Management Information System Session 3 rd Dated: -21-03-2010 BY: - Neeraj Gupta Figure 1.3 Several subsystems make up this corporate accounting system.

Management Information System

Session 3rd Dated: -21-03-2010BY: - Neeraj Gupta

Figure 1.3 Several subsystems make up this corporate accounting system.

Enterprise Systems

Enterprise System A large organization typically has many different

kinds of information systems that support different functions, organizational levels, and business processes.

Many organizations are also building enterprise systems, also known as enterprise resource planning (ERP) systems, to provide firm wide integration.

Enterprise Systems

Benefits of an Enterprise Systems The various benefits of enterprise systems

are: Firm Structure and Organization: One

Organization Management: Firm wide Knowledge-based

Management Process Technology: Unified Platform Business: More Efficient Operations and

Customer-driven Business Process.

The Challenge of Enterprise Systems Daunting Implementation High Up-front Cost and Future Benefits

inflexibility Realizing Strategic Value

Enterprise Information System Information systems can be grouped into business function

categories; however, in the real world information systems are typically integrated combinations of functional information systems.

Functional business systems are composed of a variety of types of information systems (transaction processing, management information, decision support, etc) that support the business functions of: Accounting Finance Marketing Productions/operations management Human resource management Manufacturing Information Systems Cross-functional Information systems Transaction Processing Systems

Strategic uses of Information System Firm-level Strategy and Information Technology Industry-level Strategy and Information Systems

Competitive Forces and Network Economics Information Partnerships

IS Techniques to Gain Competitive Advantage The fundamental mechanisms for gaining competitive

advantage are barriers to entry, switching costs, lower production costs, product differentiation, control over distribution channels, innovation, and quality control.

The Two-Way Relationship Between The Two-Way Relationship Between Organizations and Information Organizations and Information

TechnologyTechnology

This complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment.

How Information Systems Impact Organizations and Business Firms

• Economic impacts

• Organizational and behavioral impacts• IT flattens organizations

• Postindustrial organizations

• Understanding organizational resistance to change

• The Internet and organizations

• Implications for the design and understanding of information systems

Flattening OrganizationsFlattening Organizations

Figure 3-8

Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower-level employees more decision-making authority.

How Information Systems Impact Organizations and Business Firms

The value web is a networked system that can synchronize the value chains of business partners within an industry to respond rapidly to changes in supply and demand.

Using Information Systems to Achieve Competitive Advantage

The Value WebThe Value Web

IS to Support Product/Service Differentiation

Product/service differentiation strategy for creating brand loyalty by

developing new and unique products/services that are not easily duplicated by competitors

e.g. Citibank’s ATM

IS to Support Niche Focus Focused differentiation

strategy for developing new market niches for specialized products/services

Data mining analysis of large pool of data to find patterns and rules that

can be used to guide decision-making and predict future behavior

e.g. direct marketingApplications of Data mining Identifying individuals or organizations most likely to respond

to a direct mailing. Predicting which customers are likely to switch to competitors. Identifying common characteristics of customers who

purchase the same product.

IS to Support Low Cost Strategy

Supply chain management integrates supplier, distributors, and customer logistics

requirements into one cohesive process to reduce inventory cost or underutilized staff

e.g. Wall-Mart’s “continuous replenishment system” “lock in” customer and raise “switching costs”

expense a customer incurs in lost time and expenditure of resources when changing from one supplier to a competing supplier

e.g. Baxter Healthcare’s “stockless inventory”

Sources of Barriers to Entry

The sources of entries are: Economies of scale (size) Economies of scope (breadth) Product differentiation Capital requirements Cost disadvantages (independent of size)

Distribution channel access Government policy

Barriers to Entry

The additional costs of creating a sophisticated information system make it harder for firms to enter the industry. Distribution Channels: Control over distribution prevents others

from entering the industry. Consumers are reluctant to switch to a competitor if they have to learn a new system or transfer data.

Lower Production Costs: Using technology to become the least-cost producer gives an advantage over the competition.

Product Differentiation: Technology can add new features to a product or create entirely new products that entice consumers.

Quality Management: Monitoring production lines and analyzing data are important aspects of quality control. Improving quality leads to more repeat sales.

The Value Chain: Evaluating the entire production process identifies how value is added at each step. Combining stepsor acquiring additional stages of the value chain can lead to greater profits.

Economic organizational and Behavioral Impacts Economic Theories: -Information technology also

helps firms contract in size, because it can reduce transaction costs – the costs incurred when a firm buys on the marketplace what it cannot make itself.

According to transaction cost theory, firms and individuals seek to economize on transaction costs, much as they do on production cost. Using markets is expensive because of costs such as locating and communicating with distant suppliers monitoring contract compliance, buying insurance, obtaining information on products and so fort.

