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Contents
chapter 13
Strategies for information
Introduction
Examination context
Topic List1 The role of information
2 Information and communications technology inorganisations
3 The strategic value of IT/IS in business
4 Knowledge management
5 Risks associated with IT/IS
Summary and Self-test
Answers to Self-test
Answers to Interactive questions
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Introduction
Learning objectives Tick off
Explain and demonstrate how information can be used to gain
competitive advantage
Identify key changes needed in an information system in order to
meet changes in the needsand resources of a business
Explain how a business collects and distributes information in
order to manage its strategy
Identify the risks associated with use of information technology
and the controls available
Specific syllabus references for this chapter are: 3g, i, j.
Practical significanceThe history of firms coming to grief as a
result of inadequate management of Information Systems
andInformation Technologies (IS/IT) is long and includes:
A UK food store forced to write off CU53m of development
expenditure on a supply-chainmanagement system taking with it the
job of the CEO who was forced to resign.
An online toy shop that failed to deliver its presents in time
for Christmas and went out of business amonth later.
The UK Government's decision to outsource all passport and
essential identity background checks onteachers to a private sector
provider which led to huge backlogs and resort to the issuing of
desperate'interim ID papers' that put the cause of national
security and child protection back years.
A major bank launching an online banking system with inadequate
security leading to hundreds ofaccounts being rifled for funds and
confidential information thus eroding public confidence in
onlinebanking systems.
The problems following Morrison's acquisition of Safeway,
discussed in Chapter 10 is anotherillustration of the risks from
IT/IS.
Therefore there is a need for proper management of IT/IS to
ensure that systems are appropriate tobusiness needs, that money is
properly spent, and that systems are properly secure.
Stop and thinkThe UK National Health Service (NHS) is developing
a Care Records Service (CRS) that will give all NHSprofessionals
24/7 access to the care record of each and every NHS patient in the
UK (i.e. everyone in theUK if they have used the NHS). This has
been billed as the largest IS/IT project ever and dwarfs
militaryapplications to date. It is hugely complex and very
expensive.
What are the potential benefits from this system to health care
in UK? What technical and social issues will need to be overcome if
it is to be successful? What are the technical and social
risks?
Working contextYou are likely to come across organisational
information systems and their operation within the context ofaudit
engagements.
Many ad hoc audit assignments are to conduct independent
post-implementation reviews of an IT/ISimplementation.
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The Operating and Financial Review should include a statement of
risks associated with IT/IS.
Internal control evaluation will normally be a key issue in an
audit of IT/IS.
Syllabus linksSome of the risks associated with IT/IS have been
covered in Chapter 9.
The strategic value of IT/IS is a new topic that complements
earlier chapters on strategy.
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Examination context
Exam requirementsIn the examination you may be required to
comment upon the information available for decision making in
ascenario question is there enough information available? What
other information is needed? Is theinformation system adequate to
fulfil the functions required of it by the business?
In the context of the exam, a key aspect of information strategy
is that it should provide the appropriatetype and amount of
information needed by management to select, implement and control
its chosenbusiness strategy. The information strategy therefore
needs to match the business strategy both in terms ofthe types of
information available. Also the level of detail, the form of the
information and its timing shouldbe appropriate to the role of the
person(s) who receive it.
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1 The role of information
Section overviewInformation takes many forms and has many roles
within the organisation. It comes from internal andexternal
sources.
Organisations require information for a range of purposes.
Planning Controlling Recording transactions Performance
measurement Decision making
Organisations require different types of information system to
provide different levels of information in arange of functional
areas, supporting the distinction between strategic, tactical and
operational decisionmaking.
1.1 Why do organisations need information?
DefinitionsData is the raw material for data processing. Data
consists of numbers, letters and symbols and relates tofacts,
events and transactions.
Information is data that has been processed in such a way as to
be meaningful to the person who receivesit.
Information is now recognised as a valuable resource, and a key
tool in the quest for competitive advantage.A key aspect of IT/IS
is that it should provide the appropriate type and amount of
information needed bymanagement to select, implement and control
its chosen business strategy. The information strategytherefore
needs to match the business strategy.
More detailed information is also required, however, by lower
level management for the day-to-daymanagement of an organisation,
its functions and its divisions.
Easy access to information, the quality of that information and
speedy methods of exchanging theinformation have become essential
elements of business success.
For example the following businesses are highly dependent on
information:
Supermarkets and other retailers using customer information as
the basis of loyalty schemes
Investment fund managers that base buy and sell decisions on a
huge variety of formal and informalinformation sources
Insurance brokerages that can only quote competitive premiums if
they have access to detailedassessments of the risks from the
client and of the offers available from underwriters against
theserisks
The main purposes of information are:
Planning
Once any decision has been made, it is necessary to plan how to
implement the steps necessary to makeit effective. Planning
requires a knowledge of, among other things, available resources,
possible time-scales for implementation and the likely outcome
under alternative scenarios.
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Controlling
Once a plan is implemented, its actual performance must be
controlled. Information is required to assesswhether it is
proceeding as planned or whether there is some unexpected deviation
from the plan. Itmay consequently be necessary to take some form of
corrective action.
In some cases information systems control the process without
any human involvement at all e.g. roboticmachinery, e-commerce
transactions and automated acknowledgements.
Recording transactions
Information about each transaction or event is required for a
number of reasons. Documentation oftransactions can be used as
evidence in a case of dispute. There may be a legal requirement to
recordtransactions, for example for accounting and audit purposes.
Detailed information on production costs canbe built up, allowing a
better assessment of profitability. Similarly, labour utilised in
providing aparticular service can be measured. Structured systems
can be installed to capture transactions data.
Performance measurement
Just as individual operations need to be controlled, so overall
performance must be measured in order toenable comparisons against
budget or plan to be carried out. This may involve the collection
ofinformation on, for example, costs, revenues, volumes, time-scale
and profitability. It may also include nonfinancial information and
other metrics such as KPIs in a balanced scorecard.
Decision making
Information is also required to make informed strategic and
management decisions. This completes the fullcircle of
organisational activity.
1.2 Levels of information in the organisationA modern
organisation requires a wide range of systems to hold, process and
analyse informationOrganisations require different types of
information system to provide different levels of information in
arange of functional areas. Strategic planning, management control
and operational control may beseen as a hierarchy of decisions.
This is sometimes called the Anthony hierarchy, after the writer
RobertAnthony. One way of portraying this concept is shown on the
following diagram.
Types of information systems
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System level System purpose
Strategic To help senior managers with long-term planning, and
in assessing whether objectivesare being met. Information provided
by such systems include overall profitability, theprofitability of
different segments of the business, future market prospects,
theavailability and cost of raising new funds, total cash needs,
total manning levels andcapital equipment needs. The main function
of such systems is to ensure that changesin the external
environment are matched by the organisation's capabilities.
Management/tactical
To help middle managers monitor and control. Such information
includes productivitymeasurements, budgetary control or variance
analysis reports, forecasts and resultsfor particular departments,
and short term purchasing requirements. These systemscheck if
things are working well or not. Some management-level systems
supportnon-routine decision making such as 'what if?' analyses.
Knowledge To help knowledge and data workers design products,
distribute information andperform administrative tasks. These
systems help the organisation integrate new andexisting knowledge
into the business and to reduce the reliance on paper
documents.
Operational To help operational managers track the
organisation's specific and day-to-dayoperational activities. These
systems enable routine queries to be answered, andtransactions to
be processed and tracked.
The point to note from the above diagram is that the higher
level applications such as managerialinformation depend to a great
extent on skimming data from the operational systems maintained by
thedifferent functional departments for their own purposes.
