MANAGEMENT INFORMATION SYSTEMA & DSS

UNIT-V

Strategic Information Systems for Competitive Advantage

Key features of the Strategic ISs are the following: Decision support systems that enable to develop a strategic approach to align IS or IS 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 also facilitate identification of the data collection strategies to help optimize database marketing opportunities. The real-time ISs that intend to maintain a rapid-response and the quality indicators.

Elements of Strategic Management

1. Long Range Planning

2. Response Management 3. Proactive Innovation

The Role of IS in Business Innovation

IS creates applications that provide strategic advantages to companies

IS is a competitive weapon
IS supports strategic change, e.g, re-engineering IS networks with business partners IS provides cost reduction IS provides competitive business intelligence

Competitive Intelligence

Many companies monitor the activities of competitors

Such activities drive business performance by:

Increasing market knowledge
Improving internal relationships Raising the quality of strategic planning

The Internet is central to supporting competitive intelligence

Strategic Information systems at Rosenbluthdefending against business pressures and competition, (resource: Turban et al, 2006, p. 93)

An SIS is characterized by its ability to signicantly change the manner in which business is conducted, in order to give the rm strategic advantage. An SIS cannot be classied by organizational structure, functional area, or support system as described in the previous chapter. Any information systemEIS, OIS, TPS, KMSthat changes the goals, processes, products, or environmental relationships to help an organization gain a competitive advantage or reduce a competitive disadvantage is a strategic information system.

HOW IT/IS AFFECTS THE NATURE OF COMPETITION

It changes industry structure and alters the rules of competition...

by increasing the power of buyers, raising barriers to entry and influencing the threat of substitution

It creates competitive advantage by giving companies new ways to out-perform their rivals...

lowering costs, enhancing differentiation and changing competitive scope

HOW IT/IS AFFECTS THE NATURE OF COMPETITION

It spawns whole new businesses, often from within a company's own operations... by making

new businesses technologically feasible creating derived demand for new products and creating new businesses within old ones.

PORTERS Value Chain Model

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.

PORTERS Value Chain Model

Porters Value Chain Model

Porter 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.).
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PORTERS Value Chain Model

The term Margin implies that organizations realize a profit margin that depends on their ability to manage the linkages between all activities in the value chain. In other words, the organization is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain.

Porters Value Chain Model

In most industries, it is rather unusual that a single company performs all activities from product design, production of components, and final assembly to delivery to the final user by itself. Most often, organizations are elements of a value system or supply chain. Hence, value chain analysis should cover the whole value system in which the organization operates.

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PORTERS Value Chain Model

PORTERS Value Chain Model

A typical value chain analysis can be performed in the following steps: Analysis of own value chain which costs are related to every single activity Analysis of customers value chains how does our product fit into their value chain Identification of potential cost advantages in comparison with competitors Identification of potential value added for the customer how can our product add value to the customers value chain (e.g. lower costs or higher performance) where does the customer see such potential

ACHIEVING Operational Excellence and Customer Intimacy: Enterprise Applications

How Enterprise Systems Work

Enterprise systems feature a set of integrated software modules and a central database that enables data to be shared by many different business processes and functional areas throughout the enterprise.

Management Information Systems SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply chain Management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right rimes, in order to minimize system wide costs while satisfying service level requirements.

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Management Information Systems SUPPLY CHAIN MANAGEMENT SYSTEMS

Supply chain:

Network of organizations and processes for:

Procuring raw materials Transforming them into products Distributing the products

Upstream supply chain:

Firms suppliers, suppliers suppliers, processes for managing relationships with them Organizations and processes responsible for delivering products to customers
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Downstream supply chain:

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SUPPLY CHAIN MANAGEMENT SYSTEMS

Nikes Supply Chain

This figure illustrates the major entities in Nikes supply chain and the flow of information upstream and downstream to coordinate the activities involved in buying, making, and moving a product. Shown here is a simplified supply chain, with the upstream portion focusing only on the suppliers for sneakers and sneaker soles.

