0

INSTITUTE OF ACCOUNTANCY ARUSHA

IN COLLABORATION WITH
COVENTRY UNIVERSITY (UK)

MASTERS IN BUSINESS ADMINISTRATION
IN
INFORMATION TECHNOLOGY MANAGEMENT

REPORT ON THE IMPORTANCE OF IS/IT STRATEGY AND CHANGE
MANAGEMENT IN ORGANIZATION.
A CASE STUDY OF MSD

MODULE NAME : IS-IT STRATEGY
MODULE CODE : ECM28EMD
COURSE WORK : INDIVIDUAL ASSIGNMENT
LECTURER : Dr. Titus Tossy
DUE DATE : 13/05/2013



SUBMITED BY:
MNZAVA, EMMANUEL MBA-ITM/161/T.2012

i


LIST OF ABBREVIATION
ICT Information and Communication Technology
IS Information System Strategy
MSD Medical Stores Department

2

EXECUTIVE SUMMARY
Overview
The Medical Stores Department (MSD) is a semi-autonomous branch of the Ministry of
Health in Tanzania which is responsible for the procurement, storage and distribution
of medicines, medical supplies and laboratory supplies to health facilities throughout
the country. In support of these activities, MSD currently runs the ORION Enterprise
Resource Planning (ERP) system as its core business application. The system was
implemented in 2002, since which time MSD has experienced significant changes in
sales volume, market expectations, and has acquired additional responsibilities,
especially in the area of vertical program product management. While the business has
changed significantly, the functionality of the system has remained relatively static
during the ten years since its implementation. MSD staff has developed numerous
parallel systems and workarounds to address the challenges facing them, but while
these efforts have addressed immediate business needs the value of the ERP system as
the central hub of enterprise-wide information has declined and the integration of
operations between business units has suffered.
A post-implementation audit of ORION completed in 2008 concluded that the system
does not support the current or future needs of MSD and should be replaced, either
through an upgrade of the current ORION product, or with the implementation of a new
application or applications. A medium term strategic business plan for 2006 to 2007
authored in 2006 drew similar conclusions, and the sentiment expressed by executive
management and staff indicates a general dissatisfaction with the current ORION
implementation.




3

TABLE OF CONTENTS
LIST OF ABBREVIATION ............................................................................................................................ i
EXECUTIVE SUMMARY ............................................................................................................................ 2
TABLE OF CONTENTS ............................................................................................................................... 3
BACKGROUND ......................................................................................................................................... 4
Medical Stores Department Overview............................................................................................ 4
Current ERP System ............................................................................................................................ 4
INTRODUCTION ....................................................................................................................................... 7
IT Values .............................................................................................................................................. 8
Excellence ........................................................................................................................................ 8
Team Spirit ...................................................................................................................................... 8
Integrity ........................................................................................................................................... 9
Professionalism ............................................................................................................................... 9
Transparency ................................................................................................................................... 9
What is change management? ........................................................................................................... 9
ENVIRONMENT ANALYSIS ..................................................................................................................... 10
The concept of value chain ........................................................................................................... 10
Identifying External and Internal Environment ............................................................................ 12
Why Change management is important ....................................................................................... 13
THE CASE OF MSD ................................................................................................................................. 16
CONCLUSION ......................................................................................................................................... 18
REFERENCE ............................................................................................................................................ 19



