Tools for Strategic Analysis

1. Tools for Strategic Analysis Information and Competitive Advantage Value Chain

2. Learning Outcomes • Describe the three different levels of business strategy – corporate, business and operational/functional • Distinguish between the key elements of strategy – vision, mission, strategies and policies • Define IS strategy and be able to describe how it fits with overall strategy • Recognise the difference between Porter’s competitive strategies • Appreciate the value chain Introduction

3. Strategy • “the direction and scope of an organization over the long-term, which achieves advantage for the organization through its configuration of resources within a changing environment to the needs of markets and fulfill stakeholder expectations.” (Johnson et al, 2006) Strategies

4. Strategy • “… the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out these goals.” • (Chandler, 1962) • “…the strong focus on profitability not just growth, an ability to define a unique value proposition, and a willingness to make tough trade-offs in what not to do.” (Porter, 2001) Strategies

5. Therefore, strategy…….. • is concerned with long-term direction • is strongly influenced by considering the environment • deals with the overall plan for deploying resources • entails making trade-offs • is about achieving unique positioning against competitors • has the central goal of achieving competitive advantage over rivals Strategies

6. Types of business strategy Corporate Strategy For the whole organization – all business lines and resource allocation to those lines Corporation Strategies Business strategy Strategy for a particular business unit Business Unit A Business Unit B Business Unit C Operational/ Functional strategy Strategy for a single function within an Strategic Business Unit (SBU) Function A Function B Function C

7. Strategy Hierarchy • Different strategies must be compatible – to support the whole organisation • Strategies are normally formulated “Top-down” – higher levels set goals for lower levels • But lower level strategies may well influence those at higher levels – “Bottom-up” • IS strategy must be compatible with the business strategy of the SBU it serves and also with the overall corporate strategy and other functional areas within the SBU Strategies

8. Strategy elements • Mission • Statement of what the business intends to achieve and what differentiates it from other businesses • Vision • Image of the future direction that everyone can remember and follow Strategies

9. Nokia • Vision • Our promise is to help people feel close to what is important to them • Nokia is a consumer led company. There is a progressive and continuous increase in consumer involvement with technology and communications globally. People are broadening their modes of communication to include the web and, social networks are becoming central to how people communicate. • People want to be truly connected, independent of time and place, in a way that is very personal to them. And, Nokia’s promise is to connect people in new and better ways. Strategies http://www.nokia.com/A4126317

10. Google’s Mission • Google's mission is to organize the world's information and make it universally accessible and useful. • As a first step to fulfilling that mission, Google's founders Larry Page and Sergey Brin developed a new approach to online search that took root in a Stanford University dorm room and quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- an easy-to-use free service that usually returns relevant results in a fraction of a second. Strategies

11. Strategy elements • Vision • Mission • Used to guide the formulation of….. • Strategies • Resource allocation that defines organisation’s relationships with its environment over time • Policies • Guidelines and procedures used in carrying out a strategy Strategies

12. BIS, IS and IT strategy • Business information strategy • Defines how information, knowledge and applications portfolio will be used to support business objectives • IS strategy • “Determination of the most appropriate processes and resources to ensure that information provision supports business strategy” (Bocij, 2006) • Usually a stream of projects • IT strategy • “Determination of the most appropriate technological infrastructure comprising hardware, networks and software applications” (Bocij, 2006) Strategies

13. IS strategy and relationships Bocij et al, 2006 Internal resource analysis Strategies Micro environment Business Strategy Macro environment Corporate objectives Information Strategy Information requirements Information requirements IS Strategy IT Strategy IS strategy objectives

14. Porter’s Competitive Strategies • Overall cost leadership • IS can reduce the direct costs of manufacture and indirect costs of other functions. • Overall differentiation • IS can help to add unique features directly (tailoring to customer’s needs of wants) or allow other functions to do so indirectly (e.g. setting a high level of service quality) • Focus or niche • IS can help to identify and create niches directly and to create them indirectly through other functions Advantage

15. Porter’s Competitive Strategies • Generic strategies to build competitive advantage (Porter, 1980) Competitive Advantage Advantage Defined by Distinctiveness Defined by Cost Low-cost leadership Differentiation Industrywide (Broad) Target Market Differentiation-based focus Cost-based focus Specific niche or Segment (Narrow)

16. Nokia- strategy • Overall differentiation strategy • Nokia offer customers better quality and advanced phone features – so they are differentiating the offering against competitors • IS can help Nokia: • Understand the Customer wants/needs through CRM • Ensure higher quality through IS to monitor and control quality http://www.nokia.com/A4126317

17. Value Chains (Porter, 2001) • Basic tool for understanding the impact of information technology on companies • When a company competes in any industry it performs a set of interrelated value-adding activities • E.g. manufacture of a component; operating a sales force • The value chain is a framework for identifying these activities and their effect on: • Cost • Buyers • IT and the Internet have a pervasive effect on the value chain as they can be used to link the activities to each other and communicate between activities Value Chain

18. Firm infrastructure Human Resource Management Technology Development Procurement After Sales Service Value Chain Management (Porter,2001) • Value chains consist of primary and support activities Value Chain Secondary activities Operations Outbound Logistics Marketing and Sales Inbound Logistics Primary activities

19. Value Chain – Primary Activities • Inbound logistics • Receiving raw materials and/or partly finished goods; storing them; and transferring them to the manufacturing section • Operations • Producing finished goods from raw materials and/or partly finished goods • Outbound logistics • Storing finished goods and then distributing them to customers • Marketing and sales • Promoting the firm’s products; soliciting orders from prospective customers • After-sales service • Maintaining the value of the product to the customer after it has been delivered V.C. Primary

20. Value Chain – Secondary Activities • Firm infrastructure • General management; accounting and finance; legal department; health and safety; etc. • Human Resource Management • Recruiting; training and developing; appraising; career planning; etc. • Technology development • Research and development, relating to both products and processes • Procurement • Acquiring the goods and services that the firm needs in order to operate effectively; applicable to both primary and support activities V.C. Secondary

21. Firm infrastructure Human Resource Management Technology Development Procurement After Sales Service How do systems add value? (Porter,2001) • Cross-activity integration through information systems and the internet Enterprise Systems Value Chain Secondary activities Operations Outbound Logistics Marketing and Sales Inbound Logistics Customer Relationship Management Systems Supply Chain Management Systems Primary activities

22. Firm infrastructure Human Resource Management Technology Development Procurement After Sales Service How do systems add value? (Porter,2001) • Cross-activity integration through information systems and the internet Knowledge Management Systems Value Chain Secondary activities Operations Outbound Logistics Marketing and Sales Inbound Logistics Primary activities

23. References Bocij, P., Chaffey, D. Greasley, A. and Hickie, S., 2006.Business Information Systems Technology, Development and Management for e-business. 3rd ed. Johnson, G. Scholes, K. and Whittington, R. 2006.Exploring Corporate Strategy: Text and Cases. London: Prentice Hall Porter, M. 1980. Competitive Strategy. New York: Free Press Porter, M., 2001. “Strategy and the Internet”, Harvard Business Review, vol. 79, no. 3, pp. 63-80 Laudon, K.C. and Laudon, J.P., 2007. Essentials of Business Information Systems. 7th ed. London: Prentice Hall http://www.nokia.com/A4126317

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