According to the financial statement of the company, the disposable income has increased but the retail sales as a percentage of disposable income has decreased. This means that the consumers are spending their income on activities like entertainment, fitness, etc. This has increased competition within the sellers to attract buyers. The focus of sellers needs to be low price, quality, and service to provide customer more than expected
Substitute products
Substitute products or services are those that are within the industry but are differentiated in some way. There is always the danger that a business may lose a customer to the purchase of a substitute product from a rival business because that product meets the needs of the customer more closely. Information technology can prevent this happening in two ways. Firstly it can be used to introduce switching costs as stated above. Or the technology may be used to provide differentiated products swiftly by the use of computer aided design/computer aided manufacturing (CAD/CAM). In this latter case the business produces the substitute product itself.
In Avon Product Inc., the catalog shopping and retail stores, Mail order shopping has increased 60% since 1983. This means that the sellers have another segment to compete with. It is crucial for the sellers to offer customers quality, value, service, convenience, and pleasant stores to attract the customers from the sanctuary of their homes to stores. On-line shopping: convenience and the low prices (due to fewer overheads incurred by on-line sellers) offered by on-line sellers in their comfort of their (customer’s) homes have made it difficult for the sellers to attract them.
Television shopping: Networks like Home Shopping Network, QVC, and the Fashion Channel have been very successful at providing customers with a new way to shop. Customers get to see products displayed and used on the television in the privacy of their homes. As the discount stores reach maturity, alternate-retailing strategy may impact them.
In the recent years, it also has to face a new competitor, which is Nu Skin Co. Nu Skin’s products will be mainly based on the skin care products, cosmetics and health care products as well.
New entrants
Within any industry there is always the threat that a new company might enter and attract some of the existing demand for the products of that industry. This will reduce the revenue and profit of the current competitors. The traditional response has been for mature business within an industry to develop barriers to entry. These have been:
- Exploiting economies of scale in production
- Creating brand loyalty
- Creating legal barriers to entry – for example patents
- Using effective production methods involving large capital outlays.
Information technology can assist a business in developing these barriers. In as far as information technology makes a firm more productive, for instance by reducing labour costs or speeding up aspects of the production process, any firm attempting to enter the market place will be competitively disadvantaged without a similar investment in capital. If expensive CAD/CAM equipment is common for the production of differentiated products speedily then this will also act as a barrier to entry.
Avon Products Inc. will be facing this problem of high entry barrier because of the following reasons: the economies of scale is a key factor to maintaining low prices, therefore to maintain the volume to achieve low costs, and they have to satisfy the customer in terms of choice. Lower profit margin if not large enough. Social image, reputation and customer loyalty
Competitor rivalry
Unless in a monopoly position, any business within an industry is subject to competition from other firms. This is perhaps the greatest competitive threat that the business experiences. Information technology can be used as part of the firm’s competitive strategy against its rivals as illustrated in the preceding sections. Close linkages with suppliers and customers produce competitive forces against rivals, as dose the investment in technology allowing product differentiation and cost reductions.
In some cases the investment in information technology will be necessary to pre-empt the competitiveness of other businesses. The major investment by the banks in automated teller machines is just one example of this.
In the case of Avon, competitors are catching up by imitating MKC in terms of culture and image. MKC focuses on women encouraging them to do their best and perform to the best of their abilities. Due to saturation in the industry the profit margin is decreasing. Rivals like Avon and Amway are adapting cultures. Demographics are changing with increase of value conscious customers—more value-sensitive; hence, the competitors are adapting to low-cost strategy to satisfy the customer.
Environment influences on the organization – PEST analysis
Porter’s five forces model considers the industry sector within which the business operates. However in formulating strategy there are other external factors, which the strategist needs to take into account. This is the function of a PEST (Political, Economic, Socio-cultural, Technological) analysis.
The questions to be asked are: ‘Which environmental factors are currently affecting and are likely to affect the organization?’ ‘What is the relevant importance of these now and in the future?’
Examples of the areas to be covered under each heading are given below:
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Political/legal : monopolies legislation, tax policy, employment law, environmental protection laws, regulations over international trade, government
continuity and stability.
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Economic : inflation, unemployment, money supply, cost of parts and energy,
economic growth trends, the business cycle – notional and international
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Socio-cultural : population changes – age and geographical distribution, life-style
changes, educational level, income distribution, attitudes to work / leisure /
consumerism.
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Technological : new innovations and development, obsolescence, technology
transfer, public/private investment in research.
At a minimal level the PEST analysis can be regarded as no more than a checklist of items to attend to when drawing-up strategy. However, it can also be used to identify key environmental factors. These are factors that will have a long-term major influence on strategy and need special attention. For instance, included in the key environmental factors for a hospital will be demographic trends (increased percentage of older citizens in the population and decreased percentage of those who are of working age), increases in technological support, government policy on funding and preventative medicine. These key factors are ones that will have significant impact on strategy and must be taken into account.
PEST analysis may also be used to identify long-term drivers of change. For instance, globalization of a business may be driven by globalization of technology, of information, of the market and of the labour force.
In general a PEST analysis is used to focus on a range of environmental influences outside of the organization, and (perhaps) outside of the industry, which are important to longer-term change, and therefore strategy, but may be ignored in the day-to-day decisions of the business.
Swot Analysis of Avon Product Inc.
In order to succeed, businesses need to understand what their strengths are and where they are vulnerable. Successful businesses build on their strengths, correct weaknesses and protect against vulnerabilities and threats. Just as important, they have an eye on their overall business environment and spot new opportunities faster than competitors. A tool that helps many businesses in this process is SWOT Analysis. SWOT analysis stands for Strengths, Weaknesses, Opportunities and Threats Analysis. The technique looks at where the company has an advantage compared to its industry and where it is weak. The SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis has been a useful tool for industry. SWOT is a simple, easy to understand technique. It can be used in formulating strategies and policies for the administrator.
