Information Systems: the Foundation of EBusiness CIS 108

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Information Systems the Foundation of E-Business
(CIS 108)

• 1) Frameworks Tools
• 2) Safeguarding the Competitive Advantage
  (Strategic Approach)
• Lecture FIVE (7th February 2005)
• Amare Michael Desta

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Strategic Planning - tools

• 1) Frameworks Tools
• a) the SWOT model Kenneth Andrews
• b) PEST Analysis

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SWOT Analysis Strengths, Weakness, Opportunities
Threats

• Why use the tool?
• It is effective way to
• to identify Strengths and Weaknesses,
• to examine Opportunities Threats org. have to
  face.
• SWOT framework helps
• to focus the activities into areas where the org.
• are strong and to explore where the greatest O
  lie.

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SWOT Analysis (Contd) Analyse Strengths 1st

• What are your advantages?
• What do you do well?
• What relevant resources do you have?
• What do other people see as your strengths?
• Rem Consider the questions from the org.
• point of view and from the point of view
• of the people you deal with.
• Don't be modest BUT be realistic.

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SWOT Analysis (Contd) Analyse Weaknesses 2nd

• What could you improve?
• What do you do badly?
• What should you avoid?
• Consider this from an internal/external basis
• Do other seem to perceive W that you do not see?
• Are the competitors doing any better than you?
• It is better to be realistic now, and face any
• unpleasant truths ASAP

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SWOT Analysis (Contd) Analyse Opportunities 3rd

• Where are the good opportunities facing you?
• What are the interesting trends you are aware of?
  
• Useful opportunities can come from
• Changes in technology/markets on a broad/narrow
  scale
• Changes in govt. policy related to your business
• Changes in social patterns, population profiles,
  lifestyle changes, economic conditions etc.
• Local Events

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SWOT Analysis (Contd) Analyse Opportunities
3rd

• A useful approach to identify an opportunities
  are
• to look at your strengths and
• to ask yourself whether these open up any
• opportunities.
• Alternatively,
• to look at your weaknesses and
• to ask yourself whether you could open up
  opportunities by eliminating them

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SWOT Analysis (Contd) Analyse Threats 4th

• What obstacles do you face?
• What is/are your competitor(s) doing?
• Are the required specifications for your job,
  products or services changing?
• Is changing tech. threatening your position?
• Do you have bad debt/cash-flow problems?
• Could your W seriously threaten your business?
• Carrying out this analysis will often be
  illuminating
• - both in terms of pointing out what needs to be
  done, and in putting problems into perspective.

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SWOT Analysis (Contd) E.g. A start-up small
consultancy business

• A small consultancy business might carry out the
  following SWOT analysis and may conclude
• Strengths
• We are able to respond very quickly as we have no
  red tape, no need for higher management approval,
  etc.
• We are able to give really good customer care, as
  the current small amount of work means we have
  plenty of time to devote to customers
• Our lead consultant has strong reputation within
  the market
• We can change direction quickly if we find that
  our marketing is not working
• We have little overhead, so can offer good value
  to customers
• Weaknesses
• Our company has no market presence or reputation
• We have a small staff with a shallow skills base
  in many areas
• We are vulnerable to vital staff being sick,
  leaving, etc.
• Our cash flow will be unreliable in the early
  stages
• Opportunities
• Our business sector is expanding, with many
  future opportunities for success
• Our local council wants to encourage local
  businesses with work where possible
• Our competitors may be slow to adopt new
  technologies
• Threats
• Will developments in technology change this
  market beyond our ability to adapt?
• A small change in focus of a large competitor
  might wipe out any market position we achieve

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SWOT Analysis (Contd) Eg. A start-up small
consultancy (Contd)

• The consultancy might therefore decide to
  specialize in rapid response, good value services
  to local
• businesses.
• Marketing would be in selected local
  publications, to get the greatest possible market
  presence for a set
• advertising budget. The consultancy should keep
  up-to-date with changes in technology where
  possible.
• As mentioned above - useful approach to identify
  an opportunities are
• to look at your strengths and to ask yourself
  whether these open up any
• opportunities.
• Alternatively,
• to look at your weaknesses and
• to ask yourself whether you could open up
  opportunities by eliminating them

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PEST Framework Understanding the environment
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PEST Framework Political Factors

• Political arena has a huge influence
• 1. upon the regulation of businesses and
• 2. on spending power of consumers/other
  businesses
• We must therefore consider issues such as
• How stable is the P environment?
• Will govt. policy influence laws that regulate or
  tax the business?
• What is the govt. position on marketing ethics?
• What is the govt. policy on the economy?
• Is the govt. involved in trading agreements such
  as NAFTA, ASEAN, COMESA etc.

