Presentation on theme: "Strategic management of E-Business"— Presentation transcript:
1 Strategic management of E-Business Chapter 3E-Business strategy formulation
2 Why focus on e-business planning? Important trends enabled by IT and InternetAbility to re-engineer supply chainsUse of information to smooth out inefficiencies & bottlenecks, & thus achieve efficiency & effectiveness gainsAbility to re-engineer relationships with customersManipulate large amounts of information about customer to identify trends, preferencesImprove decision making about delivering on customer value propositionAbility to use Internet to disseminate information throughout organisationResults in more efficient internal operations
3 Why focus on e-business planning? Strategy vital to achieving benefits of these trendsIT adopting more strategic roleConcern about delivery of business valueTo realise value, need to undertake strategic analysis of possibilities of IT and Internet‘High stakes’ with IT investmentsNeed to recognise and manage risk, and weigh this against the achievement of organisational objectives
4 Why focus on e-business planning? Proportion of capital expenditure on IT 50% capital equipment expenditure in some organisations and in some industriesFuture of business now inextricably linked to IT
5 ChallengesHow to leverage connectivity, speed, and accessibility created by Internet and associated technologies to extend/enhance/enable our business vision?To be successful (viable) long term, must identify where profitability liesMust develop coherent strategies by which to exploit potentialities of I/IS/IT to deliver value to customers and shareholders
6 SISP*defined‘...planning for the effective long-term management and optimal impact of information, information systems, and information technology…’(Ward & Griffiths 1996, p.6)*SISP: Strategic Information Systems Planning
7 Objectives of planning IS/IT/ e-commerce requirements Ensure that focus of all IT investments (including Internet-based technologies) is on delivery of business goals and objectivesEnsure all stakeholders (especially senior management team) understand what IT and Internet can achieveIncrease their commitment to deploy IT to enable achievement of organisational objectives
8 Objectives of planning IS/IT/e-commerce requirements Develop appropriate resourcing levels for IT and e-commerceEstablish priorities for IT investments
9 What is business strategy? Plan that integrates organisation’s goals, policies, actions into integrated wholeDirection organisation takes in order to compete effectively and meet stakeholder expectationsRequires vision (challenging desired future state for organisation) and mission (reason for existence, overriding purpose
10 Business, IS, and IT strategies Business StrategyIS StrategyDemand orientedApplication focusedIT StrategySupply orientedTechnology focusedIT impact& potentialEstablish directionand objectivesArticulate informationrequirements and systemsneeded to deliver thatinformationIdentify technologicalinfrastructure required(Ward & Peppard 2002)
11 Impacts of Internet on planning Business StrategyIS StrategyIT StrategyHas a major effect of Internet(and hype!) been to elevatestrategic thinking about technologyto the level of business strategy?ImplicationsofInternet
12 Objectives of e-business planning To ensure that IT and e-commerce support and enhance achievement of business objectivesTo achieve cost-effective investment in IT ande-commerce for measured business benefitsControlling expenditures and ensuring delivery of value from ITTo protect existing information and IT assetsReduce maintenance costsTo prioritise IT investments according to ability to support achievement of business objectivesTo gain commitment and understanding of senior executives with respect to the role of IT in the organisation
13 Who should be involved? Senior IS management Specialist planners Representativesfrom differentfunctionsSenior executivesTrading partners?Major customers?
