CHAPTER 2 (Business Pressures, Organizational Responses, and IT Support)
PORTER'S COMPETITIVE FORCES MODEL (The best-known framework for analyzing competitiveness is Michael Porter's competitive forces model (Porter, 1985))
(1) THREAT OF ENTRY OF NEW COMPETITOR - is high when it is easy to enter a market and low when significant barriers to entry exist. * A BARRIER TO ENTRY is a product or service feature that customers expect from organizations in a certain industry. (2) THE BARGAINING POWER OF SUPPLIERS - is high when buyers have few choices and low when buyers have many choices. (3) The BARGAINING POWER OF BUYERS - is high when buyers have many choices and low when buyers have few choices. (4) The THREAT OF SUBSTITUTE PRODUCTS OR SERVICES - is high when there are many substitutes for an organization's products or services and low where there are few substitutes. (5) The RIVALRY AMONG FIRMS IN AN INDUSTRY - is high when there is fierce competition and low when there is not.
- COMPETITIVE ADVANTAGE - STRATEGIC INFORMATION SYSTEM (SIS)
- An advantage over competitors in some measure such as cost, quality, or speed, leads to control of a market and to larger- than average profits. - provide a competitive advantage by helping an organization to implement its strategic goals and to increase its performance and productivity.
STRATEGIES FOR COMPETITIVE ADVANTAGE
- COST LEADER: I can sell at a lower cost than you can. - DIFFERENTIATION: I am better because I am different. - INNOVATION: I am doing something new and you can't catch up. - OPERATIONAL EFFECTIVENESS: I can do the same thing more efficiently than you can. - CUSTOMER ORIENTED: I treat my customers better than you do.
TYPES OF BUSINESS PRESSURES
- MARKET PRESSURES: The Global Economy and Strong Competition; The Changing Nature of the Workforce; Powerful Customers. - TECHNOLOGY PRESSURES: Technological Innovation and Obsolescence Information Overload - SOCIETAL/POLITICAN/LEGAL PRESSURES: Social Responsibility; Government Regulation and Deregulation; Protection Against Terrorist Attacks and Ethical Issues
ORGANIZATIONAL RESPONSES
- STRATEGIC SYSTEMS - provide advantages that enable organizations to increase market share and/or profits, to better negotiate with suppliers, or prevent competitors from entering their markets. - CUSTOMER FOCUS - is the difference between attracting and keeping customers by providing superb customer service to losing them to competitors. - MAKE-TO-ORDER - is a strategy of producing customized products and services. - MASS CUSTOMIZATION - is producing a large quantity of items, but customizing them to fit the desire of each customer. * Reebok and Bodymetrics provide excellent examples of mass customization. E-BUSINESS AND E-COMMERCE - Buying and selling products and services electronically. * E-business is a broader concept than e-commerce.
BUSINESS PRESSURE
The business environment is the combination of social, legal, economic, physical, and political factors that affect business activities. Significant changes in any of these factor are likely to create business pressure on the organization. * The three types of business pressures faced are: market, technology, and societal pressures.
BUSINESS-IT ALIGNMENT (which we will call ALIGNMENT)
is the tight integration of the IT function with the strategy, mission, and goals of the organization. That is, the IT function directly supports the business objectives of the organization.
