STRATEGY

1
OM
BUSINESS
IS

WE ARE
BUSINESS
STRATEGY
What's The Role of
Information Systems?
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BUSINESS 101
Why are some businesses successful whileother
businesses fail?
Describe characteristics or factors that
arepresent in successful businesses.
Describe characteristics or factors that
arepresent in failed businesses.
What process is employed by organizationsto
establish a road map for success?
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STRATEGY DEVELOPMENT
? In order for a organization to be successful,
it must formally identify and document 1)
the reason(s) the organization was founded
2) the core values and purpose of the firm
3) the goals the firm will pursue to fulfill its
established mission ? Based on the
establishment of these core organizational
factors, the organization will then formulate
and implement one or more enterprise-wide plans
(strategies) for ensuring the organization
meets and exceeds both its tactical (one year)
and strategic (more than one year) goals and
objectives. ? Successful organizations ensure
they ONLY allocate their scare resources
(e.g., money and people) to projects that they
believe will allow the firm to achieve its
goals and objectives. ? Two Common Approaches
1) Strategy Pyramid 2) Strategy Cycle
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STRATEGY PYRAMID APPROACH
Articulates the enduring core values of the firm
(e.g., social responsibility, creativity,
technological innovation, etc.) and the core
purpose of the firm (e.g., the main reasons the
founders decided to start the organization).
VISION
Clear and succinct representation of the firms
purpose for existence. It should contain
meaningful and measurable criteria valued by the
firm.
MISSION
Listing of measurable and attainable financial
(e.g., sales targets, earnings growth) and
firm(e.g., market share, reputation, etc)
objectives.
GOALS
STRATEGIES
Detailed projects or initiatives launched by the
firm to ensure the firm meets its established
business goals.
Tactical
Strategic
Characteristics
1) Top Down Approach
2) Methodical and Structured Approach
3) Assumes a Stable and Known Business Environment
What are the benefits? drawbacks to this approach?
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STRATEGY PYRAMID APPROACH
Benefits
1) Top Management Support top management will
support any new business strategy (e.g.,
project or initiative) as long as it aligns with
the firms values, mission, and goals.
2) Ensures Employee Direction and Understanding
employees can use the documented information
(e.g., mission statement, goals and objectives,
etc.) as the basis for all planning and
decision making.
3) Structured Process the structured and
methodical approach ensures careful
consideration and attention is given the
approach.
Drawbacks
1) Uni-Directional Information Flow approach
assumes that top management is successfully
able to understand both the firms tactical and
strategic concerns without constant input
from business operations.
2) Assumes Static Business Environment its can
be difficult for the firm to quickly respond
to changes in its business environment due to
the formal nature of the firms strategy
development approach.
3) Lacks Innovation Leading to Competitive
Advantage strategies developed on an annual
basis lack discovery, opportunity, and purpose.
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STRATEGY CYCLE APPROACH
A high-level statement of the means by which your
organization will achieve its vision. It states
what the firm wants to achieve in the long-term
in terms oforganizational goals and objectives.
Strategic
Intent
Numerous organizational and marketplace factors
continually impact the firms ability to bring
about its strategic intent. The firm must be
willing to change its strategic intent if it
wants to be able to respond to changes in
itscompetitive marketplace. This is only
possible if the firm is able to seamlessly link
strategy creation and implementation process.
CHALLENGES
Business
Firms that are able to understand changes in
their competitive environment and implement
proper strategies to leverage those changes can
gain both new business opportunities and a
competitive advantage.
Opportunities
Characteristics
1) Bi-Directional Approach
2) Flexible and Unstructured Approach
3) Assumes a Dynamic Business Environment
What are the benefits? drawbacks to this approach?
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STRATEGY CYCLE APPROACH
Benefits
1) Bi-Directional Information Flow employees in
the field are best able to assess
emerging changes in the marketplace and pass them
up to top management so they can make
corrections in their business strategies.
2) High Business Velocity organizations are able
to make modifications to their existing
business strategies to take advantage of emerging
business opportunities resulting in an
organizational competitive advantage.
3) Development of Innovational Strategies
strategies developed on a real-time basis
have discovery, opportunity, and purpose.
Drawbacks
1) Confusing Organizational Direction since the
organizations business strategies may
change considerably over time the dynamic
nature of strategy development and
implementation may confuse employees.
2) Assumes Dynamic Business Environment if the
general structure and competitive nature of
the firms marketplace is very static
establishing a change based strategy
development process may not be appropriate.
3) Minimize Top Managements Long-Term Vision is
strategies are based only on meeting current
tactical needs strategic goals may be
sacrificed.
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STRATEGY DEVELOPMENT
1. No Standardized Approach
? there is not a single accepted approach to
organizational strategy development. Top
executives get paid serious money to develop
and implement strategies that ensure the firm
meets its goals and objectives.
2. Myriad of Factors Impact the Process
? there are numerous internal factors (e.g.,
money, culture, leadership, structure,
technology, operational, organizational) and
external factors (e.g., competition, global
issues, trading partners) that must be taken
into consideration when developing implementing
a business strategy
3. Project Selection Supports Strategy
? once a strategy or set of strategies has been
established it is the core responsibility of
the operational managers to implement projects
that will allow the organization to realize
its established strategies.
4. Careful Resource Allocation to Priority
Projects
? the approval of projects and initiatives means
the firm has made specific decisions on how it
will allocate its scare resources (e.g., money,
people, and technology) to meet organizational
needs.
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IS STRATEGY DEVELOPMENT
1. No Standardized Approach
? Much like the business strategy development
process - there is not a single accepted
approach to IS strategy development. The
general approach used to develop the firms
business strategy is typically also used to
develop the firms IS strategy.
2. The Goal is Strategy Alignment
? It is the main responsibility of the
organizations top management team, working in
concert with the CIO, to develop an IS strategy
that directly aligns with the firms business
strategy!
3. Allocation of Scare IS Resources is Critical
? IS is a scare resource in ALL organizations.
The use of IS people and technologies is an
expensive proposition. Firms must ensure they
only use their scare IS resources of projects
and initiatives that directly align with the
firms established business strategies.
Every dollar spent on IS should be directly
aligned with the businessstrategies established
by the firms management team!
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IS STRATEGY ALIGNMENT
IS Staff
Project 1

