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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?