chapter 7 competitive advantage with information systems within organizations © 2008 pearson...

Chapter 7

Competitive Advantage with Information Systems within Organizations

© 2008 Pearson Prentice Hall, Experiencing MIS, David Kroenke

7-2 © 2008 Pearson Prentice Hall, Experiencing MIS, David Kroenke

This Could Happen to You

DSI leases facilities capable of handling three aircraft at a time– Connected through wireless and wired network

DSI can handle up to six projects a year– Each project takes about six months– Typical project costs between $5-$10M– Estimated yearly revenue: $30-$60M


Dilemma

You are summer intern at DSI One intern will be offered a full-time job Your work is very good and you are a very

hard worker One of the other interns is a relative of one of

the owners How do you gain a competitive advantage?


Study Questions

How do organizations gain a competitive advantage using IS inside the organization?

What are the three fundamental types of information systems within organizations?

How do functional systems relate to the value chain? What are the basic types of functional systems? What are the problems of functional systems? How do cross-functional systems relate to the value

chain? How does knowledge from this chapter help you at DSI?


Achieving Competitive Advantage

Businesses determine competitive strategies Create processes to achieve strategies Information systems developed to support

business processes– Help organizations achieve competitive

advantage– Need to avoid creating systems that are unrelated

to organization’s strategy


Fundamental Types of Information Systems within Organizations

Calculation systems Functional systems Cross-functional systems


Calculation Systems

Antiquates system Relieved workers of repetitive calculations Labor-saving devices Produced little information Examples: systems that computed payroll

and wrote paychecks; inventory tracking


Functional Systems

Facilitates work of single department or function Functions added to calculation system programs to

provide more value Islands of automation

– Work independently from each other– Effective as independent functions– Inefficient working in cooperation with other processes

across entire business

Examples: human resources; financial reporting


Integrated, Cross-Functional Systems

Cross-department systems operate across departmental boundaries– Increased functionality

Process-based systems support complete business processes– Integrated processing systems are more efficient– Needs clear line of authority


Value Chain Activities

Primary activities– Relate directly to organization’s customers and

products Marketing and sales Inbound logistics Operations and manufacturing Outbound logistics Service and support


Primary Activities

– Facilitated by support activities Human resource Accounting and infrastructure Procurement Technology activities


Reorganized Porter’s Value Chain Model

Figure 7-3


Basic Types of Functional Systems

Marketing and Sales Systems Operations systems Manufacturing systems Human resource systems Accounting systems


Marketing and Sales Systems

Few systems support marketing– Product management

Assess product marketing efforts

Many systems support sales– Blog– Sales forecasting

Used for planning production, managing inventory, financial reporting

– Customer management Generate follow-on business


Operations Systems

Used by non-manufacturing companies Key operations functional systems

– Order entry– Order management systems– Inventory management systems– Customer service


Manufacturing Systems

Support production and planning Process data about inventories Push production planning

– Organization creates schedule and pushes goods through manufacturing and sales

Pull production planning– Responds to customer demand– Reduction in inventory triggers production

One-off producers fall into neither category


Additional Functional Manufacturing Systems and Technologies

Manufacturing scheduling systems– Assist organizations to determine optimal

methods Operations systems

– Control manufacturing plants and machines Radio-frequency identification tags (RFIDs)

– Computer chips that transmit data about items– Sensors connected to functional systems receive

signals and record information


Human Resources Systems

Payroll Compensation systems Recruiting Assessing employee performance, skills, and

training Human resource planning systems


Accounting Systems

Support organization’s accounting activities– General ledger– Financial reporting– Accounts receivable– Accounts payable– Cost accounting– Cash management– Treasury management


Ethics Guide: Dialing for Dollars

Poor performance has resulted in the organization giving a 20 percent discount – provided delivery is taken before end of quarter

In order to make sale, salesperson tells customer that company will take back any unsold inventory

– Customer wants this stipulated on purchase order Accounting won’t book order

– Salesperson agrees to send an e-mail agreeing to this Accounting books full amount

– Product will probably come back


Ethics Guide: Dialing for Dollars, continued

With another customer, salesperson doesn’t offer discount, but agrees to pay 20 percent credit in next quarter

– Accounting books full price now– Will hurt sales next quarter

Salesperson sells product to fictitious company owned by relative

– Accounting books full sale– Merchandise returned next quarter

MRP II system schedules production based on increased sales


The Sarbanes-Oxley Act of 2002

Revision of Exchange Act of 1934 Enacted to prevent corporate fraud Requires management:

– Create internal controls for production of financial statements

– Issue statement attesting to control activities External auditor must issue opinion on quality of

controls Exposes both management and external auditor to

financial and criminal liability


Controls Examples

Internal control: separation of duties and authorities

All computer-based systems must have controls– Increases burden on development of systems– Assets subject to contingent liability

Customer information


MIS in Use: Sarbanes-Oxley: Boon or Bane?

Goal was to upgrade financial reporting Intended to improve trust in financial reports More than 15 percent of IS will be diverted to SOx

compliance No one knows exactly what is necessary for

compliance– Act requires external auditors become more independent– Act is vague and is often given broadest possible

interpretation Potential for millions of dollars to be wasted in

compliance


Functional Systems Problems

Systems provide tremendous benefits, but are limited because they operate in isolation

– Data duplication results from each application having own database

Potential lack of data integrity

– Business processes disjointed across functions Produces lack of integrated enterprise information

– Limited information available at any one source– Inefficient decisions based on limited knowledge– Increased costs to organization


Cross-Functional Systems and the Value Chain

Cross-functional systems designed to overcome problems in functional systems

Customer relationship management systems (CRM)– Integrates all of the primary business activities– Makes the organization customer-centric– All customer data stored in single database

Enterprise resource management systems (ERP)– Integrates primary value chain activities with human

resources and accounting– Enterprise-wide systems


Opposing Forces Guide: The Flavor-of-the-Month Club

Management programs are often introduced into organizations – Kick-off meetings– Change management experts explain programs– HR changes annual review to include changes– Senior management seems to forget about the

programs– Program loses support and new one is introduced


How Does Knowledge from This Chapter Help You at DSI?

DSI competitive strategy based on quality Can propose system that increases quality and labor

costs– Increases sales challenges– Decide not to pursue

Focus instead on increased labor productivity, reducing labor costs

– First consider how DSI currently saves labor Uses recycled vending machines for consumables Connected to IS that allocates expense of items


How Does Knowledge from This Chapter Help You at DSI?, continued

Consider other ways to increase labor productivity– DSI maintains shop to repair tools

Broken tools means lost time Need to process repair data to determine how much

time is lost

– DSI operates a tool crib for portable tools Workers lose time waiting in line Wonder about RFID and potential for “virtual tool crib”


Active Review

How do organizations gain a competitive advantage using IS inside the organization?

What are the three fundamental types of information systems within organizations?

How do functional systems relate to the value chain? What are the basic types of functional systems? What are the problems of functional systems? How do cross-functional systems relate to the value

chain? How does knowledge from this chapter help you at DSI?

chapter 7 competitive advantage with information systems within organizations © 2008 pearson...

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