DSS Questions and Answers
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Transcript of DSS Questions and Answers
Decision Making in a Digital Age
Teaching Objectives
Students should be able to answer the following questions:
1. How can information systems help individual managers make better
decisions when the problems are nonroutine and constantly changing?
2. How can information systems help people working in a group make
decisions more efficiently?
3. Are there any special systems that can facilitate decision making among
senior managers? Exactly what can these systems do to help high-level
management?
4. What benefits can systems to support management decision making
provide for the organization as a whole?
Key Terms
The following alphabetical list identifies the key terms discussed in this
chapter. The page number for each key term is provided.
Activity-based costing, 453 DSS software system, 440
Copyright © 2005 Pearson Education Canada Inc.
Balanced scorecard, 352 Geographic information system
(GIS), 445
Business intelligence, 435 Group decision-support system
(GDSS), 447
Customer decision-support system
(CDSS), 446
Knowledge discovery, 439
Data-driven DSS, 438 Model, 440
Data visualization, 445 Model-driven DSS, 436
Drill down, 450 Sensitivity analysis, 441
DSS database, 440
Teaching Suggestions
When discussing the systems presented in this chapter with students, you
should stress to your students that these systems are often so well
integrated that they may not really have heard much about them. When
presenting this chapter, you should demonstrate the value of the systems.
For example, the value of TPS and MIS might be easy to understand and
already known by many. But the nature of the knowledge obtained through
use of a decision-support system is usually not so easy to understand or
Copyright © 2005 Pearson Education Canada Inc.
obtain. You definitely want to stress how DSS, GDSS, and ESS support
business intelligence.
Certainly students will recognize the importance of decisions on what the
selling price of an item will be or the decision on where a production facility
or retail outlet should be located. However, students are not likely to
recognize the importance of the data that go into the decision, the source of
that data, the many more limited decisions that are made prior to the final
big decision, the complexity of each decision, the side-effects of the decision,
or how the decision is really made. Decisions can be very complex, and
students need to understand the ways decision-support systems help
managers handle complexities and better understand all that goes into the
decisions.
Remind students that decision-support systems cover a wide variety of
systems, tools, and technologies. Spend some time differentiating between
model-driven DSS and data-driven DSS. When covering this material in class,
pose and discuss the following questions with your students. Exactly how do
the systems support decisions? Do DSS make decisions? Do DSS help make
decisions? Do DSS just provide the data for decisions? Perhaps one of the
best ways to teach this chapter is through the use of examples. Use the case
study, Window On boxes, and examples in your community.
Copyright © 2005 Pearson Education Canada Inc.
Besides stressing the graphical nature of most DSS, it is important to discuss
how semistructured and unstructured decisions are supported. The
relationship between DSS and management science is another point you
should make. Many of the DSS use linear programming, network methods,
and decision models to aid decision making. The use of analytical models is
an important distinction between DSS and MIS; these models are designed
for semistructured decision making. The association between database
management systems and DSS is also an important concept to stress.
The key to the DSS of the future is to engage both users and IS managers in
DSS design and development. Knowledgeable executives should speak
candidly with IS staff about deliverables, capabilities, outcomes, needs, and
what decisions should be supported by a proposed system.
“Window On” Boxes
Window on Organizations: Data Drives Insights at WH Smith PLC
List the ways this DSS helps WH Smith's employees to make
decisions.
Copyright © 2005 Pearson Education Canada Inc.
Information from every sale is now stored in a central repository that is
accessible via the Web by store managers and corporate staff. The new
system enabled WHSmith managers and staff to reduce manual paperwork,
reduced the manual processing of the paperwork, and provided easy access
to more current, detailed, consistent information for all stores. The new DSS
helps store managers understand what is happening in their stores as well as
in other WH Smith stores. The DSS enables the store managers to analyze
customer buying patterns, anticipate trends, design promotional displays,
and derive pricing strategies.
How has it provided value for the firm?
The DSS should result in additional sales due to its support for promotional
display decisions and pricing strategies. As well, profit should rise due to
support for inventory adjustments.
Suggest other ways the system can help them make decisions and
increase profits.
Student answers for this question will vary. However, managers can use the
DSS to evaluate which gift items it should sell at which store. The DSS can
help managers analyze their inventory, determining where inventory
Copyright © 2005 Pearson Education Canada Inc.
reductions can be made. Managers can use the DSS when making
forecasting, repricing, and seasonal pricing evaluations.
