Information Systems in Business

13/03/11

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

 Information technology impacts on all areas of business. Businesses ranging from accounting to marketing all need IT in some way. IT helps businesses gain access to worldwide markets and helps reduces costs, generate growth and increase productivity.

IT also helps businesses run smoother through different operations systems. It acts as an enabler for business success and innovation.

You can measure business’ success in IT through key performance indicators which are measures tied to business drivers, and also through efficiency and effectiveness metrics.

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

Porter’s Five Forces Model determines the relative attractiveness of an industry. By understanding it, businesses can identify potential opportunities and avoid potential threats. This model includes:

·         Potential Entrants
The threat of new entrants is high when  it is easy for new competitors to enter a market and are low when there are entry barriers. An entry barrier is a product or service that customers have come to expect and must be offered to compete and survive.

·         Suppliers
Supplier power is high when one supplier has a concentrated power over an industry. All parties involved in the production of a product are in the supply chain.

·         Buyers
Buyer power is high when buyers have many choices to buy from, and is lower when there are fewer choices. Buyer power can be reduced through loyalty/rewards programs. IT usually increases buyer power because through technology, customers have more choices to buy from – global market access.

·         Substitutes
The threat of substitute products or services is high when there are many alternative choices for the buyer, and lower when there are fewer alternatives.

·         Industry Rivalry
There is always rivalry amongst existing competitors. It is generally higher when there is fierce competition in the market and lower when competition is complacent. Competition can be more intense in different markets.

Describe the relationship between business processes and value chains?

A business process is a standardised set of activities that accomplish a specific task. Whereas a value chain is a view of a company, which is created through a series of processes, each of which add value to the product/service.

The relationship between these two is that the value chain of a company depends on the business processes in order to actually create a value chain. These two concepts work toward value creation.

Compare Porter’s three generic strategies.

Porter's three generic strategies are:

·         Cost leadership
Includes methods used to increase efficiency and also lower costs. An example is online software– they still create and sell the same product, but use the internet as a cheaper form of distribution.

·         Differentiation; and
Differentiation is used by companies when they make their product/service different from others on the market. An example is Apple computers and their differentiation from tradition PCs.

·         Focus
Focus strategies are used when a company makes their product/service and ‘focuses’ them at a specific market. An example is Apple iPhones being targeted at consumer markets rather than business markets.

Comparison of these three strategies:

·         The differentiation and focus strategies are used to target specific markets, whereas the cost leadership strategy doesn’t have a target market.

·         Cost leadership works toward lowering costs, but also generating growth and more profit, while the differentiation and focus strategies don’t include that. They mainly work toward gaining more profit/growth and not necessarily lowering production costs.