Behavioral Theories Behavioral researchers have theorized that information

technology could change the hierarchy of decision making in organizations by lowering the costs of information acquisition and broadening the distribution of information.

IT Impact on Decision-making Traditional and Contemporary Management Implications for System Design Information systems should have these characteristics:

They are flexible and provide many options for handling data and evaluating information.

They are capable of supporting a variety of styles, skills, and knowledge.

They are powerful in the sense of having multiple analytical and intuitive models for the evaluation of data and the ability to keep track of many alternatives and consequences.

They reflect the bureaucratic and political requirements of systems.

They reflect an appreciation of the limits of organizational change and an awareness of what IS can and cannot do.

New Marketing Strategies with IT

Firms “mine” existing information as a resource to increase profitability and market penetration Avon Products - analyzes invoices for marketing

information - location, product preference, price. Hilton Answer*Net - historical data about patrons -

personal preferences, security needs

New Relationships with Customers/Suppliers American Airlines - linked with travel agents

through SABRE to increase sales Little Company of Mary Hospital - linked with

physicians’ offices to “win” admissions Chrysler Corporation - linked with major

suppliers to achieve savings

Improved Operations and Internal Management L’Eggs Brands - reduce inventory and cut

manufacturing costs Hilton Answer*Net - expedites reservations

and sales reporting Wal-Mart - links headquarters and stores

Leveraging technology in Value Chain

Administration/Mgmt: Electronic Scheduling and Messaging

Human Resources: Employee Skills and Training Inventory

Technology: Computer-Aided Design

Procurement: Computerized Ordering

Inbound Operations Outbound Sales/Marketing ServiceLogistics Logistics

Automated Computer- Automated Point-of-Sale MachineWarehouse Controlled Packing/Shipping System Diagnostics Machining Scheduling

Support Activities

Primary Activities

MIS and Core Competency

Every market leading enterprise will have at least one core competency - that is, a function they perform better than their competition. By building an exceptional management information system into the enterprise it is possible to push out ahead of the competition. MIS systems provide the tools necessary to gain a better understanding of the market as well as a better understanding of the enterprise itself.

Achieving a Competitive Advantage (Cont.)

Establishing Alliances (Cont.)

Strategic Information System A Strategic Information System (SIS) is a system that helps

companies change or otherwise alter their business strategy and/or structure. It is typically utilized to streamline and quicken the reaction time to environmental changes and aid it in achieving a competitive advantage.

Key features of the Strategic Information Systems are the following: Decision support systems that enable to develop a strategic approach

to align Information Systems (IS) or Information Technologies (IT) with an organization's business strategies

Primarily Enterprise resource planning solutions that integrate/link the business processes to meet the enterprise objectives for the optimization of the enterprise resources

Database systems with the "data mining" capabilities to make the best use of available corporate information for marketing, production, promotion and innovation. The SIS systems also facilitate identification of the data collection strategies to help optimize database marketing opportunities.

The real-time information Systems that intend to maintain a rapid-response and the quality indicators.

Steps for Considering a new SIS

Steps to Take in an SIS Idea-Generated Meeting

SIS Information Systems can be Strategic (SIS) if they:

(a) Support the competitive strategy of the firm. (b) Change the way a firm competes. (c) Change industry structure.

SIS can provide a competitive advantage. Indicators of competitive position are as follows.

(a) Increased market share (fixed size or not) (b) Increased sales (c) New customers (d) Increased customer loyalty (e) Decrease in production costs (f) Decrease in operations (service) costs (g) Improved reputation in the market

A firm is said to have a competitive advantage when the firm produces greater return on investment (ROI) than its industry's average return.

Observing Strategic Behavior It is difficult to observe how a firm competes because:

Boasting of greater ROI can encourage other firms in the industry to claim unfair competitive practises, to bring up litigation charges.

Providing information on the SIS can make it easier to imitate the SIS.

Failures are not discussed. Customers of the IT have different uses for the IT, and also

different values which can not be compared to each other. A small store or a big firm can make use of the IT.

The IT technology is diverse. It can be a simple database or a complex expert system. The IT should not be confused with the data itself or with the information value customers gain from the data. The IT provides access to the data or information. It also allows customers to manipulate the data.

Identifying the costs and benefits attributed to the new strategic element of an existing IT system can be difficult.

Characteristics of SIS

Some characteristics of successful SIS are: They are innovative, unique, original in some way. They are not easily copied (combine IT leverage with

organizational resources). They are developed through some pre-existing resources

of the organization. For example, special skills of the employees, or protected market segment (patents), brand name (reputation), product scope, etc.

The SIS system is supported by top management. Strategic partnerships. (R&D is expensive, standardization

requires cooperation, reduce technical risks and training, allow global access, etc.)

Can be analyzed by strategic frameworks.

That’s all for Today!