2005S eb Ch03 Strate..
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2005S eb Ch03 Strate..

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    2005S eb Ch03 Strate.. 2005S eb Ch03 Strate.. Presentation Transcript

    • Chapter 3 E-Business strategy formulation Strategic management of E-Business
      • Important trends enabled by IT and Internet
        • Ability to re-engineer supply chains
          • Use of information to smooth out inefficiencies & bottlenecks, & thus achieve efficiency & effectiveness gains
        • Ability to re-engineer relationships with customers
          • Manipulate large amounts of information about customer to identify trends, preferences
          • Improve decision making about delivering on customer value proposition
        • Ability to use Internet to disseminate information throughout organisation
          • Results in more efficient internal operations
      Why focus on e-business planning?
      • Strategy vital to achieving benefits of these trends
      • IT adopting more strategic role
      • Concern about delivery of business value
        • To realise value, need to undertake strategic analysis of possibilities of IT and Internet
      • ‘ High stakes’ with IT investments
        • Need to recognise and manage risk, and weigh this against the achievement of organisational objectives
      Why focus on e-business planning?
      • Proportion of capital expenditure on IT
        •  50% capital equipment expenditure in some organisations and in some industries
      • Future of business now inextricably linked to IT
      Why focus on e-business planning?
    • Challenges
      • How to leverage connectivity, speed, and accessibility created by Internet and associated technologies to extend/enhance/enable our business vision?
      • To be successful (viable) long term, must identify where profitability lies
        • Must develop coherent strategies by which to exploit potentialities of I/IS/IT to deliver value to customers and shareholders
    • SISP*defined
      • ‘ ...planning for the effective long-term management and optimal impact of information, information systems, and information technology…’
      • (Ward & Griffiths 1996, p.6)
      • *SISP: Strategic Information Systems Planning
    • Objectives of planning IS/IT/ e-commerce requirements
      • Ensure that focus of all IT investments (including Internet-based technologies) is on delivery of business goals and objectives
      • Ensure all stakeholders (especially senior management team) understand what IT and Internet can achieve
        • Increase their commitment to deploy IT to enable achievement of organisational objectives
    • Objectives of planning IS/IT/e-commerce requirements
      • Develop appropriate resourcing levels for IT and e-commerce
        • Establish priorities for IT investments
    • What is business strategy?
      • Plan that integrates organisation’s goals, policies, actions into integrated whole
        • Direction organisation takes in order to compete effectively and meet stakeholder expectations
      • Requires vision (challenging desired future state for organisation) and mission (reason for existence, overriding purpose
    • Business, IS, and IT strategies (Ward & Peppard 2002) Business Strategy IS Strategy Demand oriented Application focused IT Strategy Supply oriented Technology focused IT impact & potential Establish direction and objectives Articulate information requirements and systems needed to deliver that information Identify technological infrastructure required
    • Impacts of Internet on planning Business Strategy IS Strategy IT Strategy Has a major effect of Internet (and hype!) been to elevate strategic thinking about technology to the level of business strategy? Implications of Internet
    • Objectives of e-business planning
      • To ensure that IT and e-commerce support and enhance achievement of business objectives
      • To achieve cost-effective investment in IT and
      • e-commerce for measured business benefits
        • Controlling expenditures and ensuring delivery of value from IT
      • To protect existing information and IT assets
        • Reduce maintenance costs
      • To prioritise IT investments according to ability to support achievement of business objectives
      • To gain commitment and understanding of senior executives with respect to the role of IT in the organisation
    • Who should be involved? Specialist planners Senior executives Senior IS management Representatives from different functions Trading partners? Major customers?
    • Problems of NOT planning
      • competitors gain competitive advantage
      • business goals unachievable due to systems limitations
      • organisational information resource not adequately exploited
      • systems not integrated
        • duplication of effort
        • inaccuracy
        • poor management information
      • lack of commitment from senior executives
      • new systems fail to deliver business benefits
        • lack of focus on business needs
      • technologies become a constraint on business
      • no means of prioritising appropriate resource levels for IS/IT
      Problems of NOT planning
    • Framework for e-business strategy formulation
      • Understanding long term goals and vision for organisation
        • Its ‘strategic intent’ (Broadbent & Weill 1997)
      • Understand external environment
      • Identify potential synergies and economies of scale through similarities between business units
      • Appreciate impacts of Internet on organisation and industry
      Appreciate the strategic context
      • Understand external and internal IT environments
        • Recognising key IT trends in industry
        • Appreciate how competitors and business partners are using IT
        • Understand internal strengths and weaknesses
        • Recognise capabilities
        • Perform audit of IT infrastructure, IT skills and IT management
      Appreciate the strategic context
    • High level strategic visioning and thinking
    • Articulate business and IT maxims
      • Business maxims: high level statements about competitive position, how value created for customers, intentions regarding growth and development, its position of use of resources, etc.
