Presentation on theme: "ICS 462 Information Systems Strategy & Implementation"— Presentation transcript:
1 ICS 462 Information Systems Strategy & Implementation 3/31/2017ICS 462 Information Systems Strategy & Implementation2.1 Analytical Tools in Strategic Management: Strategic Analysis
2 Framework for SMFramework for strategic management - Johnson & Scholes, 1993:Strategic analysis (environment, culture and stakeholder analysis, and resources and strategic capability) – to understand the strategic situationStrategic choice (generation of strategic options, evaluation of options and selection of strategy) – to form the strategiesStrategy implementation (planning & allocating resource, organizational structure and design, managing strategic change) – to implement the strategies (tactical)
3 Notes:Above elements not done sequentiallyAnalysis + choice = strategic planning – implies that SM is more about SPAbove design school of strategy (strategy as a planning activity) is not necessarily right (cf pattern school) – but provides a framework for discussion of SMRole of tools is not necessarily to help develop strategy but also to provide a basis for communication, discussion and sense-making
5 1. IntroductionSA aims to form a picture of the influences playing upon the organization in order to be informed of the strategic choice elements of the overall strategic management processIt is concerned with the following:Organizational strategic positionEnvironmental conditionsOrganization strengths and weaknessesEffects of all the above on organization stakeholders
6 SA involves understanding factors: External environment the world in which the organization existsneed to understand the impact of the environment upon the organizationInternal environment, e.g.Values and objectivesthese influence the perceived acceptability (to each stakeholder group) of candidate strategiesit is through these perceptions that other influences are interpreted especially power differentialsResourcesthey provide the internal influences upon strategy choice
8 External Env. Analysis Purpose to increase the quality of the strategic decision making by considering a range of relevant features well before the need to make an irrevocable decisionThreats and opportunitiesthe strategy is directed at exploiting the environmental opportunities and to blocking environmental threats in a way that is consistent with internal capabilities (Porter’s concept of “environmental fit” that allows the organization to maximise its competitive position)
9 Success of environmental analysis largely depends on the complexity of the environment A possible process of environmental analysis and tools to use:Audit the environmental influencesAssess the nature of the environment to judge whether it is simple or complexIdentify the key environmental factors using porter’s five forces modelIdentify the competitive position using a life cycle analysisIdentify the threats, opportunities, strengths and weaknesses using the SWOT analysis
10 Nature of the Environment An organization’s environment comprises all the events, issues and facts which will influence it’s performance but over which it has little influenceSocietal environmentconditions that have a broad rather than direct impact upon the organizationconditions represent the world within which the organization operates e.g. demographic factorsTask environmentthat which has major and direct impact upon the organization and it’s strategic planning process
12 2.1 PESTEL analysis Political Government policies and strategies, e.g. sessional paper no. 1 of 2005, V2030, Education MTP, University strategy, …National coalition government – stability, governanceDevelopment partner support to KenyaEconomicGlobal economic changesGDP growthInflation ratesTaxation ratesExchange ratesEmployment levelPoverty levelSocio-culturalPopulation growthLifestyle changesCustomer preferences
13 Legal framework governing the organization Labour mobilityEducation levelsIncome distributionGovernanceTechnologicalEnterprise applicationsMobile applicationsInternetUndersea bandwidthNational optic fibre backbone infrastructure (NOFBI) projectEnergy use and costEnvironmentalAny environmental requirements?LegalLegal framework governing the organizationOne can also consider the regulatory framework, as it has regulations and licenses which are legally binding
14 Strategic analysis involves assessing the effects of possible changes in the environment. It involves:Considering how the external (societal & task) and internal environment factors may changeAssessing the strategic implications of such change for the organization14
16 2.2 Stakeholder analysisOne of the steps in environmental analysis or enabling to make strategic forecastsStep 1: identify stakeholderspeople who are affected by your work, who have influence or power over it, or have an interest in its success or failureStep 2: Prioritize your stakeholdersMap them on a power/interest grid shown - next slideStep 3: Understand your key stakeholdersWhat are their interests?What are their strengths/weaknesses?What edge do they have over your company?You can use the power/interest grid to map your understanding – position on the grid implies strategy
18 2.3 SWOT AnalysisDefines the relationship between the internal and external appraisalsApplied to self, competitors, supplies and customers as in order to assess the full position within the industry and to direct the firm towards the appropriate directionSWOT analysis offers a fast ‘pocket sized’ method of conceptualizing complex realityStrategy:Is a result of combined and realistic assessment of market attractiveness and business strengthBased on use of the existing business strengths to exploit opportunities, to create new opportunities, to counteract threats and repair the weaknessesAlso referred to as TOWS matrix or WOTS-UP
19 Key Questions/Strategies StrengthsWhat do we control - resources, people, knowledge - that gives us an advantage. These strengths are your core competencies.What are our major internal or present strengths?Internal strengths are resources or capabilities that help an organization accomplish its mandates or mission.WeaknessesWhat do we need to fix?What are our major internal or present weaknesses?Internal weaknesses are deficiencies in resources and capabilities that hinder an organization’s ability to accomplish its mandate or mission.OpportunitiesWhat opportunities exist that we can take advantage of?What major external or future opportunities do we have?Challenges/ThreatsWhat major external or future threats do we face?External threats are outside factors or situations that can affect your organization in a negative way.
