CHAPTER 2: Strategic Decision Making

Define TPS and DSS and explain how an organization can use these systems to make decisions and gain competitive advantage

TPS Transaction Processing Systems

DSS Decision Support System

The basic business system that serves the operational level (analysts) in an organization -    Manage elementary business activities eg sales, receipts, cash deposits, payroll, credit decisions and flow of materials -    They also replace repetitive tasks -    Online transaction processing systems o   Eg ATM- information is processed immediately -    Provide the foundation for all over information systems -    Eg POS- collects information directly from customer -     Collects information directly from internet/ customer to store in database- reduces data entry processes/ reducing mistakes A system that records each transaction eg adding a payroll etc

Information to support managers and business professionals during the decision-making process -     Assist decision making to more complex problems/ unstructured/ semi-structures problems o   Eg Estimating future cash flows from the use of long-lived assets,       Eg Judging the adequacy of an argument promoting a reduction in the capital gains tax rate,       Eg preparing an operating budget for the next 5 years Comes from TPS- analyses it. Helps making strategic decisions

Describe the 3 quantitative models typically used by decision support Systems (DSS)

1.      Sensitivity analysis

-          The study of the impact that changes in one (or more) parts of the model have on other parts of the model

2.      What-if analysis

-          Checks the impact of a change in an assumption on the proposed solution

-          Eg what is sales increase or decrease?- effects: staffing, marketing etc

3.      Goal seeking analysis

-          Finds the inputs necessary to achieve a goal

-          Eg what sales do I set to break even?

Describe business processes and their importance to an organization

-          Business Process:

o   A standard set of activities that accomplish a specific task such as processing a customers order or enrolling a student

o   The more efficient this process the higher the business profits (eg creating lower COGS)

-          Customer-facing process

o   Received directly from customer

o   Eg ordering maccas

-          Business-facing process

o   INVISIBLE to the external customer

o   Eg goal setting, day to day planning, rewards and resource allocation

Compare Business process improvement and business process re-engineering

BPI Business process improvement	BPR business process re-engineering
Requires taking a broad view of both IT and business activity & the relationships between them -          Develop the business vision & process objectives -          Identify processes to be improved -          Understand & measure the existing processes -          Know the limitations/potential of technology -          Design & build a prototype of the new process Continuous improvement model	-          Assumes the process is BROKEN and needs to be improves -          EG AAMI- best call centre (because 80% of calls are answered by a person who knows all the answers- no transferring) Process is dead- needs a new one

Describe the importance of business process modeling (or mapping) and business process models

-          To be able to visualize an organisations operation- helps identify problems and new opportunities

-          Technology makes processes invisible, BPM makes them visible

-          Shows process details in a gradual and controlled manner

IT makes processing possible. Make process visible to make it more efficient 

 

CHAPTER 1: Information Systems in Business

Explain information technology’s role in business: 

 IT is critical to all businesses, as it:

Reduces costs, 
Improved productivity 
Generates growth,
An enabler to support the business
Assists with efficiency

IT solutions have the ability to improve customer service, finance, sales and marketing, operations management and human resources. 

How IT can benefit all parts of a business

Describe how you measure success?

Efficiency:

Effectiveness

Drucker 'Do things right'  Focuses on the actual technology How it runs!? Measures the performance of the IT system, including Speed and availability, Information accuracy, Web traffic and Response time Benchmarks: Baseline values the system seeks to obtain Benchmarking: Continually measuring system results with benchmarks- and identifying improvements

Drucker: 'Do the right things'  Focus on the business goals, strategies and objectives The impact IT has on business processes and activities  Includes usability, customer satisfaction, conversion rates, financial etc Set the right goals to ensure these are achieved  Mean time to repair: how long it takes to resolve an outrage First fix rate: The percentage of incidents that are correctly repaired the first time Change Success rate: % (& number for scope) of changes that are successfully deployed without creating an incident  Server to System Administration Ratio: Number of servers that can be handled by an administrator (high performers= 1:125, medium/low performers= 1:25)

List and describe each of the forces in Porter’s Five Forces Model:

5 Forces Model- evaluating business segments

          Determines the relative attractiveness of an industry

      Buyer Power:

High: when buyers have many choices of whom to buy from

Low: when their choices are few

Reduce buyer power through loyalty programs!!
Reward customers based on the amount of business they do within a particular organization
Technology helps- make business more accessible eg websites

      Supplier Power

High: when one supplier has a concentrated power over an industry (many buyers- few choices to choose from)

Low: when there are many suppliers (buyers have a wide choice)

Supply chain: Power is often with supplier: 

Threat of substitute products or services

High: when there are many alternatives eg butter, spread, magarine

Low: when there are few alternatives eg specific medicines, or specific medical equipment
Switching costs: costs (not always financial) that can make customers reluctant to switch eg switching cost of supplier with specific company or industry knowledge can be very high, Eg banks getting rid of fees

      Threat of new entrants

High: when it is easy for new entrants to enter a market eg online bike sales

Low: when there are significant entry barriers eg new telecommunications company
Entry barrier: a product or service that customers have come to expect and must be offered to compete and survive eg high entry cost for new car manufacturer

         
      Rivalry amongst existing competitors:

High: when competition is fierce in a market

Low: when competition is more complacent

Describe the relationship between business processes and value chains

VALUE CHAINS ANALYSIS

  

      Value creation is the result of effective business processes and efficient value chains

Business process:
A standardized set of activities that accomplish a specific task

Value chain: 
Views an organization as a series of processes, each of which adds value to the product or service

Primary value activities 
Acquire raw materials and manufacture, deliver, market, sell and provide after sales services

Support value activities: 
Support the primary value activities 

Porters Value Chain Analysis

Compare Porter’s three generic strategies

3 generic strategies creating a business focus:

-          Follow one when entering a new market

o   Broad cost leadership

Eg antivirus or itunes (not having to buy entire CD)

o   Broad differentiation

Eg- apple- different to PC, or Amazon- buying books online, or buying Dell computers online

o   Focused strategy

Eg Iphones and Apple Computers

Example of use of Porters 3 generic strategies