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The process of assessing an organization information system is for the growth of infrastructure and value, as a result it leads to solve the significant problems and provide the better quality of service, profit to gain the competitive advantage in the respective market place.
Ford Jackson (1987) 'The ultimate goal of any Management Information System (MIS) is optimization'. The aim of this essay is that how organization proposed the powerful model to manage the value chain and other several activities which differentiate with other companies to gain the advantages?, also helps to overcome with the existing problems.
Here in this essay we will take the example of the leading Indian Automobile manufacturing company TATA Motors who gain the competitive advantage in the Indian automobile market as well the company is today among the world's top 10 producers of commercial vehicles which use the management information system and scalable IT infrastructure for developing and deploying its DMS applications.
2. Framing the Study
For every enterprise to emerge, develop and survive in the market they must create a "value" for the organization like several other components which include staff, customer and suppliers. These processes that the organization creates value are divided into a series of Economical activity and are not the same with each other but interrelated to each other which we called as "added value" activities.
The organization also carried out several activities like designing, producing, marketing and selling etc. These activities carried out by the organization create a "value chain" which manages and operates had a link with the value chain.
To face the competition in the market a good competitive stratergy is essential for the development and survival for the organization. The concept of value chain management was put by the professor of business administration (American Business School) Dr Michael E. Porter in his book "competitive Advantage: Creating and Sustaining Superior Performance" in (1985) mentioning the other things in his work the term of "value chain", and states that the competition of an organization not only depends on the "Optimization" of the sub functions.
Let us see the above keywords in brief to understand how the organization uses these concepts to implement the "strategic planning" to gain the competitive advantage.
Value: Basically value is used to determine the business worth, theÂ valueÂ of aÂ productÂ is the general estimation a consumer made by them. Formally it can be conceptualized it is the relationshipÂ between theÂ consumer's perceived benefits in relation to perceived the costs of receiving the benefits.
Added Value (Margin): The increase in worth of a product or service of an organization as a result of particular activities in the context of the business marketing, the activity might be packaging or branding for the organization.
Optimization: The major successful companies now today use management information system to optimize their business to drive sustainable competitive advantage. However, many of the organizations are still struggling to make their information system to work for them. They face the huge data fragmented across multiple systems, data quality and enormous data latency challenges. In addition, even if information is available to them, other adoption by the business is limited because of disparate reporting and analysis tools which are not delivering the information to them like when, how and where it is needed at each level for each individuals. Hence, these challenges hamper the on-time delivery and quality of information to their business, and creates a massive barrier to the business that needs to make more efficient, better and to make more informed decisions to lead in the market.
Value Chain: the value chain is a systematic approach for how to know and examine the development of competitive advantage. The value chain consists of series of activities that creates and build the value.
"The value chain disaggregates a firm into its strategically relevant activities in
Order to understand the behavior of costs and the existing and potential sources of differentiation." (Porter,1985, p.33).
The organization splits the value process into two different activities.
1. Primary activities.
2. Support activities.
Primary activities are the activities which are related to production are:
â€¢ Inbound logistics-
â€¢ Outbound logistics-
â€¢ Marketing and sales-
Support activities are the internal activity of the company includes the following:
â€¢ Human Resource Management
â€¢ Technology Development
â€¢ Firm Infrastructure.
The goal of these two activities works together and creates value that exceeds the cost of providing the product and services, thus it generates the profit margins (added value).
Five Force Model: Porter's 5 forces model is the powerful way of analyzing the competitive forces that changes every organization. This model was developed by Michael E. Porter of Harvard Business School in 1979. This tool helps the companies to identify whether a new product, services or business have the potential to be profitable.Â
The 5 competitive forces are:
Source:"The five competitive forces that shape stratergy" by
Michael E. Porter, Harvard Business Review, January 2008
Competition in the Industry
Bargaining Power of SuppliersÂ
Bargaining Power of Customers
Threat Potential of new entrance
Threat to substitute products.
Let us see how the organization uses these five force model in details to gain the competitive advantage also helps the company to boost its profit by managing the information system.
TATA Motors is the India's foremost, and it is the only fully integrated automobile manufacturer in India which established in 1945 as TATA Engineering & Locomotive Company (TELCO), which manufactures engineering products and other locomotives; today the position of the company is among the world's top 10 producers of commercial vehicle. The annual revenue of the TATA Motors is $1.8 billion in 2001-02. Today TATA motors manufactured vehicles runs in more than 70 countries across the world.
Imagine that a top-brand company dropping the price of its high-end product to one fourth its original price which is priceless with general point of view to everyone. What are the different thoughts would come into your mind? Will it be reliable for that? Will it be long lasting? Will it be available with all the required features? Will it meet all the needs of customers? Since, it's cheap; will it be of inferior quality which other cars have? The answer will be No. Any product that is sold for cheap rate could be considered as low quality. For example, it was very awkward to say to your colleagues that you are wearing a cheap shirt as it means that you couldn't pay for a better brand and quality. Things are different now. For someone it may look cheap, but for the others it is just the right price. Could you resist for buying a brand new car for just $2,500.
