Strategic Information System
Task 1 – Group Report
1. How did information systems contribute to GM’s and Chrysler’s success or failure?
GM and Chrysler both show success and failure in maintaining their position in the market as well-known players in the automobile industry by applying Information Systems. There is no doubt that IS has a great impact over the development of an organization, thus it can create huge opportunities for growth and expansion, however, there are different processes and activities that must be done and implemented in order to ensure that it will be effective for the organization.
In the case of GM, IS contributed to its failure, primarily in the aspect of the cost. The application of IS inside the organization had become a burden in terms of budget, due to their intensive installation of huge number of hardware and software. Aside from that, the company did not consider their current business rules and structure regarding their decision not to integrate or connect the different systems and application of the different department. As a result, it cause greater problems regarding the process of managing the data and information because of some errors, inefficiency and inconsistency of data being produced and being used by the different business units. To make the situation even worse, there were some systems and applications that were not properly used because some of them are incompatible with the equipment, which signifies poor planning and implementation.
On the other hand, IS had been very vital to the success of Chrysler. This is primarily because the company had been able to see the positive impact of integrating their system, which helps the company to connect the different important processes and stakeholders inside the corporation, primarily the suppliers and the customers, regarding their orders, invoices, purchases, manufacturing, scheduling etc. Furthermore, it enables the company to gain more knowledge regarding the flow of their products, and used the data in their integrated system, to analyze the movement of their products, and used them in the process of decision-making. The said activities were made possible due to effectiveness, efficiency, accuracy as well as the consistency of data that were gathered by the integrated system.
Generally, it can be said that the success of a business or organization in applying IS depends on the proper planning which include the aspects of organizational structure, culture and business rules, which can help to decide on what will be the effective IT to be applied and used.
2. What management, organizational and technological issues explain the differences in the way Chrysler and GM used information systems?
General Motors (GM) and Chrysler are considered s two giant corporations in the automobile industry. Both of the said corporations tried to use Information Technology or IT in order to combat foreign and domestic competitors. However, the result of their efforts resulted to entirely different outcome. The main difference between the information systems strategy of the two corporations is the way that they have implemented their overall system, while the General Motors focus on implementing autonomous systems and applications for each and every department and business unit, the Chrysler focus on integrating the different software and applications of each and every business unit, and connects it to the upper management for the process of decision making.
As a result, GM uses the shotgun approach where in it targets several information technology and hope that one or all of them will be beneficial for the corporation. Thus, the companyspent huge amount of money in order to install different hardware and software for each and every department, but still every department are not linked with each other. The said action created problems regarding the data gathering process, and might cause error and inconsistency of data and information. In that case, it is important to take note of the fact that business strategies, rules and flow usually defined first, and then IT and other technologies are being aligned to them (Feurer & Chaharbaghi 2000). In connection to that, each and every department and business unit in the company are interconnected with each other, or in simple terms, an output of one department will serve as an input of another. In that case, efficiency, accuracy and consistency of data are very vital. The said aspect cannot be guaranteed by using their system, aside from the fact, that it takes time in order to retrieve and access data. One of the important contribution of IS in the company is the result of their integrated system which handles the inventory, manufacturing and financial data, which enables the different stakeholders, primarily the employees and the suppliers to be informed, thus enables the said processes to be connected and consistent.
On the other hand, Chrysler implemented the exact opposite of the GM’s IS strategies. The company adopted a rifle approach to their system, where in they build what was extremely vital and significant, and then build hat would produce the biggest returns. As a result, the company implemented a common system or integrated systems which connect the different data and process from the dealer up to the process of production, schedules, invoices, parts forecasts, projections, parts as well as the management of inventory. Furthermore, the company also focuses on corporate-wide communications system as well as the just-in-time inventory management. As a result, it enables the company to have a single corporation-wide network which connects the large and mid-size computers of the company towards their vendors, at the same time gives the engineering workstations the access to the large computers, which enables them to move data and information from one system, stage of production or plant to another. As a result, it enables the entire company to focus on their decision-making process, particularly in the process of managing their different resources, at the same time, focus on lessening the time to be spent in the process of traditional communication between the different departments and business units that are involved in the process. The company had been able to deliver their products to the respective customers, at the right time, with the right products and with the rights details. This helps not only customers, but also makes the life of the employees easier. Furthermore, the different initiatives of the company regarding their communication technology enable them to be connected with other important external stakeholders, primarily their suppliers.
Task 2 – Individual Report
1. Compare the roles played by information systems at Chrysler and GM. How did they affect the structure of the auto industry itself: use value chain and business models such as Porter’s Five Force Model in your analysis?
