Lecture 2: Strategic Management and
Planning, Competitive Advantage and
Sustainability, IS strategy implications
Strategic
Management of
Information Systems
Roadmap
• Strategic management and planning
• Competitive Advantage and Sustainability
• IS/IT strategy implications
Strategic Management
and Planning
Evolution of strategic management
Evolution of strategic management
Evolution of strategic management
PHASE 1: Financial planning
• 1 year horizon
• Budgeting
• Internal
• Consolidated
• Carried out department by
department
• Basic financial planning
• cash flow and annual financial
planning
• Focus of planning
• Meet the budget
Evolution of strategic management
PHASE 2: Forecast-based planning
• 3-5 year horizon
• Analyse and project historical performance into
future using internal trends and external
parameters (economics and market research
data)
• Forecast sales, market growth
• Predict the effect on income and expenses and
changes to the balance sheet
• Plans are quantitative, internally orientated
• Focus of planning
• Predict or forecast
• Analyse the gap between what is targeted
and the resource available
Evolution of strategic management
PHASE 3: Externally-oriented planning
• Considers the external environment
• To understand the nature of
competition
• Assess and consider potential
threats
• Position itself to gain advantage
• Dynamic allocation of resources
• Top-down strategy with no lower level
involvement
• Focus of planning
• External
• Strategic
Evolution of strategic management
PHASE 4: Strategic management
• Involves various departments and
levels
• Focus of planning
• Continuing innovation
• Needs a well-defined strategic
management framework
Evolution of strategic management
Strategic Management Elements
The environment
Expectation,
objectives & power:
culture
Resources
Generation
of options
Resource
planning
Evaluation of
options
Organisational
structure
Selection of
strategy
People &
systems
Model of strategic planning process
Simplified example of planning stages
Mission
Goal
To be the industry cost leader
Strategy
Policy
Decision
Action
Reduce time lost due to ill health (one of a set)
Achieve staff productivity gain of 3 per cent within
three years
Maintain a healthy work place (one of a set)
Ban smoking (one of a set)
Put up the signs and police the decisions (one of a
set)
Components of the strategic plan
• Mission (statement)
• What business are we in?
• State the purpose of the organisation
• Goals (objectives, aims)
• Define desired future positions of the organisation
• Goals – broad, timeless statements of the end results
• Objectives – quantitative and qualitative, specific and tangible measures of the goals
• Strategy
• General direction in which organisation chooses to move to meet goals to
achieve the mission
• Strategy plan should document which of the strategic opportunities are
deemed most beneficial to pursue
• Policy
• Framework for implementation of any major changes needed to be made
• Provide key measurements and key ratios that summarise the expected
benefits the strategy intended to yield
Strategic Management in a nutshell
A metaphorical explanation from David Kryscynski:
What is strategic management?
Brigham Young University
Competitive Advantage
and Sustainability
Links among resources, capabilities and competitive
advantage
Competitive
advantage
Strategy
Industry key
success
factors
Organisational
capabilities
Resources
Tangible
• Financial
• Physical
Intangible
• Technology
• Reputation
• Culture
Human
• Skills/know-how
• Capacity for
communication and
collaboration
• Motivation
Competitive Advantage
• A set of features and/or resources of the company which
is rare and not imitable easily and gives a certain
business advantage over competitors.
• Ability of the firm to outperform rivals on the primary
performance goal – profitability
• The competitive advantage is not static, i.e.
acquired/exists forever. It must be maintained and
developed in order to provide its sustainability.
Sustainable Competitive Advantage
• People, with knowledge, motivated, and with the
capacity to:
• Learn and to share their learning
•
•
•
•
Respond to competitive threats
Respond to customers
Ability to innovate or adapt to changes in the environment
Attain, retain, or improve viable position in industry
• Implies possession of:
• Strategic features that are difficult to copy
Sustainable Competitive Advantage
• Based on unique routines:
• Responses to past problems, challenges
• Doing things competitors can’t do –capabilities and
competences
• Strategic resources:
• Reputation / brands
• Natural monopolies
• Internal and external linkages
• Architecture
• Culture
A “strategic” resource
• Rare in the industry
(otherwise, it is only a threshold resource)
• Valuable -makes an appreciable difference to:
• cost and/or differentiation advantage
• capacity to adapt or innovate
(otherwise, just represents wasted effort)
• Difficult to acquire, copy or substitute
(otherwise firms will copy or use alternatives)
• Few resources satisfy ALL these criteria
Sustaining competitive advantage
• Depends on the existence of isolating mechanisms:
barriers to rivals’ imitation of successful strategies
• The greater difficulty that rivals face in accessing the
resources and capabilities needed to imitate or substitute
the competitive advantage the greater the sustainability of
that firm’s competitive advantage
Strategic Resources
• Physical assets –rarely
• Financial assets -in some industries
• Human resources –possibly
• Intellectual assets –frequently
• Reputational assets –often
• Capabilities and competences –usually
Intangible, knowledge-based resources most likely
sources of sustainable advantage
Sources of competitive advantage
Cost advantage
Competitive
advantage
Differentiation
advantage
Features of cost leadership
and differentiation strategies
Generic
strategy
Key strategy elements
Resource and organisational
requirements
Cost
leadership
Scale-efficient plants
Design for manufacture
Control of overheads and R&D
Avoidance of marginal customer
accounts
Access to capital
Process engineering skills
Frequent reports
Tight cost control
Specialisation of jobs and functions
Incentives for quantitative targets
Differentiation Emphasis on branding advertising,
design, service, and quality
Marketing abilities
Product engineering skills
Strong cross-functional coordination
Creativity
Research capability
Qualitative performance targets and
incentives
Examples:
Generic
strategy
Key strategy elements
Industry examples
Cost
leadership
Scale-efficient plants
Design for manufacture
Control of overheads and R&D
Avoidance of marginal customer
accounts
IKEA furniture
McDonald’s hamburgers
Differentiation Emphasis on branding advertising,
design, service, and quality
Beware of DOG! 
• In most industries market leadership is held by a firm that maximizes customer
appeal by reconciling effective differentiation with low cost
• HOWEVER beware of
Cost
leadership
Not me!
..
Beware of
being stuck in
a middle
Alternative competitive advantage
A metaphorical explanation from David Kryscynski:
Alternative competitive advantage
Brigham Young University
IT/IS strategy
implications
Evolution of IS
Trends in evolution of business IS/IT
IS management environment: The Internal
Context
Relationship between business, IS and
IT strategies
Future lectures roadmap
Lec3. Strategic Analysis tools
Strategic Management
of Information Systems
Lec4. IS Strategy
formulation
Lec5. Integration
with Business
strategy
Lec6. Organizational
architecture
Lec7. IS Strategic
Management
Lec8. Organizing and
resourcing
Lec9. Managing
investment
Lec10. Managing
supply of IT/IS
Lec11. IS security and
risk management
Recommended reading
• W. Robson, Chapter 1
• J. Ward, Chapters 1 and 2
• R. Grant, Contemporary strategy analysis, Chapter 5, 8, 9