1. Explain information technology’s role in business and describe how you measure success?
Information technology is everywhere in business and is a means of processing and managing information. Technology acts as a support role for the business. It can benefit an organisation through the potential to transform it, for example from a small organisation to a nationwide enterprise. Information technology has allowed businesses to grow, through the use of email and broadband, which makes communication faster and simpler. A business operates through functional areas known as ‘silos’, which are interdependent; with each silo working together to share common information to reach the goals of the organisation.
Most businesses today have a Management Information System (MIS), which covers the application of people, technologies and procedures to solve business problems. Within an organisation they would utilise ‘business intelligence’ systems or technologies, to gather information and data and analyse it to provide information that can be used to make decisions based on the goals of the company, which may need to be modified based on the received data.
In order for a business to achieve success, three key resources; people, information and information technology, must work together. These three key resources are linked so that if one fails, they all fail. Businesses rely on their information technology to maintain success for the organisation. Measuring success is not always easy within a business and the return of investment (ROI) may not always be distinguishable. One of the methods of measuring success is by implementing Key Performance Indicators (KPI’s), which set the standard and the level to be achieved for certain tasks and how they are going to be achieved, for example to distribute 500 discount vouchers with a 10% return rate on the vouchers. The most important aspect of a KPI is that it must be measurable. Another way of measuring success is by setting benchmarks, as decided upon by the organisation, and continually measuring the results against the benchmarks. If the results are not being achieved, the systems may have to be modified. Success within a business can also be measured through efficiency and effective metrics. Efficiency IT metrics measure the performance of the IT system and focuses on the technology itself. Effectiveness IT metrics measure the impact IT has on business processes and support and is determined according to an organisation’s goals, strategies and objectives.
2. List and describe each of the forces in Porter’s Five Forces Model?
The ‘Five Forces Model’ was developed by Michael Porter as a means of identifying and understanding the competition within the business environment and how this impacts on a business’ strategy.
The five forces include;
1. Buyer Power
Buyer Power relates to those who are buying your products. The influence they have on your business can relate to how much they are willing to pay for a product or service, for example if your price is set too high, buyers are not likely to purchase this product or service as opposed to if the prices are lower. The most common tool that businesses are using to attract customers is a loyalty program, which rewards customers for the amount they spend. IT is important for buyer power in being able to keep track of all your customer purchases. Buyer power is high when buyer have many sellers to choose from and is low when choices are few.
2. Supplier Power
Supplier power relates to the influence that suppliers have on the price of products and services. The supplier chain dictates how the suppliers sell goods to the organisation, who in turn, sell these goods to the customer. This means that the cost of goods purchased by an organisation directly affect the price for the customer. That is, if a supplier increases the price of a product then for the organisation to make a profit, they too must increase their price. Supplier power is high when there are few suppliers to choose from and low when there are many suppliers, for example phone companies.
3. Threat of Substitute Products or Services
This relates to the number of competitors selling the same products and services as your organisation. If there are many organisations selling the same products, them there is a large threat from your competitors to attract customers to your business. Threat of substitute products and services is high when there are many alternatives to a product or service and low when there are few alternatives to choose from.
4. Threat of New Entrants
This relates to how easy it is for a new organisation to enter your market. This means being aware of your competitors and the products they have to offer. This may mean that an organisation is having to offer incentives to compete with the other organisations and making it difficult for a new organisation to enter the market. Threat of new entrants is high when it is easy for a new organisation to enter a market and low when there are significant barriers to market.
5. Rivalry Among Existing Competitors
Rivalry among existing competitors exists within any industry. It is about being knowledgeable on your competitors, of the products and services they offer, and altering the products and services you offer in a means to keep in touch with them and remain on the same level. Rivalry among existing competitors is high when competition is fierce in a market and low when competition is complacent.
Information technology is everywhere in business and is a means of processing and managing information. Technology acts as a support role for the business. It can benefit an organisation through the potential to transform it, for example from a small organisation to a nationwide enterprise. Information technology has allowed businesses to grow, through the use of email and broadband, which makes communication faster and simpler. A business operates through functional areas known as ‘silos’, which are interdependent; with each silo working together to share common information to reach the goals of the organisation.
Most businesses today have a Management Information System (MIS), which covers the application of people, technologies and procedures to solve business problems. Within an organisation they would utilise ‘business intelligence’ systems or technologies, to gather information and data and analyse it to provide information that can be used to make decisions based on the goals of the company, which may need to be modified based on the received data.