Strategic information Tactical information Operational
information
Derived from both internal andexternal sources
Summarised at a high level
Relevant to the long term
Concerned with the wholeorganisation
Often prepared on an ad hocbasis
Both quantitative andqualitative
Uncertain, as the futurecannot be accuratelypredicted
Primarily generated internally(but may have a limitedexternal
component)
Summarised at a lower level
Relevant to the short andmedium term
Concerned with activities ordepartments
Prepared routinely andregularly
Based on quantitativemeasures
Derived from internal sources
Detailed, being the processingof raw data
Relevant to the immediateterm
Task-specific
Prepared very frequently
Largely quantitative
Worked example: An evening newspaper Operational information
will include supplies and returns from vendors to support
invoicing, costs of
production, controls over inventories of paper, ink etc, hours
worked by staff to support payroll,health and safety
compliance.
Managerial information will include levels of sales to plan
production runs of each edition (up to sevena day in some cities),
the quality of stories and likely interest in them to plan
production runs,advertising sales and success of special editions,
supplements etc, the weather on the day and itseffects on sales.
Clearly the main information that will be used at this level will
be the articles andstories themselves and the editorial team will
decide inclusion and position of each.
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Strategic information includes the plans of rival newspaper
owners, the policies of the presswatchdogs, potential sources of
new advertising revenues, new printing technologies, the costs
andefficiency of the various printing plants operated by the firm
potential new markets for newspapers(e.g. morning free papers).
Knowledge level refers to a cadre of knowledge workers who use
information from the operationalsystems in their work. Examples
include:
Management accountants preparing month-end reports Credit
controllers deciding which accounts to suspend and which debts to
chase
1.3 The qualities of good informationThe qualities of good
information are outlined below in mnemonic form. If you think you
have seenthis before, note that the second A here stands for
'Authoritative', an increasingly important concerngiven the huge
proliferation of information sources available today.
Quality Example
Accurate Figures should add up, the degree of rounding should be
appropriate, thereshould be no typos, items should be allocated to
the correct category,assumptions should be stated for uncertain
information (no spurious accuracy).
Complete Information should includes everything that it needs to
include, for exampleexternal data if relevant, or comparative
information.
Cost-beneficial It should not cost more to obtain the
information than the benefit derived fromhaving it. Providers of
information should be given efficient means of collecting
andanalysing it. Presentation should be such that users do not
waste time working outwhat it means.
User-targeted The needs of the user should be borne in mind, for
instance senior managers mayrequire summaries, junior ones may
require detail.
Relevant Information that is not needed for a decision should be
omitted, no matter how'interesting' it may be.
Authoritative The source of the information should be a reliable
one (not, for instance, 'JoeBloggs' Predictions Page' on the
Internet unless Joe Bloggs is known to be a reliablesource for that
type of information).
Timely The information should be available when it is
needed.
Easy to use Information should be clearly presented, not
excessively long, and sent usingthe right medium and communication
channel (e-mail, telephone, hard-copyreport etc).
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1.4 Information requirements in different sectors
Sector Information type Example(s) General comments
Strategic Future demand estimates
New productdevelopment plans
Competitor analysis
Tactical Variance analysis
Departmental accounts
Inventory turnover
Manufacturing
Operational Production reject rate
Materials and labourused
Inventory levels
The information requirements ofcommercial organisations
areinfluenced by the need to make andmonitor profit. Information
thatcontributes to the followingmeasures is important:
Changeover times
Number of common parts
Level of product diversity
Product and process quality
Strategic Forecast sales growthand market share
Profitability, capitalstructure
Tactical Resource utilisation suchas average staff timecharged
out, number ofcustomers perhairdresser, number ofstaff per
account
Customer satisfactionrating
Service
Operational Staff timesheets
Customer waiting time
Individual customerfeedback
Organisations have become morecustomer and results-oriented
overthe last decade. As a consequence,the difference between
service andother organisation's informationrequirements has
decreased.Businesses have realised that mostof their activities can
be measured,and many can be measured insimilar ways regardless of
thebusiness sector.
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Sector Information type Example(s) General comments
Strategic Population demographics
Expected governmentpolicy
Public sector (and non-profitmaking) organisations often
don'thave one overriding objective.Their information
requirementsdepend on the objectives chosen.The information
provided oftenrequires interpretation (e.g. studentexam results are
not affected bythe quality of teaching alone).
Information may compare actualperformance with:
Standards
Targets
Similar activities
Indices
Activities over time as trends
Tactical Hospital occupancy rates
Average class sizes
Percent of reportedcrimes solved
Public sector
Operational Staff timesheets
Vehicles available
Student daily attendancerecords
Strategic Activities of othercharities
Government (and insome cases overseasgovernment) policy
Public attitudes
Tactical Percent of revenue spenton admin
Average donation
'Customer' satisfactionstatistics
Non-profit /charities
Operational Households collectedfrom / approached
Banking documentation
Donations
Many of the comments regardingpublic sector organisations can
beapplied to not-for-profitorganisations.
Information to judge performanceusually aims to assess
economy,efficiency and effectiveness.
A key measure of efficiency forcharities is the percentage
ofrevenue that is spent on thepublicised cause (e.g. rather than
onadvertising or administration).
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Interactive question 1: Strategic decision making [Difficulty
level: Intermediate]Decision making at the strategic level in
organisations needs to be supported by information systems thatare
flexible and responsive.
Requirement
(a) Describe the characteristics of information flows at the
strategic level.
(b) Describe the sources of information required for strategic
decision making and the characteristics ofan information system
used to provide strategic information.
See Answer at the end of this chapter.
2 Information and communications technology (ICT)in
organisations
Section overviewModern applications of ICT have moved beyond
mechanisation of clerical tasks into becoming a strategicforce in
their own right.
Developments in IT/IS have encouraged the flattening of
organisation hierarchies and wideningspans of control.
The boundaries of organisations have become permeable as
information is shared withcustomers, suppliers and business
partners. Many staff now work from home as tele-workers.
The benefits of any new information system must however always
be weighed against the costs.
2.1 Types of system
DefinitionsInformation systems (IS): These include all systems
and procedures involved in the collection, storage,production and
distribution of information.
Information technology (IT): This term describes the equipment
used to capture, store, transmit orpresent information. IT provides
a large part of the information systems infrastructure.
Information management: This refers to the approach that an
organisation takes towards themanagement of its information
systems, including:
Planning IS/IT developments Organisational environment of IS
Control Technology
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The use of IT has permitted the design of a range of information
systems. We can identify seven types ofinformation system.
Executive Support Systems (ESS) Management Information Systems
(MIS) Decision-Support Systems (DSS) Expert systems (ES) Knowledge
Work Systems (KWS) Office Automation Systems (OAS) Transaction
Processing Systems (TPS)
DefinitionsExecutive Support System (ESS) pools data from
internal and external sources and makes informationavailable to
senior managers in an easy-to-use form. ESS help senior managers
make strategic, unstructureddecisions (sometimes called Executive
Information Systems).
Management Information Systems (MIS) convert data from mainly
internal sources into information(e.g. summary reports, exception
reports). This information enables managers to make timely and
effectivedecisions for planning, directing and controlling the
activities for which they are responsible.
Decision Support Systems (DSS) combine data and analytical
models or data analysis tools to supportsemi-structured and
unstructured decision making.
An Expert system is a computer program that captures human
expertise in a limited domain ofknowledge.
Knowledge Work Systems (KWS) are information systems that
facilitate the creation and integrationof new knowledge into an
organisation.
Knowledge Workers are people whose jobs consist of primarily
creating new information andknowledge. They are often members of a
profession such as doctors, engineers, lawyers and scientists.
Office Automation Systems (OAS) are computer systems designed to
increase the productivity of dataand information workers.
A Transaction Processing System (TPS) performs and records
routine transactions.
Worked example: The medical profession Executive Support Systems
(ESS): The general managers of hospitals will have information on
bed
usage, costs of procedures, the demographics of the hospital
catchment, the priorities of government,the care provided nearby
and the potential for epidemics or other issues. They will use this
to setpriorities and decide the levels of provision for the coming
years.
Management Information Systems (MIS): Managers exist at many
levels such as practices, wards,clinics, procurement divisions etc.
They will use information on demand and resource availability,
costsand revenues etc to ensure care is given within budget. They
will use balanced scorecard measures toensure all is
controlled.
