BUS 188: Chapter 3 Outline

Matthew Mercado

07/17/16

BUS 188 (11:00am-3:00pm)

Chapter 3 Outline (2 page minimum)

Aggarwal

Chapter 3 Outline

            The overall goals or objectives in any organization are to have some sort of strategy based on their structures, features, and functionality.  The structure alone determines the overall design of the supporting systems. Referring back to Chapter 1, Information systems are defined as: an assembly of hardware, software, data, procedures, and people that help produce information. In determining the organizational strategy of Information systems, it follows a 5-step format: Industry Structure, Competitive Strategy, Value Chains, Business Procedures, and Information Systems. When developing and implementing a strategy, it’s always best to not only know your competitors, but also what organizations can do to have the upper hand. 

           

A model used to analyze and assess an industry’s structure is Porter’s five-forces model. This model helps determine profitability, bargaining powers of the customers, threat of substitutions, bargaining powers of the suppliers, threat of new entrants, and rivalry amongst existing firms. Each of these will help determine the industry as a whole from the money they are profiting from to how well they can sustain that profit. If none of these are taken into consideration, then the outlook on the industry is being overlooked and we aren’t setting ourselves apart from other organizations. In taking these steps, organizations can create and choose a competitive strategy. They can shift their focus, for example, on products or services, or look at from a segmental standpoint. Take for instance Netflix, a video streaming service online. Its competitors such as Hulu and YouTube Red are trying to acquire subscribers by providing the variety of shows so long as they pay their dues monthly/yearly. The primary difference ranges from variety of shows provided, the quality of the videos themselves, the price of the plan, and the overall entertainment value. This is where companies try to retain their customers while also looking into how to sustain their profits, thus they have to find the competitive advantage over their competitors.

            Organizations that begin to develop, plan, and implement their strategies have to think of the overall structure of their business. An organization could potentially lean toward a differentiation strategy, although this could prove to be costly than effective. When looking at their business activities, they look the overall value chain – network value-creating activities. The chain is divided into primary and support activities. Some examples of primary activities are: Inbound logistics, operations/manufacturing, outbound logistics, sales and marketing, and customer service. For support activities, they contribute directly to production, sale, and service of the product. For both activities, they both serve a purpose.

            Much like Value Chains, a business process is a network of activities that generate value by transforming inputs into outputs. The overall business process cost inputs the cost of the activities and the margin of the business process is the value of those outputs deducting the cost. The activities can be performed by a human, computer system, or perhaps a little of both. Each activity plays a role and serve a overall purpose so long as it is achieves its desired result. The business processes vary when it comes to costs and effectiveness; just because you achieve a desired result doesn’t mean that there could be a price to pay or its 100% effective.

It’s important how organizations utilize their information systems so they can have a competitive advantage. For example, an organization could have competitive advantage over products and services. An organization’s products and services could be considered fairly new, enhanced/advanced, and differentiated from others. To implement thus, they would have to retain customers and buyers, retain their suppliers, raise barriers to market entry, establish alliances/friendships, and most importantly, reduce the costs of that product/service.

            Information systems are beneficial when it comes to creating competitive advantage. Referring back to the Netflix example, that product/service has been able to retain its customers, establish alliances w/TV and movie networks, and most importantly have kept the costs to a minimum. That’s why so many have subscribed to that service based on those three factors and to this day, is still continuing to grow. Netflix has even ventured forth into developing its own shows that are exclusive to its streaming services, yet another reason to differentiate itself from its customers. However, the Hulu streaming services have started developing their own originals and thus have become a competitor. The biggest differentiation between Hulu and Netflix is that Hulu still has ads despite the low price to watch the shows whereas with Netflix, no ads. Another example of competitive advantage could be over business processes. Organizations have to be able to retain its customers by making it as difficult as possible to switch to another product. This is commonly referred to as switching costs because when locking in their suppliers, they’re making it harder for customers to switch to another organization. They could potentially make it harder for new expensive products from coming into the market and thus retaining its customers.

            Strategies are important to any sort of organization. It keeps tabs on the entirety of the organization and sees what needs to be improved while also issuing what needs to be fixed. The inputs have to balance out the outputs and the whole point of it is to sustain customers and make a profit. In doing so, implementing the best strategy would ensure that an organization has a competitive advantage over its competitors. This only comes to show how Information Systems plays an important role in decision-making.