Week 2 Questions

Information Systems in Business

1. Explain information technology’s role in business and describe how you measure success?
Information technology's role in business is to improve communication accross an organisation, to allow businesses to access global markets, to provide efficient and effective operating procedures and to increase business intellegence. Information technology allows individuals within a business to contact each other via the internet, thus allowing communication between cities, countries and even continents. IT also provides businesses with new and innovative business opportunities via technologies such as softwears and specially designed systems.

Information Technology's success is difficult to measure. Whether something is successful or unsuccessful is determined by the needs and uses of that particular thing at any given time. If a business is to install a software that costs them more than what it generates in profit, then the installation of that particular product is genereally unsuccessful. However, if the software costs the business $15,000 to install, and within a month or so of operating has generated $100,000 then the installation has been a success for the business.

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

Porter's five forces model looks at how attractive an industry is by highlighting the forces of buyer power, supplier power, the threat of substitutive products or services, the threat of new entrants, and rivalry among existing competitors.

1. Buyer PowerBuyer power is higher when buyers have a high number of sellers to purchase from and it is low when there are very few choices for a buyer to buy from. Buyers have a large power of businesses through their ability to impact the price of an item by what they are willing to pay. One way that a business can limit buyer power is through a loyalty program. Loyalty programs will reward a customer based on how much buying they do from an individual business.
2. Supplier Power
   Supplier Power is high when a company has power of a particular industry as it means that buyers have a limited choice as to who they buy from. When supplier power is high the supplier can charge higher prices, limit quality and services and shift costs to industry participants.
3. Threat of substitute products and servicesThis is high when there are many options available for a particular product or service (such as milk) and low when there are limited alternatives available to choose from. A business aims to be in a market where there are few alternatives, however when this is not possible a business can use switching costs to make a customer reluctant to switch products or services.
4. Threat of new entrantsThe threat is high when new competitors can enter a market with ease (online stores), and low when there are barriers deferring new entrants. An entry barrier is a product or service that reflects consumers' expectations and thus must be offered by an organisation in order for that business to survive.
5. Rivalry among existing competitorsThis is high when competition is strong in the market and low when competition is content. There is a trent towards increased competition if just about every industry - more so in some industries than others. Switching costs can be used by businesses to stay competitive within a market.

Porter's Five Forces Model

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

The business process and the value chains of a particular business plays an integral role in implementing and executing strategies. Effective business processes and efficient value chains lead to value creation. A Business process is a set of activites that once completed will accomplish a specific task. The Value chain approach views the series of processes within an organisation and how each process adds value to a product or service.

4. Compare Porter's three generic strategies?

An organisation can follow one of Michael Porter's three generic strategies whilst entering a new market. These three strategies include broad cost leadership, broad differentiation or focused strategy. The broad strategies target a large market segment where as the focused strategies target a niche market.

In a broad market, cost leadership strategies look at implementing low costs in order to break into a market. Differentiation is high cost however, still reaches a broad market as the products and services available are different from those of which they are competing within that market.
The focused strategy is successful in a narrow market even though it can be of high cost to a business as it allows an organisation to have a competitive advantage over those business in a broad market.