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Chapter 3

Computer Science 1032A/B Chapter Notes - Chapter 3: Switching Barriers, Disruptive Innovation, Stephen S. Roach


Department
Computer Science
Course Code
COMPSCI 1032A/B
Professor
Louis Magguilli
Chapter
3

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CHAPTER 3: STRATEGY, INFORMATION SYSTEMS, AND COMPETITIVE ADVANTAGE
WHAT IS THE PRODUCTIVITY PARADOX?
Stephen Roach found no evidence of an increase in worker productivity associated with the massive increase in investment in
information technology
Productivity paradox: the lack of evidence of an increase in worker productivity associated with the massive increase in
investment in information technology
oProductivity has slowed while investments in IT have grown drastically
Business value: tangible benefits for organizations through either more efficient use of resources or more effective delivery of
their services to customers
3 ways in which the value of IT can be realized
oProductivity  IT allows a company to make either more/better/faster output from the same inputs
oStructure of competition  using IT can alter the way corporations compete
oBenefits to the customer  IT helps make processes more efficient and changes the nature of competition and consumers
may see cheaper and better goods/services
CAN INFORMATION SYSTEMS IMPROVE PRODUCTIVITY?
Productivity 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  doing things right
Increasing effectiveness means that the company considers offering either new or improved goods or services that the customer
values  doing the right things
Business Processes and Value Chains
A value chain is a network of activities that improve the effectiveness of a good or service
oMade up of at least one and often many business processes
oEach step in a chain adds some value
Organizations that expand into activities that affect raw materials are said to be undertaking backward integration or to be moving
upstream on the value chain
Organizations that move closer to end customers would be undertaking forward integration and moving downstream on the value
chain
The more value a company adds to a good/service in its value chain, the higher the price the company can charge for the final
product
Margin: the difference between the price the customer is willing to pay and the cost the company incurs in moving the
goods/services through the value chain
Michael Porter (professor at Harvard University) formalized concept of a value chain
oPrimary activities  activities in which value is added directly to the product
oSupport activities  activities that support the primary activities
Primary Activity Description
In-bound logistics Receiving, storing, and disseminating inputs to the product
Operations Transforming inputs into the final product
Out-bound logistics Collecting, storing, and physically distributing the product to buyers
Marketing and sales Inducing buyers to purchase the product and providing a means for them to do so
Service Assisting customers use of the product
HOW ARE ORGANIZATIONAL STRATEGY AND INDUSTRY STRUCTURE RELATED?
A companys strategy is influenced by the competitive structure of the company’s industry
Organizational strategy
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