Mission A mission statement broadly outlines the organization’s future course and communicate “who we are, what we do, for whom we do it, why we do it, and where we’re headed.” Examples of company mission statements: American Red Cross: To improve the quality of human life; to enhance self-reliance and concern for others; and to help people avoid, prepare for, and cope with emergencies. Hewlett-Packard Company: To be a major designer and manufacturer of electronic products and systems for measurement and computation. HP’s basic business purpose is to provide the capabilities and services needed to help customers worldwide improve their personal and business effectiveness. Otis Elevator: To provide any customer a means of moving people and things up, down, and sideways over short distances with higher reliability than any similar enterprise in the world.

Objectives An objective is a specific measurable result expected within a particular time period, consistent with the mission statement. NIKE’s objectives (as stated in 1987) Protect and improve NIKE’s position as the number one athletic brand in America, with particular attention to the company’s existing core businesses in running, basketball, tennis, football, baseball, and kid’s shoes and newer businesses with good potential like golf and soccer. Build a strong momentum in the growing fitness market, beginning with walking, workout, and cycling. Increase the company’s effort to develop products that women need and want. Explore the market for products specifically designed for the requirements of maturing Americans. Direct and manage the company’s international business as it continues to develop. Continue the drive for increased margins through proper inventory management and fewer, better products.

Strategy Objectives are the “ends,” and strategy is the “means” of achieving the ends. A strategy is the action path that the organization has chosen to realize goals, and establishes a broad themes for future actions. Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses. Some common strategies include: differentiation (or better), cost leadership, acquisition, and quick response.

Understanding Strategy SWOT Analysis Critically examining an organization and its environment and identifying key elements that influence the organization’s current and future competitive position Strengths such as financial resources, defendable patents, brand recognition, human-resource talent, and loyal customers Weaknesses such as insufficient financial resources for some needed investments, a decreasing market share, old product lines, and poor corporate image Opportunities such as new product or service lines, an unused customer base, and improved operational efficiencies for lower costs Threats such as emerging technologies that make our products or services obsolete, new competitors entering our markets, and existing competitors introducing innovations that enhance their competitive position relative to ours

Understanding Strategy The Value Chain In order to succeed, firms have to create more value to their products and services for their customers than the competitors do. Value, from a customer’s point of view, is a combination of features (e.g., quality, service, availability, ease of ordering, order-cycle time) and price. A firm’s value chain is the series of activities performed to create the value for which customers pay. The value-chain approach consists of identifying what activities within the firm add value to the product or service being offered to the customer.

A Possible Value Chain Supplier Developing the product Producing 1 + 2 for customization to firm’s requirements Selling Delivering Providing after-sales service 3 + 4 + 5 for long-term relationship & coordinated schedules

A Possible Value Chain (Cont.) Manufacturer (the Firm) Developing the product – get customer needs & design the product Producing – efficiently & effectively Selling – create customer dependence Delivering – reduce time & transaction cost Providing after-sales service – keep records & fast response

A Possible Value Chain (Cont.) Customer Purchasing – easy to purchase & easy to learn Assuring fit – match requirements and focus on customized products Using – provide easy user training & easy-to-use products, and assure effective use Maintaining – low maintenance products, available help & necessary information

IT & the Value Chain How can we help the customer purchase our product? How can we help our customer use and maintain our product better? How can we better coordinate our production schedule with our suppliers, to increase product availability and reduce the time it takes to fill an order?

Porter’s Five-forces Model A framework that provides a way to assess the competitive forces that can influence an organization’s strategy Supplier’s bargaining power – the influence that suppliers have over you in setting delivery schedules and quantities, price, and standards Buyer’s bargaining power – the influence that customers have over you in setting delivery schedules and quantities, price, and standards New entrants – the threat of new entrants into the industry segment or your market Substitute products – the threat of substitute products or services and a new technology making your product or service obsolete Rivalry intensity among existing competitors – positioning of traditional intra-industry rivals

Questions for Assessing Potential Impact of IT on Strategy Can IT build barriers to entry? The capabilities of IT to make it harder for new competitors to enter the firm’s market An example: Investing in a new computer-aided design/computer-aided manufacturing (CAD/CAM) system Developing an extranet to link suppliers with developers Results: Shortening the time to develop a new product from months to weeks Enabling the firm to introduce new products very rapidly

Questions for Assessing Potential Impact of IT on Strategy (Cont.) Can IT build in switching costs? Ways to increase customer loyalty (the dependence of the firm’s customers on its products and services) An example: Using of IT to recommend products based on past purchase history and stated customer preferences Being able to provide “customized” recommendations for new products Results: Customers valuing the service Customers continuing to purchase from the firm rather than from competitors

Questions for Assessing Potential Impact of IT on Strategy (Cont.) Can IT change the basis of competition? In industries where competition is intense, the primary basis of competition often tends to be price. An example: Dramatically increasing productivity (e.g., staff reductions, higher machine efficiencies, lower inventory levels) Adding features to their products and services in order to change the basis of competition from a low-cost-producer approach to a product-differentiation one (e.g., better and faster service, more flexibility in ordering) Results: Lowering product prices Satisfying customer needs in niche markets

Questions for Assessing Potential Impact of IT on Strategy (Cont.) Can IT change the balance of power in supplier-customer relationships? Ways to reduce the dependence between suppliers and customers An example: Allowing consumers to purchase products and services directly from producers using IT by offering lower prices and faster services Using the Internet capabilities to request a transportation service and cost-effectively comparing among multiple companies Results: Intermediaries having much less power in their relationship with producers Obtaining products and services at the lower costs

Questions for Assessing Potential Impact of IT on Strategy (Cont.) Can IT generate new products? IT can help the strategy of the firm by generating products on its own An example: Creating software for its own use and later decided to sell its software to other businesses that are not direct competitors Expanding product or service lines to other related-offers Results: Having another product or business Increasing customer satisfaction and receiving more sales