SWOT analysis is a simple framework for generating strategic alternatives from a situation analysis. The internal and external situation analysis can produce a large amount of information, much of which may not be highly relevant. The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as opportunities or threats. Strengths can serve as a foundation for building a competitive advantage, and weaknesses may hinder it. By understanding these four aspects of its situation, a firm can better leverage its strengths, correct its weaknesses, capitalize on golden opportunities, and deter potentially devastating threats.
The strengths in this analysis will be dealt with the questions on what are the strengths of the product of the company? What makes it better than other products? Are these strengths being sufficiently exploited? Are they being sufficiently defended? Avon Product Inc. recent conception and establishment gives it competitive strength. Management possesses the tools of extensive industry experience and understanding. These tools allow development and refinement in areas and aspects currently deficient in the multi-level cosmetic industry. Strong, healthy, friendly, hardworking, customer oriented corporate culture has established in this company. Management has identified customer relations and rapport as an unsatisfactory area in the multi-level cosmetic industry. Avon fortifies this deficiency by providing all clientele with an experience beyond the service. Industry experience confirms that established firms rely on entrenched brand equity to retain current customers and attract new customers. Customer's perceived value of entrenched market images and names create and sustain market strength for established company. Initial penetration into the established salon industry has relied on providing customers with an experience tailored to customer demands. This compliments the company’s services and products offered. Avon has established a commitment to customer satisfaction and provides customer satisfaction in the experience of the services and products offered. Besides, good image and reputation with suppliers and customers; strong leadership, esp. Mary Kay Ash will be another strengths of the company. The uncanny ability to predict customer wants and desires; focus on customer and employees instead of profit margin enabled MCK to achieve the position of a leader. Again, customer needs, ideas and demands serve as cornerstones to produce a customer tailored experience. Customer tailored experiences combined with experienced salon staff and high quality salon products elevate customer's perceived value of Avon. The ability to implement strategy especially through building strong culture, achievement awards, employee empowerment, and focus on customer; ability to adopt and invest in new technology made them more cost efficient; strong and effective leadership and management enable them to compete in the world of multi-level cosmetic companies. Economies of scale, no middleman, and a sophisticated distribution system enabled them to provide products to the customer at the time of sale and sample the many items will be another advantage to this international company, and the strategy of making women entrepreneurs and believing in them is factors of MKC’s success. This is also an asset to society because the company is concern with the service to the community and corporate citizenship and involvement in environmental issues, which will boosts their image and reputation
Weaknesses concern with the issue on what are the weaknesses of your product? What makes it inferior to other products? Are there strategies you should be adopting to offset these weaknesses? Should you be removing these weaknesses completely? In the case of Avon, it operates in the lower level of a multi-level retail mall complex. This location has no direct access from the street level and customers must walk into the mall complex and descend a flight of stairs to reach the salon. Visibility at street level remains poor since only one sign for Avon sits in the street level foyer of the multi-level complex. The rear of the building provides direct access to the salon where congested and restrictive customer parking exists. Besides, drops in profit in the recent years may appear to be a disadvantage to the company. The shareholders or the investors may have less confident on the earnings of the company and as a result, this will lead to a decrease in the share price of the company. Another major weakness of the company is that the company is still a paper-based company and the current system in the company is outdated and needs for replacement of a new system in order to keep the operations efficiency and effective. The current computer system in the company has caused lots of problems not only to the staffs but also to the sales representatives and the customers. Noted that decrease in growth rate of the consultant also represents another weakness of the company. Despite the strong management of the company, these cans still happen.
When move to the external analysis of the company, which will be dealt with the opportunities. It is the factors, situations that can benefit, enhance or improve the issue, situation, or technique. It is concern with what external factors are there those could be embraced if appropriate resources were allocated? When apply this in the case of Avon, it can be noticed that Avon’s recent establishment provides an injection of new ideas, concepts and strategies into a local market filled with stagnant, established salons. The infancy of the salon allows room to introduce change, advancement and evolution into the local market. Advancement in the quality of customer experience and delivery of salon services and products remains absent among established local salons.
Avon's location in U.S.A., provides access to a youth market currently ignored by the rest of the local industry. Many high schools operate in the Clarkson area and contain a large potential clientele pool. Related diversification and expansion of product line exists in target markets such as senior women and men. Marketing services and products target the needs of different age of women and other market segments ignored by the rest of the regional industry, specifically young lady and children and less affluent consumers, permit Avon to obtain potential clientele and retain an established. Going global to markets like Europe and South America is the factor of the company to grow established. Acquisition and strategic alliances with pharmaceutical companies to offer skin care products that can protect and improve skin maybe another opportunities to attract the new potential customers and to meet the existing customers’ needs. The management has the ability to capture and understand the overseas market. They have the underlying culture of achievement and financial capability to adapt such a strategy. In the recent year, the company has established a Web site to extend to the on-line market. They have the technological infrastructure to do so.
The last part in this analysis should be the threats. It is the factors, situations that can hinder the issue, situation, or technique. In other words, it does mean that what external factors are there that threaten to reduce your market share? The potential for a recession in the following year can dramatically deflate the amount of disposable income accessible to consumers. Drops in disposable income automatically decrease the frequency of customer patronage.