Window on Management: Digital Cockpits Help Steer the Enterprise
What are the management benefits of digital dashboards?
Digital dashboards provide management with easy to use and easy to
understand graphical displays. These displays enable management to
monitor the organization's overall performance, spot trends, keep an eye on
the competition, drill down, and identify problems and opportunities. Pfizer is
monitoring key performance indicators for the firm and measuring the firm's
performance against external environmental changes.
How do these dashboard systems provide value for the firm?
A dashboard provides management with the status of various key indicators.
This enables management to adjust its operations and strategies to
maximize the firm’s goals.
Copyright © 2005 Pearson Education Canada Inc.
What technical, organization, and management issues did the
companies described here have to address in developing and
installing their digital dashboards?
The Window on Management box does not mention specific technical,
organization, and management issues. However, you should encourage your
students to identify issues that they feel are important. Possible issues
include data integration from different systems, executive information
requirements determination, internal and external scanning capabilities, how
the data will be displayed, what types of decisions need to be supported,
what are the performance indicators that management wants tracked, and
security. Since a variety of technologies are available, management must
select the right technologies to support the decision-making process.
For Discussion Questions
1. As a manager or user of information systems, what would you
need to know to participate in the design and use of a DSS or an
ESS? Why?
Managers and users of information systems would want to specify what
kinds of decisions the systems should support, and where the data for
Copyright © 2005 Pearson Education Canada Inc.
those decisions should come from. In a typical enterprise, workers are
capturing data, sharing data with other workers, retrieving insights from
captured data, and managing the information as per agreed upon
guidelines. However, data are turned into valuable business information
and insight only when they can be easily captured, systematically
stored, properly retrieved, readily shared, and well-managed. Data
management, DSS, and ESS represent the cornerstone of any data
warehousing program.
Data warehouses have become a critical component in enabling
management to make decisions quickly and accurately. For example,
telecommunications companies use it to manage churn and ensure the
retention of their customers, while retail firms rely on datamining to
maximize product mix and shelf space, and governments use it to
manage federal welfare and healthcare programs. Across industries,
data warehousing programs have achieved a 400 percent ROI, on
average, while increasing productivity, reducing speed of analysis, and
revealing business opportunities that were otherwise hidden from
management among layers of unreachable data. However, if
management is not part of the design and use of a DSS or ESS, then this
information may not be available or utilized, and if not, the firm may not
be able to gain or maintain competitive advantage. One thing is for sure:
the competition is using these systems to enhance decision making.
Copyright © 2005 Pearson Education Canada Inc.
2. If businesses used DSS, GDSS, and ESS more widely, would they
make better decisions? Explain.
Competitiveness increasingly depends on the quality of decision making.
So naturally, companies often rely on their own history and their past
transactions and activities to make future decisions. When businesses
make decisions, it is usually helpful to use a decision-support system
and firm-wide data. These systems can automate certain decision
procedures, and they can offer information about different aspects of
the decision situation. They can also help managers question existing
decision procedures. It can be useful to explore the outcomes of
alternative organizational scenarios. And, of course, using GDSS can
improve how groups make decisions and also improve the decision that
might have been made by an independent person.
The size of the corporate information base is increasing at the rate of
400 percent every three years. Until recently, the idea of analyzing
years of accumulated transaction data in a single pass seemed
expensive and unachievable. In addition to the difficulties caused by
data format incompatibilities, the computational requirements would
have consumed much of the company's data processing capacity for
days or even weeks. Analysis has been limited to fairly simple queries
Copyright © 2005 Pearson Education Canada Inc.
run after hours against relatively small subsets of data. In recent years,
scalable hardware and software technologies have fueled data
warehousing, enabling decision makers to unleash the power of analysis
provided as a result.
On the other hand, remember that these systems do not automatically
lead to better decisions unless the decision problem or situation is
clearly understood and the systems are appropriately designed.
Review Questions
1. What is a decision-support system (DSS)? How does it differ
from a management information system (MIS)?
