INFORMATION SYSTEMS

FORMATION 2 EXAMINATION - APRIL 2013

NOTES:
Section A - You are required to answer Questions 1 and 2.
Section B - You are required to answer any three out of Questions 3 to 6.
(If you provide answers to all of Questions 3 to 6, you must draw a clearly distinguishable line through the answer
not to be marked. Otherwise, only the first three answers to hand for these four questions will be marked.)

TIME ALLOWED:
3 hours, plus 10 minutes to read the paper.

INSTRUCTIONS:
During the reading time you may write notes on the examination paper but you may not commence
writing in your answer book.

Marks for each question are shown.

The pass mark required is 50% in total over the whole paper.

Start your answer to each question on a new page.

You are reminded that you are expected to pay particular attention to your communication skills and
care must be taken regarding the format and literacy of the solutions. The marking system will take into
account the content of your answers and the extent to which answers are supported with relevant
legislation, case law or examples, where appropriate.

List on the cover of each answer booklet, in the space provided, the number of each question(s)
attempted.

The Institute of Certified Public Accountants in Ireland, 17 Harcourt Street, Dublin 2.

 INFORMATION SYSTEMS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

FORMATION 2 EXAMINATION - APRIL 2013

Time Allowed: 3 hours, plus 10 minutes to read the paper.

SECTION A
Answer BOTH Question 1 and Question 2 in this Section.
(Both Compulsory)
1. The Garrod family-run business operates four busy restaurants in Dublin having opened their first restaurant over
20 years ago. They opened their second restaurant in 2009, and purchased two others since then. The company
has for many years prided itself in sourcing all its raw materials responsibly and, where possible, locally, although
nowadays more of it is coming from larger suppliers. They are also acutely aware that food businesses are
required to be compliant with a range of legislation, and that non-compliance can result in serious consequences.

Garrods are now coming under increased pressure from multinational restaurant chains that have recently
opened in the city and are attracting customers based on brand recognition. They are also losing customers to
pubs that are now offering more late evening meals and more diverse menus than in the past.

After consultation with his restaurant managers, the managing director of the company, Garret Garrod, has
decided that it is necessary to implement an information system to automate the order taking process in all four
restaurants. He asked the manager of the most efficiently run restaurant to specify how the system should
function. As she has many years of experience in the business she was able to do this by herself over one
weekend.

The following is the main functionality she outlined for the system: as a waiter takes an order at a table, it will be
entered directly on a personal digital assistant (PDA) device. The order is routed to a printer in the appropriate
preparation area: for example: the cold item printer if it is a salad, the hot item printer if it is a hot dish, or the bar
printer if it is a drink. A customer bill is automatically generated with the items ordered and the respective prices.
When the kitchen runs out of a food item, the chefs record it as out of stock and waiters will be informed if
someone orders the item. This gives the waiters faster feedback, enabling them to give better service to the
customers.

The manager also outlined other system features that would aid management in the planning and control of the
restaurants. For example she proposed that the system should provide up-to-the-minute information on the food
items ordered and break out percentages showing sales of each item versus total sales. This would help
management plan menus according to customers tastes. The system should also enable management to
compare the weekly sales totals versus food costs, allowing planning for tighter cost controls. Finally, the system
should be used to record and cost all new dishes and recipes that the kitchen staff come across or use.

Garrods reputation for food quality excellence and friendly/efficient service has meant that they have grown a
large and loyal customer base. Garret Garrod would like to be able to keep track of all new and existing customers
(names, addresses, and, where known, the meals previously ordered). This is in order to market directly to them,
offering special deals, etc. Garret is of the view that a software development company should be approached to
build the new information system immediately and to have it installed in all four restaurants for the pre-Christmas
business in three months time. He assumes that the company will have to develop the software from the
beginning themselves, and that they will be able to incorporate all the proposed functionality. Garret envisages
that there might be some problems in the two restaurants they bought two years ago, as the staff in them follow
very different work practices to those in the other two Garrod restaurants. However he has asked the managers
to ensure a smooth adoption of the system, and to get the staff adequately prepared in advance of the system
delivery.

One of the managers, Tom, has expressed the view that the three month timeframe is not sufficient to do what
Garret is proposing. In fact he is worried about Garrods ever having a good restaurant management system in
place if it has to be developed from the beginning.

