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

Globalization1. Managing and control in a global

marketplace.2. Competition in world markets.3. Global workgroups.4. Global delivery systems.

THE CHANGING BUSINESS ENVIRONMENT

Transformation of industrial economy1. Emergence of knowledge based economies.2. Shorter product life.3. Turbulent environment.4. Emergence of information as a major asset.

THE CHANGING BUSINESS ENVIRONMENT

Transformation of the enterprise1. Less hierarchical2. Decentralization3. Flexibility4. More empowerment5. More collaborative work

THE CHANGING BUSINESS ENVIRONMENT

The digital firm1. Digitally enabled relationships with the

customers, suppliers and employees2. Transformation of core business processes.3. Digital management of core assets.4. 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 Porter’s 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

PORTER’S FIVE FORCE MODEL

Supplier Power Barriers to Entry Buyer Power Threat from substitutes Rivalry

PORTER’S 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

PORTER’S 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 seller’s 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

PORTER’S FOUR GENERIC STRATEGIES

Competitive Scope

Competitive Advantage

Lower cost Differentiation

Broad Target Cost leadership

Differentiation

Narrow Target

Cost focus Focused differentiation

WISEMAN’S 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 intensity of the value chain

Information Content of the Product

Low High

High Oil Refining Newspaper, banking

Low Cement

IT FOR COMPETITIVE ADVANTAGE

The strategic thrusts Differentiation Cost Innovation

Product Process

Growth Product

Length (new products of same kind) Depth (variants) Width (complementary products)

Functional Geographic Lateral (adding excess capacity etc)

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

THANK YOU