1. Information Systems: the Foundation of E-Business (CIS 108)
1) Frameworks & Tools
2) Safeguarding the Competitive Advantage (Strategic Approach)
Lecture FIVE (7th February 2005)
Amare Michael Desta

2. Strategic Planning - tools
1) Frameworks & Tools
a) the SWOT model [Kenneth Andrews]
b) PEST Analysis

3. SWOT Analysis: Strengths, Weakness, Opportunities & Threats
Why use the tool?
It is effective way to:
to identify Strengths and Weaknesses,
to examine Opportunities & Threats org. have to face.
SWOT framework helps:
to focus the activities into areas where the org.
are strong and to explore where the greatest O lie.

4. SWOT Analysis (Contd…) Analyse Strengths 1st:
What are your advantages?
What do you do well?
What relevant resources do you have?
What do other people see as your strengths?
Rem: Consider the questions from the org.
point of view and from the point of view
of the people you deal with.
Don't be modest BUT be realistic.

5. SWOT Analysis (Contd…) Analyse Weaknesses 2nd
What could you improve?
What do you do badly?
What should you avoid?
Consider this from an internal/external basis
Do other seem to perceive W that you do not see?
Are the competitors doing any better than you?
It is better to be realistic now, and face any
unpleasant truths ASAP

6. SWOT Analysis (Contd…) Analyse Opportunities 3rd:
Where are the good opportunities facing you?
What are the interesting trends you are aware of?
Useful opportunities can come from:
Changes in technology/markets on a broad/narrow scale
Changes in govt. policy related to your business
Changes in social patterns, population profiles, lifestyle changes, economic conditions etc.
Local Events

7. SWOT Analysis (Contd…) Analyse Opportunities 3rd:
A useful approach to identify an opportunities are:
to look at your strengths and
to ask yourself whether these open up any
opportunities.
Alternatively,
to look at your weaknesses and
to ask yourself whether you could open up opportunities by eliminating them

8. SWOT Analysis (Contd…) Analyse Threats 4th:
What obstacles do you face?
What is/are your competitor(s) doing?
Are the required specifications for your job, products or services changing?
Is changing tech. threatening your position?
Do you have bad debt/cash-flow problems?
Could your W seriously threaten your business?
Carrying out this analysis will often be illuminating
- both in terms of pointing out what needs to be done, and in putting problems into perspective.

9. SWOT Analysis (Contd…) E.g. A start-up small consultancy business
A small consultancy business might carry out the following SWOT analysis and may conclude:
Strengths:
We are able to respond very quickly as we have no red tape, no need for higher management approval, etc.
We are able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers
Our lead consultant has strong reputation within the market
We can change direction quickly if we find that our marketing is not working
We have little overhead, so can offer good value to customers
Weaknesses:
Our company has no market presence or reputation
We have a small staff with a shallow skills base in many areas
We are vulnerable to vital staff being sick, leaving, etc.
Our cash flow will be unreliable in the early stages
Opportunities:
Our business sector is expanding, with many future opportunities for success
Our local council wants to encourage local businesses with work where possible
Our competitors may be slow to adopt new technologies
Threats:
Will developments in technology change this market beyond our ability to adapt?
A small change in focus of a large competitor might wipe out any market position we achieve
The consultancy might therefore decide to specialize in rapid response, good value services to local businesses. Marketing
would be in selected local publications, to get the greatest possible market presence for a set advertising budget.

10. SWOT Analysis (Contd…) Eg. A start-up small consultancy (Contd…)
The consultancy might therefore decide to specialize in rapid response, good value services to local
businesses.
Marketing would be in selected local publications, to get the greatest possible market presence for a set
advertising budget. The consultancy should keep up-to-date with changes in technology where possible.
As mentioned above - useful approach to identify an opportunities are:
to look at your strengths and to ask yourself whether these open up any
opportunities.
Alternatively,
to look at your weaknesses and
to ask yourself whether you could open up opportunities by eliminating them

11. PEST Framework – Understanding the environment

12. PEST Framework: Political Factors
Political arena has a huge influence:
1. upon the regulation of businesses and
2. on spending power of consumers/other businesses
We must therefore consider issues such as:
How stable is the P environment?
Will govt. policy influence laws that regulate or tax the business?
What is the govt. position on marketing ethics?
What is the govt. policy on the economy?
Is the govt. involved in trading agreements such as NAFTA, ASEAN, COMESA etc….

13. PEST Framework: Economic factors
Marketers need to consider the state of a
trading economy in the short and long-terms.
This is especially true when Marketers need to
consider the state of a trading economy
You therefore need to look at:
Interest rates
The level of inflation
Employment level per capita
Long-term prospects for the economy (GDP)

14. PEST Framework: Socio-cultural factors
This S influences on businesses vary from
country to country but we must consider:
1. What is the dominant culture/religion?
2. What are attitudes to various local/foreign
products/services?
3. Are there any barriers upon the diffusion
of products onto markets?
4. Do the population have a strong/weak
opinion on political/green or issues?

