Lecture-4 Elements of strategic management

Transcription

1 Lecture-4 Elements of strategic management Thepul Ginige

2 Elements of Strategic Management Role of IT Innovation Competitive intelligence 2

3 Competitive Intelligence Internet Competitive strategy and sustainable advantage 3

4 Porter s Competitive Forces Model One of the most well-known frameworks for analyzing competitiveness is Porter s competitive forces model. The company must confront five competitive forces. 4

5 Porter s Competitive Forces Model The five major forces can be generalized as follows: 1. The bargaining power of customers 2. The bargaining power of suppliers 3. The threat of substitute products and services 4. The challenge from competitors within the industry 5. The threat of new entrants to firm s market 5

6 Eg: PORTER S MODEL FOR KODAK Potential new entrants: Foreign and US film and camera manufacturers Bargaining power of customers: Consumers in small town, USA Consumers in metropolitan areas in USA Canadian and Mexican consumers Other foreign consumers Kodak Film and film processing Substitute products: -Digital imaging -Digital photos -Photo-quality - Digital printers Competitors: Canon, Fuji Photo Film and Nikon Bargaining power of suppliers: U.S. film/camera component/imaging materials manufacturers Foreign film/camera component manufacturers 6

7 Porter s Competitive Forces Model (cont d) Competitive strategies: 1. Cost leadership strategy: Producing products/services at the lowest cost in the industry. Ex: Wal-Mart. 2. Differentiation strategy: Distinguish the products and services from those of its competitors. Ex: Apple. 3. Innovation strategy: Finding new ways of doing business. Ex: Amazon.com. 7

8 Competitive strategies (cont d): 4. Growth strategies: Managing regional and global business expansion. Ex: Wal-Mart. 5. Alliances: Working with business partners. Ex: Drugstore.com (online pharmacy) and General Nutrition Centers (GNC) (distributor of vitamins and health foods) formed a partnership that gave Drugstore.com the exclusive rights to sell GNC-branded products. 8

9 Examples of businesses defending themselves against the five competitive forces: Via the Internet and other telecommunication networks, Fedex offers self-tracking of packages, thereby reducing the chance of new companies entering the overnight delivery business. Automobile manufacturers use computerized quality-control systems to make steel producers (the suppliers) more aware of quality and reduce their bargaining power. J.C. Penny uses an information system which allows its male customers to select fabric, cut and size at J.C. Penny store and obtain a custom-made suit in a week, thus reducing the customer s bargaining power. Many computer companies provide their customers with free software and other computer services, thus reducing the customer s bargaining power. 9

10 Domino s Pizza s Competitive Strategy 1. Customer dials a special number 2. The calls are received at the AT&T Store Locator Service Node. 3. Using an automotive number identification system, the Store Locator finds the address of the caller. The computer then matches the caller s address with the nearest open Domino s Pizza restaurant. 6. Delivery 5. An employee at the restaurant picks up the phone, talks with the customer, and arranges the delivery. 4. Dials the restaurant. 10

11 Use of Porter s Model List players Analyze business drivers develop a strategy Investigate supportive information technologies 11

12 Value Chain Model According to Porter s Value chain model, the activities conducted in any manufacturing organizations can be divided into two parts: Primary activities Support activities. This model highlights the primary or support activities that add a margin of value to a firm s products and services where IT can best be applied to achieve a competitive advantage. 12

13 Value Chain Model Primary activities are most directly related to the production and distribution of the firm s products and services that create value for the customer. There are five primary activities. Support activities support the primary above five activities. There are four supportive activities. 13

14 Porter s Value Chain Analysis Model - Primary Activities Inbound logistics Operations Outbound logistics Marketing / sales Service 14

15 Inbound logistics These are all the processes related to receiving, storing, and distributing inputs internally. Your supplier relationships are a key factor in creating value here. Operations These are the transformation activities that change inputs into outputs that are sold to customers. Here, your operational systems create value. 15

16 Outbound logistics These activities deliver your product or service to your customer. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization. Marketing and sales These are the processes you use to persuade clients to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are sources of value here. Service These are the activities related to maintaining the value of your product or service to your customers, once it's been purchased. 16

17 Porter s Value Chain Analysis Model - Procurement Support Activities Human resource management Technology department Administrative Coordination and Support Services (Firm infrastructure) 17

