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Contents
BS Lectures Summary ........................................................................................................................................ 1
1.
2.
3.
4.
5.
6.
7.
8.
9.
The strategic role of ICT and the digital convergence (April 30th lecture) ............................................. 31
HBR article - IT Doesn't matter (April 30th lecture) .................................................................................... 33
B2c eCommerce Market, Business models, Customer expectations and Purchasing process ................... 34
ICT Vertical Lecture: E-procurement ........................................................................................................... 35
ICT Vertical Lecture: Mobile Marketing....................................................................................................... 38
quality but too much expensive, also because Setas delivery service is rather poor, in terms of
both lead time and flexibility.
In the past two years Setas competitive and financial performance has suffered a dramatic
decrease: 25% less sales, 10% less margin, 40% less income. The entrepreneur who is also the
President and Ceo of the company - attributes this performance to the very difficult current
market and competitive scenario: a higher and higher attention of customers (trade) to cost,
quality, time and flexibility; a more and more aggressive competition due to both local companies
(operating in the same district as Seta) and low cost country companies.
Assuming you are a consultant called by the entrepreneur:
What ideas would you suggest to him?
What analysis would you carry out?
Mini Business Case Seta: examples of strategic options
Strategy 1
Differentiation-based strategy aimed at delivering a higher value to the upper level of the
market, through a sensible improvement of product quality and reputation.
Strategic decisions:
Long term agreement with new fashion designers
New distribution channels
End consumer oriented marketing actions
Investment in new sophisticated plants
Hiring more skilled manufacturing staff
Strategy 2
Cost-based strategy aimed at dramatically reducing products full cost in order to be able to reduce
price by at least 30%.
Strategic decisions
Increase production volume to gain scale advantages (e.g. M&A)
Open a new plant in a low cost country
Find new silk sources
Rationalize product portfolio: fewer designers, brands, items
Traditional approach
Considering the company as a portfolio of Strategic Business Units.
Strategic Business Unit (SBU): Part of the company which:
Competence-based approach
Basic assumption: the overall performances of a company derive from the availability of core
competencies
Core competencies are usually transversal to SBU
Therefore:
Limits of considering the company as a portfolio of SBU
Strategic focus on core competencies
Considering the company as a group of core competencies
c. products impact on the final performance is weak (only for intermediate products)
3. Buyers characteristics - The bargaining power of buyers increases if:
a. they are not very profitable
b. they are able to integrate themselves backward
c. they have clear information about the product
d. the component or material cost is a high percentage of the total cost
PEST Analysis - The results coming from the 5 Competitive Forces analysis can be integrated by studying
which macro-environmental factors can have a significant influence on the Business Area under scrutiny, so
to identify a more comprehensive set of external opportunities and threats.
In particular, Political, Economic, Social and Technological influences can be very important.
Hence, the PEST analysis aims at analyzing environmental influences trends
Political/legal
1. Monopolies legislation
2. Environmental protection laws
3. Taxation policy
4. Foreign trade regulations
5. Employment law
6. Government stability
Economic
1.
2.
3.
4.
5.
6.
Business cycles
GNP trends
Interest rates
Money supply and Inflation
Unemployment & av. income
Energy availability and cost
Socio-cultural
1. Population demographics
2. Income distribution
3. Social mobility
4. Lifestyle changes
5. Attitude to work and leisure
6. Levels of education
Technological
1.
2.
3.
4.
5.
Primary activities - They are directly responsible for value creation through the Value Chain.
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Competitive advantages may depend on the way the company manages the links between:
its activities (internal links)
its activities and those of customers and suppliers (external links)
In the last years several techniques (as just in time, concurrent engineering and design for manufacturing)
have been introduced in order to optimize both the internal and external links.
Analyzing overall system of activities
Make decision
Advantages
Less transactional costs
Gain of suppliers margin
Learning and controlling core competence
More independence from suppliers
Disadvantages
Less efficiency than suppliers
Low motivation
Less flexibility
More capital equipment
Co-ordination costs
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10
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DISADVANTAGES
Very complex organisation
Cultural heterogeneity
Few synergies
b. Correlated portfolios
ADVANTAGES
Sharing of resources (economies of
scale, of scope, critical mass, )
Sharing of competences
Similar markets
DISADVANTAGES
High risk
High managerial complexity
Usually real-world cases of business portfolios do not strictly belong to one of these categories
Real portfolios are a mix of the two extreme solutions.
