed of the United States, Canada, and Mexico) and the creation of a uniﬁed European market with a single currency, the euro, have contributed to increased world trade. Further, reduction of trade barriers has allowed products and services to ﬂow more freely around the globe. One particular pressure that exists for businesses in a global market is the cost of labor, which differs widely from one country to another. While the hourly industrial wage rate (excluding beneﬁts) is over $25 in some developed countries, it can be less than $1 in many developing countries, including those in Asia, South America, Eastern Europe, and Africa. Therefore, many companies in labor-intensive industries have found it necessary to move their manufacturing facilities to countries with low labor costs. Such a global strategy requires extensive communication and collaboration, frequently in several languages and under several cultural, ethical, and legal conditions. This can be greatly facilitated with IT. Using IT in a multicountry/multicultural environment may create ethical issues, such as invasion of privacy of individuals whose private data are taken across borders. Global competition is especially intensiﬁed when governments become involved through the use of subsidies, tax policies, import/export regulations, and other incentives. Rapid and inexpensive communication and transportation modes increase the magnitude of international trade even further. Competition is now becoming truly global. Need for Real-Time Operations. The world is moving faster and faster. Decisions need to be...