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					                                                               Paper 3.4
Business
Information
Management
PART 3

MONDAY 5 DECEMBER 2005




QUESTION PAPER

Time allowed 3 hours

This paper is divided into two sections

  Section A   ALL THREE questions are compulsory and MUST
              be answered

  Section B   TWO questions ONLY to be answered




Do not open this paper until instructed by the supervisor

This question paper must not be removed from the examination
hall



The Association of Chartered Certified Accountants
Section A – ALL THREE questions are compulsory and MUST be attempted

All questions in this section relate to the Gervil Investment Co Case Study

CASE STUDY – Gervil Investment Co
Introduction
Gervil Investment Co provides financial services nationwide. These services include: life assurance, home insurance,
pensions, mortgages, investment products and the management of investment portfolios for individuals and companies.
Gervil’s head office is located in the financial district of the capital city. Gervil has existed with its current structure for ten
years. During the late 1980s and early 1990s George Vilsen, the founder of the successful Vilsen Finance Co, began a
business strategy of purchasing small/medium sized independent finance companies, thus expanding his business
portfolio and customer base. In 1994 George Vilsen, with the assistance of several financial backers, established Gervil
Investment, which is now one of the top ten financial companies in the country.
Where they were
Throughout the 80s and early 90s Gervil adopted a decentralised strategy in terms of information systems development.
In each region, Gervil has regional offices normally situated in a major city. These regional offices support smaller branches
within the region. The head office developed company systems that were rolled out to the regional offices. The regional
offices often enhanced the basic systems locally, some used technical staff employed by Gervil, while others used local
consultants. If new developments within the regional offices were reported to be successful then changes were made via
head office to all regional office systems.
Changing the infrastructure
Until 1995 there was a senior investment advisor at each of Gervil’s 45 branches. The advantage of employing these
specialist managers was the ability to make decisions quickly, face-to-face, using local client knowledge. A major
disadvantage was that decisions were not always consistent across the company. Some clients had complained to head
office, concerned that best advice was dependent on which branch they contacted. The financial director accepted these
criticisms. At a board meeting she declared, ‘We must adhere to our business strategy of providing the most up-to-date
advice, consistently, throughout the company’. George Vilsen, the CEO, was quick to react to this statement. This latest
criticism strengthened the CEO’s view that the company had been moving away from its core business objective of
providing the best service to all its clients throughout the country. For some time the CEO had viewed the acquisition of
the independent companies as positive in terms of market growth but negative in terms of inheriting numerous information
systems and business practices. He was aware there was a gap between Gervil’s business strategy and its information
systems strategy. He also knew he would have to take positive action to prevent the gap from widening.
The CEO decided to centralise the investment decision-making process. He commissioned the in-house development of
an automated investment advisory system (AIA). The AIA system was based on expert system technology. The system
encompassed a variety of investment products and services. The core of the system was designed to use best practice.
The knowledge base was created focusing on the knowledge of the top investment managers. A major decision taken at
the time of design was whether to make the AIA system stand-alone on unconnected computers in the branches, or to
make it a networked system controlled from head office. The stand-alone option would be relatively cheap and easy to
install while the network option would be initially more expensive and technically demanding. Gervil chose to develop the
AIA system using the network option. Using the same infrastructure, several new front-end applications have been
successfully developed. The successful development of the AIA system and its associated infrastructure has proved to be
the cornerstone of Gervil’s continued success in aligning its business strategy with its information systems strategy.
Gervil always has adopted, and will continue to adopt, a policy of exploiting technology whenever the company can
demonstrate a benefit from the introduction or enhancement of information systems. During the last decade Gervil has
continually updated its support information systems, e.g. the company has always upgraded its office automation systems
with the latest versions available.
Product database
All client details were stored within a product database. Therefore, if a client purchased several products, their details
would be stored several times. Gervil, appreciating the need to become more client based, developed a front-end enquiry
system that permitted a user to enter a client’s details and retrieve details of all the products that the client had purchased.
Gervil was among the first financial companies to develop such an enquiry system. This system has proved invaluable to
the telesales personnel, who can now target specific clients based on consumer knowledge.



