Business Strategy


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Business Strategy

  1. 1. Business Strategy • Interrelationship IT, strategy and organization - and IT impact • Analysis • Markets versus Hierarchies • E-commerce framework. • Information and configuration • Network redesign • Design • Project decision Werthner 240 Interrelationship between IT, strategy and organization • Wigand (1995) has depicted the value or profit impact of IT as indirect, via the improvement of business process. The direction of change has to be aligned with the business strategy, which by itself is affected by the enabling potentials of IT. IT X Value enables delivers Business defines Process defines Business Strategy Werthner 241 1
  2. 2. Dynamics of diffusion competition of imitation institutionalization breadth and attractiveness of offerings Development Development of the of offerings informational representation and interaction medium price differentiation experience and controll of the medium differentiation of info. demand, buying patterns communication pattern Development of customer behavior reflection of the medium (newsgroups etc.) Werthner 242 Models of causal relationship Competitive environment Strategic, organizational and technical response to the competition Strategic and organizational Information response technology Technology induced changes Werthner 243 2
  3. 3. IT impact on products, services and value chain IT - WWW product description and comparison, distribution pricing, customization, new alliances information services dis-/ reintermediat- i on, Cybermediaries Functions & Products & processes services Value chain/ system Werthner 244 Dimensions of IT impact and attributes Dimension Attributes Information ubiquitous information access, shared or pooled usage of information, transparency over distributed processes, selection and filtering of information, changing models of reality Communication improved efficiency and partial substitution of human communication Process informatization of processes, process redesign, restructuring coordination or integration of processes across functions, products, regions, even companies, impact on roles and power, formalization, standardization and harmonization of exchange relations Structural changing governance forms/ mechanisms, changes substitution of human coordination, intensified coordination, creation of coordination intensive structures decentralization of information collection and decision making, disintegration, disintermediation, centralized data analysis, concentration and cooperation, redesign of value chains, value systems, industries Network effects positive network externalities, virtual size Werthner 245 3
  4. 4. Informational impact on customer service IT impact Added value Complexity of the product description Richer descriptions of touristic offerings enable travelers to make more informed choices Transparency of the market More comprehensive information allows comparison shopping for products and services Time specificity Timelier information about weather conditions etc. enable tourists to respond to changing conditions and to use last-minute offers Personalized interactions and customized services Systematic collection and scrutiny of customer information enables principles to provide personalized interactions and customized services for individual customers and customer segments Concurrency and acceleration of processes Efficient operations add to the convenience of customers Substitution of recurrent procedures that do not Automated check-in and check-out add to the create value convenience of experienced travelers Werthner 246 Categories of IT • ICT infrastructures, which are build without one specific type of user or application • ICT services and applications have a clearly delimited purpose and identifies users, • information as a resource with multiple purposes within and among organizations, e.g. description of processes and products, executing transactions , decision making , knowledge building etc. Werthner 247 4
  5. 5. Information management framework General Management (CEO) Strategic information management IS Opera- depart- Information Information Information tions ment resource systems infrastructure (COO) management management management (CIO) Information services Werthner 248 Concepts for strategic analysis Portfolio matrix high Question marks Stars Market growth low Dogs Cash Cows low high Relative market share to apply to different market and product segments risk of undifferentiated services and prices - non specialized travel agent open for direct sales competition or specialized agents focusing on niches Werthner 249 5
  6. 6. Analysis (2) New competitors: Structural Analysis e.g. travel supermarkets Competitors in the industry: travel Customers: Suppliers: agent chains bypassing strategy of e.g. airlines large customers Substitutes: MS Expedia Porter, 1985 Werthner 250 Example of a cost-benefit analysis Applications Examples Revenue fromdistribution and services direct distribution of books, flight tickets, computer hardware and software Revenue fromadvertising banner advertising, cooperation with other electronic commerce companies Detailed market researchdata own market research, Weitergabe von Marktforschungsdaten Integral part of marketing strategy with cross marketing via different media, positive results in traditional media Hinweise und zugleich Werbung für die Online-Ticketauktionen Cost reduction through: • efficient presentation • advertising, catalogues • automation • service sites • passing onto customer • kiosks • efficient transactions • EDI, electronic ticketing • disintermediation • direct distribution • better planning accuracy • improved capacity usage • production on demand Werthner 251 6
