SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Welcome to BA530

John A. Hengeveld

Karyn Lazarus

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Agenda for Today

• Syllabus 2• Introduction and Logistics• A Firm in Competition• Porter Value Chain• Dimensions of Competition• Information Flow in a Firm

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Introduction and Logistics

• Student Introductions

• Class Syllabus & Schedule Review

• Case Writeup and Presentation Criteria

• Teams

• Any questions??

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Syllabus – Overview pt 1

• This course will be a unique and challenging mix of:introduction to strategy

introduction to information management systems

introduction to successful learning in a business school environment.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

The Strategy TriangleBusiness Strategy

OrganizationStrategy

InformationStrategy

Goal of this class,Introduce studentsTo these two topics

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Learning Objectives 1

• Understand…a firm’s competitive advantage and the generic strategies for achieving competitive advantage in today’s high paced business world. – Define and apply concepts of core competency,

competitive fit, environmental analysis and sources of competitive advantage.

– Develop a basic understanding of the concept of sustained competitive advantage and the role it plays in generating and determining a firm’s strategic choices.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Learning Objectives• To understand the essential relationships between information,

business processes and information technology in the work systems of a firm.

• To understand implications of information management and competitive strategy and how the firm’s information management options are shaped by larger economic and institutional contexts.

• To acquire a basic familiarity with the core components in information systems and how they support the information needs of the firm.

• Establish norms of working in a team environment, and exercise team skills through collaboration on case analysis, material review and presentations.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Case Analysis Method

• A note on Case Learning

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Written Grading standard:

– Organization of report 15%– Writing “correctness” 10%– Goes Beyond the Obvious 10% “depth”– Recommendation:

• Aptness: 20%• Persuasion: 15%

– Analysis:• Business Situation Analysis: 10%• Identification/Justification Criteria for decision 10%• Analysis of Alternatives and

Rationale for recommendation: 10%

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Case Presentation Criteria

• Clearly demonstrate an understanding of the issues of the case and the business situation facing the key figures – 30%

• Make a clear prescription or recommendation which addresses the real problems. – 30%

• Defend your position against questions – 30%• Style (professional quality, well presented, keeps

the class awake) – 10%

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Competing in a Global EnvironmentInformation, Management and Systems SegmentInformation, Management and Systems Segment

Business Strategy

OrganizationStrategy

InformationStrategy

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

A firm and competition

• We need to gain some alignment on some key concepts….

• What is a firm and why does it exist?

• What is a firm competing for?

• Why does it compete?

• What are industries, types of competition.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

What is Profit?

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

What is strategy??

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Common Elements of Successful Strategy

Grant: Figure 1.1

Successful Strategy

SimpleConsistent &Long Term Objectives

Effective Implementation

ProfoundUnderstanding

of the CompetitiveEnvironment

ObjectiveAppraisal ofResources

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Grants Definition

The task of business strategy is to determineHOW the firm will deploy its resources within its

environment to satisfy its long term goals and

HOW to organization itself to implement that strategy.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Graphically

Goals andValues

ResourcesCapabilities

Structure & Systems

Grant: Figure 1.2

The Firm

Strategy

Competitors

Customers

Suppliers

Industry Environment

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Strategic Analysis

• The formulation of strategy begins with– Analysis of the industry and its operating

environment and dynamics– Analysis of the firm and is capabilities to

deploy against the key success factors of an industry

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

The Porter Value ChainFirm InfrastructureHuman Resource Management

Technology Development

Procurement

SupportActivities

Primary Activities

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

Service

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Industry Analysis

• Analysis of Industry Structure

• Forecasting Industry Profitability

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Industry Structure

Grant: Figure 3.2

Concentration

Entry/Exit Barriers

ProductDifferentiation

Information

Many Firms

NoBarriers

HomogeneousProduct

PerfectInformation Flow

PerfectCompetition

Few

SignificantBarriers

Potential for Product Differentiation

Imperfect Availability of Information

HighBarriers

2 Firms One Firm

Oligopoly Duopoly Monopoly

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Porter’s 5-forces analysis:Determinants of industry attractiveness

