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Lecture 2 Management and decision-making (1)

Introduction to business strategy Consequences for management decision-making

Introduction to the module Scope of study What is a Management Support System? Blog for learning materials Coursework groups of 4: group membership form case study: Officionado need to be preparing underlying database will be developing a management support system
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Management decision-making
what sorts of decisions do business managers need to make?

Business strategy
introduction to some strategic planning techniques

Consequences for management decision-making

how can strategic planning inform our thinking about key management decisions?

Techniques
Porters generic competitive strategies Porters value chain analysis SWOT analysis BCG matrix

SCM and CRM What is strategy? Strategic planning - process overview Performance measurement and the balanced scorecard
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Porter identifies

three generic strategies

for achieving competitive advantage in the context of the five forces identified below

Porters competitive strategies

These are:

Overall cost leadership:

control and reduction of costs across all areas of the business from the basic premise that: Profit = Revenue Costs

reduced costs implies increased profit

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Porters competitive strategies

Differentiation: involves making the product or service recognisably different or unique across the whole industry sector, thereby enabling an increase in the price of that product or service (with a consequent increase in profit)

Porters competitive strategies

Focus: specialising the product and/or service for a particular market niche

e.g. by geographical region, vertical market sector, etc.

Porters Value Chain Analysis

Administration and infrastructure Human Resource Management Product technology / development Value added cost = margin

Procurement
Inbound logistics Operations Outbound Sales and Services logistics Marketing

Porters Value Chain Analysis

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Pearlson & Saunders, 2003

Porters Value Chain Analysis

"Porter's value chain is a framework for considering
key activities within an organisation and how well they add value as products and services move from conception to delivery to the customer

(Chaffey, 2003)

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Supply chain management

The planning and control of materials from identifying the need

through to delivery to the customer

Objective:

to optimise performance in meeting customer requirements i.e. increasing profit by minimising costs and making the best use of resources
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Supply chain
Raw materials Each link in the supply chain adds value

Administration and infrastructure Human Resource Management Product technology / development Procurement Inbound Operations Outbound Sales and Services logistics logistics Marketing Value added cost = margin

Administration and infrastructure Human Resource Management Product technology / development Procurement Inbound Operations Outbound Sales and Services logistics logistics Marketing Value added cost = margin

Administration and infrastructure Human Resource Management Product technology / development Procurement Inbound Operations Outbound Sales and Services logistics logistics Marketing Value added cost = margin

Manufacturers

Wholesalers / Distributors

Consumer Sales outlets

by developing products (and/or delivering services); the margin (or profit) is equivalent to the value added
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Value Chain: Interconnecting relationships between organizations

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Pearlson & Saunders, 2003

Porters five forces

"Competition is seen as the crux of an industry's profitability which is determined by the [five] competitive forces identified Each of the competitive forces is identified in depth firstly to ascertain the extent to which it is relevant to the particular industry

secondly to ascertain its strength in the particular situation...

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Porters five forces

... [However], a sixth force, government regulation, can often be the most important factor in determining the profitability of an industry"

(Pearson, 1999)

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Porters five forces

Threat of new entrants

Bargaining power of suppliers

Rivalry or basis of competition

Bargaining power of buyers (customers)

Threat of substitutes
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Porters five forces

1. Threat of New Entrants
new firms that may enter a market

2. Bargaining Power of Buyers

ability of buyers to use market power to lower a firms competitive position

3. Bargaining Power of Suppliers

ability suppliers of inputs to product/service to reduce a firms competitive position

4. Threat of Substitutes
providers of equivalent/superior products

5. Industry Competitors
current competitors for the same market
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SWOT analysis
Involves a detailed and exhaustive assessment of the strengths and weaknesses of the business and the opportunities and threats

presented by its product markets and other environments such as suppliers and technology developers

(Pearson, 1999)
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SWOT analysis

Opportunities External factors

Threats

C Strengths

D Weaknesses

Internal factors

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BCG matrix
The Boston Consulting Group analysis technique models the relationship between the current and future potential of a product or service and how management wants to deal with it. It is therefore a marketing analysis and it shows the products that are cash generators and cash consumers. Each of these will need to be managed differently and supported by different kinds of systems (Cadle and Yeates, 2001)
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BCG matrix

