BAN 203 – Systems in Business
Chapter 3: Achieving Competitive Advantage with ERP
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Essentials of Management Information Systems 15th Edition, Global
Edition
Business Information Systems Technology, Development, and Management for the Modern
Business, 6 th
edition
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Learning Objectives
After this lecture, you will be able to:
Identify and describe the major components of an enterprise system.
What problem does an E R P system solve?
What are the elements of an E R P system?
What are the benefits of an E R P system?
Demonstrate how Porter’s competitive forces model, the value chain model,
synergies, core competencies, and network-based strategies enable
companies to leverage information systems for a competitive advantage.
Describe how information systems help businesses compete globally.
Describe how information systems help businesses compete using quality
and design.
Explain the role of business process management (B P M) in enhancing
competitiveness.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise and functional BIS
Business information systems can be
categorized into operations and
management systems, which can be
implemented as enterprise or functional
business systems.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise systems (ES)
Support an organization’s business processes
across any functional boundaries within that
organization.
Internet technology connects the business with
suppliers, customers, and partners.
The advantage of ES is that it removes
‘information islands’ (separate applications and
data in different parts of the company.
Disadvantages of ES include high cost, the major
change required for implementation, and the need
to change working methods to software.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise Resource Planning
Enterprise Resource Planning (ERP) software
applications are a suite of pre-engineered, ready-
to-implement integrated application modules that
cater to all the business functions of an enterprise,
possessing the flexibility to dynamically configure
and customize the delivered functionality to suit
the specific requirements of the enterprise.
ERP enables an enterprise to operate as an
integrated, enterprise-wide, process-oriented,
information-driven, real-time enterprise.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise resource planning (ERP)
Enterprise resource planning (ERP) systems
provide a comprehensive solution from a
single supplier, integrating functions for major
internal processes such as production,
distribution, sales, finance, and human
resources management.
Three core ERP processes are procurement,
fulfillment, and production.
Procurem Fulfilment Productio
ent n
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise applications in
comparison to separate functional
applications
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Types of enterprise systems
Enterprise resource planning (ERP)
systems are specialized software applications
that support various business processes within
an organization. These processes include
procurement, product development,
manufacturing, and sales.
An ERP system can be extended to service
processes across organizations with the
addition of enterprise systems, such as
Supply chain management (SCM) systems,
Customer relationship management (CRM), and
Supplier relationship management (SRM).
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Characteristics of ERP
The distinguishing characteristics of ERP are as follows:
ERP transforms an enterprise into an information-driven enterprise.
ERP fundamentally perceives an enterprise as a global enterprise.
ERP reflects and mimics the integrated nature of an
enterprise.
ERP fundamentally models a process-oriented enterprise.
ERP enables a real-time enterprise.
ERP elevates IT strategy as a part of the business strategy.
ERP represents a significant advancement over earlier approaches
to improving manufacturing performance.
ERP represents the new departmental store model of implementing
computerized systems.
ERP is a mass-user-oriented application environment.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Characteristics of ERP
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
ERP System Elements
ERP
Software Hardware Data Procedures People
Configuratio Cloud Transactiona Users
n implications l Data
Master Data Systems
Analysts
Organization Consultants
al Data
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Before ERP Information Systems for Chuck’s
Bikes Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
E R P System for Chuck’s Bikes
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Porter’s Competitive Forces Model
Five competitive forces shape fate of firm
Traditional competitors
New market entrants
Substitute products and services
Customers
Suppliers
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.1 Porter’s Competitive Forces Model
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces
1. Basic strategy: Align I T with business objectives
2. Low-cost leadership
3. Product differentiation
4. Focus on the market niche
5. Strengthen customer and supplier intimacy.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces (1 of 5)
Basic strategy: Align I T with business
objectives
Identify business goals and strategies
Break strategic goals into concrete activities and
processes
Identify metrics for measuring progress
Determine how I T can help achieve business goals
Measure actual performance
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces (2 of 5)
Low-cost leadership: Utilize information systems
to achieve the lowest operational costs and the
most competitive prices.
Example: Walmart
The inventory replenishment system sends
orders to suppliers when a purchase is
recorded at the point of sale.
Minimizes inventory at warehouses, operating
costs
Efficient customer response system
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces (3 of 5)
Product differentiation: Use information systems to enable
new products and services, or significantly change the customer
convenience in using your existing products and services
Example: Google's continuous innovations, Apple’s iPhone
Utilize information systems to tailor and personalize products
to meet the specific needs of individual consumers.
Example: Baume’s customized watches
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces (4 of 5)
Focus on the market niche: Utilize information
systems to achieve a specific market focus and serve a
narrow target market more effectively than
competitors.
