Lecture 2 - IS for Competitive Advantage, BPM
Lecture 2 - IS for Competitive Advantage, BPM ACC1006
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This 6 page Class Notes was uploaded by Wai Chuan on Sunday August 16, 2015. The Class Notes belongs to ACC1006 at National University of Singapore taught by in Summer 2015. Since its upload, it has received 84 views. For similar materials see Accounting Information Systems in Accounting at National University of Singapore.
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Date Created: 08/16/15
Chapter 3 IS for competitive advantage Lecture 2 31 How does Organizational Strategy Determine Information Systems Industry Structure 0 Number of firms 0 Size distribution of firms 0 Fragmented All firms in an industry are small in size relative to the size of the industry 0 Beer pharmaceutical aerospace 0 Consolidated A small number of firms controls a large share of the industry s output or sales 0 health club real estate brokerage video rental computer rental Industry structure the number and size distribution of firms 9Competitive strategy what strategy to use 9Value chain having determined the strategy construct the value chain 9Business processes examine business processes 9information systems to enhance business processes 32 Five Forces Determine Industry Structure Force Strong Weak Bargaining power of 0 Toyota s purchase of auto paints 0 Retailers customers 0 Defence contractors only sell to Mindef 0 NUS 0 Sub contractors to car makers 0 McDonalds Threat of substitutions 0 Public transport is a strong substitute to 0 Pharmaceutical 0 Switching costs buying cars 0 Oil 0 relative price and performance of substitute product Washing powder Bargaining power of suppliers Motorists purchasing gasoline Operating system supplier has a monopoly over the PC making industry Grain farmers in a surplus year Threat Of new entrants Car making Mining Wireless Telecom Air travel computer hardware retailing 2 photography services Retail Rivalry Competitors have equal size Competitors have equal market share Industry growth is slow Fixed costs high Products are undifferentiated Brand loyalty Consumer switching costs Excess production capacity Exit barriers Intensity of each force Characteristics of the industry how profitable it is and how sustainable that profitability will be 33 How does Industry structure determine competitive strategy To be effective org goals objectives culture must be consistent with org strategy IS must reflect and facilitate competitive strategy Companies may choose to use ISs strategically as competitive differentiator or they may be used to enhance operational efficiency Industrywide Focus Differentiation Cost Lowest cost across the incl ustry Lowest cost within an industry segment 34 How does competitive strategy determine value chain structure Firm39 Infrastructure Support Human Resources Activities Technology Development Inbound Logistics Procurement u g6 ew Marketing and Sales Primary Activities Should develop systems where benefits outweigh the risks and provide value to the customer 0 0 Value amount of money a customer is willing to spend on a product service or resource Margin difference between the value that an activity generates and the cost of the activity Value chain Network of valuecreating activities 0 0 Primary Activities Inbound logistics activities involve receiving and managing raw materials JIT warehousing systems to support inbound logistics activities Operations activities transform raw materials into final products or create services Computer aided flexible manufacturing to support operations activities MRP CADCAM and so on Outbound logistic activities deliver finished products to customers Online POS and order processing to support outboard logistics Marketing and Sales activities create marketing strategies and sell products or services to customers Interactive targeted marketing capability on the Internet and the Web Customer service can be dramatically improved by a coordinated and integrated CRM system Support Activities in the value chain indirectly enhance production of products and services 0 O Firm infrastructure includes general management finance accounting legal and government affairs if necessary Use collaborative workflow intranet Human Resources recruits compensates evaluates and trains employees Use Employee Benefits Intranet Technology Development includes research and development for new processes or techniques Procurement finds suppliers and vendors for raw materials creates contracts and negotiates prices of raw materials E commerce web portals of suppliers Value chain linkages O O O O O Linkages Interactions across the value activities Eg Sales forecast 9Production plan material needs purchases To reduce cost and improve performance an organization must build IS that focus on linkages Possible result JIT Business process design I Organizations should not automate or improve existing functional systems I Should create new more efficient business processes that integrate the activities of the entire value chain 35 What is competitive advantage By offering customers a greater value than those offered by its competitors Lowering prices higher service quality other benefitsfeatures that justify a high price Strongest competitive advantage a strategy that cannot be imitated by other competitors 36 How do business processes generate value Business processes Networks of activities that generate value by transforming inputs into outputs Cost of the business process is the cost of the inputs plus the cost of the activities Margin of the business process is the value of the output minus the cost Forward integration ie performing the functions that were once performed by its customers Back integration ie performing the functions of its vendors 37 How Does Competitive Strategy Determine Business Processes and Structure of Information Svstems Analyze its industry Choose a competitive strategy Design its business processes to span valuegenerating activities Structure an information system scope and requirements that supports its business processes 38 How Do Information Svstems Provide Competitive Advantages Competitive advantage by Products 0 Three principles I Creating new products and services I Enhancing its existing products or services I Differentiating its products and services from its competitors 0 IS can help create a competitive advantage by being part of the product or by providing support to the product Competitive advantage by business processes 0 Lock in customers via high switching costs making it too expensive for the customer to switch to a competitor Including psychological emotional and social costs of switching 0 Lock in suppliers via easytouse connections discouraging them from changing to another business Create entry barriers for new competitors thereby raising the costs to