IT FOR STRATEGIC ADVANTAGE

How important is it to integrate business strategies with IT? How will IT affect the competition and the sources of competition? How will the advances of IT affect competition? What strategies the company should pursue to exploit IT? What are the implications of the actions that the competitive organizations have already taken?

THE CHANGING BUSINESS ENVIRONMENT

1.
2. 3. 4.

Globalization Managing and control in a global marketplace. Competition in world markets. Global workgroups. Global delivery systems.

THE CHANGING BUSINESS ENVIRONMENT

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2. 3. 4.

Transformation of industrial economy Emergence of knowledge based economies. Shorter product life. Turbulent environment. Emergence of information as a major asset.

THE CHANGING BUSINESS ENVIRONMENT

1.
2. 3. 4. 5.

Transformation of the enterprise Less hierarchical Decentralization Flexibility More empowerment More collaborative work

THE CHANGING BUSINESS ENVIRONMENT

1.

2. 3. 4.

The digital firm Digitally enabled relationships with the customers, suppliers and employees Transformation of core business processes. Digital management of core assets. Quick responses of the changing environment.

THE INFORMATION REVOLUTION

Changes the industry structure and alters competition Gives competitive advantages to the organizations by giving them new opportunities to outperform their competitors. Creates new businesses within old ones Creates new businesses technologically feasible Creates new businesses by creating derived demand for new products

STRATEGIC INFORMATION SYSTEM

Offers an organization a competitive advantage over its rivals. Measures of competitive advantage

Cost leadership Differentiation Focused or niche Innovation

THE VALUE CHAIN MODEL

Michael Porters Competitive Strategy Framework Nine Organization Activities add value to the final product/service Primary and Support activities

THE PRIMARY ACTIVITIES

Help in creating, marketing, delivering and servicing the product. Inbound logistics Operations Outbound logistics Marketing and sales After sales

Inbound Logistics: this deal with receipt, storage and management of raw material. Operations: Deals with manufacturing or service steps. Outbound Logistics: this deals with collection, storage and distributions of finished product. Marketing and Sales: this includes order entry, price management, and customer relationship After Sales: this deals with the support of the products after the sale has been done. This may also include installation and customer training.

THE SUPPORT ACTIVITIES

Are needed to support the primary activities Procurement Technology Human Resource Management Infrastructure

Procurement: this includes the procurement of raw material required for the final product, or any other item required by the organization. Procurement process is generally spread across the organization. Technology: this deals with selection and utilization of appropriate technology for product development and other activities. Human Resource Management: this deals with managing human resource in an organization from recruitment to training to development of employees. Firm Infrastructure: this is a major support function which includes accounting, legal, planning, labor relations, and other departments in an organization.

FACTORS AFFECTING ORGANIZATION

ACTIVITIES Introduction of new technology Changing buyer needs Change in industry structure Change in government regulations Change in costs

PORTERS FIVE FORCE MODEL

Supplier Power Barriers to Entry Buyer Power Threat from substitutes Rivalry

PORTERS FIVE FORCE MODEL

SUPPLIER POWER
Number of suppliers Size of suppliers Input differentiation Impact of inputs on cost differentiation and efficiency. Threat of forward integration

BARRIERS TO ENTRY
Government Policy Switching costs Economies of scale Culture Branded products. Patents Asset specificity

BUYER POWER
Buyer volume. Information with the buyer. Availability of the substitutes. Threat of backward integration. Switching costs.

RIVALRY
Product differentiation Number of firms Market growth Information asymmetry Switching costs High exit barriers

SUBSTITUTES
Switching costs of the customers. Propensity to buy the substitutes. Price-Performance tradeoffs. Product differentiation

PORTERS FOUR GENERIC STRATEGIES

Cost leadership Differentiation Cost focus Focused differentiation

ACHIEVING COST LEADERSHIP

Identify the value chain and assign a cost to each activity. Identify cost drivers for each activity and see how they interact. Determine relative cost of competitors and the sources of cost differentiators. Refine value chain to lower costs

ACHIEVING DIFFERENTIATION
Identify the customer Understand his value chain and the impact of the sellers product on it Identify the buying criteria Identify the sources of uniqueness Identify the cost associated with the sources of uniqueness Select the value activities that create the most differentiation for the customer relative to the cost incurred

PORTERS FOUR GENERIC STRATEGIES

Competitive Advantage Lower cost Competitive Scope Broad Target Cost leadership Differentiation Differentiation

Narrow Target

Cost focus

Focused differentiation

WISEMANS STRATEGIC MODEL

Organizations should develop a complete Information Systems Architecture which helps the organization to identify the key business processes and the key decision points. Methodologies

Business System Planning Critical Success Factors

IT FOR STRATEGIC ADVANTAGE: INFORMATION INTENSITY MATRIX

Information Content of the Product Information intensity of the value chain Low High

High
Low

Oil Refining
Cement

Newspaper, banking

IT FOR COMPETITIVE ADVANTAGE

The strategic thrusts

Differentiation Cost Innovation

Product Process Product Length (new products of same kind) Depth (variants) Width (complementary products) Functional Geographic Lateral (adding excess capacity etc)

Growth

Alliance (Product integration, development, product extension, distribution etc)

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