Decision-Support Systems (DSS): Clinical staff may use systems
such as scans, blood test data,information on the patient's history
and information on drug doses and effects to decide how to treatthe
patient.
Expert systems: Some telephone triage services (e.g. NHS Direct
in the UK) gather informationfrom the caller about the symptoms
using a structured set of questions and the system will
inferpotential causes and will generate further questions leading
to a preliminary diagnoses and decision oncourse of action such as
calling paramedics, recommending pain killers, etc.
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Knowledge Work Systems (KWS): Clinical staff will complete
records and reports on officeautomated systems. They may keep up to
date with their areas with on-line journals. Some specialistsuse
teleconferencing and image sharing workflow systems to discuss
cases or to provide expertdiagnoses to remote hospitals.
Office Automation Systems (OAS): The patient appointment system
will be automated and allcorrespondence typed. The hospital menus
will be prepared in a graphics package as will
occasionalsignage.
Transaction Processing Systems (TPS): The pharmacy will order
and dispense stock through itsTPS.
2.2 Intranets and extranetsOrganisations are increasingly using
intranets and extranets to disseminate information.
An intranet is like a mini version of the Internet (covered in
the following section). Organisationmembers use networked computers
to access information held on a server. The user interface is
abrowser similar to those used on the Internet. The intranet offers
access to information on a widevariety of topics, and often
includes access to the Internet.
An extranet is an intranet that is accessible to authorised
outsiders, using a valid username andpassword. The username will
have access rights attached determining which parts of the
extranetcan be viewed. Extranets are becoming a very popular means
for business partners to exchangeinformation.
2.3 The Internet
DefinitionThe Internet is a global network connecting millions
of computers.
The Internet is the name given to the technology that allows any
computer with a telecommunications linkto send and receive
information from any other suitably equipped computer
The World Wide Web is the multimedia element which provides
facilities such as full-colour, graphics,sound and video. Websites
are points within the network created by members who wish to
provide aninformation point for searchers to visit and benefit by
the provision of information and/or by entering into
atransaction.
Almost all companies have a Website on the Internet. A site is a
collection of screens providinginformation in text and graphic
form, any of which can be viewed simply by clicking the
appropriatebutton, word or image on the screen.
The Internet provides opportunities to organise and automate
tasks which would previously have requiredmore costly interaction
with the organisation. These have often been called low-touch or
zero-touchapproaches.
2.4 The benefits of a proposed information systemThe benefits
from a proposed information system should be evaluated against the
costs. To quantify thebenefits several factors need to be
considered.
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Increased revenue
Improved data collection, storage and analysis tools may
indicate previously unknown opportunitiesfor sales. Such tools may
include data-mining software which allows relationships to be
discoveredbetween previously unrelated data.
Cost reduction
New technology can be used to automate previously manually
intensive work. This saves staff time andmay result in a smaller
workforce being required.
Systems such as stock control can benefit as losses from
obsolescence and deterioration are reduced.
Enhanced service
Computerised systems that create a more prompt and reliable
service will increase customersatisfaction. In some cases it may be
a source of competitive advantage.
Improved decision making
Providing decision makers with the most accurate and up-to-date
information that is possible can havesubstantial benefits. The main
areas of benefit are:
Forecasting
Models can be created to forecast sales trends and the likely
affect on costs. Organisations thatcan make accurate forecasts are
in a better position to plan their structure and finances toensure
long-term success.
Developing scenarios
Organisations facing uncertain times, or those which operate in
dynamic, evolving environments,need to make complex decisions
(often quickly) to take advantage of opportunities or to
avoidthreats. Scenario planning models enable a wide range of
variables to be changed (such asinflation rates or sales numbers),
the overall effect on the business to be identified and a
businessplan to be constructed.
Market analysis
Modelling can be extended into the market that the organisation
operates in. Trends such assales volumes, prices and demand can be
analysed. Relationships between price and sales volumecan be
identified. These can be used by an organisation when deciding on a
pricing strategy.Setting the best price for a product can help
drive up sales and profitability.
Project evaluation
Organisations will benefit from improved decision making where
systems can accurately evaluatea wide range of projects. Investment
decisions often involve large capital outlays and if the
systemprevents bad decisions it can prevent the organisation
wasting large sums of money.
Systems can also prevent an organisation agreeing 'bad' deals.
Tenders for suppliers or otherlong-term contracts can prove costly
if the wrong choice is made.
3 The strategic value of IT/IS in business
Section overview Business analysis views the information system
in the context of the organisation's operations and
strategy.
Portfolio techniques assess the relationship between information
systems and business operations andperformance.
As the importance of information has increased, organisations
have realised that information systemsand information technology
can be used as a source of competitive advantage.
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3.1 Strategic implicationsWhen formulating an overall
information technology strategy the following aspects should be
taken intoconsideration:
What are the key business areas which could benefit most from an
investment in informationtechnology, what form should the
investment take, and how could such strategically important units
beencouraged to use such technology effectively?
How much would the system cost in terms of software; hardware;
management commitment andtime; education and training; conversion;
documentation; operational manning; and maintenance? Theimportance
of lifetime application costs must be stressed according to Roger
Lee:
'Most companies try to assess how much it will cost them to
install an information technologyfunction, but all too few measure
the costs and benefits after implementation. Yet this is the areaof
greatest potential loss.'
What criteria for performance should be set for information
technology systems. Again quoting RogerLee:
'The quality of an information technology application should be
measured in two ways: thetechnical standard it achieves and the
degree to which it meets the perceived and often changingneeds of
the user.'
What are the implications for the existing work force have they
the requisite skills; can they betrained to use the systems; will
there be any redundancies?
Whether such a strategy is based on a database approach will
depend on a number of factors.According to the US Department of
Commerce a database approach is called for when:
Application needs are constantly changing, with considerable
uncertainty as to the important dataelements, expected update or
processing functions and expected volumes to be handled.
Rapid access is frequently required to answer ad hoc
questions.
There is a need to reduce long lead times and high development
costs in developing newapplication systems.
Many data elements must be shared by users throughout the
organisation.
There is a need to communicate and relate data across functional
and department boundaries.
There is a need to improve the quality and consistency of the
database and to control access tothat resource.
Substantial dedicated programming assistance is not normally
available.
3.2 Earl's systems audit gridEarl suggests a grid to analyse an
organisation's current use of information systems
BusinessHigh Renew Maintain, enhance
valueLow Divest Reassess
Low High
Technical quality
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A system of poor quality and little value should be disposed of
(divest).
A system of high business value and low technical quality should
be renewed (invested in). Animportant system of low quality carries
a high business risk.
A system of high quality but low business value should be
reassessed. Is the system meeting aninformation need? Why is it
under-utilised?
High quality systems with a high business value should be
maintained to preserve the high quality,and if possible enhanced in
the quest for competitive advantage.
Establishing where to place systems on the grid is the difficult
part. Consultation with system users andthose for formulating and
implementing information system strategy would be undertaken to
form anopinion of each system. Again, judgements are
subjective.
3.3 The strategic grid (McFarlan/McKenney)The importance of
IS/IT to an organisation was studied by McFarlan and McKenney back
in the early 1980s.
They devised a matrix designed to show the level of dependence
on IS/IT within an organisation. The gridclassifies four levels of
dependence.
High Turnaround Strategic
Low Support Factory
Low High
Strategicimportance ofplannedinformationsystems
Strategic importance of currentinformation systems
Organisations in the strategic quadrant currently depend on
IS/IT for competitive advantage, andexpect to continue to do
so.
Organisations in the turnaround quadrant do not currently view
IS/IT as having strategic importance,but expect IS/IT will be
strategically important in the future.
Organisations in the support quadrant see no strategic value in
IS/IT.
Organisations in the factory quadrant see IS/IT as strategically
significant at the moment, but predictthis will not be the case in
the future.
3.4 The value chain and IT/ISValue chain analysis, also covered
in Chapter 5 can be used to assess the impact of IS/IT, and to
identifyprocesses where IT could be used to add value.
