BUSINESS STRATEGY

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• BUSINESS STRATEGY
• and
• INFORMATION SYSTEMS

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What is strategy ?

• 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.

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A good strategy is

• 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.
• Flexible Taking advantage of chages.
• Well led Good leadership is needed.
• Full of surprises By doing unexpected we gain
  advantage.

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Developing a strategy

• 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.

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Figure 2.2 A model of strategic management
Source Gordon Greenley, Strategic Management,
Prentice Hall, 1989
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Analytical Tools

• 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

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SWOT(Strength Weakness Opportunities Threats)

• 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.

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A SWOT matrix
Figure 2.3 A SWOT matrix
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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.

• 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 end-user sector.
• Have customer lists.
• Direct delivery capability.
• Product innovations ongoing.

• 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.

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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.

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PESTEL

• 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.

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PESTEL (cont.)

• 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.

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PESTEL (cont.)

• 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.

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Balanced Business Scorecard

• 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.

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Balanced Business Scorecard (cont.)

• 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.

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BCG (Boston Consulting Group)

• 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.

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The BCG matrix
Figure 2.4 The BCG matrix
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Competition and Strategy

• The essence of strategy formulation is dealing
  with competition said Porter and developed five
  forces model over it.
• 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.

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Porters five forces model
Figure 2.5 Porters five forces model Source
Michael Porter, Competitive Strategy Techniques
for Analyzing Industry and Competitors, The Free
Press, 1970
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Robsons analysis of IS opportunities

• Wendy Robson has modified Porters 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
• reduce overall costs,
• differentiate products and services from the
  competitions offerings and add additional
  features on them,
• concentrate on market segments and support
  activities in them.

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Robsons analysis of IS opportunities
Figure 2.6 Robsons analysis of the five forces
and IS opportunities Source W Robson, Strategic
Management Information Systems, 2nd edn,
Prentice Hall, 1997
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Generic IS strategies for organizations

• There are six strategies offered for the
  development of IS in organizations by Gregory
  Parsons. These are
• Centrally planned where the planning cycles for
  businesses and IS are closely linked and IS
  strategy is embedded in business strategy.
• Leading edge where there is a belief that
  innovative technology can create organizational
  gains and that risky investment can generate big
  paybacks.

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Generic IS strategies for organizations (cont.)

• A free market users make decisions so IS
  department behaves as a competitive business
  unit.
• 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.
• Scarce resource scope of the IS function is
  deliberately limited by budget constraints.
• Necessary evil where organizations see the
  development of IS as a necessary evil and believe
  the information is not important to their
  business.

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How strategy and systems link with organizational
culture, the 7-S model

• It proposes that there are other factors in
  addition to strategy that make an organization
  effective.

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• 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.
• Structure the basic organization of the company,
  its departments, reporting lines, areas of
  expertise and responsibility (and how they
  inter-relate).
• 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
• Skills the capabilities and competencies that
  exist within the company. What it does best.
• 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.
• 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.
• 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.

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• Thank you for participating.