1. McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved CHAPTER 2 STRATEGIC DECISION MAKING Opening Case Revving Up Sales at Harley-Davidson STRATEGIC DECISION MAKING Opening Case Revving Up Sales at Harley-Davidson

2. 2-2 Chapter Two Overview SECTION 2.1 - DECISION-MAKING SYSTEMS –Decision Making –Transaction Processing Systems –Decision Support Systems –Executive Information Systems SECTION 2.2 - ENTERPRISE SYSTEMS –Enterprise Systems –Supply Chain Management –Customer Relationship Management –Business Process Reengineering –Enterprise Resource Planning

3. 2-3 Chapter Two Overview Decision-enabling, problem-solving, and opportunity-seizing systems

4. McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved SECTION 2.1 DECISION- MAKING SYSTEMS

5. 2-5 DECISION MAKING Reasons for the growth of decision-making information systems –People need to analyze large amounts of information –People must make decisions quickly –People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions –People must protect the corporate asset of organizational information

6. 2-6 DECISION MAKING Model – a simplified representation or abstraction of reality IT systems in an enterprise

7. 2-7 TRANSACTION PROCESSING SYSTEMS Moving up through the organizational pyramid users move from requiring transactional information to analytical information

8. 2-8 TRANSACTION PROCESSING SYSTEMS Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

9. 2-9 DECISION SUPPORT SYSTEMS Decision support system (DSS) – models information to support managers and business professionals during the decision-making process Three quantitative models used by DSSs include: 1.Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model 2.What-if analysis – checks the impact of a change in an assumption on the proposed solution 3.Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

10. 2-10 DECISION SUPPORT SYSTEMS What-if analysis

11. 2-11 DECISION SUPPORT SYSTEMS Goal-seeking analysis

12. 2-12 DECISION SUPPORT SYSTEMS Interaction between a TPS and a DSS

13. 2-13 EXECUTIVE INFORMATION SYSTEMS Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization Most EISs offering the following capabilities: –Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information –Drill-down – enables users to get details, and details of details, of information –Slice-and-dice – looks at information from different perspectives

14. 2-14 EXECUTIVE INFORMATION SYSTEMS Interaction between a TPS and an EIS

15. 2-15 Digital Dashboards Digital dashboard – integrates information from multiple components and presents it in a unified display

16. 2-16 Artificial Intelligence (AI) Intelligent system – various commercial applications of artificial intelligence Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

17. 2-17 Artificial Intelligence (AI) The ultimate goal of AI is the ability to build a system that can mimic human intelligence

18. 2-18 Artificial Intelligence (AI) Four most common categories of AI include: 1.Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems 2.Neural Network – attempts to emulate the way the human brain works –Fuzzy logic – a mathematical method of handling imprecise or subjective information

19. 2-19 Artificial Intelligence (AI) Four most common categories of AI include: 3.Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of- the-fittest process to generate increasingly better solutions to a problem 4.Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

20. 2-20 Data Mining Data-mining systems sift instantly through information to uncover patterns and relationships Data-mining systems include many forms of AI such as neural networks and expert systems

21. McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved SECTION 2.2 ENTERPRISE SYSTEMS

22. 2-22 ENTERPRISE SYSTEMS Organizations can undertake high-profile strategic initiatives including: –Supply chain management (SCM) –Customer relationship management (CRM) –Business process reengineering (BPR) –Enterprise resource planning (ERP)

23. 2-23 SUPPLY CHAIN MANAGEMENT Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

24. 2-24 SUPPLY CHAIN MANAGEMENT Four basic components of supply chain management include: 1.Supply chain strategy – strategy for managing all resources to meet customer demand 2.Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services. 3.Supply chain operation – schedule for production activities 4.Supply chain logistics – product delivery process

25. 2-25 SUPPLY CHAIN MANAGEMENT Wal-Mart and Procter & Gamble (P&G) SCM

26. 2-26 SUPPLY CHAIN MANAGEMENT Effective and efficient SCM systems can enable an organization to: –Decrease the power of its buyers –Increase its own supplier power –Increase switching costs to reduce the threat of substitute products or services –Create entry barriers thereby reducing the threat of new entrants –Increase efficiencies while seeking a competitive advantage through cost leadership

27. 2-27 SUPPLY CHAIN MANAGEMENT Effective and efficient SCM systems effect on Porter’s Five Forces

28. 2-28 CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

29. 2-29 CUSTOMER RELATIONSHIP MANAGEMENT CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level CRM can enable an organization to: –Identify types of customers –Design individual customer marketing campaigns –Treat each customer as an individual –Understand customer buying behaviors

30. 2-30 CUSTOMER RELATIONSHIP MANAGEMENT CRM overview

31. 2-31 BUSINESS PROCESS REENGINEERING Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises –The purpose of BPR is to make all business processes best-in-class

32. 2-32 BUSINESS PROCESS REENGINEERING Reengineering the Corporation – by Michael Hammer and James Champy - recommends seven BPR principles

33. 2-33 Finding Opportunity Using BPR A company can improve the way it travels the road by moving from foot to horse and then horse to car BPR looks at taking a different path, such as an airplane which ignore the road completely

34. 2-34 Finding Opportunity Using BPR Progressive Insurance mobile claims process

35. 2-35 Finding Opportunity Using BPR Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

36. 2-36 ENTERPRISE RESOURCE PLANNING Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations Keyword in ERP is “enterprise”

37. 2-37 ERP SOFTWARE ERP functions offered by all ERP vendors include: –Finance, accounting, sales, marketing, human resources, operations, and logistics ERP vendors differentiate themselves by offering unique components including: –CRM, SCM, and BI According to Gartner, the average failure rate for an ERP project is 66 percent

38. 2-38 Finding The Right ERP Solution Successful ERP projects share 3 attributes 1.Overall fit Off the rack Off the rack and tailored to fit Custom made 2.Proper business analysis Successful companies spend up to 10 percent of the project budget on a business analysis 3.Solid implementation plans A plan is needed to monitor the quality, objectives, and timelines

39. 2-39 Next time….. E-Business for fun and profit!!!