IT can be used to automate and improve physical tasks in the
manufacturing sector. It also providesextra information about the
process.
3.4.1 Operations
Process control: Computer systems enable tighter control over
production processes.
Machine tool control: Machine tools can be automated and, it is
hoped, be made more precise.
Numerical control: Information to operate the machine tool is
prepared in advance togenerate a set of instructions
Computer numerical control is where the computer produces the
instructions
Direct numerical control is where the computer is linked
directly to the machine tool.
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Robots can automate some of the process.
Computer aided manufacturing (CAM) involves a variety of
software modules such as:
Production control, supervisory systems
Materials requirement planning (MRP 1) and Manufacturing
Resources Planning (MRP II). Theseare automated component ordering
and automated production scheduling systems respectively.
Capacity requirements planning
Computer Integrated Manufacturing (CIM) integrates all aspects
of an organisation'smanufacturing activities. 'IT cannot solve
basic organisational problems, but the essence is the use ofthe IT
to provide integration though communication, effectiveness and
efficiency'. Flexiblemanufacturing systems include:
Machine tools Materials handling conveyor sets Automatic guided
vehicles
Enterprise Resource Planning (ERP) systems take MRP II systems a
step further, and are notrestricted to certain types of
organisation. ERP systems are used for identifying and planning
theenterprise-wide resources needed to record, produce, distribute,
and account for customer orders.
3.4.2 Logistics
In both inbound logistics and outbound logistics IT can have an
impact.
The use of IT in inbound logistics includes stock control
systems such as MRP, MRPII, ERP and IT.
Warehousing: The use of barcodes can increase knowledge about
the quantity and nature of stock inhand.
It is possible to create computer models, or virtual warehouses,
of stock actually held at suppliers.For example an organisation
with several outlets might have each connected to a system
whichindicates the total amount of stock available at different
sites.
3.4.3 Marketing
Marketing and services can be made more effective by customer
databases enabling market segmentation.
Buying and analysing a mailing list is a more precise method of
targeting particular groups ofconsumers than television
advertising.
A variety of market research companies use IT to monitor
consumers' buying habits.
Supermarkets can use automated EPOS systems to have a precise
hour-by-hour idea of howproducts are selling to enable speedy
ordering and replenishments.
3.4.4 Service
Customer relationship management (CRM) describes the
methodologies, software, and usuallyInternet capabilities that help
an enterprise manage customer relationships.
For example, an enterprise might build a database about its
customers that described relationships insufficient detail so that
management, salespeople, service staff, and maybe the customer,
could accessinformation, match customer needs with product plans,
remind customers of service requirements andknow what other
products a customer had purchased.
CRM consists of:
Helping an enterprise to identify and target their best
customers, manage marketing campaigns withclear goals and
objectives, and generate quality leads.
Assisting the organisation to improve telesales, account, and
sales management by optimisinginformation shared, and streamlining
existing processes (for example, taking orders using
mobiledevices).
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Allowing the formation of relationships with customers, with the
aim of improving customersatisfaction and maximising profits;
identifying the most profitable customers and providing them
withthe highest level of service.
Providing employees with the information and processes necessary
to know their customers,understand their needs, and effectively
build relationships between the company, its customer base,and
distribution partners.
3.4.5 Support activities
As far as support activities are concerned IT has some
impact.
Procurement: IT can automate some purchasing decisions.
Paperwork can be saved if theorganisation's purchase systems are
linked directly to the sales order systems of some suppliers
(e.g.by electronic data interchange).
Technology development. Computer automated design (CAD) is, in a
number of areas, animportant influence.
Drafting: CAD produces engineer's drawings, component design,
layout (e.g. of stores, wiringand piping) and electronic circuit
diagrams in complex systems.
Updating: It is easy to change design in CAD systems and to
assess ramifications of any changes.Some CAD systems have archive
data (e.g. for reference).
CAD enables modelling to be checked without the necessity of
producing working prototypes.Some 'stress testing' can be carried
out on the model.
There is perhaps less impact on human resources. However, the HR
applications include themaintenance of a skills database, staff
planning (e.g. using network analysis), computer based
training,time attendance systems, payroll systems, pension
systems.
Worked example: Fast-growing firms say IT is their edgeThe
fastest-growing companies in the United States attribute their
competitive advantage to an edge in IT.A PricewaterhouseCoopers
survey found that 52% of the 436 CEOs interviewed said that their
companieshave a competitive edge in computer and information
technology. The companies are identified as thefastest-growing U.S.
businesses over the last five years.
The 'trendsetter' companies 'with an IT advantage are reaping
the benefits,' Jim Atwell, global private equitydirector at
PricewaterhouseCoopers, said in a statement. 'Their composite
revenues have grown 20-foldover the past 5 years, 45% faster growth
than their counterparts without an IT edge. And they also tend tobe
larger with 58% higher revenues and 56% more employees.'
The study found that service firms lead product vendors in
claiming an IT advantage, 58% compared to 46%.57% of the companies
surveyed report having financial analysis/cash management systems;
52% have salesinformation systems; 37% have sales/customer service
systems; 28% have marketing systems; and 24% havecustomer 'end
user' systems. In addition, 47% report the Internet as being very
important to their business.
Nearly all of the CEOs of the companies studied (97%) rated
computers and information technology asimportant to their company's
profitable business growth over the past two years, with 80% rating
them asextremely or very important.
Companies that rated IT as extremely important to their business
have grown their revenues ten-fold overthe past five years, or 72%
faster than those who did not rate it as highly. Likewise, 96% of
the CEOs saidcomputers and IT have generally lived up to their
expectations for increased business productivity. 60%rated IT as
performing extremely or very well against their original
expectation.
Although a majority of the companies studied praised IT as a
business necessity, 84% of growing companies'CEOs now express
concern about information security, an increase of seven points
from a similar studydone two years ago. 31% say security is a major
concern, with this high degree of discomfort moreprevalent among
service than product firms. To address this issue, more than half
of the CEOs of thesecompanies have documented disaster recovery
plans in place for IT emergencies.
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Looking ahead over the next year, 32% of the companies surveyed
said they are planning to increase theirlevels of investment in
computers and information technology, while only 11% are cutting
back. About 55%expect to continue with current IT spending levels,
and the remaining 2% are uncertain.
4 Knowledge management
Section overview Knowledge management (KM) refers to the
harnessing of ICT to develop and disseminate relevant
knowledge throughout the organisation.
KM is a source of competitive advantage because it encourages
process improvement and innovation.
Certain office efficiency applications are essential for
effective KM.
4.1 Knowledge management programmes
DefinitionsKnowledge is information within people's minds.
Knowledge management describes the process of collecting,
storing and using the knowledge heldwithin an organisation.
Knowledge Work Systems (KWS) are information systems that
facilitate the creation and integrationof new knowledge into an
organisation.
Knowledge workers are people whose jobs consist primarily of
creating new information and knowledge.They are often members of a
profession such as doctors, engineers, authors, lawyers and
scientists.
Data workers process and distribute information, e.g. secretary,
accounts clerk.
Knowledge management programmes extend beyond any particular
piece of IT/IS and embrace changingthe attitudes of management and
staff towards sharing information. They concern:
Designing and installing techniques and processes to create,
protect and use explicit knowledge(that is knowledge that the
company knows that it has). Explicit knowledge includes facts,
transactionsand events that can be clearly stated and stored in
management information systems.
Designing and creating environments and activities to discover
and release tacit knowledge(explained below).
Tacit knowledge is expertise held by people within the
organisation that has not been formallydocumented.
Tacit knowledge is a difficult thing to manage because it is
invisible and intangible. We do not know whatknowledge exists
within a person's brain, and whether he or she chooses to share
knowledge is a matter ofchoice.
The motivation to share hard-won experience is sometimes low;
the individual is 'giving away' their valueand may be very
reluctant to lose a position of influence and respect by making it
available to everyone.
Organisations should encourage people to share their knowledge.
This can be done through a culture ofopenness and rewards for
sharing knowledge and information.
