Tutorial Questions: Chapter One

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

It can be argued that information technology in an organisation acts as an ‘enabler’, in the sense that the processes of information technology allow the business faculties to operate effectively and efficiently. Information technology has the ability to connect the different areas of an organisation allowing it to be interdependent. For example, the sales department must attain specific information in order to understand the standings of the business; they must have access to inventory figures, expenses, the number of sales etc.

One can measure a success through ‘Key performance indicators’, specifically efficiency IT metrics and effectiveness IT metrics. Efficiency metrics measure only the performance of the information system through indicators such as, transaction speed and system availability. Whereas, the effectiveness metric measure the successes and/or failures of the IT system, for example usability and customer satisfaction.

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

The Porter’s Five Forces Model include: Buyer power, supplier power, threat of substitute products, threat of new entrants and rivalry among existing competitors.

Buyer power: refers to the influence of customers and their ability to impact the price when they are willing to pay for a certain item.

Supplier power: refers to the power of suppliers during certain circumstances. In some cases they have the ability to charge higher prices and limit quality or service when demand is high.

Threat of substitute products/services: the threat is high when there are many substitutes for a certain product and low when there a fewer products on the market.

Threat of new entrants: the threat is high when the market is easily penetrated by new competitors however, the threat is lower when there are more obstacles in entering the market.

Rivalry among competitors: rivalry between competitors is high when competition is fierce in a particular market and low when competition is much more subdued.

(Baltzan, et al, 2010 page 27&28)

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

Businesses processes can be described as a set of actions that aim to accomplish a certain task; such as processing an online transaction or completing a customer’s order manually. The concept of a value chain involves the carrying out of businesses processes, each of which will add value to the particular product or service being offered by the organisation. In order to gain a competitive advantage the value chain must enable the business to provide a unique service compared to its competitors.

(Baltzan, et al, 2010 page 31&32)

4. Compare Porter’s three generic strategies.

Michael Porter had created a theory containing three generic strategies when a business is entering a market. The three strategies include: A broad cost of leadership, broad differentiation and a focused strategy. The broad cost leadership refers to a product or service that can be purchased at a lower cost compared to other brands, allowing for the product to be accessible by a wide consumer market. Whereas, broad differentiation refers to a product’s valuable difference compared to another product of the market. For example, a certain product may offer more entertaining features compared to other substitutions in the market, therefore making the product more valuable in the eyes of customers. A focused strategy refers to the availability of a product in a narrower market or niche market. An example may include a store selling items which are useful to those who are pregnant. This particular store is focused on providing an exclusive service which is only useful to a small market demographic.

(Baltzan, et al, 2010 page 30)

Interesting Link: http://thomasbarker.com/content/competitive-advantage

(accessed 3/4/11)