2MIT4010_ASS1

ASSIGNMENT OF
MANAGEMENT INFORMATION
SYSTEMS

NAME AFKAR AHMED

STUDENT NUMBER 28001547

LECTURER NAME Mr. Cedric Assambo

COURSE Management Information Systems

MODULE CODE 2MIT4010

DATE OF SUBMISSION 30th APRIL 2009

ASSIGNMENT NO 1

TOPIC

Value chain analysis is useful at the business level to highlight specific activities in
the business where information systems are most likely to have a strategic impact.
Discuss this model; identify the activities, and how the model can be applied to the
concept of information technology.

AHMED_AFKAR_28001547_1/13
2MIT4010_ASS1

TABLE OF CONTENTS

1. Introduction ------------------------------------------------ 3

2. Value Chain ------------------------------------------------ 3

3. Primary Activities ----------------------------------------- 5

4. Support Activities ----------------------------------------- 6

5. Analysis of Wal-Mart ------------------------------------- 8

- External Environmental Conditions --------------- 8

6. Internal Value Chain Analysis -------------------------- 10

7. Conclusion -------------------------------------------------- 12

8. Bibliography ------------------------------------------------ 13

AHMED_AFKAR_28001547_2/13
2MIT4010_ASS1

Introduction
Value chain is the concept of bringing up the activities together that creates the value for
the organization and provides a competitive advantage. This idea of bringing value to the
organization introduced back in 1980. If this chain of activities is planned and operated
well, it could really have a strategic impact. These activities become more productive if
they could be backed by the technology. Information systems have helped to improve the
businesses a lot. Some of the business with the help of Information technology and value
chain re-branded their businesses and captured a huge market share then. Value chain
analysis and information systems together can bring a new life to the businesses and
organizations as whole. Wal-Mart is the vast chain of retail stores and management of
Wal-Mart have really well implemented value chain and information systems, leading it
to be the giant in the retail industry.

Value chain
M. E. Porter introduced the concept of value chain in 1980, in his book called,
competitive advantage. He defined it as, “Every firm is a collection of activities that are
performed to design, produce, market, deliver and support its products or services. All
these activities can be represented using a value chain. Value chain can only be
understood in the context of the business unit.”
(Ward & Peppard, 2002, Pg244)

Value chain is viewed as a systematic approach towards the development of the

competitive advantage for the company. This chain is made up of series of activities that
create and construct value. These activities end up being a total value delivered by an
organization. It has been found suitable for the organizations to split the business system
into a chain of value generating activities that are referred as “value chain”. Value chain
is only a single part of the larger set of value-adding activities in industry is called as the
industry value chain or value system. The value chain involves all the activities from
conception, design, extraction of raw materials, and finally developing the product or
services into its market for consumption or sale. In other words we can say that value
chain runs from conception till consumption. The organization in terms of value chain, is
slit into two kinds of activities: Primary activities and support activities.

AHMED_AFKAR_28001547_3/13
2MIT4010_ASS1

Value chain model by M. E. Porter (1980)

Available online at
http://images.google.ie/imgres?imgurl=http://pcwin.com/media/images/screen/Value_Cha
in_Analysis_Software_69743.gif&imgrefurl=http://pcwin.com/Business___Finance/Appl
ications/Value_Chain_Analysis_Software/screen.htm&usg=__GHpryA-ct-NoMdm9-
yQZVNwv2vk=&h=489&w=802&sz=29&hl=en&start=12&sig2=y2QNZW_X7k2rEFi_
dqq5ng&um=1&tbnid=mezsyTD3tsPyEM:&tbnh=87&tbnw=143&prev=/images%3Fq%
3Dvalue%2Bchain%2Banalysis%26hl%3Den%26sa%3DX%26um%3D1&ei=EgHxSe6s
OMW2-Ab2h9CiDw [Accessed on 20th April, 2009]

AHMED_AFKAR_28001547_4/13
2MIT4010_ASS1

Primary activities
Following are the primary activities:

Inbound Logistics

This part includes the activities like receiving raw materials from the company’s
suppliers, and kept in the warehouse or stored until needed on the assembly line or on the
production. This also includes the activities like moving the goods around manufacturing
places.

Operations

Here activities like manufacturing and assembling, takes place. Goods are manufactured
and assembled, for example: the final tuning of the new car’s engines, room services in
the hotels or packaging of the books by an online retailers, etc.

Outbound logistics

Here goods are successfully manufactured and packed, and are ready to be sent to the
wholesalers, retailers and the final consumers, along the supply chain. In simple terms,
distribution of the goods takes place.

Marketing and sales

Activities like the consumers’ needs and their satisfaction is taken into consideration to
generate sales. Different offering are made by the organisations to meet the targeted
customers’ needs. Here marketers strongly focus on marketing communication and
promotional mix.

Services

In this part, activities like after-sale services take place. Customer satisfaction is the most
important for compelling the customers to make another purchase, so services like,
installation, after-sales, complaint handling, etc takes place.

