Electronic commerce or in short e-commerce, refers to business activities like selling and purchasing of products and services carried

out over electronic systems like the Internet and computer networks. The history of e-commerce dates back to 1970, when for the first time, electronic data interchange (EDI) and electronic fund transfer were introduced. Since then, a rapid growth of e-commerce has pervaded almost every aspect of business such as supply chain management, transaction processing, Internet marketing, and inventory management. But like any conventional business, electronic commerce is also characterized by some advantages and inherent drawbacks. Let's have a look at some of these important advantages and disadvantages of electronic commerce. Advantages The greatest and the most important advantage of e-commerce, is that it enables a business concern or individual to reach the global market. It caters to the demands of both the national and the international market, as your business activities are no longer restricted by geographical boundaries. With the help of electronic commerce, even small enterprises can access the global market for selling and purchasing products and services. Even time restrictions are nonexistent while conducting businesses, as ecommerce empowers one to execute business transactions 24 hours a day and even on holidays and weekends. This in turn significantly increases sales and profit. Electronic commerce gives the customers the opportunity to look for cheaper and quality products. With the help of e-commerce, consumers can easily research on a specific product and sometimes even find out the original manufacturer to purchase a product at a much cheaper price than that charged by the wholesaler. Online commerce also offers buyers a wider range of products and services to choose from, as opposed to conventional shopping, without the hassles of lugging around heavy shopping bags and getting stuck in messy traffic jams, which turns out to be more convenient and timesaving. Besides these, people also come across reviews posted by other customers, about the products purchased from a particular e-commerce site, which can help make purchasing decisions. / For business concerns, e-commerce significantly cuts down the cost associated with marketing, customer care, processing, information storage and inventory management. It reduces the time period involved with business process re-engineering, customization of products to meet the demand of particular customers, increasing productivity and customer care service. Electronic commerce reduces the burden of infrastructure to conduct businesses like physical store setups and thereby raises the amount of funds available for profitable investment. It also enables efficient customer care service by collecting and managing information related to customer behavior, which in turn helps develop and adopt an efficient marketing and promotional strategy. Disadvantages Electronic commerce is also characterized by some technological and inherent limitations which has restricted the number of people using this revolutionary system. One important disadvantage of e-commerce is that the Internet has still not touched the lives of a great number of people, either due to the lack of knowledge or trust. A large number of people do not use the Internet for any kind of financial transaction. Some people simply refuse to trust the authenticity of completely impersonal business transactions, as in the case of e-commerce. Many people have reservations regarding the requirement to disclose personal and private information for security concerns. Many times, the legitimacy and authenticity of different e-commerce sites have also been questioned.

Another limitation of e-commerce is that it is not suitable for perishable commodities like food items. People prefer to shop in the conventional way than to use e-commerce for purchasing food products and objects that need to be felt and touched before actually making the purchase. So e-commerce is not suitable for such business sectors. The time period required for delivering physical products can also be quite significant in case of e-commerce. A lot of phone calls and e-mails may be required till you get your desired products. However, returning the product and getting a refund can be even more troublesome and time-consuming than purchasing, in case you are not satisfied with a particular product. Thus, evaluating the various pros and cons of electronic commerce, we can say that the advantages of e-commerce have the potential to outweigh the disadvantages. A proper strategy to address the technical issues and to build up customers' trust in the system can change the present scenario and help e-commerce adapt to the changing needs of the world. Read more at Buzzle: http://www.buzzle.com/articles/advantages-and-disadvantagesof-electronic-commerce-e-commerce.html

advantages and disadvantages of E-Commerce

E-commerce provides many new ways for businesses and consumers to communicate and conduct business. There are a number of advantages and disadvantages of conducting business in this manner.

E-commerce advantages
Some advantages that can be achieved from e-commerce include:

Being able to conduct business

E-commerce systems can operate all day every day and every hour. Your physical storefront does not need to be open in order for customers and suppliers to be doing business with you electronically. This is the greatest way to conduct the business.

Access the global marketplace

The Internet spans the world, and it is possible to do business with any business or person who is connected to the Internet. Simple local businesses such as specialist record stores are able to market and sell their offerings internationally using e-

commerce. This global opportunity is assisted by the fact that, unlike traditional communications methods, users are not charged according to the distance over which they are communicating.

No Need to Wait

Electronic communications allow messages to traverse the world almost instantaneously. There is no need to wait weeks for a catalogue to arrive by post: that communications delay is not a part of the Internet / e-commerce world.

High Market space

The market place in which web-based businesses operate is the global market. It may not be evident to them, but many businesses are already facing international competition from web-enabled businesses.

Opportunity to reduce costs

This is the greatest way to purchase the product. The Internet makes it very easy to 'shop around' for products and services that may be cheaper or more effective than we might otherwise settle for. It is sometimes possible to, through some online research, identify original manufacturers for some goods - thereby bypassing wholesalers and achieving a cheaper price.

Computer platform-independent

'Many, if not most, computers have the ability to communicate via the Internet independent of operating systems and hardware. Customers are not limited by existing hardware systems.

Efficient applications development environment

In many respects, applications can be more efficiently developed and distributed because the can be built without regard to the customer's or the business partner's

technology platform. Application updates do not have to be manually installed on computers. Rather, Internet-related technologies provide this capability inherently through automatic deployment of software.

Allowing customer self service and 'customer outsourcing

People can interact with businesses at any hour of the day that it is convenient to them, and because these interactions are initiated by customers, the customers also provide a lot of the data for the transaction that may otherwise need to be entered by business staff. This means that some of the work and costs are effectively shifted to customers; this is referred to as customer outsourcing.

E-commerce disadvantages
Some disadvantages and constraints of e-commerce include the following.

Time for delivery of physical products It is possible to visit a local music store and walk out with a compact disc or a bookstore and leave with a book. E-commerce is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. In some cases there are ways around this, for example, with electronic files of the music or books being accessed across the Internet, but then these are not physical goods.

Physical product & delivery uncertainty

When you walk out of a shop with an item, it's yours. You have it; you know what it is, where it is and how it looks. In some respects e-commerce purchases are made on trust. This is because, firstly, not having had physical access to the product, a purchase is made on an expectation of what that product is and its condition. Secondly, because supplying businesses can be conducted across the world, it can be uncertain whether or not they are legitimate businesses and are not just going to take your money. It's pretty hard to knock on their door to complain or seek legal recourse! Thirdly, even if the item is sent, it is easy to start wondering whether or not it will ever arrive.

Perishable goods

Forget about ordering a single gelato ice cream from a shop in Rome! Though specialized or refrigerated transport can be used, goods bought and sold via the Internet tend to be durable and non-perishable: they need to survive the trip from the supplier to the purchasing business or consumer. This shifts the bias for perishable and/or non-durable goods back towards traditional supply chain arrangements, or towards relatively more local e-commerce-based purchases, sales and distribution. In contrast, durable goods can be traded from almost anyone to almost anyone else, sparking competition for lower prices. In some cases this leads to disintermediation in which intermediary people and businesses are bypassed by consumers and by other businesses that are seeking to purchase more directly from manufacturers.

