Embed Size (px)
Citation preview
E-business Lectures 5&6: E-business strategy
Outline
Lecture 5 • Intro • Strategic Analysis • Strategic Objectives
Lecture 6 • Strategy Definition • Strategy Implementation • Information systems strategy and e-business
strategy
E-business strategy
• Question: What is a business strategy?
• Question: What is an e-business strategy?
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’
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
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, 62–78
E-‐business strategy: Not
How to do business online But
How to do business differently online
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
What is (e-)business strategy?
• Chaffey: Definition of the
approach by which
applications of internal and external electronic communications can
support and
influence the
corporate strategy
Organizational strategy
Organizational strategies
Traditional strategy process models
• Framework for approaching strategy development • Some approaches:
Jelassi & Enders
Johnson & Scholes
McDonald Smith SOSTAC™
SWOT analysis Strategy analysis
Situation review Situation analysis
Mission + Objectives
Strategic choice Goal setting Objective setting
Strategy formulation
Strategic implementation
Strategy formulation
Strategy
Strategy implementation
Resource allocation and monitoring
Tactics
Actions Control
Generic strategy process model Features • Non-discrete • Iterative Approaches • Prescriptive:
• Analysis > Developm. > Implem. • Medium-long term
• Emergent: • Interrelated stages • Shorter timescale
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
Resource and process analysis
• Assess • Technological infrastructure • Application infrastructure • Financial resources • Human resources
to give efficient business processes.
Strategic Information Systems matrix Source: McFarlan & McKenney (1993): Ward & Griffiths (1996)
SWOT analysis
Stage models of e-business development
• Question: How advanced in use of (ICT) resources to support e-business processes?
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
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)
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
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
Porter’s five competitive forces
Profitability
Power of suppliers
Power of buyers
New entrants
ExisKng compeKtors
SubsKtute products or services
Porter’s five competitive forces
Profitability
Power of suppliers
Power of buyers
New entrants
ExisKng compeKtors
SubsKtute products or services
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
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
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
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
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
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
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
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
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
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
Strategic objectives
1. Strategic analysis 2. Strategic objectives 3. Strategy definition 4. Strategy implementation
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)
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
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
SMART Objectives
• Successful objectives for • driving strategies and for • improvement of business processes are
• SMART • Specific • Measurable • Actionable/Attainable • Relevant/Realistic • Time-related
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”
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!
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)
Translating Vision and Strategy
Using the Balanced Scorecard as a Strategic Management System
•
•
•
B
EST
OF
HBR
harvard business review • managing for the long term • july–august 2007
Translating Vision and Strategy: Four Perspectives
Managing Strategy: Four Processes
page 99
Using the Balanced Scorecard as a Strategic Management System
•
•
•
B
EST
OF
HBR
harvard business review • managing for the long term • july–august 2007
data for the selected measures? Could unin-tended or unexpected consequences arise fromthe way the targets for the measures areachieved? Those are questions that companiesshould ask.
Furthermore, companies traditionally han-dle multiple objectives in a compensationformula by assigning weights to each objec-tive and calculating incentive compensationby the extent to which each weighted objec-tive was achieved. This practice permits sub-stantial incentive compensation to be paid ifthe business unit overachieves on a few objec-tives even if it falls far short on others. A bet-ter approach would be to establish minimumthreshold levels for a critical subset of thestrategic measures. Individuals would earnno incentive compensation if performance ina given period fell short of any threshold.This requirement should motivate people toachieve a more balanced performance acrossshort- and long-term objectives.
Some organizations, however, have reducedtheir emphasis on short-term, formula-basedincentive systems as a result of introducing the
balanced scorecard. They have discovered thatdialogue among executives and managersabout the scorecard—both the formulation ofthe measures and objectives and the explana-tion of actual versus targeted results—providesa better opportunity to observe managers’performance and abilities. Increased knowl-edge of their managers’ abilities makes iteasier for executives to set incentive rewardssubjectively and to defend those subjectiveevaluations—a process that is less susceptibleto the game playing and distortions associatedwith explicit, formula-based rules.
One company we have studied takes anintermediate position. It bases bonuses forbusiness unit managers on two equallyweighted criteria: their achievement of afinancial objective—economic value added—over a three-year period and a subjectiveassessment of their performance on measuresdrawn from the customer, internal-business-process, and learning-and-growth perspectivesof the balanced scorecard.
That the balanced scorecard has a role toplay in the determination of incentive com-
The Personal Scorecard
page 104