  7. 7. Interorganisational Systems Suppliers customers procurement markets markets downstrea upstream m Enterprise B A internal Info system Broker effect integration communications effect effect electronic communication effect more information, less costs electronic broker effect more alternatives, less selection costs electronic integration effect now media interruption, less errors Werthner 252 Definition electronic market • Division of labour -> Exchange of goods and services • Market: Exchange mechanism - economic place of exchange, where demand and offer meet; exchange of non equally distributed goods – controlled by prices (each participant optimizes) – Process contain / carry information [Market as Information system] – Assumption: information transparency; perfect competition • Hierarchy: coordination by some central power instance – not constraint to single companies – lower transaction costs and less information problems • Electronic market: IT based market places for exchanging goods and services, supporting all phases of a transaction Werthner 253 7
  8. 8. Networks • Networks are organizational arrangements that uses resources and/or governance structure from more than one organization; (Borys & Jemsion) • "Move to the middle" Hypothese: • Hierarchy Networks Markets • IT eases outsourcing • longlasting relationships protect against the loss of critical ressources and enable the integration of activities • Networks are a „middle way“ between the loose coupling of markets and tight relationships of hierarchies Werthner 254 Transaction cost framework Transaction Characteristics * Uncertainty * Asset specificity Hierarchy * Information asymmetries * Frequencies Transaction Costs Ex-ante * Cost of contracting for Attributes of unforeseen contingencies institutional *Cost of contracting for arrangements many and complex Hybrid contingencies * incentives * control Ex-post * adaptation * Cost of monitoring contract * Cost of enforcing contract Market Human Factors * Opportunism * Bounded rationality Werthner 255 8
  9. 9. Motivation • operational advantage: more efficient Coordination (e.g. in stock keeping), rationalisation, linking of ”office automation” prozedures • virtual size: Sharing of investment cost, scaling effects, using reputation of partners • privileged access to external ressources: Access to know how, research programs as well as markets Combination of • cooperation: cooperation alone can ensure that commitments are made to the long-term infrastructure development of a sector; and • competition: competition alone can ensure that business enterprises remain innovative and responsive to new challenges and opportunities. (Best, 1990) Werthner 256 Functions of mechanisms of economic coordination Hierarchy Market goal directed governance open economic exchange Network Negotiation system social integration consensus building and shared understanding Werthner 257 9
  10. 10. Governance forms Governance form Attribute Market Hybrid Hierarchy Instruments to maintain relationship incentive intensity ++ + 0 administrative controls 0 + ++ Adaptation autonomous ++ + 0 cooperative 0 + ++ Contractual relationship ++ + 0 0 weak + medium ++ strong Werthner 258 EC Reference model following Schmid Information Agreement Settlement Phase Phase Phase Business Business Community and Business Model View Process Business Scenarios/ Business Processes View Transaction Information Phase Agreement Phase Settlement Phase View Tools and Services Tools and Services Tools and Services Infrastructure Information and Communications Infrastructure View Business Trans action t Werthner 259 10
  11. 11. E-Commerce Framework Determinants of diffu- sion • Infrastructure • Network externalities • Adoption rate • Regulatory environment • Public sector initiatives Products/ Rules Services Strategic Impli- Technological cations determinants ¨ § ¢ ¦ ¥ ¤ £ ¡¢   • Application • Convergence Market Market types services ¦ ¤ © ¥ ¡ domains of technolo- • Strategic posi- gies tioning • The Web as Prozesses and trading phases • Value propositi- medium ons and benefits Electronic Commerce Impact of EC • Market structure • Value chains • Transaction cost Werthner 260 E-Commerce Architecture Banks Principal Management Marketing Intra- Insurance net Electronic Commerce Plattform RD Production Applications: Catalogue, EDI, Payment Suppliers Services: Email, FTP, WWW Protocol: TCP/IP Travel agents Communication network: Internet Travellers Tour operators Werthner 261 11
  12. 12. e-commerce and added value Dimension Example Transparency ... over competing offers, reduced information cost Price price incentives in comparison to traditional sales and distribution channels Information rich and complex product and service descriptions Interaction fast, however mostly asynchronous communication with tourism principals and intermediaries Convenience 24h shopping online delivery of tickets, vouchers etc. seamless execution of transactions and interaction with service providers Advertainment, entertainment, presentation of background information edutainment Community support for special interest groups and Online customer communities Configuration ... complex combination of products and services from different service providers Customization individualized product/ service design, customizable service offerings Werthner 262 Configuration of services and products • Configuration of options from a marketing / production perspective : bundling/ unbundling of services from different suppliers, limitation of certain products to certain distribution channels, configuration and pricing etc. • Configuration of the product from the customer perspective : the process of selecting and customizing the various options, computer-interface, management of complexity. • Configuration of the primary value system and logistics, e.g. coordination of distributed service production, outsourcing, intermediation, network management etc. • Configuration of information services , e.g. combination of different media, such as WWW, info kiosks, paper etc. And also bundling or unbundling of services. Configuration of Core product:: the value system touristic service and logistics Configuration Configuration and of options customization by the customer Configuration of Value-added information (information) services services Product Principals and Customer intermediaries Werthner 263 12