14 Problems of NOT planning competitors gain competitive advantagebusiness goals unachievable due to systems limitationsorganisational information resource not adequately exploitedsystems not integratedduplication of effortinaccuracypoor management informationlack of commitment from senior executives
15 Problems of NOT planning new systems fail to deliver business benefitslack of focus on business needstechnologies become a constraint on businessno means of prioritising appropriate resource levels for IS/IT
17 Appreciate the strategic context Understanding long term goals and vision for organisationIts ‘strategic intent’ (Broadbent & Weill 1997)Understand external environmentIdentify potential synergies and economies of scale through similarities between business unitsAppreciate impacts of Internet on organisation and industry
18 Appreciate the strategic context Understand external and internal IT environmentsRecognising key IT trends in industryAppreciate how competitors and business partners are using ITUnderstand internal strengths and weaknessesRecognise capabilitiesPerform audit of IT infrastructure, IT skills and IT management
20 Articulate business and IT maxims Business maxims: high level statements about competitive position, how value created for customers, intentions regarding growth and development, its position of use of resources, etc.IT maxims: statements about how information and IT will be valued and deployed in the organisation
21 Defining key parameters for IT Role of IS/ITstrategic enabler (opportunistic) or support?Sourcing of IS/ITInsourced, selectively sourced, or outsourced?Structure of IS/IT deptDecentralised, federal, or centralised?View of IT infrastructureEnabling or utility view?Decisions about parameters should be aligned with business strategy
22 Complementary views of strategy View presented so far regards strategy as developed from understanding of nature of competition, industry and organisational structure and competitive responseBut strategy can be articulated based on understanding of internal resources, capabilities and competencies, and access to external resources etc., which can be harnessed as sources of competitive advantageEach perspective offers valuable insights into strategies that an organisation can adopt
23 Tools to support strategy formulation SWOT analysisProduct and service lifecyclesPEST analysisCompetitive forces analysisValue chain analysisCritical success factor analysisBusiness technology auditGap analysis
24 SWOT analysis Strengths, Weaknesses Opportunities, Threats Analyse internal capabilities, skillsLook to exploit strengths for advantageConsider weaknesses and minimise potential disadvantageOpportunities, ThreatsExternal analysis to identify opportunities for exploitation, threats to be minimised or counteredSWOT analysis can provide understanding of IT resource requirements and future developments
28 Product lifecycle – emergence demand is uncertainmarket ill-definedI/IS/IT focus:market researchproduct development
29 Product lifecycle – growth need major investment to meet growth in demandmarketingproductionnew product developmentrevised supplier relationships
30 Product lifecycle – growth I/IS/IT focus:support growthmust not inhibit ability to satisfy demandcreate barriers to entrytie in suppliers and customershigh investment needed
31 Product lifecycle – maturity competition increasessupply starts to exceed demandfight to retain market share
32 Product lifecycle – maturity I/IS/IT focus:defensive strategyunderstand competitionincrease productivitymore efficient, effective use of resourcesbuild up customer switching costsbetter management of supply and distribution channels
33 Product lifecycle – decline cost effective in serving marketI/IS/IT focus:detailed and accurate management infodemand forecastsprofitability of customers, productscost controls
34 Product and service lifecycle Help managers think creatively about whether or not they have information needed to manage wildcats, rising stars, cash cows and dogs effectivelyHelps to identify gaps in existing information provision
35 PEST Analysis Political/legal Economic Sociocultural Government legislation, taxation, industrial relations, privacy, environmental protection requirements, etc.EconomicStage of economic cycle, unemployment, inflation, interest rates, relative affluence of societySocioculturalLifestyle changes, demographic characteristics, income distribution, consumer preferences, etc.
36 PEST Analysis (cont.) Technological Rate of technological innovation, rate of infusion and diffusion with respect to technologyConsider key environmental influences, drivers of change and how these might change over timeFor e-businesses, consider how technological change is driving changes in other areasConsider role of IT in exploiting of mitigating against the effects of these changes
37 Threat of new entrants Barriers to entry will be high if economies of scale are extremely importantcapital requirement of entry is highaccess to distribution channels is difficultpatents or specialist skills are requiredthere are a large number of existing rivalsexisting rivals are large and strongly positioned
38 Threat of new entrants (cont.) competition in the industry is intenseproduct offerings in the industry are highly differentiatedhigh brand loyalty existsaccess to raw materials or other critical resources is difficult
39 Threat of new entrants (cont.) How has the Internet,vastly increased connectivity,and improved communication channelsimpacted thethreat of new entrants?
