CH 4 MIS, CH 3 MIS, CH 2 MIS
point-of-sale (POS) terminal
A specialized computer used to collect, store, and report all the information about a sales transaction.
Just-in-time manufacturing
(JIT) seeks to reduce inventories for the production process by purchasing inputs for arrival just in time to use and producing output just in time to sell. Rather than costly accumulation and storage of supplies, it requires frequent ordering of small lots of goods for precisely timed arrival and immediate deployment to the factory floor.
Inventory Optimization
1. forecast the consumption of fast-moving products and order them with sufficient inventory to avoid a stock-out scenario 2. perform fast inventory turnover of slow-moving products by combining them with one in high demand
PC history
1974 - Altair 8800 - the first PC 1976 - Wosniak and Jobs - Apple I • 1977 - Apple II• - Plastic case• - Keyboard• - Capable of color graphics
FoxMeyer Drugs
1993 MarketCap of $5B• Purchased SAP and WarehouseAutomation• $35M Budget to improve efficiency• Hired Anderson Consulting toimplement and integrate• 1996: Company bankrupt. Assetssold for $80M FoxMeyer management set up an unrealisticallyaggressive time line -- the entire system wassupposed to be implemented in 18 months.• Warehouse employees whose jobs were affected --more accurately, threatened -- by the automatedsystem were not supportive of the project, to saythe least.• After three existing warehouses were closed, thefirst warehouse to be automated was plagued bysabotage, with inventory damaged by workers andorders going unfilled.• New system turned out to be less capable than theone it replaced: By 1994, the SAP system wasprocessing only 10,000 orders a night, comparedwith 420,000 orders under the old mainframe.• FoxMeyer also alleged that both Andersen and SAPused the automation project as a training tool forjunior employees, rather than assigning their bestworkers to it.
Brand Value
A brand's worth in terms of income, potential income, and prestige. A key factor in increasing customer willingness to pay, as seen in Apple's products.
Motherboard
A circuit board that contains all of the computer system's main components.
Project Lifecycle
A collection of project phases, such as concept, development, implementation, and close-out. Includes unit testing, solution delivery, user testing, go-live period, system cutover, and system maintenance.
dense wave division multiplexing (DWDM)
A technology that increases the transmission capacity (and hence speed) of fiber-optic cable. Transmissions using fiber are accomplished by transmitting light inside "glass" cables. In DWDM, the light inside fiber is split into different wavelengths in a way similar to how a prism splits light into different colors.
Porter's Five Forces
Also known as Industry and Competitive Analysis. A framework considering the interplay between (1) the intensity of rivalry among existing competitors, (2) the threat of new entrants, (3) the threat of substitute goods or services, (4) the bargaining power of buyers, and (5) the bargaining power of suppliers.
computer system
An organization of hardware and software designed to accomplish a data processing function.
What do you suppose are the factors that helped Gap to at one point rise to be first in sales in the fashion industry?
At one point, Gap had successfully marketed their clothing into the blueprint of office attire, thanks to their big advertising budget and TV ads. They were good at guessing future trends, and their CEO Micky Drexler accurately identified trends and even defined the trends until the 2000's.
straddling
Attempts to occupy more than one position, while failing to match the benefits of a more efficient, singularly focused rival.
Why would a manufacturer of DVD players be motivated to offer the Netflix "Watch Now" feature in its products?
Because so many people use Netflix that could push their DVD players to popularity as many people would use and want that feature.
Wal-Mart backed out of the DVD-by-mail industry. Why does the firm continue to have so much influence with the major film studios? What strategic asset is Wal-Mart leveraging?
Because their stores account for over 40% of DVD sales, which means that many studios will want to give Walmart special treatment so it can continue to sell well.
Which firms are or have been Netflix's most significant competitors? How do their financial results or performance of their efforts compare to Netflix's efforts?
Blockbuster, Walmart- Walmart abandoned its experiment with dvd, blockbuster started losing a lot of profit
Capital Expenses vs. Operational Expenses
Capital expenses can be depreciated over time, while operational expenses are written off against that year's revenues. The choice of depreciation method depends on the business environment and has different advantages and disadvantages.