      • IT maxims: statements about how information and IT will be valued and deployed in the organisation
    • Defining key parameters for IT
      • Role of IS/IT
        • strategic enabler (opportunistic) or support?
      • Sourcing of IS/IT
        • Insourced, selectively sourced, or outsourced?
      • Structure of IS/IT dept
        • Decentralised, federal, or centralised?
      • View of IT infrastructure
        • Enabling or utility view?
      Decisions about parameters should be aligned with business strategy
    • Complementary views of strategy
      • View presented so far regards strategy as developed from understanding of nature of competition, industry and organisational structure and competitive response
      • But strategy can be articulated based on understanding of internal resources, capabilities and competencies, and access to external resources etc., which can be harnessed as sources of competitive advantage
      • Each perspective offers valuable insights into strategies that an organisation can adopt
    • Tools to support strategy formulation
      • SWOT analysis
      • Product and service lifecycles
      • PEST analysis
      • Competitive forces analysis
      • Value chain analysis
      • Critical success factor analysis
      • Business technology audit
      • Gap analysis
    • SWOT analysis
      • S trengths, W eaknesses
        • Analyse internal capabilities, skills
          • Look to exploit strengths for advantage
          • Consider weaknesses and minimise potential disadvantage
      • O pportunities, T hreats
        • External analysis to identify opportunities for exploitation, threats to be minimised or countered
      • SWOT analysis can provide understanding of IT resource requirements and future developments
    • SWOT Analysis Retreat Protect
      Strenghten Attack
      Self Environment Weaknesses S trengths Oppor- tunities Threats
    • Industry and product lifecycles
    • Product and service portfolios
    • Product lifecycle – emergence
      • demand is uncertain
      • market ill-defined
      • I/IS/IT focus:
      • market research
      • product development
    • Product lifecycle – growth
      • need major investment to meet growth in demand
        • marketing
        • production
        • new product development
        • revised supplier relationships
      • I/IS/IT focus:
      • support growth
      • must not inhibit ability to satisfy demand
      • create barriers to entry
        • tie in suppliers and customers
      • high investment needed
      Product lifecycle – growth
      • competition increases
        • supply starts to exceed demand
      • fight to retain market share
      Product lifecycle – maturity
      • I/IS/IT focus:
      • defensive strategy
        • understand competition
      • increase productivity
        • more efficient, effective use of resources
      • build up customer switching costs
      • better management of supply and distribution channels
      Product lifecycle – maturity
      • cost effective in serving market
      • I/IS/IT focus:
      • detailed and accurate management info
        • demand forecasts
        • profitability of customers, products
        • cost controls
      Product lifecycle – decline
    • Product and service lifecycle
      • Help managers think creatively about whether or not they have information needed to manage wildcats, rising stars, cash cows and dogs effectively
      • Helps to identify gaps in existing information provision
    • PEST Analysis
      • P olitical/legal
        • Government legislation, taxation, industrial relations, privacy, environmental protection requirements, etc.
      • E conomic
        • Stage of economic cycle, unemployment, inflation, interest rates, relative affluence of society
      • S ociocultural
        • Lifestyle changes, demographic characteristics, income distribution, consumer preferences, etc.
    • PEST Analysis (cont.)
      • T echnological
        • Rate of technological innovation, rate of infusion and diffusion with respect to technology
      • Consider key environmental influences, drivers of change and how these might change over time
      • For e-businesses, consider how technological change is driving changes in other areas
      • Consider role of IT in exploiting of mitigating against the effects of these changes
    • Threat of new entrants
      • Barriers to entry will be high if
      • economies of scale are extremely important
      • capital requirement of entry is high
      • access to distribution channels is difficult
      • patents or specialist skills are required
      • there are a large number of existing rivals
      • existing rivals are large and strongly positioned
      • competition in the industry is intense
      • product offerings in the industry are highly differentiated
      • high brand loyalty exists
      • access to raw materials or other critical resources is difficult
      Threat of new entrants (cont.)
      • How has the Internet ,
      • vastly increased connectivity ,
      • and improved communication channels
      • impacted the
      • threat of new entrants?
      Threat of new entrants (cont.)
    • Threat of new entrants
      • New entrants mean
        • additional capacity
        • reduced prices
        • new basis for competition
      • IS/IT can
      • reduce costs
      • increase rate of product / service innovation and development
      • better control distribution and supply channels
      • achieve better match between products and customers
    • Bargaining power of suppliers
      • Supplier power is likely to be high
      • few suppliers
      • switching costs are high
      • there is a possibility of the supplier integrating forward
      • brand of a supplier is powerful
      • suppliers’ customers are of little importance to the supplier
      • How has the Internet ,
      • vastly increased connectivity ,
      • and improved communication channels
      • affected the
      • bargaining power of suppliers?