Limited sensory information

The Internet is an effective conduit for visual and auditory information: seeing pictures, hearing sounds and reading text. However it does not allow full scope for our senses: we can see pictures of the flowers, but not smell their fragrance; we can see pictures of a hammer, but not feel its weight or balance. Further, when we pick up and inspect something, we choose what we look at and how we look at it. This is not the case on the Internet. If we were looking at buying a car on the Internet, we would see the pictures the seller had chosen for us to see but not the things we might look for if we were able to see it in person. And, taking into account our other senses, we can't test the car to hear the sound of the engine as it changes gears or sense the smell and feel of the leather seats. There are many ways in which the Internet does not convey the richness of experiences of the world. This lack of sensory information means that people are often much more comfortable buying via the Internet generic goods - things that they have seen or experienced before and aboutwhich there is little ambiguity, rather than unique or complex things.

Returning goods

Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Will the goods get back to their source? Who pays for the return postage? Will the refund be paid? Will I be left with nothing? How long will it take? Contrast this with the offline experience of returning goods to a shop.

Privacy, security, payment, identity, contract

Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (e.g. credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply.

Defined services & the unexpected

E-commerce is an effective means for managing the transaction of known and established services, that is, things that are everyday. It is not suitable for dealing with the new or unexpected. For example, a transport company used to dealing with simple packages being asked if it can transport a hippopotamus, or a customer asking for a book order to be wrapped in blue and white polka dot paper with a bow. Such requests need human intervention to investigate and resolve.

Personal service Although some human interaction can be facilitated via the web, e-commerce can not provide the richness of interaction provided by personal service. For most businesses, ecommerce methods provide the equivalent of an information-rich counter attendant rather than a salesperson. This also means that feedback about how people react to product and service offerings also tends to be more granular or perhaps lost using ecommerce approaches. If your only feedback is that people are (or are not) buying your products or services online, this is inadequate for evaluating how to change or improve your e-commerce strategies and/or product and service offerings. Successful business use of e-commerce typically involves strategies for gaining and applying customer feedback. This helps businesses to understand, anticipate and meet changing online customer needs and preferences, which is critical because of the comparatively rapid rate of ongoing Internet-based change.

Size and number of transactions

E-commerce is most often conducted using credit card facilities for payments, and as a result very small and very large transactions tend not to be conducted online. The size of transactions is also impacted by the economics of transporting physical goods. For example, any benefits or conveniences of buying a box of pens online from a US-based business tend to be eclipsed by the cost of having to pay for them to be delivered to you in Australia. The delivery costs also mean that buying individual items from a range of

different overseas businesses is significantly more expensive than buying all of the goods from one overseas business because the goods can be packaged and shipped together. Reflecting some of the comments above, the following chart (Figure 1.6) shows some of the complaints made by Australian e-consumers.
MIS vs DSS MIS and DSS are two abbreviations that are often heard in the field of Business Management. They differ in a few aspects. It is important to know that MIS stands for Management Information Systems whereas DSS stands for Decision Support Systems. It is interesting to note that MIS is a type of link that assists in the communication between managers of various disciplines in a business firm or an organization. On the whole it plays a very important role in building up communication among the corporate people. DSS on the other hand is an improvement of the concept of MIS. It is true that both of them differ in terms of their focus. DSS focuses more on leadership. It is all about senior management in a firm providing innovative vision. On the other hand MIS focuses more on the information gathered and the information that has poured from different quarters. Experts on managerial behavior say that DSS focuses more on decision making. MIS on the other hand focuses more on planning the report of various topics concerned with the organization that would assist the managers to take vital decisions pertaining to the functioning of the organization. One of the finest differences between MIS and DSS is that MIS focuses on operational efficiency whereas DSS focuses more on making effective decision or in other words helping the company to do the right thing. Flow of information is from both sides, up and down in the case of MIS. On the other flow of information is only upward in the case of DSS. In the case of DSS the report can be flexible whereas in the case of MIS the report is usually not flexible. MIS is characterized by an input of large volume of data, an output of summary reports and process characterized by a simple model. On the other hand DSS is featured by an input of low volume of data, an output of decision analysis and a process characterized by interactive model. Experts would also say that MIS is a primary level of decision making whereas DSS is the ultimate and the main part of the decision. This is one of the most talked about different between the two. As a matter of fact MIS is all about theory whereas DSS is all about practice and analysis. An organization should employ both the systems effectively.

Read more: http://www.differencebetween.com/difference-between-mis-and-vs-dss/#ixzz2RizJW8Ke

The terms MIS and DSS stand for Management Information Systems and Decision Support Systems respectively. There has been a lot of talk regarding these two, whether they are actually the same thing or if there are any significant differences between the two. MIS is basically a kind of link to facilitate communcation between managers across different areas in a business organization . MIS plays a pivotal role in enabling communications across the floor of an organization, between various entities therein. DSS, many consider, is an advancement from the original MIS. However,this is not the sole difference between the two. While there may not be too much separating the two, the difference is still there,as is apparent when we say DSS is an advancement over MIS. The essential difference between the two is in focus. DSS, as the term indicates, is about

leadership and senior management in an organization providing good, reliable judgment as well as vision. MIS, on the other hand, is about focusing on the actual flow of information itself.

Data-driven DSS
User interacts primarily with a (mathematical) model and its results User interacts primarily with the data

Helps to solve well-defined and structured problem (what-if-analysis)

Helps to solve mainly unstructured problems

Contains in general various and complex models

Contains in general simple models

Large amounts of data are not necessary

Large amounts of data are crucial

Helps to understand the impact of decisions on organizations

Helps to prepare decisions by showing develo

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Quality Assurance
QA aims to prevent defects with a focus on the process used to make the product. It is a proactive quality process. The goal of QA is to improve development and test processes so that defects do not arise when theproduct is being developed. Statistical Tools & Techniques can be applied in both QA & QC. When they are applied to processes (process inputs & operational parameters), they are calledStatistical Process Control (SPC); & it becomes the part of QA.

Quality Control
QC aims to identify defects in the finished product. Quality control, therefore, is a reactive process.

Focus on:

Goal:

The goal of QC is to identify defects after a product is developed and before it's released.

Statistical Techniques:

When statistical tools & techniques are applied to finished products (process outputs), they are called as Statistical Quality Control (SQC) & comes under QC.

What Is The Difference Between Quality Assurance, Quality Control, And Testing?
Many people and organizations are confused about the difference between quality assurance (QA), quality control (QC), and testing. They are closely related, but they are different concepts. Since all three are necessary to effectively manage the risks of developing and maintaining software, it is important for software managers to understand the differences. They are defined below: Quality Assurance: A set of activities designed to ensure that the development and/or maintenance process is adequate to ensure a system will meet its objectives. Quality Control: A set of activities designed to evaluate a developed work product. Testing: The process of executing a system with the intent of finding defects. (Note that the "process of executing a system" includes test planning prior to the execution of the test cases.)

