Discussion: Company’s Internal Processes

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Discussion: Company’s Internal Processes

Discussion: Company’s Internal Processes

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Organization

Human Resources

Technology

Purchasing

Inbound Logistics

Outbound Logistics

Operations Marketing and Sales

Service

Materials handling Delivery

Manufacturing Assembly

Order processing Shipping

Product Pricing Promotion Place

Customer service Repair

You Competitive Advantage,” Harvard Business Review (July–August 1985), reprint no. 85415.

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42 Strategic Use of Information Resources

Although the value chain framework emphasizes the activities of the individual firm, it can be extended, as in Figure 2.6, to include the firm in a larger value system. This value system is a collection of firm value chains connected through a business relationship and through technology. From this perspective, a variety of strategic opportunities exist to use information resources to gain a competitive advantage. Understanding how information is used within each value chain of the system can lead to new opportunities to change the information component of value‐added activities. It can also lead to shakeouts within the industry as firms that fail to provide value are forced out and as surviving firms adopt new business models.

Opportunity also exists in the transfer of information across value chains. For example, sales forecasts gener- ated by a manufacturer, such as a computer or automotive company, and linked to supplier systems create orders for the manufacture of the necessary components for the computer or vehicle. Often this coupling is repeated from manufacturing company to vendor/supplier for several layers, linking the value chains of multiple organizations. In this way, each member of the supply chain adds value by directly linking the elements of its value chains to others.

Optimizing a company’s internal processes, such as its supply chain, operations, and customer relationship processes, can be another source of competitive advantage. Tools are routinely used to automate the internal oper- ations of a firm’s value chain, such as supply chain management (SCM) to source materials for operations, enterprise resource planning (ERP) systems to automate functions of the operations activities of the value chain, and customer relationship management (CRM) systems to optimize the processing of customer information. These systems are discussed in more detail in Chapter 5.

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