Explain information technology’s role in business and describe how you measure success?
The role of information technology in business is to support and process information to help and enable a business’s success and innovation. It plays a critical role in deploying such initiatives by facilitating communication and increasing business intelligence. It improves productivity and accuracy, reduces cost, helps with decision making and the speed of it, automates processes and brings business together. You can measure success by: efficiency and effectiveness metrics & benchmarking (baseline metrics).
List and describe each of the forces in Porter’s Five Forces Model?
1. Buyer power
- Is high when buyers have many choices of whom to buy from and low when their choices are few
- To reduce power (and create competitive advantage) , organisations must make it more attractive for customers to buy from it instead of its competition
- e.g. loyalty program
2. Supplier power
- Is high when buyers have a few choices of whom to buy from and low when their choices are many.
- Supply chain
- B2B market
- Private exchange
- Reverse auction
3. Threat of substitute products and services
- High when there are many alternatives to a product/service and low when there are few alternatives from which to choose
- Ideally an organisation would like to be in a market where there are few substitutes. It’s possible by creating a competitive advantage by using switching costs (costs that make a customer’s reluctant to switch to other product/service).
4. Threat of new entrants
- High when it is easy for new competitors to enter a market and low when there are significant entry barriers to entering a market
5. Rivalry among existing competitors
- High when competition is fierce in market and low when competition is more complacent
Describe the relationship between business processes and value chains?
A business process is a standardised set of activities that accomplish a specific task ( e.g. a customer order ) . In order to evaluate its effectiveness, organisations use Michael Porters value chain approach. An organisation creates value to the product/service by performed such activities that Porter identifies in his value chain. The values chain views an organisation as a series of processes, each which adds value to the product/service for each customer.
Compare Porter’s three generic strategies?
• Broad cost leadership : e.g. Hyundai – low cost car, stratification , appeal to large audience
• Broad differentiation : e.g. Audi – Quattro models available at several price points, safety, prices its cars to reach large stratified audience
• Focused strategy: e.g. Kia – offers low cost cars in lower levels of model stratification
Broad strategies reach large market segment, while focused strategies target niche market.
Focused strategy concentrates on either cost leadership or differentiation.
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