enter the market 0 Establish alliances with other organizations promote product awareness and needs develop market size set standards reduce purchase costs and provide other benefits 0 Reduce costs which in turn reduce prices and increases profitability 0 Examples of switching costs having to inform friends and relatives about a new telephone number if I switch from one provider to another having to learn how to use the interface of a new mobile phone O Chapter 4 Business Process Management Lecture 2 41 What is BPM BPM is the systematic process of creating assessing and altering business processes critical complex and dynamic Mechanisms policy committees must exist to continually adjust business processes and hence ISs Model processes 9 Create components ie the systems 9implementation assessment Complex organizations can do well only if processes are generated and adjustments can be made 42 Types of Proceses Scope Description Example BPM FIol39ie Fu nctio nal Business process resieles within a single business function Acco unts paya hle BPM author I ty loelong s to a s In glee departmental manager who has autl roritjr to resolve BPM issues rossfu nctional Business process crosses into multiple departments within a single compa my ustom er relationship rna nag ement CRM Enterprise resource manag em ent EBPj BPM authorityr shared across several or many Elena rt rnents Problem resolution 1ria committee and policy lnte rorigga oiaati ooa I Business process crosses into multiple companies Supply chain management SCM BPM authorityr shared by mutipl e companies Problem resolution via negotiatio n a ncl co nit ra 421 Functional Processes Activities within a single department or function Eg accounting human resources sales forecasting BPM is easier to accomplish with functional processes 0 A single department manager has authority over all of the activities and the resources assigned 0 If the department decides to change a business process the change and attendant problems are localized within that manager s authority Problem of isolated decision making 0 Information silos 0 Independent isolated processes cannot produce the productivity and efficiency necessary 0 Duplicated data disjointed systems limited information and inefficiencies higher costs 422 CrossFunctional Processes Activities among several business departments Eg CRM Eliminate or drastically reduce problems of isolated systems and data Process management is more difficult for crossfunctional systems because no manager has authority over all of the activities and resources assigned to them BPM for crossfunctional processes is shared across several departments that most frequently need to resolve conflict via committee and policy Processbased system Many companies are moving to integrated crossfunctional systems that integrate activities of an entire business process like a customer order Eg CRM and ERP 423 Interorganizational Processes Supply chain management SCM processes involve organizational integration In some cases SCM company will have information systems that directly access processes in your own company Processes much more complex than functional or crossfunctional systems outside entities are involved Involve different managers and owners Problem resolution occurs via negotiation contracts and even litigation 43 Functions of the basic functional systems Function al application Computer program with features and functions to support a particular business activity Aims to guarantee the continuity and quality of your business processes A functional system on the other hand is a complete information system that uses five components hardware software data procedures and people 44 Business process design Redesigning their business processes to take advantage of crossfunctional information systems Taking advantage of activity linkages and integrating activities Challenges 0 Expensive 0 Time consuming o Difficult to keep up with normal business activities 0 Employees resist the changes in work responsibilities and normal habits Ultimate outcome is uncertain 45 CRM Benefits 0 Integration of primary business activities 0 Tracking of all customer interactions 0 Storage of customer data in single a database 0 Support of customer life cycle 46 ERP De ned 0 00000 Benefits 0 O O 0 00000 0 Criteria With good CRM systems sales forces can be brought up to a higher level More integration than a CRM by integrating primary value chain activities with human resources and accounting support activities across the enterprise Formal approach based on formal business models Cross functional process view of org Integrates all business management functions provides the solid operational backbone Difficult slow to implement Customers often only use a very small percentage of the Software s overall capabilities Better and cheaper to rethink your processes prior to implementation reduce inventories no need for larger buffer stock reduce lead time because of more efficient processes and more timely information data inconsistency problems not an issue Successful business processes I Streamlining processes and workflows with a single integrated system Establish uniform processes that are based on recognized best business practices Improved workflow and efficiency Improved customer service I Improved ontime delivery increased quality shortened delivery times Greater realtime insight into org Higher profitability Decrease in vendor pricing by taking better advantage of quantity breaks and tracking vendor performance Track actual costs of activities and perform activity based costing Reduce redundant data entry and processes and in other hand it shares information across the department Turn collections faster based on better visibility into accounts and fewer billing andor delivery errors o operates in real time 0 one database 0 all modules should have the same consistent look and feel so as to make users comfortable Typical modules manufacturing finance sales CRM purchasing inventory Servers 0 Web Server Server for all the web pages 0 Application Server Business logic embedded in the applications 0 Database Server 0 For smaller systems 3 in 1 server For bigger systems three separate servers For huge conglomerates we have cluster of servers within each quotserverquot Why three servers Scalability to meet huge information needs Load balancing Each server can be a cluster of web servers to even out the workload 0 Business value of ERP I 1St layer cost reduction retire systems improve efficiency I 2nd layer productivity best practices I 3rd layer ERP must support the total business Managing change 00 Extra info 0 Primary ERP users are manufacturing companies 0 SAP and Oracle 0 ERP vendors provide software and predesigned databases predefined procedures and job descriptions for organizationwide process integration
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