Weekly Questions week 2

Weekly Questions (Week 2)

Chapter One: Information systems in business

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

Information Technology has a very important role in determining a business’s success or failure. Due to the modern world being dominated by the use of technology, it is important that businesses are able to adapt to new technology. When used correctly, Information technology has the ability to reduce a business’s costs, improve productivity and even generate growth through improving communication within and between organisations. Measuring the success of Information Technology can be very difficult; however, there are ‘Key performance indicators’ which can be used. This involves efficiency and effectiveness IT metrics and baseline metrics. ‘Efficiency It metrics’ measure the IT system’s performance which includes speed, availability, information accuracy. However, ‘Effectiveness’ is measuring the effect the IT system has on the business’s performance including processes and activities, usability, customer satisfaction and conversion rates. ‘Baseline metrics’ involves benchmarking the business’s actual system results with the optimal system performance and evaluating what measures can be taken to improve performance.

Textbook: Baltzan, Philips, Lynch & Blakey, Business Driven Information Systems (Australian/New Zealand edition) pg 19-23

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

 Forces in “Porters Five Forces Model” include:

·         Buyer power – buyers power can be seen as the buyer’s ability to impact the price of a product or service. Buyer power is low when there are few suppliers or sellers. Similarly, a buyer’s power will be high if there are many sellers of a product or service. Buyer power can be reduced through the use of ‘loyalty programs’ which aim to reward repeat customers for doing business with one organisation. 

Porters 5 Forces (Diagram 1)

·         Supplier power – supplier power is high when there are few competitors and this means that the supplier can concentrate their power in an industry, being able to influence the prices, quantity of goods produced, and shifting costs to buyers.

·         Threat of Substituteproducts and services – When there are many products in the marketplace which are alternatives to a business’s product or service, the Threat of Substitute products and services is high. Similarly, if there are very few alternatives in the marketplace, the Threat of Substitute products and services are low.

·         Threat of new entrants – the threat of new entrants is the ease of a new competitor entering the marketplace. The Threat of new entrants is high if it is easy for a competitor to enter the market and is low when it is difficult for them to enter. Through the use of ‘entry barriers’, a business is able to reduce the ‘Threat of entrants’. Entry barriers are usually features which are expected by consumers when purchasing the product or service and must be offered by the business in order to survive. As such, this adds costs to new entrants as they must provide these expected features.

·         Rivalry among existing competitors - Level of Rivalry among existing competitors is high when competition is fierce in a market and is low when the competition complacent. ‘Switching costs’ are a way of reducing a competitor’s power. Switching costs are costs (monetary or non-monetary) consumers consider as an inconvenience or nuisance if they change products. This then discourages them to switch to another product. 

For further information on Porter's Forces and Strategies, visit this website for a Video explanation:
http://www.marketingteacher.com/lesson-store/lesson-generic-strategies.html

Textbook: Baltzan, Philips, Lynch & Blakey, Business Driven Information Systems (Australian/New Zealand edition) pg26-29

3. Describe the relationship between business processes and value chains?

Generic model of Business Porcess(Diagram 3)

Business processes are the steps or set of activities which are taken to complete a specific task. A business’ supporting activities must function well for the primary functions to be successful, resulting in greater efficiency and effectiveness. As a result of this increase in efficiency and effectiveness, the business is able to reduce material wastage and costs, and produce products that are seen as superior to competitors, thus increasing the value chain.

Value Chain (Diagram 2)

Textbook: Baltzan, Philips, Lynch & Blakey, Business Driven Information Systems (Australian/New Zealand edition) pg 31-33



4. Compare Porter’s three generic strategies?

 Porter’s three generic strategies include:

·         Broad cost leadership

·         Broad differentiation

·         Focused strategy

Broad market strategies either focus on product differentiation or cost leadership but are targeted at a larger segment of the overall market; however, focused strategy is targeted at a smaller market (niche). 

Porter's Generic Strategies (Diagram 4) 

Cost leadership is a strategy used by organisations which aims to win market share by attracting cost conscious consumers. This can be achieved by having the lowest prices for a particular product and this will encourage consumers to buy the product. Product differentiation is when a business’s product or service has a distinct difference in comparison to their competitors. This aims to persuade consumers to buying their product as it is seen as superior. The Focused strategy also uses cost leadership or differentiation but is concentrated at a smaller portion of the market. This allows the creation of a marketing mix which caters for a specific clientele. 

For further information on  Porter's Forces and Strategies, visit this website for a Video explanation: http://www.marketingteacher.com/lesson-store/lesson-generic-strategies.html

Textbook: Baltzan, Philips, Lynch & Blakey, Business Driven Information Systems (Australian/New Zealand edition) pg 30


Diagram Reference 
Diagram 1-http://www.businessteacher.org.uk/wp-content/porters-5-forces-analysis.jpg
Diagram 2 - http://www.winsite.com/graphics/screen/business-taxes-porters-generic-strategies-software-41649.gif
Diagram 3 - http://www.insemble.com/software-value-chain.html
Diagram 4- http://www.marketingteacher.com/lesson-store/exercise-generic-strategies.html