IS plays vital role in the management and business process of Chrysler and GM. However, because of the fact that the two companies use entirely different approach in implementing and using their systems, software and technologies, IS plays different roles at Chrysler and GM. In GM, IS played as a support mechanism or technology for the current processes of the business, it serves as a stand-alone or independent aspect of the company, which is used by the company in order to work on a particular task or transaction. On the other hand, in Chrysler, the IS had become integrated to the overall system of the company, it was absorbed by the structure as well as business rules of the company; therefore it had been vital part of the entire business flow. As a result, it can be said that Chrysler had been able to handle their IS in more effective way.
ISs were applied by both companies in order to gain competitive advantage. This is because of the fact that business information is a group of interrelated components that work collectively in order to carry out input, processing, output, storage and control actions to convert different data into information products which can be used in order to support forecasting, planning, control, coordination, decision making as well as operational activities in an organization (Bocij & Chaffey 2003). Primarily, IS plays a very vital role in the management and business process of Chrysler and GM, in terms of supply chain management. Effective supply chain management can offer a major source of competitive advantage (Hammant p. 3, 1995). Thus, IS enables to support the goal of the supply chain manager to be linked to the end customers, the channels of distribution, the production processes and the procurement activity in a way that customer service expectations are exceeded and yet at a lower total cost than the competitors (Tsatsaki & Jones 2004).
It is important to consider that the pure competition focuses on the fact that risk-adjusted rates of return should be constant across different firms and industries, but different economic studies have affirmed that different industries can maintain different levels of profitability, because of the industry structure. Michael Porter provided a framework that shows an industry as being influenced by five vital forces. Thus, strategic business manager who are seeking for development of advantage over their rival firm can apply this model in order to understand the industry context in which the firm operates (Quick MBA 2007).
The automotive industry is the industry that is responsible in designing, developing, manufacturing, marketing as well as selling motor vehicles in the world (MotorBloggen n.d.). However, there are different factors that are affecting the entire industry. Rivalry condition can be considered as concentrated on three main actors, who are also known as the big three in the automotive industry in the US. They are considered as the leading brands and names in the industry, thus, they hold majority of the markets. The existence of substitute products is beginning to become wide and thick. Aside from that fact that the company is facing dilemma because of competition with different Japanese, and now Chinese companies, the company finds intensified competitions on companies that produce, market as well as sells motorcycles and other related motor vehicles, which shows a growing demand in different countries in the world. Penetrating the automobile industry is hard because of the established name of GM and Chrysler; therefore, new entrants must first overcome different barriers to entry such as the remarkable marketing muscle and marketing presence of the said two companies and other major players in the industry. Aside from that, both of the companies have strong long-term relationships with the suppliers making the defense of the position by means of discounts and other tactics. The bargaining power of suppliers is somewhat low because of their number, at the same time direct negotiations from the producers to suppliers are present, which enables reliable supply, faster delivery and lower price. Furthermore, the bargaining power of buyers is neutral because of their huge numbers and they do not have the ability to do the backward integration.
Value chain is considered as one of the most vital and outstanding business concept that emerged. It refers to the series of activities which firms and organizations converged into towards putting the goods or services in the marketplace, and where in through all and each of the activities within the chain, the product or service gains value. The principle is that the chain of activities offers the product more added value that sum of the added values of all activities. Michael Porter is considered as the supporter or advocate of the value chain, and he believes that it is a strong tool which can help to analyze the different sources of competitive advantage, at the same time, help to discover different ways of creating and sustaining the competitive edge and to design for a more effective structure of an organization. The automotive value chain is comprised of one of the largest sets of interconnected markets in the U.S. economy, which focus on accumulated value that is being produced by companies that sell component, materials and light vehicles to consumers, businesses and even government (McAlinden & Andrea 2002).
There are 8 important areas that summed up the value chain initiatives of companies in automotive industry: supplies of components and materials, purchasing, inventory holding, R&D/Design/Engineering, Assembly, Testing/Quality Control, Inventories of Final Goods, Sales and Marketing, Distribution and Service/Dealer Support.
Supplies of Components and Materials and Purchasing
This aspect focus on the range of cooperation among the suppliers of different automotive companies. It will be important to have a strong communication and connection with different suppliers in order to ensure their production process. IS has a great influence over this aspect because it can help to connect different suppliers in easy and fast manner. For example, the initiative of Chrysler where in the company launched an online system which enables the supplier to submit their suggestions for making improvement and subjects regarding the design prototypes and production of a given system or part (Hill n.d.).
Inventory
Inventory is a considered as one of the important aspect in the value chain because it is connected to the different factors that are connected to the business process, from purchase and sales and other important accounting aspects. Thus, IS plays a vital role in this aspect because it enables different data and information gathered from one department or business unit to be connected to others. This can be seen on the effort or initiatives of both companies in integrating their sales and dealership system with the inventory.
