Management Information Systems - Chapter 3

Computer-Aided Design (CAD) System

A computer-aided design (CAD) system automates the creation and revision of designs, using computers and sophisticated graphics software. The software enables users to create a digital model of a part, a product, or a structure and make changes to the design on the computer without having to build physical prototypes.

Enhancing Core Competencies

A core competency is an activity for which a firm is an industry leader, best in class leader. Core competencies may involve being the best miniature parts designer, the best package delivery service, or the best thin-film manufacturer. In general, a core competency relies on knowledge that is gained over many years of experience and a first-class research organization or, simply, key people who follow the literature and stay abreast of new external knowledge. Any information system that encourages the sharing of knowledge across business units enhances competency. Such systems might encourage or enhance existing competencies and help employees become aware of new external knowledge; such systems might also help a business take advantage of existing competencies to related markets.

Multinational

A multinational strategy concentrates financial management and control out of a central home base while decentralizing production, sales, and marketing operations to units in other countries. The products and services on sale in different countries are adapted to suit local market conditions. The organization becomes a far-flung confederation of production and marketing facilities operating in different countries.

Value Web

A value web is a collection of independent firms that use information technology to coordinate their value chains to produce a product or service for a market collectively. It is more customer driven and operates in a less linear fashion than the traditional value chain.

Virtual Company

A virtual company, also known as a virtual organization, uses networks to link people, assets, and ideas, enabling it to ally with other companies to create and distribute products and services without being limited by traditional organizational boundaries or physical locations. The virtual company model is useful when a company finds it cheaper to acquire products, services, or capabilities from an external vendor or when it needs to move quickly to exploit new market opportunities and lacks the time and resources to respond on its own.

3-D Printing

Also known as additive manufacturing, 3-D printing uses machines to make solid objects, layer by layer, from specifications in a digital file. Unlike traditional techniques, by which objects are cut or drilled from molds, resulting in some wasted materials, 3-D printing lets workers model an object on a computer and print it out with plastic, metal, or composite materials. 3-D printing is currently being used for prototyping, custom manufacturing, and fashioning items with small production runs.

Porter's Competitive Forces Model

Arguably, the most widely used model for understanding competitive advantage. This model provides a general view of the firm, its competitors, and the firm's environment. Porter's model is all about the firm's general business environment. In this model, five competitive forces shape the fate of the firm: Traditional Competitors, New Market Entrants, Substitute Products and Services, Customers, and Suppliers.

Benchmarking

Benchmarking involves comparing the efficiency and effectiveness of your business processes against strict standards and then measuring performance against those standards.

Business Process Management (BPM)

Business process management (BPM) is an approach to business that aims to improve business processes continuously. BPM uses a variety of tools and methodologies to understand existing processes, design new processes, and optimize those processes. BPM is never concluded because continuous improvement requires continual change.

Centralized Systems

Centralized systems are those in which systems development and operation occur totally at the domestic home base. (Domestic Exporter)

Decentralized Systems

Decentralized systems are those in which each foreign unit designs its own unique solutions and systems. (Domestic Exporter, Multinational, and Franchiser)

Duplicated Systems

Duplicated systems are those in which development occurs at the home base, but operations are handed over to autonomous units in foreign locations. (Franchiser)

Impact of the Internet on Substitute Products or Services

Enables new substitutes to emerge with new approaches to meeting needs and performing functions.

Franchiser

Franchisers have the product created, designed, financed, and initially produced in the home country but rely heavily on foreign personnel for further production, marketing, and human resources. Nevertheless, local production of some items, local marketing, and local recruitment of personnel are required.

The Business Value Chain Model

Highlights specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. This model identifies specific, critical advantage points at which a firm can use information technology most effectively to enhance its competitive position. The value chain model views the firm as a series or chain of basic activities that add a margin of value to a firm's products or services.

Network Economics

In a network, the marginal costs of adding another participant are about zero, whereas the marginal gain is much larger. The larger the number of subscribers in a telephone system or the Internet, the greater the value to all participants because each user can interact with more people. It is no more expensive to operate a television station with 1,000 subscribers than with 10 million subscribers. The value of a community of people grows as the number of participants increases, whereas the cost of adding new members is inconsequential. This is referred to as a "network effect."

Best Practices

Industry best practices are usually identified by consulting companies, research organizations, government agencies, and industry associations as the most successful solutions or problem-solving methods for consistently and effectively achieving a business objective.

Basic strategy 101: Align the IT with the Business Objectives

The basic principle of IT strategy for a business is to ensure that the technology serves the business and not the other way around.

Domestic Exporter

The domestic exporter strategy is characterized by heavy centralization of corporate activities in the home country of origin. Production, finance/accounting, sales/marketing, human resources, and strategic management are set up to optimize resources in the home country. International sales are sometimes dispersed using agency agreements or subsidiaries, but foreign marketing still relies completely on the domestic home base for marketing themes and strategies.

Cycle Time

The total elapsed time from the beginning of a process to its end.