Recently Tata Motors had launched the world's cheapest car called "Nano". The car has four-doors, five-seat hatch powered by a 30 HP Bosch and 624 cc four stroke engine. The Nano is capable of running with the speed of 65 miles an hour. With in front there is small trunk big enough for a duffel bag to keep.
The cost of Nano changes the face not only in the Indian car market, but to the global automobile industry. The innovation of Nano is best example for other industries using information System at a critical time to worldwide when others are straining all effort to come with different ways to stay for competition to decline the market conditions. Other competitors need to see from this how they can give the best value to their customers at the same unbelievable price like TATA Motors is giving. They need to think and create more opportunities that their customers can afford the high price for their cars in this weak market condition. What kind of stratergy they should have do to bring down the cost of Business information solutions drastically without compromising on the quality for their product.
TATA Motors bring the Strategic change to reduce the cost of its car which we will compare in this essay how those levers with possible other levers in business intelligence implementations for cost reduction. For customer the fact that Nano is the cheapest car ever made till now does not mean that it is either low quality or a knock-off copy of some high-quality product. According to the cost-effectiveness and quality have been achieved by understanding the specific critical customer's needs in that segment and creating the design which is very affordable to everyone.
Low costs in Business could be engineered by designing the slimmed-down version of "information" needs within the organization to change. It can be achieved by efficiently leveraging existing infrastructure of information system, resources, change of technology, processes and innovative designs by the organization.
It is all about 'data and how to transform it into information' and this in turn would help to make better business decisions and strategic change. This will help the organization to see things around before taking any important step rather than taking any decisions blindly. Sometime we would always hear that employees are unhappy as they find is difficult to get the right data to make their business decisions correctly.
At the same time if they get the data, they are not very confident if it is accurate for making the change. It is very interesting to see how most of the organizations get into this kind of situations. The major cause for this problem is lack of "data-management" and data governance in most of the organizations.
Tata Motors have some distinct advantages over other rivalry competitors' in comparison to them. There is definite cost advantage as the labor cost is 8-9 percent of sales as against 30-35 percent of sales in developed economies. Tata motors have good extensive backward and forward linkages and it is strong supply of machine tools, raw materials and metals sectors. Tata Group's strong expertise in the information Technology based engineering solution for products and process information systems that have helped Tata Motors which make them market leaders.
India has a large auto component industry noted for its world class capabilities and sales. Hence it has huge demand in domestic markets due to vast infrastructure developments and Tata Motors is able to leverage its knowledge of Indian market to gain more margin and productivity.
As we know Tata's great innovation was made possible through correct management information system not only because of Tata but also the hundreds of other vendors who joined hands to contribute towards saving the cost. I am not an automobile expert but this seems to be quite obvious to think about the strategic change and innovation. Moreover considering that Car is one of the most complex mechanical systems to understand the need of customers.
In the customers opinion there are many newest models of cars out there in market. But nothing is more valuable than new "Tata Nano" for them. In since, this smallest version of car is not available in the Indian market today. Thinking very wisely Tata Nano is very stunning and also very good looking smallÂ carÂ model. The complete design of Tata Nano is exceptionally elegant and graceful beyond the thoughts for the customers in many forms such as cost wise which is extremely a cheap to run tiny car model on the road. Due to these reason everyone can afford this newest car for fulfilling everyone modern day needs effectively.
Let us see the above concept how TATA motors strategically implement the management information system which improved the business performance and to analyze market value to boost the sales/profit.
Analyzing TATA Motors stratergy in concept of management information system to gain performance to achieve optimization with the three main functions of the organization.
How information provide across various departments in TATA motors organization.
Role of management information system in TATA motors:
Chief information officer's (CIO) task primarily provides each area with Information Technology resources to utilize and all the tools required to implement new technologies and IT solutions in every sector in the organization.
Multiple projects are defined to be done for the next 12 months and listed in order of priority for information.
They Joint teams from Information technology and business are then charged with executing these plans to work simultaneously.
CIO'S main focus is on maintaining the balance between business benefits and the required corresponding investments by the TATA motors.
To manage information across departments they also implemented Enterprise Resource Planning (ERP). It is nothing but a software architecture whose purpose is to facilitate the flow of information in the organization between all business functions from the inside boundaries of the company and manage the connections to external stakeholders. ERP systems consolidate all business operations within the organization into uniform and enterprise wide system environment more effectively with centralized database.
Since there was no online real time data available between various departments due to that they implemented ERP
Information flow across various departments such as sales, finance and production planning was very heavy so, it becomes easier with ERP.
There existed a need for the strong and quick collaboration between vehicle manufacturers and dealers to main accurate information.
Tata Motors saw implementation of ERP as a way of managing information system to achieve their goals.
They use Software Application Product (SAP) as the ERP Package.