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PEST Framework Economic factors

• Marketers need to consider the state of a
• trading economy in the short and long-terms.
• This is especially true when Marketers need to
• consider the state of a trading economy
• You therefore need to look at
• Interest rates
• The level of inflation
• Employment level per capita
• Long-term prospects for the economy (GDP)

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PEST Framework Socio-cultural factors

• This S influences on businesses vary from
• country to country but we must consider
• 1. What is the dominant culture/religion?
• 2. What are attitudes to various local/foreign
• products/services?
• 3. Are there any barriers upon the diffusion
• of products onto markets?
• 4. Do the population have a strong/weak
• opinion on political/green or issues?

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PEST Framework Technological factors

• T is vital for CA is major driver for
  Globalisation
• Therefore consider the following points
• 1. Does T allow for products/services to be made
• more cheaply/to a better standard of Quality?
• 2. Does the T offer consumers/businesses more
• innovative products/services
• 3. What type of T is in use? For what end?
• 4. Is the T used to communicate with consumers/
• work force etc? If so, why/how?

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Safeguarding the Competitive Advantage

• (strategic approach)

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What is IT/IS Strategy planning?

• IS strategy planning requires understanding of
• nature of the org., its goals objective
• where it is going, its culture, how it thinks
• type of IT what is available, how IT is changing,
  what the potential uses are
• info. needs, what/how it flows through the org.
  what decisions are made, how info. Supports BP
• the role(s) people play in the org. what their
  objectives and motives are, how they implement
  business processes
• the org .environment, what influences the org.
  legislation, markets, technology, media.

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What is IT/IS Strategy planning? (Contd)

• To put IT/IS Strategy in practice it
• - requires technical managerial understanding
• - planning the details thinking holistically
• - rational/analytical know-how political
  sensitivity
• Main/prime obj. is then an alignment to ensure
  that
• 1) the IS provision matches the business needs
• as well as
• 2) how it does it (process) when it does it
  (timing)

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What is IT/IS Strategy planning? (Contd)

• Alignment is a TWO way process
• - the business determines the IS needs BUT
• also IS influences the business.
• As we all know 
• IT/IS is changing the way business operates
• E-commerce changes the way transactions are
• done and customers communicated with etc..

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What is IT/IS Strategy planning? (Contd)

• Alignment may be
• Reactive- following after the business
• strategy or
• Proactive - leading the business strategy,
• proposing new ideas
•  

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Business and IS Alignment
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Safeguarding the Competitive Advantage (CA)

• Once the strategy is articulated, the org.
• must decide how to implement it.
• and then find a mechanism to safeguard it
• See the offensive and defensive moves

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Safeguarding CA Core Competence - Offensive
Moves

• Offensive Moves are
• are actions taken when an organization tries to
  exploit and strengthen its competitive position
  through attacks on a competitor's position.
• See the examples on the following slide

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Safeguarding CA Core Competence - Offensive
Moves

• Frontal assault
• Attack a competitors weaknesses
• All-out attack
• Maneuvering around competitors
• Guerilla tactics

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Safeguarding CA Core Competence - Offensive
Moves

• 1) Frontal assault
• Going head to head against a competitor
• in price, promotion, product features, and
• distribution channels.
• But
• the org. must have the financial
• marketing strength to do this.

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Safeguarding CA Core Competence - Offensive
Moves

• 2) Attack a competitors weaknesses
• This is a good strategy for many businesses too
• They can place their products in geographic areas
• where their competitors do not compete.
• Also, they can serve market segments that
• competitors do not serve at all or do not serve
  well.

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Safeguarding CA Core Competence - Offensive
Moves

• 3) All-out attack
• Coke and Pepsi are battling it out in this
  fashion in
• the supermarkets, vending machines, and
  restaurant
• chains
• But this moves requires significant Financial
• resources and may result in market share at the
• expense of profits.

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Safeguarding CA Core Competence - Offensive
Moves

• 4) Maneuvering around competitors
• A clever competitor sometimes can find a way to
• change the rules of the game and circumvent its
• opponents.
• This may involve
• changing the features of the product, such as
• Compaq adding a button on its personal computers
• to access the Internet

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Safeguarding CA Core Competence - Offensive
Moves

• 5) Guerrilla tactics
• Small, intermittent, seemingly random attacks can
• wear down a competitor just accumulated body
• blows slow an opponent in a boxing match
• The constant stream of coupons offered by fast
  food
• outlets do not serve well as a CA. Because they
  are
• so easily copied. But they do Keep competitors
  busy
• countering and defending their positions

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Safeguarding CA Core Competence Defensive
Moves