Page 1
REQUIREMENT:
Candidates are asked to address the following, based on a critical analysis of the above case study.
(a) Given the business environment in which the company is operating, discuss how it could expect to gain
competitive advantage or business benefits from the new information system? (8 marks)

(b) Evaluate the pros and cons of the approach proposed by Garret Garrod, and briefly describe alternative
approaches that could be considered to ease Toms concerns. (10 marks)

(c) Assess the ethical and social issues that the company needs to keep in mind with the new information system,
and explain the implications for their current proposals. (7 marks)

[Total: 25 Marks]
2. Describe briefly what is meant by ANY FIVE of the following:

(a) Irelands Data Protection Acts

(b) Data mining
(c) Computer viruses and how to lessen their impact
(d) Software as a Service (SaaS)
(e) Decision support for senior management
(f) The role of end users in information systems development
(g) Prototyping as an approach to information systems development Note: Each part carries 3 marks.
[Total: 15 Marks]

SECTION B
Answer ANY THREE of the four questions in this Section.

3. (a) Discuss the difference between information technology (IT) and information systems. Describe some of the
functions of information systems in businesses today.
(6 Marks)

(b) Businesses invest in information systems to achieve a range of strategic business objectives. Identify and
explain four of these, giving an example of each.
(8 Marks)

(c) Identify three organisational features that affect the use of information technology and information systems
by an organisation. Provide an explanation of why and how these features might affect the technology and
information system choices made.
(6 Marks)

[Total: 20 Marks]

4. (a) The business value chain model highlights activities in a business where competitive strategies can best
be applied and where information systems are most likely to have a strategic impact. Discuss the model,
and how the Internet has extended the value chain for businesses.
(7 Marks)

(b) List and describe five different Internet-based business models. Which of these models do you think would
be the most risky for a startup business today, and why?
(7 Marks)

(c) Describe three types of applications or services for which m-commerce is particulary well-suited, explaining
the reasons for each.
(6 Marks)

Page 2
 [Total: 20 Marks]
5. (a) Discuss one of the following major enterprise software applications: supply chain management (SCM)
systems or customer relationship management (CRM) systems.
(6 Marks)

(b) Evaluate the potential advantages and disadvantages of using cloud computing to implement a companys
SCM or CRM system.
(8 Marks)

(c) For a company that is using cloud-based SCM or CRM services, assess the features and importance of a
service level agreement. (6 Marks)

[Total: 20 Marks]

6. (a) Discuss the main benefits of effective knowledge management for an organisation. (5 Marks)

(b) Describe the two main types (also referred to as categories or forms) of knowledge that exist in
organisations, giving examples of each. Which is the most common type?
(5 Marks)

(c) The knowledge management value chain consists of a series of business processes developed in an
organisation to manage knowledge. It consists of a series of four process steps that involve information
systems activities and management/organisational activities.

Describe the four steps, and identify the type of information system activities that typically occur at each
step.
(7 Marks)

(d) Outline what is meant by a community of practice in the context of knowledge management.
(3 Marks)

[Total: 20 Marks]

END OF PAPER

Page 3
 SUGGESTED SOLUTIONS

INFORMATION SYSTEMS
THE INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN IRELAND

FORMATION 2 EXAMINATION - APRIL 2013

ANSWER 1
Tutorial Notes: -
Purpose: The case study question aims to be a written summary or synthesis of a real-life scenario. It requires the
candidate to isolate and think through the key issues involved against both theory and the larger comparative
environment.
This case study tests the candidates knowledge of issues relating to gaining competitive advantage from information
systems, the information systems development process, and the ethical and social issues associated with
information systems.
In the case of competitive advantage, students are expected to be familiar with the use of Porters competitive
forces model to understand the business benefits of information systems.
Links: No major links or other topics or papers.
Options: All 3 parts of the question must be answered. The candidates answers may vary slightly from the answer
format used below.
Essential components: The candidates must demonstrate understanding of the business benefits of information
systems. They must understand the stages in the software development process. They must also be familiar with
the main ethical and social issues relating to information systems development and use.

SOLUTION 1
(a) Strong candidates will use Porters competitive forces model as a framework for their answer. Listing business
benefits will also result in marks being awarded.

Garrods are now coming under threat from new market entrants (multinational chains and pubs). They are
also dependant on their ability to attract and retain customers who can easily switch to the competitors and/or
force Garrods to compete on price as well as its reputation for food excellence and responsibly sourced raw
material. The market power of the large suppliers is also starting to have a significant impact; in the past it
sourced locally which probably meant more suppliers and more opportunity for Garrods to exercise control
over price, quality and delivery schedules.

