Accounting Information Systems

Business Process
 Contents
• Organizational strategy and mission
• Organizational structures
• Business process
• Business process re-engineering

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 Organisational strategy & mission
• Mission Statement: typically contains an
expression of the organisation’s vision,
business domain, competencies and values
– Vision: what the organization wants to be
– Business domain: the area in which the business
will operate
– Competencies: the business’ unique strengths
– Values: principles upon which the business will
operate

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 Examples
Outstanding professionals, working together to deliver value. We
offer Audit, Tax and Advisory services. Three complementary areas
of knowledge and insight that enable us to meet the needs of our
clients. We turn knowledge into value for the benefit of our
clients, our people and the capital markets. (KPMG)

Our mission: Enabling Progress

Citi works tirelessly to serve individuals, communities, institutions and
nations. With 200 years of experience meeting the world's toughest
challenges and seizing its greatest opportunities, we strive to create the
best outcomes for our clients and customers with financial solutions
that are simple, creative and responsible. An institution connecting over
1,000 cities, 160 countries and millions of people, we are your global
bank; we are Citi. (CitiBank)

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 Organisational strategy & mission
• Strategy: a choice about a course of action, a
means of putting a mission statement into
practice
• Strategy operates at three levels:
– Internal: decisions made within organization
– Competitive: concerned with understanding the
industry in which the organization operates
– Business portfolio: decision of which industry an
organization should compete within and how the
organization can compete new industries

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 Strategy Options
• According to Michael Porter, businesses have
two options when deciding on a strategy:
– Cost Leadership: Organisations need to carry out
their activities cheaper than their competitors
through economies of scale, technology, low
overheads etc
– Differentiation: Involves creating a business
adding that little bit extra for customers, offering
unique products targeted to the customer’s needs

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Strategy Options

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 Porter’s Five Forces Model
For an organization to distinguish itself from
its competitors and succeed, it needs to
understand forces that shape the industry in
which it operates

Industry

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 Porter’s Five Forces Model
1. Rivalry among existing competitors: refers to
the current status within the market that a
business operates within

2. Threat of substitute products or services:

refers to those products or services that can
be used as an alternative to what the
industry currently produces

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 Porter’s Five Forces Model (Cont)
3. Bargaining power of suppliers: a supplier can
find itself in a strong bargaining position if it
is the only business able to provide a
particular product or service

4. Bargaining power of buyers: an organisation

that has a small number of specialist
customers can ill afford to lose them. Hence
the customer is in a position of relative
strength

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 Porter’s Five Forces Model (Cont)
5. Threat of new entrants: new organisations
entering an industry create increased
competition for the existing participants

Using the five forces model an organisation

can analyse its industry to identify
opportunities and threats and then develop
tactics for these situations

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 The influence of technology
• New industries
• Wider audience
• New channels for cooperation

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 The influence of technology
• Online auctions
• Markets for music and movies
iTunes
• E-books
• For customers: more information, better
choices

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 Organizational design
• Organizational design: the organization of a
business enterprise through the structure of
the relationships, interactions and reporting
responsibilities among staff
• Two main approaches
– Functional perspective
– Business process perspective

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Functional perspective of the organisation

• Functional perspective: a view of organizational

design that emphasizes hierarchical reporting roles,
narrowly specified workers roles and an emphasis on
departments
• Each individual employee would perform only a small
variety of tasks (scientific management)
• A business function or department is a specific
subset of the organization that is designed to
perform a particular task that contributes to the
organization achieving its objectives

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Functional perspective of the organisation

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Functional perspective of the organisation

• Benefits
– Control and coordination
– Specificity: highly defined and specified tasks exist
• Problems and limitations
– Not reflective of the reality of today
– Information and communication problems
– Slow to react to the environment
– Focuses on the wrong things, i.e. boss-oriented vs.
customer-oriented

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 What is a Business Process?

A business process (BP) is a series of

interlocking activities that work together,
across the organisation, to achieve some
predetermined organisational goal, which is
typically defined around satisfying customer
needs

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A Process Based Organisation

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 Functional vs Process
Functional Process
perspective perspective
Focus What is done How it is done

Orientation Vertical, hierarchical Horizontal, across

the organisation

Objective Task driven Customer driven

Personnel Specialists – highly Generalists – tasks

defined tasks across the process

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 Examples of business processes
Sales

• Aim: To sell goods and collect cash from sales

• Participants: Sales staff, customer, billing staff,

warehouse

• Inputs: sales order

• Outputs: Invoice, receipt, shipping document

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 Examples of business processes
Purchasing