Avon's location presents supersaturated levels of competition. Within a one block radius resides 5 other salons that have all existed in the area for over 20 years. An extreme level of industry competition within the local market requires continual refinement of the customer experience. Key to future existence lies in ensuring customer's perceived value of Avon exceeds the competition. Increase in on-line, catalog, and television shopping networks. Globalization of world trade allowing foreign competitors with low labor and material cost into U.S. markets; direct link to economic indicators (Leading, Lagging, and Coincident); existing competition is trying to catching up and growth of Avon; and the existing competition is adapting culture to compete. These are all the threats that have to face by the Avon Company.
Value Chain
The value chain model highlights specific activities in the business where competitive strategies can be best applied (Porter, 1985) and where information systems are most likely to have a strategic impact. The value chain model can supplement the competitive forces model by identifying specific, critical leverage points where a firm can use information technology mist effectively to enhance its competitive position. Exactly where can it obtain the greatest benefit from strategic information systems-what specific activities can be used to create new products and services enhance market penetration, lock in customers and suppliers, and lower operational costs? This model views the firm as a series or ‘chain’ of basic activities that add a margin of value to a firm’s products or services. These activities can be categorized as either primary activities or support activities.
The set of processes a firm uses to creditors value for its customers is often called its value chain. The value chain includes primary processes that directly create the value the firm’s customer perceives and support processes that add value indirectly by making it easier for others to perform the primary processes. Primary activities are most directly related to the production and distribution of the firm’s products and services that create value for the customer. Primary activities include inbound logistics, operations, outbound logistics, sales and marketing, and service. Inbound logistics include receiving and storing materials for distribution to production. Operations transform inputs into finished products. Outbound logistics entail storing and distributing products. Marketing and sales includes promoting and selling the firm’s goods and services. Support activities make the delivery of the primary activities possible and consist of organization infrastructure (administration and management), human resources (employee recruiting, hiring and training), technology (improving products and the production process) and procurement (purchasing input). The idea of the value chain is important because the way work is organized within a firm should be related to the way the firm provides value for its customers.
Organizations have competitive advantage when they provide more value to their customers or when they provide the same value to customers at a lower price. An information system could have strategic impact if it helped the firm provide products or services at a lower cost than competitors or if it provided products and services at the same cost as competitors but with greater value.
The figure below identifies some of the processes in a multi-level cosmetic company value chain. These primary processes include purchasing, taking orders, and delivering of goods. Essential support processes not mentioned in the figures include, hiring employees, paying taxes, and managing the company. Managing can be viewed as a support process because it is not directly involved with doing the work that provides value for customers.
Attaining agreement about a useful view of any firm’s value chain is an important step in improving its effectiveness. Although a value chain may seem obvious after a useful view of it is produced, that view is often far from obvious in advance. For example, the value chain in below leaves out deciding what product to sell, and which products is the most suitable for a particular customer. For some purposes, these might have been the heart of the issues. Deciding what to include and what to exclude requires judgment and careful attention to the analysis.
Primary processes for Avon
Based on the primary processes shown, this probably is not the value chain for the type of MLM cosmetic company.
Viewing suppliers and customers as part of the value chain.
The figure below shows how to extend the value chain concept to identify different ways information systems can affect the cost incurred and value received directly by the customer. It shows a product’s value chain extending from and its suppliers to the firm itself and to the firm’s customers. Steps inside the firm and its suppliers include developing, producing, selling, delivering and servicing the product’s components or the product itself. Steps involving the customer directly include the steps in the customer involvement cycle. These include determining requirements, acquiring the product, using it, maintaining it, and retiring it.
Each step in the figure is an opportunity to increase value or decrease costs or prices, regardless of whether the improvements occur within the firm’s internal operation or for a supplier or customer’s direct benefit. For example, the types of supply chain management can help a firm manufacture its product with less waste and using fewer inventories. The basic approach is to create standardized electronic links and long-term agreements with suppliers. This helps the firm price its products competitively. Within the firm, information systems can improve sales processes by providing better information for sales representatives and customers. These systems can also improve service processes by maintaining customer records and hastening response. In the customer’s part of the value chain, information systems can help fit the product to the customer’s requirements and can make the product easier to use and maintain.
Extended value chain for a manufactured product
This extended value chain starts with business processes at suppliers, and includes business processes within the firm and business processes performed by the customer using the product. Each step in the extended value chain is an opportunity to reduce the cost or to add value for customers.
PART 4 : INFORMATION SYSTEM ANALYSIS
Feasibility Analysis
The main reason for carrying out a systems investigation is to establish the feasibility of introducing a computer system. Feasibility analysis guides the organization in determining whether to proceed with a project, it will provide some estimate of the likely costs and benefits of the proposed project. Feasibility analysis also identifies the important risks associated with the project that must be addressed if the project is approved. If at any point the project’s risks and limitations outweigh its benefits, the project team may decide to cancel the project or make necessary improvements. Each organization has its own process and format for the feasibility analysis, but most include three techniques: technical feasibility, economic feasibility, and organizational feasibility.
Technical Feasibility
The first technique in the feasibility analysis is to assess the technical feasibility of the project, the extent to which the system can be successfully designed, developed, and installed by the IS group.
There are many risks that can endanger the successful completion of the project. Most important is the users’ and analysts’ familiarity with the application. When analysts are unfamiliar with the business application area, they have a greater chance of misunderstanding the users or missing opportunities for improvement. The risks increase dramatically when the users themselves are less familiar with an application, such as with the development of a system to support a new business innovation. In general, the development of new systems is riskier than extensions to an existing system because existing systems tend to be better understood.
Familiarity with the technology is another important source of technical risk. When a system will use technology that has not been used before within the organization, there is a greater chance that problems will occur and delays will be incurred because of the need to learn how to use the technology. Risk increases dramatically when the technology itself is new.
