Organizational Units

1. Organizational Units • A key issue of the planning process is to determine the scope • Organisation as a whole • Organisation can be broken strategic business units

2. Approaches to Defining Strategy • Most of the techniques apply to phase 3 • Phase 4 requires some inspiration or creativity • Boston Matrix is one of the most known techniques.

3. Approaches to Defining Strategy

4. Approaches to Defining Strategy • Product Life Cycle • Market Share • Profitability • Wild Cat / Stars / Cash Cows / Dogs • Products Portfolios • Other Planning / Policy Matrices

5. Approaches to Defining Strategy • Boston Matrix Exercise Manor Way Tools • Manor Way Tools began life as a small steel company at the end of the 19th Century. It was one of the first companies to put carbon into regular iron to create steel. It was strong and flexible. Their first products were fish hooks which were made from the flexible wire that they were able to produce. • Today they focus their operations on the manufacture of tools for the professional, production, and the enthusiastic amateur. Core products include handsaws, drill bits, screwdriver, bowsaws etc. • http://www.marketingteacher.com/Lessons/exercise_boston%20matrix.htm

6. Implication for IS /IT Strategy • For a Wild Cat Product : - focus on product - focus on process development - identify potential customers - segment customer types • For Star Products : - identifing customers and their demands

7. Implication for IS /IT Strategy • For Cash Cow Products : - focus on control of the business environment - focus on lower cost, capacity utilisation • For Dog Products : - focus on reducing costs

8. Implication for IS /IT Strategy • For Dog Products : - identifing customers and their demands • For Cash Cow Products : - focus on control of the business environment - focus on lower cost, capacity utilisation

9. Implication for IS /IT Strategy • many chocolate manufacturers (such as Cadbury, Nestle and Mars) have built on the tremendous success of their confectionery products to break into the ice-cream market (e.g. brands such as Crunchie, Starburst and Rolo have become high sales-volume ice-cream lines, as well as maintaining their high sales levels for the confectionery lines). • Niche marketing capitalises on the consumer loyalty that a business has, and helps it to develop new products and devise new marketing strategies.

10. Implication for IS /IT Strategy • the raw materials needed to manufacture a car might include steel, plastic, rubber, aluminium, glass, electronics, etc. These may total £6,000 for a particular car, which retails to customers for £19,000. The difference of £13,000 is added value. • It represents what the customer is actually prepared to pay for the final product. This £13,000 is not the profit that the manufacturer receives from selling the car, since part of it will be used to pay for wages and factory costs - so the profit will be less than the £13,000.

11. Competition • will be intensified by: • Market growth slow (or in decline) • Small number of similar sized competitors dominate • High fixed costs and/or high exit barriers for all rivals • Over capacity and/or capacity increments are large units • Commodity-like, undifferentiated products, etc.

12. Competition • Price competition • Improve price/performance • Product development • Differentiate products and services in distribution channel and to consumer • Distribution and service critical • Customer loyalty required • Get closer to the end consumer - understand the requirements

13. IS/IT Changes the basis of competition • Airline Services • differentiate service: reconfiguring aircraft due to demand • niche/focus service into high yield sectors, e.g. business travel • low cost/low price: service with on-line direct booking bypassing agents • by linking purchasing and remittance systems to reduce overheads of customer • discount/volume packages to discourage piecemeal purchase

14. IS/IT changes supplier/customer relationship • agent is constantly aware of seat availability of competing airlines • airline can readily promote unsold capacity via chosen agents or direct to customers via on-line booking with variable pricing based on sales patterns • integrated travel package to high mileage business customers - bypassing agencies • new routes/schedules to cater for demand

15. Generic Strategies • Cost Reduction • Product Differentiation • Niche Marketing

16. Cost Reduction • IS/IT to Optimise individual processes • Monitoring & reporting systems • E.g. • Banking especially internet banking. • Logistics & warehousing • ....

17. Product Differentiation • Focus on integrated IS/IT • R&D and innovation • E.g. • Dell computers - individually configured computers • Amazon.com – best prices, reviews, profiles etc

18. Niche Marketing • Hewlett-Packard, for example, markets all-in-one machines that print, fax and scan to segments of the home office market, while targeting larger businesses for higher-priced, single-function units. • Taking on a new niche can be a low-risk way to grow your business.

19. Homework 1 • Prepare a report which discusses that IS/IT projects can be used for cost reduction and/or product differentiation and/or niche marketing in business. • Report must be max 10 pages. • Due date is Apr 5, 2005. • You may send HW-1 to tamers@iris.com.tr