4

BACKGROUND
Medical Stores Department Overview
The Medical Stores Department is a semi-autonomous branch of the Tanzania Ministry
of Health and Social Welfare, with board of directors overseeing its operations. It is
charged with the procurement, storage and distribution of medicines, medical and
laboratory supplies to government health facilities and non-profit health service
organizations within the country of Tanzania. As of 2009, MSD had sales of 62.5 billion
TZS, and experienced average year over year growth in excess of 30%1 over a seven
year period. In addition, the volume of products handled by MSD from the donor
community, which are distributed but not factored into MSD sales volume, has been
rising over the same time period.
MSD has its headquarters in Dar Es Salaam and operates 9 zonal stores throughout the
country .The MSD organization includes Finance, Human Resources, Logistics, Customer
Service and Sales, Information Systems, and Pharmaceutical Technical Services
(including procurement) departments at headquarters location. The zonal stores report
administratively under the Customer Service and Sales department organization. Each
zonal store has Finance, Sales, Customer Service and Logistics reporting to a zonal
stores manager. Each functional group has a dotted line report back to a headquarters
manager in their functional area. In addition to the approximately 410 full-time
employees, MSD utilizes a number of contract employees, particularly in warehousing
and distribution roles.
Current ERP System
Early in 2002 MSD changed their core business system, at that time Navision, and
implemented ORION, a product of 3i Infotec of India. The project management of the
implementation was outsourced under a DANIDA contract. The technical
implementation was executed by 3i Infotech working through a local agent, Simba
Technology.


5

ORION was initially configured with 12 modules: Tendering, Procurement, Letter of
Credits, Supplier performance, Quality Control, Complaints handling, Finance, Inventory
Management, Sales and Distribution, Demand Forecast, Transportation, and Warehouse
Management. This wide range of modules was to ensure that all required functionality
would be available for utilization by MSD staff.
ORION is a centralized Enterprise Requirements Planning (ERP) application and is
installed on servers at the MSD headquarters in Dar Es Salaam (Dar-Central). The zonal
stores have access to the application via an VPN connection and can register their daily
activities, i.e. Customer payments and Sales order entry, directly in the centralized
database. Unfortunately the organization experiences significant problems with
connectivity between zonal stores and Dar-Central, which has had a negative impact on
the zonal operations. Opinions were heard that the system would have been better of as
a decentralized system.

MSD Business and Environment Has Changed Significantly Since Last ERP
Implementation
A post-implementation audit of ORION completed in 2008 concluded that the system
does not support the current or future needs of MSD and should be replaced, either
through an upgrade of the current ORION product, or with the implementation of a new
application or applications. A medium term strategic business plan for 2006 to 2012
authored in 2006 drew similar conclusions, and the sentiment expressed by executive
management and staff indicated a general dissatisfaction with the current ORION

6

implementation. The recommendation was for it to be upgraded or replaced with a new
system which is aligned to current and future MSD business requirements.


















7

INTRODUCTION
Over the years, many organizations have made technology decisions and acquisitions
that impact organizational information systems (IS) on the basis of what they believe or
recommendations from vendors or colleagues from other organizations. The end result
of this approach toward decision making and expenditure of funds has been quite
unpredictable. The pervasive nature of IS in todays organizations coupled with
increased pressure to leverage technology assets has dramatically increased the
importance of strategic information systems planning (Bechor, Neuman, Zviran and
Glezer, 2009). Today, most organizations insist that technology and IS- related decisions
be made with a clear understanding of business and organization strategy and direction.
Hoque, Sambamurthy, Zmud, Trainer, and Wilson, (2005) in Winning the 3 Legged
Redefine alignment as the situation in which a companys current and emerging
business strategy is enabled, supported and unconstrained by technology. Piccoli
(2008, p. 155) states that organizations achieve a high degree of fit and consonance
between priorities and activities of the IS function and the strategic direction of the
firm when they are able to achieve this so-called strategic alignment. Alignment has
become one of the top issues and concerns of IS management executives (Gutierrez,
Orozco, and Serrano, 2009).
MSD Vision and Mission in line with IT Vision, Mission, Values & Behaviours
If there isnt a constant focus on Mission and Vision its much too easy to get mired in
the day to day routine. Activities become aimless, repetitive, and boring.
Revitalizing a team to perform differently will be much more difficult if there is nothing
for it to aspire to. Aspiration must also be in real-world terms that are meaningful and
not IT for ITs sake.
MSD Mission is what we do best every day and our Vision is what the future looks like to
do the Mission very well. Our Values underpin the way we want to perform every
action.

