Information Systems in Business

Question One - Explain information technology's role in business and describe how you measure success?

Information technology is the use of technology in managing and processing information. As information is a strategic asset for all businesses, the supporting role information technology has in business is highly important.

If the implementation of information technology are successful, the benefits of using information technology extend to multiple functional areas of the business, such as customer service, finance, sales, marketing, operations management and human resources.

Success can be measured through establishing benchmarks. Benchmarks are ideal levels of performance an organisation aims to achieve. For information technology specifically, success can be measured through efficiency and effectiveness metrics. Efficiency metrics measure the performance of the IT systems itself, and determines if resources are being used optimally. Effectiveness metrics measure the impact IT has upon a certain business, and if this is assisting the business achieve its goals.

Efficiency metrics include:

• Throughput - amount of information that can travel through a system at any point in time
• Transaction speed - the time it takes a system to perform a transaction
• System availability - number of hours a system is available or customers
• Information accuracy - extent to which a system generate correct results when transactions are repeated
• Web traffic - host of benchmarks dealing with web popularity
• Response time - time taken to respond to user interactions

Effectiveness metrics include:

• Usability - the ease of which people perform transaction and/or find information
• Customer satisfaction - is measured by survey, the amount of customers retained and the increase in dollars per customer
• Conversion rates - the number of customers an organisation persuades to purchase their product
• Financial - looking at returns on investment and cost-benefit analysis

Question Two - List and describe each of the forces in Porter's Five Forces Model.

• Buyer power: buyer power is the power a customer wields in relation to purchasing. Buyer power is high when buyers have many sellers to choose from, and low when choices are few.
• Supplier power: supplier power refers to how much power a supplier has in terms of competing sellers and the demand from buyers. Supplier power is high when one supplier has concentrated power over a single market, as this diminishes the choice's buyers have. It is low when there are other, competing suppliers from which buyers can choose from.
• Threat of substitute products or services: this force refers to the amount of alternatives buyers can choose from. The threat is high when there are many alternatives for buyers to consider and purchase, and low when there are few alternatives.
• Threat of new entrants: this force pertains to the degree of ease in which new organisations can present their products to a market. The threat is high when it is easy for new competitors to enter a market, and low when there are many barriers to entry.
• Rivalry among existing competitors: rivalry essentially refers to the amount of competition that exists between the different organisations that pitch their products/services to the same market. Rivalry is high when competition is fierce and low when it is complacent.

Question Three - Compare Porter's three generic strategies.

Broad Cost Strategy
A company that implements this strategy will aim to reach a broad market based on financial leadership.

Differentiation
A company that implements this strategy will aim to reach a large market through differentiating products tailored to specific needs.

Focused Strategy
A company that implements this strategy aims to focus their marketing and sales efforts to a niche market, wither through cost or differentiated products.

Question Four - Describe the relationship between business processes and value chains.

A business process is a set of activities that accomplish a specific task within an organisation. Value chains are a series of processes that entice customers to remain loyal to a particular company through the addition of value to the service they receive. The more sophisticated and refined business processes are within the company pertaining to customer service, the more likely the value chain will be improved.