E-business. Lectures 5&6: E-business strategy

Transcription

1 E-business Lectures 5&6: E-business strategy

2 Outline Lecture 5 Intro Strategic Analysis Strategic Objectives Lecture 6 Strategy Definition Strategy Implementation Information systems strategy and e-business strategy

3 E-business strategy Question: What is a business strategy? Question: What is an e-business strategy?

4 What is business strategy? Quotes: Defines how we will meet our objectives Sets allocation of resources to meet goals Selects preferred strategic option to compete within a market Provides a long-term plan for the development of the organization Identifies competitive advantage through developing an appropriate positioning defining a value proposition delivered to customer segments

5 What is a strategy? A general, undetailed plan of action, encompassing a long period of time, to achieve a complicated goal. (Wikipedia) What is business strategy? Strategic management analyzes the major initiatives taken by a company's top management on behalf of owners, involving resources and performance in external environments (Wikipedia) The process of business model design

6 Michael Porter on the Internet The key question is not whether to deploy Internet technology companies have no choice if they want to stay competitive but how to deploy it Porter, M. (2001) Strategy and the Internet, Harvard Business Review, March 2001, E- business strategy: Not How to do business online But How to do business differently online

7 What is business strategy? Papazoglou & Ribbers (e-business, 2006): 1. Plans + Objectives to achieve higher-level goals 2. Chosen Role + Function in its environment Different levels of planning: Strategic Tactical Operational

8 What is (e-)business strategy? Chaffey: Definition of the approach by which applications of internal and external electronic communications can and the support influence corporate strategy

9 Organizational strategy

10 Organizational strategies

11 Traditional strategy process models Framework for approaching strategy development Some approaches: Jelassi & Enders SWOT analysis Mission + Objectives Strategy formulation Strategy implementation Johnson & Scholes Strategy analysis McDonald Situation review Smith SOSTAC Situation analysis Strategic choice Goal setting Objective setting Strategic implementation Strategy formulation Resource allocation and monitoring Strategy Tactics Actions Control

12 Generic strategy process model Features Non-discrete Iterative Approaches Prescriptive: Analysis > Developm. > Implem. Medium-long term Emergent: Interrelated stages Shorter timescale

13 Strategy analysis 1. Strategic analysis Resource and process analysis Analysis of micro-environment Analysis of macro-environment 2. Strategic objectives 3. Strategy definition 4. Strategy implementation

14 Resource and process analysis Assess Technological infrastructure Application infrastructure Financial resources Human resources to give efficient business processes.

15 Strategic Information Systems matrix Source: McFarlan & McKenney (1993): Ward & Griffiths (1996)

16 SWOT analysis

17 Stage models of e-business development Question: How advanced in use of (ICT) resources to support e-business processes?

18 Stage models of e-business development 1 Web presence 2 E- commerce 3 Integrated e- commerce 4 E- business Services available Brochureware, catalogue, custom. service TransacKon IntegraKon with ERP or legacy systems Full integrakon OrganizaKonal scope Isolated departments Cross- organizakonal Cross- organizakonal Across enterprise and beyond Strategy Limited Sell- side, not integrated with business strategy Integrated with business strategy, value- chain E- business strategy part of business strategy

19 E-Business capability maturity ATOS Consulting e-business capability framework Level Capabilities 1: Initial E-business unplanned 2: Repeatable E-business aware 3: Defined E-business enabled 4: Managed E-business integrated 5: Optimized Extended enterprise (Based on Carnegie- Mellon sovware development maturity process)

20 Strategy analysis 1. Strategic analysis Resource and process analysis Analysis of micro-environment Analysis of macro-environment 2. Strategic objectives 3. Strategy definition 4. Strategy implementation

21 Profitability and the Internet Profitability is determined by: Industry structure: determines profitability of average competitor Sustainable competitive advantage: Allows a company to outperform the average competitor

22 Porter s five competitive forces Power of suppliers SubsKtute products or services Power of buyers Profitability ExisKng compektors New entrants

23 Porter s five competitive forces Power of suppliers SubsKtute products or services Power of buyers Profitability ExisKng compektors New entrants