• Project Manger- Systems Analyst- Programmer-
  Technicians
• Database Mgr

• Network Mgr- Telecom Mgr
• Security- Training

Project 2
Organizational BusinessStrategy
Allocation?
IS Techs
Project 3

• Processors
• Storage- Networks- Telecomm

• Applications- Systems Software
• Security Software- Comm Software

Project 4
COST OF TIME?
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IS STRATEGY CHALLENGES
1. Constant IS Innovation
? New IS technologies and innovations are being
introduced into the business marketplace
everyday. Deciding which technologies the firm
should adopt and which ones to ignore can often
times have a significant impact on the
failure/success of an organization. (e.g., web
site)
2. Technology Investment is Long-Term
? Although organizations are able to quickly
change their business strategies to meet their
changing business environment it takes
along time for firms to identify select
integrate implement new technologies into the
firms organizational structure.
3. Investment in IS Applications and Technologies
is Expensive
? Organizations can spend a significant percent
of their capitol on the selection and
implementation of a new IS technology. The
initial cost of acquiring an application or
technology is only a small percentage of the
TOTAL COST OF OWNERSHIP (TCO) throughout the
serviceable life time of the application or
technology. (e.g., printers)
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STRATEGY FORMULATION APPROACHES
1) Resource-Based Theory of Competitive Advantage
Inside-Out Process
? Firm starts by looking at its unique internal
resources and business capabilities. The firm
then assess the potential of these assets to
provide value to the firm. Finally, the firm
selects a business strategy that will allow the
firm to best exploit its resources and
capabilities relative to external business
opportunities.
2) Environmental Forces Theory of Competitive
Advantage
Outside - In Process
? Firm starts by looking at the relative position
of the firm in a specific industry. Based on
the firms analysis of its environment, the
firm will develop a business strategy that will
allow the firm to maximize the firms
performance in their specific industry.
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RESOURCE-BASED THEORY OF COMPETITIVE ADVANTAGE
1. Identify and classify the firmsresources.
Appraise strengths andweaknesses relative to
competitors.Identify opportunities for
betterutilization of resources.
RESOURCES
2. Identify the firms capabilities Whatcan the
firm do more effectively thanits rivals?
Identify the resourcesinputs to each capability,
and the complexity of each capability.
CAPABILITIES
5. Identify resource gapswhich need to be
filled.Invest in replenishingaugmenting and
upgradingfirms resource base.
3. Appraise the rent generatingpotential of
resources and capabilitiesin term of a) the
potential for sustainable CA b) the
appropriability of their returns
COMPETITIVEADVANTAGE
REPLENISH AUGMENT
4. Select a strategy which bestexploits the
firms resources andcapabilities relative to
externalopportunities
STRATEGY
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RESOURCE-BASED THEORY AND ROLE OF IS
ISSTRATEGY
BUSINESSSTRATEGY
WHAT UNIQUE TECHNOLOGIAL RESOURCESDO WE HAVE
THAT COULD PROVIDE THE FIRM WITH A COMPETITIVE
ADVANTAGE?
RESOURCES
WHAT UNIQUE IS EXPERTISE DOES OUR IS STAFF
POSSESS THAT COULD PROVIDE THE FIRM WITH A
COMPETITIVE ADVANTAGE?
CAPABILITIES
HOW DO WE EXPLOIT OR LEVERAGE OUR IS RESOURCES
AND EXPERTISE TO GAIN A CA IN OUR SPECIFIC
MARKETPLACE?
COMPETITIVEADVANTAGE
HOW CAN OUR FIRMS IS RESOURCES BE USED TO
SUPPORT IDENTIFIED BUSINESSSTRATEGIES SUPPOTED
BY THE FIRM?
STRATEGY
WHAT UNIQUE TECHNOLOGIAL RESOURCESDO WE HAVE
THAT COULD PROVIDE THE FIRM WITH A COMPETITIVE
ADVANTAGE?
REPLENISH AGMENT
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Porter's Five Forces Model
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Porter's Five Forces Model
Michael Porter identified FIVE forces that impact
howfirms compete in their selected marketplace
4) Threat of New Entrants 5) Rivalry Among
ExistingCompetitors

• Buyer Power
• Supplier Power
• 3) Threat of SubstituteProducts or Services

Describe or define each force (in order).
Describe a program or initiative implemented by
