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. 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

3. 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?

4. 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?

5. 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

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

7. 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

8. 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

9. 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

10. 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

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

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

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

14. 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

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

16. 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

17. 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

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

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

20. 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 agreeing to this
Accounting books full amount
Product will probably come back

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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”

30. 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?