Information Technology's role in business helps to transform the company from its old ways of operating, into a more user friendly workplace. IT helps to reduce costs in a business as it costs more to keep record of hard copy information. For example, for an Accounting firm to keep hard copies of client's records will take up lots of space over time. With the help of excel spreadsheets, accountants could now save a copy of the files on a CD which saves space and paper.
Success is measured through observing the business' efficiency and effectiveness.
Efficiency- Measures the actual IT system. For example: How much files can the system hold? Or How fast is our network working?
Effectiveness- Measures how effective the IT system is. For example: How often are we repairing errors? Or What is the percentage of IT errors which are repaired correctly the first time?
2. List and describe each of the forces in Porter’s Five Forces Model?
1. Buyer Power- Is high when buyers have many sellers to choose from and is low when their choices are few. Therefore the buyers ability directly impacts the price they are willing to pay for an item.
2. Supplier Power- Is high when a supplier has dominant power over an industry. If the power is high, the supplier can: Increase price and limit quality or service. This is because there is small amount of competitors on the market offering similar products.
3. Threat of substitute products or services: Is high when there are many competitors and low when there is a minimal amount. Ideally, companies like to be in a market where there are minimal substitutes on offer by competitors.
4. Threat of new Entrants: Is high when it is easy for new competitors to enter a market and is low when there are entry barriers. For e.g. If a new bank has entered the market, they must compete with the current banks on the market and offer the same (or better) IT services and options in order to survive.
5. Rivalry amongst existing competitors: Is high when competition is fierce in a market and low when competition is more satisfied. For example, as grocery stores have strong competition with each other, they create loyalty programs for repetitive customers offering discounts to use in the store.
The link below explains the five forces
http://www.youtube.com/watch?v=5JjNUxxsDP0
3. Describe the relationship between business processes and value chains?
A value chain is used to determine the success or failure of a previously chosen strategy. To evaluate the effectiveness of its business processes, an organisation can use Michael Porter's value chain approach. The value chain approach views an organisation as a series of processes which add value to the product and/or services offered to customers.
4. Compare Porter’s three generic strategies?
An organisation can follow one of Porter's three generic strategies when entering a new market.
1) Broad cost leadership
2)Broad differentiation
3) Focus strategy
Broad strategies reach a broad market segment, while focused strategies target a niche market. A focused strategy focuses on either cost cost leadership or differentiation.
Below the link explains the three generic strategies
http://www.youtube.com/watch?v=ndARJzmKras
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