QA activities ensure that the process is defined and appropriate. Methodology and standards development are examples of QA activities. A QA review would focus on the process elements of a project - e.g., are requirements being defined at the proper level of detail. In contrast, QC activities focus on finding defects in specific deliverables - e.g., are the defined requirements the right requirements. Testing is one example of a QC activity, but there are others such as inspections. Both QA and QC activities are generally required for successful software development. Controversy can arise around who should be responsible for QA and QC activities -- i.e., whether a group external to the project management structure should have responsibility for either QA or QC. The correct answer will vary depending on the situation, but Mosaic's experience suggests that: While line management should have the primary responsibility for implementing the appropriate QA, QC and testing activities on a project, an external QA function can provide valuable expertise and perspective. The amount of external QA/QC should be a function of the project risk and the process maturity of an organization. As organizations mature, management and staff will implement the proper QA and QC approaches as a matter of habit. When this happens only minimal external guidance and review ar Back to Risk Management Tips

What Is A Business Model? The e-Business model, like any business model, describes how a company functions; how it provides a product or service, how it generates revenue, and how it will create and adapt to new markets and technologies. It has four traditional components as shown in the figure, The e-Business Model. These are the e-business concept, value proposition, sources of revenue, and the required activities, resources, and capabilities. In a successful business, all of its business model components work together in a cooperative and supportive fashion.

Figure: E-Business Model

Although an e-Business is often thought of as e-Commerce, there are other types of online activities that fall under the definition of e-Business that can benefit from this discussion (see e-Business Basics for basic concepts and definitions). E-Business Concept The e-business concept describes the rationale of the business, its goals and vision, and products or offerings from which it will earn revenue. A successful concept is based on a market analysis that identifies customers likely to purchase the product and how much they are willing to pay for it. Goals And Objectives The e-Business concept should be based, in part, on goals such as "become a major car seller, bank, or other commercial enterprise", and "to become a competitor to some of the well-known firms in each of these industries." Objectives are more specific and measurable, such as "capture 10% of the market", or "have $100 million in revenues in five years." Whether these goals and objectives are realistic or not, and whether the company is prepared to achieve these goals is addressed in the business plan process for startup firms and in the implementation plan for an existing firm that is considering a significant change. In looking at the business model it is sufficient to know what the goals and objectives are, and whether they are being pursued.

Corporate Strategies Embedded in the e-Business concept are strategies that describe how the business concept will be implemented. These are known as corporate strategiesbecause they establish how the business is intended to function. These strategies can be modified to improve the performance of the business. Environmental strategies, discussed in a following section, describe how the company will address external environmental factors, over which it has no control. The E-Business Concept And Market Research The selection and refinement of the business concept should be integrally tied into knowledge of the market it serves. In performing market research care must be taken to account for the global reach of the Internet for both customers and competitors. It is also important to remember that markets shift, and can shift rapidly under certain conditions. But most important is to truly understand what the market is, who comprises it, and what do they want.
Figure: The E-Business Concept

Products And Offerings

The Problem with WebVan WebVan sold groceries online and delivered them to your door. It burned through $800 million before declaring bankruptcy. The company apparently didn't understand its goal or its market, and suffered from a faulty business concept. Nearly every household in the country buys several hundred dollars

worth of groceries each month. WebVan marketed to the upper income families yet didn't try to sell to all of the households that had difficulty getting to the grocery store. It could have had a much wider appeal through advertising, and could have initiated programs with organizations helping shut-ins (e.g. to help fill in the order forms), the disabled, and busy housewives with young children. These customers would have found Web Van's prices lower, the quality of its food higher, and the level of service higher than is found in other grocery stores. WebVan continued to market its service to young professionals and never seemed to realize that it didn't matter who bought the groceries they were selling and delivering!

Price Pricing is an important part of the e-business concept and should be established on the basis of market research. Price is often set with an eye on the competition and can have a direct effect on market share. In traditional commerce in the U.S., the seller sets the price. Online pricing, on the other hand, may include negotiation or auction pricing, where the interaction of sellers and buyers can effect the price. Knowledge of competing prices is also readily available online, and will keep downward pressure on prices. When is it OK to increase prices? It depends on the business. If a company has high fixed to variable costs, prices should be changed cautiously. If customers are "locked-in", and the product or service is less sensitive to price, then prices may be changed, to a degree, with less risk. But all changes should be checked beforehand with market research and financial analysis. A potential problem for some products is that the market may change faster than the seller can change the product or service. One way to survive in this environment is to sell at the minimum price that allows a profit, avoid price changes and continuously upgrade the product. This approach is often used in computer hardware and software sales. At the same time the seller should invest in finding how to shorten the development cycle, and put in place a market research program that will quickly identify trends and changes. The steady development of a product has other advantages. It evens out the revenue stream rather than having the "boom or bust" cycle of a single product. It also shows that the company is steadily developing and upgrading products for the customers who should begin to buy into the company's vision. And customers, analysts, and investors will develop confidence that the company is going to be around for the long-term. The price must also provide real value to the customer, that is the customer must be pleased with the purchase of the product or service. In addition to price, the buyer may also be interested in how the product can be of assistance to his company. In this case, comparisons of price and ROI may be used to show that the offering adds more value than a competitor's. The price can also be a basis for building long-term customer relations, which can lead to multiple sales. For example, as retail customers become more comfortable shopping on a site, it should be easier to get them to migrate to higher margin products. Value Proposition

The value proposition describes the value that the company will provide to its customers and, sometimes, to others as well. With a value proposition the company attempts to offer better value than competitors so that the buyer will benefit most with this product. A value proposition may include one or more of the following points: Reduced price Improved service or convenience such as the "1 click" checkout Speed of delivery and assistance Products that lead to increased efficiency and productivity Access to a large and available inventory that presents options for the buyer

Providing value in an e-business uses the same approach as providing value in any business, although it may require different capabilities. But common to both are the customers who seek out value in a business transaction. The value proposition helps focus the business on the well-being of the customer, where it remains in successful companies. Value Delivery Through Integration Of Activities Integration Of Organization Or Enterprise Operations The integration of systems inside and outside the organization can provide value for both customers and the organization. One of the requirements for e-business is to link frontend with back-end systems in order automate the online operations of the organization. Front-end activities deal directly with the customer while back-end systems include all of the internal support activities that do not deal directly with the customer. Some enterprises have different geographic locations for front-end and back-end office activities and rely on the integration of the associated computer and network systems for successful corporate operations.

Figure: Front-End & Back-End Operations

Examples of activities that require integrated systems are: Order placement through point-of-sales systems Customization of products based on user requirements Production tracking Customer order fulfillment

External Integration: The Supply Chain Operations on the Web can also extend to cooperating firms such as partners in a supply chain, also known as a "Value Web". The Value Web may include a wide range of participants as well as the possible use of a digital exchange to procure or sell products. Many firms have participated in a supply chain for years using Electronic Data Interchange (EDI) technology to buy and sell components and products.

Electronic Data Interchange (EDI) Most large manufacturers, such as those in the automobile industry, have used EDI to engage in electronic purchasing and selling with supply chain partners and various buyers since the early 1970s. The number of firms using EDI has been in decline since 1997, when about 100,000 firms used EDI propriety software and a private network known as a value-added network (VAN) to buy and sell approximately $500 billion in goods. This networking system is too expensive for many small and medium-sized enterprises, although some are forced to use it in order to remain a supplier to a particular company.

