Chapter 2 Flashcards
2.3 Three types of business pressures
Market Pressures
Technology Pressures
Societal/Political/Legal Pressures
2.3 What are market pressures + examples
Market pressures are generated by the global economy, intense competition, the changing nature of the workforce, and powerful customers.
Ex. 1 - Globalization is the integration and interdependence of economic, social, cultural, and ecological facets of life, made possible by rapid advances in information technology.
Ex. 2 - The changing nature of the workforce, particularly in developed countries, where it is more diversified (women, single parents, members of visible minorities, persons with disabilities). IT eases the integration of these employees into the traditional workforce. Also, it also enables people to work from home (benefits parents with young children and people with mobility or transportation issues).
Ex. 3 - Powerful customers are customers who are more knowledgeable about the products and services they acquire (consumer sophistication and expectations increase). It is important to recognize the importance of customers and increase their efforts to acquire and retain them.
2.3 Technology pressure def-n + example(s)
Pressures related to technology include technological innovation and information overload.
Ex. 1 - Technological Innovation and Obsolescence, since new and improved technologies rapidly create substitutes for products. As a result, today’s state-of-the-art products may be obsolete tomorrow. These changes force businesses to keep up with consumer demands.
Ex. 2 - Information Overload due to the amount of information on the internet approximately doubling each year. The flood of information to managers must be easy to access, navigate, and use in order to make decisions effectively efficiently with the data at hand. Information technologies, such as search engines and data mining provide valuable support in these efforts.
2.3 Societal/Political/Legal Pressures def-n + example(s)
Pressures include social responsibility, government regulation/deregulation, spending for social programs, spending to protect against terrorism, and ethics.
Ex. 1 - Social Responsibility is due to social issues that affect businesses and individuals, ranging from the state of the physical environment, to company and individual philanthropy, to education. Organizational social responsibility or individual social responsibility refers to when they are willing to spend time and money to address social problems.
Ex. 2 - Green IT’s goal is to address the state of the physical environment and to “go green” in three areas:
- Facilities design and management
- Carbon management
- Canadian and international environmental laws
Other ex. - the digital divide, compliance with gov’t regulations, protection against terrorist attacks, ethical issues
2.3 What is the digital divide?
The digital divide is another problem (social/political/legal pressure category) that affects modern business. There is a wide gap between those individuals who have access to information and communications technologies and those who do not. Countries like Canada and the United States are trying to bridge this gap by providing free computer and Internet access in libraries, but demand frequently exceeds availability.
2.3 What are organizational responses?
It is how organizations are responding to the various pressures discussed by implementing IT in different ways (such as strategic systems, customer focus, make-to-order and mass customization, and e-business).
2.3 What are the 4 organizational responses?
- Strategic Systems
- Customer Focus
- Make-to-Order and Mass Customization
- E-Business and E-Commerce
2.3 What are strategic systems? (org. resp.)
Strategic systems provide organizations with advantages that enable them to increase their market share and profits to better negotiate with suppliers and to prevent competitors from entering their markets. Many information systems are strategically important to organizations, think for example of Amazon.com
2.3 What is customer focus? (org. resp)
Organizational attempts to provide superb customer service can make the difference between attracting and retaining customers versus losing them to competitors. Numerous IT tools and business processes have been designed to keep customers happy. Example: Amazon, Dell
2.3 What is make-to-order and mass customization? (org. resp.)
Make-to-order is a strategy of producing customized (made to individual specifications) products and services. The problem is how to manufacture these at a reasonably low cost. Its solution is to change manufacturing processes from mass production to mass customization.
2.3 What is e-business and e-commerce? (org. resp.)
Electronic commerce (EC or e-commerce) describes the process of buying, selling, transferring, or exchanging products, services, or information through computer networks, including the Internet.
E-business is a somewhat broader concept. In addition to the buying and selling of goods and services, e-business also refers to servicing customers, collaborating with business partners, and performing electronic transactions within an organization.
2.4 What is a competitive strategy? Hint: CGPP
A competitive strategy is a statement that identifies a business’s approach to compete, its goals, and the plans and policies that will be required to carry out those goals (Porter, 1985). When you create a competitive strategy, you must plan your own moves, but you must also anticipate and counter your competitors’ moves.
2.4 What is a competitive advantage? Hint: CQT
Every organization seeks a competitive advantage, which is seeking to outperform its competitors in a critical measure such as cost, quality, and time-to-market. This helps a company function profitably with a market and generate higher-than-average profits.