8


The Vision and Mission for IT presented below are build on the MSD aims for the Long-
Term Strategy and they encapsulate the key attributes that MSD clients expect MSD to
be able to provide.
MSD Vision IT Vision
To provide quality medical Services Closer
to People
To deliver reliable and innovative IT
Services and solutions needed to fulfill
MSDs mission anytime, anywhere, on
target, on time and on budget.
MSD Mission IT Mission
To make available at all times essential
drugs and medical supplies of acceptable
quality at cost-effective prices to the
population through government and
approved non-government and private
health facilities.
MSD is a Business that is user-centric,
business-oriented, innovation-focused,
and standard compliant. We strive to
provide efficient, effective and modern IT
infrastructure and application services to
support, optimize and transform MSDs
business process throughout Tanzania.

IT Values
Excellence
Quest for the highest level of performance through continuous improvement of our
skills and business practices
Team Spirit
Working together in a spirit of creativity and mutual respect to achieve common
objectives

9

Integrity
Observing the highest standards of ethics, honesty and accountability at all times
Professionalism
Delivering the best quality service to our clients with utmost rigour and efficiency
Transparency
Acting with clarity, equity and objectivity in designing, interpreting and applying MSD
policies and procedure.


What is change management?
As regulatory pressures, increasing customer demands and competitive forces impact
organizations on a worldwide basis, change is becoming the norm rather than the
exception. It is therefore becoming increasingly important for leaders at all levels to act
not only in their traditional roles as supervisors and managers, but also as transitional
leaders or leaders who deploy a specific change management strategy whenever
necessary. This is a role that focuses on guiding people through the changes inherent in
all kinds of teams, departments and whole organizations today. We therefore need to
spend a little time in both defining the term managing change talking about the overall
tasks that are involved in managing organizational change.






10

ENVIRONMENT ANALYSIS
The concept of value chain
As Recklies (2001) said, the term "Value Chain" was used by Michael Porter (1985). The
value chain analysis describes the activities the organization performs and links them to
the organizations competitive position. He believes: Value chain analysis describes the
activities within and around an organization, and relates them to an analysis of the
competitive strength of the organization. Therefore, it evaluates which value each
particular activity adds to the organizations products or services. This idea was built
upon the insight that an organization is more than a random compilation of machinery,
equipment, people and money. Only if these things are arranged into systems and
systematic activates it will become possible to produce something for which customers
are willing to pay a price. Porter argues that the ability to perform particular activities
and to manage the linkages between these activities is a source of competitive
advantage (Recklies, 2001) .
Porter (1985) distinguishes between primary activities and support activities. Primary
activities are directly concerned with the creation or delivery of a product or service.
They can be grouped into five main areas: inbound logistics, operations, outbound
logistics, marketing and sales, and service. Each of these primary activities is linked to
support activities, which help to improve their effectiveness or efficiency. There are four
main areas of support activities: procurement, technology development (including
R&D), human resource management, and infrastructure (systems for planning, finance,
quality, information management etc.).
The Value Chain framework of Michael Porter is a model that helps to analyze specific
activities through which firms can create value and competitive advantage. The goal of
Primary Value Chain activities is to create value that exceeds the cost of providing the
product or service, thus generating a profit margin.
Inbound logistics include the receiving, warehousing, and inventory control of
input materials.

11

Operations are the value-creating activities that transform the inputs into the
final product.
Outbound logistics are the activities required to get the finished product to the
customer, including warehousing, order fulfillment, etc.
Marketing & Sales are those activities associated with getting buyers to
purchase the product, including channel selection, advertising, pricing, etc.
Service activities are those that maintain and enhance the product's value
including customer support, repair services, etc.
Any or all of these primary activities may be vital in developing a competitive
advantage. The primary value chain activities described above are facilitated by support
activities. Porter identified four generic categories of support activities, the details of
which are industry-specific.
Procurement - the function of purchasing the raw materials and other inputs
used in the value-creating activities.
Technology Development - includes research and development, process
automation, and other technology development used to support the value-chain
activities.
Human Resource Management - the activities associated with recruiting,
development, and compensation of employees.
Firm Infrastructure - includes activities such as finance, legal, quality
management, etc.
Support activities often are viewed as "overhead", but some firms successfully have
used them to develop a competitive advantage, for example, to develop a cost advantage
through innovative management of ISs (porter, 1985) IT is also pervasive throughout all
parts of the value chain.
Porter's model recognizes five major forces that could endanger a companys position in
a given industry. These forces are and in the figure 4 Porters five forces model,
including the major determinant of each force presented:
i. The threat of entry of new competitors

