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Full download Experiencing MIS 2nd Edition Kroenke Solutions Manual all chapter 2024 pdf
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CHAPTER 7 — INFORMATION SYSTEMS FOR
COMPETITIVE ADVANTAGE
CHAPTER OVERVIEW
In Part 2 of this book, we walked through Chapters 4, 5 and 6 for a technical tour of
information systems. We change focus in Part 3 to look at the business aspect of
information systems, specifically competitive advantage. Each chapter in Part 3 considers
a different aspect of competitive advantage. Chapter 7 focuses on how organizations use
information systems to develop competitive advantage through various systems. Chapter
8 considers how the information collected in these information systems can be used to
improve business decision making. Chapter 9 then takes an executive perspective and
considers how to maintain competitive advantage by considering strategy and alignment,
governance and ethics in relation to information systems. Each of these aspects of
competitive advantage is important to understanding why competitive advantage through
IS is difficult to develop and maintain. While it may be difficult, it is also very rewarding
for those companies that are able to achieve sustained advantage.
Chapter 7 covers a wide amount of information from functional systems through cross-
functional systems and finally to inter-organizational systems. Because there is a large
amount of material, it is important to focus on a few key themes that are important to you
as an instructor. We believe there are three key themes in this chapter:
1. The challenges of using functional systems
2. The marriage between cross functional systems, industry standard business
practices and competitive advantage
3. The rise of inter-organizational systems
What makes the material in this chapter difficult to teach is that many students do not
have the breadth of experience working with information systems within an organization.
Without this experience, the students have difficulty envisioning the constraints placed on
systems by functional areas. We have a suggestion for a discussion that can occur near
the end of the lecture to help students summarize the material being presented to them. It
is focused on competitive advantage and is described later in this section.
In regards to the first issue, it is important to talk about why functional systems are
important. We believe it is more important, however, to talk about why there are
challenges with organizing data and applications in this way. It seems as though every
Introduction to MIS textbook includes a chapter talking about the various functional
systems in a business. We have found that this type of lecture that lists different
applications provides very little to the student. We have therefore tried to limit this
discussion. Instead, we have placed more emphasis on Question Q4 which we believe is
central to the learning in the chapter. Students need to realize that locking data within
business functions may limit the effectiveness of the firm.
In regard to the second issue, the marriage between cross-functional systems and industry
standard best practices is a relatively easy one to make. We tried to emphasize that the
cross-functional systems that we consider (CRM and ERP and also SCM if used
exclusively within an organization) are really a collection of best practices. People have
adopted this software because they are looking for the efficiencies that these standard
processes embedded in software can bring. This is the happy side of the marriage. But
there are two costs to consider.
The first cost is that there is the likelihood that the company adopting the software may
have to significantly change their business process. When an organization adopts the
software they are really saying that “We will have our people and procedures adapt to
conform to the software. This can be an uneasy transition as change is often not greeted
favourably within an organization. The second cost is a consideration of competitive
advantage. If other firms adopt the same software (and same business practices) then
where is the competitive advantage of adopting the system? Won’t installing these cross
functional systems lead to a reduction in competitive advantage? We leave this discussion
to the exercise described below.
One of the best ways of getting discussion is to provide a question and then ask students
to first discuss the questions in groups of three or four. Give them a short time (for
example 2-4 minutes) to discuss the item and then ask for people to talk for the group.
Using small groups first reduces the student’s risk of asking a bad question and also gets
more people talking and thinking about the question. There will always be some students
who do not engage, but this is not a reason to exclude the majority of students who will
learn something form the discussion. These discussions also help to break up a long
lecture and keep the students focused on the material.
The important questions to consider are questions 2, 3 and 4. The important job of the
instructor in this exercise is to get students to think critically about cross functional
systems. Rather than sitting in a set in the lecture hall absorbing information about the
various functional systems in a business, we should be working to engage students in
thinking about the benefits and costs of running industry standard best practices.
Another exercise we can suggest is in returning to cases that were provided previously in
the book to help provide examples. The HELM software in the MIS in Use 2 is a good
example of an industry standard practice. The ICS courier case is another case that can be
used to show the impact of industry standard practices and how they can affect small
firms. Ask student to indicate if these systems are functional or cross-functional and
whether the software developed provided sustained competitive advantage for the
companies using the software.