This enables TATA Motors to,
Manage the complete system of vehicle order-to-delivery process
Manufacture and deliver components easier and vast
Handle warranty claims by the customers with efficiency and accuracy
Enhance the challenge of dealership management
Also the software helps to efficiently manage the relationships with customers and partners
Facilitate decision making at the three tier of management
Business intelligence architecture of many midsized or large companies are incredibly complex with tangled systems including various solutions to them and which are difficult to digest at initial level. There are several components within BI architecture in the TATA Motors that are built without any strategic vision and change for some other it gets mushroomed due to tactical thinking at various department levels in the enterprise.
In terms of three tier of management By Michael E. Porter, many insignificant architectural components become more or less part of the whole in the organization. It becomes easier to implement cut such components many times by removing such unwanted architectural components might turn out to be a painful, process. A simple sleek design is what the Tata Nano theme is based on. Fewer Business information architectural components would mean minimizing on the interfaces, databases, less hardware and less process to run the design process. This leads to have large savings on cost to keep the BI up and running. The fact still remains that other competitors are struggle to come up with a BI strategy that would address their architecture.
They still analyzing their enterprise level and make it more simple and sleek. According to the survey by Accenture indicates that 75 percent of 162 Chief Information Officers surveyed said they want to develop an overall information management strategy in the next three years in order to leverage that data for strategic advantage to gain massive competition from each other.
To overcome from the deficiencies and to improve value chain and to manage it properly the above system has implemented by the Tata Motors.
IT as an efficient means for managing business processes:
IT Optimization for improvement and business success and IT strategy and architecture laid by the TATA motors for new innovative car NANO.
IT strategy and architecture services changes the designed to give you insight into the state of your IT infrastructure and they had identify opportunities for added efficiency, business value and growth for creating a roadmap of clearly defined steps to improvement of the business.
TATA excellently managed the marketing excellence of NANO to catch the customers,
the final business goal for all units are the same and they work under the same corporate strategies', lots of many processes within the organizations that can be standardized to maintain the reality it is far from this kind of ideal scenario in most companies want to be like TATA. Employees in companies do same things differently. Just imagine the cost the other organizations would have to bear for reinventing the wheel to innovate their business in different units every time. When Tata Nano was manufactured, the organization noticed this critical factor on saving cost on processes across various departments. The manufacture process and engineering made differential drive assembly for Tata Nano used a tubular design instead of the convenient normal design in all cars.
Innovation of Nano created tensions to other competitors' as a result the TATA leads among existing competitors like HONDA, MARUTI, MAHINDRA, CHEVORLET, SKODA and HYUNDAI who also produced small cars according to medium class Indians people's affordability.
The Nano effect has simply rubbed on different other competitive automobile sectors in many different ways to gain advantage. As there is no bargaining powers of suppliers because the company itself provide all sufficient raw materials for manufacturing the complete car. Most of the corporate sectors are now simply considering to offer Nano to their employees as an incentive which is becoming common these days as a result the demand goes increased of the product. The companies simply want to retain its junior level executives and mid class labors by offering them a Nano as an incentive which also makes them affordable. The car with its value is certainly going as the best offer for gifting others to anyone.
"The major competitors MARUTI has model Maruti 800 of almost same size and design losing grip from the customer when Nano comes in the market".
MARUTI has model Maruti 800 of almost same size and design but Nano to them become as threat of new entrant as well the TATA doesn't have any impact of the threat of same product or substitute of small cars competition,
Nano has hugely replaced the Maruti 800 in the Indian market which is the first choice of the customer as a small car in minimal budget. Initially where the junior executives were offered Maruti 800 as incentives for fulfilling their target in corporate business, But now the stratergy has changed today they have a Nano parked in their garage instead of other cars. Even the sales representatives are sure to come first in the list for the Nano for their achievements. Many other skilled workers from the manufacturing and engineering unit are usually the followers.
So, if speaking about the bargaining power of customers, Nano has already managed to get a number of followers since the attractive price tag has simply attracted more customers to shift their choice from Maruti 800 to Nano which leaves them with no other option. The superior ultra low cost car could simply replace as a demand a number of other costly incentives to the employees including foreign tours, laptops and LCD television. The car is not only very much cost effective but also a perfect car that is well suited for accommodating a family member of four persons
The car also has the features for very low maintenance cost and is also very much fuel efficient. It is also marked as an improvement for those entire motorbike lover junior executive who prefer purchasing a motorbike soon after getting an employment as a result leads to more demand of Nano. Most of the multinationals are in fact considering of scrapping off the Maruti 800 and motorbikes from their employers menu and enabling them to purchase the Nano by giving some convenience. The car also offers a more difference rate or competitive price as compared to 800 or even a motorbike.
5. Strength of Arguments
"Tata Nano achieved the lowest price tag through not cutting the essential corners and compact design innovation. The same Management Information system stratergy has to be applied by the other Organizations to get major cost reduction for a Business intelligence solution. Results spread Information solutions for better decision-making beyond the walls of organization and deliver the best performance to everyone. By the use Of MIS TATA Motors gain the competition over other automobile manufacturers in India".