8/26/2011 PLANNING TECHNIQUES 1. 2. 3. 4. 5. 6. SEVEN PLANNING TECHNIQUES A Framework/Methodology 7. Stages of growth Critical Success Factors Competitive Forces Model Value Chain Analysis Internet Value Matrix Linkage Analysis Planning Scenario Planning STAGES OF GROWTH ? CRITICAL SUCCESS FACTORS 1977 Jack Rockart, Center for Information Systems Research (CISR), Sloan School of Management, MIT ? A method for defining executive information systems needs ? Focuses on individual managers and their current information system needs ? It was observed that organizations go through 4 stages in the introduction and assimilation of a new technology: ? ? ? ? ? ? Stage 1: Early Successes Stage 2: Contagion Stage 3: Control Stage 4: Integration Stage 5: Data Administration Stage 6: Maturity CRITICAL SUCCESS FACTORS: SOURCES ? Few CRITICAL SUCCESS FACTORS ? One key areas where things must go right for the organization to flourish ? Fewer than 10 (to be monitored) ? Time sensitive and time dependent (reexamined often) ? Has four sources of these factors ? ? ? ? ay to use CSF : use current corporate objectives and determine which factors are critical for accomplishing the objectives ? Discovering measures is the most time consuming part ? ? Industry Company itself Environment Temporal organizational Some are hard, factual data – quickly identified Softer measures – opinions, perceptions ? IS can then be developed based on these CSFs 1 8/26/2011 COMPETITIVE FORCES MODEL Michael Porter, Harvard Business School (in the book Competitive Strategy) ? He believes companies must contend with five forces as shown in the diagram ? FIVE COMPETITIVE FORCES
Threat of new entrants into one’s industry Bargaining power of buyers ? Bargaining power of suppliers ? Substitute products or services ? Intensity of rivalry among competitors ? ? THREAT OF NEW ENTRANTS ? BARGAINING POWER OF BUYERS ? Buyers Many new entrants = decrease profitability (for all firms in the industry ) ? Perfect competition =profit rate moves towards zero ? Most attractive segment = entry barriers are high and exit barriers are low. ? Few new firms can enter and non-performing firms can exit easily. are the people / organisations who create demand in an industry ? Buyers seek lower prices and higher quality ?
The bargaining power of buyers is greater when: ? ? ? ? ? ? Industry profitability – the more profitable the industry the more attractive it will be to new competitors ? i. e. High entry barriers exist in some industries (e. g. shipbuilding) whereas other industries are very easy to enter (e. g. estate agency, restaurants) There are few dominant buyers and many sellers in the industry Products are standardised Buyers threaten to integrate backward into the industry Suppliers do not threaten to integrate forward into the buyer’s industry The industry is not a key supplying group for buyers
BARGAINING POWER OF SUPPLIERS The power of suppliers tends to be a reversal of the power of buyers ? Customers are fragmented (not in clusters) so that they have little bargaining power e. g. Gas/Petrol stations in remote places ? Power is high where the brand is powerful e. g. Microsoft ? BARGAINING POWER OF SUPPLIERS ? The ? ? ? bargaining power of suppliers will be high when: There are many buyers and few dominant suppliers There are undifferentiated, highly valued products Suppliers threaten to integrate forward into the industry (e. g. rand manufacturers threatening to set up their own retail outlets) Buyers do not threaten to integrate backwards into supply The industry is not a key customer group to the suppliers ? ? 2 8/26/2011 THREAT OF SUBSTITUTES The presence of substitute products can lower industry attractiveness and profitability because they limit price levels ? The threat of substitute products depends on: ? THREAT OF SUBSTITUTES ? Where Buyers’ willingness to substitute The relative price and performance of substitutes ? The costs of switching to substitutes ? ? here is product-for-product substitution e. g. email for fax Where there is substitution of need e. g. better toothpaste reduces the need for dentists. ? Where there is generic substitution (competing for the currency in your pocket) e. g. Video suppliers compete with travel companies. ? We could always do without e. g. cigarettes. COMPETITIVE RIVALRY This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. ? This is why it is always seen in the center of the diagram ?