A DSS assists management decision making by combining data,
sophisticated analytical models, and user-friendly software into a single,
powerful system that can support semistructured or unstructured
decision making. These systems help end users utilize data and models
to discuss and decide semistructured and unstructured problems, but
they do not solve the problems for the user. Generally speaking, MIS
provide routine, prespecified, and formatted reports based on data
extracted and summarized from the firm's TPS. These reports provide
Copyright © 2005 Pearson Education Canada Inc.
information on the firm's performance and are used to help monitor and
control the business. In contrast, DSS provide capabilities for addressing
nonroutine decisions and user control. DSS emphasize change,
flexibility, and rapid response and place a greater emphasis on models,
assumptions, ad hoc queries, and display graphics. Additionally, MIS
primarily address structured problems, while DSS focus more on
supporting semistructured and unstructured problems.
2. How can a DSS support unstructured or semistructured decision
making?
Unstructured problems are novel and non-routine and have no
predefined algorithms or solutions. DSS help design and evaluate
alternatives and monitor the adoption or implementation process. DSS
combine data with models to produce various alternative scenarios for
making choices. In large organizations, decision making is inherently a
group process, and DSS can be designed to facilitate group decision
making by providing tools, procedures, and technologies to help people
working on decisions as a group.
3. What is the difference between a data-driven DSS and a model-
driven DSS? Give examples.
Copyright © 2005 Pearson Education Canada Inc.
A data-driven DSS is a system that supports decision making by allowing
users to extract and analyze useful information that was previously
buried in large databases. Often TPS data are collected in data
warehouses. Multidimensional analysis and datamining tools can then
analyze the data. WH Smith PLC is an example of a data-driven DSS.
A model-driven DSS is primarily a stand-alone system that has a model
at its heart, perhaps a mathematical or spreadsheet representation of
such a model. The emphasis is on the model, scenarios, and what-if
sensitivity, such as linear programming. This chapter provides several
examples of model-driven DSS, including systems used by HBC and
Continental Airlines.
4. What are the three basic components of a DSS? Briefly describe
each.
The three basic components of a DSS include a DSS database, DSS
software system, and DSS user interface. The DSS database is a
collection of current or historical data from a number of applications or
groups, organized for easy access by a range of applications. The DSS
database may be a small database residing on a PC or it may be a
massive data warehouse that is continuously updated by major
organizational TPS. The DSS software system is a collection of software
Copyright © 2005 Pearson Education Canada Inc.
tools used for data analysis, including a collection of mathematical and
analytical models, OLAP tools, and datamining tools. Various kinds of
models may be in the model base, including libraries of statistical,
optimization, sensitivity analysis, and forecasting models. The DSS user
interface permits easy interaction between users and the DSS software
tools.
5. How can DSS help firms with supply chain management and
customer relationship management?
Supply chain decisions involve determining “who, what, when, and
where” from purchasing and transporting materials and parts through
manufacturing products and distributing and delivering those products
to customers. DSS can help managers examine this complex chain
comprehensively and search among a huge number of alternatives for
the combinations that are most efficient and cost-effective. The prime
management goal might be to reduce overall costs while increasing the
speed and accuracy of filling customer orders.
DSS for customer relationship management use datamining to guide
decisions about pricing, customer retention, market share, and new
revenue streams. These systems typically consolidate customer
information from a variety of systems into massive data warehouses and
Copyright © 2005 Pearson Education Canada Inc.
use various analytical tools to slice the data into tiny segments for one-
to-one marketing.
6. What is a geographic information system (GIS)? How does it use
data visualization technology? How can it support decision
making?
Geographic information systems (GIS) are a special category of DSS that
use data visualization technology to analyze and display data for
planning and decision making in the form of digitized maps. The
software can assemble, store, manipulate, and display geographically
referenced information, tying data to points, lines, and areas on a map.
GIS can thus be used to support decisions that require knowledge about
the geographic distribution of people or other resources in scientific
research, resource management, and development planning. For
example, GIS might be used to help state and local governments
calculate emergency response times to natural disasters or to help
banks identify the best locations for installing new branches or ATM
terminals. GIS tools have become affordable even for small businesses
and some can be used on the Web.
7. What is a customer decision-support system? How can the
Internet be used for this purpose?
Copyright © 2005 Pearson Education Canada Inc.
A customer decision-support system (CDSS) supports the decision-
making process of the organization’s existing and potential customers.
The data can come from both internal and external sources, including
enterprise systems and the Web. The Web and Internet can provide
online access to various database and information pools along with
software for data analysis.
8. What is a group decision-support system (GDSS)? How does it
differ from a DSS?
