Ch1 Understanding Information System Requirements Software skills: Word Processing Business skills: Management analysis and information system recommendations How do you know what information systems are really needed by a business and which are the most important? How should a company’s structure or culture affect the building and use of information systems? Dirt Bikes’s management has asked you to prepare a management analysis of the company to help it assess the firm’s current situation and future plans. Review Dirt Bikes’s company history, organization chart, products and services, and sales and marketing in the Introduction to Dirt Bikes. Then prepare a report that addresses these questions: What are the company’s goals and culture? What products and services does Dirt Bikes U.S.A. provide? How many types of products and services are available to customers? How does Dirt Bikes sell its products? How many employees are managers, production workers, or knowledge or information workers? Are there levels of management? What kinds of information systems and technologies would be the most important for a company such as Dirt Bikes? Ch2 Analyzing Financial Performance Software skills: Spreadsheet charts and formulas Business skills: Financial statement analysis As part of your analysis of the company for management, you have been asked to analyze data on Dirt Bikes’s financial performance. Review the spreadsheet Dirt Bikes Financial Data. There you will find Dirt Bikes’s income statement and summary balance sheet data from 2015 to 2017, annual sales of Dirt Bikes models between 2013 and 2017 (measured by units sold), and total domestic versus international sales (measured by units sold) between 2013 and 2017. Use your spreadsheet software to create graphs of Dirt Bikes’s sales history from 2013 to 2017 and its domestic versus international sales from 2013 to 2017. Select the type of graph that is most appropriate for presenting the data you are analyzing. Use spreadsheet software to calculate the gross and net margins in Dirt Bikes’s income statements from 2015 to 2017. You can also create graphs showing trends in selected pieces of Dirt Bikes’s income statement and balance sheet data if you wish. (You may want to rearrange the historical ordering of the data if you decide to do this.) Prepare an addition to your management report that answers these questions: What are Dirt Bikes’s best- and worst-performing products? What is the proportion of domestic to international sales? Have international sales grown relative to domestic sales? Is revenue growing steadily, and, if so, at what rate? Is the cost of goods sold compared to revenue increasing or decreasing? Are the firm’s gross and net margins increasing or decreasing? Are the firm’s operating expenses increasing or decreasing? Is the firm heavily in debt? Does it have assets to pay for expenses and to finance the development of new products and information systems? Ch3 Improving Decision Making: Analyzing Competitive Strategy Business skills: Value chain and competitive forces analysis, business strategy formulation This project provides an opportunity for you to develop the competitive strategy for a real-world business. You’ll use value chain analysis to determine what kinds of information systems will provide the company with a competitive advantage. Dirt Bikes’s management wants to be sure it is pursuing the right competitive strategy. You have been asked to perform a competitive analysis of the company. Prepare a report that analyzes Dirt Bikes using the value chain and competitive forces models. Your report should include the following: Which activities at Dirt Bikes create the most value? How does Dirt Bikes provide value to its customers? What are the competitive forces that can affect the industry? What competitive strategy should Dirt Bikes pursue? What information systems best support that strategy? Ch4 Achieving Operational Excellence: Developing a Web Site Privacy Policy Business skills: Corporate privacy policy formulation Dirt Bikes’s management wants to make sure it has policies and procedures in place to protect the privacy of visitors to its Web site. You have been asked to develop Dirt Bikes’s Web site privacy policy. On the Web you can find material on privacy best practices and model privacy policies that you can review to help you draft Dirt Bikes’s privacy policy. You can also examine specific companies’ privacy policies by searching for Web site privacy policies on Yahoo!, Google or another search engine. Prepare a report for management that addresses the following issues: How much data should Dirt Bikes collect on visitors to its Web site? What information could it discover by tracking visitors’ activities at its Web site? What value would this information provide the company? What are the privacy problems raised by collecting such data? Should Dirt Bike use cookies? What are the advantages of using cookies for both Dirt Bikes and its Web site visitors? What privacy issues do they create for Dirt Bikes? Should Dirt Bikes adopt an opt-in or opt-out model of informed consent? Ch5 Improving Decision Making: Making the Rent vs. Buy Decision for Hardware and Software Software skills: Spreadsheet