Experiencing Mis Australian 4th Edition Kroenke Solutions Manual
Experiencing Mis Australian 4th Edition Kroenke Solutions Manual
Chapter 3
Organisational Strategy, Information
Systems and Competitive Advantage
Book Content
Study Questions
Answers to the study questions
Ethics Guide
Answers to the questions in the ethics guide—Yikes! Bikes
The Guide
Answers to the questions in the guide—your personal competitive advantage
Collaboration Exercise 3
Answers to questions in collaboration exercise 3
Case Study 3
Answers to questions in the case study—competitive advantage at National
Australia Bank
• Sensitise the students to the fact that a competitive strategy is not just an
academic topic. Changing competitive strategy has dramatic impacts on
personnel and company culture.
• Understand practical applications of business reports.
• Explore ethical questions concerning communication about sensitive topics.
• As a manager, you will sometimes have information that you are not
supposed to communicate to employees. If an employee asks you directly
about that information, you can either divulge it or lie. Which would you
choose? What are the consequences of either choice?
• Is there an alternative between inappropriately divulging information and
lying? What is it? What disadvantages does that alternative have?
• In general, what are the consequences for the organisation’s culture of
moving from a differentiation strategy to a low-cost strategy?
• In general, what are the consequences for the organisation’s culture of
moving from a low-cost strategy to a differentiation strategy?
1. In your opinion, did the new owners take any illegal actions? Is there
evidence of crime in this scenario?
No. There is no evidence of crime. They own the company and can change the
competitive strategy and culture as they see fit.
2. Consider the ethics of the statement that Parks made to all the employees.
Using both the categorical imperative and utilitarianism, assess the ethics of
that statement. If you were to question her about the ethics of her statement,
how do you think she would justify herself?
3. What do you think Parks will tell the founder if he calls her as a result of
your conversation with him? Does he have any legal recourse? Is Major
Capital’s behaviour towards him unethical? Why, or why not?
It depends on her mood. She could tell him that he no longer owns the
company and to keep his thoughts to himself. Or she could listen, make some
empty statement, and then do what she plans to do anyway. Unless there
was something specific about no staff reductions in the purchase agreement
(unlikely), he has no legal recourse. Major Capital’s behaviour doesn’t appear
to be unethical. The founder asked them to take care of the employees and
their change doesn’t allow them to meet his request. You had better hope,
however, that he didn’t tell Ms Parks that you called him. She might be
vindictive.
4. Parks is going to use the information to perform staff cuts. What do you
think about her rationale? Ethically, should she consider other factors, such as
number of years of service, past employee reviews or other criteria?
5. How would you respond to Lori? What are the consequences if you tell her
what you know? What are the consequences of lying to her? What are the
consequences of saying something noncommittal? Consider both the
categorical imperative and utilitarian perspectives in your response.
Let’s say that Lori is the most popular support rep because she spends a lot of
time with the customer. But Parks has already revealed she considers people
like Lori to be ‘time wasters’, so she’s likely to be one of the first employees
fired. Knowing that, you have to be very careful lest you end up as part of a
wrongful termination lawsuit. Sad to say, but that’s the reality. To respect
your chain of command, you cannot tell her she’s about to be fired. But you
don’t want to lie, either, lest Lori sue you when she does get fired (setting
aside any moral or ethical issues). You have to say something noncommittal.
It has to be true, but non-informative. Perhaps something like, ‘Well, this is
their first day. Let’s wait and see what develops.’ You might even say
something like, ‘I suspect change is in the air,’ but if you do that, you
encourage further conversation.
This answer has to be personal. It is worth asking the students to think about
how they might behave if they were stuck in a job that they hated for some
reason.
This is a complex and difficult question. It really depends on how one views
the responsibility an organisation has to its employees.
The best definition that I’ve heard of job security is: ‘Possess a marketable
skill and the courage to use it.’ Companies are legal entities, nothing more.
No such entity will give you security.
Wrap up
Has the discussion of this guide changed student thinking in any way? In
particular:
2. Considering the first three principles in Table 3.5, describe one way in
which you have a competitive advantage over your classmates. If you don’t
have such a competitive advantage, describe actions you can take to obtain
one.
Student answers will vary. The three principles from Table 3.5 are:
1. Create a new product or service
2. Enhance products or services
3. Differentiate products or services
4. Describe two ways that you can use student alliances to obtain a job. How
can you use information systems to build, maintain and operate such
alliances?
a. Describe how each of the primary value chain activities pertains to Target.
Rank the importance of that activity to Target’s success on a scale of 1 (low)
to 5 (high). Justify your ranking.
Operations: Defined as transforming inputs into the final product. For Target,
this value chain activity involves selling to customers and collecting payment
through its network of stores. Target’s operations ensure a pleasing shopping
experience with enticing, well-designed displays. This is the heart of Target’s
service, and is the most important value chain activity (5).
