Lecture 24

Electronic Business (MGT-485)

Recap – Lecture 23

• E-Business Strategy: Formulation– External Assessment• Key External Factors• Relationships between key external factors and an

organization• Performing an External Audit• Michael Porter’s Five Forces Model

Contents to Cover Today

• E-Business Strategy: Formulation– External Assessment• Competitive Strategies for e-business (Michael Porter’s

Generic Strategies)

• E-Business Strategy: Implementation– Strategic Control– Organizational Learning

Competitive Strategies for e-business (Michael Porter’s Generic Strategies)

Cost Leadership Strategies

Differentiation Strategies

Focus Strategies

Competitive Strategies for e-Business

Cost Leadership Strategies –

Pursued in conjunction with differentiation Economies or diseconomies of scale Capacity utilization achieved Linkages with suppliers and distributors

Competitive Strategies for e-Business

Low Cost Producer Advantages –

Market of many price-sensitive buyers Few ways of achieving product differentiation Buyers not sensitive to brand differences Large number of buyers with bargaining

power

Competitive Strategies for e-Business

Differentiation Strategies –

Greater product flexibility Greater compatibility Lower costs Improved service Greater convenience More features

Competitive Strategies for e-Business

Differentiation Strategies –

Allow firm to charge higher price Gain customer loyalty

Competitive Strategies for e-Business

Focus Strategies –

Industry segment of sufficient size Good growth potential Not crucial to success of major competitors

Competitive Strategies for e-Business

Focus Strategies –

Consumers have distinctive preferences Rival firms not attempting to specialize in the

same target segment

E-Business Strategy: Implementation

• Once a strategy has been formulated, the next stage is implementation.

• Strategic implementation is the practical measures taken to execute a strategic choice.

Strategic Control

• Traditionally, firms undertook the strategic control function after the strategy had been formulated and implemented.

• The strategic control constituted the evaluation of performance against pre-determined targets.

• Contemporary thinking in management emphasizes the integrated approach to strategic controls.

Strategic Control: An Integrated Approach

Strategic Control: Informational and Behavioral Control

• Two key elements form the strategic control process: – Informational control and – Behavioral control.

Strategic Control: Informational Control

• Informational control focuses on monitoring the effectiveness of linking what actions have been decided upon with those that are actually carried out.

• Information control helps managers determine the strategic fit between the firm’s objectives and the chosen strategies.

• Consequently, it is an on-going process of information gathering and analysis to improve organizational learning.

Strategic Control: Informational Control

• Key characteristics that determine effective information control as part of a strategic control system include:– A focus on constantly changing information that has

potential strategic importance;– The information is important enough to warrant frequent

and regular attention of managers at all levels of the organization;

– The information generated is best interpreted and discussed by face-to-face meetings of superiors, subordinates and peers;

– The control system is a catalyst for on-going debate about underlying data, assumptions and action plans.

Strategic Control: Behavioral Control • Behavioral control focuses on the extent to which the

actions undertaken are correct and meet set performance standards.

• Traditionally, firms placed an emphasis on rules, regulations and procedures to control behavior and achieve aims and objectives.

• While contemporary management thinking has a focus on culture and reward systems as a basis of achieving these.

• The catalysts for this have been the rapidly changing business environment and the development of technology that speeds up business processes.

• There is a need for firms to be more agile, flexible and responsive to change (or proactive in influencing change).

Organizational Learning (OL)

Definition:It involves the ways firms build, supplement and

organize knowledge and routines around their activities and within their culture and adapt develop organizational efficiency by improving the use of the broad skills of their workforce.

Organizational Learning (OL)

• What OL includes?1- R&D activities.2- Formal & informal education of employees.3- Involves the means that org. uses to disseminate

information throughout its ranks and the way that this information is processed & stored.

Organizational Learning (OL)

• What it should result?1- Technological innovation.2- Efficiency improvement.3- Increase reliability & corp. adaptability.

• The conclusion:1- Higher level of competitiveness.2- OL is a required element for long-term success.

Organizational Learning (OL)

• In case of low level of OL, it leads to:1- Stagnant organization that cannot adjust to

environment changes or competitive challenges.2- Limits the firm ability to reduce costs.3- Limits the firm ability to change markets or

product lines.

Summary

• E-Business Strategy: Formulation– External Assessment• Competitive Strategies for e-business (Michael Porter’s

Generic Strategies)

• E-Business Strategy: Implementation– Strategic Control– Organizational Learning