Finally, project size is an important consideration, whether measured as the number of people on the development team, the length of time it will take to complete the project, or the number of distinct features in the system. Larger projects present more risk, both because they are more complicated to manage and because there is a greater chance that some misunderstood. The extent to which the project is highly integrated with other systems can cause problems because complexity is increased when many systems must work together.
The assessment of a project’s technical feasibility is not cut dried, because in many cases, some interpretation of the underlying conditions is needed.
Economic Feasibility
The second element of a feasibility analysis is to perform an economic feasibility analysis that identifies the financial costs and benefits associated with the project. Economic feasibility is determined by identifying costs and benefits associated with the system, assigning values to them. The first task when developing an economic feasibility is to identify the kinds of costs and benefits the system will have.
Economic costs
Development costs are those tangible expenses that are incurred during the construction of the system, such as salaries for the project team, hardware and software expenses, consultant fees, training, and office space and equipment. Development costs are usually thought of as one-time costs.
Operational costs are those tangible costs that are required to operate the system, such as salaries for operations staff, software licensing fees, equipment upgrades, and communication charges.
The cost of the analyst must be taken into calculation of the total cost of the project. Of course the analyst’s costs in carrying out the stages up to and including the feasibility study will not be included in this calculation. If the purpose of computerization is to replace people with machines then redundancy money may have to be paid.
Economic benefits
Computerized information systems provided more targeted and accurate information quicker and cheaper than manual systems. This leads to better managerial decisions. It is generally not possible to put a figure on the value of better managerial decisions. Even if it were, it would be impossible to assign what percentage of this improvement were the results of better information and what were the results of other factors. Again, it is not generally possible to estimate the economic benefits of either better customer service or more competitive services; this is the only factor that affects customer choice.
Comparison of costs and benefits
Both costs and benefits occur in the future though not usually in the same future periods. Normally costs will largely occur during the starting of the systems development whereas the benefits will occur later in the useful life of the system. One way to discount the future streams of costs and benefits back to the present is by using assumed rate. This will be near to the prevailing rate of interest in the financial markets though its exact determination will depend on the project, the firm undertaking the project, and the department within which the firm functions. The return on investment is a calculation that is listed somewhere on the spreadsheet that measures the amount of money an organization receives in return for the money it spends. High returns on investment will results when benefits far outweigh costs.
Organisational Feasibility
The final technique used for feasibility analysis is to assess the organizational feasibility of the system. There are many organizational factors that can have an impact on the project, and seasoned developers know that organizational feasibility can be the most difficult feasibility dimension to assess. One way to assess organizational feasibility is to conduct a stakeholder analysis. A stakeholder is a person, group, organization that can affect a new system. In general, the most important stakeholders in the introduction of a new system are the project champion, system users, and organizational management, but systems sometimes affect other stakeholders as well.
Another important set of stakeholders is the system users who ultimately will use the system once it has been installed in the organization. Too often, the project team meets with users at the beginning of a project and then disappears until after the system is created. In this situation, rarely does the final product meet the expectations and needs of those who are supposed to use it, because needs change and users become more savvy as the projects progresses. User participation should be promoted throughout the development process to make sure that the final system will be accepted and used by getting users actively involved in the development of the system. A highly centralized autoratic management structure is generally not compatible with a distributed computer system. Decentralized systems inevitably lead to local autonomy and local management of computer resources.
PART 5 : PPROPOSED SYSTEM OBJECTIVE AND SCOP AND EXISTING
SYSTEM
PART 6 : PROCESS AND DATA MODIFY
Manual System Flowcharts
After investigation the analyst may have collected an unwieldy batch of interview notes, details of observations, questionnaire responses and sundry documents. In the initial stages of analysis it is important to arrive at a methodical description of the existing manual system and to carry out some analysis at a physical, level, prior to developing a logical model of the system. The flow of formal information within a system often occurs through documents that pass from one department to another. A traditional tool of systems analysis is the manual systems flowchart.
The basic idea is that certain tasks performed on documents are common to many applications, filling, preparing multiple copies, collating, sorting. These are given special agreed symbols. The life history of a document from origination to destination is recorded on the flowchart. The best way to understand a manual flowchart is to study one. Here the Avon case study is developed giving a detailed description of the processes occurring during sales processing. A manual systems flowchart covering these is shown below: -
Symbols used in data flow diagrams
Flow Block Diagram of Avon Products Inc.
Data Flow Diagrams
A data flow diagram (DFD) is a network that describes the flow of data throughout a system, data stores, and the processes that change, or transform, data flows. The DFD network is a formal, logical abstract of a system that may have many possible physical configurations. For this reason, a set of symbols that do not imply a physical form is used to represent data sources, data flow, data process, and data storage.
Data sources
The square indicates a source or sinks for data and is a reflection of the ignorance as to what happens to the data prior to its emergence from the source or after its disappearance into the sink.
Data flow
A data flow is a single piece of data or a logical collection of several pieces of information. Every day data flow has a descriptive name that is a noun, and a description. Typically, the description of data flow will list exactly what data elements the flow contains. Data flow is the glue that holds the processes together. One end of every data flow will always come from or go to a process, with the arrow showing the direction into or out of the process. Data flows show what inputs go into each process and what outputs each process produces. Every process must create at least one output data flow because if there is no output, the process does not do anything. Each process usually has at least one input data flow because it is difficult if not impossible to produce an output with no input.
Data Process
A process is an activity or a function that is performed for some specific business reason. Processes can be manual or computerized, and every process has a name that starts with a verb and ends with a noun. Names should be short yet containing enough information so that the reader can easily understand exactly what they do. In general, each process performs only one activity, so most system analysts avoid using the word and in process names because it suggests that the process performs several activities.