40 Threat of new entrants New entrants mean IS/IT can additional capacity reduced pricesnew basis for competitionIS/IT canreduce costsincrease rate of product / service innovation and developmentbetter control distribution and supply channelsachieve better match between products and customers
41 Bargaining power of suppliers Supplier power is likely to be highfew suppliersswitching costs are highthere is a possibility of the supplier integrating forwardbrand of a supplier is powerfulsuppliers’ customers are of little importance to the supplier
42 Bargaining power of suppliers How has the Internet,vastly increased connectivity,and improved communication channelsaffected thebargaining power of suppliers?
43 Supplier power high If supplier power is high prices/costs will tend to be higherquality of supply will tend to be lowerthere will tend to be reduced availability of supplyIS/IT canuse supplier sourcing systemshelp to extend quality control into suppliersenable forward planning with suppliers through interorganisational systems including the use of EDI and/or Internet technologies
44 Bargaining power of buyers Buyer power is likely to be high whenthere are few buyersthere are alternative sources of supplycomponent or material cost is a high percentage of total costthere is a threat of backward integration by the buyer if satisfactory prices or suppliers cannot be obtained
45 Bargaining power of buyers How has the Internet,vastly increased connectivity,and improved communication channelsaffected thebargaining power of buyers?
46 Buyer power high If buyer power is high prices forced down higher quality demandedservice requirements higher and more flexiblehigher competition in industryIS/IT can help bydifferentiating products/servicesimproving price/performanceincreasing switching costs of buyersfacilitating buyer product selection
47 Threat of substitution Threat of substitution may take many forms:actual or possible substitution of one product for anothera new process may render a product superfluoussubstitutes may be thought of as competing for discretionary expenditure‘doing without’ can also be thought of as a substitute
48 Threat of substitution How has the Internet,vastly increased connectivity,and improved communication channelsimpacted on thethreat of substitution?
49 Threat of substitute products The threat of substitute productstends to limit the potential market and profittends to put a ceiling on pricesIS/IT can reduce the effects byhelping to improve price/performancehelping to enhance products and services to increase valueimproving rate of innovationidentifying new customer needs
50 Rivalry within industry Competitive rivalry will be intensified ifmarket growth is slow or in declinea small number of similar sized competitors dominatethere are high fixed costs and/or there are high industry exit barriers for all rivalsthere is over-capacity in the industry
51 Rivalry within industry How has the Internet,vastly increased connectivity,and improved communication channelsimpacted oncompetitive rivalry?
52 Rivalry within industry IS/IT can reduce the effects byhelping to improve price performancehelping to differentiate products and serviceshelping the firm ‘get closer to the end consumer’understand the requirements or needs of the ‘end consumer’Intense competition from rivals leads toaggressive competition on pricecompetition regarding product developmentdistribution and service being critical factors in customer choicethe need for customer loyalty
53 Using competitive forces identify / analyse significant players in each forcedetermine nature / strength of impact of each playerdevise strategy to exploit / defend / neutralise impactsidentify opportunities for IS/IT to support / implement / manage strategy
54 Value chain analysis (internal) Value chain analysis enables consideration of internal activities and processes, thus understanding where costs are incurred, and where value is addedExamines organisation in terms of primary activities (core business processes) and support activities
57 Critical success factor analysis Important device for ensuring that managers receive information they need to monitor achievement of corporate goals and objectivesCSFs require information to monitor achievement in key result areasCSFs may require systems enhancements or new systems
60 Business-technology audit Provides managers with an assessment of business value of IS, against an assessment of their technical qualityBusiness value: value judgement about contribution an IS makes to achievement of business goals and objectivesTechnical quality: assessment of age, amount spent on maintenance, ease of maintenance, required infrastructure, risk
62 Gap analysisAims to identify and then help remedy gaps that exist between skills, knowledge, competencies, capabilities that an organisation requires to be successful, and resources an organisation currently has
64 Portfolio of systemsAt end of strategy formulation process, organisation should be clear onbusiness goals and objectivese-business goals and objectiveshow IT used to support achievement of goals and objectivesState of existing portfolio of systemsWhere strengths and weaknesses liePrioritised set of new systems, required refurbishments
65 Portfolio of systems (cont.) Application portfolio analysis helps to ‘map’ balance required of new investments and maintenance of existing investmentsPortfolio of systems needs to be aligned with business strategy