• Aim: To acquire goods from suppliers and

appropriately manage stock

• Participants: warehouse staff, purchasing staff,

sales staff, vendor

• Inputs: Purchase requisition, back order

• Outputs: Purchase order

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 Why Business Processes?
• More coordinated and integrated approach
• Improved customer service and relations
• Better use of resources
• A competitive advantage through outsourcing

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 ERP and Business Process
• Functional perspective leads to separate
software applications in one organization
• Enterprise resource planning is a system
providing many functionalities for business
• ERPs are developed based on best practices

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 ERP Systems

• Advantages: • Disadvantages:
– Integrated modules – Costly system to
– Reflects the reality of change
a process-driven – May not suit the
system current processes in
– Performance of an organisation
customer service-
based processes could
improve

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Issues in moving to a BP based environment

• Management Change
– Functionally based structure must be changed
– Support must come from the top

• People Change
– Narrowly defined specialist jobs may become
generalist and diverse
– Reduction of middle management – increased
authority to those lower in the organisation

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 Changing Business Processes
• Business processes are not static
• Factors impacting on business processes
– Technology
– Competition
– Business environment
• The means of changing processes is referred
to as business process design

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Business Processes Design Approaches
• Total Quality Management (TQM)
• BP Re-engineering (BPR)
• Eclectic

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 TQM
• TQM is a progressive approach to organisational
change that works on the principle that a series of
small progressive steps is the best way to improve
operations
• The philosophy of TQM is geared around four main
concepts:
– Quality People
Quality Management
– People
– Organisations Organizations

– Management
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Business Process Re-Engineering (BPR)
BPR is defined as:

The fundamental rethinking and radical

redesign of business processes to achieve
dramatic improvements in critical
contemporary measures of performance, such
as cost, quality, service and speed

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 Key Components of BPR
1. Fundamental aspect forces an organisation
to question what activities it performs as part
of its current process
2. Radical component enforces organisations to
start again, redesign from scratch
3. Dramatic refers to the expected return on
the improvements.
4. Process aspect is central to BPR, organization
should forget about hierarchical system
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 Principles and Approaches
1. Establish a sense of urgency

2. Form a leadership team

3. Create and communicate a vision

4. Empower others to meet the vision

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 Principles and Approaches (Cont)
5. Plan for and create short term wins

6. Consolidate improvements and encourage

further change

7. Institutionalise the new approaches

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 BPR Principles in Practice
1. Combine jobs and let workers make decisions

2. Create a single reference point for customers

3. Perform steps in a natural order and at their

logical location

4. Allow processes to vary

5. Reduce the impediment of controls and

reconciliations
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 Exercise

2.4 About IBM Credit (page 64)

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Technology driven process improvements

• Organisations that achieve the most

significant benefits from information and
communication technology (ICT) exploit the
new capabilities to reform business processes
and create new business opportunities
• Areas in which an organisation can benefit
– Handling information
– Communication

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Examples of Process Improvements
• Vendor-managed inventory
• Evaluated receipts settlement (ERS)
– No need to wait for invoices
• Electronic bill payment (EBP)
– Example: BPAY
• Electronic bill presentment and payment (EBPP)
– Similar to EBP except the invoice is a electronic
document
• RFID or barcoding

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 BPAY Example
1. The university sends the invoice (including
biller code and reference number) for re-
enrolment to the student
2. Student accesses bank facilities by phone or
the Internet
3. The money will be transferred from student’s
account to the university’s account
4. Information of the transaction will be also
sent to the university
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 BPR Evaluated
• Benefits
– As mentioned in business process section
• Risks
– Re-engineering is often perceived as “downsizing”
– Nothing left to fall back on if fails

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 ERP Systems
• An ERP system is a set of computer program
modules that attempts to integrate the
different functional areas of the organisation

• ERP is designed on the basis of

best practice – the best way of performing a
particular process

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What are Australian Organisations Doing with IT &
Processes

• Use of the internet

• IT has widespread impact (refer table 2.6)

• Order processing – email

• Use of information to add value

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 Review of Chapter 2
• Components of organisational strategy

• Looked at benefits and limitations of the

functionally based organisation

• Described business processes and looked at

examples

• Examined the benefits of organisations adopting

a BP perspective
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 Review of Chapter 2
• The role of ERP systems

• Addressed issues involved in moving to a

business process-based environment

• Described BPR

• Considered the principles, characteristics,

benefits, risks and criticisms of BPR

• Application of IT by Australian firms

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 Key Terms

• Best practice • Functional perspective

• Business function • Information
technology
• Business process
• Organisational design
• Business process
design • Scientific
management
• Business process re-
• Total Quality
engineering (BPR) Management (TQM)
• ERP systems • Vendor managed
inventory

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