The new information system can help reduce operational costs, and thereby lower prices. However Garrods
strategy is based more on reputation for food excellence & good service (i.e. product differentiation) than
low-cost leadership. It should therefore look to using the information system to continue to support this
strategy. An example is the ability of waiters to tell customers immediately if an item is not available.

The information system can also help Garrods to produce and analyse data to help them tune the menus and
service to suit customer preferences. They can analyse customer ordering patterns, tastes and preferences
closely so that they can pitch their menus to target markets.

They can also use the information system to strengthen customer and supplier intimacy. On the supplier side,
they can automate orders to the larger new suppliers. On the customer side, they can also create loyalty
for example through personalised services.

Candidates may also list specific ways in which the company could benefit such as enhanced decision
making, the implementation of an ERP solution, use of the Internet to order from suppliers (B2B),
advertising/marketing, etc.

Marks: 2 marks each for addressing relevant competitive forces, or for list of important and relevant
benefits/competitive advantages (up to maximum of 8)

Page 4
(b) Here candidates may give pros/cons of the general proposal (to introduce the use of information systems) or
they may address Garrets proposal to have the system developed from scratch (better candidates will do the
latter). On this basis, a range of pros and cons may be given but the following are some of the key points:

Pros:
- Garrods can customise the solution to meet their needs;
- Implementation can be phased, or piloted in one restaurant (applies also in the case of off-the shelf
software)

Cons:
- Timeframe for the development and deployment of a system with so much functionality seems very
short
- Furthermore, the work practices of the two purchased restaurants will need to change (probably true
with any system purchased or implemented). This goes beyond the automation that will take place in
the two first restaurants they will need to engage in processes closer to business process redesign.
This will require time the three months development may not be sufficient. However it may also be
pointed out that introducing IT-based systems provides an opportunity for process redesign.
- The attitude of workers that will be using the system needs to be considered. The fact that they have
not been involved in the design is very likely to cause problems.
- Interoperability of different components or subsystems is often a problem when implementing enterprise
systems may be reduced by developing bespoke solution.
- Possible lack of availability of hardware.

Alternatives would include:

- different development lifecycle for example, prototyping
- consider purchasing off-the-shelf software, such as an ERP solution, and/or CRM.
- look at use of cloud-based services

Marks: 6 for pros and cons (1 mark for each valid point must have minimum 2 on both for max points; 4 for
alternative approaches)

(c) The main issue is in relation to the customer data collected. As individuals they have rights, and as a data
controller Garrods has responsibilities, as outlined in the Data Protection Act. In particular customers must
provide their informed consent to any data that is stored about them.

The question of intellectual property rights could arise in relation to recipes, although these are not typically
protected by patents or copyright. Even classifying them as trade secrets is difficult for any chef or restaurant.

The issues of accountability and liability could also potentially arise, as all orders are now recorded
electronically, as are all recipies.

The issue of system quality arises in relation to the software supplied. Given that the timeframe is likely to be
overly ambitious, there is likely to be errors or bugs in the system which the developers may know about.
If/when the system performs poorly the question of liability and accountability will arise.

Finally the automation of human work aspect e.g. will the cost-savings achieved through the new system
result in redundancies

Marks: 2 for identifying customer data issue; 0.5 each for other issues (up to 2). 1 point for correctly identifying
implications (up to 3).

Page 5
ANSWER 2
Tutorial Notes: -
Purpose: Responses for each sub question are expected to include a few sentences and/or bullet points. This limit
simulates a real life scenario in which accuracy, brevity and clarity is called for. It also presents candidates from
spending a disproportionate amount of time on each sub-question. When answering a sub-question, candidates
might use purposeful illustrations.

Links: No major links or other topics or papers.

SOLUTION 2

(a) The Data Protection Acts, 1988 and 2003 place responsibilities on the persons who collect and process
personal information as well as conferring rights on individuals. The Acts apply to persons and organisations
who actively process data in the state.

The Data Protection Acts also confer rights onto individuals. Information retained about an individual must be
obtained fairly and be stored safely and securely. It must be accurate and up to date, only made available to
those that should have it, and only used for specified purposes. Individuals have the right to access personal
information relating to them, have any errors corrected and in some cases have the information erased.
Information should not be retained for longer than is necessary for the specified purpose or purposes

Personal data protection applies to all interactions with public and private sector organisations.