Data store
A data store is a collection of data that is stored in some way (to be determined later when creating the physical model). As with processes, every data store has a descriptive name (a noun), an identification number, and a description. Data stores form the starting point for the data model (discussed in the next chapter) and are the principal link between the process model and the data model.
Data flows coming out of a data store indicate that information is retrieved from the data store, and data flows going into a data store indicate the information is added to the data store or that information in that data store is changed. Whenever a process updates a data stores (e.g., by retrieving a record from the data store, changing it, and storing it back), we document both the data coming from the data store and data written back into the data store.
Data Flow Diagram
Data flow diagram of Avon’s order processing system
Entity-Relationship Modeling
The fundamental assumption behind entity-relationship modeling is that an organisation’s data structure can be modeled with the use of just three distinct sorts of object. These are as follows:
Entity Type
An entity type is a type of thing that is capable of an independent existence and on which the organization may wish to hold data. This is the key characteristic of an entity type.
Relationship
The entity types applicable to an organization may bear some relationship to one another.
Attribute
The entity types that are deemed applicable to an organization also have attributes. These can be thought of as properties.
The use of the categories of entity, relationship and attribute is one way of viewing the world or in this case the organization. Although these terms carry no physical implications about the way that data will be physically represented in the computer it is often the case that a direct correspondence will eventually be set up. A record type will represent the entity type. Fields of the record type will represent the attributes. An individual occurrence of an entity will then correspond to a particular record with certain values for the fields.
The relationship between the entity types can be represented in different ways. One way is by the use of a pointer from one record standing for one entity to another record corresponding to the second entity involved.
Entity Relationship Diagram of Avon Products Inc
PART 7 : SYSTEMS DESIGN
While system analysis describes what a system should do to meet information requirements, systems design shows how the system will fulfill this objective. The design of an information system is the overall plan or model for that system. Information system design is an exacting and creative task demanding imagination, sensitivity to detail and expert skills.
Systems design has three objectives. First, the system designer is responsible for considering alternative technology configurations for carrying out and developing the system as described by the analyst. This may involve analyses of the performance of different pieces of hardware and software, security capabilities of systems, network alternatives and the portability or changeability of systems hardware.
Second, designers are responsible for the management and control of the technical realization of systems. Detailed programming specifications, coding of data, documentation, testing and training are all the responsibility of the design staff. In addition, designers are responsible for the actual procurement of the hardware, consultants and software needed by the system.
Third, the system designer details the system specifications that will deliver the functions identified during systems analysis. These specifications should address all of the managerial, organization and technological components of the system solution.
Centralized and distributed system
Centralized systems are those where systems development and operation occur totally at the home base, but operations are handed over to autonomous units in foreign locations.
Decentralized systems are those where each foreign unit designs its own, totally unique solutions and systems are those where each foreign unit designs its own, totally unique solutions and systems.
The use of multiple computers linked by a communication network for processing is called distributed processing. In contrast with centralized processing, in which all processing is accomplished by one large central computer, distributed processing distributes the processing work among various microcomputers, minicomputers and mainframes linked together.
The advantages of distributed computing are telecommunications costs between several sites are reduced provided that most of the processing is locally based, there is greater flexibility, as additional computers can be added to the networks as needed and the organization is not reliant on a single computer, which might break down.
The disadvantages of distributed computing are commonly used data is often replicated at many sites-changes in this data, useless happening to all occurrences, can lead to an inconsistent organizational data store, with several computers at dispersed sites lack of standardization of equipments, software and data storage is possible and control is more difficult.
Batch and online system
The manner in which data are input into the computer affects how the data can be processed. Information systems collect and process information in one of two ways: through batch or through on-line processing. In batch processing, transactions such as orders or payroll time cards are accumulated and stored in a group or batch until the time when, because of some reporting cycle, it is efficient or necessary to process them. This was the only method of processing until the early 1960s, and it is still used today on older systems or some systems with massive volumes of transactions. In on-line processing, which is now very common, the user enters transactions into a device that is directly connected to the computer system. The transactions are usually processed immediately.
The demands of the business determine the type of processing. If the user needs periodic or occasional reports or output, as in payroll or end-of-the-year reports, batch processing is most efficient.
Batch systems often use type as a storage medium, whereas on-line processing systems use disk storage, which permits immediate access to specific items of information. In batch systems, transactions are accumulated in a transaction file, which contains all the transactions for a particular time period. Periodically this file is used to update a master file, which contains permanent information on entities. Adding the transaction data to the existing master file creates a new master file. In on-line processing, transactions are entered into the system immediately and the system usually responds immediately. The master file is updated continually. In on-line processing, these is a direct connection to the computer for input and output.
On-line processing
Batch Processing
Treatment of new requirements
It is desirable to review the requirements to be made of an information system when it undergoes a major change, such as computerization of a manual system or replacement of an existing computer system by another. This review may throw up new requirements. These will be established by interviews with management and users. By definition, the logical model of the existing system cannot contain these. It is important, then, that the logical model is amended to reflect these new requirements.
These additions are likely to lead to new processes, which will be added to the higher-level data flow diagrams. They will interact via data flows with existing data stores and/or processes. Added processes are decomposed into their exploded functional constituents on lower-level data flow diagrams. If their operation is governed by sophisticated logic then this must be specified using one of the tools of specification.
Often, new requirements concern the extraction of new types of management information from data stores rather than the alteration of the existing pattern of transaction processing. This can be simply accomplished at the data flow diagram level by inserting a process that accepts as input the data flow diagram level from the relevant data stores and produces as output the required data. It will also be necessary to establish that the entity model, as revealed by the entity diagram, is sufficient to provide the data for the function. In other words, drawing a functional entity diagram must check the access path through the model.