20 Key Questions/Strategies How can organization use its strengths to take advantage of the available opportunities?Strategy - ExploitHow can organization use its strengths to overcome the threats identified?Strategy - ConfrontWWhat does organization need to do to overcome the identified weaknesses in order to take advantage of the opportunities?Strategy - SearchHow will organization minimize its weaknesses to overcome the identified threats?Strategy - Avoid
21 Strategies Indicated by SWOT Analysis Maxi-Maxi (SO)Organization is playing from its strengths to an opportunity and hence the business objectives are generally to reduce internal weaknesses and overcome external threats in order to focus upon this segment. Rowe, Mason, et al. (1994) call this segment exploitMini-Maxi (WO)Strategy appropriate minimizes weaknesses and maximizes the opportunities. The opportunity exists but requires strength where the Organization currently has a weakness. Without strategic action to remove this weakness the opportunity must go to competitors. Rowe et al. (1994) call this segment search
22 Mini-Mini (TW)The strategy for this segment is one that will reduce both the weakness and the threat. This is the precarious segment and so organisations should adopt strategies that avoid it. Rowe et al. (1994) call this segment avoidMaxi-Mini (ST)The indicated strategy for this segment is one that uses the strength of the organization in order to deflect the threat. Care must be taken to avoid unnecessary competitive battles, and strategic options that circumvent the threat are to be preferred. Rowe et al. (1994) call this segment confront
23 Another View of Strategies Implied by SWOT StrengthsWeaknessesOpportunitiesThreatsAttack‘go for it’Beware‘don’t do it’External FactorsExplore‘if have time’Project‘watch yourself’Internal Factors
24 Strengths of SWOTcan be used to generate strategic options, so it also forms part of the Strategic Choice elementoffers warning of the need for avoidancemay cause the objectives, and hence also the performance measures, to be reviewedWeaknesses of SWOTit does not build in any mechanisms for handling the uncertainty of the futuredoes not give any holistic model of the organizationtendency when doing a SWOT analysis to be less honest in appraisals. People cover up organization’s feared weaknesses by proclaiming perceived strengthsIs not aimed at option evaluation and, hence, nor selection
25 2.4 Porter’s 5 forces framework Threat of newentrantsRivalry amongstexisting competitorsBargainingpower ofsuppliersbuyersThreat of substituteproducts or services
26 It models the competitive world of an organization and the forces that play upon it The current competitive position of the organization will be the aggregate of the 5 forcesThe net power of the 5 forces needs to be judgedStrategy is to concentrate attention upon those most significant - either to exploit a powerful position or to protect from a weak oneForces and their key factors are outlined below (a – e)
27 a. Rivalry of existing competitors The structure of competitionHow many competitors?Is there a clear market leader? Where are you vis-à-vis the leader?The structure of industry costsAre there high fixed costs? Can competitors cut these costs?Degree of product differentiation.How do you distinguish your services?Switching costsAre there high/low switching costs?Strategic objectivesAre competitors pursuing aggressive growth strategies?Exit barriersAre exit barriers high or low? How does that affect the competition?
28 b. Threat of new entrants Economies of scale.Capital / investment requirements.Customer switching costs.Access to industry distribution channels.Access to technology.Brand loyalty. Are customers loyal?The likelihood of retaliation from existing industry players.Government regulations. Can new entrants get subsidies?
