Strategy and IS zDescribe the roles of business, organizational and IS strategy zCompare and contrast: Porter’s three generic strategies model, D’Aveni’s hypercompetion model, and Brandenburger and Nalebuff’s co- opetition model zDescribe the major components and apply the value chain, competitive forces and strategic thrusts models zDiscuss risks of IS success zDiscuss eras of IT use

Strategic Advantage Does an organization need Information Systems to gain strategic advantage?

Strategy - A Plan zBusiness strategy drives organizational and information systems strategy zInformation systems strategy - plan the organization uses in providing information services zInformation systems strategy is affected by a firm’s business and organizational strategies zOrganizational strategy - organization’s design as well as the choices it makes to define, set up, coordinate and control its work processes zRemember interdependency!

Porter’s Three Generic Strategies zCost leadership (lowest cost in industry) zDifferentiation of products/services zFocus (finding a specialized niche) ycost ydifferentiation of product or services

Be Low Cost Producer - IT strategic if it can: zHelp reduce production costs & clerical work zReduce inventory, accounts receivable, etc. zUse facilities and materials better zOffer interorganizational efficiencies

Produce Unique Product - IT strategic if it can: zOffer significant component of product zOffer key aspect of value chain zPermit product customization to meet customer’s unique needs zProvide higher/unique level of customer service/satisfaction

Fill Market Niche - IT strategic if it can: zPermit identification of special needs of unique target market zSpot and respond to unusual trends

D’Aveni’s Hypercompetition Model zFocused on turbulent environment zAdvantages are rapidly created and eroded zSustaining an advantage can be a deadly distraction zThe goal is disruption, not sustainability, of advantage zInitiatives are achieved with a series of small steps

Four Arenas of Competitive Advantage zCost/quality zTiming/know-how zStrongholds zDeep pockets (short-term only)

Seven S’s zSuperior Stakeholder Satisfaction zStrategic Soothsaying zPositioning for Speed zPositioning for Surprise zShifting the rules of competition zSignaling strategic intent zSimultaneous and Sequential Strategic Thrusts

Brandenburger and Nalebuff’s Co-opetition zOptimally combining cooperation and competition zValu Net of competitors and complementors

Strategic Information Systems zIS that help gain strategic advantage zSignificantly change manner in which business supported by the system is done zOutwardly aimed at direct competition zInwardly focus on enhancing the competitive position zCreate strategic alliances zIS can support business strategies

Eras of IT

Unusual Suspects: Information Resources zInformation systems infrastructure zInformation and knowledge zProprietary technology zTechnical skills of the IT staff zEnd users of the information system zRelationship between IT and business managers zBusiness processes

Strategy Axioms zAxiom: A scarce resource adds value yCorollary: only if there is a need zAltnernative axiom: Value is derived from plentitude yWhat good is a single fax machine?

Firm Infrastructure (general management, accounting, finance, strategic planning) Human Resource Management (recruiting, training, development) Technology Development (R&D< product and process improvement) Procurement (purchasing of raw materials, machines, supplies) Support Activities Primary Activities Inbound Logistics (raw materials handling and warehous- ing) Operations (machine assembling, testing) Outbound Logistics (warehous- ing and distribution of finished product) Service (installation, repair, parts) Marketing and Sales (advertising, promotion, pricing, channel relations)

Value Chain Model zChain of basic activities that add to firm’s products or services zPrimary activities zSecondary activities

Value Chain Primary Activities zInbound zOutbound zOperations zMarketing and Sales zAfter-Sale Services

Value Chain Support Activities zTechnology development zProcurement zHuman Resources Management zManagement Control yaccounting/finance ycoordination ygeneral management ycentral planning

Competitive Forces zThreat of entry of new competition zBargaining power of suppliers zBargaining power of buyers zThreat of substitute products or services zRivalry among existing firms

Strategies for Competitive Forces zNote - strength of force is determined by factors in industry zGain a competitive edge zBuild defenses against forces zFormulate actions to influence forces

Strategic Questions zCan IT create barriers to entry? (new entrants) zCan IT build in switching costs? (buyers) zCan IT strengthen customer relationships? (buyers)

Strategic Questions (cont) zCan IT change the balance of power in supplier relationships? (suppliers) zCan IT change the basis of competition? (competitors) zCan IT generate new products?(competitors, substitutes)

Wiseman’s Theory of Strategic Thrusts Strategic purposes that drive the use of the firm’s resources zDifferentiation zCost zInnovation zGrowth zAlliance

Searching for Specific Opportunities zWhat is the mode of the thrust? (offensive, defensive) zWhat is the direction of the thrust? (use, provide) zWhat is the strategic target of the thrust? (supplier, customer, competitor)

Risks of IS Success zChange the Basis of Competition zLower Entry Barriers zPromote Litigation or Regulation zAwake Sleeping Giant zReflect Bad Timing zAre Too Advanced