Treatment of inefficiencies
The data flow diagram has been developed using top-down decomposition of the major processes occurring in the Avon order processing system. Inevitably the decomposition as revealed by lower-level data flow diagrams is not purely a result of a logical analysis of the nature of the major processes. Rather, the lower-level structure tends to be determined partly by what is done in the existing system to fulfill a function as well as by what needs to be done as determined by the logic of the function. If what is done is unnecessary or inefficient this may have unfortunate repercussions on the logical model. It is at this transition stage that the model should be adjusted.
Treatment of physical aspects
Certain physical considerations may have crept into logical model. These are disallowed as bedfellows in the logical model and should be indicated on the data flow diagram as separate stores. They have been thrown together purely for convenience in the physical manual files. There is no fear that by separating these the connection between them is lost. The links remain at an attribute level, as each the trio contains the attribute order. Also, each order is linked to its relevant invoices and dispatch notes though relationships in the entity model.
Detailed Design
Data flow diagrams were used to develop a high-level logical model of the processes and the data flows between them in the system. They were particularly helpful in sketching design alternatives using automation boundaries. The logic of the process themselves has been captured in structured tools such as decision tables, structured English, or logic flow-charts. The data model of the organization has been produced using entity-relationship modeling.
The use of this logical approach has ensured that no premature physical design decisions have been taken. However, the rime has come to move away from these logical models towards the detailed physical design of the computerized system. The data flow diagrams and logic representations developed so far will be invaluable in producing program specifications. The entity model will be essential in designing a database model.
Any system can be considered as being composed of input, output, storage and processing elements.
Process Design
Process design covers the need to design and specify the processing hardware, and to design and specify the software for running in the central processing unit.
The specification of processor hardware is a technical skill beyond the scope. The analyst will need to consider the demand to be made on the processor. In particular, the volumes of transactions to be processed per day and the processing requirement for each, the speed of response needed for interactive enquiries, the number of simultaneous users and the types of peripheral devices required, the amount of RAM, the complexity of programs and the extent to which the system should be able to cope with future increases in demand are all determinants of the processing power required. Decisions taken on whether to centralize or distribute computing and the mix between batch and online processing will all affect the decision.
The structured tools used so far facilitate the development of program specifications. Programs are regarded as being composed of various models. These program modules should be constructed so that each performs a single independent function, is independent testable and leads to code that is easy to understand and amend at a later date if necessary. The modular design should also facilitate the addition of extra modules if needed later and so aid the flexibility of the system.
Tools Used During The Stages of Systems of Analysis and Design.
Input Design
Inputs facilities the entry of data into the computer system, whether highly
structure data, such as order information, or unstructured information. Input design
means designing the screens used to enter the information, as well as any forms on
which users write or type information.
Basic Principles
The goal of the input mechanism is to simply and easily capture accurate
information for the system. The fundamental principles of input design reflects the
nature of the inputs and ways to simplify their collection.
Use On-line and batch Processing Appropriately There are two general
formats for entering inputs into a computer system : on-line processing and batch
processing.
With on-line processing, each input item, example a customer order, a purchase order, is entered into the system individually, usually at the same time as the event or transaction prompting the input. For example, buying an item at the store, the computer system that supports that process uses on-line processing to immediately record the transaction in the appropriate database. On-line processing is most commonly used when it is important to have real-time information about the business process.
With batch processing, all the inputs collected over some time period are gathered together and entered into the system at one time in a batch. Some business process naturally generate information in batches. For example, most hourly payrolls are done using batch processing because time cards are gathered together in batches and processed at once. batch processing also is used for transactions processing systems that do not require on real-time information. This batching simplifies the data communication process and often cuts communications costs; however, it does mean that inventories are not accurate in real time but rather are accurate only at the end of the day after batch has been processed.
Types of inputs
Each data item that has to be input is linked to a field on the form into which
its value is typed. Each field also has a field label, which is the text beside, above, or below the field that tells the user what type of information belongs in the field. Often the field label is similar to the name of the data element, but they do not have to have identical wording.
Text As the name suggests, a text box is used to enter text. Text boxes can be
defined to have a fixed length or can be scrollable and accept a virtually unlimited amount of text.
Numbers A number box is used to enter numbers. Some software can
automatically format numbers as they are entered. dates are special form of numbers that sometimes have their own type of number box.
Selection Box A selection box enables the user to select a value from a
predefined list. The items in the list should be arranged in some meaningful order, such as alphabetic for as long lists, or in order of most frequently used. The default selection value should be chosen with care.
Output Design
Outputs are the reports that the system produces, whether on the screen, on paper, or in other media, such as the Web. Outputs are perhaps the most visible part of any system, because a primary reason for using an information system is to access the information that it produces.
Basic Principle
The goal of the output mechanism is to present information to users so they can accurately understand it with the least effort. The fundamental principles for output design reflects how output are used and ways to make it simpler for users to understand them.
Understand Report Usage The first principle in designing reports is to understand how they are used. Reports can be used for many different purposes. In some cases- But not very often-reports are read cover to cover because all information is needed. Reports are used to identify specific items or are used as references to find information, so the order in which items are sorted on the report or grouped within categories is critical. There are no inherent advantages to real-time reports over batch reports. The only advantages lie in the time value of the information. If the information in a report is time critical, then real-time reports have value. This is particularly important because real-time reports often are expensive to produce; unless they offer some clear business value, they may not be worth the extra cost.
The goal of well-designed report is to provide all the information needed to support the task for which it was designed. This does not mean that the report should provide all the information available on the subject-just what the users decide several different reports on the same topics for the same users, because they are used in different ways. this is not bad design.
