Week Two Questions: Chapter 1

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

Information is everywhere in business. An understanding of information systems and technology provides great insight into anyone learning about business.
See video for more information: From Information Technology to Business Technology

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

Michael Porter’s Five Forces Model helps to determine the relative attractiveness of an industry. It includes:

-       Buyer Power: is high when buyers have many sellers to choose from, and is low when their choices are few. The power of buyers is reflected by their ability to directly impact the price they are willing to pay for an item.

-       Supplier Power: is high when one supplier has concentrated power over an industry. If supplier power is high, the supplier can directly influence the industry by charging higher prices, limiting quality or services and shifting costs to industry participants.

-       Threat of Substitute Products or Services: is high when there are many alternatives to a product or services and low when there are few alternatives from which to choose.

-       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 entering a market.

-       Rivalry Among Existing Competition: is high when competition is fierce in a market and low when competition is more complacent.

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

The business processes of an organisation and the value chain they create play an integral role in strategy execution. A business process is a standardised set of activities that accomplish a specific task such as processing a customers order. The value chain approach views an organisation as a series of processes, each of which adds value to the product or service for each customer.

4.     Compare Porter’s three generic strategies?

Once an organisation decides to enter a new market, it must formulate a strategy to do so. An organisation can follow one of Porter’s three generic strategies when entering a new market:

-       Broad Cost Leadership

-       Broad Differentiation

-       Focused Strategy (concentrates on either cost leadership or differentiation)

Broad strategies reach a large marketing segment whereas focused strategies target a niche market. Porter suggests that an organisation is wise to adopt only one of the three generic strategies.