Foundations of Information

Systems

PART3: USING IS FOR COMPETITIVE ADVANTAGE

CHAPTER 9:SOCIAL NETWORKING, E-COMMERCE, AND THE WEB
Chapter 9: Social Networking, e-
Commerce, and the Web

Q1. What is a social media information system (SMIS)?

Q2. How do SMIS advance organizational strategy?
Q3. How do SMIS increase social capital?
Q4. How do (some) companies earn revenue from social media?
Q5. How can organizations address SMIS security concerns?
Q6. Where is social media taking us?
Q7. What is eCommerce, and where is it taking us?

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Q1. What Is a Social Media
Information System (SMIS)?
•Social media (SM)
◦ Use of IT to support content sharing of content among networks
◦ Enables communities of practice
◦ People related by common interest

•Social media information system (SMIS)

◦ IS for sharing content among networks of users

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Social Media is a Convergence of
Many Disciplines

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Three SMIS Roles

•Social media providers

◦ Facebook, LinkedIn, Twitter, Instagram, and Pinterest provide platforms
◦ Attracting, targeting demographic groups
•Users
◦ Individuals and organizations
•Communities
◦ Mutual interests that transcend familial, geographic, and organizational
boundaries

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 Social Media Providers

The size of some well-known SM providers as of September 2017

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Users

•More than 73 percent of people with Internet access use SM

•40 percent use SM via their mobile phones
•Many users are a particular demographic:
◦ Pinterest 70% female
◦ LinkedIn, 80% are 35 years or older
•Most of Fortune 500 organizations maintain a Twitter account
(almost 90%)
◦ More than 80% have Facebook
◦ More than 90% use LinkedIn

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Communities

Communities are formed

based on mutual interests
and transcend familial,
geographic, and
organizational boundaries.

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Five Components of SMIS

•Same 5 components as all IS:

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Q2: How Do SMIS Advance
Organizational Strategy?

•Strategy determines value chain

◦ Value chains determine business processes
◦ Processes determine SMIS requirements
•How do value chains determine dynamic processes?
◦ Dynamic process flows cannot be designed or diagrammed

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SM in Value Chain Activities

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Social Media and the Sales and
Marketing Activity

•Social CRM
◦ A dynamic, SM-based CRM process
◦ Each customer crafts relationship
◦ Wikis, blogs, discussion lists, frequently asked questions, sites for user reviews and
commentary, other dynamic content
◦ Customers search content, contribute reviews and commentary, ask
questions, create user groups, etc.
◦ Not centered on customer lifetime value

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Social CRM

13 https://youtu.be/1SONmvMzbog
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Amazon Vine Program

https://youtu.be/pDR96Yl6zNY
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Social Media and Customer Service

•Relationships emerge from joint activity, customers have as

much control as companies
•Product users freely help each other solve problems
•Selling to, or through, developer networks most successful
◦ Microsoft's MVP program
•Peer-to-peer support risks loss of control

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Microsoft's MVP program

https://youtu.be/j1jnSCfFDCQ
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Social Media and Inbound and
Outbound Logistics

•Numerous solution ideas and rapid evaluation of them

•Better solutions to complex supply chain problems
•Facilitate user created content and feedback among networks
needed for problem solving
•Loss of privacy
◦ Open discussion of problem definitions, causes, and solution constraints
◦ Problem solving in front of your competitors

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Social Media and Manufacturing and
Operations

•Improve communication channels within organization and

externally with consumers, design products, develop supplier
relationships, and improve operational efficiencies
•Crowdsourcing: employing users to participate in product
design or product redesign
•Enterprise social networking sites; e.g. Yammer, receive real-
time feedback to resolve internal operations inefficiencies

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Social Media and Human Resources

•Employee communications using internal personnel sites

◦ Ex: MySite and MyProfile in SharePoint
•Finding employee prospects, recruiting candidates, candidate
evaluation
•Place for employees to post their expertise
•Risks:
◦ Forming erroneous conclusions about employees
◦ Becoming defender of belief or pushing unpopular
management message

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Q3: How Do SMIS Increase Social
Capital?

