Business Stratedgy IT

8/9/2019 Business Stratedgy IT

1/44


2/44

- 2 -© Minder Chen, 1993-2013

Strategy and IS Industry Structure

(5 Competing Forces)

Competiti e

Str!tegy

"!#ue Ch!in

$n!#ysis

%usiness ProcessDesign & 'eengineering

In orm!tionSystems


3/44

- 3 -© Minder Chen, 1993-2013

Business Strategies• he *o+ o the str!tegist is to underst!nd !nd

cope ith competition .• Competition or profits goes +eyond

est!+#ished industry ri !#s to inc#ude our othercompetiti e orces- customers, supp#iers,

potenti!# entr!nts, !nd su+stitute products.• he e tended ri !#ry th!t resu#ts rom !## i e

orces de ines !n industry/s structure !ndsh!pes the n!ture o competiti e inter!ction

ithin !n industry.


4/44

- 4 -© Minder Chen, 1993-2013

Industry Structure and Forces• Forces !re intense- !ir#ines, te ti#es, !nd hote#s,

!#most no comp!ny e!rns !ttr!cti e returns onin estment.

• Forces !re +enign- so t !re, so t drin0s, !ndtoi#etries, m!ny comp!nies !re pro it!+#e

• Industry structure, m!ni ested in thecompetiti e orces, sets industry profitability &competitiveness in the medium !nd #ong run.

•Industry structure !nd ! irm strategic positioning

• Identi y the strongest competitive force ororces or str!tegy ormu#!tion.


5/44

- 5 -© Minder Chen, 1993-2013

New Entrances or Substitutes• 'i !#ry is o ten ierce in commodity industries•

Photogr!phic i#m industry- 1od!0 !nd Fu*i – 1ey competing orce – Po#!roid Su+stituti e products&ser ices

http-&&en. i0ipedi!.org& i0i&Po#!roid2Corpor!tion

• 3e entr!nts !re di ersi ying rom otherm!r0ets, they c!n #e er!ge e isting c!p!+i#ities

– Pepsi did hen it entered the +ott#ed !ter industry, –

Microso t did hen it +eg!n to o er internet+ro sers ( embrace and extend ) – $pp#e did hen it entered the music distri+ution

+usiness.http://www.businessweek.com/199 /29/9 0!15.htm

"#$"%& M"C'($()* + rt 1 "#$"%& M"C'($()* + rt 2

http://en.wikipedia.org/wiki/Polaroid_Corporationhttp://www.businessweek.com/1996/29/960715.htmhttp://www.businessweek.com/1996/29/960715.htmhttp://www.businessweek.com/1996/29/b34841.htmhttp://www.businessweek.com/1996/29/b34842.htmhttp://www.businessweek.com/1996/29/b34842.htmhttp://www.businessweek.com/1996/29/b34841.htmhttp://www.businessweek.com/1996/29/960715.htmhttp://en.wikipedia.org/wiki/Polaroid_Corporation


6/44

- -© Minder Chen, 1993-2013

Five Competing Forces

ou*ube ideo: *he )i e Competiti e )orces *h t $h pe $tr te

http://www.google.com/url?sa=t&source=web&cd=3&ved=0CBkQtwIwAg&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DmYF2_FBCvXw&ei=D7WrTKPROoX2tgPoyNXyAw&usg=AFQjCNEsm-DJP0-Eonrh5nvlI1uHaRzDOQhttp://www.google.com/url?sa=t&source=web&cd=3&ved=0CBkQtwIwAg&url=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DmYF2_FBCvXw&ei=D7WrTKPROoX2tgPoyNXyAw&usg=AFQjCNEsm-DJP0-Eonrh5nvlI1uHaRzDOQ


7/44- ! -© Minder Chen, 1993-2013

Sources of Switc ing Costs• 4oy!#ty progr!ms- S itching c!n c!use customers to #ose out on

progr!m +ene its. hin0 re uent purch!ser progr!ms th!t o er6mi#es7 or 6points7 (!## en!+#ed !nd dri en +y so t !re).

• 4e!rning costs- S itching techno#ogies m!y re uire !n in estmentin #e!rning ! ne inter !ce !nd comm!nds.

• In orm!tion !nd d!t!- Users m!y h! e to reenter d!t!, con ert i#esor d!t!+!ses, or m!y e en #ose e!r#ier contri+utions on incomp!ti+#esystems.

