Transcript Ch2 - Computer Engineering

BUSINESS STRATEGY
and
INFORMATION SYSTEMS
What is strategy ?
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We come accross the concept of strategy in military
in the time of ancient Greeks, then it moved from
military and diplomatic worlds into business as time
passed.
Strategy is the result of a careful analysis and it is
purposeful; it is a plan for achieving somthing.
Strategies may change according to environmental
changes so IS developments that supported them
may ended in such cases.
A good strategy is;
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Clear : Goals are clear enough to give continuity to tactical choices
made during the lifetime of the strategy.
Keeps the initiative : If there is freedom of action people commit
more and better motivated.
Concentrated : A good strategy concentrates resources in a good
place and time where they generate maximum advantage.
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Flexible : Taking advantage of chages.
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Well led : Good leadership is needed.
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Full of surprises : By doing unexpected we gain advantage.
Developing a strategy
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When making a decision we;
 Investigate the situation
 Develop some alternative courses of action
 Evaluate these decisions
 Choose the decision to be implemented
 Implement our decision or solution and follow it
up
By using this process we can develop a model of
strategic managment.
Figure 2.2 A model of strategic
management
Source: Gordon Greenley, Strategic
Management, Prentice Hall, 1989
Analytical Tools
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There are many analytical tools to help in this
process; most of which are concerned with offering
ways of analysing the current situation. Those we
examine are;
 SWOT
 PESTEL
 Balanced Business Scorecard
 Boston Group Matrix
SWOT
(Strength Weakness Opportunities Threats)
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It defines the strengths, weaknesses, opportunities
and threats that face an organization.
It measures a business unit, a proposition or idea.
We have here strengths - weaknesses from internal
factors and opportunities – threats from external
factors.
It helps in decision making how the firm may use its
strengths and opportunities to overcome weaknesses
and threats.
A SWOT matrix
Figure 2.3 A SWOT matrix
SWOT example
The scenario is based on a business-to-business manufacturing company, who
historically rely on distributors to take their products to the end user market. The
manufacturer tries to create a new company of its own to distribute its products direct
to certain end-user sectors, which are not being covered or developed by its normal
distributors.
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Strengths
End-user sales control and direction.
Right products, quality and reliability.
Better product life and durability.
Spare manufacturing capacity.
Some staff have experience of enduser sector.
Have customer lists.
Direct delivery capability.
Product innovations ongoing.
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Weaknesses
We would be a small player.
No direct marketing experience.
We cannot supply end-users
abroad.
Need more sales people.
Limited budget.
No pilot or trial done yet.
Delivery-staff need training.
Customer service staff need
training.
SWOT example (cont.)
Opportunities
 Could develop new products.
 Profit margins will be good.
 End-users respond to new ideas.
 Could extend to overseas.
 New specialist applications.
 Can surprise competitors.
Threats
 Environmental effects would favour larger
competitors.
 Existing core business distribution risk.
 Market demand very seasonal.
 Retention of key staff critical.
 Possible negative publicity.
 Vulnerable to reactive attack by major
competitors.
PESTEL
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It is describing the external factors of Political,
Economic, Socio-cultural, Technological,
Environmental and Legal that affect organization now
or in the future.
We need to be aware of external factors affecting our
organization and how they might change IS
developments.
PESTEL (cont.)
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Political : Government attitudes towards private and
state-owned enterprises; international politics (price
of oil, raw material supply)
Economic : They are closely related to political
factors. Interest rates, currency exchange, inflation,
market share etc.
Socio-cultural : They include changes in demography,
life style, working conditions, education etc.
PESTEL (cont.)
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Technological : Includes the availability of new ways of
delivering a service through the use of technology, exploit
marketing information and extend choices by internet etc.
Environmental : Climate change, impact of pollution,
raw material supplies, use of energy etc.
Legal : Anti-trust and monopoly legislation, laws
against pollution, specific taxation legislations etc.
Balanced Business Scorecard
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Accounting measures of an organization do not show
the intagible assets like customer loyalty, people
skills, innovation and so on.
