Week two questions

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

IT is very important in business nowadays as it impacts every part of a business. It allows businesses to access global markets, reduces costs, improves productivity (as systems work on real time and information can be sent between departments easily and quickly through portals, emails etc) and improved growth of the organisation. 

Each department of an organisation is interdependent and thus communication between these departments is vital. As you can see in the below diagram, each department needs a central point of communication as each department needs to communicate with one another. 

What is important to understand though, is that business IT is an enabler of business success and innovation. In 2007, nearly 50% of the cover stories in Business Week are technology related. This shows just how important IT is in business. 

Business IT is used for solving mathematical problems (for example on excel), transforming data into information and also business intelligence. It is important for each department to be able to make informed decisions in the business with specific information which can be attained through business intelligence.

Ways to measure success include asking the following questions:

• Is the internal IT operation performing well?
• How much of the IT operations need to be outsourced?
• How well is the outsoucer performing?
• What are the risks in an IT project?
• In order to make sure that the IT proposal is realistic, what needs to be asked?
• What makes a successful project?
• Which factors are important to keep an eye on to make sure that the project stays on track?

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

1. Buying power: Buyers are able to buy what they need from many different sellers if buying power is high. This increases the competition for the suppliers as this will impact pricing.
2. Supplier power: when one supplier is dominant in the industry then supplier power is high, they can then charge higher prices, limit quality or services and shift the costs to industry participants.
3. Threat of substitute products or services: Substitutes are alternative product types (not brands) that perform essentially the same function.
4. Threat of new entrants: New firms entering the market because it represents an attractive opportunity for them
5. Rivalry amongst existing competitors: Rivalry is high when there are many small firms in an industry or no dominant firms exist, there is little product differentiation and it is easy for customers to switch from one seller’s products to its competitors. This is when IT needs to operate at full capacity.

The following video is also useful to understand Porter's five forces model as is the following link. http://notesdesk.com/notes/strategy/porters-five-forces-model-porters-model/

Describe the relationship between business processes and value chains?

The above diagram is an in depth diagram of the value chain.

The value chain is important as it can create a competitive advantage for an organisation. The main aim though is to offer the customer a level of value which is more then the costs and thus provides a large profit margin. Value chains can affect business process as it can create a synergy between strategic business units and allow them to share resources which can lower costs. This again will result in a larger profit margin.

Compare Porter’s three generic strategies?

1.   1.   Broad cost leadership: the low cost producer in an industry, either at the average cost of the industry or below that cost to earn a higher profit than competitors. One example is Nokia and their smartphones as they charge between $350-$400 for a smart phone compared to its competitors which are near $800. In order to be successful here, an organisation needs to have efficient distribution channels, efficient in manufacturing and product engineering.

2. Broad differentiation: When a product is differentiated from their competitors in a market through product or brand image (marketed to be viewed by the consumer in a particular way). They are marketed by the unique attributes which are valued by the consumer. In order to be successful here, one needs to be prominent in research and development, the perceived strength needs to be communicated well to the consumers, and the organisation also needs to have a strong brand image for innovation and product quality. One example here is iPhone as they differentiate themselves from their competitors in the smart phone industry.

3. Focused strategy: target a niche market instead of a large segment but can differentiate itself through product quality (with a high price) or it can be marketed as a low-cost item. For example, a Hummer is targeted to a niche market, but also differentiates itself from the other 4WD in the industry.