1. Competitive Advantage with Information Systems within Organizations
Chapter 7
Competitive Advantage with Information Systems within Organizations
© 2008 Pearson Prentice Hall, Experiencing MIS, David Kroenke

2. 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?

3. 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

4. Fundamental Types of Information Systems within Organizations
Calculation systems
Functional systems
Cross-functional systems

5. Calculation Systems Antiquated system
Relieved workers of repetitive calculations
Labor-saving devices
Produced little information
Examples: systems that computed payroll and wrote paychecks; inventory tracking

6. 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

7. 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

8. 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

9. Primary Activities Facilitated by support activities Human resource
Accounting and infrastructure
Procurement
Technology activities

10. Reorganized Porter’s Value Chain Model
Figure 7-3

11. Basic Types of Functional Systems
Marketing and Sales Systems
Operations systems
Manufacturing systems
Human resource systems
Accounting systems

12. 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

13. Operations Systems Used by non-manufacturing companies
Key operations functional systems
Order entry
Order management systems
Inventory management systems
Customer service

14. 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

15. 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

16. Human Resources Systems
Payroll
Compensation systems
Recruiting
Assessing employee performance, skills, and training
Human resource planning systems

17. Accounting Systems Support organization’s accounting activities
General ledger
Financial reporting
Accounts receivable
Accounts payable
Cost accounting
Cash management
Treasury management

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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?