IT - A field concerned with the use of technology in managing and processing information. IT is important in creating and managing the innovation and success of a company.
2. List and describe each of the forces in Porter’s Five Forces Model.
- Buyer Power - high when buyers have many choices of whom to buy from and low when their choices are few. One way to reduce buyer power is through loyalty programs. These reward customers based on the amount of business they do with a particular organisation.
- Supplier Power - high when one supplier has a concentrated power over an industry. Buyers have few choices of whom to buy from and low when their choices are many. All parties involved in the procurement of a product or raw material are links in the supply chain. The power is often with the supplier.
- Threat of substitute products or services - High when there are many alternatives to a product or services and low when there are few alternatives.
- Threat of new entrants - High when it is easy for new competitors to enter a market and low when there are significant entry barriers. An entry barrier is a product or service that customers have come to expect and must be offered to compete and survive.
- Rivalry among existing competitors - High when competition is fierce in a market and low when competition is more complacent.
3. Compare Porter’s three generic strategies.
- Broad cost leadership - the low cost producer in a business for a given level of quality. Companies sell their products either at an average industry price or a below average industry price. Firms can acquire cost advantage through a number of ways, some being gaining access to a large source of lower cost materials or by improving process efficiencies.
- Broad differentiation - calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. Firms that succeed in a differentiation strategy have some of the following strengths: highly creative and skilled development team, access to leading research and a strong sales team that can successfully communicate.
- Focused strategy - concentrates on a narrow sector and within that sector attempts to achieve either a cost advantage or a differentiation. It works on the belief that the needs of a group can be better serviced by focusing entirely on it.
4. Describe the relationship between business processes and value chains.
Once an organisation chooses its strategy, it can use tools such as the value chain analysis to determine the success or failure of its chosen strategy. Value creation is the result of effective business processes and efficient values chains. Business process is a standardised set of activities that accomplish a specific task. Value chains view an organisation as a series of processes, each of which adds value to the product or service.