Analyzes customer buying habits, preferences
Advertising pitches to smaller target markets
Example: Charlotte Hornets NBA basketball team
Maintains detailed records on fans that include real-time data
to create a single profile of each fan, enabling the team to build
a more personal relationship with fans
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Information System Strategies for
Dealing with Competitive Forces (5 of 5)
Strengthen customer and supplier intimacy:
Strong linkages to customers and suppliers
increase switching costs and loyalty
Toyota: uses I S to facilitate direct access from
suppliers to production schedules
Permits suppliers to decide how and when to
ship supplies to plants, allowing more lead
time in producing goods
Amazon: keeps track of user preferences for
purchases and recommends titles purchased by
others
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Spotlight on People: Customer Experience
Management: A New Strategic Weapon
Class Discussion
What is customer experience management? How can it
contribute to competitive advantage?
How does information technology support customer
experience management? Give some examples.
How did information technology and customer experience
management change operations and decision-making at
the organizations described in this case?
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
The Internet’s Impact on
Competitive Advantage
Impacts include:
Enabling new products and services to emerge as
substitutes for existing products and services
Changes to the balance of power between customers and
suppliers
Reduction of barriers to entry
Transformation, and even destruction, of some industries
Creation of opportunities for developing new markets,
building brands, and large customer bases
Innovative products and the Internet of Things are an
excellent example of how the Internet is changing
competition within industries and enabling new products
and services
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
The Business Value Chain Model
Highlights specific activities in a business where
competitive strategies can best be applied and where
information systems are likely to have a strategic
impact.
Primary activities
Support activities
Benchmarking
Best practices
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.2 The Value Chain Model
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
3.3 The Value Web
A firm’s value chain is
linked to the value chains
of its suppliers, distributors,
and customers.
Value web
A collection of
independent firms that
use information
technology to coordinate
their value chains to
produce a product
collectively
Value webs are flexible
and adapt to changes in
supply and demand
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Synergies, Core Competencies,
and Network-Based Strategies
Large corporations are comprised of business units
Financial returns overall are tied to the performance of
business units
Information systems improve performance of business units
by promoting
Communication
Synergies
Core competencies
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Synergies
When the output of business units can be used as inputs to
other units
When two firms can pool markets and expertise
Example: Amazon’s
acquisition of MGM
Lower costs and generate
profits
Enabled by information
systems that tie together
disparate units, so they act
as a whole
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Core Competencies
Activities for which the firm is a world-class leader (the
world’s best miniature parts designer, the best package
delivery service, etc.)
Relies on knowledge gained over years of experience,
as well as expertise from research
Any information system that encourages the sharing of
knowledge across business units enhances competency.
Example: Procter & Gamble utilizes systems to facilitate
collaboration among individuals working on similar
problems, enabling them to share ideas and expertise.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Network-Based Strategies
Virtual company
Uses networks to link people, resources, and ally with other
companies to create and distribute products without
traditional organizational boundaries or physical locations
Example: Li & Fung
Network economics
Marginal costs of adding another participant to the network
are near zero, whereas the marginal gain is much larger
E.g., a larger number of participants on the Internet,
greater value to all participants
Example: eBay
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Business Ecosystems and Platforms
Business ecosystem (industry sets): Loosely
coupled by interdependent networks of suppliers,
distributors, outsourcing firms, transportation
service firms, and technology manufacturers
IT plays an important role
Platforms: Keystone firms that dominate the
business ecosystem and let other firms use their
resources and services
Examples: Microsoft, Apple, Facebook
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Disruptive Technologies
Technologies with a disruptive impact on
industries and businesses, rendering existing
products, services, and business models obsolete
Personal computers
World Wide Web
Internet music, video, and TV services
First movers versus fast followers
First movers may fail to take advantage, allowing second
movers (fast followers) to reap rewards
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
The Internet and Globalization
Prior to the Internet, competing globally was only an option for
huge firms able to afford factories, warehouses, and distribution
centers abroad.
The Internet drastically reduces costs of operating globally.
Globalization benefits
Scale economies and resource cost reduction
Higher utilization rates, fixed capital costs, and lower cost per unit of
production
Speeding time to market
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.4 Apple iPhone’s Global
Supply Chain
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Global Business and System
Strategies
Four main ways of organizing business internationally:
Domestic exporter
strategy
Multinational
Caterpillar Inc. strategy
Ford Motor Company
Franchiser
McDonald’s
Transnational strategy
Nestlé S.A.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Global System Configuration
Centralized systems Duplicated systems
Four main system
strategies and
configurations
Decentralized Networked systems
systems
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.5 Global Business
Organization Systems Configurations
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
What is Quality?
Producer perspective
Conformance to specifications and absence of variation
from specs
Customer perspective
It is broader than the producer perspective; it also
includes physical quality (reliability), quality of service,
and psychological quality.
Total quality management (T Q M )
Quality control is an end in itself
Everyone in the organization is responsible for quality
Six Sigma
Measure of quality: 3.4 defects/million opportunities
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
How Information Systems Improve Quality
1. Reduce cycle time and simplify production
Example: ArcScam
2. Benchmark
Example: L.L. Bean
3. Use customer demands to improve products and
services
Example: Delta Airlines
4. Improve design quality and precision
Computer-aided design (C A D) systems; 3-D printing
5. Improve production precision and tighten production
tolerances
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
ERP Advantages
A company’s success hinges on balancing the conflicting goals of different
departments. Transparent information sharing promotes cross-functional
collaboration, which is critical for efficiency across all divisions.