How does the Netflix business model work?
Charges flat-rate monthly subscription rather than per-disc rental fee. No mailing charges/late fees. Web site used to rate videos, specify movie preferences, get video recommendations, check out DVD details, and share reviews. Customers can also stream to computer. Any customer paying at least $8.99 for a DVD-by-mail subscription plan can stream an unlimited number of videos each month at no extra cost.
Who are the rivals to Netflix's "Watch Now" effort? Do any of these firms have advantages that Netflix lacks? What are these advantages?
Companies like HBO and Showtime have been rivals, as they have exclusive rights to certain shows and movies during pay television windows.
Consider the Prada case mentioned in the sidebar "Technology ≠ Systems." What did Prada fail to consider when it rolled out the technology in its flagship location? Could this effort have been improved for better results? If you were put in charge of this kind of effort, what factors would you consider? What would determine whether you'd go forward with the effort or not? If you did go forward, what factors would you consider and how might you avoid some of the mistakes made by Prada?
Even though they had software that sounded like a flawless and perfect system, they forgot to account for the hardware and procedures that people actually have to use daily. They went for flashy and cool technology instead of functionality. They could have tested the doors and made the pedals easier to navigate for customers. If I were put in charge, I would probably cut out the digital doors that rely on pedals and focus more on the RFID systems and tracking what products are most desirable.
fast follower problem
Exists when savvy rivals watch a pioneer's efforts, learn from their successes and missteps, then enter the market quickly with a comparable or superior product at a lower cost before the first mover can dominate.
What factors account for a firm's profit margin? What does Gap focus on? What factors does Zara focus on to ensure a strong profit margin?
Expenses and production costs, revenue, Gap focused more on costs as they used the production contractors to lower their costs and only produced so many clothes season since it cost more to do a higher variety of items. Zara lowers costs by vertical integration and getting a lot of their supplies and resources in-house, as well as revenue as they are highly focused on what consumers want and have a high turnover rate of products and have a wider range of styles.
Where do Gap clothes come from? Who makes them? Why? Are there risks in this approach?
Gap clothes come from contract manufacturing in countries like New Delhi, and there have been reports of children as young as 10 making their clothes. They did this to cut their production costs to lower their prices and increase their profit margins, but the risks are having dangerous and inhumane working conditions for the contract manufacturing workers in developing countries. Civil and political unrest as well as worker availability and reliability are also factors
What recent appointment did Reed Hastings accept in addition to his job as Netflix CEO? Why is this appointment potentially important for Netflix?
He accepted an appointment to the Board of Directors at Microsoft. This could be important as Microsoft is the largest software firm, which could grow Netflix
IT vs IS
IT pertains to the hardware, software, and data components. IS is an assembly of hardware, software, data, procedures, and people that produces info
Netflix uses technology to coordinate the process of sorting and dropping off DVDs for the U.S. Postal Service. This application of technology speeds delivery. What other advantage does it give the firm?
It also gives Netflix the lowest possible postage rates for first class delivery.
Could a new competitor match Netflix's recommendation software? If it did, would this create a threat to Netflix? Why or why not?
It could make a similar type of software, but its accuracy and valuableness would not be the same, as it requires a network effect of many people liking or disliking things to narrow down titles to specifics. It may threaten Netflix if they could quickly get their software up to Netflix's speed and precision, but otherwise probably not.
How has Netflix improved its customer service operation? Describe the results and impact of this improvement.
It pays close attention to process improvements and errors and quickly jumps in the prevent errors from ever happening again. Their technology also helps to smooth operations and customer experience, which has allowed Netflix to reduce its customer service reps even though their amount of subscriptions were rising. This allows them to cut costs.
Describe various revenue models available as video content shifts from atoms to bits. What are the advantages and disadvantages to each—for consumers, for studios, for middlemen like television networks and Netflix?