                                                                 2
The sales process
Currently in each of the main branches there is a sales manager who is responsible for meeting sales targets which are
set by head office. The branch sales manager leads a team of sales personnel who visit existing and potential clients to
sell Gervil products. When a sale has been finalised the details are downloaded into the product database. Administrative
staff in the sales department prepare all the relevant documentation and distribute it to the clients. Applications for some
products, such as mortgages, can take several weeks to process. In such cases a specific administrator is assigned to the
application. The administrator maintains a file locally for each ongoing application. It is the administrator’s task to ensure
the procedure is completed and to monitor progress. Clients are informed of the administrator’s details, ensuring a
one-to-one contact.
Most of the sales personnel specialise in particular products although they have a limited knowledge of all other products
and services. The sales personnel are all equipped with the latest mobile technology – phones and laptops. Sales are
obtained in a variety of ways, e.g. via telesales where existing clients are contacted periodically and informed of new
services and products. If interested, their details are sent by e-mail to a sales person and an appointment is made either
in their place of work, their home or at one of Gervil’s offices. Another form of attracting new clients is through advertising
new products in the press, on radio and on television. When potential clients contact any of Gervil’s offices, the same
procedure as the telesales process is adopted. If clients want specific advice, the point of contact at the office will pass on
their details to an appropriate sales person who will then arrange an appointment. Gervil also has a website that attracts
many enquiries. The website, along with providing visitors with an overview of the company, advertises the company’s
products. Because of the nature of many of the products, the website is normally used to gather basic client information.
Once this is collected, the sales process is as stated above. Some of the basic products such as home insurance can be
purchased online. The website provides contacts to a central help desk where personal advice can be given. Sales staff
have commented on the rather reactive role of the website, where communication is instigated by the client. All enquiries
are logged on a client database and the date, type of enquiry and action taken are input into the system. This database is
checked frequently to ensure appropriate action has been taken.
A customer service centre is based at head office. Clients can contact this centre if they have specific enquiries concerning
details of products. Within the centre there is a team of expert staff, each having expert knowledge of specific products.
Product development
Product innovation has always been the cornerstone of Gervil’s success. New products or services are normally developed
and designed in the head office in the Product and Services (PS) department. When a new product is ready to be launched,
details are placed on the intranet. Frank Maloney, an executive director of Gervil, manages the PS department. Within his
remit he has to be constantly aware of new financial products being offered by Gervil’s main competitors and, where
appropriate, develop new products or services ahead of Gervil’s competitors. During the last few years many areas within
the financial services have become very competitive. The ease and willingness of clients to move from one provider to
another has made it necessary to provide the best quality service at competitive rates. Frank’s team in the PS department
is consistently gathering information from a variety of sources both internal and external in an effort to keep ahead of
competitors. Frank has always believed his work would be made easier if communication throughout the company was
better. He is sure that knowledge within the organisation is not always shared and communicated to the appropriate
people. He is committed to improving knowledge management throughout Gervil.
In a recent meeting with George Vilsen, Frank stated his concerns about the use of the intranet. He said, ‘The
implementation of the intranet was fairly successful, especially as the appropriate infrastructure was in place. The intranet
could be used more effectively as a forum for two-way information provision. Currently the company uses the intranet as
a method of communicating one-way predominantly down through the structure’. Frank continued, ‘I believe we need to
adopt a knowledge management strategy throughout the company. We have most of the technology in place; now we need
a strategy’. George, who has always been a strong supporter of exploiting technology, replied, ‘ I am not entirely sure what
you mean by a knowledge management strategy. But the concept sounds very interesting. Give me your views on the idea
and I will discuss it informally with other members of the board’.




