Transcript
Effects of IT on Strategy and Competition
Strategic Management and Planning
Strategic Management and Planning
Strategic Management
Most significant form of management decision making
We are concerned about:a process: planninga product: strategy
The thinking about both is called strategic management
What is Strategy ?
It is not an exact science It cannot be calculated There are no cook-book approaches
Proposed definition:
Strategy is the pattern of resource allocation decisions made throughout an organization.
These encapsulate both desired goals and beliefs about what are acceptable and, most critically, unacceptable means for achieving them.
What is Strategic Management ?
Strategic management is concerned with deciding on strategy and planning how that strategy is to be put in effect via :Strategic analysisStrategic choiceStrategic Implementation
Several levelsCorporate strategyBusiness strategy: within business unitFunctional Strategy: e.g. IS strategy
Strategic Process
Process by which an organization establishes answers to questions such as: What business are we in exactly ?
Who is it competing with us?
How are we performing ?
How are the business and its markets changing ?
Where within the industry want we to be?
What must be done to achieve our objectives?
Requirements for a Relevant Strategy
The strategy needs to :
be used proactively;
recognize that there are severe limits to the predictability of the future;
take account of the organizational, political, and psychological dimensions of corporate life;
be accepted by the majority of those concerned with strategy to be a realistic relevant tool for more effectively coping with the future.
Model of Strategic Management Elements Model of Strategic Management Elements
StrategicAnalysis
StrategicImplemen-
tation
StrategicChoice
TheEnvironment
Expectationsobjectives andpower:culture
Resources
Generationof options
Evaluationof options
Selection of strategy
ResourcePlanning
Organizationstructure
Peopleand systems
Diversity of Strategic Problems and Decisions
Strategic decisions are :broad in their scope;enduring in their effects;difficult in their reversal;worth devoting time and resources
Factors that determine the nature of strategic problemsthe nature of the industry;the nature of the enterprise;the current circumstances;the organization’s environment.
History of Strategic Planning
Analytical Schoolassumes strategists can be trained to anticipate complexityassumes strategy can be designed using a range of models
based on normative principlesbut models are based upon somewhat dubious assumptionsassumes predictable environmentoffer a range of techniques
Pattern Schoolstrategy of the resource allocationevolves on a trial-and-error basissuccessful actions are pursued ( Japan )problem of understanding the relation between resource
allocation and result.
Model of Strategic Planning ProcessModel of Strategic Planning Process
Planning element Plan component Key question
Mission
Goals
Strategies
Policies
Decisions
Actions
{
{
Strategic Analysis
Strategic Choice
Strategic Implementation
What should we be doing?
Where are we going?
What routes have we selected?
How do we guide our collective decisions?
What choices do we have?
Shall we do it?
Societal Environment
Socio-Culturalforces
Economic forces
Political-legalforces Technological
forces
Taskenvironment
GovernmentDemand
TechnologyMarket
structure
InternalEnvironment
- Structure- Cultural web- Resources
Strategic Analysis: Environmental Analysis
Organizational Development
Key Dimensions of the Societal EnvironmentKey Dimensions of the Societal Environment
Socio-cultural Economic Technological Political-Legal
Life-style changes GNP trends Organizationalspending on R&D
Commercialregulations
Career expectations Interest rates Total industryspending on R&D
Environmentalprotection laws
Consumer activism Money supply Focus oftechnological efforts
Tax laws
Growth rate ofpopulation
Inflation rates Patent protection Special incentives
Age distribution Unemployment levels New products Foreign traderegulations
Regional shifts inpopulation
Wage/price control Technology transferfrom lab to market
Attitude towardsforeign companies
Life expectancies Devaluation Productivity improve-ment via automation
Laws on hiring andpromotion
Birth rates Energy availabilityand cost
Stability ofgovernment
The nature of strategic changeThe nature of strategic change
Continuity Incremental Flux Global
Established strategyremains unchanged
May make good sense but the worldmay change fasterthan the strategy
No clear direction to the change
Change of this scalehappens at times of crisis when the organisation is out ofstep with the world
Constructing step for scenariosSchoenmaker 1995
Constructing step for scenariosSchoenmaker 1995
Define the scope: time scale, products, area, technologies, …
Identify major involved parties
Identify basic trends
Identify uncertainties
Construct initial scenario themes
Check for consistency and plausibility (e.g. trend vs time scale )
Develop learning scenarios ( good name for each scenario )
Identify research needs
Develop quantitative models
Evolve towards decision scenarios
The significant skills required are diffused throughout the organization
Effects on Competition
Text book
Analysing Impact: Forces that shape strategy
variety of potential uses is as broad as the industry managers need a framework to facilitate planning
strategic view on use of computer and communications Michael Porter’s industry and competitive analysis
State of competition depends on five forcesbargaining power of suppliersbargaining power of buyers threat of new entrants into the industry segment threat of substitute products or servicespositioning of traditional intra-industry rivals
very useful to consider impact of IT
Model1: Porter’s five forces modelModel1: Porter’s five forces model
Impact of competitive forces
Thread of new
entrants
Rivalty amongstexisting
competitors
Bargainingpower ofsuppliers
Bargainingpower of
buyers
Thread ofsubstitute products
or services
Analysing Impact: Impact of competitive Forces
Force Implication Potential uses of IT
Threat of new entrants New capacity Provide entry barriers:Substantial resources - economies of scaleReduced prices or inflation - switching costs of incumbents’ costs - access to distribution channels