Many models are going to be focused on streaming directly to the TV or using some sort of hardware or software that limits the need of DVDs and physical copies. This means that streaming rights and other rights will be important and cause an issue
Who ran Gap in the 1990s? How did the executive perform prior to leaving Gap? Describe what happened to sales. Why
Micky Drexler- He performed very well and was very talented in the fashion industry. However, as time went on, his team had less and less accurate taste and he lost sales. Because of this, they were left to guess which did not work and they lost out on even more profit.
Why did Wal-Mart and Blockbuster managers, as well as Wall Street analysts, underestimate Netflix? What issues might you advise analysts and managers to consider so that they avoid making these sorts of mistakes in the future?
Netflix had significantly lowered their prices and increased their advertising budget, which many thought would drive them out of business. However, since that was their only focus and they were not straddling, they increased profits while Walmart had to cut their losses and Blockbuster loses billions after losses each quarter.
What "class" of software does Netflix use to make movie recommendations? Think about Chapter 2 "Strategy and Technology: Concepts and Frameworks for Understanding What Separates Winners from Losers": Which key competitive resource does this software "create"? What kinds of benefits does this provide to the firm? What benefits does it provide to Netflix's suppliers?
Netflix uses Cinematch and collabroative filtering to make movie recommendations. This creates the imperfectly imitable and valuable resources, as even though other companies have similar tools, Netflix's is considered to gold standard since theirs has been around for so long and they are constantly improving the software.
What do you believe are the most significant long-term threats to Netflix? How is Netflix trying to address these threats? What obstacles does the firm face in dealing with these threats?
Newer technology may threaten Netflix, so Netflix needs to make sure to leverage their technology and make sure that they can move their operations from physical DVDs to digital video streaming.
Would a traditional Internet storefront work well with Zara's business model? Why or why not?
No, it would probably not work, as their company is very focused on foot traffic and returning customers and their opinions, and since their products only last 2-3 weeks, it would be very hard to keep things in stock and hard to keep up with production timelines.
Investigate the firm Red Box. Do you think they are a legitimate threat to Netflix? Why or why not?
Not really, as they are not really moving from atoms to bits and their selection is very limited and only has the most popular titles in stock.
The Zara case shows how information systems can impact every single management discipline. Which management disciplines were mentioned in this case? How does technology impact each?
Ops management (supply chain, inventory management), marketing management (data extraction instead of ads), information systems management, consumer management. They use Just in time manufacturing, as well as inventory optimization, POS and PDS, and inventory control. Technology helps all of these to become more mainstream and automated instead of requiring workers to do the work themselves.
Who was the Gap's second CEO of this decade? How did sales fare under him? Why?
Paul Pressler- Even though he tried to stop the losses from closing down stores, the firm continued to lose a lot of profits and his efforts were deemed a failure. There was a lot of unsold inventory and it was hard to liquidate, they had to write it off and take the loss
Value Creation
Performing activities that increase the value of goods or services to consumers
strategic positioning
Performing different tasks than rivals, or the same tasks in a different way.
software
Software is a set of instructions that makes thecomputer perform tasks. In other words,software tells the computer what to do.
Straddling
seeking to match a successful competitor by adding features, services, or technology to existing activities
Vertical Integration
Practice where a single entity controls the entire process of a product, from the raw materials to distribution
RAM
Random Access Memory
SAP
SAP software is used to control all types of critical business functions. By integrating and automating key processes, SAP helps organisations to run faster and more efficiently. By storing data centrally, SAP software provides multiple business functions with real-time and accurate insight into operations.
Sainsbury's
Sainsbury's, the British supermarket giant, wasdetermined to install an automated fulfillmentsystem in its Waltham Point distribution center.• Waltham Point was the distribution center formuch of London and southeast England.• The barcode-based fulfillment system wouldincrease efficiency and streamline operations.• Installed in 2003• The system promptly ran into what were thendescribed as "horrendous" barcode-readingerrors.• Regardless, in 2005 the company claimed thesystem was operating as intended.• Two years later, the entire project wasscrapped, and Sainsbury's wrote off £150million in IT costs
Zara's just-in-time, vertically integrated model has served the firm well, but an excellent business is not a perfect business. Describe the limitations of Zara's model and list steps that management might consider to minimize these vulnerabilities
Since Zara is based out of two main headquarters, if one of them experiences internal or external issues, this could cause massive production problems. Since they are so focused on just-in-time fast production, if some sort of supply chain issue or tech issue occurred it could set production back. Additionally, since they are a clothing company, during periods of economic slowdown could cause them to lose profit.