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Worked example: Mittal SteelBill Scotting, Director of
Continuous Improvement at Mittal Steel, identifies the role of
KnowledgeManagement as a rationale for growth by acquisition.
'Over the past decade and a half, Mittal Steel has grown into
the world's leading steel producer. Thisachievement is I think
testament not just to our ability to make the right acquisitions,
but also to makethose acquisitions work for us. I think that in a
company that grows so much through acquisition thatknowledge
management is a vital part of it. A company formed through a merger
or an acquisition will havemore knowledge than the two companies
before the union, and the scope and potential that comes fromthis
knowledge increases. The companies differ in geography, in history,
in culture, and in operatingpractices bringing people together to
benchmark, to share experiences and best practices, and to
evenundertake joint problem solving. We try to foster knowledge
sharing, and we always encourage ourmanagers to think
entrepreneurially. I think with the various acquisitions we've made
we've achieved thebenefits, be they financial or operational. By
really focusing on addressing the business needs in each case.We've
made targeted capital investments. We've applied our knowledge
management programme. We'vepromoted the sharing of product and
process capabilities. But I think most of all what drives all of
this isthat it's the sharing of the knowledge and the experiences
of the diverse management team that has cometogether to form this
group through all these acquisitions that's what underpins success
at the end of theday.
In 1992 we acquired a flat products producer in Mexico. In the
year before we bought it, it was shippingaround half a million tons
of production. It's now regularly doing 4 million tons. That's an
eightfold increasein output. Temirtau in Kazakhstan is another one
we acquired in I think 1995. It's grown from a productionand output
of around 2.5 million tons at that time to over 4 million tons
today. Since buying in South Africain 2001 we have successfully
increased production by over a million tons at that operation. But
it's not justabout increasing output and production in emerging
countries. If I think of the developed world, think ofEurope, in
Germany in 1995 we bought a long products business. In 2004, the
peak of the market, weactually produced 20% more than it had been
doing at that time. And in the US, at Inland Steel, a producerwe
bought in 1998, we have seen an improvement in output of around
300,000 tons at that facility. Andthat's from a very strong
starting base. I think in both these latter cases we've not just
been focused onvolume growth, but we've also improved the value
added mix through product development and processinnovation.'
Source: Securities and Exchanges Commission filing June 2006
(adapted)
Interactive question 2: Data and knowledge work [Difficulty
level: Intermediate]In traditional industrial economies a large
proportion of businesses produced or assembled goods and
mostemployees worked in factories.
Many countries now have an information economy where most wealth
originates in information andknowledge production and the majority
of workers process or create information. Information work
isdivided into two groups: data and knowledge work.
Requirements
(a) Distinguish between data workers and knowledge workers.
(b) Outline the role of a professional accountant as both a data
worker and a knowledge worker andbriefly describe the support
systems they require to work effectively.
See Answer at the end of this chapter.
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4.2 Systems that aid knowledge managementInformation systems
play an important role in knowledge management, helping with
information flowsand helping formally capture the knowledge held
within the organisation.
Worked example: How to facilitate knowledge sharingThe business
trend for the new millennium might well be summed up as, 'Tradition
is out, innovation is in.'World-class companies now realise that
the best ideas do not necessarily come from the executiveboardroom
but from all levels of the company; from line workers all the way
through to top management.
Companies that have cultures that encourage best practice
sharing can unlock the rich stores ofknowledge within each
employee: sharing promotes overall knowledge, and facilitates
further creativity.World-class companies are innovatively
implementing best practice sharing to shake them of out of the
rutof 'the way it's always been done.' Programs such as General
Electric's Work-Out sessions or Wal-Mart'sSaturday meetings help
employees challenge conventions and suggest creative new ideas that
drive processimprovement, increased efficiency, and overall, a
stronger bottom line.
The fundamental goal of knowledge management is to capture and
disseminate knowledge across anincreasingly global enterprise,
enabling individuals to avoid repeating mistakes and to operate
moreintelligently striving to create an entire learning
organisation that works as efficiently as its mostseasoned
experts.
Best Practices' recently updated report, Knowledge Management of
Internal Best Practices, profiles innovativemethods used by
world-class companies to communicate best practices internally. The
study providesrecommendations for how to create a best
practice-sharing culture through all levels of the organisation,how
to use both external and internal sources to find best practices
and how to capture that knowledgeand communicate it to all
employees.
Best Practices, LLC contacted over fifty leading companies at
the vanguard of knowledge management tocompile its report. Some of
the vital issues these thought leaders addressed include
measurement andmanagement of intellectual assets, best practice
identification and recognition systems, best practiceprioritisation
systems, communication of best practices, and knowledge sharing
through technology.For example, in the area of best practice
communications, the report examines how General Electricspreads
best practices with regular job rotations.
4.3 GroupwareGroupware is a term used to describe software that
provides functions for the use of collaborative workgroups.
Typically, groups utilising groupware are small project-oriented
teams that have important tasks and tightdeadlines. Perhaps the
best-known groupware products at present are Lotus Notes and
MicrosoftExchange. However, there are many related products and
technologies.
Features might include the following:
A scheduler (or diary or calendar), allowing users to keep track
of their schedule and plan meetingswith others.
An electronic address book to keep personal and business contact
information up-to-date and easyto find. Contacts can be sorted and
filed in any way.
To do lists. Personal and business to-do lists can be kept in
one easy-to-manage place, and tasks canquickly be prioritised.
A journal, which is used to record interactions with important
contacts, record items (such as e-mailmessages) and files that are
significant to the user, and record activities of all types and
track them allwithout having to remember where each one was
saved.
A jotter for jotting down notes as quick reminders of questions,
ideas, and so on.
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4.4 WorkflowWorkflow is a term used to describe the defined
series of tasks within an organisation to produce a finaloutcome.
Sophisticated workgroup computing applications allow the user to
define different workflows fordifferent types of jobs. For example,
in a publishing setting, a document might be automatically routed
fromwriter to editor to proof reader to production.
Workflow systems can be described according to the type of
process they are designed to deal with. Thereare three common
types.
Image-based workflow systems are designed to automate the flow
of paper through anorganisation, by transferring the paper to
digital 'images'. These were the first workflow systems thatgained
wide acceptance. These systems are closely associated with
'imaging' (or 'document imageprocessing' (DIP)) technology, and
help with the routing and processing of digitised images.
Form-based workflow systems (form-flow) are designed to route
forms intelligently throughout anorganisation. These forms, unlike
images, are text-based and consist of editable fields. Forms
areautomatically routed according to the information entered on
them. In addition, these form-basedsystems can notify or remind
people when action is due.
Co-ordination-based workflow systems are designed to help the
completion of work byproviding a framework for co-ordination of
action. Such systems are intended to improveorganisational
productivity by addressing the issues necessary to satisfy
customers, rather thanautomating procedures that are not closely
related to customer satisfaction.
4.4.1 Intranets and extranets
An intranet is an internal network used to share information.
Intranets utilise Internet technology andprotocols. The firewall
surrounded an internet fends off unauthorised access.
The benefits of intranets are:
Savings accrue from the elimination of storage, printing and
distribution of documents that canbe made available to employees
on-line.
Documents on-line are often more widely used than those that are
kept filed away, especially if thedocument is bulky (e.g. manuals)
and needs to be searched. This means that there areimprovements in
productivity and efficiency.
It is much easier to update information in electronic form.
Wider access to corporate information should open the way to
more flexible working patterns,e.g. material available on-line may
be accessed from remote locations.
An extranet is an intranet that is accessible to authorised
outsiders. Only those outsiders with a validusername and password
can access an extranet, with varying levels of access rights
enabling control overwhat people can view. Extranets are becoming a
very popular means for business partners to
exchangeinformation.
Extranets therefore allow better use of the knowledge held by an
organisation by facilitating access to thatknowledge.
Interactive question 3: Information and knowledge
management[Difficulty level: Intermediate]
Increasingly the management of information sharing and group
working ventures is a fundamental part ofbusiness management.
Requirements
(a) Discuss how the management of information might differ from
the management of knowledge.