Some firms using EDI are moving to the Internet to reduce the communications costs associated with VANs, but many are maintaining the status quo because the firms in their supply chain may not be ready to make the move. On the other hand, some smaller firms are utilizing the Internet and XML to achieve EDI on the Web. A large company like Sears, with thousands of suppliers, is able to continue working with large suppliers on a traditional EDI system, while moving smaller suppliers to a Web-based EDI system. The supplier systems are integrated with Sears's back-end systems in order to shave weeks off of the purchasing cycle.

Successful supply chains are vital for manufacturing operations since the timeliness, cost and success of the final product may depend on a component part made by a single supplier. The competence of suppliers may now be demonstrated through the ISO 9000 qualification process, which is critical when using suppliers from foreign countries or when the final products are exported.
Figure: Supply Chain Integration

When the supply chain transactions of the partners can be automated and integrated over the Web into the back-end systems of each other, then the resources of all the chain partners can be planned and managed for an efficient operation. An emerging approach to automate transactions with partners is to link systems through the corporate portal, which greatly reduces the integration requirements. Portal software now has potential connections, or hooks, where the systems of different enterprises can be linked to securely transfer data. In addition to good technology, it takes a strategy, time, resources and, most importantly, trust between partners, for the supply chain to function successfully.

Structural Concepts To Deliver Value The effective delivery of value to a customer, requires that a company organize its structure and functions according to the type of product or offering delivered. The value chain, as popularized by Michael Porter 1, describes a linear set of steps, which could be activities or business processes such as design, production and sales, whereby a manufacturing company delivers value. This value chain delivery model strives for overall efficiency and cost reduction by increasing the efficiency and reducing the cost of each business process. Each step is independent and separable, and can be outsourced, or contracted out to another company. The value chain becomes a supply chain when a company uses the inputs and activities of other companies in its manufacturing process. However, the value chain doesn't appear to describe how many service-oriented businesses operate. Stabell and Fjeldstad, Timmers, and Afuah and Tucci, have developed additional concepts of "value shop" and "value network", following the work of Thompson to address other types of businesses.2 The value shop describes a service operation, such as a consulting, law or accounting firm, that focuses on customer needs rather than on the production process of the value chain. It may also describe a department, such as customer service, within a larger organization. For example a manufacturing company, a value chain operation, could have within it a department that operates as a value shop. The e-business set up as a value shop works directly with the customer to provide a necessary, often unique, solution. The value shop is geared to solve specific client problems rather than to make a common solution more efficient. Some value shops, such as large consulting companies, will attempt to duplicate solutions among clients by introducing jargon to describe steps in an approach, and by attempting to fit the client's problem to the approach, rather than focusing on the client's problem. The value network is a type of e-business where networked users negotiate a transaction on a web site. The value network hosts online auctions, brokering, market making, intermediation, or other types of transactions. The value network depends on growth in order to attract more users. When the number of users on a value network increases, the network becomes more valuable to each participant since it increasingly becomes the site where desirable transactions will take place. Ultimately the strategy of network dominance results in large companies like eBay, since in theory it drives all of the users to be on one network. However, for various reasons described in a following section, this limit is never reached, and competitors do emerge, even for a company like eBay. Sources Of Revenue Depending on the business model, several revenue sources may be available to an ebusiness. Many online businesses will have a three or four of these sources. A mix of revenue sources is often referred to as a revenue model but may be mistakenly called a business model. Some of these sources of revenue are: Advertising Affiliation Agent commissions Licensing Sales commissions Sales profits

Sponsorship Subscription Syndication Use Fees

For large public-private or government projects revenue sources might also include: Bonds, usually for large capital expenditures Taxes, primarily income, property and sales taxes Use fees and tolls

With small fast-growing companies such as e-Business startups, investors often track expected revenues and revenue growth and may make changes to increase revenue. However, after the Dot-Com boom ended, more traditional measures such as cash flow and earnings have came back into favor as means of evaluation. Activities, Resources And Capabilities The activities, resources and capabilities of a business are sometimes known as its requirements. In order to perform the activities required to carry out themission of the business, certain resources are needed; for example, employees with certain skills, or capabilities, are needed to perform activities correctly and efficiently. Also, inventions, processes and other intellectual property may add to the individual knowledge of an employee to develop a competence in the performance of the required activities. Activities Activities are specific business processes or groups of processes such as design, production and sales that implement the business concept. The operational business model identifies the costs and outputs of each activity. Activities drive the need for resources. Existing activities should be carefully scrutinized in order to conserve resources and reduce costs. Activities left over from previous initiatives, but not currently necessary should be curtailed. This may sound elementary but businesses start many activities over time, especially if its business concept changes. But one doesn't often hear of a large business curtailing its activities in order to focus on its current mission. Also, proposed activities should be carefully reviewed before a commitment is made to develop them. Not only should they be aligned with the goals of the organization and contribute to offerings in demand in the market, but the required resources and capabilities should be considered. The implementation of some activities, such as production or manufacturing, have high costs that must be incurred before a product can be sold and revenues begin to flow. E-Business Processes Beware: Some fundamental e-business activities may infringe on patents. Business processes, or the "method of doing business" may be patented, so that a business model may unwittingly include the development or use of intellectual property owned by another party. Patents have been freely awarded for even the most straight forward business processes.3 Some examples are:

Amazon.com has a patent for "one click" purchasing technology and its "Affiliates" program.

CyberGold has a patent for pay-per-view ads where the customer enjoys an incentive for clicking on them

Netincentives has a patent for online incentives programs, possibly in conflict with CyberGold's

Netword LLC has a patent for a Web navigation based on keywords rather than URLs

Open Market has a patent on electronic shopping carts, on paying with credit cards using the secure socket layer encryption and on secure credit card transactions. However, there are now several types of shopping carts.

Priceline.com was issued a patent for its reverse auction method, that is, "name your price" auction.

Sightsound.com has a patent for selling digital content (e.g. downloading films) on the Web.

CI Software has a patent for EDI on the Internet

One of the most widely renowned patent infringement cases was Amazon.com's patent for "one click" technology for purchasing items, which was at the center of its dispute with Barnes and Noble. One-click shopping allows the prospective buyer to bypass the use of a "shopping cart", which is cumbersome for many users. Amazon.com also has a patent for its "Affiliates" program, which allows the company to market the products of other companies in return for a commission. This business process has been used freely by traditional businesses since the beginning of recorded history and the fact that this process has been patented is very controversial. Also controversial is Priceline.com's patent for a reverse auction method, which it uses to sell airline tickets.