•Capital
◦ Investment of resources for future profit
•Types of business capital
◦ Physical capital: produce goods and services (factories, machines,
manufacturing equipment)
◦ Human capital: human knowledge and skills investments
◦ Social capital: social relations with expectation of marketplace returns

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What Is the Value of Social Capital?

•We benefit in four ways:

1. Information
• About opportunities, alternatives, problems, and other factors
important to professionally and personally
• E.g. personal: recommending an instructor for a course;
professional: introducing you to a potential new supplier

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What Is the Value of Social Capital?
(Cont’d)

2. Influence
• An opportunity to influence decision makers and peers
• E.g. playing golf with the CEO of your company
3. Social credentials
• Being linked to a network of highly regarded contacts is a
form of social credentials

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What Is the Value of Social Capital?
(Cont’d)

4. Personal reinforcement
• Reinforces a professional’s identity, image, and position in
organization or industry
• Reinforces the way you define yourself
• E.g. Being friends with bankers, financial investors may
reinforce your identity as a financial professional

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Gain Social Capital for Professionals

•The value of social capital is determined by the number of of

relationships, strength of relationships, and resources controlled
•You can gain social capital:
◦ By adding more friends and strengthening relationships with existing
friends
◦ By adding friends and strengthening relationships with people who
control resources important to you

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How Do Social Networks Add Value to
Businesses?

•Organizations have social capital just as humans do

•Progressive organizations:
◦ Presence on Facebook, LinkedIn, Twitter, and other SN sites
◦ Include links to their social networks on their website
◦ Encourage customers and interested parties to leave comments

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Using Social Networking to Increase the
Number of Relationships

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Using Social Networks to Increase the
Strength of Relationships

Strength of a relationship
•The likelihood that the other entity will do something that
benefits your organization
•Positive reviews, post pictures using organization’s products or
services, tweet about upcoming product releases, and so on
•Frequent interactions strengthen relationships

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Using Social Networks to Connect to
Those with More Resources

•Social Capital = Number of Relationships × Relationship

Strength × Entity Resources
•Huge network of people with few resources less valuable than
smaller network with substantial resources
•Resources must be relevant
◦ E.g. followers of an influencer are mostly college students and you are
selling kids’ toys

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Q4: How Do (Some) Companies Earn
Revenue from Social Media?

•How do the SM companies monetize?

•You Are the Product
◦ “If you’re not paying, you’re the product.”
◦ Renting your eyeballs to an advertiser

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Revenue Models for Social Media

•Advertising
◦ Pay-per-click revenue model
◦ Conversion rate:
◦ Frequency someone clicks on ad makes a purchase, “likes” a site, or takes some
other action desired by advertiser
•Freemium
◦ Offers users a basic service for free, then charges a premium for
upgrades or advanced features
•Sales
◦ Apps and virtual goods, affiliate commissions, donations

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Facebook Advertisements

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https://youtu.be/L0AJABsw9Ww 31
Q5: How Can Organizations Address
SMIS Security Concerns?

Managing the Risk of Employee Communication

•Develop and publicize a social media policy
◦ Delineate employees’ rights and responsibilities
◦ Index to 100 different policies at Social Media Today Web site*
•Intel's Three Pillars of SM Policies
◦ Disclose
◦ Protect
◦ Use Common Sense
* https://www.socialmediatoday.com/content/social-media-emplo
yee-policy-examples-over-100-organizations

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Intel’s Rules of Social Media
Engagement

Source: Intel Social Media Guidelines, Intel, accessed May 7, 2015, www.intel.com/content/www/us/en/legal/intel-social-media-guidelines.html.

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Q5: How Can Organizations Address
SMIS Security Concerns? (Cont’d)

Managing the Risk of Inappropriate Content

•User-generated content (UGC)
•Problems from external sources
◦ Junk and crackpot contributions
◦ Inappropriate content
◦ Unfavorable reviews
◦ Mutinous movements

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Responding to Social Networking
Problems

•Leave it
•Respond to it
•Delete it
•General rule
◦ “Never wrestle with a pig; you’ll get dirty and the pig will enjoy it.”