CHAPTER OBJECTIVES
1. Understand how organizations gain a competitive advantage using IS
2. Know the three fundamental types of information systems within organizations.
3. Understand how functional systems relate to the value chain.
4. Know the basic types of functional systems.
5. Know the problems of functional systems.
6. Understand how industry standard best practices support cross-functional systems
7. Understand cross functional system (ERP and CRM) and how they relate to business
process
8. Understand inter-organizational systems including E-commerce and supply chain
management
CHAPTER OUTLINE
Q1 What are the fundamental types of IS within organizations?
Q2 What are functional systems and why are they changing?
Q3 What is the importance of industry standard processes?
Q4 What are CRM systems?
Q5 What are ERP systems?
Q6 What are e-commerce and Web 2.0??
Q7 What are SCM systems?
The following three software products were identified through a Google search
for “manufacturing software”:
Alliance/MFG® by Exact Software: Alliance/MFG manages material and
labor through the manufacturing process, helping you control inventory, plan
purchases and schedule work.
Batchmaster by Best Software: Process manufacturers work from recipes and
formulas, mixing and blending raw materials in batches. This type of
manufacturing is qualitatively different from a discrete manufacturer’s
operation.
IndustriOS by Industrios Software: IndustriOS is an operations software
solution that is fully functional and designed with applications that are
focused on managing your business processes. These include customer and
vendor management, order fulfillment, materials planning and procurement,
production control and scheduling, and inventory control.
As the above brief descriptions demonstrate, these products are quite different
from each other. Alliance/MFG is definitely focused on the manufacturing
process. Batchmaster is focused on a specific type of manufacturing—process
manufacturing. IndustriOS seems to have the broadest definition, extending out
to include vendors and customers as well as outbound logistics.
c. For each vendor, specify the characteristics of a company for which that vendor's
offering would be ideal.
2. Examine the list of isolated functional systems problems in Figure 7-5. Assuming that
DSI the company introduced at the start of this chapter, uses only functional systems,
give an example of each one of these problems. (You do not have all of the data
necessary to know whether or not DSI has those problems, but describe problems that
are plausible.) State your assumptions when necessary.
3. Investigate the possibility of a virtual tool crib at DSI. Assume each tools has an
RFID. (Search the web for the term RFID to learn more if you need to.) Assume that
each production facility has racks on which tools can be placed when not in use and
that tools reside only in one of those racks; there is no centralized tool crib or other
repository. Describe the nature of an information system for tracking tools. Could
that system prevent tool theft? If so, how? How would an employee obtain a tool
when needed? How would the information system help employees learn the location
of tools? On balance does this seem like a workable idea? Or, is it just some high-
tech option that would create confusion?
The content of the RFID can be updated each time a tool is used by an employee.
When a tool is removed from the rack, the employee’s ID, name, and date/time of
tool removal is recorded. The employee is responsible for the tool until it is returned
to the rack, at which point the return is recorded. Theft could be reduced because of
the ability to connect a tool to the specific employee who checked it out, holding
him/her responsible for safeguarding the tool. In addition, sensors at the doors could
record any tool that leaves the premises. If a checked-out tool is needed by another
employee, sensors within the production facility could identify exactly where the tool
is currently located, and the system would also know who has checked out the tool.
This idea is workable, but could encounter some resistance on the part of employees
because it would require a change in behavior. With proper training and motivation,
these difficulties could be overcome.
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As the diagrams in part a and part b show, the processes required with non-
distance learning courses and distance learning courses are similar, but the way
the processes are performed is different. When courses are distance learning
courses, the various processes associated with this environment need to be
primarily Web-based and basically self-service for the students. In addition, in
some settings, distance learning courses are not offered on a regular
semester/quarter-based schedule, but are delivered whenever the student enrolls
and last as long as it takes for the student to complete the course requirements.
Professors can teach in distance-learning courses and may have students enrolled
from any location. Professors could offer distance-learning classes for any
institution wanting to offer that class, not just their home institution. Professors
certainly could join together to form a virtual college, as long as issues such as
program accreditation were considered. Although it is unlikely that most
professors will be this entrepreneurial, if they were, they could develop programs
comprised of expert faculty and attract students from anywhere.