organizations to try and manage the force
impact.
Describe a program or initiative implemented by
organizations to try and manage the force
impact byleveraging the capabilities of either
technology orinformation systems .
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Buyer Power
Description
? high when buyers have many choices of whom to
buy from and low when their choices are few.
Business Initiatives
? Loyalty Programs reward customers based on the
amount of business (e.g., money they spend)
with the business.
? Heavy Product Marketing firms spend
significant financial resources marketing
their product or service to develop customer
loyalty through marketing perception.
Technology / IS Initiatives
? Mobil and Speedpass customer retention due
to quick and easy method to purchase gas.
? Microsoft Market Dominance a lack of
software marketplace competitors limits
customer choices.
? Federal Express Software Lock-In FDX
Powership mc software system provides firms
with logistics shipping advantages.
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Supplier Power
Description
? high when buyers have few choices of whom to
buy from and low when their choices are many.
Business Initiatives
? Wal-Mart Effect the firm buys in such great
quantity in typically markets with many supply
options price is low.
? OPEC Control oil producing countries create a
financial demand for their product by limiting
production.
Technology / IS Initiatives
? Sprint/Motorola Partnership Sprint limits
what cell phones they will support on their
network thus controlling Motorola?
? Ace Hardware Lights B2B Reverse Auction
firm accept bids at an increasingly lower
price - for Christmas lights.
? Automobile Industry Parts Buying B2B
Private Auction the industry posts its parts
needs and solicits bids from suppliers.
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Threat of Substitute Products or Services
Description
? high when there are many alternatives to a
product or service and low when there are few
alternatives of which to choose from.
Business Initiatives
? Cell Phone Market customer is reluctant to
switch due to contract cancellation costs.
? Heavy Customer Service Product Marketing
firms spend financial resources to discourage
substitutes through perception.
Technology / IS Initiatives
? Amazon.Com Valued Customer System was a
customer has registered (logged-in) the
system will make recommendations and provide
incentives specific to the customer.
? Harrahs Individualized Customer Marketing
firm tracks specific customer needs based on
their business with the firm by using a
sophisticated customer rewards level approach.
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Threat of New Entrants
Description
? high when it is easy for competitors to enter a
market and low when there are significant entry
barriers to a market.
Business Initiatives
? Harley-Davidson Government Tariffs U.S.
government restricted import of motorcycles
that compete with Harley-Davidson.
? Cable TV Source Contracts cities and states
established exclusive agreements with cable
companies to provide services.
Technology / IS Initiatives
? Dell Computer Economies of Scale hard to
compete with Dell in the PC marketplace because
they buy components in bulk driving down
their total product cost.
? Cisco Expertise Monopoly firm virtually
invented network component design and
operations hard to compete without possessing
requite marketplace knowledge.
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Rivalry Among Competitors
Description
? high when competition is fierce and low when
competition is more complacent.
? in todays dynamic global marketplace for
products and services, there are VERY FEW
industries in which competition is fierce!
? global entrepreneurship has resulted in a
staggering increase in global competition for
products and services.
Why is it so hard to establish and maintain a
competitiveadvantage within a given marketplace?
What factors are changing the types of products
and services that the U.S. economy can
successfully offerbuyers in todays cost
conscious economy?
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Porter's Three Generic Strategies
Michael Porter identified THREE generic
strategiesfor competing within a given
marketplace