15. PEST Framework: Technological factors
T is vital for CA & is major driver for Globalisation
Therefore consider the following points:
1. Does T allow for products/services to be made
more cheaply/to a better standard of Quality?
2. Does the T offer consumers/businesses more
innovative products/services
3. What type of T is in use? For what end?
4. Is the T used to communicate with consumers/
work force etc? If so, why/how?

16. Safeguarding the Competitive Advantage
(strategic approach)

17. What is IT/IS Strategy planning?
IS strategy planning requires understanding of:
nature of the org., its goals objective
where it is going, its culture, & how it thinks
type of IT what is available, how IT is changing, what the potential uses are;
info. needs, what/how it flows through the org. what decisions are made, how info. Supports BP;
the role(s) people play in the org. what their objectives and motives are, how they implement business processes;
the org .environment, what influences the org. legislation, markets, technology, media.

18. What is IT/IS Strategy planning? (Contd…)
To put IT/IS Strategy in practice – it:
- requires technical & managerial understanding;
- planning the details & thinking holistically;
- rational/analytical know-how & political sensitivity
Main/prime obj. is then an alignment to ensure that
1) the IS provision matches the business needs
as well as:
2) how it does it (process) & when it does it (timing)

19. What is IT/IS Strategy planning? (Contd…)
Alignment is a TWO way process:
- the business determines the IS needs BUT
also IS influences the business.
As we all know: 
IT/IS is changing the way business operates;
E-commerce changes the way transactions are
done and customers communicated with etc…..

20. What is IT/IS Strategy planning? (Contd…)
Alignment may be:
Reactive- following after the business
strategy or
Proactive - leading the business strategy,
proposing new ideas

21. Business and IS Alignment

22. Safeguarding the Competitive Advantage (CA)
Once the strategy is articulated, the org.
must decide how to implement it.
and then find a mechanism to safeguard it:
See the offensive and defensive moves

23. Safeguarding CA & Core Competence - Offensive Moves
Offensive Moves are:
… are actions taken when an organization tries to exploit and strengthen its competitive position through attacks on a competitor's position.
See the examples on the following slide

24. Safeguarding CA & Core Competence - Offensive Moves
Frontal assault
Attack a competitor’s weaknesses
All-out attack
Maneuvering around competitors
Guerilla tactics

25. Safeguarding CA & Core Competence - Offensive Moves
1) Frontal assault
Going head to head against a competitor
in price, promotion, product features, and
distribution channels.
But
the org. must have the financial &
marketing strength to do this.

26. Safeguarding CA & Core Competence - Offensive Moves
2) Attack a competitor’s weaknesses
This is a good strategy for many businesses too
They can place their products in geographic areas
where their competitors do not compete.
Also, they can serve market segments that
competitors do not serve at all or do not serve well.

27. Safeguarding CA & Core Competence - Offensive Moves
3) All-out attack
Coke and Pepsi are battling it out in this fashion in
the supermarkets, vending machines, and restaurant
chains
But this moves requires significant Financial
resources and may result in market share at the
expense of profits.

28. Safeguarding CA & Core Competence - Offensive Moves
4) Maneuvering around competitors
A clever competitor sometimes can find a way to
change the rules of the game and circumvent its
opponents.
This may involve:
changing the features of the product, such as
Compaq adding a button on its personal computers
to access the Internet

29. Safeguarding CA & Core Competence - Offensive Moves
5) Guerrilla tactics:
Small, intermittent, seemingly random attacks can
wear down a competitor just accumulated body
blows slow an opponent in a boxing match
The constant stream of coupons offered by fast food
outlets do not serve well as a CA. Because they are
so easily copied. But they do Keep competitors busy
countering and defending their positions

30. Safeguarding CA & Core Competence – Defensive Moves
An org. will not always be on the attack.
Sometimes it will be under attack by competitors,
needing to defend its competitive advantage and
core competences . This is when it will need
defensive moves.
See the examples on the following slide

31. Safeguarding CA & Core Competence – Defensive Moves
Don’t give competitors anything to attack
Make competitors believe they will suffer if they attack
Counterattacks
Lower the incentive to attack

32. Safeguarding CA & Core Competence – Defensive Moves
1) Don’t give competitors anything to attack
If a firm offers a full and competitive product
line, protects its products with patents, and has
exclusive contracts with suppliers, it does not
leave much for competitors to attack.
Coke & Pepsi cover many bases by having broad
product lines, heavy marketing, & control over
Bottlers – but rem. they are so balanced in power

33. Safeguarding CA & Core Competence – Defensive Moves
2) Make competitors believe they will
suffer if they attack
Public signals that a competitor 's move will meet
with strong retaliation may prevent the competitor
from executing its plans.
E.g. if a firm announces plans to build a new plant,
that signals a competitor that it should rethink its
plans to attack that firm's market segment. Matching
a competitor's price is a good signal too – price war

34. Safeguarding CA & Core Competence – Defensive Moves
3) Counterattacks
If a vital market segment is under attack, some
form of counterattack may be necessary. An
organization's strategists should choose thei
battles carefully, though, because retaliation
can be expensive.
They should be sure the attacker is strong enough
to do harm before spending too much to defend.