(b) Data mining is a process that provides insights into corporate data. It analyses data from different perspectives
and summarizing it into useful information - information that can be used to increase revenue, cuts costs, or
both. Data mining software allows users to analyse data from many different dimensions or angles, categorize
it, and summarize the relationships identified. predict behaviors and future trends, allowing businesses to
make proactive, knowledge-driven decisions. Data mining tools can answer business questions that
traditionally were too time consuming to resolve. They scour databases for hidden patterns, finding predictive
information that experts may miss because it lies outside their expectations.

Technically, data mining is the process of finding correlations or patterns among dozens of fields in large
relational databases.

Data mining tools Data mining derives its name from the similarities between searching for valuable
information in a large database and mining a mountain for a vein of valuable ore. Both processes require either
sifting through an immense amount of material, or intelligently probing it to find where the value resides.

(c) A computer virus is a program that spreads by first infecting files or the system areas of a computer or network
router's hard drive and then making copies of itself. Some viruses are harmless, others may damage data files,
and some may destroy files. Viruses are typically spread when people share files and portable media, or
through email messages.

Unlike other forms of computer malware such as worms, viruses often require some sort of user action (e.g.
opening an email attachment or visiting a malicious web page) to spread.

The main ways to avoid viruses and lessen their impact is to install anti-virus software from a reputable
vendor, and to have it updated regularly. A virus scan should be automatically conducted before any new
programs or files that may contain executable code are opened. Users should be careful about accepting files
from others or about clicking links that are sent by email or other means. Regular scans should be conducted
to check for infected files on a computer system. And finally, it is important to back up data (documents,
bookmark files, important email messages, etc.) so that in the event of a virus infection, valuable work and/or
data is not lost.

(d) Software as a Service (SaaS) is a cloud-based model of software deployment whereby a provider licenses
an application to customers for use as a service on demand. It is typically accessed by users via a web
browser.

SaaS has become a common delivery model for many business applications, including accounting, customer
relationship management (CRM), management information systems enterprise resource planning (ERP),
human resource management, etc. It has been incorporated into the strategy of all leading enterprise software
companies. One of the biggest selling points for these companies is the potential to reduce IT support costs

Page 6
 by outsourcing hardware and software maintenance and support to the SaaS provider. SaaS providers can
make upgrades to their software more often, which means less customer risk and lower adoption costs for
service users.

(e) Executive Support Systems (ESS) are used primarily by senior management whose decisions are usually
never structured and could be described as "educated guesses." Executives rely as much, if not more, on
external data than they do on data internal to their organization. Decisions must be made in the context of
the world outside the organization. The problems and situations senior executives face are very fluid, so the
system must be flexible and easy to manipulate.

Executive support systems don't provide executives with ready-made decisions. They provide the information
that helps them make their decisions. Executives use that information, along with their experience,
knowledge, education, and understanding of the corporation and the business environment as a whole, to
make their decisions.

Using a balanced scorecard method, executives combine their company's internal financial information with
additional perspectives like customers, internal business processes, and learning and growth. By focusing on
key performance indicators (KPIs) in each of these areas, executives gain a better understanding of how the
organization is performing overall. After senior management establishes KPIs for each area, then and only
then can the flow of information be established. Figure 12-7 depicts the framework for a balanced scorecard.

Business performance management (BPM) is yet another tool for executives to systematically translate the
strategy they've developed for their company into operational targets. BPM methods use KPIs to help users
measure the organization's progress towards the targets. BPM is similar to the balanced scorecard approach
but with a stronger strategic viewpoint than an operational viewpoint.

Executives often face information overload and must be able to separate the chaff from the wheat in order to
make the right decision. On the other hand, if the information they have is not detailed enough, they may not
be able to make the best decision. An ESS can supply the summarized information executives need and yet
provide the opportunity to drill down to more detail if necessary.

Candidates that cover ESS and one other method/tool, as well as identifying the nature of the decision-making
made will get full marks.

(f) It is very important that users are involved in the system development process, as they are the ones who best
understand the requirements for a new system. In particular users must be involved in the analysis and design
stages. Business analysts and designers should work with them, keeping the goals of the organization as the
number one priority, and remembering that the best system is one that meets the users needs.

Users must feel they have ownership of the system for it to be a success. If they begin to feel they have little
input into the development process, problems can occur. Management must therefore ensure discussion and
communication between the designers and the end users. Lack of communication results in a user-designer
communications gap. Bridging this gap helps ensure success of the new system.