2.4 What are the 5 strategies for competitive advantage?
- Cost leadership
- Differentiation strategy
- Innovation strategy
- Operational effectiveness
- Customer orientation strategy
2.4 What are strategic information systems? Hint: Tool for GPP
Information technologies simply offer tools that can enhance an organization’s success through its traditional sources of competitive advantage, such as low cost, excellent customer service, and superior supply chain management.
Strategic information systems (SISs) provide a competitive advantage by helping an organization to implement its strategic goals and improve its performance and productivity.
2.4 Describe the interplay between strategic management and information systems.
Information is the driving force for organizations (John Naisbitt, 1982)
Information Systems are integrated in almost every aspect of business encompassing areas critical to strategic management.
Impact of IT in terms of informing strategic decisions and enabling information flow vis-à-vis all manner of organizational processes.
Companies that manage information well are more likely to maintain a competitive advantage against their peers.
2.4 Summarize Business-IT alignment or strategic alignment.
Business drives IT, which in turn enables business. At the heart of this is strategic alignment.
What is Business-IT alignment?
Business-information technology alignment (business-IT alignment) is the tight integration of the IT function with the organization’s strategy, mission, and goals.
2.4 Why do many organizations fail to implement Business-IT alignment?
- Business managers and IT managers have different objectives.
- The business and IT departments are ignorant of the other group’s expertise.
- There is a lack of communication.
2.4 What is IT governance?
It is IT governance that helps organizations effectively manage their IT operations so that they align with their business strategies. It is defined as “a formal framework that provides a structure for organizations to ensure that IT investments support business objectives.”
[+ Businesses can also use enterprise architecture to foster alignment. This concept encompasses both a technical specification (the information and communication technologies and the information systems used in an organization) and a business specification (a collection of core business processes and management activities).]
2.4 What are the forces that shape industry competition?
- The threat of new entrants (“me too” products)
- Barriers to entry
- Bargaining power of suppliers
- Bargaining power of buyers
- Intra-industry rivalry
- Threat of substitutes
(Or uses Porter’s Five Forces: 1. The threat of entry of new competitors 2. The bargaining power of suppliers 3. The bargaining power of customers (buyers) 4. The threat of substitute products or services 5. The rivalry among existing firms in the industry)
2.4 Describe the threat of new entrants (“me too” products)
The threat of entry lowers the prices firms can charge
Some factors that lower the threat of new entrants:
• Economies of scale, high fixed costs, access to capital
• Learning/experience curves
• Limited access to distribution channels
2.4 Describe & name some barriers to entry.
- Supply-side economies of scale
- Demand-side benefits of scale (aka Network effects)
- Capital requirements
- Incumbency advantages independent of size
- Unequal access to distribution channels
- Restrictive government policy
2.4 What is the bargaining power of suppliers?
When your suppliers have power, your costs are higher
Some factors that increase suppliers’ bargaining power:
• If there are a few large suppliers
• If your industry is a small part of these suppliers’ demand
• If firms find it difficult to switch from their existing suppliers
2.4 What is the bargaining power of buyers? Give examples.
When your buyers have power, you can’t raise prices
Some factors that increase buyers’ power:
- If buyers purchase in large volume
- If buyers can easily switch to a competing firm
- If buyers know a lot about your cost structure
Examples of how IT affects buyer power
- IT-administered loyalty programs foster “stickiness”
- The Internet provides buyers with detailed information
2.4 Describe intra-industry rivalry. Give examples. Hint: think of Pepsi v. Coke
Intra-industry rivalry decreases prices.
Some factors that increase intra industry rivalry:
- Lots of firms in the industry (especially of similar size)
- Competing firms offer similar products
- Slow industry growth
Examples of how IT affects rivalry between firms
• The Internet globalizes commerce, increasing # of firms
• Web-based personalization can reduce product similarity
2.4 What is the threat of substitutes?
Lowers a firm’s ability to raise prices and may reduce demand.
Some factors that increase threat of substitutes:
- Convergence (of products/features) – PDA or cameras vs. smartphones
- Changing tastes/preferences – high quality (CD) vs. high variety (iPod)
- Radical Innovations – landline vs. cell phones, books vs. e-books
2.4 What are the two categories of activities within Porter’s Value Chain Model (model to design general business activities)?
2 categories of activities:
Primary activities relate to the production and distribution of the firm’s products and services. These activities create value for which customers are willing to pay.
Unlike primary activities, support activities do not add value directly to the firm’s products or services. Rather, as their name suggests, they contribute to the firm’s competitive advantage by supporting the primary activities.
2.1 What is a business process & what are its elements?
A business process is an ongoing collection of related activities or tasks that in a specific sequence create a product or a service of value to the organization, its business partners, and its customers.