formulas Business skills: Technology rent vs. buy decision, TCO analysis This project provides an opportunity for you help a real-world company make a decision about whether to rent or buy new technology. You’ll use spreadsheet software to compare the total threeyear cost of licensing and maintaining new manufacturing software or renting the software from an application service provider. Dirt Bikes would like to implement new production planning, quality control, and scheduling software for use by 25 members of its manufacturing staff. Management is trying to determine whether to purchase the software from a commercial vendor along with any hardware required to run the software or to use a software solution from a SaaS provider that runs in the cloud. You have been asked to help management with this rent vs. buy decision by calculating the total cost of each option over a three-year period. The costs of purchasing the software (actually for purchasing a license from the vendor to use its software package) include the initial purchase price of the software (licensing fee of $100,000 paid in the first year), the cost of implementing and customizing the software in the first year ($20,000), one new server to run the software (a first-year purchase of $4000), one information systems specialist devoting half of his or her time to supporting the software ($55,000 in full-time annual salary and benefits with a 3% annual salary increase each year after the first year), user training in the first year ($10,000), and the cost of annual software upgrades ($5,000). The costs of renting cloud-hosted software are the rental fees ($2500 annually per user), implementation and customization costs ($12,000 in the first year), and training ($10,000 in the first year). Use your spreadsheet software to calculate the total cost of renting or purchasing this software over a three-year period. Identify the lowest-price alternative that meets Dirt Bikes’s requirements. What other factors should Dirt Bikes consider besides cost in determining whether to rent or buy the hardware and software? Ch6 Improving Decision Making: Redesigning the Customer Database Software skills: Database design - querying Business skills: Customer profiling Dirt Bikes U.S.A. sells primarily through its distributors. It maintains a small customer database with the following data: customer name, address (street, city, state, zip code), telephone number, model purchased, date of purchase, and distributor. You can find the database in D2L. These data are collected by its distributors when they make a sale and are then forwarded to Dirt Bikes. Dirt Bikes would like to be able to market more aggressively to its customers. The Marketing Department would like to be able to send customers e-mail notices of special racing events and of sales on parts. It would also like to learn more about customers’ interests and tastes: their ages, years of schooling, another sport in which they are interested, and whether they attend dirt bike racing events. Additionally, Dirt Bikes would like to know whether customers own more than one motorcycle. (Some Dirt Bikes customers own two or three motorcycles purchased from Dirt Bikes U.S.A. or other manufacturer.) If a motorcycle was purchased from Dirt Bikes, the company would like to know the date of purchase, model purchased, and distributor. If the customer owns a non–Dirt Bikes motorcycle, the company would like to know the manufacturer and model of the other motorcycle (or motorcycles) and the distributor from whom the customer purchased that motorcycle. Redesign Dirt Bikes’s customer database so that it can store and provide the information needed for marketing. You will need to develop a design for the new customer database and then implement that design using database software. Consider using multiple tables in your new design. Ch7 Achieving Operational Excellence: Using Internet Tools to Increase Efficiency and Productivity Business skills: Employee productivity analysis In this project, you’ll suggest applications of Internet technology to help a employees at real-world company work more efficiently. Dirt Bikes’s management is concerned about how much money is being spent communicating with people inside and outside the company and on obtaining information about developments in the motorcycle industry and the global economy. You have been asked to investigate how Internet tools and technology could be used to help Dirt Bikes employees communicate and obtain information more efficiently. Dirt Bikes provides Internet access to all its employees who use desktop computers. How could the various Internet tools help employees at Dirt Bikes? Create a matrix showing what types of employees and business functions would benefit from using each type of tool and why. How could Dirt Bikes benefit from intranets for its sales and marketing, human resources, and manufacturing and production departments? Select one of these departments and describe the kind of information that could be provided by an intranet for that department. How could this intranet increase efficiency and productivity for that department? Ch8 Achieving Operational Excellence: Developing a Disaster Recovery Plan Business