(b) How can an organisation develop a knowledge strategy?
See Answer at the end of this chapter.
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5 Risks associated with IT/IS
Section overview The risks of IT/IS can be summarised as:
The risk of inadequacy: the failure by the firm to utilise IT/IS
as effectively as its rivals will leadto loss of competitive
advantage, e.g. inferior service, poorer products, excess
costs.
The risk of breakdown: where the firm depends on IT/IS a
breakdown in its operationsthreatens the business.
The risk of excess expense: IT/IS is a significant budget item.
Botched projects, expensivecontracts, inappropriate systems or
non-adoption presents a direct financial risk.
Risks are present at the system specification stage, and they
carry through to implementation. Thereis also the risk of systems
failure. Controls are therefore needed to protect data and
information.
5.1 Development and implementation what can go wrongSome of
these issues involve change and project management which we have
covered elsewhere.
Problems that occur when implementing a new information system
can usually be traced to deficiencies inthe development and
specification process. The following table outlines some common
mistakes thatadversely affect the implementation process.
Stage/activity Problems
Analysis The problem the system is intended to solve is not
fully understood.
Investigation of the situation is hindered by insufficient
resources.
User input is inadequate through either lack of consultation or
lack of userinterest.
The project team is unable to dedicate the time required.
Insufficient time spent planning the project.
Design Insufficient user input.
Lack of flexibility. The organisation's future needs are
neglected.
The system requires unforeseen changes in working patterns.
Failure to perform organisation impact analysis. An
organisational impactanalysis studies the way a proposed system
will affect organisation structure,attitudes, decision making and
operations. The analysis aims to ensure thesystem is designed to
best ensure integration with the organisation
Organisational factors sometimes overlooked include:
Ergonomics (including equipment, work environment and user
interfaces)
Health and safety
Compliance with legislation
Job design
Employee involvement
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Stage/activity Problems
Programming Insufficient time and money allocated to
programming.
Programmers supplied with incomplete or inaccurate
specifications.
The logic of the program is misunderstood.
Poor programming technique results in programs that are hard to
modify.
Programs are not adequately documented.
Testing Insufficient time and money allocated to testing.
Failure to develop an organised testing plan.
Insufficient user involvement.
User management do not review and sign-off the results of
testing.
Conversion Insufficient time and money allocated to data
conversion.
Insufficient checking between old and new files.
The process is rushed to compensate for time overruns
elsewhere.
Implementation Insufficient time, money and/or appropriate staff
mean the process has to berushed.
Lack of user training increases the risk of system
under-utilisation andrejection.
Poor system and user documentation.
Lack of performance standards to assess system performance
against.
System maintenance provisions are inadequate.
A recurring theme when examining the reasons for information
system failure is user resistance. Users maybe management and
staff, but for outward-facing systems equally could involve
customers, suppliers andother partners.
The three types of theories to explain user resistance are
explained in the following table.
Theory Description Overcoming the resistance
People-oriented User-resistance is caused by factorsinternal to
users as individuals or as agroup.
For example, users may not wish todisrupt their current work
practicesand social groupings.
User training.
Organisation policies.
Persuasion.
User involvement in systemdevelopment.
System-oriented User-resistance is caused by factorsinherent in
the new system designrelating to ease of use andfunctionality.
For example, a poorly designed user-interface will generate
user-resistance.
User training and education.
Improve user-interface.
Ensure users contribute to thesystem design process.
Ensure the system 'fits' with theorganisation.
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Theory Description Overcoming the resistance
Interaction User-resistance is caused by theinteraction of
people and the system.
For example, the system may be well-designed but its
implementation willcause organisational changes that usersresist
e.g. reduced chance of bonuses,redundancies, monotonous work.
Re-organise the organisation beforeimplementing the system.
Redesign any affected incentiveschemes to incorporate the
newsystem.
Promote user participation andencourage
organisation-wideteamwork.
Emphasise the benefits the systembrings.
5.2 Security controls
DefinitionSecurity means the protection of data from
unauthorised modification, disclosure or destruction, and
theprotection of the information system from the degradation or
non-availability of services in other words,system failure.
The risks to data are:
Human error
Entering incorrect transactions Failing to correct errors
Processing the wrong files
Technical error such as malfunctioning hardware or software
Natural disasters such as fire, flooding, explosion, impact,
lightning Deliberate actions such as fraud Commercial espionage
Malicious damage Industrial action
Security can be subdivided into a number of aspects.
Prevention: It is in practice impossible to prevent all threats
cost-effectively.
Detection: Detection techniques are often combined with
prevention techniques: a log can bemaintained of unauthorised
attempts to gain access to a computer system.
Deterrence: As an example, computer misuse by personnel can be
made grounds for dismissal.
Recovery procedures: If the threat occurs, its consequences can
be contained.
Correction procedures: These ensure the vulnerability is dealt
with (for example, by institutingstricter controls).
Threat avoidance: This might mean changing the design of the
system.
Methods of identifying and avoiding risks in an IT environment
were discussed in Chapter 9.
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Summary and Self-test
Summary
Uses ofinformation
Benefits Quality
IT/IS Strategy
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Self-testAnswer the following questions.
1 List five uses of information.
2 List five characteristics of strategic information.
3 List five characteristics of tactical information.
4 List five characteristics of operational information.
5 Match the following abbreviations with the appropriate
description.
TPS, OAS, KWS, MIS, DSS, ESS.
(a) Information systems that facilitate the creation and
integration of new knowledge into anorganisation.
(b) A system that pools data from internal and external sources
and makes information available tosenior managers in an easy-to-use
form.
(c) Computer systems designed to increase the productivity of
data and information workers.
(d) A system that converts data, mainly from internal sources
into information (e.g. summaryreports, exception reports).
(e) A system that combines data and analytical models or data
analysis tools to support semi-structured and unstructured decision
making.
(f) A system to perform and record routine transactions.
6 Distinguish between explicit knowledge and tacit
knowledge.
7 Information systems used to collect, generate and manipulate
information can be classified as follows.
(a) Transaction Processing Systems (TPS)(b) Office Automation
Systems (OAS)(c) Knowledge Work Systems (KWS)(d) Management
Information Systems (MIS)(e) Decision Support Systems (DSS)(f)
Executive Information Systems (EIS) [also known as Executive
Support Systems (ESS)]
Requirement
Describe each of the categories identified above in terms of the
functions information systemsperform, and the level they serve in
the organisation. (20 marks)
8 The SFA Company
The SFA Company manufactures clothing and operates from one
location in a major city. It purchasescotton and other raw
materials and manufactures these into garments of clothing, such as
sweatshirts,T-shirts and similar articles in its factory. There are
approximately 20 administration staff, 30 sales staffand 300
production workers. Although the company is profitable, three major
concerns were raised ata recent board meeting about the operations
of the company:
(1) The company does not always appear to obtain the best prices
for raw materials, which hasdecreased gross profit in the last few
years of trading.
(2) Many garments are made to order for large retail shops, but
the company has spare capacity andso it maintains an active sales
force to try to increase its total sales. However, the sales
forcedoes not seem to be making many sales because of lack of
information about the garments inproduction and stocks of finished
garments.
(3) Some production is carried out using Computer Assisted
Design and manufacture although thecompany has found limited use
for this application to date. The system was purchased in a
hurrytwo years ago with the objective of keeping up with
competitors who had purchased similarsystems. The board believes
that greater use could be made of this technology.
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The Value Chain model produced by Porter provides a good summary
of the primary and supportactivities of the company. An adaptation
of Porter's general model follows.
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
INBOUNDLOGISTICS
OPERATIONS OUTBOUNDLOGISTICS
MARKETING& SALES
AFTER-SALES
SERVICE
MARGIN
MARGIN
SUPP
OR
TA
CTI
VIT
IES
PRIMARY ACTIVITIES
The board of SFA is currently considering introducing some form
of information system or systems,such as a MIS, into the company
for all staff to use. Because of the perceived weaknesses in
thecurrent systems already mentioned, the directors are
particularly interested in the areas of:
(1) Inbound logistics
(2) Marketing and sales
(3) Technology development
Requirements
(a) Explain what inputs will be needed for the information
systems designed to support theoperations of the business in the
three areas mentioned above. (14 marks)
(b) Explain what outputs will be required from those information
systems. (6 marks)
Note: Do not describe Porter's general model. (20 marks)
9 The results obtained from conducting a current situation
analysis are often depicted in Earl's audit gridformat.