Types of Outputs
There are many different types of repots, such as detail reports, summary
reports, exception reports, turnaround documents, and graphs.
Automation Boundaries
As well as revealing the logic of data flows between processes in process modeling, the data flow diagram can be the basis of design in selecting and communicating, which processes are to be computerized. In the diagram below the automation boundaries suggest that the entire order processing system for Avon is to be computerized. Customer orders flow into the system and company invoice, dispatch notes and approved and unapproved company order flow out.
Automation Boundaries
Hardware
Different design will have different hardware requirements. Some of these factors have been taken into accounts in the choice of input method and equipment. The analyst will need to take decision on suitable processing, output, communications and storage hardware. This will depend largely on the amount of processing required by the system, the complexity of the software and the number of users attached to the system. Choice on whether to develop a centralized or distributed system will obviously have hardware implications. The amount of data to be stored and decisions over adopting a file-based approached as opposed to a database with a database management system will affect storage hardware needs.
The analyst suggests two or three alternative systems to management. All the factors discussed in this section into account in each design. Management will need not only an explanation of the alternative designs but also estimates of the costs and the time schedules associated with each alternative. The data flow diagrams will provide a valuable tools for the analyst in developing alternative high-level designs as they can be used to indicate which features of a system are to be computerized.
Structure charts
Structure chart are a diagrammatic representation of the way that modules are connected. For each module it shows what data is input and output and what other modules call it or are called by it. There is no more information in a structure chart in the set of module specifications. The structure chart does, however, give a picture of the system that is easy to understand. Frequently, the data flows between modules are omitted for the sake of clarity. The structure chart is hierarchical. The use of hierarchical charts together with input/process/output specifications is called the HIPO (hierarchical input/process/output) technique.
Structure chart for the Avon order processing system.
Structure chart for the generation of an approved order.
PART 8 : IMPLEMENTATION AND MAINTENANCE
Implementation and maintenance is the last 2 phases for a new system development life cycle. The purpose of implementation is to build a properly working system and to install it in the organization to replace the current system correctly. Implementation included finalizing all system and user documentation, thoroughly training users and others to effectively use the new system, and preparing support systems to assist users as they encounter difficulties. Maintenance process is to fix and enhance the system to the bugs or problems that occurred in the implementation process. Besides, maintenance process is needed to improve the performance of the system to be better than the beginning time of the implementation.
Below are the phases for implementation:
Writing computer software: for a system analyst, this means writing code or monitoring coding done by programmers to insure that programs fulfill all the system requirements.
Testing software: it involves using test data and scenarios to verify that each component and the system work under expected performance and find out abnormal circumstances.
Converting from the old to new system: it includes not only installing the new system in organizational sites but also dealing with personal and organization resistance to the change the new system cause. Besides it also minimizes the failures that will happen in the process of converting from the old to new system.
Documenting the system: it is the process to document down all the information about the new system. For example, user guides, user manual, tutorials and system information. It can allow everyone to handle the new system easily.
Training users and others: it is the process to make the system become more users friendly by given training to the new users. So it can allow all the users to know the purpose and use of the new system.
Designing support procedures: it is to ensure users can obtain the assistance they need as questions and problem arises.
Implementation also includes the closedown of the project, including evaluating personnel, reassigning staff, assessing the success of the project, and turning all resources over to those who will support and maintain the system. Implementation is tightly linked to the next phase – maintenance, which is why we combine these two phases into one section. This phase continues until the system is operating in production in accordance with the defined user requirements
The new system can fall into three categories, replacement of a manual process, replacement of a legacy system, or upgrade to an existing system. Regardless of the type of system, all aspects of the implementation phase should be followed. This will ensure the smoothest possible transition to the organization's desired goal.
The implementation notice should be sent to all users and organizations affected by the implementation. Additionally, it is good policy to make internal organizations not directly affected by the implementation aware of the schedule so that allowances can be made for a disruption in the normal activities of that section. Some notification methods are email, internal memo to heads of departments, and voice tree messages. The notice should include: the schedule of the implementation; a brief synopsis of the benefits of the new system; the difference between the old and new system; responsibilities of end user affected by the implementation during this phase; and the process to obtain system support, including contact names and phone numbers.
Application software for the new information system can be obtained from purchase as off-the-shelf packaged software and possibly modified, or it can be custom designed. It is necessary to look at the time-and-billing packaged software designed for service organization. Such a system will not only help supervisory and middle managers do their jobs but also help top managers make decision. Some new system may not require new computer equipment, but others will. The kinds needed and the places they are to be installed must be determined. This is a very critical area. Switching or upgrading equipment can be a tremendously expensive proposition.
After the software and equipment have been installed, the system should be tested. Sample data is fed into the system. The processed information is then evaluated to see whether results are correct. Testing may take several months if the system is complex. After the system has been thoroughly tested and revised as necessary then it is ready to be out into use.
Now moves to another phase of system implementation, which is the conversion stage. Conversion is the process of changing or converting from the old system to the new system. With the implementation of any system, typically there is old data which is to be included in the new system. This data can be in a manual or an automated form. Regardless of the format of the data, the tasks in this section are two fold, data input and data verification. When replacing a manual system, hard copy data will need to be entered into the automated system. Some sort of verification that the data is being entered correctly should be conducted throughout this process. In the case in data transfer, where data fields in the old system may have been entered inconsistently and therefore affect the integrity of the new database. Verification of the old data becomes imperative to a useful computer system.
