1. Explain information technology’s role in business and describe how you measure success?
Information technology is worldwide, in every household and organisation from a small corner shop to a large corporation, such as Commonwealth Bank Australia. I.T not only has an effect on business, but also has the potential to transform it. (Business information driven systems, Baltzan). I.T has a differing role in each and very single department within an organization, for example, the marketing sector will use and widely undertake I.T much differently to others functional areas such as, collecting and recording data. Effectively implementing I.T within a business can decrease their liability by reducing the cost of expected failures which in turn, may increase flexibility by reducing the cost of change.
I.T has encouraged globalization which for most large companies has brought about a lot of change and success. With the help of I.T, communication has become a lot faster, cheaper and much more efficient. Therefore, it can be seen that the role of I.T is broad within each and every business and can impact on organisations quite heavily. Implementing I.T has been used as a major strategy to gain a competitive advantage and therefore increase profits. I.T is very complicated to measure however managers must design metrics that feed certain key performance indicators (KPI’s). Efficiency and effectiveness I.T metrics must be used to measure both the impact and performance of I.T within the business as well as effectively undertaking and comparing benchmarks. However, it must be clear that success in one area doesn’t lead to success in another area. (Business information driven systems, Baltzan).
Porters Five Forces Model believes that there are five vital forces that determine competitive power in a particular situation. The five forces include the following:
Buyer Power- how strong is the company’s buyer power and how powerful their dictation of prices is. E.g. decrease prices
Supplier Power- how influential is the company’s supplier by dominating a certain industry and dictating for higher prices and limiting quality.
Threat of substitutes- if a company’s product or service is easy to substitute then there may be too many alternatives to choose from.
Threat of new entrants- if a company has strong and durable entry barriers then they can lessen their threat of new competitors and remain with a competitive advantage.
Rivalry among existing competitors- a very competitive market means fighting for more market share and customers this therefore increase rivalry between competitors.
3. Compare Porter’s three generic strategies.
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The companies that are low-cost producers fall into the category of cost leadership. Low costs usually lead to higher profits when a product is competing with a similar product in the same marketplace at the same selling price.
If a company differentiates its products or services it often tries to sell them at a maximum price, especially if it is ahead of its competitors. A product can be differentiated by its advertising, image or service.
Finally, Porter suggests that when a company concentrates on either cost leadership or differentiation it has a focused strategy.
4.Describe the relationship between business processes and value chains.
A business process is standardized set of activities that accomplish a specific task, e.g. processing a customer order. (Business information driven systems, Baltzan).
The relationship between businesses processes and value chains is evident when a company is evaluating the effectiveness of its business processes, an organization can use Porters’ value chain approach. The value chain approach examines an organization as a sequence of processes, each of which continues to add value to the product and or service for each customer. A company examines each stage of the value chain separately such as, making of the product to marketing and selling to the actual product. Therefore, by examining each stage the business is evaluating the effectiveness of its overall business processes.
By Christine Kilzi
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