What are Netflix's sources of competitive advantage?
Since it is not limited to a physical store like Blockbuster, it can have as many movies in its inventory as it wants, since their space isn't limited and their dvds can ship anywhere. This allows for them to make more money of less popular titles than the money that the popular titles make.
Scale advantages are advantages related to size. In what key ways is Netflix "bigger" than the two major competitors who tried to enter the DVD-by-mail market?
Since they could offer a wider range of titles on their platform due to their automated warehouses, they did not have to rely on brick and mortar locations and could also ship to anyone, anywhere. This differs from walmart and blockbuster, as they had to deal with physical stores as well.
Describe the Fair Factories Clearinghouse. Which firm thought of this effort? Why did they give the effort away? What happens as more firms join this effort and share their data?
The Fair Factories Clearinghouse provides systems where apparel and other industries can share audit information on contract manufacturers to hopefully more accurately record these manufacturers' misdeeds. Reebok was the one who though of this, but they realized it would work even better if the whole industry could access the information. As more firms join and share data, the more information that an industry has on bad apples in contract manufacturing as a whole.
Supplier Bargaining Power
The ability of your suppliers to negotiate price and terms with your firm. Often a measure of your dependence upon them.
inventory turns
The number of times inventory is sold or used during a specific period (such as a year or quarter). A higher figure means a firm is selling products quickly.
switching costs
The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth.
Software Cost vs. Project Cost
The cost of software is not the same as the cost of the project, as there are additional expenses such as training and support.
Total Value Created
The difference between customer willingness to pay and supplier opportunity cost.
IT Methods
The first step is identifying business needs. Strategic systems are top-down projects driven by management, while technical systems are bottom-up projects driven by specific needs.
Supplier Opportunity Cost
The lower bound of value creation, representing the minimum amount the product must be sold for in order to break even.
Customer Willingness to Pay
The maximum amount of money the firm's customers are willing to spend in order to obtain the firm's product.
Hardware
The mechanical devices that make upthe computer are called Hardware. A computer'shardware consists of interconnected electronicdevices that you can use to control thecomputer's operation, input, and output.
supplier opportunity cost
The minimum amount of money suppliers are willing to accept to provide the firm with the needed resources.
atoms to bits
The phrase represents the shift from physical products to digital products
Added value
The portion of total value created that would be lost if a certain part of it didn't change.
Value Appropriation
The process by which the total value created in the transaction is split among all the entities who contributed to creating it (i.e., suppliers, the firm, and the customer).
What risks are inherent in the conventional practices in the fashion industry? Is Zara susceptible to these risks? Is Zara susceptible to different risks? If so, what are these?
The risks are not using the resources efficiently, as many use technology in a way that wastes more money but is more inefficient. Conventional practices are usually the easiest way to cut corners which ends up hurting them in the long run. Zara is susceptible to different risks, since their performance depends a lot on the customer, their success may differ week to week. If their foot traffic slows it could affect a lot as that is what their company is centered around. Their materials are already made though, and they can buy in bulk which cuts down on risk. Zara is also within the EU, which is an economic advantage.
Value Chain
The set of activities through which a product or service is created and delivered to customers.
information symmetry
The state that exists when both parties have access to the same information
project management triangle
The tension between the three objectives of a project: time, budget, and scope. exactly two degrees of freedom
Total Value Created
The theoretical number calculated by subtracting one theoretical number from another, essentially the difference between customer willingness to pay and supplier opportunity cost.
Scope Creep
The uncontrolled expansion to product or project scope without adjustments to time, cost, and resources. The expansion of project boundaries, a significant concern for project managers as it can be detrimental to the success of an initiative.
What is the Netflix churn rate and what are the reasons behind this rate?