12

ii. The bargaining power of suppliers
iii. The bargaining power of customers (buyers)
iv. The threat of substitute products or services
v. The rivalry among existing firms in the industry

Identifying External and Internal Environment
Adapting with the change of environment that is external or internal is one of the key
factors of strategic planning.
Definition of external environment goes to recognize the threats and opportunities in
the working environment. For the things that effect on organizations task and future
firm should examine the external environment and this way helps the managers for
developing. Searching about demographics of your customer groups or market
segmentation is one of the tool for being successful in this issue, and another is
nationality of them or groups and community which they accompany in them. There are
many other parameters that effect on the organization like political, economic, social,
new technological methods and also the revenue and competition. Companies should
not forget that internal environment is also very important versus external
environment. The strength and weakness of the organization is the parameter of
internal environment. For classify the internal environment quality and quantity of
resources play a significant role in organization and also core competencies of the firm
are very important that consider in the strengths point. Unlike the strong resources,
inadequate resource consider in weakness of company or organization. One of the
significant parts of internal evaluating is the current strategy of firm and anticipating its
future from its mission and vision. Swot analysis is another tool for clearing the
opportunities and treats that can help in development of organization.



13

Why Change management is important
It increases project success (it has been found that most often the reason for project
failure is resistance of people and bad management of the human element in the
project).
The success of a project is not only related to good strategy or good technical
management. Motivation and skills of the team are also important.
Change management is of strategic importance, without which companies cannot exist.
Their ability to change and adapt quickly brings enormous market advantages.
Importance of Information System Strategy in Organization
To survive and succeed, a business must develop and implement strategies to effectively
counter the above five competitive forces. OBrien and Marakas (2011, p. 49) suggest
that organisations can follow one of five basic competitive strategies, which are based
on Porters three generic strategies of broad cost leadership, broad differentiation, and
focused strategy. The five competitive strategies are: cost leadership, differentiation,
innovation, growth, and alliance. Meanwhile, information systems could be a critical
enabler of these five competitive strategies (see Table 2).
Table 2: Competitive Strategies & Roles of Information Systems
Competitive Strategy

Roles of Information Systems

Cost Leadership

Organizations can use information systems
to fundamentally shift the cost of doing
business (Booth, Roberts & Sikes 2011) or
reduce the costs of business processes
or/and to lower the costs of customers or
suppliers, i.e., using online business to
consumer & business to business models,

14

e-procurement systems to reduce
operating costs.

Differentiation

Organizations can use information systems
to develop differentiated features or/and
to reduce competitors differentiation
advantages, i.e., using online live chatting
systems and social networks to better
understand and serve customers; using
technology to create informe- diaries to
offer value-added service and improve
customers sticki- ness to your web
site/business(Booth, Roberts, and Sikes
2011); ap- plying advanced and
established measures for online
operations to offline practices (i.e., more
accurate and systematic ways of measur-
ing efficiency and effectiveness of
advertising) (Manyika 2009).

Innovation

Organizations can use information systems
to identify and create (or assist in
creating) new products and services
or/and to develop new/niche markets
or/and to radically change business
processes via automation (i.e., using digital
modelling and simulation of product
design to reduce the time and cost to the

15

market (Chui & Fleming 2011). They also
can work on new initiatives of establishing
pure online businesses/operations. At the
same time, the Internet and
telecommunications networks provide
better capabilities and oppor- tunities for
innovation. Combinational innovation
and Open inno- vation are two good
examples. There are a large number of
compo- nent parts on the networks that
are very expensive or extremely dif- ferent
before the establishment of the networks,
and organizations could combine or
recombine components/parts on the
networks to create new innovations
(Manyika 2009). Meanwhile everyone is
connected via personal computers, laptops
and other mobile devices through cabled
Internet or wireless networks or mobile
networks, there are plenty of
opportunities to co-create with customers,
exter- nal partners and internal people.