So this approach gives;
 the customer perspective,
 the internal business perspective and
 employee perspective
to solve this.
Balanced Business Scorecard (cont.)
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Customer Perspective : How customers see the
organization. The measures may include response and
delivery times, defect rates and so on. Customers are
surveyed to find out what it is like to be a customer of our
organization.
Internal Business Perspective : How well our business is
running ? What processes must work excellently if we are
to exceed our customers’ expectations ?
Employee Perspective : Often called the ‘learning and
growth’ or ‘organizational growth perspective’. It is about
the constant development of employees and is much more
than just training.
BCG (Boston Consulting Group)
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It provides a firm an opportunity to assess how well its
business units work together.
Each business unit is evaluated in terms of two factors:
market share and the growth prospects in the market.
It is a marketing analysis tool.
After using this tool there will be a process for the
development and implementation of business strategy.
The BCG matrix
Figure 2.4 The BCG matrix
Competition and Strategy
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‘The essence of strategy formulation is dealing with
competition’ said Porter and developed five forces
model over it.
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His model takes competitive world as a violent
environment within which the business position of an
organization is determined by five forces acting on it.
Porter’s five forces model
Figure 2.5 Porter’s five forces model
Source: Michael Porter, Competitive Strategy: Techniques for Analyzing Industry and Competitors, The Free Press, 1970
Robson’s analysis of IS opportunities
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Wendy Robson has modified Porter’s five forces
model to show the opportunities for information
systems.
He identified 3 generic business strategies to respond
to the five competitive forces by using IS to;
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reduce overall costs,
differentiate products and services from the
competition’s offerings and add additional features on
them,
concentrate on market segments and support activities in
them.
Robson’s analysis of IS opportunities
Figure 2.6 Robson’s analysis of the five forces and IS opportunities
Source: W Robson, Strategic Management & Information Systems, 2nd edn, Prentice Hall, 1997
Generic IS strategies for organizations
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There are six strategies offered for the
development of IS in organizations by Gregory
Parsons. These are;
1.
Centrally planned – where the planning cycles for
businesses and IS are closely linked and IS strategy is
embedded in business strategy.
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Leading edge – where there is a belief that innovative
technology can create organizational gains and that
risky investment can generate big paybacks.
Generic IS strategies for organizations (cont.)
3.
A free market – users make decisions so IS
department behaves as a competitive business unit.
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Monopoly – the information is a corporate asset and
strategy for IS development is founded on it. There is
a danger of slow moving and unresponsive to
customer.
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Scarce resource – scope of the IS function is
deliberately limited by budget constraints.
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Necessary evil – where organizations see the
development of IS as a necessary evil and believe the
information is not important to their business.
How strategy and systems link with
organizational culture, the 7-S model
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It proposes that there are other factors in addition to
strategy that make an organization effective.
The 3Ss across the top of the model are described as 'Hard
Ss':
Strategy: the direction and scope of the company over
the long term.
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Structure: the basic organization of the company, its
departments, reporting lines, areas of expertise and
responsibility (and how they inter-relate).
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Systems: formal and informal procedures that govern
everyday activity, covering everything from management
information systems, through to the systems at the point
of contact with the customer (retail systems, call center
systems, online systems, etc).
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The 4Ss across the bottom of the model are less tangible,
more cultural in nature, and were termed 'Soft Ss' by
McKinsey:
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Skills: the capabilities and competencies that exist within
the company. What it does best.
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Shared values: the values and beliefs of the company.
Ultimately they guide employees towards 'valued'
behavior.
Staff: the company's people resources and how the are
developed, trained and motivated.
Style: the leadership approach of top management and
the company's overall operating approach.
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Effective organizations achieve a fit between these seven elements.
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If one element changes then this will affect all the others. For example,
a change in HR-systems like internal career plans and management
training will have an impact on organizational culture (management
style) and thus will affect structures, processes, and finally
characteristic competences of the organization.
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The soft factors can make or break a successful change process, since
new structures and strategies are difficult to build upon inappropriate
cultures and values.
Thank you for participating.