Their churn rate is about 3 percent, as their customers are happy and do not think that other services would be better for them.
point-of-sale (POS) system
Transaction processing systems that capture customer purchases. Cash registers and store checkout systems are examples of point-of-sale systems. These systems are critical for capturing sales data and are usually linked to inventory systems to subtract out any sold items.
What is the "conventional wisdom" of the fashion industry with respect to design, manufacturing, and advertising?
Usually, the industry relied on guessing months in advance what consumers would want for the next season and making the collection ahead of time. Firms would use contract manufacturing from developing countries to lower the production costs which do not lead to great conditions for workers in these countries. Contract manufacturing, however, takes time and leads to guessing what consumers will want in the future. Inventory turnover was also very important, and conventional companies heavily relied on big budget television advertising. Firms would use high volume products sold at hundreds of stores instead of making unique pieces
Waterfall vs. Agile Methodologies
Waterfall follows a systematic process, while Agile involves iterative feedback and development.
Does Netflix have a strong brand? Offer evidence demonstrating why the firm's brand is or isn't strong. How is a strong brand built?
Yes, as Netflix has continuously ranked first on consumer satisfaction surveys, and many agencies have named Netflix as the number one e-commerce sit in terms of customer satisfaction. A brand is made strong by offering exceptional value to the customer.
In what ways is the Zara model counterintuitive? In what ways has Zara's model made the firm a better performer than Gap and other competitors?
You would think that a company like Zara who produces almost 32k items a year would not be profitable, however, their wide range of products and ability to get products on the market fast has allowed them to dominate the industry and consistently meet consumer's wants. Zara's items also have a short lifespan; This differs from other competitors, as they can only produce new designs once or twice every season and do not cater as much to consumers, instead look to create their own trends.
How does technology spending at Zara compare to that of rivals? Advertising spending? Failed product percentages? Markdowns?
Zara spends ¼ less for IT than the rest of the fashion industry, their failed product is at 1% instead of 10%, and there are little to no markdowns. Their advertising is also a lot cheaper as well as they do not believe in traditional advertising.
What role does technology play in enabling the other elements of Zara's counterintuitive strategy? Could the firm execute its strategy without technology? Why or why not?
Zara uses its POS system as well as inventory optimization models and factory technology helps to automate the supplies and merchandise-making. This allows them to have a flexible value chain and have a wider variety of customization. I do not think Zara could execute this strategy without technology, as automation and quick relaying of information is how they constantly turn over new product.
Pure Play
a business that operates on the internet only without a physical store
sunk cost fallacy
a framing effect in which people make decisions about a current situation based on what they have previously invested in the situation • The sunk cost fallacy reasoningstates that further investments orcommitments are justified becausethe resources already invested willbe lost otherwise.• Therefore, the sunk cost fallacy is amistake in reasoning in which thesunk costs of an activity areconsidered when deciding whetherto continue with the activity.• This is also often known as"throwing good money after bad." • In the following examples, you can clearlysee how sunk costs affect decision-making.Sunk costs cause people to think irrationally.• Tom purchases a movie ticket online for$12.50 and upon arriving at the theatres towatch the movie, Tom realizes that themovie is really boring and does not appealto him. Tom decides to sit through the entiremovie because he already bought a ticket.• Jennifer pays a $100 entry fee to join a newtutoring club. After attending 4 of the 7sessions, Jennifer decides that the tutoringsessions hosted by the club do not help herat all. She decides to attend the remaining 3sessions despite it being unhelpful becauseof the $100 entry fee.
information system
a group of components that interact to produce information
competitive advantage
a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition
ERP (Enterprise Resource Planning)
a suite of applications called modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. ERP stands for enterprise resource planning, but what does ERP mean? The simplest way to define ERP is to think about all the core business processes needed to run a company: finance, HR, manufacturing, supply chain, services, procurement, and others. At its most basic level, ERP helps to efficiently manage all these processes in an integrated system. It is often referred to as the system of record of the organization.