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Basic assumption
1. Business Area attractiveness can be measured through Market growth rate:
ess likely
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GE-McKinsey Matrix
Main objectives:
1. To allocate resources correctly
2. To choose the businesses to invest in, to maintain and to divest
3. To analyze the strategies of competitors
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Market size
Market growth rate (10 year basis)
Industry profitability (average Return-on-Sales of companies on a 3 years basis)
Reactivity to inflation
Foreign markets incidence (export)
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Sources of financing:
1. Debts
1. Financial Institutions
Financial Institutions evaluate the possibility of providing capital to firms through the 4Cs Model:
Characteristics
Cash flow
Contribution
Collateral
2. Government Agencies
Typologies of financing
Government grants
Interest-free loans or subsidised rate loans
Bank guarantees
Participation to the firms activities
Monitoring
Evaluation criteria
Business Plan
Specifications of financing laws
2. Services
1. Venture leasing - venture capitalists or investment companies providing machines and tools in
leasing to start-ups in exchange for small equity stakes
2. Incubators - help start-ups during the first months/years. They can be both private or related to
government agencies, both non-profit and for-profit
3. Science & Technology Parks - they are geographical areas characterised by a cluster of firms in the
same industry capable to exploit a competitive advantage based on a common localisation
3. Equity
1. Venture capitalists
a. Participation to the firms activities
i. Equity investors
ii. Stock options
iii. They require board seats
b. Evaluation criteria
i. Entrepreneurs and management team
ii. Business Plan
iii. Available assets
c. Business angels - They are high net-worth individuals (liquid assets 1.000.000 $ or
earnings 200.000 $/year) Usually they invest between 25.000 $ and 100.000 $ each time
and often they finance several firms at the same time
There are two typologies of BA:
1. 3Fs (friends, family and fools)
2. Experts
They can be important when firms require less than 500.000 $
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2. Big corporations - They are similar to Venture Capitalists. Often big corporations create their own
venture capitalist firms (Corporate venturing)
Objectives
1. To control specific research and technology areas
2. Research outsourcing
3. To maintain a window on products and technologies
iii. Vision and mission statements allow the management to: provide a sense of
direction to the firm, transmit an idea of discovery and challenge, motivate
people, and create the firms culture.
iv. Strategic objectives Measurable, Linked to the Economic Value, Credible and
attainable but ambitious (they have to lead to attractive financial results)
c. Objectives and economic value - Economic value:
i. Net Cash Flow Volume (critical mass, growth rates), Economic profitability
(margin, gross margin, EBITDA).
ii. Terminal value - Financial profitability (IRR, PBT (payback time)), Intangible R/C
(brand reputation & awareness, know how, skills)
iii.
Time critical objectives (i.e. 1st mover)
d. External analysis
i. Environmental macro-variables
1. Identification of key variables
2. Evaluation of their impact
ii. Enlarged competition
1. Identification of industrys boundaries and segmentation
2. Enlarged competitive analysis through five competitive forces model
e. Strategic segmentation
i. Generation of relevant segmentation variables - Features of products/services
portfolio , Reference geographical market , Degree of vertical integration
ii. Mapping of companies toward segmentation variables
f. Business area attractiveness 5 forces
g. Internal analysis
i. Start-up - Definition and evaluation of core resources and competences: resources
and competences to exploit and resources and competences to develop
ii. Existing company - Definition of sustainable competitive advantage through the
Value Chain approach
6. Marketing plan
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a. Market analysis
i. General outlines of reference market - actual dimensions, demands sources,
estimated growths rate.
