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IT & S TRATEGY MGT 30660 Khalil Fadil Matta University of Notre Dame 1.

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Presentation on theme: "IT & S TRATEGY MGT 30660 Khalil Fadil Matta University of Notre Dame 1."— Presentation transcript:

1 IT & S TRATEGY MGT Khalil Fadil Matta University of Notre Dame 1

2 W HAT IS THE OLDEST ORGANIZATION IS EXISTENCE TODAY ? MGTI-458 Khalil F. Matta University of Notre Dame

3 S TRATEGY 101: Compete on Cost Compete on Differentiation: Performance Quality & reliability Speed of delivery Service Aesthetics Location & geographic reach Brand Focus Narrow Broad MGTI-458 Khalil F. Matta University of Notre Dame

4 G IVE EXAMPLES OF COMPANIES THAT HAVE USED LOW COST STRUCTURE AS A COMPETITIVE WEAPON MGTI-458 Khalil F. Matta University of Notre Dame

5 G IVE EXAMPLES OF COMPANIES THAT HAVE USED DIFFERENTIATION AS A COMPETITIVE WEAPON MGTI-458 Khalil F. Matta University of Notre Dame

6 L OW P ROFIT M ARGIN E XAMPLE Wal-Mart Case (Revenue is $300 Billion – Profit Margin 5%): You can deploy an IT solution for the same price to either Increase your revenues by 10% (same profit margin) Reduce your overall costs of doing business by 5% (inc profit margin) Which one of the 2 alternatives you would choose to invest your IT in? 6 MGT Khalil Fadil Matta University of Notre Dame

7 W ALMART E XAMPLE Current Situation.. No IT investment Revenue: B 300 Cost: B 285 Profit: B 15 Profit Margin: 5% 7 MGT Khalil Fadil Matta University of Notre Dame

8 A NALYSIS OF S CENARIOS Case 1: Add 10% to the Revenue: Revenue inc: 300 * 1.1 = B 330 Cost: 330 *.95 = B Profit = 330 – = B 16.5 Profit Margin = 16.5/330 = 5% Case 2: Reduce costs by 5% Revenue = $300 Cost: 285 *.95= B Profit: 300 – = B Profit Margin: 29.95/300 = 9.75% 8 MGT Khalil Fadil Matta University of Notre Dame

9 H IGH P ROFIT M ARGIN E XAMPLE Case of a pharmaceutical company (Revenue $ 50B - profit margin of 80%) You can deploy an IT solution for the same price to either Increase your revenues by 5% Reduce your overall costs of doing business by 10% Which one of the 2 alternatives you would choose to invest your IT in? 9 MGT Khalil Fadil Matta University of Notre Dame

10 P HARMACEUTICAL E XAMPLE S OLUTION Revenue 50 B Profit Margin 80% Cost = 50 *.2 = 10 B Profit = 50 – 10 = 40 B

11 A NALYSIS OF S CENARIOS ! Increase Revenues by 5% keep Profits Margins the same – Revenue = 50 * 1.05 = 52.5 B – Profit Margin = 80% – Cost = 52.5 *.2 = 10.5 B – Profit = 52.5 – 10.5 = 42 B Decrease cost by 10% keeping Revenue the same – Revenue = 50 B – Cost = 10 *.9 = 9 B – Profit = 50 – 9 = 41 B – Profit Margin = 41/50 * 100 = 82% 11 MGT Khalil Fadil Matta University of Notre Dame

12 H OW CAN TECHNOLOGY BE USED TO REDUCE COSTS OF OPERATIONS AND INCREASE THE DIFFERENTIATION OF ITS PRODUCTS AND SERVICES ? MGTI-458 Khalil F. Matta University of Notre Dame

13 S YSTEM E VOLUTION Transaction-oriented systems Personal Computing Networked environment Internet 13 MGT Khalil Fadil Matta University of Notre Dame

14 T RANSACTION - ORIENTED Mainframe era Centralized IT function Black Box mentality Punch card/card readers Major applications: Accounting, payroll, back office functions Major benefit: Increase organizational efficiency 14 MGT Khalil Fadil Matta University of Notre Dame

15 K ILLER A PPLICATIONS Billing A/R Payroll Inventory Management Sales Analysis 15 MGT Khalil Fadil Matta University of Notre Dame

16 P ERSONAL COMPUTING Completely distributed environment Master of the universe Increasing computer literacy Redundancy and inefficiency Major contribution: increase personal efficiency, enhance tactical decision making 16 MGT Khalil Fadil Matta University of Notre Dame

17 K ILLER A PPLICATIONS Word Processing Spreadsheets Database Management Systems 17 MGT Khalil Fadil Matta University of Notre Dame

18 N ETWORKED E NVIRONMENT Pseudo-distributed environment Server-based applications particularly database management Major benefit: enhanced problem solving capabilities, basic strategic decision making, enlarge the enterprise 18 MGT Khalil Fadil Matta University of Notre Dame

19 K ILLER A PPLICATIONS Decision Support Systems Electronic Data Interchange (EDI) Shared Spreadsheet information Shared DBMS 19 MGT Khalil Fadil Matta University of Notre Dame

20 I NTERNET E NVIRONMENT Open systems Collaborative Environment No boundary enterprise Ease of use Outsourcing Major Applications: CRM, ERP, SCM, seamless communication, instant and global access to relevant information Benefits: New business models, new business innovations, improved organizational efficiency 20 MGT Khalil Fadil Matta University of Notre Dame

21 K ILLER A PPLICATIONS Collaboration Commerce Content 21 MGT Khalil Fadil Matta University of Notre Dame

22 P ORTER ’ S C OMPETITIVENESS M ODEL 22 MGT Khalil Fadil Matta University of Notre Dame


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