24 Porter s five competitive forces (1) Threat of new entrants New entrants put pressure on prices / profitability Barriers to entry: 1. Supply-side economies of scale 2. Demand-side benefits of scale 3. Customer switching costs 4. Capital requirements 5. Incumbency advantages independent of size 6. Unequal access to distribution channels 7. Restrictive government policy

25 Porter s five competitive forces (1) Threat of new entrants Influence of Internet: (-) Reduces barriers for entry (-) Internet applications difficult to keep proprietary from new entrants (-) A flood of new entrants and new business models has come into many industries

26 Porter s five competitive forces (2) Power of Suppliers Powerful suppliers can: Charge higher prices Shift costs Supplier group is powerful if: 1. More concentrated than industry it sells to 2. Does not depend on its industry for its revenue 3. Industry participants face switching costs 4. Suppliers offer differentiated products 5. Lack of substitutes for what suppliers offer

27 Porter s five competitive forces (2) Power of Suppliers Influence of Internet: (+/-) Procurement using Internet increases bargaining power over suppliers + gives suppliers access to more customers (-) Switching costs/soft lock-in (+/-) Bypassing the intermediaries

28 Porter s five competitive forces (3) Power of Buyers Powerful buyers can: Force down prices Demand better quality or more service Buyer group is powerful if: 1. There are few buyers or volumes are large 2. Products are standardised or undifferentiated 3. Buyers face little switching costs 4. Buyers can threaten to produce themselves

29 Porter s five competitive forces (3) Power of Buyers Influence of Internet: Bargaining power of channels (+) Eliminates powerful channels / improves bargaining power over traditional channels Bargaining power of end users (-) Shift bargaining power to end consumers (-) Reduces switching costs

30 Porter s five competitive forces (4) Threat of substitutes Substitutes limit profitability by: Putting a ceiling on prices Threat of substitute is high if: 1. Offers attractive price-performance trade-off to existing products 2. Buyers switching costs are low

31 Porter s five competitive forces (4) Threat of substitutes Influence of Internet: (+) Overall industry becomes more efficient è expansion of market size (-) Proliferation of Internet approaches creates new substitution threats (-) Digital fulfillment

32 Porter s five competitive forces (5) Rivalry among existing competitors Effect on profitability depends on: Intensity of competition (greatest if): Competitors are numerous/equal in size Exit barriers are high Basis on which they compete: Price Profitability is not threatened by competition on: Product features, support service, delivery time

33 Porter s five competitive forces (5) Rivalry among existing competitors Influence of Internet: (-) Reduces differences among competitors (-) Migrates competition to price (-) Widens geographic market è increase number of competitors (+) enabled new strategies for differentiation and branding

34 Strategic objectives 1. Strategic analysis 2. Strategic objectives 3. Strategy definition 4. Strategy implementation

35 Vision A mental image of the possible and desirable future state of the organization. Vision or mission statement for e-business: Summary defining scope and broad aims of an organization s digital channel in the future. Where (business scope) How (unique competencies) Why (values)

36 Vision: Complement vs. Replace Complement: In addition to traditional channels Replace Instead of traditional channels Depends on: Level of access to communication technology Better online value proposition Product can be delivered digitally Product can be standardized

37 Business value through e-business The organizational value of e-business is due to more effective use of information Information can create value for organization: 1. Adding value 2. Reduce costs 3. Manage risks 4. Create new reality

38 SMART Objectives Successful objectives for driving strategies and for improvement of business processes are SMART Specific Measurable Actionable/Attainable Relevant/Realistic Time-related

39 Efficiency vs. Effectiveness Efficiency: Minimizing resources or time needed to complete a process Doing the thing right Effectiveness: Meeting process objectives Delivering required outputs and outcomes Doing the right thing

40 Metrics Balanced scorecard (Kaplan & Norton, 1993): 1. Translate vision into measurable objectives 2. Plan the achievement of the objectives 3. Feedback and learn, adjust strategy accordingly Categories: 1. Financial 2. Customers 3. Internal business processes 4. Learning and growth Scorecard unique per company!

41 Scorecard Categories Financial: Turnover, costs, profitability, return on capital employed Customers: Time, quality, performance, service, satisfaction, cost. Internal business processes: Cycle time, quality, employee skills, productivity. Learning and Growth: Innovation and staff development, Change in value through time (employee, shareholder)

42 Translating Vision and Strategy

43 The Personal Scorecard