skills: Disaster recovery planning Management is concerned that Dirt Bikes’s computer systems could be vulnerable to power outages, vandalism, computer viruses, natural disasters, or telecommunications disruptions. You have been asked to perform an analysis of system vulnerabilities and disaster recovery planning for the company. Your report should answer the following questions: What are the most likely threats to the continued operation of Dirt Bikes’s systems? What would you identify as Dirt Bikes’s most critical systems? What is the impact on the company if these systems cannot operate? How long could the company survive if these systems were down? Which systems are the most important to back up and restore in the event of a disaster? Ch10 Achieving Operational Excellence: Developing an E-Commerce Strategy Business skills: Strategic analysis This project provides an opportunity for you to develop an e-commerce strategy for a real-world business. Dirt Bikes’s management believes that the company could benefit from e-commerce. The company has sold motorcycles and parts primarily through authorized dealers. Dirt Bikes advertises in various magazines catering to dirt bike enthusiasts and maintains booths at important off-road motorcycle racing events. You have been asked to explore how Dirt Bikes could benefit from e-commerce and a Dirt Bikes Web site. Prepare a report for management that answers the following questions: How could Dirt Bikes benefit from e-commerce? Should it sell motorcycles or parts over the Web? Should it use its Web site primarily to advertise its products and services? Should it use the Web for customer service? Introduction to Dirt Bikes Dirt Bikes USA is a small company headquartered in Carbondale Colorado that manufactures and sells its own brand of off-road motorcycles. It was founded in 1993 to product dirt bikes that could be customized for racing and off-road recreational riding using the best quality components and parts from all over the world. The company has continued to grow and now faces a new set of challenges and opportunities. You have been asked to serve as a consultant to apply your information systems knowledge to help Dirt Bikes solve some of the problems it is encountering. To develop solutions, you may need to do Web research and to use spreadsheet, database, or Web browser software tools, and you will need to use a word processor to write up your findings. In order to complete your assignments, you should familiarize yourself with Dirt Bikes. To learn more about the company and how it works, review each of these topics in this document:      Company History and Background Organization Chart and Employees Products and Services Sales and Marketing Selected Financial Data The following is a list of Dirt Bikes tasks we plan to complete: 1. Understanding Information System Requirements [Data File: Dirt Bikes Org Chart] 2. Analyzing Financial Performance [Data File: Dirt Bikes Financial Data] 3. Analyzing Competitive Strategy 4. Developing a Web Site Privacy Policy 5. Improving Decision Making: Making the Rent vs. Buy Decision for Hardware and Software 6. Improving Decision Making: Redesigning the Customer Database [Data File: Customer Database] 7. Achieving Operational Excellence: Using Internet Tools to Increase Efficiency and Productivity 8. Achieving Operational Excellence: Developing a Disaster Recovery Plan 9. Achieving Operational Excellence: Identifying Supply Chain Management Solutions 10. Achieving Operational Excellence: Developing an E-Commerce Strategy 11. Improving Decision Making: Analyzing the Impact of Component Price Changes [Data File: Bill of Materials] 12. Achieving Operational Excellence: Designing an Employee Training and Skills Tracking System and Database [Data File: Employee Database] Company History and Background Dirt Bikes USA was founded in 1993 by Carl Schmidt and Steven McFadden, two young but experienced bikers with engineering backgrounds who saw that dirt bikes were becoming very popular in the United States as both sporting and racing motorcycles. They developed frames for dirt bikes that were more suited to off-road handling and started using these frames to build their own dirt bike models using motorcycle engines manufactured by other companies, such as Honda and Rotax Motors of Austria. Riding on one of their customized dirt bikes, Steven finished first in the famous Barstow to Las Vegas race. There was so much interest in Carl and Steve’s bikes that they decided to open a production facility that could manufacture large numbers of their dirt bikes for the retail market. They opened a small production facility in Carbondale which has since expanded to house 120 workers involved in production, design, and engineering and a corporate sales and administrative staff of close to 20 employees. Over the years Dirt Bikes USA has enhanced and expanded its product line to include dirt bike models optimized for racing and for off-road recreational use. Its racing models have placed well-and often placed first-- in the many dirt bike races staged throughout the United States, including the Barstow-Las Vegas race and competitions at Daytona Bike Week. Organization Chart and Employees Dirt Bikes USA is