A GDSS is an interactive computer-based system that facilitates the
solution of unstructured problems by a set of decision makers working
together as a group. GDSS have been developed in response to the
growing concern over the quality and effectiveness of meetings. In
general, DSS focus on individual decision making while GDSS support
decision making by a group.
9. What underlying problems in group decision making have led to
the development of GDSS?
The underlying problems of group decision making that have led to the
development of GDSS are the explosion of decision-maker meetings, the
Copyright © 2005 Pearson Education Canada Inc.
growing length of these meetings, and the increased number of
attendees at these meetings.
10. Describe the three elements of a GDSS.
Hardware, software tools, and people are the three GDSS elements.
Hardware includes the conference facility itself (room, tables, chairs)
that is laid out to support group collaboration. It also includes electronic
hardware such as electronic display boards as well as audiovisual,
computer, and networking equipment. Software tools include electronic
questionnaires, electronic brainstorming tools, idea organizers,
questionnaire tools, tools for voting or setting priorities, stakeholder
identification and analysis tools, policy formation tools, and group
dictionaries. People include the participants, a trained facilitator, and the
staff to support the hardware and software.
11. Name five GDSS software tools.
Although many tools exist, the list provided in the textbook includes
electronic questionnaires, electronic brainstorming tools, idea
organizers, questionnaire tools, tools for voting or setting priorities,
stakeholder identification and analysis tools, policy formation tools, and
group dictionaries.
Copyright © 2005 Pearson Education Canada Inc.
12. How can GDSS facilitate group decision making?
GDSS enable more people to attend and participate in a meeting, and at
the same time the GDSS can increase meeting productivity. This
increase in productivity is realized because the attendees can contribute
simultaneously. A GDSS can guarantee anonymity, follow structured
methods for organizing and evaluating ideas, preserve the results of
meetings, and can increase the number of ideas generated and the
quality of decisions while producing the desired results in fewer
meetings. A GDSS can support idea generation, complex problem
analysis, and large groups.
Copyright © 2005 Pearson Education Canada Inc.
13. Define and describe the capabilities of an executive support
system (ESS).
Executive support systems (ESS) help managers make unstructured and
semistructured decisions. ESS focus on the information needs of senior
management and combine data from both internal and external sources.
The ESS creates a generalized computing and communications
environment that can be focused on and applied to a changing array of
problems. The ESS can help senior executives monitor organizational
performance, track activities of competitors, spot problems, identify
opportunities, and forecast trends.
14. How can the Internet and enterprise systems provide
capabilities for executive support systems?
There are several ways that the Internet and Web technology can
enhance such a system. First, the Web interface is a well-known and
understood interface, making it easier to learn and use and less costly to
create. Secondly, the Web is an important source of external data and
information. Enterprise systems eliminate the problem of data being
unavailable or available in different formats, or having to access
hundreds or even thousands of incompatible systems. Enterprise
Copyright © 2005 Pearson Education Canada Inc.
systems allow data to be gathered from a company-wide perspective so
that it can be more easily analyzed by senior management.
15. What are the benefits of ESS? How do these systems enhance
managerial decision making?
Although ESS benefits are not easily measured, several benefits are
mentioned in the chapter. ESS increase flexibility, provide the ability to
analyze, compare and highlight trends, monitor performance, improve
management performance, and increase management's span of control.
ESS flexibility allows executives to shape the problems, using the
system as an extension of their own thinking. ESS offer executives the
ability to analyze quickly and to compare and highlight trends, freeing
up executives and their staff for more creative analysis and decision
making. ESS can, and do, change the workings of organizations.
Executives are better able to monitor activities below them, allowing
them to push decision making further down in the organization while
expanding the executive’s span of control.
Application Software Exercise
Copyright © 2005 Pearson Education Canada Inc.
This problem is useful for showing students how a rudimentary DSS
works and for illustrating the concepts of “what-if” analysis and
sensitivity analysis. Instructors may need to spend a little time
explaining breakeven analysis to students. Discuss with the students the
fact that the principal idea behind break-even analysis is that all costs
are variable (which means they vary with output), fixed (which means
they are relatively constant over time), or a combination of both.
Theoretically, after fixed costs are covered, each dollar of sales will have
to cover only variable costs.
The problem here has been simplified so that it treats Selmore as a one-
product company and calculates the breakeven point for one product.
