Chapter 3 - strategy, information sytstems, and competitive advantage.docx

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Western University
Computer Science
Computer Science 1032A/B

Chapter 3 – Strategy, information systems and competitive advantage - Stephen roach reported that it was not his intention to downgrade the importance of information technology o He found no evidence of an increase in worker productivity aossciated with the massive increase in investment in information technology - Robert solow make the following statement : we see computers everywhere except in the productivity statistics - Productivity paradox was born - Today we are interested in how investments in information technology can create business value, tangible benefits for organizations through either more efficient use of resources or more effective delivery of their services t ocustomers - Over time it has been recognized that measurement error may be a critical reason for the observed alck of productivity from IT investments - One response to the productivity paradox was a careful consideration of the value that can be derived from IT investment o 3 different ways through which the value of IT can be realized o Produtvitiy – IT allows company to make either mor eoutpuit from the same inputs or to make better output or make it faster o Through structure of competition – alter the way corporations compete o Benefits to the end customer- see cheaper and better goods and services as a result of information technology (offer better services and cheaper prices) Q2- can information systems improve productivity - Business processes are an important consideration in produvitiy - Produvtity for organizations can be increased either through increased efficiency or effective business processes - Increasing efficiency means that business processes can be accomplished either more quickly or with fewer resources and facilities or both - Efficiency – doing things right (right amount of resources to complete the job) - Effective – doing the right things (offering either new or improved goods or services that customer values) – require company to change buisienss processes - Effective and efficiency might come in conflict Business processes and value chains - Value chain is a network of activities that improve the effectiveness or value of a good or service – make up of at elast one or often many business processes - Each of new steps in the chain adds value (value chain) - Organizatiosn that expand into activities that affect raw materials - When an organization begin to produce its own raw matierals it is said to be undertaking backward integration or to be moving upstream 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 the 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 o The greater the margin the greater the profit - Value chain is formalized by michale porter – 2 types of activities that support value chains - Primary activities = activities in which alue is added directly to the product - Support activities = support the primary activities (Add values indirectly) - Understanding the value chain helps us understand how information systems can increase producitivity o Enabling the development of more efficient or more effective supporting acitivities o Increasing the efficiency and effectivenss of these support systems increases the margin enjoyed by the company o IS also increase productivity by offering new and improved services – primary activities that would not be available without information technology (hotel reservation, FAQ) Q3 – how are organizational strategy and industry structure related? - Organization strategy reflects its goals and objectives - Strategy is influenced by competitive structure of the company’s industry - A company’s information systems strategy should support or be aligned with the overall company strategy o Possible for the organizational strategy and information systems strategy to be somewhat out of alignment - Organizational strategy begins with an assessment of the fundamental characteristics and structure of an industry o Access industry structure – Porter’s five forces model o 5 competitive forces determine industry profitability :  bargaining power of customers  threat of substitutions  bargaining power of suppliers  threat of new entrants  rivalry among existing firms o these forces dete
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