In effect, a few companies have patented Internet business models, which are being used by many other companies. If these patents can be easily licensed at reasonable rates then there won't be a problem in the future development of e-business. But if not, the resulting chaos will inhibit the growth of the online business world. Resources In order to perform activities an organization requires human, tangible, intangible and supporting resources. Human resources, in particular the skills and knowledge of employees are important, as are the programs (e.g. incentives, training) and institutions that support them. Of related importance is the "corporate culture" that shapes how employees work together and which may also be instrumental in determining how a company works with its partners, or whether a merger between two companies can be successful. Tangible, or physical and financial, resources include facilities, equipment, and cash reserves. Intangible resources include intellectual property, business processes that can be patented, brands, customer profiles and personalization data in databases, and customized software. Supporting systems include organizational structure, information systems or communications processes that may have little value as stand-alone resources. Capacity The total resources of the organization represent its capacity. When resources are underutilized, the company has resources that aren't used, or idle capacity. Idle capacity in manufacturing tends to be measured in terms of additional output that could be produced. In service organizations the measure for idle capacity is usually a number of employees. Resource capacity can also be measured in job-hours, machine-hours, sales per employee, or square feet. Often these are compared with industry standards to assess the efficiency of the organization. Resources may also misallocated. Processes may be successively introduced over time that result in an overall inefficiency. This may be a significant potential problem in eBusiness since activities are accumulated based on market demand and there are few if any other companies available for a comparison. Capacity also represents a constraint to growth. Demand for product or services may exceed capacity and managers may take a variety of steps to temporarily resolve the problem: overtime for existing employees, additional shifts to increase the utilization of equipment, contracting to outside entities, even competitors! For example, a software company may outsource code writing, which is standard fare - almost a routine activity, in order to increase its design capacity. Of importance here is to be able to distinguish between real growth in demand versus periodic spikes in activity, which frequently occur in some industries such as printing. Real growth would merit the expansion of capacity. However, this should take place only after careful analyses of the current and future market, relevant technologies, and resource and financial requirements. And it should be executed based on an implementation plan. Capabilities, Competencies And Competitive Advantage In order for the business to be successful, workers with certain skills, or capabilities, must be available. This is important for two reasons. First wages are usually the highest expense of a business, as much as 70% of the budget of an organization with low capital requirements (e.g. an accounting, or legal firm). Second, capable workers may not

always be available, which may lead to the issue of outsourcing, as discussed in a following section. When activities, or sets of activities, are performed extremely well and are, in fact, among the best in the industry, then these are known as competencies. Competencies result from workers with distinctive capabilities; skills and processes that efficiently utilize resources, and combinations of activities that add significantly to the value of the output. Competencies become organizational strengths and an important component of the business model. Sometimes competencies will allow a firm to lead an industry in providing value to customers. When other companies can't easily duplicate these competencies, the firm is said to have a competitive advantage. For example, a low cost manufacturing process may enable a company to sell products at a very low price and still make a profit - a situation that can't be matched by competitors. Competencies may also point to possible future directions for the firm. When the business model fails due to factors beyond its control, such as a shift in the market, then a new business concept may be based on the competencies of the firm. Firms with leading edge programming staffs, for example, can often shift to another type of software application without too much difficulty. An e-tail operation such as Amazon can easily add new product groups to its Web site due to its industry-leading competencies in online transactions, customer tracking, order fulfillment/shipping, and customer service. E-Business Environment And Strategies The rate of change in e-business presents an enormous challenge to managers. Business on the Internet is just beginning, and is evolving through a process of trial and error. Management flexibility is a key for survival and success in e-business. The environment of any organization consists of all of the factors that are beyond its control, but influence it in one way or another. Examples of these factors are shown in the figure, E-Business Environment and Strategies. To counter the potential adverse affects of these factors, the e-business can respond with strategies. An external strategy is an approach to deal with factors in the external business environment such as competitors, markets, and technological developments, that are beyond the company's direct control. This is different from a corporate strategy, which addresses factors under the company's control such as the approach to marketing, sales, and pricing. Other components of the business model such as the value proposition and sources of revenue may also include strategies.

Figure: The E-Business Environment And Strategies

External strategies may be driven by components of the business model, such as finding workers with certain capabilities to staff activities. If the required work force is not available locally, the business concept may have to change, and workers brought in, or the work outsourced. Even though strategies may be implicit in the business model, such as hire workers at the industry wage, it is important to recognize them explicitly because they may have to change as the business environment changes. The Competitive Environment And Strategies The competitive environment, sometimes known as the industry environment, results from relationships with other firms. These relationships are with suppliers, customers, producers of substitute products, potential new entrants, competitors, "complementors", and strategic partners, which are described by Porter.4 When suppliers are limited, they may keep prices high and reduce the profit of a firm that buys from them. A strategy for the buyer is to find new suppliers, or producers of substitute products. On the other hand, if there are only a few buyers, they can keep prices low, but a strategy for the seller is to find more customers to compete for products in order to raise prices, or to find a more profitable of their industrial capacity. Therefore the Internet serves to increase the knowledge of prices, find producers of substitute inputs, and subsequently cause downward pressure on prices. Potential new entrants to a market may also disrupt prices. Either they enter the market with low prices to gain market share, or they cause the existing firm to lower its prices in order to create a entry barrier to the new firm. Competitors may also cause prices to drop through price wars, but can also contribute to stability in the marketplace. Finally,

complementors, firms that make products that need the firm's product to add value (e.g. software developers for particular PC operating systems), as well as strategic partners can create demand for the firm's products. In each case the Internet may be used to the advantage or disadvantage of the e-business. The point is that an e-business must have an Internet strategy to be successful. First Mover Advantage A strategy that has been used by some dot-com companies is the first mover advantage, that is, to be the first to serve a new online market. The common wisdom is that the first business into an unserved or underserved market captures the largest share of the market and is in a better position to survive and might even increase its market share in an economic downturn that causes competitors to go out of business. Second Mover Advantage In some traditional sectors, such as real estate development, being a first mover is often shunned as too risky, and the second mover advantage is sought. Second movers learn from the mistakes of first movers and may take advantage of the investments made by first movers by buying them at discounted prices. This strategy may be appropriate in the early years of an e-business where the risk is high and managers are responding quickly to a changing environment. Increasing Value Through Network Dominance Another strategy, mentioned earlier, involves one situation where being a first mover is very important. Metcalfe's Law states that the value of the network to each user increases as more users are added to the network. Therefore, one of the competing networks becomes dominant as most of the buyers and sellers shift to it. Competing with a company that has achieved network dominance is very difficult and expensive. The best example of network dominance is the online auction, where eBay dominates the market. The auction site that starts first in a particular market and attracts the most attention and customers, is probably the most valuable to the occasional user who wants to buy or sell something. Only larger online companies with high traffic volumes, such as Amazon, Google, and Yahoo, can begin to compete on a "head-to-head" basis with eBay. However, smaller online auctions have opened in niche markets, where they may provide specialized knowledge and services. Maintain And Improve Competencies One obvious strategy is to develop the capabilities, and to build and maintain competencies in order to keep an advantage over other firms. To do this, one must understand market conditions and the firm's strengths and weaknesses. Other strategies to maintain competencies include: Block: The "block" strategy makes it difficult for other companies to copy business processes and intellectual property. Blocks can be achieved by limiting knowledge transfer about critical features or by reducing or indicating a reduction in prices.

Run: The "run" strategy means the business innovates faster than potential competitors. To pull it off the company needs competencies in critical areas.

