Business Value Chain example essay topic

The Role of Information Systems in the Business Value Chain Strategic targeting and efficient production creates an effective and smooth-running business. The goal of businesses is to gain advantages over the competition by instilling a certain value in their products. Product differentiation, whether it is cost, quality, or convenience in acquisition, creates this value. Companies continually strive to become more efficient and effective by managing the supply-chain, or in other words, the value chain.

The information systems employed in modern-day businesses help to create greater value for their products. Firms like State Farm Insurance, Sprint Corporation, and Wal-mart all incorporate different processes of business that work toward a better value chain model for the production of their goods. The value chain these companies create is largely based on technology and information systems (Laudon & Laudon, 2003). Coordinating and implementing information systems has an economically beneficial effect for not only the company, by increasing revenues, but also for the customer, by lowering acquisition costs. Technology plays a crucial role in creating a firm's value chain.

Starting at the point-of-sale systems and moving all the way up to analysis programs for upper management, information systems streamline the organization's progress in achieving its objectives. A hassle-free point-of sale system is most desirable when checking out goods in a retail store. Take, for instance, the automated checkout counters at K-mart retail stores. These counters make for less time in line for those who do not have a large amount of merchandise. They automatically ring up the goods and have a fully automated pay station for taking in cash, check, or credit cards. Not only does this make the store more desirable for customers to shop with, but it also cuts down the employee overhead costs for the company.

This is one of many examples of how information technology / systems support the business value chain. State Farm, the nation's largest insurance company exemplifies a complex information technology system. Maintaining well over 50 million policies for families across the U.S., the company needs to have a sound IT system. According to Edward B Rust Jr. President and CEO, the company handles around 7 billion complex transactions per year (Slater, 1998). Being that the company is so large in size, having a fully accessible information system is difficult, but Rust reported that State Farm is in the process of linking all of the claims offices, regional offices, and customer care centers to ensure the fastest and most efficient ways to assist customers.

Edward also emphasized that the company focuses on acquiring the best partners in regards to handling claims. Body shops, health-care providers, and other vendors cut down the time to fulfill an insurance claim. Information technology is also important for vendors who work with State Farm. For example, State Farm instills value to their customers by electronically arranging for a rental car to be picked up if a their car needs to go in for repair. Therefore, the repair shop, ideally, would be linked to the State Farm information system in conjunction with the rental company.

State Farm Insurance Cos. understands the needs of the customer, and they continue to mold their technology and value chain around the customer's needs and concerns when there is a claim to file or just a simple question to answer. Creating communication solutions for individuals and companies is a major concern in 21st century life. Sprint Corporation understands that there is a largely saturated market when it comes to communications. Providing the utmost value to the customer is the driving force behind the concept of presenting "one sprint" to customers.

According to William T. Esrey, Chairman and CEO of Sprint Corporation, Sprint does not want two or three people calling in to customers or customers receiving two or three bills (Slater, 1998). Esrey maintains that technology can help to flatten the corporate hierarchy. Empowering employees of lower positions cut down the internal communication barriers when issues were passed down the ladder for an appropriate response. The turn around time for dealing with customer complaints and escalations that may occur is shortened when someone down the ladder can handle the problem himself or herself. The basis of communications is providing higher speeds at a lower cost, and within the next five years, Esrey believes that, because of the progress of technology, the distinction between a long distance call and a local call will simply go away.

Staying ahead of the curve, as Esrey explains, is comprised of meeting the customers' needs with the latest technologies and capabilities. Wal-Mart, the world's largest company, exemplifies superior information technology / systems. The company produces well over $200 billion in sales each year (Lundberg, 2002). Kevin Turner, CIO explains that the company has three basic philosophies that they stick to concerning information systems: First, they run a centralized information system versus decentralizing and splitting up the company by market.

Second, the stores use common systems and platforms. This helps to simplify a seemingly boundless information system, and eliminates training time and startup costs when an employee wishes to transfer to a different location. And lastly, the company remains true to business by being... "merchants first and technologists last" (2002). The Wal-mart point-of sale systems employ a just-in-time inventory approach which helps to keep money from being tied up in inventories. The point-of sale systems at checkout counters send data directly to the suppliers. This instantaneous data alerts them when to ship out replenishment merchandise (Laudon & Laudon, 2003).

The value chain in this example benefits both the customers and the company by saving money. Loss prevention and security are additional value chain components. Keeping prices low for the consumer cannot be jeopardized by significant losses. Turner explains that they have made a 180-degree turn from the conventional 20 percent security and 80 percent recovery. Loss prevention and security have tightened up since 9/11, and many company resources have been taken away from other investments which could further their growth (2002). Wal-mart pleases the public with their "Everyday low-prices"; consequently, the sheer volume of sales and service the company provides creates a need for a sound information system in their value chain.

The value chain exists to create a better product to the customer whether it is in retail, wholesale, or production. The concept of the value chain creates better service and value for the end product, and illustrated in these companies, information technology is essential to the management of the product, employees, and stores.

Bibliography

Laudon, K.J. (2003).
Essentials of Management Information Systems. (5th ed. ). New Jersey: Prentice Hall. Lundberg, Abbie (2002, July 1) The IT Inside the World's Biggest Company.
CIO Enterprise Magazine, . Retrieved February 6, 2003 from web Slater, Derick (1998, August 15) Chain Commanders.
Retrieved February 6, 2003 from web.