                                                              3                                                        [P.T.O.
Required:
1   (a) Discuss in general terms how Porter’s value chain model can assist the development of an information
        systems strategy that will enable an organisation to trade competitively in the market.   (10 marks)

    (b) For each of the five primary activities suggested in Porter’s value chain evaluate the current position within
        Gervil Investment Co. Your evaluation may include suggestions where new information systems could
        improve the current activity.                                                                     (10 marks)

                                                                                                            (20 marks)


2   Following his recent discussion with George Vilsen, Frank Maloney is eager to pursue his idea of introducing a
    knowledge management strategy. He has asked you, a business analyst within his department, to write a draft report
    that should include:
    (a) An evaluation, in general terms, of the need for developing a knowledge management strategy. The concept will
        be new to many of the members of the board. He believes they will require information on the necessity of
        developing such a strategy.
    (b) An assessment of the four functions normally associated with knowledge management with reference to the
        existing information systems within the company. This section should include recommendations regarding the
        development or enhancement of information systems where appropriate.
    The four functions normally associated with knowledge management are: distribute knowledge, share knowledge,
    capture and codify knowledge and create knowledge.
    Section (a) should be approximately 40% of the report.

    Required:
    Write the draft report.

                                                                                                            (20 marks)


3   (a) Explain how the application of gap analysis can contribute to the development of an information systems
        strategy that aligns with a business strategy.                                                (8 marks)

    (b) ‘The successful development of the AIA system and its associated infrastructure has proved to be the cornerstone
        of Gervil’s continued success in aligning its information systems strategy with its business strategy.’

        Required:
        Discuss the above statement from the scenario in the context of the model referred to in part (a).
                                                                                                         (12 marks)

                                                                                                            (20 marks)




                                                          4
Section B – TWO questions ONLY to be attempted

4   The human resources (HR) department at the GB University is developing a system that will enable junior lecturers
    to apply for promotion to the senior lecturer grade. Currently promotions are given on an individual basis within
    faculties. This procedure has been strongly criticised by many of the stakeholders including: the lecturers’ union, junior
    lecturers and the heads of faculties who all complain about the lack of fairness of the system. The university executive
    is planning to develop a university wide promotion strategy that it hopes will alleviate the criticisms of the current
    system. The executive managers are developing general criteria based on teaching ability, management responsibility
    and academic achievements. When the criteria are established, prospective applicants will be requested to complete
    a standard application form informing the HR department of their relevant details. Applicants will be shortlisted based
    on their ability to match the criteria. A panel selected from faculty professors within the university will interview
    shortlisted applicants. Successful applicants will be offered promotion while unsuccessful applicants will be given
    feedback on their applications. A predetermined number of promotions will be offered.

    Required:
    (a) Produce a root definition for the GB University’s promotion system.                                        (3 marks)

    (b) Using the root definition produced in part (a) draw a conceptual model of the GB University’s promotion
        system.                                                                                       (9 marks)

    (c) Discuss the reasons why a soft systems approach is appropriate to the development of the university’s
        promotion system.                                                                         (8 marks)

                                                                                                                 (20 marks)


5   A model often used as a framework to encourage debate and policy-making decisions concerning ethical issues is the
    Five Moral Dimensions of the Information Age. This model identifies five major dimensions: (1) Information rights and
    obligations (2) Property rights (3) Accountability and control (4) System quality (5) Quality of life.

    Required:
    (a) Briefly describe each of the five moral dimensions within the context of an organisation.                  (5 marks)

    (b) (i)   For each of the five moral dimensions, identify an example where an infringement on the principle of
              the moral dimension may have occurred in the context of any organisation.               (10 marks)
        (ii) Identify what steps the organisation could have taken to minimise the risk of each infringement,
             identified in part b(i).                                                               (5 marks)
                                                                                                                 (20 marks)




                                                             5                                                        [P.T.O.
6   The results obtained from conducting a current situation analysis are often depicted in Earl’s audit grid format.

    Required:
    (a) Evaluate the use of current situation analysis and the resulting audit grid within the context of developing an
        information systems strategy.                                                                       (10 marks)

    (b) Examine a key information system in an organisation of your choice using Earl’s audit grid as a framework.
        In your answer you should discuss which of the four quadrants is more applicable to your chosen information
        system and why.                                                                                  (10 marks)

                                                                                                               (20 marks)




                                                 End of Question Paper




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