Global Business and System Strategies

There are four main ways of organizing businesses internationally: domestic exporter, multinational, franchiser, and transnational, each with different patterns of organizational structure or governance. In each type of global business organization, business functions may be centralized (in the home country), decentralized (to local foreign units), and coordinated (all units participate as equals).

Transnational

Transnational firms have no single national headquarters but instead have many regional headquarters and perhaps a world headquarters. In a transnational strategy, nearly all the value-adding activities are managed from a global perspective without reference to national borders, optimizing sources of supply and demand wherever they appear and taking advantage of any local competitive advantages. There is a strong central management core of decision making but considerable dispersal of power and financial muscle throughout the global divisions.

Strengthen Customer and Supplier Intimacy

Use information systems to develop strong ties and loyalty with customers and suppliers.

Product differentiation

Use information systems to differentiate products and provide new services and products.

Focus on Market Niche

Use information systems to enable a focused strategy on a single market niche; specialize.

Low-Cost leadership

Use information systems to produce products and services at a lower price than competitors while enhancing quality and level of service.

Information System Strategies for Dealing with Competitive Forces

What is a firm to do when faced with all these competitive forces? How can the firm use information systems to counteract some of these forces? How do you prevent substitutes and inhibit new market entrants? How do you become the most successful firm in an industry in terms of profit and share price (two measures of success)?

Impact of the Internet on Positioning and Rivalry Among Existing Competitors

Widens the geographic market, increasing the number of competitors and reducing differences among competitors; makes it more difficult to sustain operational advantages; puts pressure to compete on price.

Business Process Reengineering (BPR)

Many business process improvements are incremental and ongoing, but occasionally, more radical change is required. This radical rethinking and redesign of business processes is called business process reengineering (BPR). When properly implemented, BPR can lead to dramatic gains in productivity and efficiency, even changing the way the business is run. In some instances, it drives a paradigm shift that transforms the nature of the business itself.

Networked Systems

Networked systems are those in which systems development and operations occur in an integrated and coordinated fashion across all units. (Multinational and Transnational)

Primary Activities

Primary activities are most directly related to the production and distribution of the firm's products and services, which create value for the customer. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service.

Quality

Quality can be defined from both producer and customer perspectives. From the perspective of the producer, quality signifies conformance to specifications or the absence of variation from those specifications. A customer definition of quality is much broader. First, customers are concerned with the quality of the physical product—its durability, safety, ease of use, and installation. Second, customers are concerned with the quality of service, by which they mean the accuracy and truthfulness of advertising, responsiveness to warranties, and ongoing product support. Finally, customer concepts of quality include psychological aspects: the company's knowledge of its products, the courtesy and sensitivity of sales and support staff, and the reputation of the product. Today, as the quality movement in business progresses, the definition of quality is increasingly from the perspective of the customer. Customers are concerned with getting value for their dollar and product fitness, performance, durability, and support.

Impact of the Internet on Threat of New Entrants

Reduces barriers to entry, such as the need for a sales force, access to channels, and physical assets; provides a technology for driving business processes that makes other things easier to do.

Impact of the Internet on Customers' Bargaining Power

Shifts bargaining power to customers due to the availability of global price and product information.

Six Sigma

Six sigma is a specific measure of quality, representing 3.4 defects per million opportunities. Most companies cannot achieve this level of quality but use six sigma as a goal to implement a set of methodologies and techniques for improving quality and reducing costs.

Disruptive Technologies

Sometimes a technology and resulting business innovation comes along to change the business landscape and environment radically. These innovations are loosely called disruptive. In some cases, disruptive technologies are substitute products that perform as well or better than anything currently produced.In other cases, disruptive technologies simply extend the market, usually with less functionality and much less cost, than existing products. Eventually they turn into low-cost competitors for whatever was sold before. Some firms can create these technologies and ride the wave to profits, whereas others learn quickly and adapt their business; still others are obliterated because their products, services, and business models become obsolete. There are also cases when no firms benefit, and all gains go to consumers (firms fail to capture any profits). Disruptive technologies are tricky. Firms that invent disruptive technologies as first movers do not always benefit if they lack the resources to exploit the technology or fail to see the opportunity. Second movers, so-called fast followers, sometimes reap the rewards.

Support Activities

Support activities make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring, and training), technology (improving products and the production process), and procurement (purchasing input).

Synergies

Synergies develop when the output of some units can be used as inputs to other units, or two organizations can pool markets and expertise, and these relationships lower costs and generate profits. One use of information technology in these synergy situations is to tie together the operations of disparate business units so that they can act as a whole.

Total Quality Management (TQM)

TQM makes quality the responsibility of all people and functions within an organization. TQM holds that the achievement of quality control is an end in itself. Everyone is expected to contribute to the overall improvement of quality.

Impact of the Internet on Suppliers' Bargaining Power

Tends to raise bargaining power over suppliers in procuring products and services; however, suppliers can benefit from reduced barriers to entry and from the elimination of distributors and other intermediaries standing between them and their users.