Topic 2:

An Overview of Strategic
Management and the IS/IT Strategy
Implications

ISP680 – Corporate Strategic Information System Planning

TOPIC OUTLINE
1. The Evolving Nature of Strategic Management in
Organizations
2. A Framework for Strategy Formulation
3. Gaining an Advantage through Strategic
Management
4. Assessing Dynamic Capabilities
5. Strategy Implementation
‘The business strategy is the IS/IT
strategy' or 'digital business strategy
will become the business strategy'

An explicit IS/IT or digital

strategy needs to be formulated,
investment and resourcing plans
developed and sourcing
decisions made.
 The Evolving Nature of Strategic Management in
Effectiveness of
Organizations
strategic decision
making
• Well-defined strategic
management
framework

I • Situation analysis • Strategically focused

N and competitive organization
C assessment
R • Multi-year budgets • Widespread strategic
E • Evaluation of thinking capability
A • Gap analysis strategic option Evolution of Strategic
S • Reinforcing Management
• ‘Static’ allocation of • ‘Dynamic’ allocation management values
I • Annual Maturity
resources of resources and processes
N budgets
G
• Functional • Innovation from
focus knowledge and
competences

Phase 1 Phase 2 Phase3 Phase 4

Financial Forecast-Based Externally Oriented Strategic
Planning Planning Planning Management
Meet budget Predict the future Think strategically Create the future
Value system
 Scope of Strategy Development
• Strategy can be defined as: 'the direction and scope of an organisation over the
long term, which achieves advantage in a changing environment through its
configuration of resources and competences with the aim of fulfilling stakeholder
expectations’.

• 'strategic business units’ (SBUs) - an organizational unit that sells a distinct set of
products or services serves a specific set of customers and competes with a
defined set of competitors

• The strategy for IS/IT should be developed not in response to the SBU strategy
but as an integral part of it.
 Scope of Strategy Development
Corporate
• What is the overall rationale, logic, and scope of the
Head
corporation?
Quarters • How will the corporate centre add value to the
constituent businesses?

Business Unit
SBU SBU SBU • How will each business complete?
• How will sustainable competitive advantage be achieved?

Functional
Sales Marketing Operations R&D Logistics How will the different functional areas contribute to the
effective implementation of business/corporate strategy?
 A Framework for Strategy Formulation
Where to compete?
Requires a detailed understanding of the industry, its dynamics and the
forces shaping its evolution and then identifying how the firm might
position itself.
Where to
compete? How to gain an advantage?
Deciding how to compete in the chosen marketplace so as to be
attractive for customers and to gain an advantage over competitors.
What assets are How to change? How to gain
required? advantage?
What assets do we have?
Considering what makes the firm successful today and assessing the
resources and capabilities to deliver the promises made to customers.

What assets do What assets are required?

we have? Identifying any areas of weakness to overcome or new resources
required or capabilities that have to be developed.
A Framework for Formulating Strategy
How to change?
Based on the answers to the previous questions, agreeing what to
change in order to compete (more) successfully and how this will be
achieved.
A Framework for Strategy Formulation
Where to compete?

PESTEL
• Political
• Economic
• Sociocultural
• Technological
• Environmental
• Legal

Porter 5 Forces
 Gaining an Advantage through Strategic
Management
How to gain advantage?
Low Cost Strategy
Cost leadership strategies imply identifying the
lowest cost approaches to the direct activities of the
business, minimizing the indirect/overhead
expenses and providing management with detailed
reporting on all aspects of fixed and variable costs
incurred.
IS/IT will be required lo automate basic business
information processes to achieve efficiencies and
also link them together effectively, but not
necessarily to produce a highly integrated
information resource. An alternative approach is to
transfer higher cost activities lo either the
customers or suppliers or both.
Differentiation Strategy
The strategy emphasizes
innovation and creativity plus a
strong customer and market
orientation.
The strategic use of IS/IT will focus
on enabling new things co be
achieved or existing things to be
done better and gathering
knowledge about customers and
consumers.
Niche/Focus Strategy
Adopt either a differentiation or low
cost strategy to achieve and sustain
long-term success in that niche.
IS/IT may be a competitive weapon
in identifying and then establishing
close relationship with customers,
leading to a strong hold on a
particular niche.
Gaining an Advantage through Strategic
Management
How to gain advantage?
Understanding organization's value via existing products and services

Emerging Growth Mature Declining

Industry and
product life cycle
Demand Demand > Demand < Demand <
Unknown Supply Supply Supply
Emerging Growth Mature Declining

Product specification Product enhancement Product variations Reduce inventory levels and
Customer requirements Customer service Customer segmentation optimize service costs
Process design Capacity development and utilization Product cost reduction Sales forecasting
Market research and Extend distribution channels Costing/Sourcing of components Subcontracting – control of
forecasting Set prices/ Monitor margins (make or buy decisions) suppliers
Logistic planning Services from suppliers Finished goods inventory control Release capacity for other users
Identify costs Promotion to expand customer Pricing flexibility Rational distribution channels
database Value analysis/ Cost reduction Reduce administrative costs
Selling support Analysis of contribution
Identify competitors’ positions Target specific competitors
Gaining an Advantage through Strategic
Management
What assets do we have? What assets are required?

Three Path of Market Leadership (by Treacy and Wiersma)

Operational Excellence
Enabling products and services to be obtained reliably, easily and cost-
effectively by customers. This implies a focus on business processes to
outperform others and can deliver both low costs and consistent quality
of customer satisfaction.

Customer Intimacy
Targeting markets very precisely and tailoring products and services to
the needs of particular customer groups.

Product/ Service Leadership

Continuing product innovation meeting customers' needs. This implies
not only creativity in developing new products and enhancing existing
ones, but also astute marker knowledge to ensure chat they sell.
 Assessing Dynamic Capabilities
How to change?
The need for dynamic capabilities

Dynamic Capabilities
The most challenging assets to develop are
Ability to adapt more quickly and effectively to strategic assets, which are firm specific,
changes in the business environment than often complex and may involve tacit
others. knowledge and routines.

Organizations that possess appropriate dynamic Hence, it is important that an organization

capabilities as well as a range of strategic assets knows what dynamic capabilities it has, if it is
are most likely to be successful in both to develop strategic assets.
sustaining existing and creating new business
advantages.
 Strategic Implementation

1. Imposed changes 2. New opportunities

While an organization can use all its
knowledge and experience to devise
its intended strategy and plan for its
REALIZED implementation, things are unlikely to
INTENDED Planned EMERGENT
STRATEGY STRATEGY STRATEGY turn out as predicted.
Implementation
Unexpected constraints or new
options will occur, changes will be
3. Unexpected 4. Failed enforced by the actions of others, new
constraints of options implementation UNREALIZED opportunities will arise that could not
STRATEGY have been predicted and some parts of
the strategy will fail to be
implemented successfully.