35. Safeguarding CA & Core Competence – Defensive Moves
4) Lower the incentive to attack:
Most attacks are launched because the attacking
firm believes that the high profits will result. There
are ways for a defender to alter that belief.
Some firms reduce the incentive for attack by
constantly lowering costs so that price can drop
while profit margins remain constant. Managers in
the attacking firm should know that their costs will
be higher for some time.

36. The Internet & E-Commerce
Impact of the INTERNET
What is the difference between E-COMMERCE & E-BUSINESS

37. Impact of the Internet
E-commerce and e-business existed before the Internet burst onto the business scene.
However it is the ubiquitous nature of the Internet which gives it much of its power.
It is ubiquitous because it is affordable technology.
Therefore it opens up new opportunities to small and large firms alike.
(true or false?)

38. E-Commerce & E-Business
This is a much disputed topic.
It has been argued that there is little or no meaningful difference between the two.
However, there is a plethora of definitions in the literature.
We therefore must define what it is

39. E-Commerce
‘E-commerce covers outward-facing processes that touch customers, suppliers and external partners, including sales, marketing, order taking, delivery, customer service, purchasing of raw materials and supplies for production and procurement of indirect operating-expense items, such as office supplies.
It involves new business models and the potential to gain new revenue or lose some existing revenue to new competitors.’
[Bartels 00]

40. E-Business (i) E-business includes e-commerce but also covers
internal processes such as production, inventory
management, product development, risk mangt. ,,
finance, knowledge management & human resources
E-business strategy is more complex, more focused
on internal processes, and aimed at cost savings and
improvements in efficiency, productivity and cost
savings.’
[Bartels 00]

41. E-Business (ii)
“E-Business is what happens when you combine the broad reach of the Internet with the vast resources of traditional information technology systems. It is dynamic and interactive.”
(IBM)

42. To avoid confusion we will adopt the convention: E-COMMERCE = E-BUSINESS

43. E-Commerce STRATEGY
The Internet opens up NEW STRATEGIC OPTIONS regarding how and where firms compete and how they organise.
Porter’s Five Forces reveals some of the threats and opportunities

44. Porter’s Five Forces Model
Threats of
New Entrants
Threats of
Substitute Products
& services
The Company
Traditional
Rivals
Bargaining Power
of Customers
Look at the forces in terms of internet based businesses:
New Entrants:
Given the internet, it is possible argue that any(!) company is in a position to compete with large companies.
e.g., Amazon.com, Sainsbury’s bank (once purely a supermarket) are prime examples of threats presented by new entrants.
There are two competing arguments here;
1 - there is an opportunity presented to new and smaller entrants to the market, because the ‘market’ has been redefined,
2 - business strategies of new entrants can be incorporated into the ethos (the knowledge, experience and strategy) of existing companies.
Substitute Products: E.g. downloadable music - threat to CD market + legal issues.
Bargaining Power of Customers:
The Internet provides an easy means of comparing products and prices, hence imparting the information needed to select from a broader choice, or bargain for best deal. (does this affect the role of customer services?)
Bargaining Power of Suppliers:
Companies can aim for best deal from the supply chain and are also in a position to sell directly to customers (eliminating intermediaries in the supply chain between the company and the consumer/customer).
Companies exist within an environment of these threats and opportunities and can use various strategies to gain a competitive advantage
Bargaining Power
of Suppliers

45. EC Strategy: Concepts & Overview
The e-difference
Reach – access and connection
Richness depth & detail of information are possible
Barriers to entry are reduced
Market niches abound

46. Selling is not easy on the Internet – because of
- Large number of sites
- 80% of Internet revenue from limited sites
- Profitability still out of reach of majority of
Internet retailers.
- Provide all information for a sale.
- Security is paramount
- Link E-commerce to back office processes.
Brand is of key importance

47. E-Commerce strategy – main issues
We need to think about:
- New business strategies which incorporate e-b
- Changing org. structure including IT business links;
- Correct technology platform;
- Benching marking against other sites;
- Maintenance and on-going management and
development of site;
- Relationship management with customers,
suppliers and allies.