Marketing and Sales: Defined as inducing buyers to purchase the product and
providing a means for them to do so. Target uses advertising conveying its
hip and stylish products at value prices to attract customers. This is a critically
important value chain activity for Target (5). Target must make potential
customers aware of its existence and the goods and products it provides and
make it easy for customers to access its stores.
Service: Defined as assisting the customer’s use of the product and thus
maintaining and enhancing the product’s value. This is a very important part
of Target’s value chain (4)—anything that enhances the customer’s
experience at Target will increase the likelihood that the customer will be a
repeat customer.
b. Describe how each support value chain activity pertains to Target. Rank the
importance of that activity to Target’s success on a scale of 1 (low) to 5
(high). Justify your ranking.
Student responses will vary and will depend on their responses to part a. The
diagrams should be based on Figures 3.4 and 3.5 and should focus on the
primary activities rated highly in part a.
d. Explain how each of the business processes in your answer to part c adds
value to Target. How does the business process need to be designed to
support Target’s competitive strategy?
e. How does Target’s competitive strategy and the nature of its business
influence the general characteristics of Target’s information systems?
2. Apply the value chain model to an online business such as Red Balloon
(<www.redballoondays.com.au>). What is its competitive strategy? Describe
the tasks Red Balloon must accomplish for each of the primary value chain
activities. How does Red Balloon’s competitive strategy and the nature of its
business influence the general characteristics of its information systems?
3. Suppose you decide to start a business that recruits students for summer
jobs. You will match available students with available jobs. You need to learn
what positions are available and what students are available for filling those
positions. In starting your business, you know you will be competing with
local newspapers and websites. You will probably have other local competitors
as well.
c. Describe the primary value chain activities as they apply to this business.
Inbound logistics refers to acquiring our raw materials (jobs) and organising
them in some way that makes it easier to match student skills and interests
with job opportunities and requirements. We need to make it easy for
employers to contact us and provide information about job opportunities.
Operations involves matching students and jobs so that the most successful
placements can be made. Outbound logistics involves notifying the student of
a job match and getting the student’s job acceptance. Marketing and Sales
involves building awareness of our service to the population of students who
are our customers. Service involves providing information and support to
students who have agreed to a job placement we have arranged for them.
Student answers will vary. This is a sample answer. As a marketing and sales
technique, we utilise a skills and interests survey that determines the type of
summer jobs a student is qualified for and capable of performing. Because of
the quality and detail of our survey, we are able to achieve highly successful
placements. Therefore, students are attracted to our service.
f. Explain how the process you described in part d and the system you
described in part e reflect your competitive strategy.
This business process and the way it is accomplished could be part of the way
we distinguish ourselves from the competition. Possibly none of the others in
the industry have such a comprehensive understanding of a student’s skills
and interests; therefore, we are better able to make successful placements
that satisfy the employer and the student.
a. Compare and contrast the operations value chains of these two businesses
as they pertain to the management of bicycles.
In the low-cost student rental business, used bicycles are acquired as cheaply
as possible (e.g., garage sales, campus and community police unclaimed
bicycle auctions, classified ads, etc.). Minimal care and maintenance are
provided, such as tyre repair, lubrication and brake and gear adjustment. If
anything significant is damaged on the bicycle it is disposed of as landfill.
In the high-service rental business, new bicycles are purchased from known,
quality bicycle manufacturers. An array of types, models and sizes will be
acquired to satisfy a range of bicycle preferences. Maintenance will be
meticulous so that every bicycle is well-tuned prior to each rental. When a
bicycle gets to the end of its service life, possibly after a year or two of use, it
is sold because it will still have a good market value.
In the low-cost student rental business, cheap bicycle sources are utilised
(e.g., garage sales, campus and community police unclaimed bicycle auctions,
classified ads, etc.). In the high-service rental business, the latest models are
purchased from the most well-known bicycle manufacturers.
In the low-cost student rental business, bicycles are used until they break
down completely. Disposal involves disposing of them as landfill. In the high-
service rental business, the bicycles will have a lot of market value and so
disposal will involve reselling them, perhaps using eBay to get the best
possible price for the bicycle.
e. What roles do you see for information systems in your answers to the
earlier questions? The information systems can be those you develop within
your company or they can be those developed by others.
The information system for the low-cost student rental business will be quite
simple, perhaps an index card for each bicycle in inventory. The information
system for the high-service rental business could be more sophisticated, with
complete information on each bicycle’s acquisition and maintenance records.
Samantha has never heard of Michael Porter or any of his theories. She
operates her business ‘by the seat of her pants’.
a. Explain how an analysis of the five competitive forces could help Samantha.
Samantha probably has not thought about a competitive strategy. Many small
business owners have not stepped back from the hectic pace of just keeping
the business going to consider this issue. For Samantha, given her forestry
education, a differentiation strategy with a focus on the tree health and
maintenance industry segment may make sense. Her education will clearly
distinguish her from many others in the field and she should be able to
capitalise on that with residential and commercial properties requiring regular
tree maintenance.
c. How would knowledge of her competitive strategy help her sales and
marketing efforts?
