Decision Support Systems and Competitive Advantage - Assignment Example

Decision Support Systems and Competitive Advantage 1.0 Introduction Decision Support Systems are specific classes of computerized information systems that support business and the decision-making activities of organizations (Zaraté, 2012). A Decision Support Systems that is properly designed should be an interactive software-based system, that is intended to help managers compile useful organizational information from raw data that has not been synthesized to documents, personal knowledge, and business models to help identify problems and provide solutions. Some of this information may include: inventories of information assets; a firm’s projected revenue figures based on product sales models and a comparison of sales figures (Power, 2002). Decision support systems comprise of a diverse group of interactive computer tools/software that are purposefully designed to assist managers in decision making. They serve a solitary goal of making management more efficient and effective. In most circumstances, interactivity is key to their designs. These systems do not make decisions by themselves, but through the presentation of information in a manner that enables decision-making possible and informed (Power, 2002). Their application majorly in most organizations is to help create competitive advantage. This refers to an organization’s resources, capabilities or skills that significantly enhance its success within the market it operates and against rivalry situations it encounters. Such results from carrying out activities better than competitors thus creating value and superior performance to consumers and clients alike (Parsaei, Kolli & Hanley, 1996). A decision support system can only create a competitive advantage for an organization when certain criteria are met. These involves: using it and making it become an important and significant strength of the particular organization once it is implemented; being unique and proprietary to the organization and taking of the advantage provided by its sustainability until the adequate payback is received, which normally takes at least three years. These criteria have to be carefully considered to derive the benefits of the decision support systems throughout (Power & Business Expert Press, 2009). Managers have increasingly integrated the use of decision support systems in their organizations through the use of sophisticated data-driven systems to obtain information that were initially present in ordinary files and those on computer storage systems (Green, Stankosky & Vandergriff, 2010). The use of such systems has enabled the reduction of wastes in production operations and also an improvement in the management of inventory (Samli, 1996). The improvements in information technologies have also opened wider the doors for innovative web-based decision support systems. Some of the innovative uses of these systems have been geared towards increasing linkages between organizations with their customers and suppliers. Its extensions have even enabled the removal of some of the existing time and location barriers making the firms contain the ability to operate throughout (Power & Business Expert Press, 2009). 2.0 Components of a Decision Support System A typical Decision Support System usually consists of three basic components that include: The database; also referred to as the database management system (DBMS) in advanced systems; carries out the function of storing and maintaining of data and information that is needed for the Decision Support System. It thus consists of both the Decision Support System information and the Decision Support System database management system. Data that could be stored in this component could include customer account records, product sales history, employee schedules, or manufacturing process statistics (Janakiraman & Sarukesi, 1999). The model base; also referred to as the model base management system (MBMS); has one or more models for the kind of analysis the system would perform. It is a representation of some events, facts, or situations which takes various forms. In business situations, models are often used to represent variables and their relationships. The decision support systems utilize models that allow people to analyze information in several different ways majorly depending on the decisions to be made and the kind of analysis that is needed. These could involve the what-if analysis and optimization models used and applied in different circumstances (Janakiraman & Sarukesi, 1999). The user interface; the user interface management component allows one to communicate with the Decision Support System. It comprises of the user interface management system. It is the component that allows the user to combine his/her knowledge of the storage and processing capabilities of the computer programs (Respício et al., 2012). The user interface is the part where one can see the Decision Support System as he/she enters information, commands, and models. The interface provides the direct contact with the system and should be properly designed so as not to be too rigid or cumbersome to use. It should be flexible, adaptable, consistent and simple to use (Respício et al., 2012). 3.0 Taxonomy of Decision Support Systems These Decision Support Systems, depending on their intent and purposes with the users as the criterion, can be divided into different taxonomies including among them: Communication-driven DSS; supporting more than one individual working on shared tasks Document-driven DSS; managing, retrieval and manipulation of unstructured data sets in variable electronic formats Data-driven DSS; emphasizing on the analysis and manipulation of a company’s internal and external data Model-driven DSS; emphasizing on the access and manipulation of various models; these aren’t data intensive. 