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Tools for Strategic Analysis Information and Competitive Advantage Value Chain Learning Outcomes Describe the three different levels of business strategy – corporate, business and operational/functional

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Tools for strategic analysis l.jpg

Tools for Strategic Analysis

Information and Competitive Advantage

Value Chain


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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)


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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


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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


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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


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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


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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


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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


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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


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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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