Buyers’ bargaining power Prices forced down Buyer selectionHigh quality Switching costsMore services DifferentiationCompetition encouraged Entry barriers
Suppliers’ bargaining power Prices raised SelectionReduced quality and services Threat of backward integration
Threat of substitute products Potential returns limited Improve price/performance or services Ceiling on prices Redfine products and services
Intra-industry rivals Competition: Cost-effectivenessPrice/Product/ Market access differentiation: distribution and services Product/Services/Firm
Analysing Impact: Specific actions
Specific actions to implement generic strategy vary widely competitive advantage is the goal of any strategy
define type of required competitive advantage
Competitive advantage
Lower Cost Differentiation
BroadTarget
Narrow Target
Competitive Scope
Cost Leadership Differentiation
Cost Focus Differentiation focus
Strategic Analysis: Values and ObjectivesStrategic Analysis: Values and Objectives
Porters value chain model
Administration and infrastructure
Human resource management
Product/technology/development
Procurement
Support activities
Primary activities
Inbound logistics
Operations Outboundlogistics
Sales andmarketing
Services
Valueadded -cost = MARGIN
Inbound Logistics
Inbound logistics:materials receiving, storing, distribution – to manufacturing premises
just-in-time on-line ordering in major distribution company• cut-down on warehousing needs for incoming materials
• reduced disruption on inventory shortfalls
• safetystocks are passed to supplier
• scan supplier databases for lowest price
• changing vendors has become more difficult
large department store linked to textile suppliers• improved delivery
• inventory reduction
• flexibility to meet changing demands
• easier to deal with domestic suppliers
Outbound Logistics Outbound Logistics : storing and distributing products
IT has great impact on the way products are delivered to customers.
reservation-systems links to travel agents
automatic teller machines
theatre-ticket machines , gaz stations
Outbound for one company is inbound for another
Marketing and Sales
Marketing and sales: promotion and sales force
on-line order-entry for pharmacies
industrial air-conditioning company has build a computer-based modeling system prefered by architects
competitor made a similar on-line system also providing cost information
farmers information system by agricultural chemical company with build-in decision support system
Marketing systems became important with the laptop
After-Sale Service , Infrastructure
After sale service reduction of repair costs and increased customer satisfaction
by installing flight-recording devices in elevatorson-line maintenance expert systems reduced service visits
Corporate infrastructureon-line link for outlying travel agents to deliver documents• 27 % growth in sales
financial service company used information in database to refine commission sytem• less comission for first sale• more for service extension
Enhanced management control and coordination via voice mail, e-mail , videotext
location of airplanes improved connections for delayed fligths
Other applications
Human resourceshead-hunters information on skills and experience
Technology developmentaccess to large computing facilities (generation gap )CAD/CAMseed company : computer support is most important
technology expenditure for genetic planning ( data on thousands of plants , molecular simulatiom models )
Procurementon-line electronic bulletin boardsaccess to production scedules of suppliers
Value chain of Porter: ICT Influence
MIS, DSS, EIS, ES multimedia, VR
ES, DSS, MIS
DSS, ES, GSS, CASE
EDI, DSS, Voice technology
EDIE-mail
RobotsCAD/CAMSimulation
MRPVRCIM
Scheduling
EDIDSS
EDICD/ROM
MultimediaDSSGIS
Internet
LaptopsWirelessTracking
Primary activities
Supportingactivities
MA
RG
inP
rofit
Inbound Operations Outbound Marketing Services
Infrastructure
HRM
Technology
Procurement
The risks of information systems success
Key problem: - success in narrow technical sense- disastrous organisational and
competitive consequencesNine topics focus on strategic vulnerabilities
Systems that : change the basis of competition negativelySystems that : lower entry barriersSystems that : bring on litigation or regulationSystems that : increase customers’ or suppliers’ power to the
detriment of the innovatorBad timing Indefensible investments that fail to bring lasting advantagesSystems that pose a threat to large, established competitors Inadequate understanding of buying dynamics across marketCultural lag and perceived transfer of power
Assessing competitor risk
Two phase process:describe in detail the industry-level changes invokeddetermine potential impact on the company
increasing use of IT not always inevitablesome technological advances remain embryonic for reasons of
cost, IT capability , user acceptance , lack of support from established industry (e.g. home banking )
consider motivation for the new system software from nonexclusive source gives no lasting advantage mobility between IT personnel results in rapid proliferation of
ideas long-term commitment of top management required before start clear view on long range strategy is absolute must resources and capabilities of competitors must be examined
The Challenge
broad IT-management - user dialog plus imagination
potential benefits are subjective and not easily verified
ROI focus may turn attention towards a narrow focus
most companies are in support or factory quadrant of strategic grid and organisation is set up accordingly
playing cath-up can be difficult and expensive
Life cycle analysisLife cycle analysis
Four stages in life cycle of a product or industry: Introduction
early adoptersdemand unknown
Growthentry of competitors fight for share, undifferentiated products and services
Maturitysaturation of users fight to maintain share, emphasis on efficiency and cost
Declinedemand < supply
SWOT analysisSWOT analysis
A SWOT analysis defines the relationship between internal and external appraisal in strategic analysis
Internal factors
Externalfactors
Strengths
Strengths
Weaknesses
Weaknesses
Opportunities Opportunities
Threats Threats
top related