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Q5: How Can Organizations Address
SMIS Security Concerns? (Cont’d)

Internal Risks from Social Media

Threats to information security, increased organizational liability,
decreased employee productivity
•Directly affect ability to secure information resources
◦ Innocuous comments inadvertently leak information used to secure
access to organizational resources
◦ Revealing personal information to hackers
◦ Unintentionally leak secret information

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Internal Risks from Social Media

•Employees inadvertently increase corporate liability when they

use social media
◦ Leak confidential information
◦ E.g. tweeting about students, patients can have legal consequences
•Reduced employee productivity
◦ 64% of employees visit non-work-related websites each day
◦ Tumblr (57%), Facebook (52%), Twitter (17%), Instagram (11%), and
SnapChat (4%)

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How Social Media Can Cost Someone
Their Job

38 https://youtu.be/ZX1rHHp8WDw
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Q6: Where Is Social Media Taking Us?

•Monumental changes will continue to occur over the next several

years
•Chief Digital Officer (CDO) a position
◦ A position responsible for developing and managing innovative social
media programs
•BYOD policy
•Mobility + cloud + social media

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Q7: What Is Ecommerce, and How Is
It Used?

•Buying and selling of goods and services over public and private
computer networks
•This definition restricts ecommerce to buying and selling
transactions
•Checking the weather at yahoo.ca is not ecommerce, but buying a
weather service subscription that is paid for and delivered over
the Internet is

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Ecommerce

Ecommerce has several implications:

•Consumer perspective
◦ Provides much more information
•Technology perspective
◦ Defines the need for additional infrastructure
•Management and governments perspective
◦ Coordination for smooth business operations
◦ Security must be enabled

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Ecommerce Categories

•Merchant companies
◦ take title to the goods they sell
◦ buy goods and resell them
◦ sell services that they provide

• Nonmerchant companies
◦ arrange for the purchase and sale of
goods without ever owning or
taking title to those goods
◦ sell services provided by others

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Ecommerce Merchant Companies

•Business-to-Consumer (B2C)
◦ Selling directly to consumer
•Business-to-Business (B2B)
◦ Sales between companies
•Business-to-Government (B2G)
◦ Sales between companies and governmental organizations

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Examples of B2B, B2G, and B2C

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Non-Merchant Ecommerce

•E-commerce auctions match buyers and sellers by using an

ecommerce version of a standard auction, e.g. eBay
•Clearinghouses provide goods and services at a stated price and
arrange for the delivery of the goods, but they never take title, e.g.
Amazon selling others’ products
•Electronic exchanges match buyers and sellers; the business
process is similar to that of a stock exchange, e.g. priceline.com

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Benefits of Ecommerce

•Leads to greater market efficiencies

•Disintermediation: removal of intermediaries between parties
◦ Higher revenues for manufacturers
◦ Lower price for buyers

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Disintermediation vs Intermediation

•In some cases, intermediaries have grown into the spaces:

Trivago, Expedia, etc., rather than users having to buy direct (re-
intermediation)

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Benefits of Ecommerce

•Improves flow of price information

◦ Sites provide price comparisons
◦ Sellers have access to better information about what customers will pay
•Price elasticity: how much demand rises/falls with changes in
price
◦ Experiments with customers

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The Challenges of Ecommerce

•Channel conflict: if a company sells to a retailer, then adds a

channel directly to consumers, will the retailer drop them?
•Price conflict: if manufacturer sells direct to consumer at lower
price than retailer, this will disrupt retailer
•Logistics expense: Manufacturers need to factor in costs of
entering and processing orders in small quantities

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The Challenges of Ecommerce (Cont’d)

•Customer service expense: manufacturers will need to support

customers that aren’t knowledgeable retailers
•Showrooming: merchants lose money if customer tries product
out in-store, then later purchases it online at a lower cost

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