still privately owned with Carl serving as CEO and Steven as President and Chief Operating Officer. About 120 employees work in design, engineering and production, including 3 full-time product designers and 3 engineers. In addition to a 4-person Parts department, Dirt Bikes maintains a ten-person service department to service warranties and customer problems with parts and motorcycle performance. Five employees work in Dirt Bikes’ shipping and receiving department. Dirt Bikes’ sales staff consists of a marketing manager and 5 sales representatives, two for the West coast and Western United States, one for the Midwest, one for the Northeast and one for the South. The corporate administrative staff consists of a controller, one accountant, one administrative assistant, two human resources staff members, three secretaries, and two information systems specialists to support systems servicing all of the business functional areas. The data file Dirt Bikes Org Chart shows Dirt Bikes’s organization chart. The company maintains a very friendly family atmosphere, encouraging teamwork, attention to detail and quality, and continual learning and innovation. Employees, distributors, and retail customers are urged to contribute ideas on how to improve Dirt Bikes’ products and service. Products and Services Dirt Bikes’ founders realized that the most popular dirt bikes were foreign brands and wanted to capitalize on their proximity to the dirt bikes racing circuit and market in the United States. Carl and Steve hoped they could develop bikes that performed and looked better than the competition by using the best custom parts available. Dirt Bikes does not hesitate to use quality components from all over the world. The engines for Dirt Bikes are Rotax engines from Austria and tires are from Dunlop, but many of their parts, such as shock absorbers, front wheel forks, exhaust pipes, and headlights, are from the United States. Dirt Bikes makes its own frames, shaping them to give them the unique spirited style for which the company is noted. The company’s parts and service business accounts for about 15% of its total revenue. Manufacturing and selling dirt bikes is a complex business. Dirt bike racing has many forms, including racing specifically for different size bikes, for short distances, long distance, and even for up to six days. Enduro bikes are for cross-country racing and motocross bikes are specially designed for racing in an enclosed dirt course that can consist of a variety of terrains; uphill, downhill, corners, jumps, and so forth. Dirt Bikes currently produces four models: the Enduro 250, the Enduro 550, the Moto 300 and the Moto 450. The two Enduros are endurance racers, while the Motos are for motocross racing. All four are very modern, with such technology as both kick and electric starters, steering stabilizers, and liquid cooling. The large majority of these bikes are sold in the United States for between $3,250 and $9000 retail. (The Enduro 250 retails for $3250, the Enduro 550 retails for $7600, the Moto 300 retails for $4295 and the Moto 450 retails for $8995.) Dirt Bikes has appealed primarily to serious trail and Enduro riders, although it is making inroads into the motocross market. Sales and Marketing Dirt Bikes does not sell directly to retail customers, relying on a network of 40 distributors concentrated in the Western and Midwestern United States. A small percentage of Dirt Bikes are sold in Europe using independent distributors that sell other brands of dirt bikes and motorcycles as well as Dirt Bikes. Dirt Bikes’ motorcycles, parts, and service, including warranty repairs, can only be obtained through an authorized Dirt Bikes dealer. All motorcycle and spare parts sales, shipping and set-up must be handled by a certified dealer. If a potential customer lives more than 50 miles from the nearest authorized Dirt Bikes dealer, the customer can purchase a Dirt Bike or Dirt Bike parts through a certified independent motorcycle dealer. Retail customers can purchase spare parts directly from Dirt Bikes only by verifying that they live more than 50 miles from an authorized Dirt Bikes dealer. Dirt Bikes’ sales department works closely with Dirt Bikes’ distributors. One of its key responsibilities is to aggressively promote Dirt Bikes at dirt bike racing and other events. Many Dirt Bikes employees are dirt bike racing enthusiasts themselves. Several are official company racers representing the company in dirt bike racing competition. Dirt Bikes recently established a Dirt Bikes USA Owners’ Group to promote stronger relationships with customers and to make it easier for them to share their Dirt Bikes USA experiences. Dirt Bikes also advertises in magazines devoted to motorcycle racing and dirt bikes. It uses a small public relations firm to place articles about new company products or racing victories in these magazines. Dirt Bikes also pays for ads in these publications. Selected Financial Data The data file Dirt Bikes Financial Data provides a spreadsheet with three worksheets containing Dirt Bikes financial data for you to review:    Income statement and summary balance sheet data from 2011-2013 Annual sales (measured by units sold) of each Dirt Bikes model