Chapter 2 Flashcards
Business Processes
are the activities organizations perform to reach their business goals, including core activities that transform inputs and produce outputs, and supporting activities that enable the core activities to take place
Organizations are composed of different decision-making levels
- Operational Level: the routine day-to-day business processes and interactions with customers. Information systems at this level are designed to automate repetitive activities, such as sales transaction processing, and to improve the efficiency of business processes at the customer interface.
- Managerial Level: focus on monitoring and controlling operational-level activities and providing information to higher levels of the organization. Hence, the information systems at this level improve effectiveness by automating the monitoring and controlling of operational activities.
- Executive Level
The focus is on long-term strategic questions facing the organization, such as which products to produce which countries to compete in and what organizational strategy to follow. Information systems at this level help to improve strategy and planning by providing summaries of past data and projections of the future.
Organizations are composed of different decision-making levels
- Operational Level: the routine day-to-day business processes and interactions with customers. Information systems at this level are designed to automate repetitive activities, such as sales transaction processing, and to improve the efficiency of business processes at the customer interface.
- Managerial Level: focus on monitoring and controlling operational-level activities and providing information to higher levels of the organization. Hence, the information systems at this level improve effectiveness by automating the monitoring and controlling of operational activities.
- Executive Level
The focus is on long-term strategic questions facing the organization, such as which products to produce which countries to compete in and what organizational strategy to follow. Information systems at this level help to improve strategy and planning by providing summaries of past data and projections of the future.
A transaction is
anything that occurs as part of a firm’s daily business of which it must keep a record.
Structured Decisions are
those in which the procedures to follow for a given situation can be specified in advance. These can be programmed directly into operational information systems so that they can be made with little or no human intervention. (e.g. inventory management system)
At the operational level information systems are typically used to
increase efficiency - (goals are achieved faster, at lower cost, or relatively little time and effort)
At the managerial level, midlevel managers focus on
effectively utilising and deploying orgnisational resources to increase effectiveness
decisions at the managerial level are
semistructured decisions, where some procedures to follow for a given situation can be specified in advance, but not to the extent where a specific recommendation can be made
Key Performance Indicators (KPI’s) are
metrics that assess the progress towards a certain goal that are displayed on performance dashboards.
Functional Area Information Systems are designed to
support the unique business processes pf specific functional areas
At the executive level decisions are
unstructured Decisions, where there are few or no procedures to follow for a given situation to be specified in advance
Information systems are used at different levels of an organization to
support automating and organisational learning, and to support strategy
- automating: this perspective thinks of technology as a way to help complete a task within an organisation faster, cheaper, and perhaps with greater accuracy.
- Organisational Learning: the ability of an organisation to use past behaviour and information to improve its business processes.
- Organisational Strategy: firm’s plan to accomplish its mission and goals as well as to gain or sustain competitive advantage over rivals.
- Strategic Planning: form a vision of where the organisation needs to head, convert that vision into measurable objectives and performance targets, and craft a strategy to achieve the desired results.
- Low-Cost leadership strategy: offer the best prices in the industry on goods/services.
- differentiation strategy:provide better products/services than competitors.
- best-cost Provider strategy: offering products or services reasonably good quality at competitive prices
Sources of having a competitive advantage:
- Being the first to enter the market (i.e. having a First-Mover Advantage) 2. Having the best-made product on the market
- Delivering superior customer service
- Achieving lower costs than rivals
- Having a proprietary manufacturing technology, formula, or algorithm
- Having shorter lead times in developing and testing new products
- Having a well-known brand name and reputation
- Giving customers more value for their money
To develop and sustain a competitive advantage, organisations must have
resources/capabilities that are superior to those of their competitors:
- Resources - reflect the organisation’s specific assets that are utilised to create cost or product differentiation from their competitors.
- Capabilities - reflect the organisation’s ability to leverage these resources in the marketplace.
Together resources and capabilities provide the organisation with
Distinctive Competences (such as innovation, agility, quality, or low cost) that help to pursue the organisational strategy.
