Theories on Strategy IT & Business Models Chp. 3

Strategy – Chapter 2 Agenda Review chapter 2 Strategy  Structure Swot Growth share matrix The experience curve

Structure versus Strategy Chandler: ”Structure should follow strategy” The oporsite view: ”Developing a strategy requires a structure with systems and resources” This book: ”It is a chicken-or-egg discussion”

Andrews: SWOT analysis Internal analysis: S = Strengths W= Weaknesses External analysis: O= Opportunities T= Threats *Kenneth Andrews

The process of SWOT Identify Strategic Factors Strengths Weaknesses Scan Internal Environment Core Competence Synergy Value Creation Evaluate Current: Mission Goals Grand Strategy Scan External Environment National Global Opportunities Threats Identify Strategic Factors SWOT

The Boston Matrix The Growth Share Matrix Star Question Mark (Big growth rate (Big Growth rate Big market) Small market) Cash Cow Dog (Small growth rate Big market) Small market) Industry Growth Rate Market Share

The Experience curve Accumulated excperince  Greater efficientcy – but at a decreasing rate Cost per unit Cumulative Productive Volume *BCG 1968 later Henderson 1984

Theories on Strategy IT & Business Models Chp. 3

Porters Generic Framework Generic (=” common themes / shared portion ”) Framework (=a collection of models) The Three Core Models The Five Forces of Competition The Competitive Strategies The Value Chain Can be used together to form a Strategy

Porter’s Competitive Forces Potential new entrants Bargaining power of buyers Bargaining power of suppliers Threat of substitute products Rivalry among competitors Beware

Also called Porters Five Forces Industry Competitors Potential Entrants Suppliers Buyers Substitutes

The threat af entry New companies (Why) Product innovation Product diversifation The treat of entry depends on barrieres to entry: Economies of scale (experience curve) Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages independent from scale and government policy

The Generic Strategies 1. Overall Cost of Leadership 2. Product Differentiation 3. Focus 1. Overall Cost of Leadership 2. Product Differentiation 3. Focus

Also called Generic Strategies Cost Leadership Differentiation Cost Focus Differentiation Focus Broad Target Narrow Target Competitive Scope Competitive advantage Lower Cost Differentiation

Porters Generic Value Chain A firms value chain identifies all strategically relevant activities performed by the firm; That is, the activities that generate competitive advantage through their being conducted at a lower cost or better.

Porters Generic Value Chain Inbound Operations Outbound Marketing Service Logistics Primary Activities Support Activities Firm Infrastructure Human Ressource Management Technology Development Procurement Direction of activity flow Margin

Comments on Porters Framework These three models have become common goods among practitioners Academics claim that the models are too focused on external factors too planning oriented too simplistic in describing the value chain too static and economic oriented