R&D/Design/Engineering, Assembly and Manufacturing
This aspect of value chain is considered as one of the most important process in the automotive industry because it focuses on the product innovation and development and it pertains on the finished products to be delivered to the customers. IS play crucial role in this stage because it can make the life of the employees and engineers easier. For example, Chrysler decided to implement a centralized pool of computerized CAD specifications that was accessible to all stages of production and built their CTC in order to enhance their productivity by offering different technologies that will make the engineer to do things only once and not repeat them. In connection, GM also adopts standard software which integrates computer-aided design and manufacturing processes (Hill n.d.).
Testing/Quality Control
Quality is one of the most important characteristics of the products that are being offered by different automotive companies, thus, it will be important to focus on the aspect of testing and quality control. IS help the employees to track, manage and analyze the condition of one car in easy manner.
Sales and Marketing
Sales and marketing pertains on the relationship of the companies towards their customers. It focuses on the different factors that are connected to the behavior and preferences of their customers. IS can help the automotive industry because it enables companies to use data that have been gathered from the previous performance of the company in the process of decision making regarding the current marketing and sales strategies to be implemented. For example, by analyzing the number of people who have purchased a certain automotive, it can help the companies to focus on a given market who commonly buy or avail of any specific model.
Distribution
Distribution of the product focuses on the process of delivering the orders of the customers or dealers. IS plays a significant role in this aspect because it enables the company to prevent any wrong or late delivery to a wrong person or organization.
Service/Dealer Support
Dealers are considered as one of the most important stakeholders or entities in the value chain of the automotive industry, because they are the one that are directly connected to the customers, therefore, they have the first hand data regarding the people or customers that are availing the product. Therefore direct and clear communication with them is essential.
2. How did GM and Chrysler redesign their business processes to compete more effectively?
During the mid-1980s, researchers have found out that Japanese automobile are starting to create their image and names in the market. As a result, many of the players in the said industry, including GM and Chrysler had started to focus on redesigning their business process. Lean manufacturing can be attributed to the efforts of the Toyota Motor Company, where in the embodiment of the Lean a principle is known as the Toyota Product System (Dirgo 2005, p. 71). It is a five-step process: defining customer value, defining the value stream, making it flow, pulling from the customer back and striving for excellence. Thus in order to become a lean manufacturer, it requires a way of thinking which focus on the process of making product flow through value-adding processes without interruption, a pull system that cascades back from customer demand by replenishing only what the next operation takes away at a short intervals, and a culture where in everyone is striving continuously to improve (Liker 2004, p. 7). In detail, Japanese auto makers focused on minimizing the waste as well as inventory, at the same time utilizing the ideas of workers. Thus, they focus on minimizing reliability and quality, and minimizing waste (Hill n.d.).
Chrysler focused on cutting down billion in operating cost yearly, and focus on the virtually rethinking regarding its entire operation and overhauled its top-down autocratic management structure by replacing the traditional rigid departments like the engine division into the cross-functional platform teams (Hill n.d.). In addition, the company mandates cost savings from their suppliers by different efficiency improvements, primarily the launching of the SCORE in 1989, which aims to reduce the cost in the entire system. Under the said program, suppliers were all encouraged to find ways in order to improve the value for the customer but without reducing the profit margins, at the same time helping to eliminate the waste and inefficiencies. The entire program was based on teamwork, where in the company undertook in order to implement the ideas that quickly or to refer the issue back to the supplier if the idea would not work; any cost reductions would be shared equally by the company and its suppliers; and suppliers were promised long-term relationships (Kobe 1994 cited from Rugman & D’Cruz 2000, p. 169). As a result, in 1996, the company received more than 16,000 proposals from its suppliers and received a total cost savings of .5 billion which made the company as the lowest cost producer among the Big Three (Chrysler Corporation 1996 cited from Rugman & D’Cruz 2000, p. 169). In order to support the said development, the company also established their Chrysler Technology Center or CTC in the north of Detroit in Auburn Hills, Michigan, which helped to enhancement of productivity by supporting the technologies that will be helpful to the manufacturing process of the corporation. On the other hand, in GM, the organization revamped its approach to production and product development by moving away from their traditional assembly lines and focusing on the smaller working units which they called cells. The said unit enables the worker to have more opportunity to design their own processes and improve their output. Aside from that, the company also focuses on replacing their old committee system with a single strategy board where in the top executives in different business units – manufacturing, engineering, sales and marketing, finance, human resources, logistics, purchasing and communication work together in order to achieve the same goal. As a result, the company focuses on establishing different plants that are dedicated to a single model, which enables them to reduce the potential variations of each model, therefore give emphasis on building several models in the same plans, with fewer parts per car, thus cars are much easier to assemble (Hill n.d.).
3. What other business areas would you recommend that GM and Chrysler use information systems to impact their competitiveness? Give reasons for your answer.