ii. Market segmentation - wanted product attributes, demographic variables,
psychological variables, methods of purchase Generation of segments toward
company wants to focus
Market analysis: sources of information:
i. Primary
1. market researches companies
2. in house
a. statistics
b. Desk researches
c. experts opinions
d. Others
ii. secondary
1. Internet
2. Magazines, publications
3. Research companies
4. Institutional organizations
b. Forecast of companys demand - q = k*Q
q = companys demand, k = companys
market share
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7. Operating plan
a. Headquarters
b. Key processes
i. Identification of the key processes
ii. Boundaries of the value chain (make or buy)
iii. Coherence of market and output
iv. Managerial logic
v. Mapping of the processes (ex. PERT, CPM, )
c. Main resources and inputs
i. Resources:
1. Tangible assets (plants, machineries, computers, )
2. Intangible assets (patents, brands, databases, )
3. Key human resources (skills, competences)
ii. Input: Raw materials, components, services
iii. Key suppliers and possible partnerships
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a. Basic hypotheses
b. Projected income statement balance sheet
i. Projected Profit and Loss (Income Statement)
ii. Activities and Liabilities (Balance Sheet) (at least a draft)
iii. Net cash flow(t) = NI(net income t ) + A(amortizations and depreciation t ) + D(OWC
- change of Net Operating Working Capital (account receivable, inventories,
account payable)) + D(IC - change of Invested capital (total asset))
c. Profitability ratios - Final profitability ratios, or anyway after the launch transitory (e.g
ROE, ROI, ROS, RA, breakeven point, etc...)
d. Liquidity ratios - Liquidity ratios (Current ratio, Quick ratio, Cash Flow/Debts)
e. Projected cash flow statement
f. Capital budgeting indicators: NPV and IRR (Interest when NPV = 0)
g. Sensitivity analyses
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23
The new CEO starts a project to assess restructuring opportunities for EG, simulating the assessments and
the actions of a raider. The goal is to investigate the value of EGs existing businesses and to understand
how to increase it.
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2.
25
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Value Innovation - Value innovation is created in the region where a companys actions favorably affect
both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and
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reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the
industry has never offered.
30
9. The strategic role of ICT and the digital convergence (April 30th
lecture)
The strategic role of ICT according to the strategic models:
1. Internal Perspective - ICT can create new sources of competitive advantage both in terms of cost
and differentiation by impacting on the companys Value Chain
Examples of internal perspective:
1. Internet B2C:
Corporate Web site (for communication), e.g. Zegna
Pre and after sale services, e.g Costa Cruises
Online sale, e.g. Dell, MediaMarket, Trenitalia, Esselunga
Mobile Advertising through SMS, e.g. Alpitour, Bravofly (Volagratis)
Mobile Advertising through Mobile site, e.g. Dolce e Gabbana, Monster
Mobile Services, e.g. Alitalia, Lufthansa, Cartas
Mobile Commerce, e.g. Mediamarket
2. Internet B2C:
eSupply Chain Execution, e.g. Comifar, Esprinet
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How to really exploit ICT to create business value (and in particular strategic value)?
The cultural barriers
the CEO above all
You can learn finance and marketing, but not technology. ICT is not sexy enough for a top
manager to take the time to understand and learn (Luca Majocchi, CEO, Seat Pagine Gialle)
Top managements ability to really worry about ICT? It is a cultural problem. ICT is like
mathematics : either someone was able to teach it well, help you to understand and appreciate, or
you are put off for life (Massimo Capuano, CEO, Milan Stock Exchange)
leadership, business acumen,
organizational competence, communicational skills, etc.)
ICT people must be able to play their game: to speak the language of business, to demonstrate
concrete results, earning credibility "
ICT people speak a language different from ours: I dont want technical terms or acronyms, I want
logical reasoning!"
The CIO must have a good mix of technical, organizational, communication and relationship skills"
Too often CIOs focus only on their projects, paying no attention to their actual impact on the
business"
It would be useful for the key people in the IT Department to have an MBA
-mindedness and sensitivity to ICT
Business Managers: the different approaches to ICT:
Pro-active
Re-active
Eternal skeptic
Procrastinator
Unwitting
and more
Standard
Cheap
Available to all
Outsourcable
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in a word a commodity
IT (ICT) is more and more essential to operations but it is insignificant to strategy
1. Technological perspective - ICT Competence is seen as a bundle of software & hardware assets and
technical skills that are fully available on the market
2. Infrastructure perspective - The focus is mainly on Infrastructure(hardware and network) that is
becoming more and more a commodity
3. Single ICT Project perspective - The focus is on the single ICT Project, that may or may not be the
driver of competitive advantages
Vs.
1. Organizational & Business Perspective - ICT Competence is the ability of a company to
exploit/leverage ICT to pursue business innovations, to change business practices, to improve
business performance . This is in short supply!