  13. 13. Adjusting functional strategies and processes • Integration: reservation, distribution, planning, yield management • Effectiveness: Customer segmentation and pricing strategies • Efficiency: IT enables operations • Control of different operations • Innovation: distribution organization Werthner 264 Changing roles in the e-market place - Network Redesign Player Changing role Changing relation to other players Tourist ... more active role in specifying ... addressed by more players: new intermediaries and configuring services and principals Travel agent ... more emphasis on consulting ... diminishing power in the sales channel and complex business Internet travel ... new intermediaries ... new players with understanding of technology sites (Cybermediaries) and the new rules of the market but little traditional (Cybermediaries ... platform character, bundling of power ) offerings ... need to form alliances for growth and external competencies ... market functionality (comparison shopping etc.) as asset for marketing but obstacle for cooperations Regional and/ or ... potential for extended role: ... difficult neutral status in relation to the national tourist destination management and represented principals organizations regional Web platform ... new ways of customer interaction Werthner 265 13
  14. 14. Changing roles in the e-market place - Network Redesign (2) Tour operator ... boundaries between individual ... more flexible agreements with principals in order and packaged tour are blurring to be able to produce and market more flexible packages ... CRS/ GDS ... growth potential in ... exploring new business segments alone or in collaboration with Web sites collaboration with players in the electronic retail ... marketing like 'INTEL inside': segment 'powered by Amadeus, Galileo ... potential conflict of interest between different etc.' potantial customers (principals, cybermediaries, travel agents etc.) Brokers ... powerful intermediary behind ... considerable negotiation power in relation to the scenes principals Providers ... electronic direct sales to ... ambivalent relationship to travel agents tourists ... horizontal and vertical alliances ... redefining customer processes (electronic ticketing, automated check-in etc.) Werthner 266 Dimensions of strategic positioning Medium Scope Competitive Design parameters environment Marketing Cooperative relations Werthner 267 14
  15. 15. Web application - design • Design and maintenance of the Web site, including special events; • clear profile and focus of the activities: entertainment, education, information, special services (weather, exchange rates, maps, travel and shopping guides etc.); • co-operation and integration of complementary touristic services; • comprehensive presentation of a region; • presence on electronic malls and directory services through active announcements; • advertisements for the Web services in traditional media. The overall challenge of this new interactive medium of communication and commerce is to mobilize customers to create their own value from the company's various offerings Werthner 268 Design (2) Customers / Competition Target Groups Strategy Position Coordinate Content Design Technology Applications Medium Features Presentation Dimensions Lock-in Organisation Werthner 269 15
  16. 16. Development phases • internally: applications, marketing, strategy, Position organisation • externally: target group, added value, competition, media mix • content, functionality, appearance Design • technical features • organisationally Integrate • technically • customer reaction / acceptance Monitor, • industry benchmarks Evaluate • new entrants • technological developments Werthner 270 Project decisions and risk assessment Strategic Projects, decisions are hard, Some lessons Lesson 1: Ranking of alternatives Alternative 1: no system Question: what does competition, how market access guarenteed Alternative 2: Use an existing system Question: how is the owner, dependencies Alternative 3: look for partner Question: which one, competencies, who does what? Alternative 4: Do it alone Question: will we succeed, what happens if we fail Alternative 5: do a smaller version Question: Frage: Upgrade, Timing Werthner 271 16
  17. 17. continue Lesson 2: work with numbers It is strategic - classical ROI does not work. Information Economics approach with qualitative criteria - Strategic Match, Comp. Advantage, Comp. Response, Risks Lesson 3: Identify and evaluate risks Financial risk: Not enough money Technical risk Project risk: Project team is not well organized and trained, management does not work Functional risk: Every worked well, but the wrong thing was developed, cannot be used Systematic risk: Project was successful, but competition finds it attractive - enters market with more power Time risk: too early or too late (technology was not available, market is already penetrated Werthner 272 continue Lesson 4: Maintain criticl ressources active role of organisor on local, regional or national level private and public institutions have to be integrated, project champion. maintain political agreements in heterogeneous structures as destinations it is important that all potential users are integrated. projekt - Know How IT as well as Tourism is necessary. Permanent training and international cooperations. Werthner 273 17
  18. 18. continue Lesson 5: Project Hierarchy - what is important Objectives and organisational concept / design !! Hardware Software Training Organisation Werthner 274 Summary • Tourism among leading industries • Tourism field of IT application and research - recipr. relationship • Development in tourism • Development in IT • Different strategies, solutions and speed of different sectors • Private sector ahead, also with cooperations • Underlying strategy important • Changing roles - enforced by technical solutions • Speed • Permanent input (human and financial resources) • Cooperation strategies - sharing knowledge and access Werthner 275 18