ISM 158 Business Information StrategyIntroductionsOverview and updateISM 158: Lecture 2The Embedding of ITWhat is a Business Model?Slide 7Slide 8Slide 9Competitive Model ForcesPorter Competitive Model Education Industry – Universities U.S. MarketSlide 12Porter Competitive StrategiesStrategic Vision Service ConceptStrategic Vision Operating StrategyStrategic Vision Service Delivery SystemSlide 17Slide 18Slide 19Slide 20Strategy Audit of CompanySlide 22Understand CustomersUnderstand CompetitorsUnderstand Market and ProductSlide 26Understand PartnersUnderstand Societal ContextStrategic ShiftsSlide 30Slide 31Slide 32Slide 33OpportunitiesRisksSlide 36Slide 37QuestionsPresentation: Ingrid GainTips for Reading CasesISM 158 Business Information StrategyLecture 2IT StrategyIntroductions•Kevin Ross•[email protected]•Office hours: Tuesday 3:30pm – 5pm –(or by appointment)•E2 room 559Overview and update•Website now has schedule of presentations and readings•Any questions from last week?–Quizzes–Projects–Presentations–Cases/ReadingISM 158: Lecture 2“This class considers the role of information in business strategy. In particular, we focus on decisions regarding information technology and information systems to give a business competitive advantage over other companies” •Today we focus on identifying strategies and the role of IT in strategyThe Embedding of IT•IT now embedded in:–Definition and execution of strategy–Organization and leadership of businesses–Definitions of unique value propositions•Every business definition is morphing before our eyes–Markets–Industries–Strategies–Firm designs•Information is now a major economic goodWhat is a Business Model?•Defines how enterprise relates to environment–Strategy aligns organization with environment–Resources in and out–How value is created for stakeholders–Sets goals and ways to achieve themFig 1.1 Components of a Business ModelIntra-Industry RivalryStrategic Business UnitBargainingPower of BuyersBargaining Power of SuppliersSubstitute Products and ServicesPotentialNew EntrantsPorter Competitive Model•What is driving competition in the current or future industry?• What are current or future competitors likely to do and how can a company respond?• How can a company best posture itself to achieve and sustain a competitive advantage?Competitive Model FocusCompetitive Model ForcesIntra-industry Rivals: Strategic Business Unit (SBU) and major rivals.Buyers: Categories of major customers.Suppliers: Categories of major suppliers that play a significant role in enabling the SBU to conduct its business.New Entrants: Companies that are new as competitors in a geographic market or existing companies that through a major shift in business strategy will now directly compete with the SBU.Substitutes: An alternative to doing business with the SBU.Intra-Industry Rivalry SBU: UCSC Rivals: UC campuses, CSU, Private universities, Community Colleges BargainingPower of BuyersBargaining Power of SuppliersSubstitute Products and ServicesPotentialNew Entrants• Faculty• Staff• Equipment and Service Suppliers• Alumni• Foundations• Governments• IT Vendors• Internet Distance Learning• Books and Videotapes• Computer-Based Training• Company Education Programs • Students• Parents• Businesses• Employers• Legislators• Foreign Universities• Shift in Strategy by Universities or Companies Porter Competitive Model Education Industry – Universities U.S. MarketRole of Technology through Role of Technology through Porter perspective: Can we…Porter perspective: Can we…1. Build barriers to prevent a company from entering an industry?2. Build in costs that would make it difficult for a customer to switch to another supplier?3. Change the basis for competition within the industry?4. Change the balance of power in the relationship that a company has with customers or suppliers?5. Provide the basis for new products and services, new markets or other new business opportunitiesPorter Competitive StrategiesDifferentiation StrategiesDifferentiation StrategiesInnovation StrategiesInnovation StrategiesGrowth StrategiesGrowth StrategiesAlliance StrategiesAlliance StrategiesCost Leadership StrategiesCost Leadership StrategiesPrimaryStrategiesSupportingStrategiesStrategic VisionService Concept•What are important elements of the service to be provided, stated in terms of results produced for customers?•How are these elements supposed to be perceived by the target market segment, by the market in general, by employees, by others?•How do customers perceive the service concept?•What efforts does this suggest in terms of the manner in which the service is designed, delivered, marketed?Strategic VisionOperating Strategy•What are important elements of the strategy: operations, financing, marketing, organization, human resources, control?•On which will the most effort be concentrated?•Where will investments be made?•How will quality and cost be controlled: measures, incentives, rewards?•What results will be expected versus competition in terms of, quality of service, cost profile, productivity, morale/loyalty of servers?Strategic VisionService Delivery System•What are important features of the service delivery system including: role of people, technology, equipment, layout, procedures?•What capacity does it provide, normally, at peak levels?•To what extent does it, help insure quality standards, differentiate the service from competition, provide barriers to entry by competitors?•Seeking Out Low-cost Customers•Standardizing a Custom Service •Reducing the Personal Element in Service Delivery (promote self-service)•Reducing Network Costs (hub and spoke)•Taking Service Operations Off-lineCompetitive Strategies (Overall Cost Leadership)•Making the Intangible Tangible (memorable)•Customizing the Standard Product•Reducing Perceived Risk•Giving Attention to Personnel Training•Controlling QualityNote: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.Competitive Service Strategies (Differentiation)Strategic Focus Competitive Use of Information On-line(Real time)Off-line(Analysis)External (Customer) Creation of barriers to entry:Reservation system Frequent user clubSwitching costsData base asset:Selling information
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