Threat ofNew Entrants

BargainingPower of Suppliers

Threat ofSubstitutes

CustomerBuying Power

Rivalry among Existing

Competitors

2 examples

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Competing in the Age of Information

• Assess information intensity of its products and businesses

• Determine the role of information technology in industry structure (5 forces analysis)

• Identify and rank ways in which information technology might create competitive advantage (hint: value chain)

• Investigate how information technology might spawn new business

• Develop a plan for taking advantage of information technology

From Porter Article

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Types of Resources• Tangible

– Financial– Physical

• Intangible– Technology– Reputation– Culture

• Human– Specialized Skills and Knowledge– Communication and Interactive abilities– Motivation

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Profit Potential of Resources

From Grant: Contemporary Strategy Analysis, Blackwell, 1998

The ProfitEarning Potential

of a Resourceor Capability

Scarcity

Relevance

Durability

Mobility

Replicability

The Extent of theCompetitiveAdvantageEstablished

Sustainability ofCompetitiveAdvantage

Appropriability

Property Rights

Relative Bargaining Power

Embeddedness

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Information Systems

• What is data, information, knowledge?

• What are systems?

• How does information get used in a firm?

• How can information be used to generate competitive advantage

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

DATA VS. INFORMATION

Websters Collegiate Dictionary

Data. "... factual information... used as a basis for reasoning, discussion, or calculation."

Information. "2c: facts, data." "1: the communication or reception of knowledge or intelligence." "2a: knowledge obtained from investigation, study, or instruction."

Alter’s textbook

Data. ”… facts, images, or sounds that may or may not be pertinent oruseful for a particular task."

Information. ”… data whose form and content are appropriate for aparticular use."

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Okay… what about “knowledge”?

(Data vs. information, continued)

Data is a kind of ‘proto-information’ (or information potential) that hasn’t (yet) made sense to someone and that hasn’t (yet) made a difference.

Websters Collegiate DictionaryInformation. "2c: facts, data." "1: the communication or reception of knowledge or intelligence." "2a: knowledge obtained from investigation, study, or instruction."

“Information is created from streams of data through the application of knowledge.”

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

SIMPLE MODEL OF AN OPEN SYSTEM

INPUTSTRANS-

FORMATIONPROCESS

OUTPUTS

INFORMATION PROCESSOR& AGENT OF CONTROL

ENVIRONMENT

COMMUNICATION:

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

SYSTEM

A system is a set of interrelated COMPONENTS that WORK TOGETHER to achieve some predetermined OBJECTIVES by drawing on RESOURCES available from the system's ENVIRONMENT and producing OUTPUTS that satisfy the objectives in some way.

COMPONENTS: people, objects, subsystems; i.e., it’s differentiated

WORK TOGETHER: interdependencies and integration… which implies coordination and control (management)

OBJECTIVES: the goals and purposes of the system; they provide the basis for evaluating system performance

RESOURCES: the inputs to the system

ENVIRONMENT: defines constraints, including resource limits and demand for the output

OUTPUTS: what the system produces

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

TRANS-FORMATION

PROCESS

OUTPUTINPUT

RESOURCES

A SYSTEMS MODEL OF THE FIRM

ENVIRONMENT

Physical resources,data & information

Physical resources,data & information

Data

INFORMATIONPROCESSOR

PERFORMANCESTANDARDS

Information

Decisions

MANAGEMENT

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

SYSTEM

A system is a set of interrelated COMPONENTS that WORK TOGETHER to achieve some predetermined OBJECTIVES by drawing on RESOURCES available from the system's ENVIRONMENT and producing OUTPUTS that satisfy the objectives in some way.

