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CHAPTER 2

CHAPTER 2. STRATEGIC DECISION MAKING Opening Case Revving Up Sales at Harley-Davidson. Chapter Two Overview. SECTION 2.1 - DECISION-MAKING SYSTEMS Decision Making Transaction Processing Systems Decision Support Systems Executive Information Systems SECTION 2.2 - ENTERPRISE SYSTEMS

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CHAPTER 2

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  1. CHAPTER 2 STRATEGIC DECISION MAKING Opening Case Revving Up Sales at Harley-Davidson

  2. Chapter Two Overview • SECTION 2.1 - DECISION-MAKING SYSTEMS • Decision Making • Transaction Processing Systems • Decision Support Systems • Executive Information Systems • SECTION 2.2 - ENTERPRISE SYSTEMS • Enterprise Systems • Supply Chain Management • Customer Relationship Management • Business Process Reengineering • Enterprise Resource Planning

  3. Chapter Two Overview • Decision-enabling, problem-solving, and opportunity-seizing systems

  4. SECTION 2.1 DECISION-MAKING SYSTEMS

  5. DECISION MAKING • Reasons for the growth of decision-making information systems • People need to analyze large amounts of information • People must make decisions quickly • People must apply sophisticated analysis techniques, such as modeling and forecasting, to make good decisions • People must protect the corporate asset of organizational information

  6. DECISION MAKING • Model – a simplified representation or abstraction of reality • IT systems in an enterprise

  7. TRANSACTION PROCESSING SYSTEMS • Moving up through the organizational pyramid users move from requiring transactional information to analytical information

  8. TRANSACTION PROCESSING SYSTEMS • Transaction processing system (TPS) - the basic business system that serves the operational level (analysts) in an organization • Online transaction processing (OLTP) – the capturing of transaction and event information using technology to (1) process the information according to defined business rules, (2) store the information, (3) update existing information to reflect the new information • Online analytical processing (OLAP) – the manipulation of information to create business intelligence in support of strategic decision making

  9. DECISION SUPPORT SYSTEMS • Decision support system (DSS) – models information to support managers and business professionals during the decision-making process • Three quantitative models used by DSSs include: • Sensitivity analysis – the study of the impact that changes in one (or more) parts of the model have on other parts of the model • What-if analysis – checks the impact of a change in an assumption on the proposed solution • Goal-seeking analysis – finds the inputs necessary to achieve a goal such as a desired level of output

  10. DECISION SUPPORT SYSTEMS • What-if analysis

  11. DECISION SUPPORT SYSTEMS • Goal-seeking analysis

  12. DECISION SUPPORT SYSTEMS • Interaction between a TPS and a DSS

  13. EXECUTIVE INFORMATION SYSTEMS • Executive information system (EIS) – a specialized DSS that supports senior level executives within the organization • Most EISs offering the following capabilities: • Consolidation – involves the aggregation of information and features simple roll-ups to complex groupings of interrelated information • Drill-down – enables users to get details, and details of details, of information • Slice-and-dice – looks at information from different perspectives

  14. EXECUTIVE INFORMATION SYSTEMS • Interaction between a TPS and an EIS

  15. Digital Dashboards • Digital dashboard – integrates information from multiple components and presents it in a unified display

  16. Artificial Intelligence (AI) • Intelligent system – various commercial applications of artificial intelligence • Artificial intelligence (AI) – simulates human intelligence such as the ability to reason and learn

  17. Artificial Intelligence (AI) • The ultimate goal of AI is the ability to build a system that can mimic human intelligence

  18. Artificial Intelligence (AI) • Four most common categories of AI include: • Expert system – computerized advisory programs that imitate the reasoning processes of experts in solving difficult problems • Neural Network – attempts to emulate the way the human brain works • Fuzzy logic – a mathematical method of handling imprecise or subjective information

  19. Artificial Intelligence (AI) • Four most common categories of AI include: • Genetic algorithm – an artificial intelligent system that mimics the evolutionary, survival-of-the-fittest process to generate increasingly better solutions to a problem • Intelligent agent – special-purposed knowledge-based information system that accomplishes specific tasks on behalf of its users

  20. Data Mining • Data-mining systems sift instantly through information to uncover patterns and relationships • Data-mining systems include many forms of AI such as neural networks and expert systems

  21. SECTION 2.2 ENTERPRISE SYSTEMS

  22. ENTERPRISE SYSTEMS • Organizations can undertake high-profile strategic initiatives including: • Supply chain management (SCM) • Customer relationship management (CRM) • Business process reengineering (BPR) • Enterprise resource planning (ERP)

  23. SUPPLY CHAIN MANAGEMENT • Supply Chain Management(SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

  24. SUPPLY CHAIN MANAGEMENT • Four basic components of supply chain management include: • Supply chain strategy – strategy for managing all resources to meet customer demand • Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services. • Supply chain operation – schedule for production activities • Supply chain logistics – product delivery process

  25. SUPPLY CHAIN MANAGEMENT • Wal-Mart and Procter & Gamble (P&G) SCM

  26. SUPPLY CHAIN MANAGEMENT • Effective and efficient SCM systems can enable an organization to: • Decrease the power of its buyers • Increase its own supplier power • Increase switching costs to reduce the threat of substitute products or services • Create entry barriers thereby reducing the threat of new entrants • Increase efficiencies while seeking a competitive advantage through cost leadership

  27. SUPPLY CHAIN MANAGEMENT • Effective and efficient SCM systems effect on Porter’s Five Forces

  28. CUSTOMER RELATIONSHIP MANAGEMENT • Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability • Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

  29. CUSTOMER RELATIONSHIP MANAGEMENT • CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level • CRM can enable an organization to: • Identify types of customers • Design individual customer marketing campaigns • Treat each customer as an individual • Understand customer buying behaviors

  30. CUSTOMER RELATIONSHIP MANAGEMENT • CRM overview

  31. BUSINESS PROCESS REENGINEERING • Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order • Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises • The purpose of BPR is to make all business processes best-in-class

  32. BUSINESS PROCESS REENGINEERING • Reengineering the Corporation – by Michael Hammer and James Champy - recommends seven BPR principles

  33. Finding Opportunity Using BPR • A company can improve the way it travels the road by moving from foot to horse and then horse to car • BPR looks at taking a different path, such as an airplane which ignore the road completely

  34. Finding Opportunity Using BPR • Progressive Insurance mobile claims process

  35. Finding Opportunity Using BPR • Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

  36. ENTERPRISE RESOURCE PLANNING • Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations • Keyword in ERP is “enterprise”

  37. ERP SOFTWARE • ERP functions offered by all ERP vendors include: • Finance, accounting, sales, marketing, human resources, operations, and logistics • ERP vendors differentiate themselves by offering unique components including: • CRM, SCM, and BI • According to Gartner, the average failure rate for an ERP project is 66 percent

  38. Finding The Right ERP Solution • Successful ERP projects share 3 attributes • Overall fit • Off the rack • Off the rack and tailored to fit • Custom made • Proper business analysis • Successful companies spend up to 10 percent of the project budget on a business analysis • Solid implementation plans • A plan is needed to monitor the quality, objectives, and timelines

  39. Next time….. • E-Business for fun and profit!!!

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