Note:
This is not an easy exercise. It requires the students to do some research, to consider a
company’s business model and then think about what information systems will provide
the company with the best business value. Since this is an introductory class this is a lot
to ask for. But the exercise will make the point of linking business strategy with
information technology strategy and focusing on business value.
As for answers, there are a wide number of possible solutions and the instructor should
not focus necessarily on the one “best” strategy but rather on making sure that the
students provide justification for their choices and see both the costs and benefits of using
the technology.
1. Create a maximum two-page information sheet that summarizes the company, the
idea, and the system it uses. The summary should include:
a. An introduction to the company (example companies are listed below, but you are
welcome to use another company).
b. Outline the basis of the idea.
c. Identify, as best you can, the strategy of the company (Note: you can use Porter’s
five forces to understand the company’s industry.)
d. Identify the information systems you think will be most critical to support the
strategy.
2. Choose one of the following companies (or ask your professor if you can choose a
different company):
a. Zipcar
b. Avelle (www.bagborrowandsteal.com)
c. Grand & Toy
d. Dell
e. My Virtual Model (www.MVM.com).
f. The Running Room
g. Ritchie Bros. Auctioneers
Originally, the company thought the software was the problem but later the company
recognized it was the Data, Procedures, and People that were the real issues.
2. What do you think is the most important component in the success of DPT’s ERP in
the second implementation?
The most important factor was the experience and knowledge provided by Eric. This was
the catalyst for understanding more deeply the data and procedures the company would
have to adopt to effectively use the system.
3. What role does Eric Dang play in the ERP implementation? What skills do you think
are most important for Eric’s success?
Eric Dan played the role of Business Analyst as well as some elements of project
manager for the project. (Students will learn more about these roles in chapter 10 and 11).
The most important skills were the analytical skills that focused attention on the business
processes and documented the various processes the company would be used with the
new ERP system. Also important were the technical skills that helped Eric understand the
database and other technical details in the application. But the business analysis skills
were the most critical
4. Do you think that DPT had to fail in its initial ERP implementation before it
succeeded? That is, do you think it is necessary for companies to understand clearly what
can go wrong before they fully commit to the project? Justify your answer.
I would argue that yes the first system had to fail before the company was willing to take
the project seriously. Since the company had little experience with ERP, it was likely
impossible for people in the company to estimate the real effort needed to successfully
implement the ERP. The company might also have been able to acquire the necessary
knowledge by hiring consultants who had experience with ERP implementation, but
again the need to document business processes and make implementation decisions
unique to the company would have required significant effort from internal employees.
There are numerous advantages to this technology. Aside from the obvious reduction in
labour costs the system allows continuous harvesting of cotton which can be critical
given short harvesting windows. More importantly the newest technology marries
location based services in at least two ways. During harvesting for example the picker
calculates the yield from the land. This information is helpful because it allows
calculation of the right amount of fertilizer or pesticide to use rather than guessing.
Knowing where the cotton came from and what pesticides or fertilizers were used could
allow farmers to charge higher prices for certain types of organic cotton. This information
could also be used to track back to other problems or opportunities for suppliers.
2. How does this technology allow John Deere to compete against lower-cost
manufacturers and producers?
This technology allows Deere to compete by changing the dimensions from simply costs
to information. The advanced technology would also allow the machines to diagnose
problems and to schedule service or maintenance before failure. Since machine failure is
one of the largest (next to crop failure and market risk) risks that a farmer face all
activities that can reduce this risk are worth considering._
3. Are there any other advantages to using this technology? What adaptation
and extensions would increase the advantage? (Hint: Radio-frequency tags
can be inserted into each bundle to track harvesting information and
pinpoint where the cotton came from, identifying for example if the cotton
qualifies as organic.)
RFID and yield information could be used by farmers when conducting experiments
using new forms or strains of cotton. A farmer for example could allocate a new variety
of cotton to a few selected sections of the farm and then evaluate objectively the results
rather than accept manufacturer or supplier claims. The farmer could also have
contingent or partnership arrangements. If for example a form of cotton did not provide a
certain yield a farmer could receive a rebate or if it produced a higher yield the supplier
could share in the increase through a performance linked bonus.
Goals
Reinforce the importance of inherent processes in ERP and other licensed
software and the expense and challenges of variances from those processes
Introduce possible longer-range consequences of adapting to vendors’ inherent
processes
Demonstrate an example of long-range thinking
Warning: Before using this exercise, ensure the students understand what an ERP system
is and how much it integrates the organization’s activities. It may be a good idea to start
with a review of ERP systems.
