Tuesday, February 22, 2011

CH 3: INFORMATION SYSTEMS FOR COMPETITIVE ADVANTAGE

Q1: HOW DOES ORGANIZATIONAL STRATEGY DETERMINE INFORMATION SYSTEMS STRUCTURE?
       Information systems exist to aid organizations in accomplishing their goals and objectives. The goals and objectives are identified by its competitive strategy. Organizations first observe their industry structure then  establish a competitive strategy, which determines the value chains followed by the business processes. The structure of business processes finally concludes with the design of the information systems.
Q2: WHAT FIVE FORCES DETERMINE INDUSTRY STRUCTURE??
      Porter's Five Forces Model illustrates five competitive forces in the environment which is bargaining power of customers, threat of substitutions, bargaining power of suppliers, threat of new entrants and rivalry.
      Bargaining Power of Customers: Wanting to pay less for a gym membership
      Threat of Substitutions: Thinking of joining a sporting league to have a healthy lifestyle
      Bargaining Power of Suppliers: A landowner raising the rent
      Threat of New Entrants: A new gym opens up across the street from the other
      Rivalry: Going to the newly open gym
Q3: HOW DOES ANALYSIS OF INDUSTRY STRUCTURE DETERMINE COMPETITIVE STRATEGY??
      It is very essential for an organization to determine what their competitive strategy is going to be which is going to establish what direction the company is going to take and can be decided upon by using Porter's 4 Competitive strategies which is shown below.


 Q4: HOW DOES COMPETITIVE STRATEGY DETERMINE VALUE CHAIN STRUCTURE??
       There are different ways of choosing a competitive strategy, if a company chooses a differentiation strategy, they are choosing to develop more costly systems only if the benefits overshadow the risks.
A value chain is a network of value-creating activities which consists of 5 primary activities and 4 supporting activities. An example would be a bicycle maker. His primary activities are acquiring the bicycle parts to producing the bicycle and shipping to market and selling the bicycles and providing service to customers.
His supporting activities are managing supplier relationships, investigating new designs, hire and support employees, and managing company resources. All the stages the bicycle maker takes in his primary and supporting activities accrues costs and adds value to his/her products.Porter's model also include linkages which can be very beneficial to a company because they can reduce industry costs.
Q5: HOW DO BUSINESS PROCESSES GENERATE VALUE??
     A business process is a network of activities that produce value by converting inputs into outputs. The costs are the inputs plus the cost of the activities, the margin is the value of the outputs minus the cost. Business processes can have varied costs and effectiveness and the key to their competitive advantage is adding value while reducing costs.
Q6 & Q7:
    Organizations need to examine and evaluate their industry and decide upon a competitive strategy where they can then design business processes that span value-generating activities. By doing this, all the processes can establish the requirements of each organization's information system. There are 2 competitive techniques that can be used for a competitive strategy which are via products and services or via the development of business processes. In via products, organizations can create their existing products and making them better and having their products different from the rest of the competition. In via business processes, organizations can lock in customers by it making it to expensive for customers to leave or switch to another product. An example would be a gym where they can have high cancellation fees for members and make it an extremely difficult process to cancel their membership.

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