High

Wild Cats (or problem children) Dogs

Stars

Market growth Cash Cows High Market Share Low Low

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Customer relationships

Customer relationship management Marketing has traditionally been about finding new customers CRM is about maximising the profit from relationships with existing customers through targeting your best customers, repeat-selling, cross-selling, etc. Putting the customer at the of your business
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Customer relationships

Customer satisfaction

High

Happy wanderers

Satisfied stayers

Low

Dealers
Low

Hostages
High

Source: Piercy (1997), from Needle (2004)

Customer loyalty
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What is strategy (1) ?

Even from the crudest SWOT model, [strategy] frameworks have been concerned largely with the nature of the organisation and its environment and how the two might be advantageously related to each other
(Pearson, 1999)
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What is strategy (2) ?

The strategic process refers to the way in which

management strategy is formed. In most organisations this involves a mixture of scientific and rational analysis together with more subjective and political considerations.
(Needle, 2004)
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What is strategy (3) ?

Mintzberg (1987) considers 5 definitions, not necessarily mutually exclusive: Strategy as plan Strategy as ploy Strategy as pattern Strategy as position Strategy as perspective

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What is strategy (4) ?

Strategy as plan: a deliberate, intentional approach to achieving (long-term) results

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What is strategy (5) ?

Strategy as ploy: competitive manoeuvres aimed at generating some positive effect on the basis of competition

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What is strategy (6) ?

Strategy as pattern: strategy emerges or is inferred from consistent natural (i.e. unplanned) behaviour

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What is strategy (7) ?

Strategy as position:
how the organisation positions itself in its various environments, particularly its market and competitive environments

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What is strategy (8) ?

Strategy as perspective: distinctive characteristics of an organisation as perceived both internally and externally

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What is strategy (summary) ?

Mintzberg (1987) considers 5 definitions, not necessarily mutually exclusive: Strategy as plan: a deliberate, intentional approach to achieving (longterm) results Strategy as ploy: competitive manoeuvres aimed at generating some positive effect on the basis of competition Strategy as pattern: strategy emerges or is inferred from consistent natural (i.e. unplanned) behaviour Strategy as position: how the organisation positions itself in its various environments, particularly its market and competitive environments Strategy as perspective: distinctive characteristics of an organisation as perceived both internally and externally
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Business Strategy

Organisation

Business environment

Strategic planning and management Strategy as pattern

Analysing the environment

SWOT analysis BCG matrix Porters five forces Porters generic strategies

Vision Mission

Planning the direction

Objectives

Planning the strategy

Organisation structure and culture

Strategic planning overview

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Targets

Implementing the strategy

Monitor and control

Vision, mission, objectives, targets

Vision Mission statement
Every business will have some sort of vision or core ideology made up of: core values

core purpose
visionary goals

Objective

Objective

KPI

KPI

KPI

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Vision, mission, objectives, targets

The vision is often captured in a

Vision Mission statement

mission statement often not more than 50 words

Objective

Objective

KPI

KPI

KPI

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Vision, mission, objectives, targets

The vision is often captured in a

Vision Mission statement

mission statement often not more than 50 words

The mission can be highlighted in a strapline using only a few words London Metropolitan Universitys strapline is: transforming lives
KPI KPI KPI

Objective

Objective

meeting needs building careers

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Vision, mission, objectives, targets

Vision Mission statement

The mission statement may be expanded into key goals or which should be SMART: Specific and written down Measurable Agreed, Aligned, Achievable Realistic, Relevant Time-framed
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Objective

Objective

KPI

KPI

KPI

Vision, mission, objectives, targets

Vision Mission statement
Objectives will be supported by Critical Success Factors (CSFs) and measurable targets, or

Objective

Objective

Key Performance Indicators (KPIs)

KPI

KPI

KPI

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Vision, mission, objectives, targets (summary)

Vision Mission statement
Every business will have some sort of vision

The vision is captured in a mission statement The mission can be highlighted in a strapline

Objective

Objective

The mission may be expanded into SMART objectives

KPI

KPI

KPI

Objectives will be supported by CSFs and measurable targets as KPIs

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Performance measurement

Why measure performance?