(g) Prototyping is a good way to develop a new system if end users don't know what they really want the system
to look like. Even if they have a few clues, prototypes works well because the user can guide the process
based on what they see as the system is built.

Generally prototyping is used for very small systems or small parts of a larger system. You wouldn't want to
use this method to build a company-wide information system. It can be too unstructured, making it harder to
manage in large projects. Prototyping works well when you're developing user interfaces and output reports
areas the users will see the most.

Prototyping is generally an iterative process. It involves talking with users, implementing a shallow version
of the system, and have users try it out. These steps are repeated many times over.

From a developers point of view it is important to ensure that the prototype meets the user's needs.

The main advantage of the prototyping method of developing end-user interfaces is that users see the product,
or at least a pretty good replica of it, right away. If they like it, development proceeds. If they don't like it,
changes can be made immediately. There's less red tape and bureaucracy (perceived or otherwise) to work
through in this method. However care must be exercised if the prototype is used as the actual production
version.
Page 7
ANSWER 3
Tutorial Notes: -
Purpose: To examine the candidates understanding of the differences between information technology (IT) and
information systems (IS), the links between information systems and business strategy, and the relationships
between organisations and IT/IS.
Links: No major links or other topics or papers.
Options: Candidates must answer all parts of the question. Answers should not vary significantly from those given
below.
Essential components: Candidates must demonstrate an understanding of the functions of information systems, the
strategic value of information systems and the impact of organisational issues such as culture and structure on the
use of IT and IS.

SOLUTION 3

(a) Information technology (IT) consists of all the hardware and software that a firm needs to use to achieve its
business objectives. Information systems are more complex. An information system can be defined technically
as a set of interrelated components that collect (or retrieve), process, store, and distribute information to
support decision making and control in an organization. In addition to hardware and software components it
also covers people and processes and, of course, data.

The people include developers, users, and information systems managers.

The functions of information systems in business today include such things as:

supports decision making, coordination, and control

helps employees analyze problems

helps employees visualize complex subjects

helps create new products

Marks: 3 for differences; 3 for functions representative range of functions expected).

(b) Answer to include any four of the following:

Operational excellence. Businesses improve the efficiency of their operations in order to achieve higher
profitability. Information systems are important tools available to managers for achieving higher levels
of efficiency and productivity in business operations. A good example is Wal-Mart that uses a RetailLink
system , which digitally links its suppliers to every one of Wal-Mart's stores. As soon as a customer
purchases an item , the supplier is monitoring the item , knows to ship a replacement to the shelf.

New products, services, and business models. Information systems are a major tool for firms to create
new products and services, and also an entirely new business models. A business model describes how
a company produces, delivers, and sells a product or service to create wealth. Example: Apple
transformed an old business model based on its iPod technology platform that included iPod, the iTunes
music service, and the iPhone.

Customer/supplier intimacy. When a business serves its customers well, the customers generally
respond by returning and purchasing more. This raises revenue and profits. The more a business
engages its suppliers, the better the suppliers can provide vital inputs. This lowers costs. Example:
High-end hotels exemplify the use of information systems and technology to achieve customer intimacy.
They use computers to keep track of guests' preferences, such as their preferred room temperature,
check-in time, television programs.

Improved decision making. Many managers operate in an information bank, never having the right
information at the right time to make an informed decision. These poor outcomes raise costs and lose
customers. Information system made it possible for the managers to use real time data from the
marketplace when making decision. Example: Use of a Web-based digital dashboard to provide
managers with precise real -time information on customer complaints. Using this information managers
can immediately allocate repair resources to affected areas, inform customers of repair efforts and
restore service fast.

Page 8
 Competitive advantage. When firms achieve one or more of these business objectives above
(operational excellence, new products, services, and business models, customer/supplier intimacy, and
improved decision making) chances are they have already achieved a competitive advantage. Doing
things better than your competitors, charging less for superior products, and responding to customers
and suppliers in real time all add up to higher sales, and higher profits. Example: Toyotas Production
System focuses on organizing work to eliminate waste, making continues improvements.

Day to day survival. Business firms invest in information system and technology because they are
necessities of doing business. These necessities are driven by industry level changes. Example:
Citibank introduced the first automatic teller machine to attract customers through higher service levels,
and its competitors rushed to provide ATM's to their customers to keep up with Citibank. Providing
ATMs services to retail banking customers is now a requirement of being in and surviving in the retail
banking business. Firm turn to information system and technology to provide the capability to respond
to these.