Are organizations that enforce the standard ERP blueprint for their industry condemning
themselves to industry-wide uniformity? I don’t know if this problem is real or not. But,
in theory, as ERP packages become commodities (and we do know that competitive
software products always becomes a commodity), then every business will be run just
like every other business. If that is the case, then how will one business gain a
competitive advantage? Possibly, the company that executes the ERP processes most
efficiently becomes the leader, but that is a difference in scale more than a difference in
kind.
Even more worrisome, once ERP systems are solidly integrated into the organization, will
they stifle creativity? Employees already complain that they are forced to do silly things
because the “software requires them to.” Will the software mean that it is a waste of time
to develop improved ways of doing business, because the improved way is incompatible
with the “always-enforced” ERP way?
I posed this question to a PeopleSoft salesperson who said the answer lay with business
intelligence applications of the data generated by the ERP system. “Organizations can
gain a competitive advantage,” he said, “by reporting and mining the data that we
generate in their databases.” Is that answer credible? If the information created by the
business intelligence system can be applied in the context of the existing ERP or other
system, then his answer may have merit. But what if the information created indicates the
need for a change to a system that cannot be changed because of the structure of an
existing ERP system?
Side effect: When an organization requests a feature change in the ERP system, that
action may mean that every other customer of that vendor, and ultimately the entire
industry, will have that change. Thus, the competitive advantage will be unsustainable.
What to do? No organization today that can benefit from ERP would choose not to
implement it. But, having done so, has the organization entered a conformity trap?
1. The vendors would say that customers should adapt because the standard
blueprint, the inherent processes, are the “best-of-class solutions.” They also
know that variances are expensive and difficult to maintain. Life for the vendor
and for the IS department is a lot easier if the company converts to the standard
process.
- what does the organization lose by converting to the standard blueprint
- what are the costs of that conversion (also consider nonmonetary costs)
2. This is the key question, and I don’t know a definite answer. The answer may
come down to the issue of whether they can be better in the execution of the
inherent processes in the software.
- if a company executes the standard blueprint better than its competitors, will
that give it a competitive advantage
- is it possible for a company to engage in a differentiation strategy if all
companies use the same inherent processes
- consider Lowe’s and Home Depot. They have the same business processes.
What will make one better than the other? If they’re both using the same
ERP package, the differentiation won’t be in IS innovation
3. Such transfer of innovation happens when a company has an exception to the ERP
system for which it asks the ERP vendor to program supporting software. If the
exception represents an improved process, the ERP vendor can put it into its new
software versions. Voila! The ERP vendor has been a conduit of innovation from
one company to an industry.
Ultimately, this phenomenon is beneficial to the industry and the economy. That
may be small consolation to the company that cannot maintain its competitive
advantage. Then again, innovation should be a continuous process. As Rudyard
Kipling wrote, “They copied all they could follow, but they couldn’t copy my
mind, and I left ‘em sweating and stealing a year and a half behind.” (The Mary
Gloster, 1894)
4. It is probably not possible for two companies ever to be completely alike, but they
may be close enough to make sustainable competitive advantages difficult, if not
impossible. Example: Lowe’s versus Home Depot. One way to teach this is to
play devil’s advocate (or, depending on your views, an honest critic). Say
something like:
- this essay is much ado about nothing. It has no real issue; the points it makes
are hair-splitting, unrealistic, theoretical, and vapid. We’re wasting our time.
See how the students respond. If they take an opposing position, continue in this
vein. If they don’t, ask them if they think they’ve wasted their time by considering
this essay. To me, thinking about something that might be important and
concluding that it is not important is hardly a waste of time.
Wrap Up
From time to time, it’s worth thinking about the long-range consequences of
technology trends. In this case, we find that adapting to industry-wide inherent
processes may create competitive advantages but – at least for interdepartmental
processes – those advantages may not be sustainable.
By the way, most medium to large-scale companies have a person called the
CTO, or chief technology officer. You’ll learn more about that person in Chapter
10. One of the key roles of that person is to think about the longer-range
consequences of technology use. The job of CTO is fascinating, and it is one that
some of you might want to consider.