• Fin!nci!# commitment- C!n inc#ude in estments in nee uipment, the cost to !c uire !ny ne so t !re, consu#ting, ore pertise, !nd the de !#u!tion o !ny in estment in prior techno#ogiesno #onger used.

• Contr!ctu!# commitments- %re!0ing contr!cts c!n #e!d tocompens!tory d!m!ges !nd h!rm !n org!ni8!tion/s reput!tion !s !re#i!+#e p!rtner.

• Se!rch costs- Finding !nd e !#u!ting ! ne !#tern!ti e costs time!nd money.


8/44- -© Minder Chen, 1993-2013

Barriers to Entry • Supp#y9side economies o sc!#e•

Dem!nd9side +ene its o sc!#e (net or0 e ects)• Customer s itching costs-

– Enterprise resource p#!nning (E'P) so t !re is !ne !mp#e o ! product ith ery high s itching costs.

• C!pit!# re uirements – Semiconductor oundry s. corner co ee shop

• Incum+ency !d !nt!ges independent o si8e – %r!nd, e periences cur e

• Une u!# !ccess to distri+ution ch!nne#s – Using e9commerce or direct s!#es

• 'estricti e go ernment po#icy


9/44- 9 -© Minder Chen, 1993-2013

Emergingtechno#ogies

&ntr thre t/&ntr b rriers

http://www. outube.com/w tch 6m )27)8C w

http://www.youtube.com/watch?v=mYF2_FBCvXwhttp://www.youtube.com/watch?v=mYF2_FBCvXw


10/44- 10 -© Minder Chen, 1993-2013

!isruptive Tec nology

http://en.wikipedi .or /wiki/)i e:%isrupti etechno o . i;


11/44- 11 -© Minder Chen, 1993-2013

Type of Innovations• Sust!ining- $n inno !tion th!t does not ! ect

e isting m!r0ets. – E o#ution!ry- $n inno !tion th!t impro es ! product

in !n e isting m!r0et in !ys th!t customers !ree pecting. (E.g., ue# in*ection )

– 'e o#ution!ry (discontinuous, r!dic!#)- $n inno !tionth!t is une pected, +ut ne erthe#ess does not ! ecte isting m!r0ets. (E.g., the !utomo+i#e )

• Disrupti e- $n inno !tion th!t cre!tes ! nem!r0et +y !pp#ying ! di erent set o !#ues, hichu#tim!te#y (!nd une pected#y) o ert!0es !ne isting m!r0et. (E.g., the #o er pricedFord Mode# )

8ower, Christensen, C ton M. +1995 . ?%isrupti e *echno o ies: C tchin the @ e?Harvard Business Review , < nu r A)ebru r 1995

http://en.wikipedia.org/wiki/Fuel_injectionhttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Ford_Model_Thttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Ford_Model_Thttp://en.wikipedia.org/wiki/Automobilehttp://en.wikipedia.org/wiki/Fuel_injection


12/44- 12 -© Minder Chen, 1993-2013

Innovator"s !ilemma• :ood irms !re usu!##y ! !re o the inno !tions, +ut their

+usiness en ironment does not !##o them to pursue them

hen they irst !rise, +ec!use they !re not pro it!+#eenough !t irst !nd +ec!use their de e#opment c!n t!0esc!rce resources ! !y rom th!t o sust!ining inno !tions( hich !re needed to compete !g!inst current competition).

• ;:ener!##y, disrupti e inno !tions ere techno#ogic!##ystr!ight or !rd, consisting o o 9the9she# components puttogether in ! product !rchitecture th!t !s o ten simp#erth!n prior !ppro!ches. hey o ered #ess o h!t customersin est!+#ished m!r0ets !nted !nd so cou#d r!re#y +einiti!##y emp#oyed there. hey o ered ! di erent p!c0!ge o!ttri+utes !#ued on#y in emerging m!r0ets remote rom,!nd unimport!nt to, the m!instre!m.;

B http://en.wikipedi .or /wiki/%isrupti e7inno tion nd Christensen, C ton M. +199! , The innovator's dilemma: when new technologies cause great firms to fail , 8oston, M ss chusetts, $D: E r rd 8usiness $choo ress , "$8# 9! -0- !5 4-5 5-2 .