Requirements
(a) Evaluate the use of current situation analysis and the
resulting audit grid within the context ofdeveloping an information
systems strategy. (10 marks)
(b) Examine a key information system in an organisation of your
choice using Earl's audit grid as aframework. In your answer you
should discuss which of the four quadrants is more applicable
toyour chosen information system and why. (10 marks)
(20 marks)
10 CC Ltd
CC Ltd is a company employing 2,560 staff in 20 different
offices within one country. The companyoffers a wide range of
specialist consultancy advice to the building and construction
industry. Thisincludes advice on materials to be used, relevant
legislation (including planning applications) andappropriate
sources of finance.
The information to meet client requirements is held within each
office of the company. Although mostclients are serviced by a
single office, a lot of the information used is duplicated between
the differentoffices. This is not surprising given that legislation
and other standard information such as details ofmaterials used are
the same for the whole country.
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In the past there has been no attempt to share data because of
the cost of transferring information and thelack of trust on the
part of staff in other offices. Some senior managers tend to keep
part of client dataconfidential to themselves.
The company has recently provided all employees with e-mail for
communication within CC Ltd andto clients. Software with internet
access is also available so that staff can obtain undated
planninginformation from appropriate websites. The hardware in the
company is quite old and only just meetsthe minimum specification
for these purposes.
The marketing director has suggested that an Intranet should be
established in the company so thatcommon information can be shared
rather than each office maintaining its own data. This suggestion
ismeeting with some resistance from all grades of staff.
Requirements
(a) Explain the objectives of an intranet and suggest how the
provision of an intranet within CC Ltdshould result in better
provision of information. (9 marks)
(b) Discuss the organisational and human reasons why information
may not become more widelyavailable in CC Ltd, and suggest methods
for overcoming these barriers. (7 marks)
(c) Briefly explain how an extranet differs from an intranet,
and how CC Ltd could utilise anextranet. (4 marks)
(20 marks)
Now, go back to the Learning Objectives in the Introduction. If
you are satisfied you have achieved theseobjectives, please tick
them off.
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Answers to Self-test
1 Planning, controlling, recording transactions, measuring
performance and making decisions.
2 Five of:
Derived from both internal and external sources Summarised at a
high level Relevant to the long term Concerned with the whole
organisation Often prepared on an ad hoc basis Both quantitative
and qualitative Uncertain, as the future cannot be predicted
accurately
3 Five of:
Primarily generated internally (but may have a limited external
component) Summarised at a lower level Relevant to the short and
medium term Concerned with activities or departments Prepared
routinely and regularly Based on quantitative measures
4 Five of:
Derived from internal sources Detailed, being the processing of
raw data Relevant to the immediate term Task-specific Prepared very
frequently Largely quantitative
5 (a) Knowledge Work Systems (KWS)(b) Executive Support Systems
(ESS)(c) Office Automation Systems (OAS)(d) Management Information
Systems (MIS)(e) Decision Support Systems (DSS)(f) Transaction
Processing Systems (TPS)
6 Explicit knowledge is knowledge that an organisation already
stores in formal systems. It includes facts,transactions and events
that can be clearly stated and stored in information systems.
Tacit knowledge is expertise held by people within the
organisation that has not been formallydocumented.
7 (a) Transaction Processing Systems (TPS) are operational level
systems that perform andrecord the daily routine transactions
necessary to conduct business. They provide informationabout the
efficiency of operations and activities, but are limited in the
support they provide tomanagement decision-making.
The TPS routinely captures, processes, stores and outputs the
low-level transaction data. It isnormally characterised by the use
of one of the following methods of processing.
Batch processing e.g., payroll systems Online processing sales
order entry systems Real time processing inventory control
systems
(b) Office Automation Systems (OAS) serve the information needs
of the data workers at theknowledge level of the organisation.
Typical office automation systems create, handle and
managedocuments (through word processing, desktop publishing and
digital filing), manage workflow andscheduling (through electronic
calendars), help financial managers manage client portfolios,
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manage projects and communication (through electronic mail,
electronic bulletin boards, voicemail or teleconferencing). Text
and image processing systems evolved from word processors todesktop
publishing, enabling the creation of professional documents with
graphics and speciallayout features. Spreadsheets, presentation
packages (like PowerPoint), personal databasesystems and
note-taking systems (appointment book and notepad) are all part of
OAS and aredesigned to increase the productivity of data workers in
the office.
(c) Knowledge Work Systems (KWS) support knowledge workers at
the knowledge level ofthe organisation. They are information
systems that aid knowledge workers in the creation andintegration
of new knowledge in the organisation. To do this they need to link
the worker toexternal and internal (organisation) information.
KWS require much more powerful analytic, graphics, document
management, andcommunications abilities than a typical
microcomputer. They also need more computingprocessing power
because knowledge workers tend to do more data-intense and
computing-intense work than other workers. Examples of KWS include
the following:
Computer Aided Design (CAD) systems
Virtual Reality systems for simulating the real world e.g.,
flight simulators
Investment workstations used in the financial industry
Group collaboration systems although the software can be counted
among officeautomation systems, it is used to support knowledge
workers also. Groupware is softwarethat supports shared activities:
documents, ideas, calendars, e-mail, meeting software, etc.
Intranet environments include Internet technologies used for
communication purposes e.g.,e-mail, chat groups, web tools.
Artificial Intelligence (AI) systems are based on human
expertise, knowledge, and somereasoning patterns. They extend the
power of experts, but lack the general reasoningcapabilities. These
systems are useful to preserve the expertise that can be lost
whenworkers leave a firm.
(d) Management Information Systems (MIS): Information systems at
the management level ofan organisation that serve the functions of
planning, controlling, and decision making by providingroutine
summary and exception reports. An MIS is defined as 'a system to
convert data frominternal and external sources into information,
and to communicate that information in anappropriate form to
managers at all levels and in all areas of the business to enable
them to maketimely and effective decisions'.
The format of the information supplied is determined by the
abilities of the user and by the usethat will be made of it.
Strategic management will require information that is broad,
aggregated and summarised
Tactical management requires information that is more detailed
and tailored to the user'sneeds or area of responsibility
Operational management require very detailed information
specific to their responsibilityarea
The MIS produces reports that are mainly summarised and
inflexible, e.g. scheduled reports,demand reports, exception
reports etc.
(e) Decision Support Systems (DSS): Information systems also at
the management level of anorganisation that combine data and
sophisticated analytical models to support semi-structuredand
unstructured decision-making. A DSS is defined as 'a computer-based
system which enablesmanagers to confront ill-structured problems by
direct interaction with data and problem-solvingprograms'. Their
aim is to provide information in a flexible way to aid
decision-making.
The DSS does not itself make the decision, it merely assists in
going through the phases ofdecision making. The system sets up
various scenarios and the computer predicts the result foreach
scenario by using a process of 'what if?' analysis.
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There are three basic elements to the DSS.
A language sub-system, which is likely to be non-procedural
(called a structured querylanguage or SQL)
A problem processing sub-system, which includes spreadsheet,
graphics, statistical analysis
A knowledge sub-system, which includes a database function
(f) Executive Information Systems (EIS): Information systems at
the strategic level of anorganisation designed to address
unstructured decision-making through advanced graphics
andcommunication. Information is provided in a very summarised way
and is specially designed forthe non-IT executive. The EIS has the
ability to:
Call up summary data from an organisation's main systems e.g.,
summary income statement,balance sheet etc
Analyse the summary data to a more detailed level e.g., analysis
of the inventory figureshown in the balance sheet
Manipulate summary data e.g., rearrange its format, make
comparisons with similar data
Set up templates so that information from different areas of the
business is alwayssummarised in the same format
Perform complicated 'what if?' analysis
8 (a) The SFA Company
Introduction
As a result of concerns raised at the recent board meeting a new
Management InformationSystem (MIS) is currently being considered.