• Cost Leadership
• Differentiation
• 3) Focused

Describe or define characteristics of firms
thatcompete using the strategy (in order).
Describe capabilities or internal strengths
must bepossessed by the firm to successfully
implement thespecific strategy.
Describe what risks or challenges the firm will
have tocontinually address in order to complete
using the strategyin a given marketplace.
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Cost Leadership
Strategy Characteristics

• Firm is the low cost producer in an industry for
  a given level of product or service quality.
• Firm sells its products at average industry
  prices to earn a profit higher than that of
  rivals, OR below the average industry price to
  gain market share.

Internal Strengths (Possessed By Firm)

• High level of expertise in manufacturing process
  engineering.
• Efficient distribution channels.

Strategy Risks
- Firms in marketplace offer their products at a
lower price. - Firms use technology to leapfrog
production capabilities.
1) What firms employ this business strategy?
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Differentiation
Firm Characteristics

• Strategy calls for the development of a product
  or service that offers unique attributes that
  are valued by customers AND are perceived to
  be better than the products offered by the
  competition.- The value added by the
  uniqueness of the product may allow the firm
  to charge a premium price for their product.

Internal Strengths (Possessed By Firm)

• - Highly skilled and creative product and team.
• Strong sales and marketing team that is able to
  communicate the perceived value of the
  product to the consumer.
• Corporate reputation for quality and innovation.

Strategy Risks
- Imitation of the product by competitors -
Changes in consumer tastes and perceptions
1) What firms employ this business strategy?
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Focused
Firm Characteristics

• Firm concentrates on a narrow segment and within
  that segment attempts to achieve a cost
  advantage or differentiation.- The premise is
  that the needs of the selected segment can be
  better served by focusing entirely on it.- Firm
  hopes to gain a high level of loyalty from
  customers
• Firm may be able to pass on higher product costs
  to their valued customers since substitute
  products do not exist.

Internal Strengths (Possessed By Firm)

• Ability to tailor a broad range of product
  development strengths to a relatively narrow
  market segment that they know very well.

Strategy Risks
- Attempt at imitation from competitors. - Other
focusers may try to carve out sub-segments.
1) What firms employ this business strategy?
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Strategies and Forces
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IS Strategy Summary
BusinessManagementTeam
Organizational Business Strategy
Strategy Alignment(Allocation of Scare Resources)
Information Systems Strategy
BusinessManagementTeamWith CIOSupport
Applications
Technology
Professionals
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Any Questions?