29 c. Threat of substitute products/services Quality. Is a substitute better?Buyers' willingness to substitute.The relative price and performance of substitutes.The costs of switching to substitutes. Is it easy to change to another product?
30 d. Bargaining power of suppliers Concentration of suppliersAre there many buyers and few dominant suppliers?BrandingIs the brand of the supplier strong?Profitability of suppliersAre suppliers forced to raise prices?Suppliers threaten to integrate forward into the industry (for example: brand manufacturers threatening to set up their own retail outlets).Buyers do not threaten to integrate backwards into supply.Role of quality and service.Switching costsIs it easy for suppliers to find new customers?
31 e. Bargaining power of buyers Concentration of buyersAre there a few dominant buyers and many sellers in the industry?DifferentiationAre products standardized?Profitability of buyersAre buyers forced to be tough?Role of quality and service.Threat of backward and forward integration into the industry.Switching costsIs it easy for buyers to switch their supplier?
32 2.5 Life Cycle AnalysisThe aim of this model is to relate the competitive position of an organization to the maturity of the industry or its productsIt assumes there is a basic S-shaped curve description to the growth phenomenon of the organization and its products
33 Life Cycle Analysis Activity or product is new Rapid growth IntroductionGrowthMaturityDeclineActivity or product is newRapid growthDecline in sales or activityNo further increaseExperimentation
34 Life Cycle Analysis Model DevelopmentDemand UnknownProduct/Service is newExperimentation &gradual acceptanceGrowthDemand > SupplyRapid growth insales.MaturityDemand SupplySales remain highbut there is nofurther increaseDeclineDemand < SupplyCompetition &product displacementcause decline in sales
35 Life Cycle Model Example in HE DevelopmentGrowthMaturityICT use & impactdeclinesDecline45123IntegrationUbiquitousimpacts (quality,governance, etc.ICT use is newLaying infrastructureExperimentation &gradual acceptanceNo budgetsEmploy some ICToperations staffComplacency sets inShift in focusTechnology haschangedCannot sustain ICT(cost, staff, etc.)Demand by students& staff growsInternet connectionKey MIS implementede-learning growthTop mgnt championshipBudgets and controlsICT is strategicresource &Impacts allaspectsIntroduction ofICT with limiteduse & impactsICT use & impactsgrows35
36 3. Analysis of Internal Environment (Values and Objectives)
38 3.1 Strategy and Culture Definition of corporate culture: “the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration and that worked well enough to be considered valid and, therefore taught to new members as the correct way to perceive, think and feel in relation to those problems”.Culture is sometimes described in terms of levels distinguishing between:Visible aspects of culture (rules, procedures, technology); andUnderlying aspects of culture (the unseen, unarticulated, untested values & assumptions)
39 Strong Vs. Weak cultureStrong - when the visible and underlying levels are consistent with each otherWeak - if the cultural levels are inconsistent with each other and/or in pocketsElements of culture:power, history, language, dress code, status symbols, reward structures, logos, organizational charts, etc. what Deal and Kennedy(1982) call “the way we do things around here”Note:Groups within any organization may have clashing cultures E.g., a sales team may have a results driven culture while the accountancy group may have a culture focused on accuracy
40 Conservative organizations Value low risk strategies, secure markets and well tested potential solutionsAlso called defendersInnovative organizationsValue ground breaking, risk and pay-offAlso called prospectorsStrategy – culture relationship. The 2 types of organizations will behave differently under the same circumstances:Defenders value low-risk strategies (risk averse)Prospectors go for higher-risk strategies and new opportunities (risk taker)
41 How is culture related to strategy? Analysis of culture will enable interpretations of its meaning to inform the selection of feasible and acceptable strategy optionsCulture determines how an organization measures success. The common perception can have a dampening effect upon the influence of environmental factors upon strategy because the organization creates its own model of reality and every decision is seen in the light of that modelCulture influences strategy implementation
42 3.2 Strategy & ObjectivesObjectives in an organization serve three important functions:They provide a statement of the financial objectives compared with the current performance of the organization indicating the extent and scope of the strategic decisions to be madeBy providing a statement of the broad mission of the organization, they provide a product-market focus for the business strategy of the organizationHaving a set of corporate goals provide objectives for individual functions or lower areas of responsibility within the organization