Output from the main transaction processing systemswill form the
input of the MIS.
The MIS manipulates this data into summary level information for
control and decision-makingpurposes to support the monitoring and
control of the key functions of the organisation. The MISwill
require inputs relating to the three key primary activities of
inbound logistics, marketing andsales and technology
development.
lnbound logistics
The inbound logistics function aims to ensure the right
materials are available at the rightprice and at the right time. A
key element of this involves ensuring the best possible price
forraw materials of the required quality is negotiated. Output from
the Computer Assisted Design(CAD) and Computer Assisted Manufacture
(CAM) systems will become inputs into the MIS. TheMIS will
manipulate and summarise this data, resulting in information that
will enable thepurchasing department to plan and meet its
responsibilities in the most efficient manner. Forexample,
negotiations with suppliers can be faced with improved knowledge of
the quantitiesof raw materials required in the medium term which
should help win improved prices.
Marketing and sales
The MIS can provide information on the activities of customers
and salespeople, showing who isbuying and selling what. Over time,
useful trends should become apparent. The links with theCAM system
will enable customers to be given accurate information relating to
both orders inprogress and finished goods. Forecast demand can be
made available via the feeder systems tothe MIS, and when matched
with production scheduling information, instances of spare
capacityshould be able to be established and appropriate action
taken.
Technology development
The new MIS should provide information that will allow the
increased use of ComputerAssisted Design (CAD) and Computer
Assisted Manufacture (CAM). Use of CAD andCAM techniques will
improve efficiency, resulting in the faster production of garments,
andimproved garment quality. Prototypes can be produced rapidly
allowing customer feedbackto be acted on at the design stage.
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The MIS can monitor sales and production information and when
necessary provide controlinformation to ensure orders are delivered
on time. One difficult area to predict in the clothingindustry is
future demand levels for fashion items, as a change in consumer
taste can often berapid and on the surface unpredictable. The MIS
will therefore require information feeds from'outward looking'
sources such as fashion show trends and market research.
(b) Outputs required
Outputs from the CAD/CAM systems should include performance
measures that showwhether the design, development and production
activities are achieving their targets, andhow these functions are
contributing to the overall performance of SFA. The
performancemeasures should be available for on-screen viewing, and
be included in control reports thathighlight areas in need of
corrective action.
Reports from the MIS should also show supplier and buyer
performance, including informationon price, quantity and quality
(including service quality). Marginal cost information should
feedfrom the accounting system to the MIS, as this information is
vital when negotiating pricesrelating to 'extra' production runs to
utilise any spare capacity.
Conclusion
The proposed MIS will consolidate information from the main
transaction processing systems. Itwill 'pull-together' information
from the separate functions of SFA, allowing the overall pictureto
be seen more clearly. This will enable SFA to identify and respond
quickly to circumstancesthat require action. The MIS will enable
SFA to operate more efficiently and effectively andshould be
implemented as soon as possible.
9 (a) Current situation analysis (CSA) involves a review of all
information systems and informationtechnology used within an
organisation. The review includes all aspects of hardware,
software,communications devices, network topologies, systems
development methodologies, maintenanceprocedures, contingency plans
and IS/IT personnel.
CSA may be used in conjunction with Earl's grid. Earl devised a
grid to analyse an organisation'scurrent use of information
systems. Current systems are plotted on the following grid the
gridis shown below.
HighRenew Maintain, enhance
Businessvalue
Low DivestReassess
Low High
Technical quality
The four quadrants in the grid suggest the following.
If a system has little business value and is low on technical
quality the system should be disposedof (divest). In the context of
information systems strategy, these systems will have very
littleimpact on strategic planning.
If a system has a high business value and low technical quality,
then the appropriate action is torenew the current system by
investing in it. The information systems strategy should take
theneed for investment in these systems into account.
If the system is judged to have high technical quality but low
business value, the system should bereassessed. An investigation is
required before a course of action for these systems can bedevised.
Relevant questions could include whether the system is meeting an
information need isthe system really required?
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Finally, if a system has high business value and high technical
quality the system should be wellmaintained and if possible
enhanced. Systems in this quadrant contribute significantly
towardsthe achievement of organisational goals and must be given
due consideration in the informationsystems strategy.
(b) Considering an 'Internet retailer' such as Amazon, their
website represents an informationsystem that has high technical
quality and high business value. As such, this system would
beplaced in the 'maintain/enhance' quadrant on Earl's grid.
This quadrant is most appropriate for this system for the
following reasons.
The technical quality of the system is important in terms of the
customer experience itprovides and in ensuring reliability (as
downtime means lost revenue as potential customerswill simply click
onto another site).
As the site is in effect the organisation's 'retail outlet', it
is the means by which it is able toattract customers and earn
revenue. The business value of the website as an informationsystem
is therefore extremely high.
The site is also a potential source of competitive advantage
relative to traditionalretailers and other websites. To achieve an
advantage requires a user-friendly, reliable siteand order
fulfilment procedures of equally high quality.
To ensure Amazon remains the 'e-trailer' of choice for many
customers requires almostconstant improvements (i.e. maintain and
enhance) to make things easier for users and toremain ahead of the
competition.
For these reasons, the website definitely represents an
information system of strategicimportance in this organisation and
belongs in the maintain/enhance quadrant of Earl's grid.
The fact that both business value and technical quality are high
discounts all of theother three quadrants of the grid as
possibilities.
10 CC Ltd
(a) An intranet uses software and other technology originally
developed for the internet on internalcompany networks. An intranet
comprises an organisation-wide web of internal documents thatis
familiar, easy to use and comparatively inexpensive. Each employee
has a browser enabling himor her to view information held on a
server computer and may offer access to the internet.
The main objective of an intranet is to provide easy access to
information that helps peopleperform their jobs more efficiently.
Many roles require increased access to knowledge andinformation. An
intranet is a way of making this knowledge readily available.
Other objectives are outlined in the following paragraphs.
To encourage the use of reference documents: Documents on-line
are more likely to beused than those stored on shelves, especially
if the document is bulky (for instance proceduremanuals).
To create a sense of organisational unity: An intranet 'pulls
together' in a co-ordinatedfashion information from disparate parts
of an organisation. It may be the only visible way someparts of a
large organisation are linked.
The provision of an intranet within CC Ltd should result in
better provision of informationby:
Ensuring consistency in information held and provided to
clients. The intranet will enableone set of data to be held and
accessed by all 20 offices.
Providing easy access to a larger pool of data: Information that
managers previously'kept to themselves' will be available to
others.
The intranet-Internet link will ensure the most up-to-date
planning information isavailable. It would be useful to develop an
intranet page complied from appropriatewebsites. (This must be kept
up to date.)
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(b) Even after an intranet and e-mail have been implemented at
CC Ltd, organisational and humanreasons will hinder the process of
making information more widely available. Steps need to betaken to
overcome these barriers to information sharing.
Human reasons that will need to be overcome include the
following.
Information is only available if people know how to find it. The
people at CC Ltdwho could use the information held on the intranet
must be told that the information isavailable, and trained so that
they are confident enough to access it.
Efficient communication (including a company-wide e-mail
explaining the intranet) andstaff training programmes demonstrating
intranet use will help overcome this problem.
Some staff will not choose to share information or knowledge.
People may protectthe information they have to boost their own
performance relative to their colleagues. Aculture change within CC
Ltd is required before staff will be willing to share knowledge
andinformation so that the organisation as a whole can benefit.
To tackle this problem, techniques and processes to encourage
the sharing ofinformation could be included as part of a
communication and knowledge managementprogramme.
Organisational reasons that will need to be overcome include the
following.
The hardware used by CC Ltd is too old to support the new
communication tools. This islikely to lead to user frustration with
slow response times and pr