There are four approaches to conversion, which are direct, parallel, pilot, and phased. One of the ways verification of both system operation and data integrity can be accomplished is through parallel operations. Parallel operations consist of running the old process or system and the new system simultaneously until the new system is certified. This is low risk since if the new system fails in any way, the operation can proceed on the old system while the bugs are worked out. This approach is used only if the cost of failure in the case of Avon is expected to be great. Another least risky approach will be the phased approach, where the new system is implemented gradually over a period of time. The entire implementation process is broken down into parts or phases. Implementation begins with the first phase and once it is successfully implement, the second phase begins until all phases are operating smoothly. However, this is an expensive proposition because he implementation is done slowly.
To ensure that the system is fully operational, install the system in a production environment. The central purposes for developing a computerized information system for Avon were to process customer orders faster and be able to satisfy customer enquiries in such areas as the status of orders, prices, types of products, and delivery available. Besides, they also plan to provide management and the sales representatives with a greater variety of relevant up-to-date information on company performance. Avon’s current computerized system is outdated, but it is not the beginning to embark on computerized system. That’s why it should have the experience or confidence gained by the organization that have a continuing systems development policy, possibly over 20 years or more. Therefore, it only wishes to embark on a testing strategy as cheaper as possible. Since the new system is quite similar to the old one in Avon, the parallel approach will allow the necessary processing checks to be carried out and at the same time will allow a manual system to be provided as backup. However, there will be difficulties performing these checks as the computerized system works almost instantaneously whereas the old system took many steps and through many different staffs to process the orders, so it should be decided to rely entirely on the new system, though sample checks are to be recorded and verified later. Similarly, the management reports as generated by the new system will be used. Sample checks against reports from the old system are to be made, but given the limited number of types of report that were generated this part of the system will rely heavily on the adequacy of systems testing prior to the changeover. The parallel run is to be initially for a period of one to one and a half months. There will then be a formal review of the system prior to its final acceptance and the discarding of the old manual system.
After the system has been fielded, a post-implementation evaluation is conducted to determine the success of the project through it's implementation phase. The purpose of this evaluation is to document implementation experiences to recommend system enhancements and provide guidance for future projects.
In addition, change implementation notices will be utilized to document user requests for fixes to problems that may have been recognized during this phase. It is important to document any user request for a change to a system to limit misunderstandings between the end user and the system programmers. This post-implementation should consist the adequacy of the systems documentation that governs manual procedures and computer programs will be checked; the training pf personnel involved in the use of the new system will be assessed; attempts will be made to establish the reliability of systems output; comparison of the actual costs incurred during implementation is made against the estimated costs, and significant variances investigated; and the response times will be determined and compared with those specified.
Training people is important, of course. Unfortunately, it is one of the most commonly overlooked activities. Users are the keys element in any successful computer system. Their knowledge and understanding will have been tapped during systems investigation and analysis. Models of users will have influenced the user-machine interface design. But unless staffs are adequately prepared for the new system it will have little chance of being effectively used. This requires staff training and education. . Some people may begin training early, even before the equipment is delivered, so that they can adjust more easily. In some cases, a professional software trainer may be brought in to show people how to operate the system.
Education is to be distinguished from training in that the former involves providing staff with a general understanding of the system, the way it functions, its scope and its limitations. They will be informed of how the system can be used to provide information for their needs of staff with the skills necessary to operate the computer system to perform tasks. In the case of Avon, suggested that, since the new system is going to replace almost all of the operations in the company, lectures or seminars can be used for instructive overviews. Their advantage is that a large number of staff are reached using one instructor for the purpose of time saving and cost saving too. Besides, simulation of the work environment can be take into consideration in deciding which ways to use for training. This is a costly, though effective, training technique. The information center should devise training courses for staff involving some, if not all, of these techniques.
Staff training and education need to take account of the abilities of the trainees as well as the tasks for which training is provided. Staff will have different requirements and expectations of training. Insufficient attention to staff development is one certain way of ensuring that an information system will fall.
After implementation comes systems maintenance, the last step in the systems life cycle. This stage is a very important, ongoing activity. Most organizations spend more time and money on this phase than any of the others. Maintenance has two parts, which will be the systems audit and periodic evaluation.
In the system audit, the system’s performance is compared to the original design specifications. This is to determine whether the new procedures are actually furthering productivity. If they are not, some further redesign may be necessary.
After the system audit, the new information system is periodically evaluated and further modified, if necessary. All systems should be evaluated from time to time to see if they are meeting the goals and providing the service they are supposed to.
PART 9 : COST AND BENEFIT OF NEW SYSTEM
Avon Products, Inc.
Analysis of Significant Financial Ratios
Above is the financial ratios of Avon Product Inc. It will be quite costly to install the new system but however, in the long run, it will be beneficial. It is time-saving, cost-saving(although spend a lot to install and design the new system), upgrade the image of the company and so forth.
It is said to be costly because a large amount of capital needed to be allocated in the urban countries since their technology is not as advance as those developed countries.
The new system will allowed the sales representatives to manage their “own business” more efficiently since they are updated with the products and the details of the customers frequently.
Customers will have more confident on the products and services provided by the company. This will indirectly keep the company as competitive as ever in the industry and will be able to maintain the sales level. This will in turn, increase the share price of the company as well as the earnings per share of the company.
BIBLIOGRAPHY
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Alan Dennis, Barbara Haley Wixom, (2000) Systems Analysis and Design, John Wiley and Sons, Inc.
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Jeffrey A. Hoffer, Jocy F. George, Joseph S. Valacich, (1996) Modern Systems Analysis and Design, The Benjamin/Cummings Publishing Company, Inc.
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Matget S.Wu, Shih-Yen Wu, (1994) Systems Analysis and Design, WEST Publishing Company.
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Marvin Gore, Jogn W.Stubbe, (1975) Elements of Systems Analysis, Fourth Edition, WM.C. Brown Publishers.
