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Rushen Chahal
Learning Objectives:1. Evolution of strategic planning in organizations 2. Strategic framework 3. Business planning process 4. Business planning tools & techniques
CHAPTER 1 Evolution of IS/IT. IS strategies MUST BE developed within the context of corporate and business strategic planning processes. $$$ IS/IT
Achievement of business objectives/goals Maximize ROI Enabling strategic use of information
PLANNING INVOLVEMENT
IS managers should understand the corporate perspective of the world
IS Managers
Business Managers
Formal approaches to business planning 1950s Evolved to cater for changes of the dynamic business environment
Prof. Rushen Chahal
Cont
In phase 2, the focus is on trying to predict, or forecast, what is likely to happen within a 5 years horizon. Historical performance analysed and projected into the future using internal trends and external parameters such as economic and market research data. It forecasts sales and market growth and predicts the effects on income and expenses and changes to the balance sheet. Plans are still quantitative and internally oriented, focusing on what is targeted and the resources available.
Prof. Rushen Chahal
Cont
In phase 3, the organisation starts to look outside itself an concentrate on understanding the nature of competition in its industry, and positions itself to gain advantage. Managers try to shift companys product portfolio to more attractive market sectors. In phase 4, the organization is driven by innovation and becomes capable of creating its own business environment. Thus, the organisation gains a leading role in the industry. Obviously, the leadership will require continuing innovation.
What is Strategy?
A strategy is a collection of statements that express or propose a means through which an organization can fulfill its primary purpose or mission A chosen strategy must focus and coordinate the firms activity from the top down toward accomplishing its mission Developing a strategy begins with:
a thoughtful understanding of the firms mission analysis of the environment a detailed assessment of how various business units interact
Strategy (text book) An integrated set of actions aimed at increasing long-term well-being and strength of enterprise relative to competitors
Prof. Rushen Chahal
A strategic vision concerns a firms future business path -where we are going
Markets to be pursued Future technologyproduct-customer focus Kind of company that management is trying to create
Current product and service offerings Customer needs being served Technological and business capabilities
Establishment of Strategy
There are essentially three processes that can contribute to the establishment of a strategy: 1. Strategic thinking creative, entrepreneurial insight into
the ways the enterprise could develop.
A Strategic FW
The external environment
Economic/ Social / Political / Legal / Ecological / Technological
A Strategic Framework
Socio-Cultural: Population growth rate and age profile Population health, education and social mobility, and attitudes to these Population employment patterns, job market freedom and attitudes to work Press attitudes, public opinion, social attitudes and social taboos Lifestyle choices and attitudes to these Socio-Cultural changes
Technological Environment: Impact of emerging technologies Impact of Internet, reduction in communications costs and increased remote working Research & Development activity Impact of technology transfer
PEST Analysis is a useful tool for understanding the big picture of the environment in which firms are operating, and the opportunities and threats that lie within it.
Firms can draw conclusions By understanding the as to the significant forces of environment, firms can take change operating within the advantage of the opportunities environment. Prof. Rushen Chahal and minimize the threats.
Stakeholders:
Have a direct financial interest in the organization and demand a fair share of the wealth created; Expect some form of material and financial benefit;
Pressure Groups:
Media Shareholders Competitors Suppliers Government Unions Customers Public Financial Institution Employees
Evaluate Select
Implement
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Financial Objectives
Outcomes focused on improving financial performance
Situation Analysis
Where are we now ? Consists of two essential elements: looking inside the organization; looking outside the organization.
INTERNAL Resources available in the organization; Financial health of the organization; Employees, skills, training, experience, motivation, resulting business competencies; Physical assets, age, technology, usefulness; R&D The organization, its structure and relationships, attitudes and culture, and effectiveness of operational and management processes, and its ability to change the circumstances;
EXTERNAL Market segments, and within them, identifying competitors (current & potential); Market shares within segments increase share or increase the total size of market; The organizations position in the product life cycles An examination of all current and potential competitors to understand their current and potential strategies, Strengths & Weaknesses; Future competitive actions concerning potential substitute products and thrusts into new markets;
S.W.O.T Analysis
Strengths: attributes of the organization that are helpful to achieving the objective. Weaknesses: attributes of the organization that are harmful to achieving the objective. Opportunities: external conditions that are helpful to achieving the objective. Threats: external conditions that are harmful to achieving the objective.
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TOWS analysis
Strengths and Opportunities (SO) How can you use your strengths to take advantage of the opportunities? Strengths and Threats (ST) How can you take advantage of your strengths to avoid real and potential threats? Weaknesses and Opportunities (WO) How can you use your opportunities to overcome the weaknesses you are experiencing? Weaknesses and Threats (WT) How can you minimize your weaknesses and avoid threats?
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Business SWOT
IS SWOT
Business application Technical infrastructure People, organization, culture Processes
IT Organization, Culture
IS Process Analysis
Future Strategies
This can provide both defensive mechanism against possible future threat and capability to exploit the opportunities by identifying the pressure groups and the stakeholders; Future options can be discovered by undertaking scenario planning to identify discontinuities and predict the potential implications or bring in outside experts to facilitate breakthrough thinking;
Prof. Rushen Chahal
Future Strategies
Future possible strategies are evaluated against criteria, such as the following :
The risks financial and managerial; and likely responses of main competitors; The degree to which the organization needs to create new capabilities to be offensive or improve control to be defensive; Appropriateness of current organization structure to achieve intended strategies; The ability of the organization to implement the strategy in terms of ability, resources, processes and culture; The implications for customers and trading partners; Requirement for alliances or joint ventures to enable or secure strategies;
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Strategy Implementation
INTENDED STRATEGY
plans
EMERGENT STRATEGY
REALISED STRATEGY
Failed implementation
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Unrealized Strategies
Low
Industry Analysis
How can IS/IT affect nature & value of product or service and its life cycle?
Electronic financial and business services, e.g. Banks Online publishing, e.g. online journals Recruitment services via Internet
Threat of new Additional capacity entrants Reduced prices New basis for competition
Provide entry barriers/reduce access by - exploiting existing economies of scale - differentiate products/services - controls distribution channels - segment markets
Differentiate products/services and Forces prices down improve price/performance Demand higher quality Increase switching costs, of buyers Require service flexibility Facilitate buyer product selection Prof. Rushen Encourage competitionChahal
Raises prices/costs Reduced quality of supply Reduced availability Limits potential market and profit Price ceilings
Supplier sourcing systems Extended quality control into suppliers Forward planning with supplier Improve price/performance Redefine products and services to increase value Redefine market segments
Improve price/performance Price competition Product development Differentiate products and services in distribution channel and to consumer Distribution and service critical Get closer to the end-consumerCustomer loyalty Prof. Rushen Chahal understand the requirement required
CONCLUSION
IS Strategies must be developed within the context of business strategic planning processes. Thus, the investment in IS/IT throughout an organization can be directed towards the achivement of business objectives
Prof. Rushen Chahal