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IT & Strategy

IT & Strategy. What is the oldest organization is existence today?. Strategy 101:. Compete on Cost Compete on Differentiation: Performance Quality & reliability Speed of delivery Service Aesthetics Location & geographic reach Brand Focus Narrow Broad.

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IT & Strategy

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  1. IT & Strategy MGT 30660 Khalil Fadil Matta University of Notre Dame

  2. What is the oldest organization is existence today? MGTI-458 Khalil F. Matta University of Notre Dame

  3. Strategy 101: • Compete on Cost • Compete on Differentiation: • Performance • Quality & reliability • Speed of delivery • Service • Aesthetics • Location & geographic reach • Brand • Focus • Narrow • Broad MGTI-458 Khalil F. Matta University of Notre Dame

  4. Give examples of companies that have used low cost structure as a competitive weapon MGTI-458 Khalil F. Matta University of Notre Dame

  5. Give examples of companies that have used differentiation as a competitive weapon MGTI-458 Khalil F. Matta University of Notre Dame

  6. Low Profit Margin Example • Wal-Mart Case (Revenue is $300 Billion – Profit Margin 5%): • You can deploy an IT solution for the same price to either • Increase your revenues by 10% (same profit margin) • Reduce your overall costs of doing business by 5% (inc profit margin) • Which one of the 2 alternatives you would choose to invest your IT in? MGT 30660 Khalil Fadil Matta University of Notre Dame

  7. Walmart Example Current Situation.. No IT investment • Revenue: B 300 • Cost: B 285 • Profit: B 15 • Profit Margin: 5% MGT 30660 Khalil Fadil Matta University of Notre Dame

  8. Analysis of Scenarios Case 1: Add 10% to the Revenue: • Revenue inc: 300 * 1.1 = B 330 • Cost: 330 * .95 = B 313. 5 • Profit = 330 – 313.5 = B 16.5 • Profit Margin = 16.5/330 = 5% Case 2: Reduce costs by 5% • Revenue = $300 • Cost: 285 * .95= B 270.75 • Profit: 300 – 270.75 = B 29.25 • Profit Margin: 29.95/300 = 9.75% MGT 30660 Khalil Fadil Matta University of Notre Dame

  9. High Profit Margin Example • Case of a pharmaceutical company (Revenue $ 50B - profit margin of 80%) • You can deploy an IT solution for the same price to either • Increase your revenues by 5% • Reduce your overall costs of doing business by 10% • Which one of the 2 alternatives you would choose to invest your IT in? MGT 30660 Khalil Fadil Matta University of Notre Dame

  10. Pharmaceutical Example Solution • Revenue 50 B • Profit Margin 80% • Cost = 50 * .2 = 10 B • Profit = 50 – 10 = 40 B

  11. Analysis of Scenarios! • Increase Revenues by 5% keep Profits Margins the same • Revenue = 50 * 1.05 = 52.5 B • Profit Margin = 80% • Cost = 52.5 * .2 = 10.5 B • Profit = 52.5 – 10.5 = 42 B • Decrease cost by 10% keeping Revenue the same • Revenue = 50 B • Cost = 10 * .9 = 9 B • Profit = 50 – 9 = 41 B • Profit Margin = 41/50 * 100 = 82% MGT 30660 Khalil Fadil Matta University of Notre Dame

  12. How can technology be used to reduce costs of operations and increase the differentiation of its products and services? MGTI-458 Khalil F. Matta University of Notre Dame

  13. System Evolution • Transaction-oriented systems • Personal Computing • Networked environment • Internet MGT 30660 Khalil Fadil Matta University of Notre Dame

  14. Transaction-oriented • Mainframe era • Centralized IT function • Black Box mentality • Punch card/card readers • Major applications: Accounting, payroll, back office functions • Major benefit: Increase organizational efficiency MGT 30660 Khalil Fadil Matta University of Notre Dame

  15. Killer Applications • Billing • A/R • Payroll • Inventory Management • Sales Analysis MGT 30660 Khalil Fadil Matta University of Notre Dame

  16. Personal computing • Completely distributed environment • Master of the universe • Increasing computer literacy • Redundancy and inefficiency • Major contribution: increase personal efficiency, enhance tactical decision making MGT 30660 Khalil Fadil Matta University of Notre Dame

  17. Killer Applications • Word Processing • Spreadsheets • Database Management Systems MGT 30660 Khalil Fadil Matta University of Notre Dame

  18. Networked Environment • Pseudo-distributed environment • Server-based applications particularly database management • Major benefit: enhanced problem solving capabilities, basic strategic decision making, enlarge the enterprise MGT 30660 Khalil Fadil Matta University of Notre Dame

  19. Killer Applications • Decision Support Systems • Electronic Data Interchange (EDI) • E-mail • Shared Spreadsheet information • Shared DBMS MGT 30660 Khalil Fadil Matta University of Notre Dame

  20. Internet Environment • Open systems • Collaborative Environment • No boundary enterprise • Ease of use • Outsourcing • Major Applications: CRM, ERP, SCM, seamless communication, instant and global access to relevant information • Benefits: New business models, new business innovations, improved organizational efficiency MGT 30660 Khalil Fadil Matta University of Notre Dame

  21. Killer Applications • Collaboration • Commerce • Content MGT 30660 Khalil Fadil Matta University of Notre Dame

  22. Porter’s Competitiveness Model MGT 30660 Khalil Fadil Matta University of Notre Dame

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