Organisations use key performance indicators (KPIs) to:
identify success identify whether they are meeting customer requirements help them understand their processes identify where bottlenecks, waste, etc. exist ensure decisions are based on fact show if planned improvements happened
(Parker, 2000)

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Conceptual Model for Addressing the Gaps between Performance Measurement and Customer Satisfaction
Word of Mouth and Communications Customer Value Past Experience

Expected Service Gap 5 Perceived Service CUSTOMER Customer Satisfaction

PROVIDER

Alignment of CRM Vision and Strategy through streamlined technology

Ga p

Gap 1
Contact staff perceptions

Service Delivery (including previous and post)

Gap 4

External Communications

Service Performance Measurement Processes Gap 2 Management perceptions of customer expectations

Gap 7

ap G
Actual Perception Level of Customer Satisfaction

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Internal Communications

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Wood, Page and Webb (2007)

Balanced Scorecard

Traditional performance measurement based mainly on financial measures Balanced scorecard designed to translate overall mission and business strategy into specific, quantifiable goals Usually divided into 4 key areas:
financial customer internal business process learning and growth

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Strategy triangle

Successful firms have an overriding business strategy that drives both organisational and IS strategy IS strategy can affect and is affected by changes in a firms business and organisational strategy

Business Strategy

Changes in any strategy must be accompanied by changes in the Organisational others Strategy
Source: Pearlson (2001)

Information Strategy
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Strategic Planning

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source: http://www.soroc.com/Content.aspx?ID=5

Starting the coursework assignment

Consider the following:

Detailed requirements
identify data to support chosen decision for proposed MSS

Management Information
include ERD and data dictionary describe how you dealt with any problems in the data

Sample queries
relevant to your choice of decision providing information needed by management
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Recommended reading for next week management decision making

Chaffey, D. (ed.), 2003, Business Information Systems, 2nd ed., FT Prentice Hall Data and information: pages 4 - 14 + Decision-making: pages 16 - 28 Laudon, K. & Laudon, J., 2004, Management Information Systems, 8th ed., Pearson Prentice Hall Role of managers: pages 85 - 87 + Decision-making: pages 87 - 90 Lucey, T., 1997, Management Information Systems, 8th edition, Continuum Decision-making: pages 140 - 151 Turban E. & Aronson J.E., 2001, Decision Support Systems and Intelligent Systems (6th edition), Prentice Hall Business Publishing Decision-making: (summary) pages 4 - 13 + (detail) pages 33 - 77 Whiteley, D., 2004, Introduction to Information Systems, Palgrave Management decision-making: pages 171 -178 or similar https://dspace.lib.cranfield.ac.uk/bitstream/1826/2594/1/Creating%20and% 20Managing%20Value%20in%20Collaborative%20Netwo.pdf

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References

Boston Consulting Group (1968), Growth and Financial Strategies, BCG Cadle J and Yeates, D, (2001), Project Management for Information Systems, 3rd edition, Prentice Hall Chaffey D (2003), Business Information Systems, 2nd edition, FT Prentice Hall Mintzberg H (1987), The Strategy Concept I: five Ps for strategy, California Management Review, Fall Needle D (2004), Business in Context, 4th edition, Thomson Learning Parker C (2000), Performance Measurement, Work Study, MCB University Press Pearlson K (2001), Managing and Using Information Systems, Wiley Pearlson K & Saunders C (2003), Managing and Using Information Systems: A Strategic Approach, Wiley Pearson G (1999), Strategy in Action, Prentice Hall Porter M E (1979), How competitive forces shape strategy, Harvard Business Review, March/April Porter M E (1980), Competitive Strategy: Techniques for analyzing industries and competitors, Free Press Robson W (1997), Strategic Management and Information Systems, Prentice Hall Wood S, Page S, Webb P (2007) Measurement of Customer Satisfaction & Performance Measurement within a Local Government Framework (available at: http://chesterrep.openrepository.com/cdr/handle/10034/37773)
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Any questions?

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