Week 2: Information Systems in Business

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

Information technology is a business function that plays a support role, reaching all facets of modern business. It is effectively an enabler for facilitating business processes and achieving business goals. It should thus be aligned with the strategic direction of the organisation.

Measuring the success of information technology can be difficult, however it is best measured by efficiency and effectiveness metrics. Efficiency IT metrics measure the performance of the IT system itself (e.g. throughout, speed and availability). Effectiveness IT metrics measure the impact IT has on business processes and activities (e.g. customer satisfaction). Key performance indicators (KPIs) can be used to tie measures to business drivers through benchmarking.

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

Porter's Five Forces model is used to determine the relative attractiveness of an industry, allowing a business to identify potential opportunities, create competitive advantage and deter potential rivals. Technology allows markets to become more competitive.

1. Buyer power: high when buyers have many sellers to choose from, and is low when choices are few.
2. Supplier power: is high when on supplier has concentrated power of an industry.
3. Threat of substitute products or 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: is high when it is easy for new competitors to enter a market and low when there are significant barriers to entry.
5. Rivalry among existing competitors: is high when competition is fierce in a market and low when competition is more complacent.

Source: (Porter, 2008)

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

A business process is a standardised set of activities that accomplish a specific task. A value chain is a series of business processes, each of which adds value to the final product or service for the customer.

4. Compare Porter's three generic strategies.

Porter's three generic strategies are used when entering an new market. These strategies are:

1. Broad cost leadership: low cost, reaching a large market segment.
2. Differentiation: a focus on something that sets a business apart from its competition.
3. Focused strategy: targets a niche market, concentrating on either cost leadership or differentiation.

To be successful, a business should only adopt one of the three strategies and not try and be 'all things to all people'.

Source: (Baltzan et al, 2010)

References

Baltzan P., Phillips A., Lynch K., & Blakey P. 2010, Business Driven Information Systems, North Ryde, McGraw-Hill

Porter, M.E. 2008 "The five competitive forces that shape strategy", Harvard Business Review, Vol. 86, pp. 78 - 93.