      Bargaining power of suppliers
    • Supplier power high
      • If supplier power is high
      • prices/costs will tend to be higher
      • quality of supply will tend to be lower
      • there will tend to be reduced availability of supply
      • IS/IT can
      • use supplier sourcing systems
      • help to extend quality control into suppliers
      • enable forward planning with suppliers through interorganisational systems including the use of EDI and/or Internet technologies
    • Bargaining power of buyers
      • Buyer power is likely to be high when
      • there are few buyers
      • there are alternative sources of supply
      • component or material cost is a high percentage of total cost
      • there is a threat of backward integration by the buyer if satisfactory prices or suppliers cannot be obtained
    • Bargaining power of buyers How has the Internet , vastly increased connectivity , and improved communication channels affected the bargaining power of buyers?
    • Buyer power high
      • If buyer power is high
      • prices forced down
      • higher quality demanded
      • service requirements higher and more flexible
      • higher competition in industry
      • IS/IT can help by
      • differentiating products/services
      • improving price/performance
      • increasing switching costs of buyers
      • facilitating buyer product selection
      • Threat of substitution may take many forms:
      • actual or possible substitution of one product for another
      • a new process may render a product superfluous
      • substitutes may be thought of as competing for discretionary expenditure
      • ‘ doing without’ can also be thought of as a substitute
      Threat of substitution
      • How has the Internet ,
      • vastly increased connectivity ,
      • and improved communication channels
      • impacted on the
      • threat of substitution?
      Threat of substitution
    • Threat of substitute products
      • The threat of substitute products
      • tends to limit the potential market and profit
      • tends to put a ceiling on prices
      • IS/IT can reduce the effects by
      • helping to improve price/performance
      • helping to enhance products and services to increase value
      • improving rate of innovation
      • identifying new customer needs
      • Competitive rivalry will be intensified if
      • market growth is slow or in decline
      • a small number of similar sized competitors dominate
      • there are high fixed costs and/or there are high industry exit barriers for all rivals
      • there is over-capacity in the industry
      Rivalry within industry
    • Rivalry within industry How has the Internet , vastly increased connectivity , and improved communication channels impacted on competitive rivalry?
      • Intense competition from rivals leads to
      • aggressive competition on price
      • competition regarding product development
      • distribution and service being critical factors in customer choice
      • the need for customer loyalty
      • IS/IT can reduce the effects by
      • helping to improve price performance
      • helping to differentiate products and services
      • helping the firm ‘get closer to the end consumer’
      • understand the requirements or needs of the ‘end consumer’
      Rivalry within industry
    • Using competitive forces
      • identify / analyse significant players in each force
      • determine nature / strength of impact of each player
      • devise strategy to exploit / defend / neutralise impacts
      • identify opportunities for IS/IT to support / implement / manage strategy
    • Value chain analysis (internal)
      • Value chain analysis enables consideration of internal activities and processes, thus understanding where costs are incurred, and where value is added
      • Examines organisation in terms of primary activities (core business processes) and support activities
    • Internal value chain analysis
    • External value chain analysis
      • Important device for ensuring that managers receive information they need to monitor achievement of corporate goals and objectives
      • CSFs require information to monitor achievement in key result areas
      • CSFs may require systems enhancements or new systems
      Critical success factor analysis
    • Critical success factor analysis
    • CSFs and the value chain
    • Business-technology audit
      • Provides managers with an assessment of business value of IS, against an assessment of their technical quality
      • Business value: value judgement about contribution an IS makes to achievement of business goals and objectives
      • Technical quality: assessment of age, amount spent on maintenance, ease of maintenance, required infrastructure, risk
    • Business-technology audit
    • Gap analysis
      • Aims to identify and then help remedy gaps that exist between skills, knowledge, competencies, capabilities that an organisation requires to be successful, and resources an organisation currently has
    • Combining the tools
    • Portfolio of systems
      • At end of strategy formulation process, organisation should be clear on
        • business goals and objectives
        • e-business goals and objectives
        • how IT used to support achievement of goals and objectives
        • State of existing portfolio of systems
        • Where strengths and weaknesses lie
        • Prioritised set of new systems, required refurbishments
    • Portfolio of systems (cont.)
      • Application portfolio analysis helps to ‘map’ balance required of new investments and maintenance of existing investments
      • Portfolio of systems needs to be aligned with business strategy
    • Application portfolio analysis
    • Matching portfolio against strategy
    • Circumstances dictate change in portfolio