AHMED_AFKAR_28001547_5/13
2MIT4010_ASS1

Support activities
Support activities includes:

Procurement

This function includes the purchase of inputs like, material, supplies, equipment, etc. the
basic aim is to make purchases of the high possible quality materials on the lowest
possible prices. Activities like out sourcing and ePurchasing (use of web-based
technologies for procurement aims) also takes place here.

Technology development

Here technologies are used to support value-creating activities. Technology is the most
important source of getting the competitive advantage over the rivals. Innovations needed
to reduce the cost by employing production technologies; Internet marketing activities
and customer relationship management are the most useful technologies.

HRM (Human Resource Management)

Employees are the most vital and expensive resources. Here activities like, recruitment,
selection, and training and development takes place.

Firm Infrastructure

This activity is includes, corporate strategy and planning. It includes the activities like
planning and controlling such as accounting department, by management information
system and other mechanisms.

For any organization to actively increase its revenues with consistency doesn’t only
depend on a unique proposition to have. It should be having a set of inter-related
activities that fit the strategy, so it can contribute in the unique strategic positioning of the
organization. This is a moral of value chain.

For example: south west Airlines has a strategy to be low-cost airline, providing many
short haul point to point routes with frequent departures. There are so many internal
organizational practices that enabled this strategy. See fig below.

AHMED_AFKAR_28001547_6/13
2MIT4010_ASS1

Fig. 1
Available online at
http://training.byu.edu/documents/t-strategy.pdf
[Accessed on 22nd April, 2009]

Along with southwest Airlines, Wall-Mart has also proved itself as one of the most
successful retailers around the globe. It is counted in one of the best retailers of all the
times, which hasn’t left any margin of hope for their competitors just because of their
better and advanced ability to integrate value chain activities. Since ages Wall-Mart has
been able to attain and maintain its competitive advantage by applying its key value chain
activities, such as, inbound logistics, out bound logistics, advanced technological
developments, brand image and reputation with suppliers, customers and would easily be
able to maintain its competitive advantage for the future.

AHMED_AFKAR_28001547_7/13
2MIT4010_ASS1

Analysis of Wall-Mart

Available online at http://www.scribd.com/doc/6250191/Wal-Mart-Case-Study-for-

Supply-Chain-Management [Accessed on 24rth April, 2009]

The owner of Wal-Mart, Sam Wilton opened the first Wal-Mart Discount Store in 1962,
with a philosophy of “four basic beliefs: excellence in the workplace, respect for the
individual, outstanding customer service, and always having the lowest prices.”
(Pearce & Robinson, 1996, Pg 317)

External Environmental Conditions

External environmental conditions are generally favourable but changing. These are:

Socio-cultural Segmentation

Retailers are changing their strategies because shoppers these days are decreasing the
time spent on shopping. Grocery shopping is considered as a “need to do” now that was
previously taken as “want to do.” As a result of it, consumers now ultimately spend lesser
time in the stores.

AHMED_AFKAR_28001547_8/13
2MIT4010_ASS1

Technological Segmentation

With the rapid change and advancements in the technology have helped the retailers a lot.
With the help of technology it has linked several different systems i.e. wireless
communications- has provided perfect flow of information and better management
resources. Large retailers are relying on the intra and extranets for information sharing
within or outside the organization. Other technological developments are smart cards,
radio frequency data communications, etc.

Available online at
http://www.scribd.com/doc/6250191/Wal-Mart-Case-Study-for-Supply-Chain-
Management [Accessed on 24rth April, 2009]

AHMED_AFKAR_28001547_9/13
2MIT4010_ASS1

Internal Value Chain Analysis

Internal analysis includes the best use of the value chain activities.

Inbound Logistics

Inbound logistics are being counted as one of the most important reasons in the success
of Wal-Mart. Hub-and-spoke distribution system was introduced by Wal-Mart. Due to its
central distribution warehouses and the strategic locations have served a lot of Wal-Mart’s
stores, which in result have minimized the shipping time.

Operations

Wal-Mart has Hand-held scanners, which helps it to monitor its inventory in real-time.
With the help of this Wal-Mart have reduced the fears of stock outs or excess inventory.
Wal-Mart, with the use of people greeters and ten-foot rule, has significantly
differentiated itself from its competitors.

Outbound Logistics

Another key factor of the Wal-Mart’s success is its excellent inventory control system,
i.e. bar scan registers tie into inventory control and ordering. Wal-Mart has been seen in
continuous contact with its distribution centres, suppliers and each store, so that orders
could easily and quickly be executed. Along with that, it also has a wide communication
network, which connects all of the suppliers, stores, and warehouses. Due to its effective
shipping process it takes them less time to deliver the orders from its distribution centres
to the stores. As a result of Wal-Mart’s efficient plant operations, it’s actually able to
minimize its costs. Right distribution network is very critical issue.
“You must pick the right distribution network. In our case it is our dealers, they are our
first, last, primary, and most critical link to our end customers”
(Ross & Perry, 1999, Pg 293)

Marketing & Sales

Wal-Mart is following an EDLP (Everyday low prices) Strategy, and its no or low
promotional budget have proved to be unique in the industry. Due to the Wal-Mart’s
EDLP strategy consumers are sure that they will get the low-priced items. Low costs
from other value chain activities have helped to make the retailer’s EDLP possible. Just
because of this sales and marketing strategy, organization is saving a lot of money and it
rarely needs advertisements or promotions.