43 Closed Vs open objectives Closed objectives that can be achieved usually measurable and definable in terms of their in-built measures of success or performance indicatorsOpenobjectives that can be striven for, but can never be achieved, so they persist throughout the life of the organizationThe organization-wide mission is always an open objectiveE.g. UoN MissionTo provide quality university education and training and to embody the aspirations of the Kenyan people and the global community through creation, preservation, integration, transmission and utilization of knowledge
44 E.g. Conflicting Objectives of Stakeholders Objectives or interestsShareholderMarket value of the investmentStability of dividendsSize of dividendManagementSales growthAsset growthProfitabilityLabor forceWage increaseNumbers employedJob securitySocietyProduction gainsExportsSocial welfare
45 Stakeholders in organization usually have conflicting interests, and hence objectives. Therefore stakeholder analysis is important in strategic analysisStakeholder goals change as the coalition membership changes and as the goals of those individuals changeCorporate objectives or goals therefore:emerge as a result of the process of internal negotiation amongst individuals and groupsrepresent the current position of compromise between different interestsrepresent satisfactory rather than optimal solution
46 E.g. UoN Corporate Objectives To manage the University efficientlyTo produce quality and holistic graduatesTo contribute to scientific and technological innovationsTo enhance the competitiveness of the UniversityAt lower level unit, e.g. ICT objectiveTo maximize student and staff productivity and service delivery, enhance teaching and learning and improve quality of research through ICTPower structure determines where the balance point for the compromise liesPower is the ability of individuals or groups to obtain and use the human and material resources availablePower is not evenly distributed, some units, groups and individuals are more powerful than others
48 IntroductionThe aim is to understand the organization’s strategic capabilityIt establishes what strengths & weaknesses the organization has i.e. what it does best and what it does not do wellFig. suggests process of analyzing resourcesTable (next 3 slides) show the key dimensions of the various business resources to be assessedIn the 1980’s, it was felt “out of fashion” to base competitive strategy on internal capability – less chances of innovation (focus on ext. environment)However, with the rise of TQM and BPR, there has been a corresponding growth in interest in understanding the organization’s strategic capability
49 Resource Analysis Process Value chainanalysisDrawingComparisonsAssessingbalanceIdentificationof key issuesUnderstandingstrategiccapability
50 Key areas of business resources & competence Product/marketShare of existing marketRange of productsPosition in product life cycleDependence upon key product for sale/profits/cash flowDistribution networkMarketing and market researchProduction resourcesNumber, size, location, age and capacity of plantsSpecialization/versatility of equipmentProduction and cost levelsCost/availability of raw materialsProduction control system
51 Financial resourcesPresent asset structurePresent capital structureAccess to additional equity and debt financePattern of cash flowProcedures for financial managementTechnologyCurrency of production methods and productsR&D spending and effectiveness
52 Organizational and human resources Organization structureManagement style and successionStaff development policiesManagement/labour force relationshipReward structures
53 Value Chain AnalysisCompetitive possibilities open to an organization can be discerned from a resource auditPorter’s value chain is the commonest model and portrays an organization as a connected chain of activities, each of which relates the organization’s products to its customers (see fig)Model can be used to assess the degree of effectiveness and efficiency of resource use in the activities in the value chainEfficiency - measure of how well the resources are being used, e.g. profitability, capacity use and the yield gained from that capacityEffectiveness - assessment of how well the resources are allocated to those activities which are the most competitively significant within the value chain
54 Porter’s Value Chain Model Primary activitiesContribute to getting the goods or service one step closer to the customersSecondary activitiesSupport the primary activitiesSupport/secondary ActivitiesAdministration & InfrastructureHuman resource managementValue Added-Cost=MARGINProduct/ Technology/ DevelopmentProcurementInboundlogisticsOperationsOutboundlogisticsSales &marketingServicesPrimary Activities
55 (a) Primary activities Inbound logisticsAll processes associated with receiving, storing and disseminating inputs to the production process for the product or serviceOperationsAll processes associated with transforming i/ps into o/psOutbound logisticsAll activities concerned with distributing the products or services to the customersSales & marketingActivities which provide opportunities for the potential customer to buy the product or service and offer inducements to do so, e.g. advertising, pricing, tendering,ServicesAll processes concerned with the provision of service as part of the deal struck with the customers, e.g. repairs, maintenance, spare parts supply, training, installation, etc.