The process involves three fundamental elements:
- Inputs: Materials, services, and information that flow through and are transformed as a result of process activities
- Resources: People and equipment that perform process activities
- Outputs: The product or a service created by the process
2.1 What are the two fundamental metrics used to evaluate a business process?
Two fundamental metrics:
- Effectiveness focuses on doing the things that matter; that is, creating outputs of value to the business process customer
- Efficiency focuses on doing things without wasting resources
Effectiveness is about getting things done, and efficiency is about getting more things done with the same or fewer resources.
2.1 What are cross-functional processes?
Cross-functional business processes mean that no single functional area is responsible for their execution. Rather, multiple functional areas collaborate to perform the process. Each functional area must execute its specific process steps in a coordinated, collaborative way.
2.1 Describe the symbols used while designing a business process (BPMN standard notation).
Circle - input
Rectangle - activities/events/task
Diamond - decision/gateway
2.1 What is the role of IS in business processes?
Information systems facilitate communication and coordination among different functional areas, and allow easy exchange of, and access to, data across processes.
Specifically, ISs play a vital role in three areas:
- executing the process
- capturing and storing process data
- monitoring process performance
2.1 Describe the “execution of a process” (IS-BP relationship).
ISs are typically embedded into the processes
An IS helps execute processes by informing people when it is time to complete a task, by providing the necessary data to complete the task, and, in some cases, by providing the means to complete the task
2.1 Describe the “capturing and storing of process data” (IS-BP relationship).
Processes generate data (ex.: dates, times, product numbers, quantities, prices, addresses, names, and employee actions
ISs capture and store process data (aka, transaction data)
Immediate capturing and storing of data provides “real time” feedback
2.1 Describe “monitoring process performance” (IS-BP relationship).
IS evaluates information to determine how well a process is executing.
Evaluations occur at 2 levels
- Process (process as a whole)
- Instance (a specific task or activity)
Monitoring identifies problems for process improvement
2.2 How do we measure excellence in processing business processes? Hint: CCCQDP
- Customer satisfaction: The result of optimizing and aligning business processes to fulfill customers’ needs, wants, and desires.
- Cost reduction: The result of optimizing operations and supplier processes.
- Cycle and fulfilment time reduction: The result of optimizing the manufacturing and logistics processes.
- Quality: The result of optimizing the design, development, and production processes.
- Differentiation: The result of optimizing the marketing and innovation processes.
- Productivity: The result of optimizing each individual work process.
2.2 What is business process reengineering (BPR)? What are its cons?
- A radical redesign of an organization’s business processes to increase productivity and profitability
- Examines business processes with a “clean slate” approach
Cons: many organizations found this strategy too difficult, too radical, too lengthy, and too comprehensive.
*BPR projects involve top-down change mandates.
2.2 What is business process improvement (BPI)? What are its pros?
- An incremental approach to move an organization toward business-process-centered operations
- Focuses on reducing variation in process outputs by identifying the underlying cause of the variation
- Six Sigma, developed by Motorola in the 1980s, is a popular methodology for BPI.
- Six Sigma’s goal is to ensure that the process has no more than 3.4 defects per million outputs by using statistical methods to analyze the process. (A defect is defined as a faulty product or an unsatisfactory service.)
Pros: gradual/incremental change, less risky/expensive, less radical
*BPI projects tend to be performed more from the bottom up, in contrast to BPR projects, which involve top-down change mandates.
2.2 What are the 5 phases of a BPI project? Hint: Six Sigma = DMAIC
- Define: documenting the existing “as is” process activities, process resources, and process inputs and outputs (use a graphical process map or diagram).
- Measure: identifying relevant process metrics ( Time & Cost to create output).
- Analysis phase: examines the “as is” process map and the collected data to identify problems with the process (e.g., decreasing efficiency or effectiveness) and their root causes.
- Improve phase: identifying possible solutions – designing “to be” process alternatives.
• Control phase: establishing process metrics,
monitoring the improved process to ensure the process performance remains stable.
2.2 With what do we support BPI projects?
With business process management - BPM.
A management system used to support continuous BPI initiatives for core business processes over time.
2.2 What is BPM and what are its important components?
It’s a management system used to support continuous BPI initiatives for core business processes over time.
Important components of BPM:
• Process modeling: graphical depiction of all steps in out process
• Business activity monitoring (BAM): a real-time approach for measuring and managing business processes. (Where does failure lie?)
2.2 Compare BPImprovement to BPReengineering. Hint: think of cost, changes, approach, time and results
BPI:
- Low risk / low cost
- Incremental change
- Bottom-up approach
- Takes less time
- Quantifiable results
- All employees trained in BPI
BPR:
- High risk / high cost
- Radical redesign
- Top-down approach
- Time consuming
- Impacts can be overwhelming
- High failure rate