Strategic Alliance: The e-business works with other firms that are not usually direct competitors. For small e-businesses, alliances may be essential since every facet of growth can be facilitated through association with a well-known and capable partner. Strategic alliances can solve immediate problems of developing capabilities in distribution, shipping, and billing, and will allow the company to be "up and running" very quickly. However, the small company should be concerned about losing its autonomy and intellectual property to its larger partner.

The Technology Environment And Strategies Technology plays an important role in e-business and must be tracked closely. It can shift very quickly and greatly disrupt an unprepared company. Disruptive Technologies When a new technology creates a different approach to performing a task that is less costly, more efficient, or otherwise relatively advantageous and displaces existing technology, it is known as a disruptive technology. These technical disruptions can cause businesses to fail, particularly in those organizations unprepared to change their business model. Examples of disruptive technologies are: Alternative Energy Generation at low cost Artificial Intelligence including Autonomous Systems Emergent Computing: Biocomputing, DNA Computing, Optical Computing, Molecular or Chemical Computing, and Quantum Computing Global e-Commerce with the Electronic Product Code (EPC) and RFID Grid Computing, including Bioinformatics Grids and Economic Development Grids Human-Machine Interaction: Intelligent Collaboration, Intelligent Design, and Intelligent Training Systems Nanotechnology Open Courseware Open Design & Problem Solving Parallel Computing Knowledge Representation and the Semantic Web Superconductivity Voice, Sight and Haptic (i.e. touch) Response Systems Wireless Internet

When high-speed optical networking was developed, many of the existing networking companies were slow to recognize its potential or miscalculated the time required to deploy the technology. As a result, new firms began meet the demand for glass fiber and switching components, and competed successfully with communications manufacturing companies that didn't change. Technology Strategies Every e-business concept based on a technology break-through runs the risk of being replaced by a company with a newer technology. Therefore, a strategy to maintain

technological leadership, or to have access to the leading applicable technologies, is essential for the long-term survival of a technology-based e-business. A technical innovation strategy can be as simple as outsourcing the technical side of an e-business rather than trying to maintain the competency in-house. If it is large enough, a firm can develop new technologies. But for most firms, an R&D program is too expensive. One option is to partner with an organization known for developing new technologies, so that they become available as they are developed. Co-developing and licensing technologies are also options. The use of a strategic alliance can serve as a technology strategy, as well as a competitive strategy. To avoid falling victim to a new technology, a firm must try to keep abreast of technological developments that may affect its industry. Any company that is technology-dependent must have someone in-house who is knowledgeable about the latest technical developments. But more importantly, the company must be willing to take action when it appears that a major advance in technology poses a threat. The General Environment And Strategies The general environment contains those factors that face most businesses: laws and regulations, the economic climate, and worker availability. Laws And Regulations New laws and regulations may have unexpected effects on e-business, especially in the areas of privacy, patents and other intellectual property. E-Business leaders should understand regulations and the rational for local taxes, including how tax revenues are spent. Unfair tax breaks should not be expected by an e-business; neither should businesses expect to compete unfairly with other businesses. Economic Climate Sound financial strategies will help maintain cash flow and solvency during an economic downturn. Many small businesses simply run out of money before products begin to generate revenues. E-business should use the conservative accounting practices preferred by most investors. Worker Availability The availability of qualified employees is one of the biggest problems for an e-business attempting to grow from a startup into a small or medium sized enterprise. Although technical workers became available in the economic downturn after the Dot-Com crash, the availability of foreign workers decreased significantly after the terrorist attack of September 11, 2001. Larger technical companies, who had augmented their work force through hires of foreign workers prior to "9/11" now feel that must outsource large numbers of jobs abroad in order to find the talent needed to stay competitive. Whether outsourcing will be proven as a successful strategy over time remains to be seen. Certainly it will work in some situations, but it is unlikely to work in all situations. Strategies for the local work force include obtaining and keeping qualified employees with programs such as training, child care, and employee services. Training programs are also necessary for all employees to develop skills in new technologies. Summary

The Business Model: describes how a company functions; how it provides a product or service, and how it produces revenue

indicates how a company will create and adapt to new markets and technologies

has four components: e-business concept, value proposition, sources of revenue, and business activities, resources and capabilities

shows how a company can be successful provided that all the components work together in a cooperative and supportive fashion.

helps management to focus on the whole business, not just on one activity
[1]

omputer crime refers to any crime that involves a computer and a network. The computer may [2] have been used in the commission of a crime, or it may be the target. Netcrime refers to criminal [3] exploitation of the Internet. Halder and Jaishankar (2011) defines Cybercrimes as: "Offences that are committed against individuals or groups of individuals with a criminal motive to intentionally harm the reputation of the victim or cause physical or mental harm to the victim directly or indirectly, using modern telecommunication networks such as Internet (Chat rooms, emails, notice boards and groups) [4] and mobile phones (SMS/MMS)". Such crimes may threaten a nations security and financial [5] health. Issues surrounding this type of crime have become high-profile, particularly those surrounding cracking, copyright infringement, child pornography, and child grooming. There are also problems of privacy when confidential information is lost or intercepted, lawfully or otherwise. Internationally, both governmental and non-state actors engage in cybercrimes, including espionage, financial theft, and other cross-border crimes. Activity crossing international borders and involving the interests of at least one nation state is sometimes referred to as cyber warfare. The international legal system is attempting to hold actors accountable for their actions [6] through theInternational Criminal Court. [edit]Topology Computer crime encompasses a broad range of activities. Generally, however, it may be divided into two categories: (1) crimes that target computers directly; (2) crimes facilitated by computer networks [citation needed] or devices, the primary target of which is independent of the cats network or device. Crimes that primarily target computer networks or devices include: Computer viruses Denial-of-service attacks Malware (malicious code)

Crimes that use computer networks or devices to advance other ends include: Cyberstalking Fraud and identity theft Information warfare Phishing scams

[edit]Spam Spam, or the unsolicited sending of bulk email for commercial purposes, is unlawful in some jurisdictions. While anti-spam laws are relatively new, limits on unsolicited electronic communications [7] have existed for some time. [edit]Fraud Main article: Computer fraud Computer fraud is any dishonest misrepresentation of fact intended to let another to do or refrain from [citation needed] doing something which causes loss. In this context, the fraud will result in obtaining a benefit by: Altering computer input in an unauthorized way. This requires little technical expertise and is not an uncommon form of theft by employees altering the data before entry or entering false data, or by entering unauthorized instructions or using unauthorized processes; Altering, destroying, suppressing, or stealing output, usually to conceal unauthorized transactions: this is difficult to detect; Altering or deleting stored data; Altering or misusing existing system tools or software packages, or altering or writing code for fraudulent purposes.

