Chapter 2

Implications of the ICT revolution for

business and strategy

SESSION OBJECTIVES ●This session aims to : ●Introduce how information communication technologies

revolutionise modern society & how they affect business strategy

●Demonstrate how ICTs revolutionise societies and businesses

●Improve your understanding of the basic structure & tools for strategic analysis for organisations

●Introduce the issue of eCommerce and demonstrate how it grows

●Demonstrate how organisations can achieve competitive advantage and strengthen their competitiveness

●Explore how ICTs can support organisations to enhance their strategic position

Information Communication Technologies

at macro-economic level

●A new global information society is gradually emerging

●ICTs are instrumental in regional development & long-term

prosperity of regions

●All enterprises become global as they can be present in the

international marketplace at an affordable cost

●Frontier controls and limitations are gradually eased as a result of

ICTs

●The location of buyers & sellers becomes less important for

transactions.

●Management, quality & speed of information are key factors for

competitiveness

Information Communication Technologies

at micro-economic level

●ICTs change the operation, structure and strategy of

organisations

●They drive a shift from product-oriented organisations, to a

flexible & responsive marketplace

●Gradually they reengineer the entire business process of

organisations

●ICTs become one of the most important strategic

considerations at the corporate level

●Successful ICT strategies based on innovative and dynamic

management can provide organisations with competitive

advantage

●Failure to adopt suitable technologies may generate

competitive disadvantages

Corisande Hotel in Cornwall www.cornwall-

calling.co.uk

●The Corisande Manor Hotel in Cornwall is an example of best

practice in ICT usage.

●It receives 90% of its bookings through the Internet

●David Grant taught himself how to use the internet and gradually

learned how to develop a web page promoting his property

●Instead of David doing a usual page about his own hotel he

registered the domain name www.cornwall-calling.co.uk and

provided information on Cornwall and its attractions.

●Each page invited people to stay in his property by providing a

link to his hotel (www.corisande.co.uk).

●David managed to gain a respectable return on his investment,

which cost the equivalent amount of one regular advertisement in

a Sunday newspaper.

The impact of the ICT revolution and the information

society●Technology enables the personalisation of information, products

and services to individual needs and desires

●ICTs enable people to socialise and interact with their local

community

●Virtual communities are being established

●Digital-living places less emphasis upon people being in a specific

place at a specific time

●The Internet introduces new services such as home-shopping, tele-

entertainment, tele-working, tele-banking

●The Internet provides niche markets with access to specialised

information & services

●The Internet can also introduce a wide range of political, economic

& social threats

●The Internet encourages transparency & interactivity in the society

●It also empowers individuals to research on major issues and

decide their standing for themselves

Value chains and the influence of ICTs

Value chains and the influence of ICTs

Value chains within

the entire industry

value system

The information marketplace

The development of eCommerce & cybermarkets

The information marketplace is:

“the collection of people, computers, communications,

software and services that will be engaged in the

intra-organisational and inter-personal informational

transaction of the future”

eBusiness

●Represents the entire range of business processes that

are enhanced by the emerging ICT tools

- provides electronic tools and resources for business

- may replace some of the off-line business transactions

- can enhance the total transaction volume

- the Internet provide eBusiness tools internally

(intranets),

with partners (extranets) and with the entire world

(Internet)

- eBusiness bridges the gap between consumers &

partners

- provides opportunities for disintermediation and

reintermediation

eCommerce

●Electronic Commerce (eCommerce) can be defined as the

secure trading of information, products and services via

computer networks and the exchange of value on-line, as

well as the support for any kind of business transactions

over a digital infrastructure ●Electronic Commerce (eCommerce)

- can include all ICT-supported transactions

- secures trading of information, products and services via computer

networks

- enables the exchange of value on-line

- supports any kind of business transactions over a digital

infrastructure

The development of eCommerce & Cybermarkets

●eCommerce facilitates a wide range of business opportunities,

mainly:

●Business to consumers (B2C)

- trading and delivery of commodities & services to consumers

- entire support information and mechanisms required for these

transactions

●Businesses to Business (B2B)

- trading between producers and intermediaries

- transactions between producers towards the final product

Interacting in the electronic marketplace

●Grow Customer base & market share

Share of customer’s disposable income

Global presence all day every day

Efficiency in business processes

Profit by increasing turnover & reducing cost

●Protect Customer base & market share

Brand name and property

Markets, investments and ultimately business

●Differentiate Specialise and 1-2-1 marketing

Improve customer service/information/knowledge

Time to market

Price/value proposition

Potential benefits from enterprise-wide

Internet & eCommerce

●Manage & create change Enhance environment

Organisational structure and culture

Business process

Enhance competitiveness

●Trust Leverage the trust and values of brand

Implement a secure and reliable system

Develop trust in all your eCommerce

applications

Potential benefits from enterprise-wide

Internet & eCommerce (continued)

●Information & communication technologies have critical impacts

on the industry structure and on organisations as they :

●Create new industries

●Restructure existing industries

●Radically change the way organisations compete

●The Internet provides a comprehensive way for interacting

●Business model of organisations need to be redesigned

●Reshape the nature of competition and value chain

●Entire economic system changed

Strategic management & competitive advantage

●Top management’s plans to attain outcomes

consistent with the organisation’s mission and goals

●A coherent, unifying and integrative pattern of

decisions

●A means of establishing the organisational purpose in

terms of its long-term objectives, actions programs

and resource allocation priorities

●A definition of the competitive domain of the firm

Defining

strategy & strategic management

●A response to:

- Industry structures and challenges

- External opportunities & threats

- Internal strengths & weaknesses to achieve competitive advantage

●A mechanism to:

- Define managerial tasks at the corporate, business &

functional levels

●A statement of the economic & non-economic contribution the firm

intends to make to its stakeholders

Defining

strategy & strategic management (continued)

●Where are we now? Situation analysis

SBU analysis

Future analysis

Demand & Supply

External (PEST)

Internal analysis

Competition analysis & industry

Stakeholder mapping

Competitive SWOT analysis

●Where do we Mission statement

want to go? Strategic options

Strategic choice

Portfolio management & SBU reviewSource: Based on Hax and Majluf (1991); Finlay (2000); Lynch (1997); Johnson and Scholes (1999)

Strategic management : processes & tools

●How do we Strategic direction

get there? Portfolio analysis & adjustment

Implementation

Strategic alliances

Tactical planning

Budgeting

●How do we know Control & feedback

we get there? Setting of indicators, warnings

Incorporate feedback & reaction

mechanisms Source: Based on Hax and Majluf (1991); Finlay (2000); Lynch (1997); Johnson and Scholes (1999)

Strategic management : processes & tools

(continued)

●Generic strategies

●Cost leadership

- based on mass production & to cost minimisation, e.g. EasyJet

or Go offer limited service & charge for all catering offered

●Differentiation

- Creating different products & services that are unique & valuable,

e.g.

Mauritius as a destination or the Orient Express

●Focus

- A strategy with a narrow competitive scope targeting specific

market

segments

- Business class on airlines focuses on business passengers

Competitive strategy & advantage

●provide executive management with information to

support the development and implementation of

strategy

●link the organisation via technology-based systems to

its customer/consumers and/or suppliers

●produce more effective integration of the use of

information in the organisation's value adding process

●enable the organisation to develop, produce, market

and deliver new or enhanced products or services

based on information

4 categories of strategic ICT systems

Strategic opportunities emerging

through ICTs

●Gain a competitive advantage

●Improve productivity and performance

●Facilitate new ways of managing &

organising

●Develop new businesses or expand

horizontally and vertically

Management & business opportunities of ICTs

●Organisations need to use ICTs to be proactive &

reactive

●Innovative and ongoing market research is the driving

force

●New niche markets can be developed to create and add

value to products and services

●Communicating effectively with consumers & partners

is critical

●Support the growth of the organisation, geographical &

operational

Using ICT

to support strategic initiatives

●Info-structure brings partners & their core competencies

together

●Enhance efficiency through redesigning & re-engineering

business process

●Encourage staff to share knowledge

●Collection of information in dynamic data warehouses

enables organisations to constantly update their consumer

research

●Use to avoid substitution by developing barriers to entry

●Integrate internal & external processes

Using ICT

to support strategic initiatives (continued)

●long term planning and strategy

●innovative processes

●top management commitment

●training throughout the hierarchy

●Enterprise Resource Planning (ERP)

Prerequisites for achieving competitive

advantage through ICTs

●Refocusing:

raising executive management awareness and understanding

how important ICTs are for business

●Retooling:

developing management or application skills and knowledge to

follow up any new initiatives identified in refocusing

●Reskilling:

educating and training the Information Systems community on

technology, management and business skills for the new ICT era

●Reinforcing:

building top management understanding, confidence and

commitment to support the effects of the other programmes.Source: Based on Earl (1988)

4Rs framework for ICT training

Paradigm shifts influencing business

Paradigm shifts influencing business

Source: Based on Tapscott and Caston

(1993)

●co-destiny with partner throughout the value chain

●products are produced instantaneously

●products are customised in response to customer

demand

●develop best of everything

●demonstrate focused strategic direction & purpose

●develop dynamic communications with partners

●create cultures that support continual organisational

adaptation

●can compete on a global scale

●overcomes geographical constraints

●undertake an extensive outsourcing policy

●use less of everything - compared with mass production

●synergies in communications & technologies used

The virtual corporation

●virtuality: process and direction, journey not a destination

● focus on consumer gratification

● responsiveness and promptness: just in time

●cost effectiveness

● trust partners/consumers/suppliers/employees

●continuous organisational adaptation to market needs

●continuous learning and training towards innovation

●networking and partnerships

●synergies in communication and technologies utilised

● lean production through outsourcing

●dynamic involvement of suppliers/consumers/employees

●co-destiny throughout the value chain

● teamwork and empowerment

● innovative use of Information Technology

● flexible and intelligent location

●proximity to the needs of the marketplace Source: Based on Tapscott (1996); Davidow and Malone (1992); Handy (1995); Hollister (1995);

Loebbecke and Jelassi (1997)

Characteristics of virtual corporations

A multidimensional framework for strategic

management & marketing Organizational info-

space for strategic

management

●maximises the efficiency and effectiveness of each organisation

●capitalises on the market opportunities

●positions the organisation effectively for taking advantage of the

partnership opportunities

●formulates successful value chains

●maximises consumer benefits

A multidimensional framework

for strategic management & marketing