Management Information Systems SUPPLY CHAIN MANAGEMENT SYSTEMS

THE BULLWHIP EFFECT

Inaccurate information can cause minor fluctuations in demand for a product to be amplified as one moves further back in the supply chain. Minor fluctuations in retail sales for a product can create excess inventory for distributors, manufacturers, and suppliers.
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SUPPLY CHAIN MANAGEMENT SYSTEMS

Push- Versus Pull-Based Supply Chain Models Traditional supply chain strategies are often categorized as push or pull strategies. Probably. this stems from the manufacturing revolution or ihe I 9&)s. in which manufacuring systems were divided into these categories. Push. Based supply chain : In a push-based supply chain, production and distribution decisions are based on long term forecasts. Typically. the manufacturer bases demand forecasts on orders received from the retailer's warehouses. It therefore takes much longer for a push-bused supply chain to react to the changing marketplace. which can lead to . The inability to meet changing demand patterns. . The obsolescence or supply chain inventory as demand ror certain products disappears. In addition, we saw in Chapter 4 that the variability of orders recciscd from the retailers and the warehouses is much larger than the variabiliy in customer demand. due to the bullwhip effect. This increase in variability leads to . Excessive inventories due to the need for large safely stocks (see chapter 3). . Larger and more ariabte production batches. . The difference between levcls. Unacceptable service push- and pull-based models is summarized by the slogan Make what we sell, not sell what we make. Prxduct obsolcscence.

SUPPLY CHAIN MANAGEMENT SYSTEMS

Push- Versus Pull-Based Supply Chain Models

The difference between push- and pull-based models is summarized by the slogan Make what we sell, not sell what we make.

SUPPLY CHAIN MANAGEMENT SYSTEMS

Management Information Systems

Business value of SCM systems

Match supply to demand Reduce inventory levels Improve delivery service Speed product time to market Use assets more effectively Reduced supply chain costs lead to increased profitability Increased sales

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SUPPLY CHAIN MANAGEMENT SYSTEMS

THE FUTURE INTERNET-DRIVEN SUPPLY CHAIN

Management Information Systems

The future Internet-driven supply chain operates like a digital logistics nervous system. It provides multidirectional communication among firms, networks of firms, and emarketplaces so that entire networks of supply chain partners can immediately adjust 25 inventories, orders,

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Management Information Systems CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM

CRM integrates people, process. and technology to maximize relationships with all customers. CRM is a comprehensive approach that provides seamless coordination between all customer-facing functions. CRM increasingly leverages the Internet.

Management Information Systems Customer Relationship Management Systems

Knowing the customer

In large businesses, too many customers and too many ways customers interact with firm Capture and integrate customer data from all over the organization Consolidate and analyze customer data Distribute customer information to various systems and customer touch points across enterprise Provide single enterprise view of customers
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Customer relationship management (CRM) systems

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Management Information Systems Customer Relationship Management Systems

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) CRM systems examine customers from a multifaceted perspective. These systems use a set of integrated applications to address all aspects of the customer relationship, including customer service, sales, and marketing.

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Management Information Systems CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

CRM packages typically include tools for:

Sales force automation (SFA)

E.g. sales prospect and contact information, and sales quote generation capabilities

Customer service

E.g. assigning and managing customer service requests; Web-based self-service capabilities
E.g. capturing prospect and customer data, scheduling and tracking direct-marketing mailings or e-mail

Marketing

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CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

CRM SOFTWARE CAPABILITIES The major CRM software products support business processes in sales, service, and marketing, integrating customer information from many different sources. Included are support for both the operational and analytical aspects of CRM.
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Management Information Systems

Management Information Systems CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

CUSTOMER LOYALTY MANAGEMENT PROCESS MAP

This process map shows how a best practice for promoting customer loyalty through customer service would be modeled by customer relationship management software. The CRM software helps firms identify high-value customers for preferential treatment.
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Management Information Systems CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Operational CRM:

Customer-facing applications

E.g. sales force automation, call center and customer service support, and marketing automation

Analytical CRM:

Analyze customer data output from operational CRM applications Based on data warehouses populated by operational CRM systems and customer touch points

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Management Information Systems CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

ANALYTICAL CRM DATA WAREHOUSE

Analytical CRM uses a customer data warehouse and tools to analyze customer data collected from the firms customer touch points and from other sources.
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CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Management Information Systems

Business value of CRM

Increased customer satisfaction Reduced direct-marketing costs More effective marketing Lower costs for customer acquisition/retention Increased sales revenue Reduce churn rate

Number of customers who stop using or purchasing products or services from a company. Indicator of growth or decline of firms customer base

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