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Chapter 2 Business Processes: Learning Objectives
Chapter 2 Business Processes: Learning Objectives
Business processes
©2017 John Wiley & Sons Australia, Ltd
Learning objectives
After studying this presentation, you should be able
to:
2.1 identify and interpret the components of
organisational strategy and mission
2.2 critique alternative organisational structures,
reflecting on their strengths and weaknesses and the
implications for organisational operations
2.3 identify and describe a business process
2.4 appraise the benefits of organisations adopting a
business process perspective
2.5 critically evaluate the role enterprise resource
planning (ERP) systems play in business process design
2.6 interpret and communicate issues for organisations
changing to a process‐based focus
2.7 summarise and evaluate approaches to changing
business processes, in particular business process re‐
engineering (BPR)
2.8 critically evaluate BPR techniques
2.9 critique the application of information technology
(IT) to business processes by Australian firms.
Organisational strategy and mission
• Mission Statement: typically contains an expression
of the organisation’s vision, business domain,
competencies and values
• Strategy: a means of putting a mission statement
into practice. Operates at three levels:
• Internal
• Competitive
• Business portfolio
• According to Michael Porter, businesses have two
options when deciding on a strategy:
• Cost Leadership: Organisations need to carry out
their activities cheaper than their competitors
through economies of scale, technology, low
overheads etc
• Differentiation: Involves creating a business
adding that little bit extra for customers, offering
unique products targeted to the customer’s
needs
Porter’s five forces model
1. Rivalry among existing competitors: refers to the
current status within the market that a business
operates within
2. Threat of substitute products or services: refers to
those products or services that can be used as an
alternative to what the industry currently produces
3. Bargaining power of suppliers: a supplier can find
itself in a strong bargaining position if it is the only
business able to provide a particular product or
service
4. Bargaining power of buyers: an organisation that
has a small number of specialist customers can ill
afford to lose them. Hence the customer is in a
position of relative strength
Porter’s five forces model
5. Threat of new entrants: new organisations entering
an industry create increased competition for the
existing participants
• Using the five forces model an organisation can
analyse its industry to identify opportunities and
threats and then develop tactics for these situations
The functional perspective of
the organisation
• Benefits
• Control and coordination: provides sound
organisational control
• Specificity: highly defined and specified tasks exist
• Problems and limitations
• Not reflective of the reality of today
• Information and communication problems
• Slow to react to the environment
• Focuses on the wrong things
• A business process is a series of interlocking
activities that work together, across the
organisation, to achieve some predetermined
organisational goal (typically defined around
satisfying customer needs).
A process based organisation
Functional Process
perspective perspective
Business process within
the organisation
• Sales
– Aim: To sell goods and collect cash from sales
– Participants: Sales staff, customer, billing staff,
warehouse
– Inputs: sales order
– Outputs: Invoice, receipt, shipping document
Why business processes?
• Resource benefits that flow from having a process
emphasis
• Improved customer service and relations
• A value‐adding emphasis
• A competitive advantage through outsourcing
• End‐user perspective
• An ERP system is a set of computer program modules
that attempts to integrate the different functional
areas of the organisation.
• ERP is designed on the basis of best practice – the
best way of performing a particular process.
Issues in moving to a business process ‐
based environment
• Management Change
• Functionally based structure must be changed
• Support must come from the top
• People Change
• Narrowly defined specialist jobs may become
generalist and diverse
• Reduction of middle management – increased
authority to those lower in the organisation
• Business processes are not static
• Factors impacting on business processes
• Technology
• Competition
• Business environment
Changing business processes
• The means of changing processes is referred to as
business process design
• Approaches:
• TQM
• BP Re‐engineering (BPR)
• Eclectic
• TQM is a progressive approach to organisational
change that works on the principle that a series of
small progressive steps is the best way to improve
operations
• The philosophy of TQM is geared around four main
concepts:
• Quality
• People
• Organisations
• Management
Quality
• Poor quality is costly
• Costs are associated with rework and product
returns
• TQM refers to how people within an organisation are
valued for their contributions towards the process
and their idea on how the process can be improved
Organisations
• The organisational aspect of TQM emphasises:
• That the organisation does not operate as a series
of independent departments
• That functions interact to provide a good product
or deliver a quality service
• TQM asserts that change and improvement can only
occur if they have the support and endorsement of
top management
• Management must focus on processes rather than
individual functions
Business process
re‐Engineering (BPR)
1. Fundamental aspect forces an organisation to
question what activities it performs as part of its
current process
2. Radical component compel organisations to start
again
3. Dramatic refers to the expected return on the
improvements
4. Process aspect is central to BPR
Principles and approaches
1. Establish a sense of urgency
2. Form a leadership team
3. Create and communicate a vision
4. Empower others to meet the vision
5. Plan for and create short term wins
6. Consolidate improvements and encourage further
change
7. Institutionalise the new approaches
• Combine jobs and let workers make decisions
• Create a single reference point for customers
• Perform steps in a natural order and at their logical
location
• Allow processes to vary
• Reduce the impediment of controls and reconciliations
Technology driven process
improvements
• Organisations that achieve the most significant
benefits from information technology exploit new
capabilities to reform business processes and create
new business opportunities
• Areas in which an organisation can benefit:
• Information
• Strategy
• Transaction
• Change
1. Vendor managed inventory
2. Evaluated receipts settlement
3. Electronic bill payment (EBP)
4. Electronic bill presentment and payment (EBPP)
5. RFID or bar coding
BPR Evaluated
• Work units change – functional to process
• Jobs change and people are empowered
• Huge efforts required to make BPR work
• Often changes are dictated from the top
• Reality of re‐engineering is that it involves people
• IT is not always the answer
• Need to be wary of the “clean slate” approach
What are Australian organisations doing
with IT and processes?
• IT has widespread impact (refer table 2.4).
• Increasing use of the internet.
• Order processing – email.
• Information as a business:
– use of information to add value.
• Components of organisational strategy
• Looked at benefits and limitations of the functionally
based organisation
• Described business processes and looked at
examples
• Examined the benefits of organisations adopting a
Business Process perspective
Summary
• The role of ERP systems
• Addressed issues involved in moving to a business
process‐based environment
• Described BPR
• Considered the principles, characteristics, benefits,
risks and criticisms of BPR
• Application of IT by Australian firms
• Best practice • Functional perspective
• Business function • Information technology
• Business process • Organisational design
• Business process design • Scientific management
• Business process re‐ • Total Quality
engineering (BPR) Management (TQM)
• ERP systems • Vendor managed
inventory