Other forms of fraud may be facilitated using computer systems, including bank fraud, identity theft, extortion, and theft of classified information. A variety of Internet scams target direct to consumers. [edit]Obscene

or offensive content

The content of websites and other electronic communications may be distasteful, obscene or offensive for a variety of reasons. In some instances these communications may be illegal. Over 25 jurisdictions place limits on certain speech and ban racist, blasphemous, politically subversive, libelous or slanderous, seditious, or inflammatory material that tends to incite hate [citation needed] crimes. The extent to which these communications are unlawful varies greatly between countries, and even within nations. It is a sensitive area in which the courts can become involved in arbitrating between groups with strong beliefs. One area of Internet pornography that has been the target of the strongest efforts at curtailment is child pornography. [edit]Harassment Whereas content may be offensive in a non-specific way, harassment directs obscenities and derogatory comments at specific individuals focusing for example on gender, race, religion, nationality, sexual orientation. This often occurs in chat rooms, through newsgroups, and by sending

hate e-mail to interested parties (see cyber bullying, cyber stalking, hate crime, Online predator, and stalking). Any comment that may be found derogatory or offensive is considered harassment. There are instances where committing a crime, which involves the use of a computer, can lead to an enhanced sentence. For example, in the case of United States v. Neil Scott Kramer, Kramer was [8] served an enhanced sentence according to the U.S. Sentencing Guidelines Manual 2G1.3(b)(3) for his use of a cell phone to persuade, induce, entice, coerce, or facilitate the travel of, the minor to engage in prohibited sexual conduct. Connecticut was the first state to pass a statute making it a criminal offense to harass someone by computer. Michigan, Arizona, and Virginia have also passed laws banning harassment by electronic [9][10] means. Harassment by computer statutes are typically distinct from cyberbullying laws, in that the former usually relates to a person's "use a computer or computer network to communicate obscene, vulgar, profane, lewd, lascivious, or indecent language, or make any suggestion or proposal of an obscene nature, or threaten any illegal or immoral act," while the latter need not involve anything of a sexual nature. [edit]Threats Main article: Intimidation Although freedom of speech is protected by law in most democratic societies (in US this is done by First Amendment) that does not include all types of speech. In fact spoken or written "true threat" speech/text is criminalized because of "intent to harm or intimidate", that also applies for [11] online or any type of network related threats in written text or speech. The US Supreme Courtdefinition of "true threat" is "statements where the speaker means to communicate a serious [11] expression of an intent to commit an act of unlawful violence to a particular individual or group". [edit]Drug

trafficking
[citation needed]

Drug traffickers are increasingly taking advantage of the Internet

to sell their illegal

substances through encrypted e-mail and other Internet Technology. Some drug traffickersarrange deals at internet cafes, use courier Web sites to track illegal packages of pills, and swap recipes for amphetamines in restricted-access chat rooms. The rise in Internet drug trades could also be attributed to the lack of face-to-face communication. These virtual exchanges allow more intimidated individuals to more comfortably purchase illegal drugs. The sketchy effects that are often associated with drug trades are severely minimized and the filtering process that comes with physical interaction fades away. [edit]Cyber

terrorism

Main article: Cyber terrorism Government officials and Information Technology security specialists have documented a significant increase in Internet problems and server scans since early 2001. But there is a [who?] growing concern among federal officials that such intrusions are part of an organized effort by cyberterrorists, foreign intelligence services, or other groups to map potential security holes in critical systems. A cyberterrorist is someone who intimidates or coerces a government or organization to advance his or her political or social objectives by launching computer-based attack against computers, network, and the information stored on them.

Cyber terrorism in general, can be defined as an act of terrorism committed through the use of cyberspace or computer resources (Parker 1983). As such, a simple propaganda in the Internet, that there will be bomb attacks during the holidays can be considered cyberterrorism. As well there are also hacking activities directed towards individuals, families, organized by groups within networks, tending to cause fear among people, demonstrate power, collecting information relevant for ruining peoples' lives, robberies, blackmailing etc. Cyberextortion is a form of cyberterrorism in which a website, e-mail server, or computer system is subjected to repeated denial of service or other attacks by malicious hackers, who demand money in return for promising to stop the attacks. According to the Federal Bureau of Investigation, cyberextortionists are increasingly attacking corporate websites and networks, crippling their ability to operate and demanding payments to restore their service. More than 20 cases are reported each month to the FBI and many go unreported in order to keep the victim's [12] name out of the public domain. Perpetrators typically use a distributed denial-of-service attack. [edit]Cyber

warfare

Sailors analyze, detect and defensively respond to unauthorized activity within U.S. Navy information systems and computer networks

Main article: Cyber warfare The U.S. Department of Defense (DoD) notes that cyberspace has emerged as a national-level concern through several recent events of geo-strategic significance. Among those are included the attack on Estonia's infrastructure in 2007, allegedly by Russian hackers. "In August 2008, Russia again allegedly conducted cyber attacks, this time in a coordinated and synchronized kinetic and non-kinetic campaign against the country of Georgia. Fearing that such attacks may become the norm in future warfare among nation-states, the concept of cyberspace operations [13] impacts and will be adapted by warfighting military commanders in the future. Herbert Alexander Simon (June 15, 1916 February 9, 2001) was an American political scientist, economist, sociologist, psychologist, and professormost notably at Carnegie Mellon Universitywhose research ranged across the fields of cognitive psychology, cognitive science,computer science, public administration, economics, management, philosophy of science, sociology, and political science. With almost a thousand very highly cited publications, he is [2] one of the most influential social scientists of the 20th century. Simon was among the founding fathers of several of today's important scientific domains, including artificial intelligence, information processing,decision-making, problem-solving, attention economics, organization theory, complex systems, and computer simulation of scientific discovery. He coined the terms bounded rationality and satisficing, and was the first to analyze the architecture of [3] complexity and to propose a preferential attachment mechanism to explain power law distributions. He also received many top-level honors later in life. These include: becoming a fellow of the American [4] Academy of Arts and Sciences in 1959; election to the National Academy of Sciences in [5] 1967; the ACM's Turing Award for making "basic contributions to artificial intelligence, the psychology of human cognition, and list processing" (1975); the Nobel Memorial Prize in Economics "for his pioneering research into the decision-making process within economic

organizations" (1978); the National Medal of Science (1986); and the APA's Award for Outstanding Lifetime Contributions to Psychology (1993). As a testament to his interdisciplinary approach, Simon was affiliated with such varied Carnegie Mellon departments as the School of Computer Science, Tepper School of Business, Departments of Philosophy, Social and Decision Sciences, and Psychology. Simon received an honorary Doctor of Laws (LL.D.) degree from Harvard University in 1990. [edit]Early