The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences. ? COMPETITIVE RIVALRY Economists measure rivalry by indicators of industry concentration ? The Bureau of Census periodically reports the CR for major Standard Industrial Classifications (SIC’s) ? The CR indicates the percent of market share held by the four largest firms ? COMPETITIVE RIVALRY ?A COMPETITIVE RIVALRY ? If high concentration ratio indicates that a high concentration of market share is held by the largest firms – the industry is concentrated. With only a few firms holding a large market share, the competitive landscape is less competitive (closer to a monopoly). ? A low concentration ratio indicates that the industry is characterized by many rivals, none of which has a significant market share. ? These fragmented markets are said to be competitive. rivalry among firms in an industry is low, the industry is considered to be disciplined. ? This discipline may result from the industry’s history of competition, the role of a leading firm, or informal compliance with a generally understood code of conduct. Explicit collusion generally is illegal and not an option; in low-rivalry industries competitive moves must be constrained informally. ? However, a maverick firm seeking a competitive advantage can displace the otherwise disciplined market. 3 8/26/2011 VALUE CHAIN ANALYSIS ? By ? A VALUE CHAIN ANALYSIS By studying how a firm performs the primary and support activities for a product or service, a firm can explore how it might add more value at every activity ? It could determine where another company could add more value, and team up with that firm, outsourcing that activity to a partner ?
Michael Porter in 1985 popular strategic planning tool ? A value chain for a product or service consists of major activities that add value during its creation, development, sale, and after-sale service ? Primary activities and Support activities VALUE CHAIN ANALYSIS ? VALUE CHAIN ANALYSIS ? ? ? Inbound logistics ? receive and handle inputs, receiving and storing externally sourced materials convert inputs to the product or service, converting inputs to outputs activities associated with getting finished goods and services to buyers informing buyers and consumers about products and services (benefits, use, price etc. activities associated with maintaining product performance Organizational infrastructure ? includes and is driven by corporate or strategic planning employees are an expensive and vital resource include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments. This function is responsible for all purchasing of goods, services and materials. ? Operations ? HR management ? ? Outbound logistics ? Technology development ? ? Marketing and sales ? ? Procurement ? Service ? INTERNET VALUE MATRIX ? INTERNET VALUE MATRIX Portfolio management ? A portfolio management approach is valuable to senior execs The value of each project is meant to be placed in one of four categories to assess its value to the company ? Assessed as high or low in two categories ? ? ? Criticality to the business Newness of the idea 4 8/26/2011 INTERNET VALUE MATRIX New fundamentals – i. e. web-based expense reporting system ? Operational excellence – involve reengineering ? Rational experimentation – test new technologies and new ideas ?
Breakthrough strategies – have a huge impact on the company or industry if they succeed ? CASE EXAMPLE: CISCO ? New Fundamentals ? Expense reporting system (now needs only three people to manage expense reports of 31,000 employees) Executive Dashboard (used by execs to model sales, manage supply chain, and trend analysis of components) Experimenting on multicast streaming video deployed to IP TV) Build a virtual supply chain Only 5 out of the 26 companies/factories are owned by CISCO ? Operational Excellence ? ? Rational Experimentation ? ? Breakthrough Strategy ? LINKAGE ANALYSIS Espoused by Kenneth Primozic, Edward Primozic, and Joe Leben ? Examines the links organizations have with one another with the goal of creating a strategy for utilizing electronic channels Methodology: 1. Define power relationships among the various players and stakeholders 2. Map out the extended enterprise to include suppliers 3. Plan electronic channels to deliver the information components of products and services ? DEFINE POWER RELATIONSHIPS Management must first understand the power relationships that exist among players ?
Begin with Porter’s competitive forces ? Then they add technology, demographics, global competition, government regulations, and whatever is important in your environment ? Goal is to identify who has the power and determine future threats and opportunities for the company ? DEFINE POWER RELATIONSHIPS ? Analysis MAP OUT THE EXTENDED ENTERPRISE Deals with external players Includes those whose decisions affect the organization and vice versa ? How links could change and how it could be managed ? Relationship will only succeed if there is a winwin relationship ? ? egins by identifying linkages, which are the relationships the organization has with other entities ? Once identified, management needs to determine who manages these links and decide how the firm can control that link ? It is believed that successful organizations will be those that control the electronic channels or the electronic links to enterprises ? ? How might alliances with other firms help us? How do we restructure ourselves to ward of threats 5 8/26/2011 PLAN YOUR ELECTRONIC CHANNEL ? SCENARIO PLANNING Scenarios – stories about the way the world might be in the future ?
Can help people spot and adapt to aspects of their lives that are actually changing ? Four steps ? Electronic channel – used to create, distribute, and present information and knowledge as part of a product or service ? ? Focus on information component of products Those who control electronic channels will be winners (be able to address new markets) 1. Define decision problem and time to bound the analysis – IS Manager: how will IT be managed 10 years from now? IS employee: What skills would I need and how? 2. Identify the major known trends that will affect the decision problem –
Think about trends in categories (i. e. gov’t regulations, societies, etc) 3. Identify just a few driving uncertainties – Explore quite different futures, not the likely scenarios 4. Construct the scenarios – Each scenarios, based on a driving uncertainty, needs to be plausible. To make this possible, scenario writers include a “triggering event” something that redirects the future into the desired space. *With these scenarios at hand, execs and planners then decide how well their current strategies would fare in each case 6