18 Procurement (purchasing) This is what the organization does to get the resources it needs to operate. This includes finding vendors and negotiating best prices. Human resource management This is how well a company recruits, hires, trains, motivates, rewards, and retains its workers. People are a significant source of value, so businesses can create a clear advantage with good HR practices. 18

19 Technological development These activities relate to managing and processing information, as well as protecting a company's knowledge base. Minimizing information technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation. Firm Infrastructure These are a company's support systems, and the functions that allow it to maintain daily operations. Accounting, legal, administrative, and general management are examples of 19

20 The value chain of a firm 20

21 Managerial Issues Implementing strategic information systems can be risky Strategic information systems require planning Sustaining competitive advantage is challenging Ethical issues 21

22 ERP Why do they Fail? 1.Is it needed? (Integration vs. Standardization) 2.Ineffective Stakeholder Management and Change Management 3.Bad data (GIGO) 4.No clear objective/ destination 5.Lack of a proper Project Plan/ Management 22

23 ERP Why do they Fail? Contd.. 6.Customization 7.Under-estimating the resource requirement 8.Inadequate Internal resources 9.Insufficient testing 10.Insufficient Training and Education 23

24 Using IT for Strategic Advantage IT can be used - to build a customer focused business - to reengineer business processes - to improve quality - to become an agile company - to form a virtual company - To build a knowledge-creating company 24

25 Customer focused business Develop a focus on the customer Customer value Best value Understand customer preferences Track market trends Supply products, services, & information anytime, anywhere Tailored customer service Think how do you use IT to build a customer-focused business in your organization? 25

26 Reengineering the processes Business Process Reengineering (BPR) Rethinking & redesign of business processes Combines innovation and process improvement There are risks involved. 26

27 BEFORE REENGINEERING A mortgage applicant Bank Specialists Filling out a paper loan application Entering the application into its computer system Accessing the application individually closing approved 17 DAYS AFTER REENGINEERING Loan originators Software Specialists Entering the Mortgagee application into Laptop computers Checking the Application transaction Accessing the application electronically together, as a team closing approved 2 DAYS 27

28 Improving quality Total Quality Management (TQM) Quality from customer s perspective Meeting or exceeding customer expectations Commitment to: Higher quality Quicker response Greater flexibility Lower cost IT can help firms to achieve quality goals by helping them simplify products or processes, make improvements based on customer demands, reduce cycle time and increase the quality of design and production. 28

29 Agile company Old businesses: Low cost, low price, mass production, economy of scale. New businesses: Global competition, sophisticated customers, customized production. An agile companies are fast moving, flexible and robust firm capable of offering customized production, product variety, bring products based on rapid response to unexpected challenges, events, and opportunities to market rapidly and cost effectively. Ex: Dell Computers is an agile competitor. It heavily depends on IT. Ex: Flexible Manufacturing Systems (FMS) help companies become an agile competitor. A business can use IT to become an agile company. 29

30 Virtual company IT makes the virtual corporation possible. A virtual company is an organization that uses IT to link people, assets, and ideas to create and distribute products and services without being limited to physical locations or traditional boundaries. Ex: JetBlue Airways Corporation,commonly called jetblue, is an American low-cost airline. 30

31 Virtual company Major attributes of VC: Each partner brings its core competency so anall star winning team is created. No single company can match what the VC can achieve. Resources of the business partners can be put to use more profitably. It is difficult to identify the boundaries of a VC. 31

32 Building a Knowledge-creating company Knowledge management enable companies to learn faster than their competitors giving them a sustainable competitive advantage. The goal of knowledge management systems is to help organizations create, organize and make available important business knowledge whenever and wherever it s needed in an organization. KMSs collect all relevant knowledge and experience in the firm and make it available whenever and wherever it is needed to support management decisions and business processes. 32

33 What is Knowledge? Personalized information State of knowing and understanding An object to be stored and manipulated A process of applying expertise A condition of access to information Potential to influence action

34 Sources of Knowledge of an Organization Intranet Data warehouses and knowledge repositories Decision support tools Groupware for supporting collaboration Networks of knowledge workers Internal expertise

35 Definition of KMS A knowledge management system comprises a range of practices used in an organization to identify, create, represent, distribute, and enable adoption to insight and experience. Such insights and experience comprise knowledge, either embodied in individual or embedded in organizational processes and practices.

36 Purpose of KMS Improved performance Competitive advantage Innovation Sharing of knowledge Integration Continuous improvement by: Driving strategy Starting new lines of business Solving problems faster Developing professional skills Recruit and retain talent