Week 2, Chapter 1: INFORMATION SYSTEMS IN BUSINESS

Blog Questions

Explain information technology’s role in business.
“Information technology (IT) is everywhere in business”. Staffs from all departments unavoidably deal with information technology everyday. It is a facet of organisations that impact almost every role within an organisation. In retail environments, the manager accesses sales information and inventory records when performing stock takes. IT systems such as MYOB are also used to enter the end of day sales. The accountant calculates the weekly wages using IT, while the sales person records sales, tracks inventory available at interstate stores and may enter details provided by the customer that are then stored on a database.  All organisations work with systems, which makes IT very relevant to everyday business activity.

What are Efficiency and Effectiveness Metrics? Provide some examples of each.

Efficiency and effectiveness metrics are two primary types of IT metrics. Efficiency measures the performance of the IT system itself. If an IT system is efficient it is doing things right. An example of an efficiency metric may be transaction speed, throughput and response time. The University of Notre Dame’s previous online timetable sign up was very inefficient according to these metrics as it was unable to process a large amount of information through the system at one time which resulted in slow transaction speed and response time.

Effectiveness measures the impact IT has on business processes and activities. Effectiveness may also be measured by how well an organisation achieves its goals and objectives. If an IT system is effective it is doing the right things. Metric that measure this conversion rates. This is very common with web banners. The effectiveness of such elements is measured by the amounts of users that click through (the web banner) to the actual advert. Users that click on the ‘Lose 5kgs for Summer’ web banner and are then taken to the Jenny Craig home page have added to the effectiveness.

What does Porter’s Five Forces Model attempt to explain? How does the Internet affect each of the five forces?

The five forces define an attractiveness of particular markets and shape the nature of competitive interaction within a particular industry. Porter’s analysis reveals the strongest competitive force or forces within an industry, which determine the industry’s profitability by identifying critical success factors, ultimately exploiting opportunities that enable organisations to establish a competitive advantage. The Internet affects the five forces across all industries in the following ways:

- Buyer power is more powerful due to access to information and consumer ability to research alternatives. Although this is beneficial to consumers, it also poses a significant managerial threat.

- Supplier power is increased, as suppliers are able to reach many more potential customers, ultimately allowing the ability to supply to more, however the internet also allows buyers to easily source alternative suppliers.

- Threat of substitutes is increased as the Internet itself as a substitute or providing a platform for the substitute.

- Threat of new entrants is increased as the Internet reduces industry entry barriers.  

- Rivalry among existing competitors is also increased.

Conclusively, the Internet decreases the attractiveness of markets for existing dominating companies but also provides opportunity for potential entrants. The Internet creates an even platform in which all organisations are able to compete and thus create competitive advantages, ultimately providing the consumer with more choice, lower prices and more choices.