3 Why Have a Strategy? Does a business/organization need a strategy? What makes a good strategy?Does IT affect a strategy?If so, how?
4 Elements of Strategic Management Long Range PlanningOutside scope of this courseResponse ManagementProactive InnovationInformation TechnologiesOur focus
5 Where Does a Strategy Come From? MissionGoalsOrganizational strategyFunctional strategiesFinanceMarketingOperationsTacticsoperations
6 What is a Mission?Mission: The reason for existence of an organizationMission Statement: A statement of purpose that serves as a guide for strategy and decision makingShould answer:What business are we in? Where should we be in 10 years?Who are our customers?What are our basic beliefs?How do we measure success?
7 IBM Mission StatementWe create, develop and manufacture the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We have two fundamental missions:We strive to lead in the creation, development, and manufacture of the most advanced information technologies. (Performance objective & Business definition)We translate advanced technologies into value for our customers as the world’s largest information services company. Our professionals worldwide provide expertise within specific industries, consulting services, systems integration, and solution development and technical support. (Business definition, customers)
8 Goals Goal: Provides substance to the overall mission. Example: 3M More specificExample: 3MMission: “To solve unsolved problems innovatively …”Possible Goal: Our corporate goal is to have 30% of sales come from new products.
9 Distinctive Competencies Distinctive Competencies: Special attributes or abilities possessed by an organization that give it a competitive edgeORUnique resources and strength of an organization that reflect the collective learning of an organization
11 The Role of ITIT creates applications that provide strategic advantages to companiesIT is a competitive weaponIT supports strategic change, e.g. reengineeringIT networks with business partnersIT provides cost reductionIT provides competitive business intelligence
12 Competitive Advantage in the Web Economy Competitive StrategySearch for a competitive advantage in an industry, which leads to control of the marketCompetitive AdvantageLook for a competitive necessity, which will help your company keep up with the competitorsSustainable Strategic AdvantageMaintain profitable and sustainable position against the forces that determine industry competition
13 Analyzing Competitiveness Well-known framework is Porter’s competitive forces model (1985)Used to develop strategies for companies to increase their competitive edgeDemonstrates how IT can enhance competitiveness of corporationsRecognizes 5 major forces that could endanger a company’s position in a given industry
14 Porter’s 5 Competitive Forces The threat of entry of new competitorsThe bargaining power of suppliersThe bargaining power of customers (buyers)The threat of substitute products or servicesThe rivalry among existing firms in the industry
17 Porter’s Model in Action Step 1: The players in each force are listedStep 2: An analysis is made which relates Porter’s determining factorsStep 3: A strategy is devised to defend against these factorsStep 4: Support information technologies are employed
19 Case: DaimlerChrysler Problem:In 1993, Chrysler lost $2.6 billion because its program with parts suppliers was failingSolution:Suppliers began using Lotus Notes/DominoMeasurement reports to static HTML pagesE-Procurement exchange at CovisintResultsChrysler saved millions of $
20 Porter’s Value Chain Analysis Model Primary ActivitiesInbound logistics (inputs)Operations (manufacturing and testing)Outbound logistics (storage and distribution)Marketing and SalesServiceThese 5 activities constitute a supply chain
21 Value Chain Model, cont’d. Support ActivitiesFirm infrastructureHuman resources managementTechnology developmentProcurement
22 Value SystemA firm’s value chain is part of a larger stream of activities, which Porter calls a “Value System”Includes the suppliers that provide the necessary inputs AND their value chainsApplies to both products & services, for any organization, PUBLIC or PRIVATEIs the basis for the Supply Chain Management
25 Value Chain Model, cont’d. The Value System Model is used to:Evaluate a company’s process and competenciesInvestigate whether adding IT supports the value chainEnable managers to assess the information intensity and role of IT