http://en.wikipedia.org/wiki/Disruptive_innovationhttp://en.wikipedia.org/wiki/Clayton_M._Christensenhttp://books.google.com/books/about/?id=SIexi_qgq2gChttp://books.google.com/books/about/?id=SIexi_qgq2gChttp://en.wikipedia.org/wiki/Harvard_Business_School_Presshttp://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Special:BookSources/978-0-87584-585-2http://en.wikipedia.org/wiki/Special:BookSources/978-0-87584-585-2http://en.wikipedia.org/wiki/International_Standard_Book_Numberhttp://en.wikipedia.org/wiki/Harvard_Business_School_Presshttp://books.google.com/books/about/?id=SIexi_qgq2gChttp://en.wikipedia.org/wiki/Clayton_M._Christensenhttp://en.wikipedia.org/wiki/Disruptive_innovation


13/44- 13 -© Minder Chen, 1993-2013

Strategy and t e Internet


14/44- 14 -© Minder Chen, 1993-2013

#pple"s Entrance to !ifferent Industries


15/44- 15 -© Minder Chen, 1993-2013

#pple• $pp#e Computer Inc. $pp#e Inc.•

$pp#e to M!c• iPod < i une < music• $pp#e Stores (see te!ching note)• iPhone < i une < $pps• iP!d < i une < $pps < i%oo0

• From ! system to !n eco9system• From h!rd !re to so t !re to contents !nd

ser ices


16/44- 1 -© Minder Chen, 1993-2013

#pple Stores Services• Intensi e contro# o ho emp#oyees inter!ct ith

customers, scripted tr!ining or on9site techsupport !nd consider!tion o e ery store det!i#do n to the pre9#o!ded photos !nd music on demode ices.

hoto b 8obb 8 nk/Fett "m es


17/44- 1! -© Minder Chen, 1993-2013

Customer #udit #pproc


18/44- 1 -© Minder Chen, 1993-2013

Competitor #udit #pproac


19/44- 19 -© Minder Chen, 1993-2013

$n!#y8ing Competiti e Forces !nd Str!tegic Positioning

http://Gc o.b .ttu.edu/Drc) 10/ pp e te7ch01.pd;

http://qcao.ba.ttu.edu/ArcFall10/applegate_ch01.pdfhttp://qcao.ba.ttu.edu/ArcFall10/applegate_ch01.pdfhttp://qcao.ba.ttu.edu/ArcFall10/applegate_ch01.pdfhttp://qcao.ba.ttu.edu/ArcFall10/applegate_ch01.pdfhttp://qcao.ba.ttu.edu/ArcFall10/applegate_ch01.pdf


20/44- 20 -© Minder Chen, 1993-2013

$orter %eneric Strategies• Cost 4e!dership- =igh o#ume !nd #o pro it m!rgin• Di erenti!tion str!tegy- =igh m!rgin&price, #o o#ume

$ource: http://b o s.hbr.or /cs/2011/0 /wh 7hps7dep rture7;rom7the7pc.htm

re d the comments

http://blogs.hbr.org/cs/2011/08/why_hps_departure_from_the_pc.htmlhttp://blogs.hbr.org/cs/2011/08/why_hps_departure_from_the_pc.html


21/44- 21 -© Minder Chen, 1993-2013

%eneric Strategies and Industry Forces


22/44- 22 -© Minder Chen, 1993-2013

alue C ain


23/44- 23 -© Minder Chen, 1993-2013

Internet and alue C ain #nalysis

http://hi hered.mc r w-hi .com/sites/d /;ree/00!3043559/3140 3/(8rien713e7Ch pter72.pd;

$


24/44- 24 -© Minder Chen, 1993-2013

alue C ain and E'$( C')( SC)

Supp#y Ch!inM!n!gement

Customer 'e#!tionshipM!n!gement

Enterprise 'esourc eP#!nning

l d


25/44- 25 -© Minder Chen, 1993-2013

alue Networ* #udit #pproac


26/44

C 5-

Relative SizeSpeed

InnovationQuality

Ability forAction andResponse

OutcomesDrivers of

CompetitiveBehavior

$ !renessMoti !tionC!p!+i#ity

CompetitorAnalysis

Mar etCommonality

ResourceSimilarity

Interfirm Rivalry!Attac " Response

#i elihood of Attac #i elihood of Attac $irst Mover Incentives

#i elihood of Response#i elihood of Re sponse%ype of Competitive

Action

Dependence on theMar et

Resource Availability

Actor&s Reputation

CompetitiveCom petitive

Slo'( Standardor $ast Cycle

Mar et %ypesMar et % ypes

CompetitiveCom petitive

SustainedOutcomesOutcomes

CompetitiveAdvanta)e

%emporaryAdvanta)e*volutionary*volutionar yOutcomesOutcomes

*ntrepreneurial

or Mar et+,o'er

-ro'th+Oriented

ActionFeedbac*

Competiti e Dyn!mcis (Mode# o Inter irm 'i !#ry)-4i0e#ihood o $tt!c0 !nd 'esponse

http://www.wiHiG.com/tutori /3 1-Competiti e-% n mics

l

http://www.wiziq.com/tutorial/381-Competitive-Dynamicshttp://www.wiziq.com/tutorial/381-Competitive-Dynamics


