CISB444 - Strategic Information Systems Planning Chapter 2 - An Overview of Business Strategy Concepts and the IS/IT Strategy Implications Part II

Course Overview Chapter 2 considers approaches and techniques involved in business strategy formulation and strategic management and their implications for IS/IT strategy development.

Main topics The evolving nature of strategy and strategic planning in organisations The strategic framework Strategy implementation Strategy tools and techniques

Competitive Forces and Competitive Strategies An enterprise exists within an industry, and to succeed, it must effectively deal with the competitive forces that exist within the particular industry. For example, the forces in an emerging industry such as bio-technology or genetic engineering are considerably different from those of a growth industry, say leisure or financial services, or the more mature or declining industries such as coal mining.

Competitive Forces and Competitive Strategies The enterprise interacts with its customers, suppliers, and competitors, but in addition to these interactions, there are potential new entrants into the particular competitive marketplace and potential substitute products and services. To survive and thrive in this environment, it is obviously vital to understand these interactions and the implications in term of how to avoid being disadvantaged and to understand the opportunities to gain competitive advantage

Porter Competitive Forces Model Describes the interaction of external influences, specifically threats and opportunities, affecting an organisation’s strategy and ability to compete

Porter Competitive Forces Model Describes the interaction of external influences, specifically threats and opportunities, affecting an organisation’s strategy and ability to compete

Porter Competitive Forces Model

Analysing the Five Competitive Forces: How to Do It Step 1: Identify the specific competitive pressures associated with each of the five forces Step 2: Evaluate the strength of each competitive force : fierce, strong, moderate, or weak? Step 3: Consider the overall pattern of competition and collective impact of all five forces

Strategic Implications of the Five Competitive Forces Competitive environment is unattractive from the standpoint of earning good profits when Rivalry is strong Entry barriers are low and entry is likely Competition from substitutes is strong Suppliers and customers have considerable bargaining power

Strategic Implications of the Five Competitive Forces Competitive environment is ideal from a profit making standpoint when Rivalry is moderate Entry barriers are high and no firm is likely to enter Good substitutes do not exist Suppliers and customers are in a weak bargaining position

Five Competitive Forces Coping With the Five Competitive Forces Objective is to formulate a strategy To insulate firm from competitive pressures To initiate actions to produce a sustainable competitive advantage, placing added pressure on rivals Which allows firm to define the business model for the industry

and Factors Affecting Strength of Rivalry Weapons for Competing and Factors Affecting Strength of Rivalry

Factors Affecting the Threat of Entry

Factors Affecting Competition From Substitute Products

Factors Affecting the Bargaining Power of Suppliers

Bargaining Power of Buyers

Analysis of Competitive Forces to Identify IS/IT Opportunity and Threats How can IS/IT build barriers to entry? How can IS/IT build in switching costs for customers? How can IS/IT change the basis of competition? How can IS/IT change the balance of power in supplier/customer relationship? How can IS/IT generate new products and services?

Competitive Strategies : Strategic Approaches to Building Competitive Advantage 1. Strive to be the industry’s low-cost provider 2. Out compete rivals on a key differentiating feature 3. Focus on a narrow market niche, doing a better job than rivals of serving the unique needs of niche buyers 4. Develop expertise, resource strengths, and capabilities not easily imitated by rivals

Competencies vs. Core Competencies vs. Distinctive Competencies A competence is the product of organisational learning and experience and represents real proficiency in performing an internal activity A core competence is a well-performed internal activity that is central (not peripheral or incidental) to a company’s competitiveness and profitability A distinctive competence is a competitively valuable activity that a company performs better than its rivals

Competencies and Competitive Advantage Operational Excellence Enabling products and services to be obtained reliably, easily, and cost-effectively by customers. Customer Intimacy Targeting markets very precisely and tailoring products and services to the needs of particular customer groups. Not just to satisfy but to please customers by understanding their needs and meeting them on every occasion

Competencies and Competitive Advantage Product Leadership Continuing product innovation meeting customers’ needs Not only creativity in developing new products and enhancing existing ones, but also astute market knowledge to ensure that they sell.

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