IT FOR S TRATEGIC A DVANTAGE

How important is it to integrate business strategies with IT? How will IT affect the competition and the sources of competition? How will the advances of IT affect competition? What strategies the company should pursue to exploit IT? What are the implications of the actions that the competitive organizations have already taken?

T HE CHANGING BUSINESS ENVIRONMENT Globalization 1. Managing and control in a global marketplace. 2. Competition in world markets. 3. Global workgroups. 4. Global delivery systems.

T HE CHANGING BUSINESS ENVIRONMENT Transformation of industrial economy 1. Emergence of knowledge based economies. 2. Shorter product life. 3. Turbulent environment. 4. Emergence of information as a major asset.

T HE CHANGING BUSINESS ENVIRONMENT Transformation of the enterprise 1. Less hierarchical 2. Decentralization 3. Flexibility 4. More empowerment 5. More collaborative work

T HE CHANGING BUSINESS ENVIRONMENT The digital firm 1. Digitally enabled relationships with the customers, suppliers and employees 2. Transformation of core business processes. 3. Digital management of core assets. 4. Quick responses of the changing environment.

T HE I NFORMATION R EVOLUTION Changes the industry structure and alters competition Gives competitive advantages to the organizations by giving them new opportunities to outperform their competitors. Creates new businesses within old ones Creates new businesses technologically feasible Creates new businesses by creating derived demand for new products

S TRATEGIC I NFORMATION S YSTEM Offers an organization a competitive advantage over its rivals. Measures of competitive advantage Cost leadership Differentiation Focused or niche Innovation

T HE VALUE CHAIN MODEL Michael Porter’s Competitive Strategy Framework Nine Organization Activities add value to the final product/service Primary and Support activities

T HE P RIMARY A CTIVITIES Help in creating, marketing, delivering and servicing the product. Inbound logistics Operations Outbound logistics Marketing and sales After sales

Inbound Logistics: this deal with receipt, storage and management of raw material. Operations: Deals with manufacturing or service steps. Outbound Logistics: this deals with collection, storage and distributions of finished product. Marketing and Sales: this includes order entry, price management, and customer relationship After Sales: this deals with the support of the products after the sale has been done. This may also include installation and customer training.

T HE S UPPORT A CTIVITIES Are needed to support the primary activities Procurement Technology Human Resource Management Infrastructure

Procurement: this includes the procurement of raw material required for the final product, or any other item required by the organization. Procurement process is generally spread across the organization. Technology: this deals with selection and utilization of appropriate technology for product development and other activities. Human Resource Management: this deals with managing human resource in an organization from recruitment to training to development of employees. Firm Infrastructure: this is a major support function which includes accounting, legal, planning, labor relations, and other departments in an organization.

F ACTORS AFFECTING ORGANIZATION ACTIVITIES Introduction of new technology Changing buyer needs Change in industry structure Change in government regulations Change in costs

P ORTER ’ S F IVE F ORCE M ODEL Supplier Power Barriers to Entry Buyer Power Threat from substitutes Rivalry

P ORTER ’ S F IVE F ORCE M ODEL

S UPPLIER P OWER Number of suppliers Size of suppliers Input differentiation Impact of inputs on cost differentiation and efficiency. Threat of forward integration

B ARRIERS TO ENTRY Government Policy Switching costs Economies of scale Culture Branded products. Patents Asset specificity

B UYER P OWER Buyer volume. Information with the buyer. Availability of the substitutes. Threat of backward integration. Switching costs.

R IVALRY Product differentiation Number of firms Market growth Information asymmetry Switching costs High exit barriers

S UBSTITUTES Switching costs of the customers. Propensity to buy the substitutes. Price-Performance tradeoffs. Product differentiation

P ORTER ’ S F OUR G ENERIC S TRATEGIES Cost leadership Differentiation Cost focus Focused differentiation

A CHIEVING COST LEADERSHIP Identify the value chain and assign a cost to each activity. Identify cost drivers for each activity and see how they interact. Determine relative cost of competitors and the sources of cost differentiators. Refine value chain to lower costs

A CHIEVING D IFFERENTIATION Identify the customer Understand his value chain and the impact of the seller’s product on it Identify the buying criteria Identify the sources of uniqueness Identify the cost associated with the sources of uniqueness Select the value activities that create the most differentiation for the customer relative to the cost incurred

P ORTER ’ S F OUR G ENERIC S TRATEGIES Competitive Scope Competitive Advantage Lower costDifferentiation Broad Target Cost leadership Differentiation Narrow Target Cost focusFocused differentiation

W ISEMAN ’ S S TRATEGIC M ODEL Organizations should develop a complete Information Systems Architecture which helps the organization to identify the key business processes and the key decision points. Methodologies Business System Planning Critical Success Factors

IT FOR STRATEGIC ADVANTAGE : I NFORMATION I NTENSITY M ATRIX Information intensity of the value chain Information Content of the Product LowHigh Oil RefiningNewspaper, banking Low Cement

IT FOR COMPETITIVE ADVANTAGE The strategic thrusts Differentiation Cost Innovation Product Process Growth Product Length (new products of same kind) Depth (variants) Width (complementary products) Functional Geographic Lateral (adding excess capacity etc) Alliance (Product integration, development, product extension, distribution etc)

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