1. Strategy and Information Systems 11/02/2002

2. What is Strategy? Merriam Webster Dictionary –The science and art of military command exercised to meet the enemy in combat under advantageous conditions Michael Porter –Leverage of core competence to achieve competitive innovation (changing the rules of the game). It is about being different Hamel and Prahalad –Strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value Resource-based view –The use of valuable, rare, non-substitutable, and appropriable resources and capabilities to create sustainable advantage

26. Current Trends in Strategy Business building Growth short-term and long-term Dealing with disruption Strategic alignment

46. Strategy and the Internet 2002/10/17

47. Michael Porter’s view of the Internet We need to move from the rhetoric about “Internet industries,” ”e-business strategy,” and a “new economy” and see the Internet for what it is –An enabling technology –A power set of tools that can be used, wisely or unwisely in almost any industry and as part of almost any strategy

48. Fundamental Questions Who will capture the economic benefits that the Internet creates? Will all the value end up going to customers, or will companies be able to reap a share of it? What will be the Internet’s impact on industry structure? Will it expand or shrink the pool of profits? What will be its impact on strategy? Will the Internet bolster or erode the ability of companies to gain sustainable advantages over their competitors?

49. Negative view of the Internet It tends to alter industry structures in way that dampen overall profitability It has a leveling effect on business practices –Reducing the ability of any company to establish an operational advantage that can be sustained

50. Positive View of the Internet It provides better opportunities for companies to establish distinctive strategic positionings than did previous generations of information technology –Gaining such a competitive advantage does not require a radically new approach to business –It requires building on the proven principles of effective strategy –Many of the companies that succeed will be ones that use the Internet as a complement to traditional ways of competing, not those that set their Internet initiatives apart from their established operations –Dot-coms can also be winners If they understand the trade-offs between internet and traditional approaches and can fashion truly distinctive strategies

51. Rivalry among Existing Competitors Reduces differences among competitors as offerings are difficult to keep proprietary(-) Migrates competition to price(-) Widens the geographic market, increasing the number of competitors(-) Lowers variable sot relative to fixed cost, increasing pressures for price discounting(-)

52. Threat of Substitute Products or Services By making the overall industry more efficient, the Internet can expand the size of the market (+) The proliferation of Internet approaches creates new substitution threats (-)

53. Barriers to Entry Reduces barriers to entry such as the need for a sales force, access to channels, and physical assets –Anything that Internet technology eliminates or makes easier to do reduces barriers to entry(-) Internet application are difficult to keep proprietary from new entrants(-) A flood of new entrants has com into many industries(-)

54. Bargaining Power of Suppliers Procurement using the Internet tends to raise bargaining power over suppliers, though it can also give supplier access to more customers (+/-) The Internet provides a channel for suppliers to reach end users, reducing the leverage of intervening companies(-) Internet procurement and digital markets tend to give all companies equal access to supplier, and gravitate procurement to standardized products that reduce differentiation(-) Reduced barriers to entry and the proliferation of competitors downstream shift power to supplier(-)

55. Buyers Bargaining Power Bargaining power of channels –Eliminates powerful channels or improve bargaining power over traditional channels(+) Bargaining power of end users –Shifts bargaining power to end consumers –Reduces switching costs(-)

56. Five Competitive forces Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Customers Bargaining Power of Suppliers Threat of Substitutes

57. COMPETITIVE FORCES MODEL SUBSTITUTE PRODUCTS & SERVICES NEW MARKET ENTRANTS SUPPLIERSCUSTOMERS THE FIRM TRADITIONAL INDUSTRY COMPETITORS THE INDUSTRY

58. COMPETITIVE FORCES MODEL SUBSTITUTE PRODUCTS & SERVICES NEW MARKET ENTRANTS SUPPLIERSCUSTOMERS INDUSTRY SET INDUSTRY COMPETITORS INDUSTRY 4 INDUSTRY 3 INDUSTRY 2 INDUSTRY 1

59. Fundamental Competitive Strategies Differentiation Strategies Innovation Strategies Growth Strategies Alliance Strategies Cost Leadership Strategies

60. Strategic Uses of Information Technology Improving Business Process Promote Business Innovation Locking in Customers and Suppliers Use IT to reduce costs of doing business Use IT to improve quality Use IT to link business to customers and suppliers Use IT to create new products or services Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Strategy IT Role Outcome

61. Strategic Uses of Information Technology Raise Barriers to Entry Build a Strategic IT Platform Build a Strategic Information Base Increase amount of investment or complexity of IT needed to compete Use IT to provide information to support firm’s competitive strategy Leverage investment in IS resources from operat- ional uses to strategic uses Increase Market Share Create New Business Opportunities Enhance Organizational Collaboration Strategy IT Role Outcome

62. Strategic Positioning of Internet Technologies Global Market Penetration E-Commerce Website Value-added IT Services Product and Services Transformation E-Business; Extensive Intranets and Extranets Cost and Efficiency Improvements E-Mail, Chat Systems Performance Improvements in Business Effectiveness Intranets and Extranets Strategy Solution Low High Customer Competition Connectivity E-Business Processes Connectivity Internal Drivers External Drivers

63. The Value Chain Administrative Coordination & Support Services Human Resource Management Technology Development Procurement of Resources Inbound Logistics Inbound Logistics Operations Outbound Logistics Outbound Logistics Marketing and Sales Marketing and Sales Customer Service Customer Service Competitive Advantage

64. The Internet Value Chain Marketing and Product Research Sales and Distribution Support and Customer Feedback Data for market research, establishes consumer responses Access to customer com- ments online Immediate re- sponse to customer problems Low cost distribution Reaches new customers Multiplies contact points Enhance Efficiency Create New Business Opportunities Maintain Valuable Customers and Relationships Internet Capability Benefits to Company Opportunity for Advantage