27/44- 2! -© Minder Chen, 1993-2013

Five+Force #nalysis vs, Competitive !ynamics )i e-)orce Dn sis Competiti e % n mics

8 sic premise "ndustr structure determinescompetition nd pro;it bi it

Competition is Id n micJ +or inter cti end re ti eK ctions/ responses m tter ;or

;irm per;orm nce=e e o; n sis M cro industr e e Micro ;irm nd ction e e"nte ectu ori in "ndustri or niH tion

economics*heoretic nd empiric work in str te icm n ement eLtended ;rom $chumpeter

nd Dustri n economics

)ocus )i e ;orces th t m ke up theindustr structure

Dction/response d d nd/or indi iduction

Competiti ed nt e

Competiti e d nt e c n becre ted nd sust ined

Competiti e d nt e istime-dependent nd ephemer Kon re ti e d nt es eList

(rient tion "ndustr /en ironment 8 nced m rket-resource +or eLtern -intern consider tion

'e tionshipbetween ;irms

$ mmetric Ds mmetric

Competiti estr te

Feneric t pes 'epertoires o; ctions nd responses

% n micconsider tion

Comp rison between two timepoints

&Lch n e o; ctions nd responses orinter cti e beh iors between two ;irms

http://www.min erchen.com/d /Dc demic7 pers/20127DMD7Competiti e7% n mics*hemes.pd;

' B d i f C i i #d


28/44- 2 -© Minder Chen, 1993-2013

'esource+Based iew of Competitive #dvantage

• he str!tegic thin0ing !ppro!ch suggesting th!ti ! irm is to m!int!in sust!in!+#e competiti e!d !nt!ge, it must contro# !n e p#oit!+#eresource, or set o resources, th!t h! e ourcritic!# ch!r!cteristics.

• hese resources must +e – "!#u!+#e, – '!re, – Imper ect#y imit!+#e, !nd – 3on9su+stitut!+#e.

N http-&&en. i0ipedi!.org& i0i&'esource9+!sed2 ie N #icho s C rr, ;Does I M!tter,; -arvard Business 'eview , M!y >?? , pp. AB9A .

(CSUCI 4i+r!ry n#ine D!t!+!se ) !nd 'esponses

P d &M! 0 P i i i $ di $ ! h

http://en.wikipedia.org/wiki/Resource-based_viewhttp://faculty.csuci.edu/minder.chen/MIS310/Reading/JournalArticles.aspxhttp://www.johnseelybrown.com/Web_Letters.pdfhttp://www.johnseelybrown.com/Web_Letters.pdfhttp://faculty.csuci.edu/minder.chen/MIS310/Reading/JournalArticles.aspxhttp://en.wikipedia.org/wiki/Resource-based_view


29/44- 29 -© Minder Chen, 1993-2013

Product&M!r0et Positioning $udit $ppro!ch

S $


30/44

- 30 -© Minder Chen, 1993-2013

.+Step $rocess

• h!t !re your mission& isions&go!#s

• h!t !re your str!tegies – Product&ser ice str!tegies – M!r0eting&+r!nding str!tegies – echno#ogy str!tegies

• h!t !re your methods orimp#ementing your str!tegies

• =o do you 0no you !re m!0ingprogress to !rds your go!#s

Fi / ti


31/44

- 31 -© Minder Chen, 1993-2013

Five /uestions• $tr te is c oice .• 5 choices- a winning

aspiration, where to play, how to win, corecapabilities, andmanagement systems .

• More speci;ic ,str te is ninte r ted set o;choices th t uniGue

positions t e firm in

its industry so s tocre te sust in b ed nt e nd

superior ue re ti eto the competition.