56 (b) Secondary activities Admin. & infrastructureThe tasks that comprise general management, e.g. financial management, planning, legal services, quality management, office administration, etc.HR managementActivities associated with the recruiting, training, developing, appraising, promoting, and rewarding of personnelProduct/technology developmentActivities that relate to developing the technology of the product or service and the processes that produce it and the processes that ensure the management of the org., e.g. IS, development of new product/service designsProcurementActivities that support the procurement of inputs for all of the activities of the value chain e.g. procurement of IS, raw materials, etc.
57 3.3.3 Product Portfolio Analysis An example tool is the Boston consulting Group (BCG) tool matrix, which is a 2x2 matrixThe BCG tool models the relationship betweena division’s (or product) current or future revenue potential andthe appropriate management stanceIt classifies businesses, products or divisions according to the present market share and the future growth of the marketThe intention of the matrix is to distinguish between the cash generators and the cash consumersThe model uses the analogy in fig. below
58 BCG model L H Wild cat Star (quickly Future market growth (Exploit now nurture intostars)Star(Exploit now& in future)HLDog(Divest)Cash cow(Exploit now)Existing Market share
59 The Interpretation of the BCG Model Cash CowsProducts or segments that are the current high earners for the organizationThey are relatively short termThe organization should seek to adopt measures to increase profit and extend their lifetimeStarsProducts or segments providing significant revenue now & expected to do so in future
60 Dead dogsProducts or segments providing little or no contribution currently and not expected to change in the futureThey should be divestedWild catsProducts or segments providing little or no contribution currently but expected to change in the futureThe organization should ensure that they quickly mature into profitable stars
61 3.3.4 Analysis of Core Competences Core competencies are the capabilities that are vital for the competitive well-being of the organization. Significant resources must be put into acquiring themCore competencies support all business aspectsTests to identify core competences:provides potential access to a wide variety of marketsmakes a significant contribution to the perceived customer benefits of the end productmakes it difficult for a competitor to copy
62 Guidelines for core competences: Should be few, about 5-6 To produce a list of core competencies, an organization must consider it’s capabilities and any gaps that need to be pluggedGuidelines for core competences:Should be few, about 5-6The embedded skills that breed the next generation of competitive products should not be bought or rented on outsourcing deals. Any outsourcing for core competencies must be treated with care.Deliver core productsCore products embody the core competencies and are the components that add to the value of the end productsused to seek maximum world manufacturing share in core products
63 The organization needs to create a strategic road map (architecture) of the desired core competencies and how to get them as part of SPThe organization can pose the following questions so as to judge the extent of the architecture:how long it can preserve its competitiveness in the business if it doesn’t control the core competencehow central the core competence is to the perceived customer benefitswhat future opportunities would be foreclosed if it lost the particular competenceThe architecture gives a way to assess possible diversification, provides a template for the allocation of resources, etc.
64 Diversified organizations: Core competencies are a corporate resource and the more a core competence is used, the stronger it getsDiversified organizations:hold portfolio of core competencies (just like portfolio of many business)must assess their core competencies, core products and end productscore competencies should be used to widen the domain of innovation so as to overcome the SBU constraints. This ensures hybrid opportunities that combine across SBUs are exploited. Unless this is done, only the ideas that lie close at hand (within one SBU) may be exploitedThe organization should alter its patterns of communication, career paths, strategy formulation and managerial rewards away from the SBU constraintsBelonging together must be considered to add something that would not be present if each SBU were an independent operator
65 The mission core competence (MCC) decision matrix PoorGoodFit with missionDilution(Defineframework)Drive(Cherish)GoodPoorDrain(Discard)Distraction(Develop)Fit with core competencies
66 It is a tool based upon the analogy of an organization as a tree : The mission and the vision provide the nutrients that feed the treeThe core competencies serve as the roots, which through core processes produce projects and products (the “fruits”)Use of matrixResource allocation - assesses the relative merits of any competing claims on resources, not just those associated with product/market segments or SBUs ORResource allocation - apply strategic logic to resource-allocation decisions or day-to-day activities throughout an organization, ensuring their optimal contribution to building competitive strength.
67 Product/service selection - offers a way of selecting which actual and potential project or product to support since each project and product can be judged in terms of its match to the mission and to core competencies of the organizationThe best quadrant is the G-GNotes:This tool is good in forcing the testing of assumptions about what the core competencies actually are and what the mission actually isIt is also good in integrating issues to support making holistic decisions in an organization that has a definable mission and definable core competencies