Currently, the automobile industry is facing different challenges, particularly from the global economic environment. As a result different automotive leaders are cutting cost by the process of improving their efficiencies in terms of developing their products, managing supply chain as well as manufacturing and collaboration with the dealer. Aside from that it is very important to make different strategic investments for the future by using different new technologies and growth markets (IBM n.d.).
One of the important business areas to be considered by the two giants is the Marketing. This is because of the fact that marketing focus not only to the process of buying and selling products towards the customers, but it also involves the direct and indirect connection with the customers. Thus, the application of IS in the said business area will be helpful in order to improve the performances of both companies. Information is a pre-requisite in all commercial activities and it can be regarded as the life and blood within which business interaction unfolds. According to Bartels (1962), in the documenting the historical development of marketing research and its evolution, traces emerge the emergence of a concern towards the increasing need for accurate marketing information and as the growing utilization of scientific methods in the marketing management. Thus, behind the idea of any marketing research exercise is a belief that managerial problems can be solved much more readily by the help and use of facts (cited in Low 1994, p. 1). In connection, Montgomery & Urban explained that IS can be designed in the process of planning and decision-making by combining the management science, statistics, computer science as well as market data into an integrated decision-information system (cited in Low 1994, p. 1). As a result, application of IS, in the marketing process can help to increase the loyalty of the customer as well as the image of the brand (IBM n.d.). IBM recommends different IS solutions in terms of marketing information system in automobile companies such as: customer relationship management or CRM; dealer management system solution; quality insight; and spare parts inventory management solution. The CRM will help to offer a single view of customer information that are accessible across the entire enterprise which will help to lower call center operating costs and increase its efficiency, at the same time boost the satisfaction of the customer (IBM n.d.).
Another important business area to consider is the human resource management. This is because of the fact that human or the employees are considered as one of the most important resources in the company, particularly in the case of the two companies, where in they are in great needs of skills and quality. Thus, it will be important to focus on the Human Resource Information System or HRIS which handles the process of data entry, data tracking and data information that are needed in the Human resources, payroll, management as well as accounting functions. In details it will provide features such as management of all information regarding the employee; reporting and analysis of information regarding the employees; managing company-related documents like employee handbooks, emergency evacuation procedure and safety guidelines; administration information such as enrollment, status change and update in any personal information; integration with payroll and the entire financial and accounting system of the company; and management of new applicant and management of resume. Furthermore it also focus on the different histories such as pay raises, pay grades and positions, performance development, training, disciplinary Acton, succession plans, identification, applicant tracking, interviewing and selection, and more importantly attendance (Heathfield 2009).
4. In the light of recent announcements about the failings of the US automotive industry and the need for both these companies to be assisted by Federal Government discuss whether or not either company’s strategy as discussed in this case study can be described as having ‘successful’. Justify your answer and describe what key points you have learned from examining their success/failure about the relationship between IT and corporate strategy.
Currently, the automotive industry is undergoing unparalleled chaos that has found its most current expression in a stiff credit market and declining consumer assurance which come together to smother demand for new vehicles. Furthermore, the recognizable industry challenges like unpredictable raw materials cost and fuel prices, tighter regulation, increased governmental oversight, and the need to please consumer demand for cleaner, greener cars, have combined to generate a business environment such as the industry has not experienced until now (PriceWaterCoopers 2008). Last December 19, 2008, President Bush offers a financial assistance to GM and Chrysler because the two automakers had testified before Congress that if they did not receive federal financial assistance before the end of the year, they could be forced into bankcruptcy (FAS 2009).
The said event happened even though both of the companies have already implemented intensive IS and other aspects that are related in IT. Based on that, I can say that both of the companies have been successful in using IS as their strategies in meeting the demand of the customers as well as coping with the current environmental problems that are associated with the global market. However, applying IS is not enough in order to ensure success of any company, this is because of the fact that IS is considered as a support and part of the entire system of the company which is considered as an essential part of the structure and foundation of companies. The primary evidence which signifies the success of the said movement or action of the company can be seen in their effort and initiatives in applying technology, at the same time they had been able to manage the different factors that are associated with the process of applying new technologies inside the company such as the business culture, attitudes and behaviors that has a great impact over the performance of each and every individual inside the organization. Furthermore, both of the company had been able to learn on their experience and apply new approach that will help them to become more productive and give space for future growth.
There are different lessons which can be acquired in the said case. First is that although there are different studies, research and vendors who are stating that IS can help any business to become more productive, innovative and successful, it is applicable to all cases. Thus, there is a great need for research and study in order to ensure effectiveness of any system, together with proper maintenance and control. Furthermore, it is also important to consider the current business rules, objectives, mission and vision, together with business structure in order to ensure that a proposed IS is applicable or suitable to any organization. Above all, spending high amount or cost in any IS project will not necessarily produce effective and efficient system.
References
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