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The information system collects the raw data, facts and figures and processes this data as per the needs of user or organisation and gives them an output based on which it can make some decisions. So basically it is a system that capture data and processes it to facilitate decision making (Curtis and Cobham, 2002)
Example - a transaction is recorded say on a piece of paper (sales book) or a compact disc but it is not information until it undergoes some sort of processing and the results are communicated to the persons.
In the given case the IS captures the sales figures of Shopko Stores Inc for the past three years and it also captures the sales figures at different time of the year and at different prices. The information system will process the data collected and present it in a way that will lead Shopko stores in decision making.
As in the company is struggling to identify the correct prices for its products and thereby resulting in losses either if it discounted the prices early or even if they discounted it late. They were not able to price its products correctly at times. They needed a system that could address their pricing strategies.
The information system they introduced provided them with the detailed analysis of their sales in the past telling them as to when their demand of products is at peak and sensitivity of customers demand to change in prices and upto what level.
So with the help of this system they could identify as to when to discount its products and how much to discount the products. With the help of information system strategic decisions are being addressed by Shopko Stores Ltd. As to what is the correct time of marking down the prices of their products, what is the optimum price for each product etc. because prior to the introduction of this system there markdown strategy was just a best guess one which lead them to huge losses.
What has been the strategy of the company in marking down of the prices? What does the new IS do? And what are the advantages.
Strategy is a long term plan of action designed to achieve a particular goal. Cost consideration should be taken into account when implementing a strategic information system which is aimed at efficiency. The information system should however be a functional monitoring system and key performance indicators, the system should also be useful in analysing data, processing and interactive. It is however important to integrate the set of actions in information system with the business strategy and plan in order for the business to survive.
Buyers love a bargain and definitely love to save money; customers are willing to shop around to receive the best price. The strategy of guesswork pricing being used by ShopKo stores was best enjoyed by such type of buyers. This however made the business loss profits and no system to control the pricing.
Shopko Stores implemented the new IS in order to improve the price markdown; with the new system management was able to understand, anticipate and influence the market. Taking into account the customer needs of the right product offered at the right time and at the right price. The system is able to periodically review the transactions.
A balanced scorecard is an approach that can be used to implement a marketing strategy to control and keep track of key performance indicators. The scorecard is designed to be wholly strategic as it contains long term outcomes and drivers of success. There are four zones in a balanced scorecard namely financial, customers, business processes and learning and growth (what If). Each measure is part of a long term chain of cause and effect. The scorecard is balanced in that outcomes are balanced with each other. (Johnson 2005)
The balanced scorecard is a strategic system of ratios often attributed to controlling and is user friendly. In Applying this approach with and Information system, Shopko stores will be able to have a balanced score in the new IS management, it will be able to markdown prices targeting the customer with a balanced target on the profits while using a balanced target of staff and a what if process which is balanced with a target to learn the business environment. The data input on the weekly sales against the costs ratio will provide a more accurate ratios and future sales forecasts. Competitive advantage is important for the profits to remain high hence from the learning & growth initiatives, Shopko Stores are able to formulate a competitive advantage not only in price markdown as well as price discrimination.
Source: Exhibit 8.9 (Jhonson 2005)
The installation of new IS helps the Shopko Stores Inc. in many ways, one of them being it reduces the frequency of markdown as the company earlier was just following the reduce till we match the customers expectations policy that was to keep on reducing the price until they reached a price which the customers were willing to pay. This is because of its scientific method of price markdowns that helped to increase profits and lower the chances of loss. Moreover it saved a lot of time and money which was earlier wasted in marking down the price many times. This system also helped the company to reduce its labour cost because the IS can handle the work carried out by many human employees and it can perform the task in an efficient manner
The balanced scorecard is a structure that corresponds to the character of the business and can easily be integrated with the strategic information system is able to transform data or give row facts on elementary facts on events, seasonal activities and monitoring of the market behaviour by other competitors. Reduced staff turnover and more focus on the customer needs than prices focus. Inventory control and reduced stock.
Inputting low and high volume data and outputs for decision making purposes. Information system processes information or transaction fast and accurate. It provides large capacity, fast access storage, fast and quick communication and reduce information overload. The balanced The Information system is an efficiency based system.