Enterprise Resource Planning (ERP) enhances flexibility, integration, and
the transition from function-oriented to team-based, process-oriented
structures.
ERP serves as a platform for process improvements, including innovation,
redesign, and quality assurance initiatives such as QC and TQM.
Being process-oriented, ERP supports activity-based management (ABM)
strategies in budgeting, costing, and performance quality.
ERP systems effectively measure the benefits of implementation, tracking
Return on Investment (ROI) across financial resources, manpower, and
time, while facilitating the balanced scorecard approach.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
ERP Advantages
By adopting best-in-class practices, ERPs serve as valuable tools for
benchmarking competitiveness.
An ERP enables significant operational scaling or market entry
without disruption.
Real-time data is generated during actual processes, allowing
operational staff to access the latest information for quicker
decision-making and reducing the issues linked to data
management.
Furthermore, integrating enterprise data into a single database
provides online access to accurate and up-to-date information,
enhancing efficiency.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Enterprise Business Process
Businesses transform inputs into goods and services for
customers. Accurate and up-to-date information is crucial
to managing resources and business processes efficiently.
Most companies have unintegrated information systems
known as "silos," which limit information sharing between
departments, resulting in costly inefficiencies.
Unintegrated systems can lead to data-entry errors and
problems in sharing timely and accurate information
between functional areas. Businesses view themselves as
cross-functional processes to avoid this issue, promoting
flexibility and rapid decision-making. Now, information
flows between operating levels without top
management's involvement.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
A
Marketing
Information Flow
Sales
Information Flow
Manufacturing
Information Flow
Logistics
Information Flow
Finance &
Accounting
To
Information and material flows in (a) a functional business
model and (b) a business process model. M
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
B
Top Management
Accounts Finance & Accounting Accounts
Payable Receivable
Marketing & Sales
Top Manufacturing
Procurement Management Logistics
Information Flow
Suppliers Conversion Storage & Shipping
Material & Product Flow
Information and material flows in (a) a functional business model
Su and (b) a business process model. Cu
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
ppl sto
What is Business Process
Management (B P M )?
Technology alone is often not enough to improve business
Organizational changes are often necessary
May require just minor changes in work habits or redesigning
entire business processes
Aims to improve processes continuously
Uses a variety of tools and methodologies to:
Understand existing processes
Design and optimize new processes
Business Process: a series of ordered activities that convert
inputs into higher-value outputs.
Business System: a group of interacting, interrelated, or
interdependent elements organized to meet a particular set of
business objectives.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
What is Business Process
Management (B P M )?
Business Process Mapping is the graphical representation of
how tasks are accomplished. It helps to visualize the details of the
process closely and guides decision-making.
It can identify the major areas of strengths and weaknesses in the
existing process, such that the contribution of individual steps in
the process can be assessed.
It helps reduce cycle times and defects in the process, enhancing
its productivity.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Steps in Business Process Management
1. Identify processes for change
2. Analyze existing processes
3. Design new process
4. Implement new process
5. Continuous measurement
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
BPM vs. BPM
Business Process Management (BPM)
• Discipline and strategy for continuously managing,
improving, and optimizing processes across the
organization.• Focuses on strategic and ongoing
improvement of efficiency, agility, and customer
satisfaction.• Involves designing, modeling, automating,
monitoring, and refining processes.• Covers multiple
processes end-to-end across the business.
Business Process Mapping
• A visual tool (like a flowchart) that shows every step,
role, and decision point in a process.• Describes how a
single process currently works (as-is state).• Helps spot
bottlenecks, redundancies, and opportunities for
improvement.• Focuses on one process at a time.
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Steps in Business Process Mapping
1. Identify the Process You Need to Map
2. Bring Together the Right Team
3. Gather All the Necessary Information
4. Organize the Steps in a Sequential Order
5. Draw the Baseline Process Map
6. Analyze the Map to Find Areas for Improvement
7. Implement Improvements and Monitor Them
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.6 As-Is Business Process
for Purchasing a Book from a
Physical Bookstore
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Figure 3.7 Redesigned Process for
Purchasing a Book Online
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Spotlight on Organizations: GCB
Bank: A Digital Transformation
Class discussion
What is the role of information systems at GCB
Bank?
Could the early adoption of information systems by
GCB Bank widen its customer base?
Do you anticipate that GCB Bank will continue to rely
on the application of information systems
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Process Map Symbols
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Business Process Reengineering
A radical form of far-reaching change
Not continuous improvement, but elimination of old
processes, replacement with new processes
Can produce dramatic gains in productivity and
efficiency
Can produce more organizational resistance to change
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
ERP Business Value
1. Increase operational efficiency
2. Provide firm-wide information to support decision-
making
3. Enable rapid responses to customer requests for
information or products
4. Include analytical tools to evaluate overall
organizational performance and improve decision-
making
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
Major ERP Vendors
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
SAP Procurement Example
Copyright © 2023, 2019, 2015, 2008 Pearson Education, Inc. All Rights Reserved
