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ISM 158 Business Information Strategy

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ISM 158 Business Information Strategy Lecture 2 IT Strategy Introductions Kevin Ross kross_at_soe.ucsc.edu Office hours: Tuesday 3:30pm 5pm (or by appointment) E2 ... – PowerPoint PPT presentation

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Title: ISM 158 Business Information Strategy


1
ISM 158 Business Information Strategy
  • Lecture 2
  • IT Strategy

2
Introductions
  • Kevin Ross
  • kross_at_soe.ucsc.edu
  • Office hours Tuesday 330pm 5pm
  • (or by appointment)
  • E2 room 559

3
Overview and update
  • Website now has schedule of presentations and
    readings
  • Any questions from last week?
  • Quizzes
  • Projects
  • Presentations
  • Cases/Reading

4
ISM 158 Lecture 2
  • This class considers the role of information in
    business strategy. In particular, we focus on
    decisions regarding information technology and
    information systems to give a business
    competitive advantage over other companies
  • Today we focus on identifying strategies and the
    role of IT in strategy

5
The Embedding of IT
  • IT now embedded in
  • Definition and execution of strategy
  • Organization and leadership of businesses
  • Definitions of unique value propositions
  • Every business definition is morphing before our
    eyes
  • Markets
  • Industries
  • Strategies
  • Firm designs
  • Information is now a major economic good

6
What is a Business Model?
  • Defines how enterprise relates to environment
  • Strategy aligns organization with environment
  • Resources in and out
  • How value is created for stakeholders
  • Sets goals and ways to achieve them

7
Fig 1.1 Components of a Business Model
8
Porter Competitive Model
Potential New Entrants
Bargaining Power of Suppliers
Intra-Industry Rivalry Strategic Business Unit
Bargaining Power of Buyers
Substitute Products and Services
9
Competitive Model Focus
  • What is driving competition in the current or
  • future industry?
  • What are current or future competitors likely
  • to do and how can a company respond?
  • How can a company best posture itself to
  • achieve and sustain a competitive advantage?

10
Competitive Model Forces
Intra-industry Rivals Strategic Business Unit
(SBU) and major rivals. Buyers Categories of
major customers. Suppliers Categories of major
suppliers that play a significant role in
enabling the SBU to conduct its business. New
Entrants Companies that are new as competitors
in a geographic market or existing companies that
through a major shift in business strategy will
now directly compete with the SBU. Substitutes
An alternative to doing business with the SBU.
11
Porter Competitive Model Education Industry
Universities U.S. Market
  • Foreign Universities
  • Shift in Strategy by Universities
  • or Companies

Potential New Entrants
Intra-Industry Rivalry SBU UCSC
Rivals UC campuses, CSU, Private
universities, Community Colleges
Bargaining Power of Suppliers
Bargaining Power of Buyers
  • Faculty
  • Staff
  • Equipment and
  • Service Suppliers
  • Alumni
  • Foundations
  • Governments
  • IT Vendors
  • Students
  • Parents
  • Businesses
  • Employers
  • Legislators

Substitute Products and Services
  • Internet Distance Learning
  • Books and Videotapes
  • Computer-Based Training
  • Company Education Programs

12
Role of Technology through Porter perspective
Can we
1. Build barriers to prevent a company from
entering an industry?
2. Build in costs that would make it difficult
for a customer to switch to another
supplier?
3. Change the basis for competition within the
industry?
4. Change the balance of power in the
relationship that a company has with
customers or suppliers?
5. Provide the basis for new products and
services, new markets or other new business
opportunities
13
Porter Competitive Strategies
Cost Leadership Strategies
Primary Strategies
Differentiation Strategies
Innovation Strategies
Growth Strategies
Supporting Strategies
Alliance Strategies
14
Strategic VisionService Concept
  • What are important elements of the service to be
    provided, stated in terms of results produced for
    customers?
  • How are these elements supposed to be perceived
    by the target market segment, by the market in
    general, by employees, by others?
  • How do customers perceive the service concept?
  • What efforts does this suggest in terms of the
    manner in which the service is designed,
    delivered, marketed?

15
Strategic VisionOperating Strategy
  • What are important elements of the strategy
    operations, financing, marketing, organization,
    human resources, control?
  • On which will the most effort be concentrated?
  • Where will investments be made?
  • How will quality and cost be controlled
    measures, incentives, rewards?
  • What results will be expected versus competition
    in terms of, quality of service, cost profile,
    productivity, morale/loyalty of servers?

16
Strategic VisionService Delivery System
  • What are important features of the service
    delivery system including role of people,
    technology, equipment, layout, procedures?
  • What capacity does it provide, normally, at peak
    levels?
  • To what extent does it, help insure quality
    standards, differentiate the service from
    competition, provide barriers to entry by
    competitors?

17
Competitive Strategies (Overall Cost Leadership)
  • Seeking Out Low-cost Customers
  • Standardizing a Custom Service
  • Reducing the Personal Element in Service
    Delivery (promote self-service)
  • Reducing Network Costs (hub and spoke)
  • Taking Service Operations Off-line

18
Competitive Service Strategies (Differentiation)
  • Making the Intangible Tangible (memorable)
  • Customizing the Standard Product
  • Reducing Perceived Risk
  • Giving Attention to Personnel Training
  • Controlling QualityNote Differentiation in
    service means being unique in brand image,
    technology use, features, or reputation for
    customer service.

19
Competitive Role of Information in Services
  • Strategic Focus Competitive
    Use of Information

20
Limits in the Use of Information
  • Anti-competitive (Barrier to entry)
  • Fairness (Yield management)
  • Invasion of Privacy (Micro-marketing)
  • Data Security (Medical records)
  • Reliability (Credit report)

21
Strategy Audit of Company
  • Market/Channel position
  • Who are customers?
  • How to reach them
  • Product position
  • What products/services to offer
  • Features, price
  • Value chain/value network position
  • Role with respect to suppliers, producers,
    distributors, partners
  • Boundary Position
  • What wont you do?

22
Fig 1.2 Analyzing Competitive Forces and
Strategic Positioning
23
Understand Customers
24
Understand Competitors
25
Understand Market and Product
26
Fig 1.3 Product/Market Positioning in the US
Retail Financial Services Industry, 1990
27
Understand Partners
28
Understand Societal Context
29
Strategic Shifts
  • Strategy changes over time
  • Flow of information makes this possible
  • Enhancement (improve existing)
  • Expansion (launch new)
  • Extension (new business or business model)
  • Exit (drop product/category/market/channel)

30
Fig 1.4 Options for Evolving Strategy
31
Fig 1.5 Categories of Strategic Risk
32
Fig 1.6 McFarlans Strategic Grid
33
Fig 1.7 Strategic Alignment Model
Ideally, all four quadrants align to create value
34
Opportunities
  • Can IT change basis for competition?
  • Can IT change balance of power among buyers and
    supplyers?
  • Can IT build or reduce barriers to entry?
  • Can IT increase or decrease switching costs?
  • Can IT add value to existing products and
    services or create new ones?

35
Risks
  • Can emerging technologies disrupt current
    business models?
  • Are we too early or too late to exploit IT
    opportunity?
  • Does IT lower entry barriers?
  • Does IT trigger regulatory action?

36
Fig 1.8 Analyzing Disruptive Technologies
37
Fig 1.9 Analyzing Cash Flow Curve
38
Questions
39
Presentation Ingrid Gain
40
Tips for Reading Cases
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