$ource

St S i 0S il C 1

http://www.playingtowin.info/sites/leadingauthorities.drupalgardens.com/files/aPlaybookForStrategy.pdfhttp://www.playingtowin.info/sites/leadingauthorities.drupalgardens.com/files/aPlaybookForStrategy.pdf


32/44

- 32 -© Minder Chen, 1993-2013

Stan S i 0Smile Curve1

I%M 4e!ds the !y in the Post9PC Er! @h "8M eLited the C m rket

$ource: http:// sm rterp net.com/b o /2011/0 /ibm- e ds-the-w -in-the-post-pc-er .htm

# l I

http://asmarterplanet.com/blog/2011/08/ibm-leads-the-way-in-the-post-pc-era.htmlhttp://asmarterplanet.com/blog/2011/08/ibm-leads-the-way-in-the-post-pc-era.htmlhttp://asmarterplanet.com/blog/2011/08/ibm-leads-the-way-in-the-post-pc-era.htmlhttp://asmarterplanet.com/blog/2011/08/ibm-leads-the-way-in-the-post-pc-era.html


35/44

- 35 -© Minder Chen, 1993-2013

Components of a Business )odel

http://Gc o.b .ttu.edu/Drc) 10/ pp e te7ch01.pd;

$rocess in $erspective


36/44

- 3 -© Minder Chen, 1993-2013

$rocess in $erspective

$ource: rocess in erspecti e +or I*e me in, wh re we doin this OprocessP stu;; J , :e!ry 'umm#er

Business $rocesses


37/44

- 3! -© Minder Chen, 1993-2013

Business $rocesses• he order m!n!gement process consists o

se er!# +usiness processes !nd crosses the+ound!ries o tr!dition!# +usiness unctions.

http://hi hered.mc r w-hi .com/sites/d /;ree/00!3043559/3140 3/(8rien713e7Ch pter72.pd;

#n Example of !etail alue C ain #ctivities


39/44

- 39 -© Minder Chen, 1993-2013

IT $ermeates t e alue C ain

$ource: Eow in;orm tion i es ou competiti e d nt e.

Industrial alue C ain


43/44

- 43 -© Minder Chen, 1993-2013

p)orce

; p )

*hre t o; #ew&ntr nts

Q r Ps "* supports its ti ht -knit roup o; desi ners, m rket speci ists, productionm n ers nd production p nners. #ew entr nts re un ike to pro ide "* to supportre tionships th t h e been bui t o er time. )urther it h s rich in;orm tion repositor

bout customers th t wou d be h rd to rep ic te.

8 r ininower o;

8u ers

@ith its const nt in;usion o; new products, bu ers re dr wn to Q r stores. Q rbo sts more th n 11,000 new desi ns e r, where s competitors t pic o;;er on2,000 A 4,000. )urther, bec use o; the ow in entor th t the Q r stores stock, there u rs bu products the ike when the see them bec use the re ike to be onethe neLt time the isit the store. More recent Q r h s emp o ed ser techno o tome sure 10,000 women o unteers so th t it c n dd the me surements o; Ore Pcustomers into its in;orm tion repositories. *his me ns th t the new products wi bemore ike to ;it Q r customers.

8 r ininower o;

$upp iers

"ts computer-contro ed cuttin m chine cuts up to 1000 ers t time. "t then sendsthe cut m teri s to supp iers who sew the pieces to ether. *he supp iersP work isre ti e simp e nd m n supp iers c n do the sewin . *hus, the poo o; supp iers iseLp nded nd Q r h s re ter ; eLibi it in choosin the sewin comp nies. )urther,bec use Q r d es 50R o; the ; bric in its p nt, it is ess dependent on supp iers ndc n respond more Guick to mid-se son ch n es in customer co or pre;erences.

*hre t o;$ubstitute

roducts

"ndustr competitors on m rketed the desire o; dur b e, c ssic ines. Q r ;orces onmeetin customer pre;erences ;or trend , ow-cost ; shion. "t h s the hi hest s es persGu re ;oot o; n o; its competitors. "t does so with irtu no d ertisin nd on10R o; stock is unso d. "t keeps its in entor e e s er ow nd o;;ers new products t

n m Hin p ce ;or the industr +i.e., 15 d s ;rom ide to she es . Q r h seLtreme e;;icient m nu; cturin nd distribution oper tions.

"ndustri

Competitors

Q r o;;ers eLtreme ; shion b e ines th t re on eLpected to st ;or pproLim te

10 we rs. "t o;;ers trend , ppe in pp re t h rd-to-be t price.

Integration


44/44

Integration

Documents

Business Stratedgy IT