The actual breakeven calculations in the real business world would be
much more complicated and perhaps too challenging for most students
taking the MIS course. Students will need to know how to use the data-
table command for sensitivity analysis in order to solve this problem.
The solution spreadsheet was designed so that one can easily
recalculate the breakeven point when the selling price is $125 by
entering $125 as the sales price per unit.
Group Project
Copyright © 2005 Pearson Education Canada Inc.
With three or four of your classmates, identify several groups in
your university that could benefit from a GDSS. Design a GDSS
for one of those groups, describing its hardware, software, and
people elements. Present your findings to the class.
Presentations will depend upon the university group selected by each
student group. For instance, the student group might select the faculty
personnel and tenure committee, which probably engages in lengthy
deliberations about appointments, tenure, and promotions. After
selecting a target group, the student teams must first define the needs
of that group. For instance, the student groups must determine the
kinds of problems they will address through the GDSS, the problems the
GDSS need to solve. At this point, you should encourage your students
to review Section 13.2, “Group Decision-Support Systems (GDSS).”
Copyright © 2005 Pearson Education Canada Inc.
Case Study – Can DSS Help MasterCard Master the Credit Card
Business?
1. Analyze MasterCard using the competitive forces and value
chain models. Briefly summarize the problems that MasterCard
was facing before 1998 that caused it to change its business
strategy.
MasterCard is operating in a very competitive industry. MasterCard has
several competitors, with Visa being its primary competitor. Although
not mentioned in the case, MasterCard does have competition from
other credit cards companies, such as American Express, Discover, and
the various retail stores that offer their own credit cards. MasterCard
customers can easily switch credit card companies, and banks can opt
to promote one credit card over the other. Although entry of a new
credit card company into the industry is a threat, it would require a
significant investment. MasterCard is using information technology to
support its value chain activities. Information technology has enabled
MasterCard to enhance market penetration and create new services.
Because of the data provided by MasterCard's system, its merchants can
use the data to target specific customers. Wal-Mart is one example
mentioned in the case.
Copyright © 2005 Pearson Education Canada Inc.
In 1998, Visa had over 50 percent of the credit card charge volume, and
MasterCard was lagging behind with 28.8 percent. In an effort to attract
new business, MasterCard updated and consolidated its computer
centers, building a system that could track every transaction made by
customers for three years. MasterCard added new data fields and made
the customer data and analytical tools available to and directly
accessible by its member banks.
2. Describe the new business strategy MasterCard developed.
What is the role of information systems in its new strategy?
MasterCard's new strategy focused on information leadership and
customer service. Part of MasterCard's strategy was to encourage bank
issuers to promote its cards over its competitors. To spur its bank
issuers, MasterCard sought to make more customer and transaction
information available to the bank issuers than the competition currently
makes available to them.
MasterCard required a system that would keep a record of every
transaction of every customer for three years. Information systems were
crucial to the implementation of MasterCard's strategy. The new
information systems were responsible for collecting, storing, and
consolidating customer data. The new information systems also provide
Copyright © 2005 Pearson Education Canada Inc.
member banks with online access to their customer data, reports, and
analytical tools.
3. What kind of decision-support systems did MasterCard develop?
How are they related to its business strategy? How do they
provide value for MasterCard and its clients?
MasterCard developed data-driven DSS. The DSS provide 27 tools that
banks can use. Although the Business Performance Intelligence tool also
provides some MIS capabilities, such as providing operational reporting,
it does include a suite of 70 standard reports that banks can use to
analyze their daily, weekly, and monthly transactions. Banks can
compare results from one market with the results from another market.
MarketScope can help merchants and banks generate more purchases
for the merchants if the customers use their MasterCards for their
purchases. MarketScope can analyze the purchases and help the
merchants target market special opportunities to customers.
MasterCard's DSS have helped the company increase its market share.
Copyright © 2005 Pearson Education Canada Inc.
4. Has MasterCard's strategy been successful? Can MasterCard
hold on to its strategic advantage? Explain your answer.
MasterCard's strategy has been successful. MasterCard encouraged
several companies, such as Citigroup and J.P. Morgan Chase, to push its
credit cards. MasterCard's strategic advantage is not sustainable. The
case clearly points out that VISA is not sitting by and allowing
MasterCard to eat away at its market share. VISA is now running
analyses for its banks on its own computers and is offering a Web
service called Resolve Online.
Copyright © 2005 Pearson Education Canada Inc.