session 2a a dynamic model of it strategy in a netcentric economy

8/3/2019 Session 2a a Dynamic Model of IT Strategy in a Netcentric Economy

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A Dynamic Model of IT Strategy

In A Netcentric Economy


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Information Technologys Ability

To Change Strategy IT can

Enable new strategies

Provide new ways to reach customers

Expand the markets in which the firmparticipates


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Metrics for Evaluating Strategies

Market share

Number of markets in which a firm

participates Number of new markets

Sales growth

Size of the average sale Sales per employee


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Thinking Strategically

Strategy is an approach to achieving aseries of objectives

Corporate strategy describes how a firmwill achieve the vision of its seniormanagement

Corporate strategy and IT strategy are

intertwined The new economy has created threats and

opportunities for corporate strategy


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E-Business

An e-business

Recognizes that IT is a fundamental driver of

success Uses technology extensively in all its

operations

E-commerce is one aspect of e-business

Involves using networks (primarily theInternet) for the sale and purchase of goodsand services


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E-commerce

Consists of two broad categories Business to consumer (B2C)

E.g., Buying books and music CDs over the internet

Business to business (B2B) E.g., Companies buying goods from their suppliers

Has stimulated much greater competition and therapid creation of new firm-specific resources(e.g., cash flows and venture capital)

In a hypercompetitive economy, successfulstrategies allows firms to sustain competitiveadvantage for over a year


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E-Business and E-Commerce

Nature of Business Description Example

Electronic business Pervasive use of

technology in the firm

E-mail, electronic

conferencing, automatedtransactions processing,ERP, CRM, knowledgemanagement systems, etc.

Electronic commerce

Sell side

To consumers (B2C)

To other businesses (B2B)

Buy side (B2B)

Internet online store

Electronic connection

vendors to customers

Businessespurchasing goodsfrom suppliers online

Amazon.com

Wal-mart Internet EDI withvendors

Procurement auctions, freemarkets


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Corporate Strategy:

Porters Value Chain The value chain divides a firms activities into two types

Primary: activities associated with the mission of the firmsuch as inbound logistics, operations, outbound logistics,marketing and sales, and service

Support: activities represented by the firms infrastructure

such as human resources management, technologydevelopment, and procurement

The Internet and electronic commerce have impacted thetraditional value chain

E.G., Amazon.com has no physical stores and hence a smallerinfrastructure which is easier to manage

Comparing value chains can highlight the differencesamong business models based on the internet and web


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Porters Five Forces Model

Forces that shape a firms competition Competitive rivalry

The threat of new entrants

The bargaining power of suppliers The bargaining power of buyers

The threat of substitutes

The Internet has affected the five forces by Lowering entry barriers for new firms

Creating substitutes for traditional businesses (e.G.,Stock trading and music)

Creating new markets that change the way buyers andsupplies interact


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The Five Forces Model of

Competition


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Core Competencies View of

Strategy Core competencies are the collective

learning in the organization about how tointegrate multiple technologies andcoordinate diverse production capabilities

A core competency Should provide access to a wide variety of

different markets

Should make a significant contribution to theend product

Should be difficult to imitate


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Resource-Based Views of

Strategy Firm resources are all assets, capabilities,

organizational processes, firm attributes,information, knowledge, etc. controlled by a firm

Categories of resources Physical

Human

Capital

A firm has competitive advantage when it createsa successful non-duplicable strategy andimmobile, heterogeneous resources that are rare,valuable, inimitable, and non-substitutable


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Competitive Advantage in the

Internet Economy


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A Dynamic Resource-Based Model

of Competitive Advantage in the

Internet Economy Components of the Dynamic Model

Network Externalities and Critical Mass

Other Assets that make the Innovation succeed

complementary, specialized or co-specialized assets Lock-In and Switching Costs

Additional Resources

continually added resources protect and enhanceexisting resources that are rare, valuable, inimitable,

and non-substitutable A System of Interacting Resources that create and

sustain Advantage

Knowledge and Skills gained by Managers

Feedback Loop


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Summary

To gain competitive advantage, firms haveto create resources that are rare, valuable,

inimitable, and non-substitutable The objective of a firm is to create an

initial advantage, sustain that advantage,and to appropriate benefits from its

innovative activities


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Summary (Continued)

A firm cannot succeed with a strategyalone and must first devise a business

model Executing the business model and

strategy requires highly capable managerswho can respond to changes in the

economy, environment, technology, andcompetitor actions

session 2a a dynamic model of it strategy in a netcentric economy

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