Chapter 2

Question 1

2.3 Three types of business pressures

Answer 1

Market Pressures
Technology Pressures
Societal/Political/Legal Pressures

Question 2

2.3 What are market pressures + examples

Answer 2

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.

Question 3

2.3 Technology pressure def-n + example(s)

Answer 3

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.

Question 4

2.3 Societal/Political/Legal Pressures def-n + example(s)

Answer 4

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:

1. Facilities design and management
2. Carbon management
3. Canadian and international environmental laws

Other ex. - the digital divide, compliance with gov’t regulations, protection against terrorist attacks, ethical issues

Question 5

2.3 What is the digital divide?

Answer 5

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.

Question 6

2.3 What are organizational responses?

Answer 6

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).

Question 7

2.3 What are the 4 organizational responses?

Answer 7

1. Strategic Systems
2. Customer Focus
3. Make-to-Order and Mass Customization
4. E-Business and E-Commerce

Question 8

2.3 What are strategic systems? (org. resp.)

Answer 8

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

Question 9

2.3 What is customer focus? (org. resp)

Answer 9

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

Question 10

2.3 What is make-to-order and mass customization? (org. resp.)

Answer 10

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.

Question 11

2.3 What is e-business and e-commerce? (org. resp.)

Answer 11

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.

Question 12

2.4 What is a competitive strategy? Hint: CGPP

Answer 12

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.

Question 13

2.4 What is a competitive advantage? Hint: CQT

Answer 13

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.

Question 14

2.4 What are the 5 strategies for competitive advantage?

Answer 14

1. Cost leadership
2. Differentiation strategy
3. Innovation strategy
4. Operational effectiveness
5. Customer orientation strategy

Question 15

2.4 What are strategic information systems? Hint: Tool for GPP

Answer 15

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.

Question 16

2.4 Describe the interplay between strategic management and information systems.

Answer 16

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.

Question 17

2.4 Summarize Business-IT alignment or strategic alignment.

Answer 17

Business drives IT, which in turn enables business. At the heart of this is strategic alignment.

Question 18

What is Business-IT alignment?

Answer 18

Business-information technology alignment (business-IT alignment) is the tight integration of the IT function with the organization’s strategy, mission, and goals.

Question 19

2.4 Why do many organizations fail to implement Business-IT alignment?

Answer 19

• 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.

Question 20

2.4 What is IT governance?

Answer 20

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).]

Question 21

2.4 What are the forces that shape industry competition?

Answer 21

1. The threat of new entrants (“me too” products)
2. Barriers to entry
3. Bargaining power of suppliers
4. Bargaining power of buyers
5. Intra-industry rivalry
6. 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)

Question 22

2.4 Describe the threat of new entrants (“me too” products)

Answer 22

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

Question 23

2.4 Describe & name some barriers to entry.

Answer 23

• 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

Question 24

2.4 What is the bargaining power of suppliers?

Answer 24

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

Question 25

2.4 What is the bargaining power of buyers? Give examples.

Answer 25

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

Question 26

2.4 Describe intra-industry rivalry. Give examples. Hint: think of Pepsi v. Coke

Answer 26

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

Question 27

2.4 What is the threat of substitutes?

Answer 27

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

Question 28

2.4 What are the two categories of activities within Porter’s Value Chain Model (model to design general business activities)?

Answer 28

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.

Question 29

2.1 What is a business process & what are its elements?

Answer 29

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

Question 30

2.1 What are the two fundamental metrics used to evaluate a business process?

Answer 30

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.

Question 31

2.1 What are cross-functional processes?

Answer 31

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.

Question 32

2.1 Describe the symbols used while designing a business process (BPMN standard notation).

Answer 32

Circle - input
Rectangle - activities/events/task
Diamond - decision/gateway

Question 33

2.1 What is the role of IS in business processes?

Answer 33

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:

1. executing the process
2. capturing and storing process data
3. monitoring process performance

Question 34

2.1 Describe the “execution of a process” (IS-BP relationship).

Answer 34

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

Question 35

2.1 Describe the “capturing and storing of process data” (IS-BP relationship).

Answer 35

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

Question 36

2.1 Describe “monitoring process performance” (IS-BP relationship).

Answer 36

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

Question 37

2.2 How do we measure excellence in processing business processes? Hint: CCCQDP

Answer 37

• 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.

Question 38

2.2 What is business process reengineering (BPR)? What are its cons?

Answer 38

• 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.

Question 39

2.2 What is business process improvement (BPI)? What are its pros?

Answer 39

• 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.

Question 40

2.2 What are the 5 phases of a BPI project? Hint: Six Sigma = DMAIC

Answer 40

• 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.

Question 41

2.2 With what do we support BPI projects?

Answer 41

With business process management - BPM.

A management system used to support continuous BPI initiatives for core business processes over time.

Question 42

2.2 What is BPM and what are its important components?

Answer 42

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?)

Question 43

2.2 Compare BPImprovement to BPReengineering. Hint: think of cost, changes, approach, time and results

Answer 43

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