between 2009 and 2013 Total domestic vs. international motorcycle sales (measured by units sold) between 2009 and 2013 The income statement and balance sheet are the primary financial statements used by management to determine how well a firm is performing. The income statement, also called an operating statement or profit and loss statement, shows the income and expenses of a firm over a period of time, such as a year, a quarter, or a month. The gross profit represents the difference between the firm’s (sales) revenue and the cost of goods sold. The gross margin is calculated by dividing gross profit by revenues. Net profit (or loss) is calculated by subtracting all other expenses, including operating expenses and income taxes from gross profit. Operating expenses are all business costs (such as expenditures for sales and marketing, general and administrative expenditures, and depreciation) other than those included in the cost of goods sold. Net margins are calculated by dividing net profit (or loss) by revenues (or sales). A balance sheet provides a snapshot of a company’s financial assets and liabilities on a given date, usually the close of an accounting period. It lists what material and intangible assets the business owns and what money the business owes either to its creditors (liabilities) or to its owners (shareholders’ equity, also known as net worth). We have included here are only the most important pieces of balance sheet data for you to review. At any given time a business’s assets equals the sum of its liabilities plus its net worth. Current assets include cash, securities, accounts receivable, or other investments that are likely to be converted into cash within one year. Current liabilities are debts that are due within one year. Long-term debt consists of liabilities that are not due until after a year or more. If too much debt has been used to finance the firm’s operations, problems may arise in meeting future interest payments and repaying outstanding loans. By examining a series of financial statements one can identify and analyze trends in the financial strength of a business. When examining Dirt Bikes’ income statement and balance sheet data, pay special attention to the company’s three-year trends in revenue (sales), costs of goods sold, gross margins, operating expenses, and net income (or loss). Pay attention to whether the company’s short and long-term liabilities are growing and whether they exceed assets. If a company has more current assets than current liabilities, it is a sign that it probably has enough working capital to fund investments in new equipment or information systems. The two other spreadsheets present motorcycle sales data measured by units sold between 2009 and 2013, which can be used to gauge motorcycle sales. When examining these spreadsheets, pay attention to the trends in sales. This includes the sales trends for each product Dirt Bikes sells, overall sales trends, and the proportion of international to domestic sales. This worksheet shows the number of Dirt Bikes motorcycles sold between 2013 and 2017. Worksheet name: Sales Amounts are in units sold Model Enduro 250 Enduro 550 Moto 300 Moto 450 TOTAL 2013 1201 2832 1755 463 6251 Sales by Model 2014 2015 1663 2291 3290 3759 1932 2454 598 661 7483 9165 2016 2312 4078 2615 773 9778 2017 2195 3647 2627 823 9292 This worksheet shows Dirt Bikes' income statements and summary balance sheets from 2015-2017. Worksheet name: Financial Statements Amounts are in thousands Consolidated Satements of Income (in thousands) 2017 2016 2015 Revenue Net sales Cost of goods sold Gross profit/(loss) Gross margin Operating expenses Sales and markering Engineering and product development General and administrative Total operating expenses Operating income/loss Other income/expense Interest income/expense Other income/(expense) Income before provision for income taxes Income taxes Net income/(loss) Net margin 60,144 45,835 14,309 64,063 43,155 20,908 61,529 41,072 20,457 4,733 3,141 1,913 9,787 4,522 4,537 2,992 1,601 9,130 11,778 3,944 2,339 1,392 7,675 12,782 1,747 (6,254) 15 1,459 (1,444) 175 (2,914) 9,039 1,729 7,310 80 (3,080) 9,782 535 9,247 Summary Balance Sheet Data At December 31 Current assets Cash and cash equivalents Accounts reveivable Inventories Total current assets 2017 2016 2015 6,994 13,083 6,315 26,392 7,197 12,981 5,931 26,109 6,891 12,872 5,843 25,606 Property plant, and equipment Other assets Total assets 36,920 1,765 65,077 34,515 1,903 62,527 32,002 1,834 59,442 Current liabilities Accounts payable Accrued expenses and other liabilities Total current liabilities 8,943 10,877 19,820 8,694 9,382 18,076 7,592 8,654 16,246 Long-term debt Total liabilities 9,772 29,592 9,338 27,414 8,890 25,136 Shareholders' equity Total liabilities + shareholders' equity 35485 65,077 35113 62,527 34306 59,442 This worksheet shows number of Dirt Bikes' domestic vs. interational motorcycles sold between 2013 and 2017. Worksheet name: Domestic vs. International Sales Amounts are in units sold Domestic International TOTAL % International 2013 5723 528 6251 8.4% Domestic vs. International Sales 2014 2015 2016 6843 8254 8889 640 911 889 7483 9165 9778 8.6% 9.9% 9.1% 2017 8530 762 9292 8.2%