(c) Any 3 of the following features:

Routines and Business Processes: Successful organisations develop efcient routines for producing
goods and services. They are able to reduce costs and win a competitive advantage over others
because these routines are built into business processes. Information systems can help to do this.

On the other hand some standard operating procedures, politics, and culture are so ingrained in
organizations that they actually hinder the success of the group because they dont allow people to
change their routines and processes as they should. This can impact negatively on the implementation
of information systems.

Organizational Politics: Each person in an organization has their own goals. Those goals may be aligned
very well with organizational goals but this isnt always the case. Each person comes into an
organization with different concerns and perspectives. When those viewpoints clash with others the
end result is organizational politics. This can impact on organizational changes necessary for the
deployment and use of new information systems.

Organizational Culture: Just as every society reects cultural values like language, dress, and food,
every organization also has its own culture. Some companies like Google are very laid-back. The
company allows employees to bring their dogs to work and ride skateboards in the hallways. Other
companies like IBM require employees to adhere to a strict dress code and leave the skateboards at
home. Yet both companies are very successful in their own right. However, when each company
embarks on organizational change, the culture is very much a player in what they can and cant do.
Technological change that threatens commonly held cultural assumptions can meet with a great deal
of resistance. When this occurs, information systems implementation is generally stalled until the
organizational culture adjusts.

Organizational Environments: Organisations must adapt to changes in their environment, such as new
technologies, new products, changing public tastes, legislative changes, etc. Information technology and
systems play a critical role in helping companies act in response to these changes in a timely manner
for example recognizing shifts in customer preferences based on data gathered is important in the
grocery retail sector.

Organisations can also shape and even change their environment through the use of information
technology and systems. An example is the radical change caused by the introduction of a disruptive
technology to the marketplace.

Organizational Structure: They type of information systems used in organisations often reects the type
of organizational structure. For example in large bureaucratic organisations there may be parallel
systems operated by different departments. In small, entrepreneurial businesses poorly designed
systems are often implemented in a rush and these often outgrow their usefulness. In distributed
organisations there may be different systems used in different locations, rather than one integrated
system.

Also accept answers like different markets, different leadership styles, type of business or activities, etc.
provided adequate explanation is provided.
Marks: 2 marks each for each feature properly identified and explained.

Page 9
ANSWER 4
Tutorial Notes: -
Purpose: To examine the candidates understanding of the impact of the Internet on businesses today.
Links: No major links or other topics or papers.
Options: Candidates must answer all parts of the question. Answers should not vary significantly from those given
below.
Essential components: Candidates must be understand how use of Internet can be incorporated into business
strategies, the different type of Internet-based business models that exist, and the emerging area of m-commerce.

SOLUTION 4
(a) The value chain model highlights specific activities of a business where competitive strategies can best be
applied, and where information systems are most likely to have a strategic impact. The model identifies
specific, critical leverage points where a business can use IT most effectively to enhance its competitive
position. The value chain model views the business as a series of basic activities that add value to its products
or services. These activities are categorized as either primary activities or support activities.
Primary activities are most directly related to the production and distribution of the products and services and
as such these create value for the customer. They include inbound logistics, operations, outbound logistics,
sdales & marketing, and service.
Support activities make the delivery of the primary activities possible. They consist of administration &
management, human resources, IT department, procurement, etc.
More and more companies are now incorporating the Internet in their business strategies through the use of
value webs. These allow them to extend the value chain to connect itself, suppliers, and business partners
and share best practices so that each participant can improve its business processes. That in turn lowers
supply costs and ensures a certain level of standardization through the manufacturing process. Suppliers can
collaborate with each other via the value web to enhance their core competencies and improve the entire
supply chain.
Sharing information through the value web helps not just one company but the entire vehicle manufacturing
industry.
Marks: 4 for explaining the model, 3 for how the Internet extends it.
(b) Internet business models include:
e-tailer
transaction broker
market creator
content provider
community provider
portal
service provider.
The choice of riskiest model will depend on the individual student. A sample answer is: Today the riskiest
model would be a content-provider, because most if not all of the major offline entertainment and content
producers such as television networks and newspapers are online. They would be your competitors, and
already have the means for content creation and distribution in place. All of the other business models do not
have the risk of creating brand new content.
Marks: 1 mark each for 5 business models. 2 marks for valid explanation of risky business model.

