Problem Solving and Decision Making Presentation - Essay Example

Effects of IT on competition and value chain activities Introduction Michael Porter introduced the value chain analysis concept in his 1985 book ‘TheCompetitive Advantage’. Porter suggested that activities within an organization add value to the service and products that the organization produces, and all these activities should be run at optimum level if the organization is to gain any real competitive advantage. If they are run efficiently, the value obtained should exceed the costs of running them i.e. customers should return to the organization and transact freely and willingly.

Although, primary activities add value directly to the production process, they are not necessarily more important than support activities. Nowadays, competitive advantage mainly derives from technological improvements or innovations in business models or processes. Therefore, such support activities as ‘information systems’, ‘R&D’ or ‘general management’ are usually the most important source of differentiation advantage. On the other hand, primary activities are usually the source of cost advantage, where costs can be easily identified for each activity and properly managed.