life and education

Herbert Alexander Simon was born in Milwaukee, Wisconsin on June 15, 1916. His father, Arthur Simon (18811948), was an electrical engineer who had come to the United States fromGermany in [6] 1903 after earning his engineering degree from the Technische Hochschule of Darmstadt. Arthur, an inventor who was granted "several dozen patents", was also an independent patent [7] attorney. Herbert's mother, Edna Marguerite Merkel, was an accomplished pianist whose ancestors [8] had come from Prague and Cologne. Herbert's European ancestors had been pianomakers, goldsmiths, and vintners. Simon's father was Jewish and his mother came from a [8] family of Jewish, Lutheran, and Catholic backgrounds. Herbert Simon was educated as a child in the public school system in Milwaukee where he developed an interest in science. He found schoolwork to be interesting but rather easy. Unlike many children, Simon was exposed to the idea that human behavior could be studied scientifically at a relatively young age due to the influence of his mothers younger brother, Harold Merkel, who had studied economics at the University of WisconsinMadison under John R. Commons. Through his uncles books on economics and psychology, Simon discovered the social sciences. Simon received both his B.A. (1936) and his Ph.D. (1943) in political science, from the University of Chicago, where he studied under Harold Lasswell and Charles Edward Merriam. Among his earliest influences, Simon has cited Richard Elys economics textbook, Norman Angells The Great Illusion, and Henry Georges Progress and Poverty. In 1933, Simon entered theUniversity of Chicago, and following those early influences, he studied the social sciences and mathematics. He was interested in biology, but chose not to study it because of his "color-blindness [9] and awkwardness in the laboratory". He chose instead to focus on political science and economics. His most important mentor at the University was Henry Schultz who was an econometrician and mathematical economist. After enrolling in a course on "Measuring Municipal Governments," Simon was invited to be a research assistant for Clarence Ridley, with whom he coauthored the [10] book Measuring Municipal Activities in 1938. Eventually his studies led him to the field of organizational decision-making, which would become the subject of his doctoral dissertation. [edit]Academic

career

From 1939 to 1942, Simon acted as director of a research group at the University of California, Berkeley. When the groups grant was exhausted, he joined the faculty of Illinois Institute of Technology, where he was a professor of political science from 1942 to 1949, and also served as department chairman. Back in Chicago, he began participating in the seminars held by the staff of the Cowles Commission who at that time included Trygve Haavelmo, Jacob Marschak, and Tjalling Koopmans. He thus began a more in-depth study of economics in the area of institutionalism. Marschak brought Simon in to assist in the study he was currently undertaking with Sam Schurr of the prospective economic effects of atomic energy.

In 1949, Simon became a professor of administration and chairman of the Department of Industrial [11] Management at Carnegie Tech (later to become Carnegie Mellon University). He continued to teach in various departments at Carnegie Mellon, including psychology and computer science, until his death in 2001. From 1950 to 1955, Simon studied mathematical economics and during this time, together with David Hawkins, discovered and proved the HawkinsSimon theorem on the conditions for the existence of positive solution vectors for input-output matrices." He also developed theorems on neardecomposability and aggregation. Having begun to apply these theorems to organizations, Simon determined around 1954 that the best way to study problem-solving was to simulate it with computer programs, which led to his interest in computer simulation of human cognition. End 1950s he was among the first members of the Society for General Systems Research. Simon had a keen interest in the arts. He was a friend of Robert Lepper and Richard [13] Rappaport and he influenced Lepper's interest in the impact of machine on society. Rappaport also [14] painted Simon's commissioned portrait at Carnegie Mellon University. [edit]Study
[12]

of decision-making

Main article: Administrative Behavior

Simon's 3 stages in Rational Decision Making: Intelligence, Design, Choice (IDC)

Administrative Behavior from 1947 was based on Simons doctoral dissertation. It served as the foundation for his life's work. The centerpiece of this book is the behavioral and cognitive processes of making rational human choices, that is, decisions. An operational administrative decision should be correct and efficient, and it must be practical to implement with a set of coordinated means. Any decision involves a choice selected from a number of alternatives, directed toward an organizational goal or subgoal. Realistic options will have real consequences consisting of personnel actions or non-actions modified by environmental facts and values. In practice, some of the alternatives may be conscious or unconscious; some of the consequences may be unintended as well as intended; and some of the means and ends may be imperfectly differentiated, incompletely related, or poorly detailed. The task of rational decision making is to select the alternative that results in the more preferred set of all the possible consequences. This task can be divided into three required steps: 1. the identification and listing of all the alternatives; 2. the determination of all the consequences resulting from each of the alternatives; and 3. the comparison of the accuracy and efficiency of each of these sets of consequences.
[16]

[15]

Any given individual or organization attempting to implement this model in a real situation would be unable to comply with the three requirements. It is highly improbable that one could know all the alternatives, or all the consequences that follow each alternative. The question here is: given the inevitable limits on rational decision making, what other techniques or behavioral processes can a person or organization bring to bear to achieve approximately the best result? Simon writes: The human being striving for rationality and restricted within the limits of his knowledge has developed some working procedures that partially overcome these difficulties. These procedures consist in assuming that he can isolate from the rest of the world a closed system containing a limited number of variables and a limited r ange of consequences.
[17]

Administrative Behavior, as a text, addresses a wide range of human behaviors, cognitive abilities, management techniques, personnel policies, training goals and procedures, specialized roles, criteria for evaluation of accuracy and efficiency, and all of the ramifications of communication processes. Simon is particularly interested in how these factors directly and indirectly influence the making of decisions. Weaving in and out of the practical functioning of all of these organizational factors are two universal elements of human social behavior that Simon addresses in Chapter VII The Role of [18] [19] Authority, and in Chapter XLoyalties, and Organizational Identification. Authority is a well studied, primary mark of organizational behavior, and is straightforwardly defined in the organizational context as the ability and right of an individual of higher rank to determine the decision of an individual of lower rank. The actions, attitudes, and relationships of the dominant and subordinate individuals constitute components of role behavior that can vary widely in form, style, and content, but do not vary in the expectation of obedience by the one of superior status, and willingness to obey from the subordinate. Authority is highly influential on the formal structure of the organization, including patterns of communication, sanctions, and rewards, as well as on the establishment of goals, objectives, and values of the organization. Decisions can be complex admixtures of facts and values. Information about facts, especially empirically proven facts or facts derived from specialized experience, are more easily transmitted in the exercise of authority than are the expressions of values. Simon is primarily interested in seeking identification of the individual employee with the organizational goals and values. [20] FollowingLasswell he states that a person identifies himself with a group when, in making a decision, he evaluates the several alternatives of choice in terms of their consequences for the [21] specified group. A person may identify himself with any number of social, geographic, economic, racial, religious, familial, educational, gender, political, and sports groups. Indeed, the number and variety are unlimited. The fundamental problem for organizations is to recognize that personal and group identifications can either facilitate or obstruct correct decision making for the organization. A specific organization has to deliberately determine and specify in appropriate detail and clear language its own goals, objectives, means, ends, and values. Chester Barnard pointed out that the decisions that an individual makes as a memb er of an [22] organization are quite distinct from his personal decisions. Personal choices may be determined whether an individual joins a particular organization, and continue to be made in his or her extraorganizational private life. But, as a member of an organization, that individual makes decisions not in relationship to personal needs and results, but in an impersonal sense as

part of the organizational intent, purpose, and effect. Organizational inducements, rewards, and sanctions are all designed to form, strengthen, and maintain this identification. The correctness of decisions is measured by two major criteria: 1. adequacy of achieving the desired objective; and 2. the efficiency with which the result was obtained. Many members of the organization may focus on adequacy, but the overall administrative management must pay particular attention to the efficiency with which the desired result was obtained. Simon's contributions to research in the area of decision-making have become increasingly mainstream in the business commun