Growth (including mergers and
acquisitions)

Organizations can use information systems
to expand domestic and international
operations or/and to diversify and
integrate into other products and services,
i.e., establishing global intranet and global
operation platform; establishing omni-

16

channel strategy to gain growth(omni-
channel strategy looks at leveraging
advantages of both online (or digital) and
offline (or non-digital) channels) (Rigby
2011).

Strategic Alliance

Organizations can use information systems
to create and enhance relations with
partners via applications, such as
developing virtual organizations and inter-
organizational information systems.


THE CASE OF MSD
MSD is in transition period where by new system is introduced and in order for a
successful implementation of the new system. IS/IT Strategy of the company should be
in line with Organisation Strategy and Better Change management practices.
There are areas, which have shown to be critical for the successful implementation of
the new ERP because of the culture that existed for years at MSD.
The following has been experienced among staffs.
Fear for the unknown after implementation of the new ERP. This is when users
started to fear for their position after knowing that there will be changes to how
they work and interact with the system.
Also for some of the managers they had fear for loosing their position for not
knowing or fail to catch up with the new system.

17

To address these issues an improved reception of change while keeping staff engaged is
more likely to be achieved if someone understands how to put into action the theory of
change. Stakeholder engagement is deep-seated to successful change and it is equally
original to understand the function and content of a stakeholder engagement strategy,
how to plan and execute effective engagements and how to provide a feedback and
review cycle to adjust and improve influence. Training in change management can help
to provide a deeper knowledge of its principles. and an understanding of how to
implement and manage change in an organization by increasing the ability of the firms
of course with recruiting training for employees, firms can allocate their force and
power in specific part of the firm and with this they can distrusted and develop the
firms abilities and also the training that can be use not only for the enhancing the
capability but also for using and implementing the strategic change in the firm,(Goll, et
al., 2007).
The management of MSD decided to introduce training to all staff at all levels to make
sure that are in par with the changes that are taking place at MSD. By involving staff at
all level of changes and by ensuring they are part of change.
Also, The management decided to fully support the use of IS/IT Strategy for MSD to gain
competitive advantage in this modern world of Technology where 80% of activities at
MSD are done through the use of Information System.
About 70% of Staff at MSD are knowledgeable about the use of Information Technology.
This poses as a Advantage to MSD when they embrace Technology, while management
is making sure that the investment put into the Technology reap benefits to MSD and
not a Burden.



18

CONCLUSION
Because information has emerged as an agent of integration and the enabler of new
competitiveness for todays enterprise in the global marketplace and because strategic
IS supports or shapes competitive strategies, the concepts of ISs is so important, IT can
be used to support a variety of strategic objectives, including creation of innovative
applications, changes in business processes, links with business partners, reduction of
costs, acquiring competitive intelligence, and others.















19

REFERENCE
Ankit Bhatnagar. (2006). Strategic Information Systems Planning: Alignment of
'IS/IT' Planning and Business Planning, Unitec New Zealand.
Frenzel, C. W. (1996). Management of Information Technology, 2nd ed. Cambridge,
MA: Course Technology. Gregus, Michal and Benova, Eleonora. (2006). Strategic
Information Management, Comenius University, E-Leader, Slovakia 2006.
Neumann, S. (1994). Strategic Information SystemsCompetition through
Information Technologies. New York: Macmillan.
Stephen T. Bajjaly. (1998). Strategic Information Systems Planning in the Public
Sector, University of South
Carolina. The American Review of Public Administration, Vol. 28, No. 1, pp. 75-85.