2. Application perspective - Business Applications are extremely customized built on the specific
business logic of the company embedded in the organizational routine of the company. They Can
create strategic differentiation
3. Learning Process perspective - This capability is the result of a complex and long cumulative (path
dependent) and collective (organizational) learning process. This can lead to durable and
defendable competitive advantages
4.
5.
BuyVip
ICT Vertical Lecture: Mobile Content & Internet
key processes
technology (EDI, Extranet, eMarketplace, etc.)
usage of the platform (training for the buyer and seller, help desk, document management,
etc.) complete the business model offer.
Process Outsourcers: they offer professional services such as: the consultancy for
improving the purchase of the company user; the support to create the specification for a
negotiation event; the search of new suppliers Technology represents just a tool for
pursuing the purchasing objectives in a better way
i. eSourcing
Advantages
Liabilities
Price savings:
suppliers since
the very first phases of the process
time online negotiation tools
contingencies found on the market
Increase in process efficiency
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Advantages
Liabilities
(in some industries/sectors) need to use tools
compliant with currentlegislation
ii. eCatalog
Advantages
Liabilities
purchasing authorization
workflow
goods in the
catalo
convenience/simplicity
catalog management
ia,
resistance to change management
Reduction of order-to-delivery time
Especially referring to eMarketplaces
enabled/qualified suppliers
(products and prices) of several
different suppliers (benchmarking)
In order to sustain a growth on the correct path, the organizational approach must be characterized by:
Defined objectives
Strong commitment in all relevant levels
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Highlights:
Mobile is the most penetrated media in the world!
Mobile Marketing is not only Sms push!
Mobile Marketing will be more and more linked with engagement and customer experience
Mobile as a marketing channel must be integrated into a wider multichannel marketing strategy
Need for strong educational activity for advertising investors and all the players in communication
supply chain
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6.
2. Intranet
What is an Intranet?
A set composed by a company network (private computer network), protected from external world with
devices called firewalls, and a group of applications provided using typical technologies of
Internetworking (based on Internet communication standards). William Safire, 1994
In other words, an Intranet is a way of thinking and organizing people, work and interaction.
3. Web 2.0
Web 2.0 is the business revolution in the computer industry caused by the move to the internet as
platform, and an attempt to understand the rules for success on that new platform. Chief among those
rules is this: build applications that harness network effects to get better the more people use them.
Openness (Google), Decentralization of authority (Wikipedia), Freedom to share and re-use (youtube)
Within a social network, weak ties are more powerful than strong ties. They are indispensable to
individuals opportunities and to their incorporation into communities while strong ties breed local
cohesion.
The central idea of Open Innovation is that when companies look outside their own boundaries, they can
gain better access to ideas, knowledge, and technology than they would have if they relied solely on their
own resources.
User generated content (UGC) refers to various kinds of media content that are produced by end-users
The Long Tail is the realization that the sum of many small markets is worth as much, if not more, than a
few large markets
4. Enterprise 2.0 - Enterprise 2.0 is the natural evolution of the Enterprise Case study: IBM
E2.0 is a set of organizational and technological approaches steered to enable new
organization models, based on open involvement, emergent collaboration, knowledge
sharing, internal/external social network development and exploitation.
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1.
2.
3.
4.
5.
6.
Open Belonging
Social Networking
Knowledge networks
Emergent Collaboration
Adaptive Reconfigurability
Global Mobility
Main barriers
Little comprehension of the benefits
Difficulty in identifying the economical returns
Organizational changes
7.
8.
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Solution: it allows the control and traceability of company fleet in real time
Technology: box GPS (with GPRS module in order to transmit information) installed
on vehicles
o Benefits: higher quality in transport process, better monitoring, higher quantity of
information, decrease probability of theft
6. Wireless Operations (WO)
Ausl di Forl
o
Solution:it allows real time communications with Public Transport users, giving
information about delay etc.
Technology:displays connected via Cellular Network
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Solution: it gives the opportunity to Top and Middle Management to access mail
and intranet everywhere
Technology: solution based on Smartphone (but also Notebook) connected via
Cellular or WiFi Network
Benefits: increase in productivity and efficiency, reduction in non-value added
time
c. Principal benefits
i. SFA for order gather:
-85% salesmen activities
-60% call center activities
ii. FFA:
-67% call center cost
-50% back office cost
d. Organizational impact
e. Case Studies
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