(c) The types of applications include:

location-based services: enable users to locate nearby restaurants and gasoline stations, find local
entertainment and movie times, and call a cab, providing maps showing how to reach their locations.
banking and financial services: Banks are rolling out services that let customers manage their bank
accounts from their cell phones or other mobile devices.
wireless advertising: Mobile phone service providers who have information valuable to advertisers
about where subscribers live, their location the moment they view ads, their age, and the games, music,
and other services they use on their phones. When done right, mobile campaigns yield high response
rates and increased consumer engagement.
games and entertainment: Games and entertainment are another popular area, with music, digital
games, ringtones, and even films designed for mobile phone screens.
Marks: 2 marks each for any three of the above, identified and described
Page 10
ANSWER 5
Tutorial Notes: -
Purpose: To examine the candidates knowledge of supply chain management systems and customer relationship
management systems, and of cloud-based solutions for these types of enterprise applications.
Links: No major links or other topics or papers.
Options: Candidates must answer all parts of the question. Answers should not vary significantly from those given
below.
Essential components: Candidates must be able to explain SCM or CRM systems, and show an understanding of
cloud computing.

SOLUTION 5
(a) Candidates describe one of the following:

Supply chain management systems help an organization better manage its supply chain, including planning,
sourcing, making, delivering, and returning items. Supply chain management software can be categorized as
a supply chain planning system or as a supply chain execution system. A supply chain planning system
enables a firm to generate demand forecasts for a product and to develop sourcing and manufacturing plans
for that product. A supply chain execution system manages the flow of products through distribution centers
and warehouses to ensure that products are delivered to the right locations in the most efficient manner.
Supply chain management benefits include improved customer service and responsiveness, cost reduction,
and cash utilization.

Customer relationship management systems help firms maximize the benefits of their customer assets. These
systems capture and consolidate data from all over the organization and then distribute the results to various
systems and customer touch points across the enterprise. Customer relationship management systems can
be classified as operational or as analytical. Operational CRM refers to customer-facing applications, such
as sales force automation, call center and customer service support, and marketing automation. Analytical
CRM refers to customer relationship management applications dealing with the analysis of customer data to
provide information for improving business performance. Benefits include increased customer satisfaction,
reduced direct marketing costs, more effective marketing, and lower costs for customer acquisition and
retention.
Marks: 1 mark for each key point made (up to total of 6)

(b) Students can list some or all of the following:

Advantages:
- Cloud-based services can provide a low cost way to acquire SCM/CRM functionality lower upfront
costs
- Works around IT resource and budget constraints.
- Typically achieves faster time to deployment.
- Avoids delays and costs associated with long IT projects.
- Faster ongoing release of new features.
- Can be used to build competencies prior to investing.
- Easy to test the providers application in a proof of concept or pilot.
- It enables companies to try it out at a lower cost, without any long-term commitment.
- Greater confidence in proven solution

Disadvantages:
- Less control
- Data security and/or confidentiality may be an issue
- Possible downtime (may be outside companys control)
- Performance latency could be an issue with a service that is experiencing heavy usage from a lot of
customers (servers may not be able to cope).
- Inflexibility (possibly locking the company into using proprietary applications or formats)
- May be difficult to get support or essential changes implemented quickly
- Potential difficulties integrating with other services

Marks: Up to 4 marks for valid advantages; up to 4 marks for valid disadvantages

Page 11
(c) Service level agreements (SLA) help protect both the company (the customer) and the service provider. The
main points of SLAs are:
- They define the responsibilities of the service provider and level of service expected by the customer
- Specify the nature and level of services provided
- Establish criteria for performance measurement
- Outline the customer support options
- Make provisions for security and disaster recovery
- Clarify the software upgrade process
- State the billing and conditions for termination

Marks: 1 mark each for each valid point (up to a maximum of 6)

Page 12
ANSWER 6
Tutorial Notes: -
Purpose: To examine the candidates familiarity with the area of knowledge management.
Links: No major links or other topics or papers.
Options: Candidates must answer all four parts of the question. Answers should not vary significantly from those
given below.
Essential components: Candidates must be able to explain the benefits of knowledge management, the types of
knowledge that exist in organisations, and the knowledge management value chain.