COMPONENTS: people, objects, subsystems; i.e., it’s differentiated

WORK TOGETHER: interdependencies and integration… which implies coordination and control (management)

OBJECTIVES: the goals and purposes of the system; they provide the basis for evaluating system performance

RESOURCES: the inputs to the system

ENVIRONMENT: defines constraints, including resource limits and demand for the output

OUTPUTS: what the system produces

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

DIFFERENTIATION

The establishment and maintenance of distinctive “parts” within the business firm that are specialized for accomplishing certain kinds of tasks and for performing certain kinds of functions effectively and efficiently.

mfg &prodn

finance & acctg

sales &mktg

HR

Strategicplanning

Tactical decisionmaking

Operational control

Senior mgmt

Middle mgmt

Oper’l mgmt

functional

hierarchical

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

TASKS IN THE FUNCTIONAL AREAS (in brief)

Manufacturing & productiono inbound logistics, production, outbound logisticso production planning, facilities development, product engineering, operations scheduling, materials acquisition, inventories, manufacture and assembly, order processing, shipping, ...

Finance & accountingo financial assets management, firm capitalizationo financial records management

Sales & marketingo product, pricing, promotion, placement (distribution)o product development, market research, forecasting, competitor analysis, distribution networks, differentiation and promotion, ...

Human resourceso recruitment, retention, developmento labor needs, performance appraisal, training, compensation, legal compliance, ...

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Senior management: Strategic planningo long-term decisionso environmental scanning, forecasting o capital budgetingo product and market directionso . . .

Middle management: Tactical decision makingo short-range planningo planning for daily operationso operational monitoring and responseo . . .

Operational management: Operational controlo standardized procedures o routine worko clerical taskso . . .

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Manufacturing& production

Finance &

accounting

Sales &

marketing

Humanresources

TRANSACTION PROCESSING

OPERATIONAL CONTROL

TACTICAL DECISION MAKING

STRATEGICPLANNING

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

INTEGRATION

Getting the differentiated elements of the business firm working together as a whole so that firm-wide goals can be achieved…

… and integration depends on coordinating flows of information.

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Materials

SUPPLIERS PRODUCTIONSUBSYSTEM

SALES &MARKETINGSUBSYSTEM

Product

CUSTOMERS

Product

FunctionalIntegration

CUSTOMERS& OTHERFINANCIAL SOURCES

Money Money FINANCE &

ACCOUNTINGSUBSYSTEM

CUSTOMERS

Information

Information

Information

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

CUSTOMERS

Materials

SUPPLIERS

Money

Information

Information

Information

Money

PRODUCTIONSUBSYSTEM

SALES &MARKETINGSUBSYSTEM

FINANCE &ACCOUNTINGSUBSYSTEM

Product

CUSTOMERS

Product

FunctionalIntegration

CUSTOMERS& OTHERFINANCIAL SOURCES

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

HierarchicalIntegration

Strategicobjectives

Information Transformation Decisions

Decisions

Tactical objectives

Information

Operational objectives

Senior mgmtlevel

Middle mgmtlevel

Operational mgmtlevel

Production layer/Transaction processing systems

Transformation

Transformation Decisions

Information

Information

Decisions

Information

Decisions

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Summary: What information does…

It supports the diverse work activities in the differentiated components of the business firm.

It gets the differentiated components working together as a whole so that firm-wide goals can be achieved…

o integrating production and control

o integrating differentiated functions

o integrating managerial levels

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Setup of the HE Butt case• HE Butt was 3rd largest grocery retailer in the US

in 1992 ($3.2B)• Mass merchandisers entered the market and

represented a serious threat.. Why?• Implement ECR system which moved buying

logistics to suppliers! – Radically increased inventory turns– Eliminated “death by price promotion”– Levered improvements in scanner technology to

automate inventory management

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

Simplified Grocery Value Chain

Factory

Warehouse

Manufacturers Distributors Stores

Warehouse

$$ $$

Info Info

Goods Goods

Customers

RawMaterials

Storage

Shelves

HE Butt Grocery: A Leader in ECR Impl (Abridged) HBSP

SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2003BA 530 – John A. Hengeveld Winter 2003

HE Butt Discussion Questions• (note.. These things need to be in your writeup,

but they are only part of what you need to do…..)• What is going on in the industry and what are the

dynamics of competition? (ie: provide an industry and competitive analysis)

• What is HE Butts generic strategy?• What do you think of the plan in Exhibit 1?