The competencies help to pursue the organisational strategy and make the organisation’s product valuable to its customers relative to its competitors;
superior Value Creation
occurs when an organisation can provide products at a lower cost or with superior benefits to the customer.
Five forces that influence the level of competitiveness in an industry, known as
Porter’s Five Forces:
Industry rivalry
power of buyers
power of sellers
threat of substitutes
threat of new entrants
The Value Chain
refers to the set of activities that add value throughout the organisation.
Value Chain Analysis
is the process of analysing an organisation’s activities to determine where value is added to product/services and what costs are incurred for doing so.
Information Systems can
automate many activities along the value chain.
Organisations are trying to maximise
Business/IT Alignment where systems are matched with strategy.
Strategic Necessity
Sometimes, organisations have no choice in making some types of investments that may or may not coincide with their overall strategy. Such investments are called strategic necessity.
something the company does to survive
A Business Model is
a summary of a business’s strategic direction that outlines how the objectives will be achieved; this specifies the Value Proposition
Value Proposition
how a company will create, deliver, and capture value.
A Revenue Model describes
how the firm will earn revenue, generate profits, and produce a superior return on invested capital
A form of a revenue model enabled by the digital world is
Affiliate Marketing - achieving greater market penetration through websites who target specific groups of internet users
Forms of marketing
- Subscription - users pay a monthly/yearly recurring fee for the use of the product/service.
- Licensing - users pay a fee for using protected intellectual property (e.g., software).
- Transaction Fees - a commission is paid to the business for aiding in the transaction. 4. Traditional Sales - consumer buys from a web site.
- Web Advertising - a free service/product is supported by advertising displayed on the web site.
Freeconomies
is the leveraging of digital technologies to provide free goods/services to customers as a business strategy for gaining a competitive advantage.
The Freemium approach is
where users can upgrade to a paid “pro account:, providing additional features, such as unlimited storage, advertisement free browsing, etc.
There are several International Business Strategies:
- Global Strategy: attempt to achieve economies of scale by developing products for the global market, which can be sold in large quantities.
- Transnational Strategy: attempt to leverage the flexibility offered by a decentralised organisation while at the same time reaping economies of scale enjoyed by centralisation.
- International Strategy: view international operations as secondary to their home operations, focussing on domestic customers’ needs and wants and exporting products to generate additional sales.
- Multidomestic Strategy: attempt to be extremely flexible and responsive to the needs and demands of local markets by using a loose federation of associated business units,
each of which is rather independent in its strategic decisions.
New technologies are not as stable as
traditional ones and given that, being at the technological cutting edge has its disadvantages and is typically difficult to execute.
Those organisations that find themselves in highly competitive environments probably most need to
deploy new technologies to stay ahead of rival.To do so, organisations must be ready for the business process changes that will ensue, have the resources necessary to deploy new technologies successfully, and be tolerant of the risk and problems in being at the cutting edge.
Disruptive Innovations
are new technologies, products, or services that eventually surpass the existing dominant technology or product in a market.
The Innovators’ Dilemma refers to
how disruptive innovations, typically ignored by established market leaders, cause these established firms or industries to lose market dominance, often leading to failure.
A process called Disruptive Growth Engine outlines how
organisations can effectively respond to disruptive innovations in their industry. This process includes the following steps:
- Start early
- Display executive leadership
- Build a team of expert innovators
- Educate the organisation
The Disruptive Innovation Cycle holds
That the key success for modern organisations is the extent to which they use information technologies and systems in timely, innovative ways:
> Bubble 1: Enabling technologies are the information technologies that enable a firm to accomplish a task or goal or to gain or sustain competitive advantage is some way (disruptive innovations).
> Bubble 2: Organisation matches promising new technologies with current economic opportunities.
> Bubble 3: the processes of selecting those emerging technologies that have the biggest potential to address the current opportunities.
> Bubble 4: the process of assessing the value of that use of technology, not only to
customers but also to internal clients.
The disruptive innovation cycle suggests three ways to
think about investments in disruptive innovations:
1. Put technology ahead of strategy
2. Put technology ahead of marketing
3. Innovation is continuous