inventory control
activities to ensure that goods are always available to meet customers' demands
scale advantages
advantages related to size. Example: Netflix incurs a cost of $300 million for 25 million subscribers while Blockbuster incurs the same cost for 1.3 million subscribers
Strategic Information Systems
c
barriers to entry
factors that make it difficult and costly for an organization to enter a particular task environment or industry
sustainable competitive advantage
financial performance that consistently outperforms their industry peers. The goal is easy to state, but hard to achieve
resource-based view of competitive advantage
for a firm to maintain sustainable competitive advantage, it must control a set of exploitable resources that have 4 critical characteristics. These characteristics are valuable, rare, imperfectly imitable, and non subsitutable.
personal digital assistants
handheld computing devices meant largely for mobile use outside an office setting
information technology
includes all of the computing resources that collect, store, and analyze data
network effects
increases in the value of a product to each user, including existing users, as the total number of users rises
Added Value Created
is the difference between the value of the input and the value of the output
first-mover advantage
occurs when a company can significantly increase its market share by being first with a new competitive advantage
Operational Effectiveness
performing the same tasks better than rivals perform them
churn rate
referring to the rate at which customers leave a product or service. a low rate is best for profit.
long tail
referring to the tail of a typical sales curve
Strategic Information Systems
systems that help an organization gain a competitive advantage by supporting its strategic goals and/or increasing performance and productivity
firm cost
the actual amount of money the firm paid suppliers to acquire the resources needed to create its product or service
return on investment (ROI)
the direct financial impact of a firm's expenditure of a resource, such as time or money
price transparency
the ease with which consumers can find out the variety of prices in a market
What is the long tail? How "long" is the Netflix tail compared to traditional video stores?
the long tail is the demand for less popular items that aren't offered by traditional brick and mortar shops. Netflix's tail is especially long as it can have a limitless amount of less popular items and also has a wider base of customers since it ships after ordering online. This gives Netflix a selection advantage that traditional stores can't match.
Value Chain
the series of internal departments that carry out value-creating activities to design, produce, market, deliver, and support a firm's products
radio frequency identification (RFID) tags
tiny computer chips that automatically transmit to a special scanner all the information about a container's contents or individual products
crowdsourcing
using consumers to develop and market products
healthcare.gov
• $840 Million• Less than 1% success rate at go-live• Site taken down first weekend aftergo-live. It was practically unusable.• Security Defects - insecuretransmission of personal data,unvalidated password resets, errorstack traces revealing internalcomponents, and violations of userdata privacy • Scope should have been limited toa modest beta upon launch.• The Minimum Viable Product (MVP)could have been a simpler site thatallowed users to compare differenthealth plans and then purchase theinsurance by going directly to theinsurer's website or using manual,offline processes that were reliableand secure.
Canada
• Phoenix Pay System - Canada's governmentpayroll system• Peoplesoft implementation by IBM• Peoplesoft is a COTS ERP similar to SAP• Project Kick-off in 2010• By July 2018, Phoenix has caused pay problems toclose to 80 percent of the federal government's290,000 public servants through underpayments,over-payments, and non-payments.• The report added that the system, whose original2009 budget was $309-million, had already costtaxpayers $954-million and could rise to $2.2billion by 2023 in unplanned costs." (2018 Reportby Standing Senate Committee on NationalFinance) • Office of the Auditor General of Canada alsoperformed an independent audit, and published areport in 2018 that concluded that the Phoenixproject "was a incomprehensible failure of projectmanagement and oversight"• Project scrapped in 2019.• Contract for replacement in 2021.• Ceridian won an eight-year, $16.9-million contract• Ceridian is a global human capital managementsoftware company, which has a flagship cloudhuman capital management platform calledDayforce• Their platform can manage everything fromrecruiting employees to paying employees
DoD EHR
• Replacing a $2B systemcommissioned in 2004• $4.3B budget• Cerner COTS EHR• Scheduled to be completed in 2023• Internal reports called it "neitheroperationally effective noroperationally suitable"• Military Health System - GENESIS• "MHS GENESIS is not operationally effectivebecause it does not demonstrate enough workablefunctionality to manage and document patientcare"• "MHS GENESIS is not operationally suitablebecause of poor system usability, insufficienttraining, and inadequate help desk support."• So, what does the US Government do about this?• Sign a $10B contract for Cerner to provide andEHR System for the VA• Obviously.
