Explain information technology’s role in business and describe how you measure success?
Information Technology's role in business is to manage and process information. It collects raw data which when processed becomes information which is meaningful to the company. This is an important role in business as it enables success, however it requires people that understand how to use and manage it effectively.
Information Technology plays an important role in fulfilling business goals by facilitating communication and increased business intelligence. Technology can increase communication and business intelligence by utilising systems which enable the functional areas of business such as accounting, marketing, operations, human resources and logistics to share information. This is an extremely important function as each of these functional areas is interdependent as they rely on each others information. For example, sales must rely on information from operations to understand inventory, place orders, etc.
Through the business function of management information systems (MIS) information technology has an important role in the resolution of business problems. MIS is the application of people, technologies and procedures to solve a business problem. It is an integral business function which enables success.
Information Technology is measured in Key Performance Indicators (KPIs) which are measures that are tied to business drivers. Metrics are the detailed measures that inform KPIs.
Efficiency Metric - Measures the performance of an It system. For example throughput, speed and availability. Focuses on the extent an organisation is using its resources in an optimal way.
Effectiveness Metric - Measures the impact IT has on business processes and activities. For example, customer satisfaction and sell effectiveness. Focuses on how well an organisation is achieving its goals and objectives.
Benchmarking - baseline metrics benchmarking is the process of continuously measuring system results, comparing those results to optimal system performance, and identifying steps and procedures to improve system performance.
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List and describe each of the forces in Porter’s Five Forces Model?
Buyer Power
Buyer power is high when there are many sellers, and low when their are few. Buyers impact the price of items as they determine what they are willing to pay. Strong buyer power (similar to a monopsony) allows the buyer to determine the price. Businesses reduce buyer power by expanding and improving services to produce a competitive advantage and loyalty programs which reward customers for the amount and continued use of their business. IT is often employed to manage loyalty programs.
Supplier Power
The supplier provides raw materials to an organisation to produce products which may in turn become raw materials. Supplier power is high when one supplier has concentrated power over an industry. High supply power allows the supplier to charge higher prices, limit quality or service and shift costs to industry participants. High supplier power prevents organisations from passing on costs for fear of jeopardising sales. Standard parts reduce supplier power.
Threat of Substitute Products or Services
Organisations attempt to enter markets where there are few substitutes and therefore less competition.
Threat of new entrant
An entry barrier is a product of service feature which has become an expectation of customers, necessary to be competitive in a market. The threat of new entrants in a market is high when there are small entry barriers and low when there are large entry barriers.
Rivalry among existing competitors
There is a general trend towards high competition in most industries. In order to reduce competition companies introduce switching costs. A switching cost can be a feature such as customer service or an associated monetary cost such as a loyalty program. To reduce competition from rivals companies create products significantly different from their competitors' products.
Describe the relationship between business processes and value chains?
A business process is a standardised set of activities that accomplish a specific task. To evaluate the effectiveness of its business processes an organisation can use the value chain. The value chain views an organisation as a series of processes, each of which adds value to the product/service for each customer. To create a competitive advantage the value chain must allow the organisation to provide unique value to its customers.
Compare Porter’s three generic strategies?
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Broad Cost Leadership
Requires a company to be a low cost producer in an industry. Companies may sell prices at market average to earn higher profits or at below average industry prices to gain a market share. Strategy is advantageous as companies will remain profitable for a long period if their production costs are cheap. Improvements in technology mean that there is a risk another company could leapfrog the production capabilities, eliminating the competitive advantage.
Broad Differentiation
Requires a company to develop a product or service that offers unique attributes valued and perceived by customers as better than the competition. Companies may charge higher prices and increase products due to the value added by the uniqueness of the product. May enable the company to pass along costs to its customers who cannot find a substitute product. However, the strategy also has risks as it can be limited by competitors and customers may change their taste.
Focused Strategy
Requires a company to focus on a narrow segment and attempts to achieve a cost advantage or differentiation. There is a high degree of customer loyalty in niche markets which limits the threat of new entrants. Companies pursuing a focus strategy have less bargaining power with suppliers due to their smaller volume. They may, however, pass on costs to the customer since no close substitute products exist. The strategy risks a broad-market cost leader adapting its product to suit the market segment of the company and is bound to the limitations and changes in the target segments.
Through the business function of management information systems (MIS) information technology has an important role in the resolution of business problems. MIS is the application of people, technologies and procedures to solve a business problem. It is an integral business function which enables success.
http://www.sharkyextreme.com/img/2007/09/a64x2_5600/pcmark2005_sys.jpg
List and describe each of the forces in Porter’s Five Forces Model?
Buyer power is high when there are many sellers, and low when their are few. Buyers impact the price of items as they determine what they are willing to pay. Strong buyer power (similar to a monopsony) allows the buyer to determine the price. Businesses reduce buyer power by expanding and improving services to produce a competitive advantage and loyalty programs which reward customers for the amount and continued use of their business. IT is often employed to manage loyalty programs.
The supplier provides raw materials to an organisation to produce products which may in turn become raw materials. Supplier power is high when one supplier has concentrated power over an industry. High supply power allows the supplier to charge higher prices, limit quality or service and shift costs to industry participants. High supplier power prevents organisations from passing on costs for fear of jeopardising sales. Standard parts reduce supplier power.
Organisations attempt to enter markets where there are few substitutes and therefore less competition.
An entry barrier is a product of service feature which has become an expectation of customers, necessary to be competitive in a market. The threat of new entrants in a market is high when there are small entry barriers and low when there are large entry barriers.
There is a general trend towards high competition in most industries. In order to reduce competition companies introduce switching costs. A switching cost can be a feature such as customer service or an associated monetary cost such as a loyalty program. To reduce competition from rivals companies create products significantly different from their competitors' products.
A business process is a standardised set of activities that accomplish a specific task. To evaluate the effectiveness of its business processes an organisation can use the value chain. The value chain views an organisation as a series of processes, each of which adds value to the product/service for each customer. To create a competitive advantage the value chain must allow the organisation to provide unique value to its customers.
http://www.marketingteacher.com/IMAGES/porter_generic.gif
Requires a company to be a low cost producer in an industry. Companies may sell prices at market average to earn higher profits or at below average industry prices to gain a market share. Strategy is advantageous as companies will remain profitable for a long period if their production costs are cheap. Improvements in technology mean that there is a risk another company could leapfrog the production capabilities, eliminating the competitive advantage.
Requires a company to develop a product or service that offers unique attributes valued and perceived by customers as better than the competition. Companies may charge higher prices and increase products due to the value added by the uniqueness of the product. May enable the company to pass along costs to its customers who cannot find a substitute product. However, the strategy also has risks as it can be limited by competitors and customers may change their taste.
Requires a company to focus on a narrow segment and attempts to achieve a cost advantage or differentiation. There is a high degree of customer loyalty in niche markets which limits the threat of new entrants. Companies pursuing a focus strategy have less bargaining power with suppliers due to their smaller volume. They may, however, pass on costs to the customer since no close substitute products exist. The strategy risks a broad-market cost leader adapting its product to suit the market segment of the company and is bound to the limitations and changes in the target segments.
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