Business Strategy Concepts & IT/IS Strategy Implications

1. Business Strategy Concepts &IT/IS Strategy Implications

2. Definition of Strategy • Strategy is an integrated set of actions aimed at increasing the long-term well-being and strength of the enterprise relative to competitors (Porter, 1980)

3. Role of Strategy • Without a strategy, managers HAVE NO: • Prescriptions for doing business • Road map to competitive advantage • Game plan for pleasing customers or achieving good performance (Thompson & Strickland, 2003)

4. Three Interrelated ProcessContributed in Establishing A Strategy(Porter, 1980) • Strategic thinking : creative, entrepreneurial insight • Strategic planning: systematic, comprehensive analysis to develop plans / actions • Opportunistic decision making: effective reaction to unexpected threats or opportunities Effective combination of them called as strategic management

5. Relationship Between of IS/IT Strategy and Business Strategy • IS/IT is a mean implementing chosen strategy, BUT ALSO • An enabler of new business strategies (strategies that are impossible to be implemented without IT)

6. Evolution Of Strategic Management(Gluck, 1980) Annual planning 5-years planning Competitors Oriented Innovation Oriented

7. Five Task of Strategic Management

8. Strategic vision • “A computer on every desk and in every home using great software as an empowering tool” old version of Microsoft’s vision • “Empower people through great software anytime, anyplace, and on any device”, The new one

9. Strategic objective • “To safely deliver a hot, quality pizza in 30 minutes or less at fair price and reasonable profit” (Domino’s Pizza) • To achieve annual growth in earnings per share of 10 percent or better, on average; a return on stockholders’ equity on 20-25 percent; …” (3M Corporation)

10. Strategic Framework • Three factors that should be involved in strategic management: • External environment • Pressure of group and stakeholders • Internal business strategizing and planning

11. External Environment • Done by PEST analysis • That analysis involves aspects: • Politic (including legal) • Economic • Social (including ecological) • Technological • Can be used to identify opportunities and threats

12. Pressure of Groups and Stakeholders • Shareholders • Competitors • Customers • Suppliers • Government • Employees • Labor unions • Public (society) (including NGO) • Financial institution • Mass media

13. External environment Threats Opportunities Strategy Business Strategy Formulation and Planning Processes Determine the scope (whole in the organization or in discrete parts such as SBUs)

14. Future Strategies • Need for identifying future strategies • Factors that maybe need to be identified: • Risks in financial and managerial • Degree needed to create new capabilities • Current organization structure • Ability organization to implement the strategy (competencies, resources, processes, and culture) • Implications for customers and partners • Need to create alliances or joint ventures

15. Strategy Implementation • A strategy needs to be implemented • Unexpected constraints or new option will occur • New oppurtinities come

16. Product Life Cycles

17. Strategy Tools and Techniques • Common tools for formulating strategy: • BCG matrices • Policy/portfolio matrices • Five forces • Industry analysis

18. Situational Analysis • To evaluate ‘Where we are now’ • Usually is done by SWOT analysis • Several factors that should be analyzed: • Resources (excluding the employees) • Financial health • Employees (skill, experience, motivation, trainings) • Physical assets • R&D • Organization culture and structure • Market segment & market share • Product life cycles • Potential competitors • Future competitive actions

19. BCG Matrices

20. BCG Matrices (continued) • Need to manage products according to market opportunities and pressure (not internal factors) • Need to reinvest net cash inflows into future products to ensure continuing sources of revenue • Need to have a complete and balanced portfolio if the business is thrive in the long term

21. Policy/Portfolio Matrices • There are other factors that make industries more or less attractive: • Size • Market diversity • Competitive structure • Price • Profitability • Technology development effects • Legal, social, and environmental factors Market share Innovation

22. Implications for IS/IT Strategy • Wildcat products: • focus on product and/or process development • to identify potential customers, segment customer types • To ensure effective information exchange occur about the product/service with the chosen segment or customers • To enable exact specification of service and product requirement

23. Implications for IS/IT Strategy • Star products: • focus on customers – identifying customer and their requirements to achieve better understanding of demand than actual or potential competitors • To handle business innovation

24. Implications for IS/IT Strategy • Cash cow products: • Focus on control of business relationships and activities rather than innovation • To maintain low cost

25. Implications for IS/IT Strategy • Dog products: • Very little innovative IS/IT use can be expected

26. Competitive Forces and Competitive Forces

27. Competitive Forces and Competitive Forces

28. Industry Analysis • Developed by Parsons and McFarlan • Three essential role of IS/IT in industry: • How can IS/IT affect products/services? • e-publication • e-job • How can IS/IT affect demand for products/services, segment markets, extend them geographically, or provide new distribution channels? • mail order • e-auction • How can IS/IT influence cost base of key processes? • Remote printing (newspapers) • E-procurement

29. Generic Business Strategies • Low cost strategy • Differentiation strategy • Niche/focus strategy

30. A Resource-Based View Of Strategy • Three important keys to market leadeship (Treacy and Wiersma, 1995): • Operational Excellence (reliable, easily, and cost-effectively by customers) • Customer intimacy (targeting markets precisely) • Product leadership (continuing product innovation meeting customer’s needs)