chap003 - Chapter 3 The REA Enterprise Ontology Value...

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Chapter 3 The REA Enterprise Ontology: Value System and Value Chain Modeling Review Questions R1. What is a business process? Describe each of the major business processes found in most enterprises. A business process is a group of related activities an organization performs to provide goods and services to customers. Regardless of the type of good or service an organization provides, each organization has three broad business processes: 1. Acquisition/Payment Processes - acquiring, maintaining, and paying for resources needed by the organization (e.g. human resources, financing, property, plant, equipment, materials and supplies) to provide goods and services. 2. Conversion Process - converting the acquired resources into goods and services for customers. 3. Sales/Collection Process - delivering goods and services to customers and collecting payment. R2. What does it mean to create value? How do enterprises create value? In his book Competitive Advantage , Michael Porter explains that everything an organization does should create value for its customers. Every organization seeks to create value by providing goods and services that customers want. They accomplish this through a series of business processes, e.g., acquisition/payment process, conversion process, and sales/collection process. Leaders of an organization are responsible for managing the business processes. An information system with several information processes provides information to help management plan, execute, evaluate, and control the business processes. Creating value incurs costs for the organization. For example, assembling an automobile creates value but it also requires the organization to pay for various costs (e.g., materials, supplies, and time of employees). Whether profit or not- for-profit, viable organizations provide goods and services that customers value in a cost-effective way. 22 Solutions Manual to accompany Dunn, Enterprise Information Systems: A Pattern Based Approach, 3e
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Chapter 3 R3. What is an enterprise’s “margin” as defined by Michael Porter? Porter computes an organization’s “margin” as the difference between value and cost. This is a much broader definition of margin than the typical accounting definition because Porter’s calculation includes all value and all cost, much of which is difficult to measure financially. R4. Differentiate between the objectives of a profit and a not-for-profit enterprise. The concept of creating value applies to both profit and not-for-profit organizations but their objectives differ. For-profit organizations try to maximize their margins. Not-for-profit organizations, such as charitable or governmental entities, seek to maximize the goods and services they provide with the resources (funds) they receive. Over the long run, charitable and governmental organizations seek to optimize their services while matching outflows to inflows. Whether for-profit or not-for-profit, viable organizations provide goods and
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This note was uploaded on 01/17/2011 for the course INFO SYSTE 115 taught by Professor Baker during the Spring '10 term at Strayer.

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chap003 - Chapter 3 The REA Enterprise Ontology Value...

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