1. Explain information technology’s role in business and describe how you measure success?
Information technology has an effect on business and also the potential to transform it. Information technology can reduce costs, improve productivity and generate growth. To achieve these general business goals the organisation needs to take on enterprise-wide initiatives. By assisting communication and amplifying business intelligence, information technology plays a significant role in arranging these initiatives. Across an organisation, employees must work collectively to develop strategic initiatives that create competitive advantages. Information technology can allow departments to perform their business operations more efficiently and effectively.
I.T success is very difficult to measure. But how does a company decide if an information system helps make a business successful? Key performance indicators (KPIs) are measures tied to business drivers, and metrics are the thorough measures that supply those KPIs.
Efficiency and effectiveness metrics are primary types of IT metrics. Efficiency measures the performance of the system itself ie how fast the system is running or the capacity of the system. Effectiveness IT metrics measure the impact IT has on business and are determined according to organisations goals, strategies and objectives.
There must be benchmarks or baseline values that the system tries to achieve, despite what is measured and if it is for the sake of efficiency or effectiveness. Benchmarking is a process of continuously measuring system results, comparing those results to benchmark values and recognise steps and procedures to advance system performance.
I.T success is very difficult to measure. But how does a company decide if an information system helps make a business successful? Key performance indicators (KPIs) are measures tied to business drivers, and metrics are the thorough measures that supply those KPIs.
Efficiency and effectiveness metrics are primary types of IT metrics. Efficiency measures the performance of the system itself ie how fast the system is running or the capacity of the system. Effectiveness IT metrics measure the impact IT has on business and are determined according to organisations goals, strategies and objectives.
There must be benchmarks or baseline values that the system tries to achieve, despite what is measured and if it is for the sake of efficiency or effectiveness. Benchmarking is a process of continuously measuring system results, comparing those results to benchmark values and recognise steps and procedures to advance system performance.
2. List and describe each of the forces in Porter’s Five Forces Model?
1. Buyer power- Is high when there are many sellers, and low when there are a few. Buyer power is mirrored by their ability to impact the price they are willing to pay for an item. Monopsony is when a market has only one buyer but many suppliers, so the buyer sets the price, meaning the buyer has all the power. To reduce buyer power companies often create a loyalty program to reward customers based on the amount of business they do with a certain organisation.
2. Supplier power – An organisation will be both a supplier (to customer) and a customer (of other organisation), in a typical supply chain. Supply power is high when a supplier has concentrated power over an industry. The supplier can influence the industry if the supplier power is high by charging higher prices, limiting quality or services and shifting costs to industry participants. When supplier power is high, buyers lose revenue because they cannot pass on the price to their customers.
3. Threat of substitute products or services – is high when they are many options to a product or services and low when there are little options to choose from. A market where there are few substitutes for the product is an ideal market for an organisation.
4. Threat of new entrants- The threat of new entrants is high when it is easy for new competitors to join the market and low when there are many barriers to entering a market. An entry barrier is a product or feature that customers expect from an organisation by a particular industry, and must therefore be offered when entering an industry to survive. E.g. – A bank must offer IT enabled services such as ATMs and online bill paying. These are barriers to entering the banking market.
5. Rivalry among existing competitors – is high when competition is intense and low when competition is more complacent in a market. The overall trend in almost every industry is towards increased competition. One way to reduce rival power i.e. between Coles and Woolworths is by switching costs. This can make customers more unwilling to switch to another product or service.
3. Describe the relationship between business processes and value chains?
A business process is a standardised set of activities that achieve precise tasks, such as processing a customer’s order. An organisation can use Michael Porter’s value chain approach to evaluate the effectiveness of its business process. The value chain approach views an organisation as a series of processes, each adding to the value of the product for each customer. The value chain must enable the organisation to provide sole value to its customers to create competitive advantage. To achieve this, a firm must carry out one or more value creating activities that creates more overall value than do competitors. Lower costs or superior benefits (differentiation) are a way to create added value. Identifying important activities that add value for a customer and then finding IT systems that support those activities is what can be achieved by examining the organisation as a value chain.
4. Compare Porter’s three generic strategies?
Porter’s three generic strategies are broad cost leadership, broad differentiation and focused strategy.
Cost leadership and differentiation are broad strategies; therefore they reach a large market segment, while focused strategies target a smaller market, concentrating on either cost or differentiation.
Cost leadership calls for being the low cost producer in an industry for a given level of quality. The organisation sells its product at an average industry price to earn the profit higher that of its rivals or below average industry prices to gain market share. This is different to broad differentiation as it calls for the development of a product with unique attributes that customers perceive to be better than or different to other products of the competition. Focused strategy focuses on a narrow segment and within that segment attempts to create either cost advantage or differentiation.
Cost leadership and differentiation are broad strategies; therefore they reach a large market segment, while focused strategies target a smaller market, concentrating on either cost or differentiation.
Cost leadership calls for being the low cost producer in an industry for a given level of quality. The organisation sells its product at an average industry price to earn the profit higher that of its rivals or below average industry prices to gain market share. This is different to broad differentiation as it calls for the development of a product with unique attributes that customers perceive to be better than or different to other products of the competition. Focused strategy focuses on a narrow segment and within that segment attempts to create either cost advantage or differentiation.
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