AHMED_AFKAR_28001547_10/13
2MIT4010_ASS1

HRM (Human Resource Management)

Wal-Mart wanted all its employees to follow a hand-on approach to their jobs. “Total
customer satisfaction” is the main goal of Wal-Mart, so it want their employee to be
totally committed toward the goal. Wal-Mart implemented a strategic control system, to
motivate their employees, with that they are giving feedbacks about the performance, to
all levels of employees, along with that they also give a feedback about the company’s
performance too. Due to its organizational culture, the store and departmental managers
as well as employees have the decision-making authority. This culture also has stock
ownership and profit sharing plans for its employees as well as associates, which lead to
higher employee performance and productivity, low shrinkage and less costs than its
rivals.

Technology Development

Information technology is the key aspect of the firm’s success, keeping this in mind, Sam
Walton (the owner of the Wal-Mart) paid so much of attention towards information
technology, just because of this Wal-Mart now Operates the biggest private satellite
communication system in the world, that is called as Wal-Mart Retail Link-System. Its
main functions are to track the sales, stock up the inventory, process the payments due
and it even regulates the different stores temperature in the real time. This system also
replenishes the stock in its stores quickly, and even minimizes the amount of
unproductive space. This results in higher number of sales per square foot and a rapid
turnover of inventory. Due to this system, Wal-Mart is able to drive down the costs of its
inventory and logistics and have significantly increased the store sales.

Wal-Mart’s has a sophisticated information system that differentiates it from its

competitors; this could be counted as another advantage. It has a computer based
information system that is used to track the sales records and transfer of that data to the
suppliers. This information is also used for the purpose of determining the price and stock
strategies, which could optimise the inventory management. This advanced information
system gives store managers detailed information of the customers’ behaviours and
reducing the costs. This system allows Wal-Mart to efficiently meet the customers’ needs
and responding quickly to the changing preferences.

As a result we can say that Wal-Mart is doing an excellent job combining the value chain
activities that creates a competency webs.

AHMED_AFKAR_28001547_11/13
2MIT4010_ASS1

Conclusion
Value chain is taken as an altering activity for the businesses. Things were not going good
with Southwest airlines, but with their new strategy and implementation of value chain,
they became the highest revenue generators of the industry, taking themselves so high
from the competition. Wall-Mart has also proved itself as one of the most successful
retailers around the globe. It is counted in one of the best retailers of all the times, which
hasn’t left any margin of hope for their competitors just because of their better and
advanced ability to integrate value chain activities. Wal-Mart not only coupe up well with
value but also did its best with the technological changes and now Operates the biggest
private satellite communication system in the world, that is called as Wal-Mart Retail
Link-System. The best use of information technology has taken Wal-Mart to be the best
retailers on the globe. Value chain is used to give organizations competitive edge on their
competitors, which is nicely covered by this company. Starting from inbound logistics to
Marketing and sales, and touching the support activities really well Wal-Mart has proven
itself. Value chains along with the use of information technology have made this
organization so good to compete successfully in the global market.

AHMED_AFKAR_28001547_12/13
2MIT4010_ASS1

Bibliography

1. Pearce, A. John. , Robinson, B. Richard. , 1996, Formulation, implementation,

and control of competitive strategy, Edition: 6, illustrated, Published by Irwin.

2. Ross, E. Jeol. , Perry, Susan. , 1999, Total Quality Management, 3rd Edition,
Published by CRC Press

3. Ward, J., Peppard, J., 2002, Strategic planning for information systems, 3rd Edition

4. http://images.google.ie/imgres?imgurl=http://pcwin.com/media/images/screen/Val
ue_Chain_Analysis_Software_69743.gif&imgrefurl=http://pcwin.com/Business_
__Finance/Applications/Value_Chain_Analysis_Software/screen.htm&usg=__GH
pryA-ct-NoMdm9-
yQZVNwv2vk=&h=489&w=802&sz=29&hl=en&start=12&sig2=y2QNZW_X7k
2rEFi_dqq5ng&um=1&tbnid=mezsyTD3tsPyEM:&tbnh=87&tbnw=143&prev=/i
mages%3Fq%3Dvalue%2Bchain%2Banalysis%26hl%3Den%26sa%3DX%26um
%3D1&ei=EgHxSe6sOMW2-Ab2h9CiDw

5. http://training.byu.edu/documents/t-strategy.pdf

6. http://www.scribd.com/doc/6250191/Wal-Mart-Case-Study-for-Supply-Chain-
Management

7. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1017465

8. http://management-case-studies.blogspot.com/2005/10/wal-marts-supply-chain-
management.html

AHMED_AFKAR_28001547_13/13