In order for a business to achieve success, three key resources; people, information and information technology, must work together. These three key resources are linked so that if one fails, they all fail. Businesses rely on their information technology to maintain success for the organisation. Measuring success is not always easy within a business and the return of investment (ROI) may not always be distinguishable. One of the methods of measuring success is by implementing Key Performance Indicators (KPI’s), which set the standard and the level to be achieved for certain tasks and how they are going to be achieved, for example to distribute 500 discount vouchers with a 10% return rate on the vouchers. The most important aspect of a KPI is that it must be measurable. Another way of measuring success is by setting benchmarks, as decided upon by the organisation, and continually measuring the results against the benchmarks. If the results are not being achieved, the systems may have to be modified. Success within a business can also be measured through efficiency and effective metrics. Efficiency IT metrics measure the performance of the IT system and focuses on the technology itself. Effectiveness IT metrics measure the impact IT has on business processes and support and is determined according to an organisation’s goals, strategies and objectives.
2. List and describe each of the forces in Porter’s Five Forces Model?
The ‘Five Forces Model’ was developed by Michael Porter as a means of identifying and understanding the competition within the business environment and how this impacts on a business’ strategy.
The five forces include;
1. Buyer Power
Buyer Power relates to those who are buying your products. The influence they have on your business can relate to how much they are willing to pay for a product or service, for example if your price is set too high, buyers are not likely to purchase this product or service as opposed to if the prices are lower. The most common tool that businesses are using to attract customers is a loyalty program, which rewards customers for the amount they spend. IT is important for buyer power in being able to keep track of all your customer purchases. Buyer power is high when buyer have many sellers to choose from and is low when choices are few.
2. Supplier Power
Supplier power relates to the influence that suppliers have on the price of products and services. The supplier chain dictates how the suppliers sell goods to the organisation, who in turn, sell these goods to the customer. This means that the cost of goods purchased by an organisation directly affect the price for the customer. That is, if a supplier increases the price of a product then for the organisation to make a profit, they too must increase their price. Supplier power is high when there are few suppliers to choose from and low when there are many suppliers, for example phone companies.
3. Threat of Substitute Products or Services
This relates to the number of competitors selling the same products and services as your organisation. If there are many organisations selling the same products, them there is a large threat from your competitors to attract customers to your business. Threat of substitute products and services is high when there are many alternatives to a product or service and low when there are few alternatives to choose from.
4. Threat of New Entrants
This relates to how easy it is for a new organisation to enter your market. This means being aware of your competitors and the products they have to offer. This may mean that an organisation is having to offer incentives to compete with the other organisations and making it difficult for a new organisation to enter the market. Threat of new entrants is high when it is easy for a new organisation to enter a market and low when there are significant barriers to market.
5. Rivalry Among Existing Competitors
Rivalry among existing competitors exists within any industry. It is about being knowledgeable on your competitors, of the products and services they offer, and altering the products and services you offer in a means to keep in touch with them and remain on the same level. Rivalry among existing competitors is high when competition is fierce in a market and low when competition is complacent.
Porter's Five Forces Model:
http://kelas.files.wordpress.com/2009/10/porters-five-forces-model.jpgFor more information on Porter's Five Forces Model:
http://www.quickmba.com/strategy/porter.shtml
3. Describe the relationship between business processes and value chains?
Business processes and value chains are both concerned with adding value to the organisation. The processes that an organisation uses, combined with the value chain, play an important role in the way the strategies are executed.
The business process relates to standards set out by the organisation that they follow when completing tasks, which relate to the goals they set out. These tasks that they complete aim to create value, which is known as the value chain identified by Porter. Each of these processes adds value to the product or service being provided to the customer, which to offer a competitive advantage must be unique to your organisation. In order for the value chain to be successful, the organisation should identify what tasks add the most value to customers and then find IT systems that are able to provide for these tasks.
4. Compare Porter’s three generic strategies?
http://charliealfred.files.wordpress.com/2009/01/porter-1.png?w=694&h=396
Porter’s three generic strategies were designed for organisations willing to enter a new market. His three strategies are: broad cost leadership, broad differentiation or focused strategy.
Broad cost leadership is based on efficiency and finding ways to reduce costs in all aspects of the business. A cost leadership strategy is when a business is able to design, produce and market a product more efficiently than a competitor. By selling mass produced products at a lower price, an organisation is likely to gain an advantage over their competitors with higher sales gained on that product. If a business can maintain the low cost of the product, their market share is likely to increase.
Broad differentiation involves creating/ selling a product that is different or unique from your competitors. This will usually result in higher returns for the business as customers feel a loyalty to the brand, as it is not being offered elsewhere. Examples include Apple products and Mercedes-Benz automobiles.
Focused Strategy is about focusing your products or services to a particular market or a niche market. This means altering your marketing mix to suit the particular target market. Competitor advantage is gained though product innovation as opposed to efficiency. It is best suited to smaller organisations.
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