Information Systems In Business (Week 2)

Explain information technology’s role in business and describe how you measure success

Information technology is an enabler of business. It facilitates communication and increases business intelligence. It allows for automated processing which improves productivity and accuracy, reduces costs, assists with quality decision making and the speed at which decisions are made. 

Success is measured through the efficiency and effectiveness metrics. 

Efficiency IT metrics measure the performance of the system itself which include throughput, speed and availability. These metrics are able to answer questions such as, how fast the system is, how many transactions per hour and how much capacity the system has. 

Effectiveness IT metrics measure the impact IT has on business activities and processes by considering customer satisfaction and conversion rates. 

Primarily, efficiency focuses on the extent to which an organisation is using its resources while effectiveness focuses on how well an organisation is achieving its goals and objectives. 

List and describe each of the forces in Porter’s Five Forces Model

Michael Porter developed the Five Forces Model which is a useful tool to aid in understanding competition and its implications for business strategies. 

1. Buyer Power

The power of buyers is reflected by their ability to directly impact the price they are willing to pay for an item. Buyer power is high when buyers have many sellers to chose from and low when their choices are few. 

2. Supplier Power

Supplier power is high when one supplier has concentrated power over an industry. When supplier power is high, the supplier can directly influence the industry by charging higher prices and limiting services or quality.

3. Threat of Substitute Products or Services

The threat of substitute products or services is high when there are many alternatives to a product or service and low when there are few alternatives.

4. Threat of New Entrants

The threat of new entrants is high when it is easy for new competitors to enter a market and low when there are significant barriers to entering a market. 

5. Rivalry Among Existing Competitors

Rivalry among existing competitors is high when competition is fierce in a market and low when competition is more settled. 

Describe the relationship between business processes and value chains

Value chain analysis is used to determine the success or failure of an organisation's chosen strategy. Business processes are a standardised set of activities that accomplish a specific task and a value chain views an organisation as a series of processes, each of which add to the product or service. 

Primary value activities acquire raw materials and manufacture, market, sell and provide after sales services. Support value activities support the primary value activities. 

Improving primary activities can decrease the threat of substitutes and improving support activities can decrease the threat of new entrants. 

Compare Porter’s three generic strategies

Porter's three generic strategies are:

1. Broad cost leadership

2. Broad differentiation

3. Focused strategy

Focused strategies target a niche market while broad strategies target a large market segment. A focused strategy ideally concentrates on either cost leadership or cost differentiation. 

Porter suggests that an organisation is wise to adopt only one of the three generic strategies in order to succeed.