4.0 How firms use DSS to enhance their competitive advantage Firms compete on various levels to reach more customers and retain the present ones they have. In the ever growing markets and industries, most firms have incorporated the use of information technologies to maintain a competitive advantage against rivals to market their products and stay relevant (Power, 2002). The use of DSS has particularly been applied by various firms and has helped serve the purpose in the following ways; Improvement of personal efficiency; DSS has given firms a competitive edge by helping people become more effective in decision making by making then efficient in data manipulation. This either allows people to perform similar tasks in lesser times or perform the same tasks with similar speed rates but more thoroughly (Green, Stankosky & Vandergriff, 2010). This has helped improve the consistency and accuracy of the automated clerical component of decision-related tasks and allowed employees to spend less time on such tasks and more on substantive ones. Still on the efficiency of operations, DSS can be used to create a major cost advantage by increasing efficiency or in the elimination of some value chain activities (Rainer & Cegielski, 2011). Expedition of problem-solving, and improvement of decision quality; A Decision Support System that is Data-Driven can help in the faster retrieval of decision-relevant information and improvement in their consistency and accuracy. It may also help in the provision of better ways of viewing and solving problems (Rainer & Cegielski, 2011). In firms where Decision Support Systems are applied, users can obtain answers to non-routine questions faster. Use of these systems can also help in the reduction of variability in the application of organization’s guidelines and policies and solve problems faster. Group Decision Support Systems can lead to the reduction in the length of feedback loops and the need to perform the analysis again and again. In expediting problem-solving, the decision makers should strive to create a cost advantage by searching for situations and areas where decision processes are taking longer and/or are cumbersome to apply the appropriate Decision Support Systems (Daidj, 2015). Facilitation of Interpersonal Communication; the use of Decision Support System can help improve communication and collaboration among organization’s decision makers. Communications driven, and group DSS in most circumstances have had the greatest impacts in this area. The Decision Support Systems which are Model-driven can provide a means for sharing of facts and assumptions among the workers of an organization. If an organization gets to have this kind of data accessibility over its competitors, the business is bound to be greater (Daidj, 2015). Promotion of Learning or Training; most Decision Support Systems serve as the ordinary training tools for new employees. The kind of training and/or learning that could give an organization an edge over its competitors could involve the learning of new concepts and the development of the basic understanding of how the business and its decision processes work (Respício & DSS 2010, 2010). Increased Organizational Control; The use of some of the data-driven decision Support Systems often makes business transaction data available for the purposes of overall organizational control. These can then be monitored, analyzed or retained. Such systems can help enhance management understanding of the operations of the businesses and provide a competitive advantage (Respício & DSS 2010, 2010). Creation of a differentiation advantage; provision of DSS to customers can help in the differentiation of products and the creation of possible provision of new services. In firms, differentiation could increase profits where the price premium charged would be greater than any of the added costs associated with the differentiation. A firm could then charge products at premium prices or sell more product units and increase the buyer loyalty for service with successful differentiation (Khosrow et al., 1992). Market segmentation; DSS can help a company obtain a better focus on a specific market segment. This could enable it to gain a competitive advantage in meeting the needs of that particular segment. These systems can help track customers and make it even easier to serve specialized groups of customers with special products and services (Khosrow et al., 1992). 5.0 Conclusion Companies should always continually improve their information technology so that they can gain and maintain this competitive advantage. They should focus greatly on investing more time and money to achieve a competitive advantage that is sustainable. To do this, the organization should be able to predict their competitors’ actions and achieve it largely through intimidation. This could be through the creation of larger and complex systems to scare away potential duplicators. Besides to this, these systems should also be continually developed and enhanced. Managers should consider various factors including their cost, the managerial effectiveness and the customer and supplier relations of such systems in the course of their developments. The aim of gaining competitive advantage has to be achieved in the long run (Burstein & Holsapple, 2008). Reference Burstein, F., & Holsapple, C. W. (2008). Handbook on decision support systems. Berlin: Springer. Daidj, N. (2015). Developing strategic business models and competitive advantage in the digital sector. Decision support systems and electronic commerce. (1999). Amsterdam, Netherlands: North-Holland. Green, A., Stankosky, M., & Vandergriff, L. J. (2010). In search of knowledge management: Pursuing primary principles. Bingley, UK: Emerald. Information Resources Management Association., & Khosrow-Pour, M. (1992). Emerging information technologies for competitive advantage and economic development: Proceedings of 1992 Information Resources Management Association International Conference. Harrisburg: Idea Group. Janakiraman, V. S., & Sarukesi, K. (1999). Decision support systems. New Delhi: Prentice-Hall of India. Khosrowpour, M., Information Resources Management Association, & Information Resources Management Association International Conference. (1999). Managing information technology resources in organizations in the next millennium: 1999 Information Resources Management Association International Conference, Hershey, PA, USA, May 16-19, 1999. Hershey, Penn: Idea Group Pub. Parsaei, H. R., Kolli, S., & Hanley, T. R. (1996). Manufacturing Decision Support Systems. Boston, MA: Springer US. Power, D. J. (2002). 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