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BUSINESS STRATEGY and INFORMATION SYSTEMS. 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.
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BUSINESS STRATEGY and INFORMATION SYSTEMS
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.
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.
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.
Figure 2.2 A model of strategic management Source: Gordon Greenley, Strategic Management, Prentice Hall, 1989
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
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.
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. 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.
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 • 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.) • 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.) • 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 • 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 businessperspective and • employee perspective to solve this.
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.
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.
The BCG matrix Figure 2.4 The BCG matrix
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.
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 ofIS opportunities • 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; • 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 • 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.
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.
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.
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).
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.
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.