Samantha should not try to be all things to all parts of her market. She should
focus her efforts on making her company’s name well known, selling her
professional knowledge and training, being responsive to customer calls and
keeping her prices competitive but not necessarily rock-bottom.
Collaboration exercise 3
1. Explain the relationship between value and cost according to the Porter
model. When does it make sense to add cost to a business process?
2. Suppose you are told that the business process in Figure 3.8 has a negative
margin. Explain what that means. Suppose the margin of some business
process is negative $1 million. If costs are reduced by $1.2 million, will the
margin necessarily be positive? Explain why, or why not.
A negative margin means that the value produced by the process is less than
the cost associated with the process. Reducing costs may improve the margin,
but possibly not by the full amount of the cost reduction because the value
produced by the process may also be reduced.
3. Consider the alternative of replacing the rental personnel from the business
process in Figure 3.8.
This figure replaces much of the rental personnel’s interactions with the
customer with a website. The customer basically uses a self-service process to
reserve a bike and return the bike. The only role for people is to do the
physical maintenance of the bicycles.
The costs of developing and maintaining the website, databases and servers
would have to be factored into the value chain. People would have to do these
tasks. Their costs might be higher than the costs of the bike rental personnel;
certainly, these are more costly skills.
a. Describe five ways that you think the existing personnel could increase the
value of this business process.
Student answers will vary. Some possible ideas include selling related items,
such as bike clothing and shoes; renting helmets and saddlebags for the bike;
selling snacks, bottled water and boxed meals fit for trail rides; and providing
guides for trail rides of varying lengths and levels of difficulty.
b. For the five alternatives you developed in part a, name and describe
criteria for selecting among them.
c. Using your criteria in part b, evaluate the alternative you identified in part a
and select the best one. Explain your selection.
Student answers will vary. Look for the student’s choice to be justified by a
careful analysis and application of their selection criteria in part b.
3. Explain the nature of the five primary value chain activities for NAB.
Inbound logistics involves obtaining funds and credit from Australian and
global financial markets through investment returns, buying and selling
financial instruments, etc. Operations involves selling products to customers
such as mortgages, car loans, savings accounts (personal customers) and
lines of credit and merchant services like EFTPOS and e-commerce support
(business customers). Outbound logistics involves delivery of the product to
NAB can and does enhance its delivery of banking services through
information systems as described in the case study. Recent improvements in
their mobile banking app have met with customer satisfaction, as has moving
to a ‘real-time’ model for internet transactions. If NAB’s competitors are
weaker in these areas, for example, it allows NAB to differentiate itself. In the
banking sector, many of the available products are, by necessity and by
government regulation, similar (e.g., mortgages, savings accounts). It is
often difficult to enhance the underlying product, so banks tend to focus on
differentiation through the delivery of that product to the customer (e.g.,
mobile banking) and through customer service provided. Therefore these are
the two areas where NAB can focus on developing information systems to
support competitive advantage: product delivery and customer service.
As discussed earlier, the banking sector already has very high barriers to
entry, because of high establishment costs, government regulation, and the
need to gain customer trust. New entrants to the market over the last 20
years have tended to be either low-cost online banking providers, or overseas
banks which have created products aimed at the Australian market. In
response to the rise of low-cost, online-only banking services, established
bricks-and-mortar banks like NAB created (or acquired) their own low-cost,
online-only banking services like NAB’s UBank. Information systems are
critical to companies being able to efficiently offer products and services
through multiple channels or brands like this. Another way to think of it is that
the same parent company uses different brands to adopt more than one of
Porter’s competitive strategies (one brand to compete on better
product/service and a different brand to compete on lower cost). By covering
more of the market, they are raising barriers to entry even higher by
occupying as much of the available market space as possible to lock others
out.
There are at least two ways that banks can try to lock in customers—one is by
providing a superior customer experience that cannot be matched by
competitors, and the other is to create switching costs for the customer.
Information systems can play a role in both of these strategies. Continually
enhancing the information systems used to deliver the products, for example,
through enhanced online and mobile banking services, and staying ahead of
the competition is a way to lock customers in through providing superior
customer experience without necessarily increasing staff costs (e.g., without
Banks can also use information systems to create switching costs; for
example, NAB could develop and give each of its small business customers
access to a free accounting software package. The catch being that NAB’s
business accounting software only interfaces with NAB’s own online banking
service, so if a business customer later wanted to switch their accounts to
another bank, they would also have to replace the accounting software. For
business customers, providing a seamless integration between online banking,
EFTPOS terminals, online accounts payables and receivables, and support for
preparing business reports like Australia’s Business Activity Statement (BAS)
are ways to lock in business customers by offering them a superior customer
experience and by creating switching costs.
Examples include:
NAB does indeed already have some of these information systems. Enhancing
these systems in order to stay ahead of the competition and perhaps lock in
customers is one possible competitive strategy that NAB could adopt.