Week 1 Writing Essay example

Submitted By mvpete13
Words: 497
Pages: 2

Malone argued, as stated in the introduction of the paper, “by reducing the costs of coordination, information technology will lead to an overall shift toward proportionately more use of markets-rather than hierarchies-to coordinate economic activity”. The production value of a company can be measured by the price that are accustom to consumers’ affordability. A company often engage in numerous activities to keep its business running. New information technologies are allowing closer integration of these activities on the value-added chain through the development of electronic markets and electronic hierarchies. The analytic framework consists of two mechanisms: markets and hierarchies. Malone et al (1987) defined these mechanisms in terms of coordinating the flow of materials or services. The definition of markets is, “Markets coordinate the flow through supply and demand forces and external transactions between different individuals and firms.” The definition of hierarchies is, “hierarchies coordinate the flow of materials through adjacent steps by controlling and directing it at a higher level in the managerial hierarchy.” The traditional way of doing business, face-to-face is the transaction medium. In today’s online markets, communication technologies are the transaction media. Malone et al (1987) predicts that information technology makes markets and hierarchies not only more efficient but also shift toward proportionately more market coordination. The coordination costs, in markets, could be selecting suppliers, negotiating contracts, and paying bills. As for hierarchies, the coordination costs could be managerial decision-making, accounting, planning, and control processes. Although many factors affect the coordination costs, Malone et al (1987) stated that information technology generally decreases coordination cost. Because of advancement in information technology, the traditional classification of the markets and hierarchies is altering. According to the article, the business press confirms that electronic connections within and between organizations are becoming increasingly important. Information technology may allow more information to be communicated in the same amount time or the same amount in less time, and