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Lecture 2

Comm 190 Week 2.docx

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COMM 190
Tracy Jenkin

Week 2 Class 3 Chapter 3 Q1 What is the productivity paradox Productivity paradox Stephen Roach reported that he found no evidence of an increase in worker productivity associated with the massive increase in investment in info technology We see computers everywhere except in the productivity statisticsHow IT adds to productivity how IT creates business value Business value tangible benefits for organizations through either more efficient sue of resources or more effective delivery of their services to customers Over time it has been recognized that measurement error may be a critical reason for the observed lack of productivity from IT investments The difficulty in measuring productivity in an increasingly servicebased economy has it challenging to find productivity increase from IT It is in part due to the often invisible or intangible benefits associated with info tech One response to the productivity paradox was a careful consideration of the value that can be derived from IT investment 1 Productivity IT tech allows a company to make either more output from the same inputs andor to make better output andor to make the output faster than before the tech was in place Eg A small accounting firmallow to add more customers to automate tasks completing tax forms provide more uptodate info for clients So makes firm more efficient and potentially more effective 2 Structure of competition IT alters the way organizations compete Eg Video rental industry Blockbusters shut down bc technology has changed the structure of competition 3 Benefits to the end customer IT helps make processes more efficient and changes the nature of competition W increased competition the reduction of costs associated with new processes is often transferred to the final consumer Consumer may see cheaper and better goods and services as a result of IT Eg Competing accounting firms may offer their clients more services and perhaps even lower prices on services after investing in info tech Consumer often reaps the benefit of investment in ITChapter 3 Q2 Can info systems improve productivity Productivity for organizations can be increased either through increase efficiency or effective business processes Increasing efficiency means that business processes can be accomplished either more quickly or with fewer resources and facilities or bothWhen organizations focus on efficiency they are working toward doing things right Doing things right often means using just the right amount of resources facilities and info to compete the job satisfactorily When companies focus on effectiveness they are interested in doing the right things Increase effectiveness means that the company considers offering either new or improved goods or services that the customer values Doing the right things often requires companies to consider changing their business processes to deliver sth new and improved Companies with longterm success in mind understand the importance of balancing between effectiveness and efficiency Business Processes and Value Chains A value chain is a network of activities that improve the effectiveness or value of a good or service A value chain is therefore made of at least one and often many business processes Each business process adds some value to a good or service Eg Blob of rubber harvested in Vietnam has no initial value later it is shipped to Canada and made into a allseason car tire and sold in a tire store close to the customer it now has significant value Organizations that expand into activities that affect raw materials tire company that begins to manufacture its own rubber or a coffee store that begins to grow its own coffee are said to be taking backward integration or moving upstream on the value chain a mining company that begins to cut and finish its own diamonds rather than wholesale raw stones would be undertaking forward integration or moving downstream on the value chain The more value a company adds to a good or service in its value chain the higher the price the company can charge for the final product The difference between the price th customer is willing to pay and the cost the company incurs in moving the goods or services through the value chain is defined as the margin The greater the margin the greater the profit per unit for the company Porters concept of a value chain Primary activities are activities in which value is directly added to the product Tire example each primary activity adds value to for the customer Support activitiesare a range of activities that do not add value directly to the product They support the primary activities Eg Who pays the workers in the factory Who schedules the shipping of the finished tires Who keeps track of the mechanics hoursSupport activities add value only indirectly No one buys a tire because a company has a great payroll system The payroll system may make the company more efficient and allow the company to offer a more lower price than competitors Porters Value Chain ModelUnderstanding the value chain helps us understand how info systems increase productivity One way is by enabling the development of more efficient or more
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