• An org. will not always be on the attack.
• Sometimes it will be under attack by competitors,
• needing to defend its competitive advantage and
• core competences . This is when it will need
• defensive moves.
• See the examples on the following slide

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Safeguarding CA Core Competence Defensive
Moves

• Dont give competitors anything to attack
• Make competitors believe they will suffer if they
  attack
• Counterattacks
• Lower the incentive to attack

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Safeguarding CA Core Competence Defensive
Moves

• 1) Dont give competitors anything to attack
• If a firm offers a full and competitive product
• line, protects its products with patents, and has
• exclusive contracts with suppliers, it does not
• leave much for competitors to attack.
• Coke Pepsi cover many bases by having broad
• product lines, heavy marketing, control over
• Bottlers but rem. they are so balanced in power

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Safeguarding CA Core Competence Defensive
Moves

• 2) Make competitors believe they will
• suffer if they attack
• Public signals that a competitor 's move will
  meet
• with strong retaliation may prevent the
  competitor
• from executing its plans.
• E.g. if a firm announces plans to build a new
  plant,
• that signals a competitor that it should rethink
  its
• plans to attack that firm's market segment.
  Matching
• a competitor's price is a good signal too price
  war

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Safeguarding CA Core Competence Defensive
Moves

• 3) Counterattacks
• If a vital market segment is under attack, some
• form of counterattack may be necessary. An
• organization's strategists should choose thei
• battles carefully, though, because retaliation
• can be expensive.
• They should be sure the attacker is strong enough
• to do harm before spending too much to defend.

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Safeguarding CA Core Competence Defensive
Moves

• 4) Lower the incentive to attack
• Most attacks are launched because the attacking
• firm believes that the high profits will result.
  There
• are ways for a defender to alter that belief.
• Some firms reduce the incentive for attack by
• constantly lowering costs so that price can drop
• while profit margins remain constant. Managers in
• the attacking firm should know that their costs
  will
• be higher for some time.

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The Internet E-Commerce

• Impact of the INTERNET
• What is the difference between E-COMMERCE
  E-BUSINESS

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Impact of the Internet

• E-commerce and e-business existed before the
  Internet burst onto the business scene.
• However it is the ubiquitous nature of the
  Internet which gives it much of its power.
• It is ubiquitous because it is affordable
  technology.
• Therefore it opens up new opportunities to small
  and large firms alike.
• (true or false?)

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E-Commerce E-Business

• This is a much disputed topic.
• It has been argued that there is little or no
  meaningful difference between the two.
• However, there is a plethora of definitions in
  the literature.
• We therefore must define what it is

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E-Commerce

• E-commerce covers outward-facing processes that
  touch customers, suppliers and external partners,
  including sales, marketing, order taking,
  delivery, customer service, purchasing of raw
  materials and supplies for production and
  procurement of indirect operating-expense items,
  such as office supplies.
• It involves new business models and the
  potential to gain new revenue or lose some
  existing revenue to new competitors.
• Bartels 00

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E-Business (i)

• E-business includes e-commerce but also covers
• internal processes such as production, inventory
• management, product development, risk mangt. ,,
• finance, knowledge management human resources
• E-business strategy is more complex, more focused
• on internal processes, and aimed at cost savings
  and
• improvements in efficiency, productivity and cost
• savings.
• Bartels 00

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E-Business (ii)

• E-Business is what happens when you combine the
  broad reach of the Internet with the vast
  resources of traditional information technology
  systems. It is dynamic and interactive.
• (IBM)

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To avoid confusion we will adopt the
conventionE-COMMERCE E-BUSINESS
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E-Commerce STRATEGY

• The Internet opens up NEW STRATEGIC OPTIONS
  regarding how and where firms compete and how
  they organise.
• Porters Five Forces reveals some of the threats
  and opportunities

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Porters Five Forces Model
Threats of New Entrants
Threats of Substitute Products services
The Company
Traditional Rivals
Bargaining Power of Customers
Bargaining Power of Suppliers
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EC Strategy Concepts Overview

• The e-difference
• Reach access and connection
• Richness depth detail of information are
  possible
• Barriers to entry are reduced
• Market niches abound

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Selling is not easy on the Internet because of

• - Large number of sites
• - 80 of Internet revenue from limited sites
• - Profitability still out of reach of majority of
• Internet retailers.
• - Provide all information for a sale.
• - Security is paramount
• - Link E-commerce to back office processes.
• Brand is of key importance

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E-Commerce strategy main issues

• We need to think about
• - New business strategies which incorporate e-b
• - Changing org. structure including IT business
  links
• - Correct technology platform
• - Benching marking against other sites
• - Maintenance and on-going management and
• development of site
• - Relationship management with customers,
• suppliers and allies.