SOLUTION 6
(a) Effective knowledge management contributes to improved organisational excellence by helping to:
dramatically reduce costs by leveraging what is known in the organisation (not reinventing the wheel)
leads to increased profitability
reduce the tendency to repeat mistakes leads to improved products and/or services (competitive
advantage)
improved speed of response (for example in a call centre) as a result of better knowledge access and
application
better relationship management through knowing customer/supplier/employee needs

Effective knowledge management, especially accelerated knowledge creation, is also a driver for innovation.
In particular the ability to better collaborate in physical and virtual teams, as knowledge workers, is driving the
process of new knowledge creation. Ideas can now be turned into innovative products and services much
faster.
Marks: 3 marks for identifying knowledge sharing and creation/innovation; 1 mark for each valid point made
(up to maximum of 5)

(b) The two types are explicit and tacit knowledge.

Explicit knowledge is articulated knowledge, expressed and recorded as words, numbers, codes,
mathematical and scientific formulae, etc. It is knowledge that has been formalized and codified. It is therefore
fairly easy to identify, store, and retrieve. This is the type of knowledge most easily handled by a knowledge
management system, which are very effective at facilitating the storage, retrieval, and modification of
documents and texts.

Tacit knowledge is highly personal and hard to formalize, making it difficult to share with others. Subjective
insights, intuitions and hunches fall into this category of knowledge. It is deeply rooted in and individuals
actions and experience as well as in the ideals, values, or emotions individuals embrace. It has a personal
quality which makes it hard to formalize and communicate.

Tacit knowledge includes the kind of informal personal skills of crafts often referred to as know-how as well
as beliefs, ideals, values, schemata and mental models which are deeply ingrained in individuals.

The most common form of knowledge in an organisation is tacit knowledge (most literature refers to 80/20
split between tacit and explicit).

Marks: 2 marks each for correct descriptions and examples of tacit & explicit; 1 mark for correctly identifying
the most common type).

Page 13
(c) The following figure from Laudon & Laudon (2012) describes the activities involved in each part of the
knowledge management value chain:

The four main steps are:

Acquisition: organisations acquire knowledge in a number of ways. A range of technologies are used to gather
information and knowledge from emails; transaction-processing systems that track sales, payments, inventory,
customers, etc.; and outside sources such as news feeds and industry reports. Organisations also acquire
knowledge by developing online expert networks so that employees can find someone who has expertise in
a particular area.

New knowledge might also be created by discovering patterns in corporate data (data mining) or by using
knowledge work systems where knowledge workers can discover new knowledge.

Storage: As organisations gather knowledge they must store it efficiently so that it can be retrieved and used
by employees. Knowledge storage generally involves the creation of a database, typically on a central server
or cloud-based service. Document management systems are an easy way to digitize, index, and tag
documents so that employees can retrieve them without much difficulty. Expert systems also help corporations
to preserve the knowledge that is acquired by incorporating that knowledge into organisational processes.

Dissemination: Once a organisation has acquired and stored the knowledge, they need to make it easy and
efficient for employees to access it. Portals, wikis, social networks, IM, and email are just some of the tools
used to disseminate information easily and cheaply.

Organizations needs to make knowledge dissemination unobtrusive and easy to master or the employees and
managers will ignore it or underutilize it.

Application: Knowledge that is not shared and applied to the practical problems facing an organisation does
not add value. Knowledge must become a systematic part of management decision making, and become
situated in decision support systems. New knowledge must also be build into an organisations business
processes and key application systems, including enterprise systems for managing key internal business
processes and relationships with customers and suppliers.

The management and organizational activities include the development of new roles and responsibilities for
the acquisition of knowledge, including the creation of a chief knowledge officer (CKO) executive position
and dedicated staff positions (knowledge managers). Their responsibilities should involve designing new
programs, systems, and methods for capturing and managing knowledge.

Marks: 1 mark for explaining the value chain; 1.5 each for each of the 4 steps

Page 14
(d) A community of practice is a group of practitioners who share a common interest or passion in an area of
competence and are willing to share the experiences of their practice. It differs from a work team, in that it
has no specific time-bound work objective, but exists indefinitely for the promotion of the issue or issues
around which the community is formed.

Many organizations have found that communities of practice enable significant knowledge sharing to take
place. They are typically based on the affinity created by common interests or experience, where practitioners
face a common set of problems in a particular knowledge area, and/or have an interest in finding or improving
the effectiveness of solutions to those problems. Various tools can be used to strengthen such communities,
including the establishment of specific work objectives for the community, the provision of adequate staff,
financial resources, technology and management support to enable it to conduct its activities.

(3 marks)

Page 15