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8/3/2019 Session 2a a Dynamic Model of IT Strategy in a Netcentric Economy
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A Dynamic Model of IT Strategy
In A Netcentric Economy
8/3/2019 Session 2a a Dynamic Model of IT Strategy in a Netcentric Economy
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Information Technologys Ability
To Change Strategy IT can
Enable new strategies
Provide new ways to reach customers
Expand the markets in which the firmparticipates
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Metrics for Evaluating Strategies
Market share
Number of markets in which a firm
participates Number of new markets
Sales growth
Size of the average sale Sales per employee
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Thinking Strategically
Strategy is an approach to achieving aseries of objectives
Corporate strategy describes how a firmwill achieve the vision of its seniormanagement
Corporate strategy and IT strategy are
intertwined The new economy has created threats and
opportunities for corporate strategy
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E-Business
An e-business
Recognizes that IT is a fundamental driver of
success Uses technology extensively in all its
operations
E-commerce is one aspect of e-business
Involves using networks (primarily theInternet) for the sale and purchase of goodsand services
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E-commerce
Consists of two broad categories Business to consumer (B2C)
E.g., Buying books and music CDs over the internet
Business to business (B2B) E.g., Companies buying goods from their suppliers
Has stimulated much greater competition and therapid creation of new firm-specific resources(e.g., cash flows and venture capital)
In a hypercompetitive economy, successfulstrategies allows firms to sustain competitiveadvantage for over a year
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E-Business and E-Commerce
Nature of Business Description Example
Electronic business Pervasive use of
technology in the firm
E-mail, electronic
conferencing, automatedtransactions processing,ERP, CRM, knowledgemanagement systems, etc.
Electronic commerce
Sell side
To consumers (B2C)
To other businesses (B2B)
Buy side (B2B)
Internet online store
Electronic connection
vendors to customers
Businessespurchasing goodsfrom suppliers online
Amazon.com
Wal-mart Internet EDI withvendors
Procurement auctions, freemarkets
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Corporate Strategy:
Porters Value Chain The value chain divides a firms activities into two types
Primary: activities associated with the mission of the firmsuch as inbound logistics, operations, outbound logistics,marketing and sales, and service
Support: activities represented by the firms infrastructure
such as human resources management, technologydevelopment, and procurement
The Internet and electronic commerce have impacted thetraditional value chain
E.G., Amazon.com has no physical stores and hence a smallerinfrastructure which is easier to manage
Comparing value chains can highlight the differencesamong business models based on the internet and web
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Porters Five Forces Model
Forces that shape a firms competition Competitive rivalry
The threat of new entrants
The bargaining power of suppliers The bargaining power of buyers
The threat of substitutes
The Internet has affected the five forces by Lowering entry barriers for new firms
Creating substitutes for traditional businesses (e.G.,Stock trading and music)
Creating new markets that change the way buyers andsupplies interact
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The Five Forces Model of
Competition
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Core Competencies View of
Strategy Core competencies are the collective
learning in the organization about how tointegrate multiple technologies andcoordinate diverse production capabilities
A core competency Should provide access to a wide variety of
different markets
Should make a significant contribution to theend product
Should be difficult to imitate
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Resource-Based Views of
Strategy Firm resources are all assets, capabilities,
organizational processes, firm attributes,information, knowledge, etc. controlled by a firm
Categories of resources Physical
Human
Capital
A firm has competitive advantage when it createsa successful non-duplicable strategy andimmobile, heterogeneous resources that are rare,valuable, inimitable, and non-substitutable
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Competitive Advantage in the
Internet Economy
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A Dynamic Resource-Based Model
of Competitive Advantage in the
Internet Economy Components of the Dynamic Model
Network Externalities and Critical Mass
Other Assets that make the Innovation succeed
complementary, specialized or co-specialized assets Lock-In and Switching Costs
Additional Resources
continually added resources protect and enhanceexisting resources that are rare, valuable, inimitable,
and non-substitutable A System of Interacting Resources that create and
sustain Advantage
Knowledge and Skills gained by Managers
Feedback Loop
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Summary
To gain competitive advantage, firms haveto create resources that are rare, valuable,
inimitable, and non-substitutable The objective of a firm is to create an
initial advantage, sustain that advantage,and to appropriate benefits from its
innovative activities
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Summary (Continued)
A firm cannot succeed with a strategyalone and must first devise a business
model Executing the business model and
strategy requires highly capable managerswho can respond to changes in the
economy, environment, technology, andcompetitor actions