Lecture 5B Strategy

Lecture Overview

• Dr. Abhijit Sengupta, University of Surrey

• Focus on IT and its strategic role in business.

Generic Strategies

Cost Strategy

• High Cost vs Low Cost

• Cost Leadership and Differentiation strategies

• Broad vs Narrow market focus

Market Focused Strategy

• Aimed at strengthening customer and supplier relationships.

Value Chain Analysis

• Components of Value Chain:

  • Administrative Functions: Legal, accounting, financial management.

  • Human Resources: Personnel management, recruitment, training.

  • Product & Process Design: Market testing, R&D, production engineering.

  • Procurement: Supplier management, funding, subcontracting.

• Value Added Less Cost: Profit Margin

  • Inbound Logistics: Receiving raw materials.

  • Operations: Manufacturing, quality control.

  • Outbound Logistics: Dispatching finished goods.

  • Sales & Servicing: Order handling, marketing, customer management.

Technology in Business Strategy

Administrative and Management Tools

• Electronic scheduling and messaging systems.

• Workforce planning systems in HR.

Primary Activities in Value Chain

• Automated ordering systems in procurement.

• Digital technology for inbound operations, outbound logistics, and marketing.

Common Business Strategies

• Reducing costs and creating barriers to entry.

• Establishing alliances and differentiating products/services.

Strategic Uses of IT

• Tangible Benefits: Increased sales, market share, efficiency, and lower operational costs.

• Intangible Benefits: Improved decision-making, communication, branding.

• The paradox of IT raising or lowering barriers to entry.

• Importance of sustaining value creation through IT.

Critical Readings in IT Strategy

• "Does IT Matter?" - Michael E. Porter (2001)

• "IT Doesn't Matter" - Nicholas G. Carr (2003)

IT Spending and Strategic Value

• Discussion of IT as an infrastructural technology.

• IT as a commodity and utility.

• New approaches to IT spending: lower costs, vulnerability focus.

Network-Based Strategies

• Leveraging networks for competitive advantage through:

  • Network economics.

  • Virtual company models.

Disruptive Technologies

• Definitions and examples across various sectors like Banking, Healthcare, and Retail.

• The significance of technologies such as 3-D printing and telemedicine.

Using the Internet for Growth Strategies

Growth Strategies Supported by Internet

• Market Development and Diversification strategies targeting new markets.

• Enhancements in customer loyalty through improved online services.

Strategic Agility (Donald Sull)

• Concept of maintaining flexibility amid uncertainty in business strategy.

Key Points Summary

• Long-term strategy direction includes cost differentiation, alliances, and the impact of IT.

• Recognition that IT's strategic value can become a liability over time.