Do you see any other / additional benefit of this new IS? How would these benefits help improve the key performance indicators and the customers relations management?
Before enumerating the other benefits of the new information system software Spotlight, an analysis of the benefits given in the text should be done.
First of all, Spotlight brought a scientific way of doing price markdown. This fact demonstrates the efficiency of the information technology. Then, it has sharpened and focus the interest of buyers who aim is to have precise information on shops markdown at a certain period of time.
Eventually the new information system has lightened the tasks of employees in charge of marking down prices. Implementing it is of a great importance for it has enabled them to have a less boring and stressful job.
Overall, the new system has made ShopKo more effective in achieving its goals. However, apart from these advantages of Spotlight, there some more which work on improving the Key performance indicators and the customers' relation management.
"Key performance indicators (KPI) are high-level snapshots of a business or organization based on specific predefined measures. KPIs typically consist of any combination of reports, spreadsheets, or charts", Barkley (2001).
In effect, they can take into account global or regional sales figures and trends over time, personnel stats and trends, real-time supply chain information, or anything else that is deemed critical to a corporation's success. A KPI application such as an executive portal can give a business executive a high-level, real-time view of the health of a company by visually displaying vital statistical information about that company. In addition, KPIs allow business executives to see the health of their company at a single glance.
Taking into consideration ShopKo case, apart from product costing and others benefits already given, the new information system programme will allow it to improve their key performance indicators by conveying accurate information regarding the sales and trends over time as mentioned in the precedent paragraph. Tank to the new Information system, ShopKo forecasting, planning and budget controlling tasks will have a great sense because the efficiency of Spotlight Optimiser. As its name defines it, the new Information System optimizes the work in terms of accounting and financial management, in order to be more competitive.
As well improving the key performance indicators, Spotlight Optimizer will have an effect on customers' relation management. For a better understanding of this impact, lets us present Customers Relation Management (CRM).
"The better a business can manage the relationships it has with its customers the more successful it will become." Business Link (2008). Customer relationship management (CRM) is an application of technology as well as a strategy to learn more about customers' needs and behaviours with the purpose to develop stronger relationships with them. Therefore it relies on the use of technology.
The benefits of Spotlight on CRM lie in:
Enhancing customer satisfaction and retention and ensuring that ShopKo good reputation in the marketplace continues to grow
Increased value from your existing customers and reduced cost associated with supporting and servicing them, increasing your overall efficiency and reducing total cost of sales
Improving profitability by focusing on the most profitable customers and dealing with the unprofitable in more cost effective ways. (Business link 2008).
There can be many more benefits of an IS to an organisation, some of which can be seen but some of them can only be observed or we can say that some of them are tangible and others intangible. (Boddy, Boonstra and Kennedy)
Direct cost savings
The most obvious benefit is that an information system can save costs by automating processes and thereby replacing people. More accurate and timely distribution of work can decrease operator waiting time and lead to efficiency-based cost reductions.
A major benefit is the ability of computer based system to reduce errors when it replaces a manual system. While people can provide a personal and flexible service, they can also make mistakes and act inconsistently. Customers become annoyed if they are treated differently each time they use a service or see others receiving more favourable treatment. Errors are also expensive since they need additional effort to find and correct and may result in compensation payments or lost business.
Those advocating a new system will emphasise the prospects of increased sales through offering new services, delivery channels, promotional activities or market penetration. These can be real benefits but are likely to be optimistic. They are also notoriously difficult to validate, since any change in sales is usually the result of a variety of factors, not necessarily connected to the new system.
According to Brynjolfsson and Hitt(2000) a large part of the benefits from IS investments come from intangible benefits such as communication between staff and suppliers, customers or investors, Staff morale - staff may see improvements in their role of working environment, Customer satisfaction - brings repeat business and reduces the cost of sales, Reputation - new systems may send positive signals to the market about commitment to innovation, Customer management - using customer data in advanced info sys may improve reaction to customers' needs, Value chain mgt - building direct system links between partners in the value chain can improve responsiveness and reduce costs, Flexibility - IS often enable an organisation to react more quickly and easily to changes in the marketplace, Organisational learning - it enables lessons from current practices to spread more widely; staff can also learn about external events, and be better placed to take advantage of new developments,
Differentiation - it is hard to quantify the benefits, as we cannot know how soon competitors will match it