E Business Planning, Strategy & Management part 3

Summary

This video covers essential concepts in e-business planning, strategy, and management, with a focus on external analysis using Michael Porter's Five Forces model. The lecture explains how supplier and buyer power, competition, threats of new entrants, and substitutes shape a firm's competitive advantage. It also delves into e-business strategy, describing its integration with organizational and informatics strategies, and the importance of process redesign. Key ideas include strategic analysis, competitive positioning, and the role of information systems management in driving organizational success in the digital era.

Takeaways

• 💼 Michael Porter's Five Forces model is a well-known tool for assessing external factors influencing a firm's competitive advantage.
• 📊 The five forces include supplier power, buyer power, threat of new entrants, threat of substitutes, and the intensity of competition.
• ⚙️ The internet has both positive and negative effects on supplier power, providing greater access to customers but also reducing barriers to entry for competitors.
• 💡 Buyers gain more power when products are undifferentiated and switching costs are low, leading firms to lower prices to stay competitive.
• 🔗 The threat of new entrants increases when entry barriers are low, such as capital requirements, economies of scale, and brand differentiation.
• 📉 The threat of substitutes grows when alternative products meet or exceed customer expectations, which can erode brand loyalty.
• 🏷️ E-business strategy integrates organizational and informatics strategies and can be viewed as a corporate, unit, or process strategy depending on the business model.
• 📅 The planning horizon for e-business strategy is shorter (3 to 6 months) compared to traditional organizational strategy (3 to 6 years) due to rapid technological changes.
• 🔄 E-business management emphasizes the redesign of business processes through ICT, including activities like process mapping, specification, and implementation.
• 📚 Informatic management is divided into three areas: information management, information system management, and ICT management, each supporting different aspects of organizational activities.

Q & A

What is the primary focus of the video lecture series?

The video lecture series focuses on business planning, strategy, and management, specifically external analysis using Michael Porter's model and e-business strategy.

What is Michael Porter's Five Forces Model?

Michael Porter's Five Forces Model is a framework for analyzing the competitive forces that shape an industry. These forces are: the power of suppliers, the power of buyers, the threat of new entrants, the threat of substitution, and the intensity of competition.

How does the internet impact the bargaining power of suppliers?

The internet affects the bargaining power of suppliers both positively and negatively. It provides suppliers access to larger markets, but it also reduces their power due to the increased competition and customer empowerment that the internet enables.

What factors contribute to the bargaining power of buyers?

The bargaining power of buyers is influenced by factors such as buyer concentration, purchase volumes, product differentiation, switching costs, and the ability of buyers to integrate backward in the supply chain.

What are the key barriers to entry that affect the threat of new entrants?

Key barriers to entry include high capital requirements, economies of scale, product differentiation, customer loyalty, switching costs, and access to distribution channels.

How does the threat of substitution affect an industry?

The threat of substitution increases when alternatives to a firm's products or services are easily available. Brand loyalty can decrease if competitors offer better or more innovative options, especially with lower switching costs.

What is e-business strategy, and how does it integrate with organizational strategy?

E-business strategy is the integration of organizational strategy with informatics strategy, focusing on the use of ICTs to improve both. It can either be the corporate strategy for businesses like Amazon, a business unit strategy, or a process strategy focusing on specific operations.

What is the difference between traditional organizational strategy and e-business strategy in terms of planning horizon?

Traditional organizational strategy typically has a planning horizon of 3-6 years, whereas e-business strategy, due to rapid technological change, operates on a much shorter 3-6 month planning horizon.

How does process redesign play a role in e-business management?

Process redesign, often called business process re-engineering, involves mapping and selecting key processes, specifying new processes, and implementing changes using ICT to improve efficiency and meet organizational goals.

What are the three generic competitive strategies proposed by Michael Porter?

Michael Porter's three generic strategies for gaining competitive advantage are: cost leadership (becoming the low-cost leader), differentiation (offering unique products or services), and focus (targeting a specific market or niche).

Outlines

00:00

🔍 External Analysis Using Michael Porter's Five Forces Model

The paragraph introduces the external analysis using Michael Porter's Five Forces model in the context of e-business strategy and management. It contrasts this with the previously discussed internal analysis, particularly the value chain model by M. Porter. The Five Forces model assesses external factors that impact a firm's competitive advantage, such as supplier power, buyer power, the threat of new entrants, the threat of substitutes, and competitive intensity. The internet's role in altering the balance of these forces is emphasized, both enhancing and diminishing supplier and buyer power.

05:02

🏢 The Three Viewpoints of E-Business Strategy

This paragraph discusses e-business strategy as the integration of organizational and informatics strategies. Three viewpoints of e-business strategy are described: 1) E-business as the entire corporate strategy, particularly relevant for businesses like Amazon; 2) E-business as a business unit strategy, applicable to specific units within larger companies; and 3) E-business as a process strategy, focused on redesigning key organizational processes through ICT innovations. The differences in planning horizons, processes, and business focus between organizational strategy and e-business strategy are also explored.

10:03

⚙️ Strategic Analysis and Implementation in E-Business

This paragraph delves into the stages of strategy formulation: strategic analysis, strategic choice, and strategic implementation. Strategic analysis involves assessing the external environment, organizational resources, and goals. Strategic choice focuses on generating options and selecting the best approach. Strategic implementation revolves around organizing resources, restructuring the organization, and guiding decisions to achieve the strategic goals. The role of competitive positioning in e-business strategy is also discussed, with a focus on Michael Porter’s three generic strategies: cost leadership, differentiation, and focus.

15:04

🧠 Informatics Strategy and E-Business Management

This paragraph explains how informatics strategy supports organizational activities by ensuring alignment between an organization’s activities and its information systems. Issues such as fragmentation, redundancy, inconsistency, and interoperability are highlighted. The role of ICT in driving organizational change through business process re-engineering is emphasized, along with a focus on process mapping, selection, design, and implementation. Finally, three forms of informatics management—information management, information system management, and ICT management—are outlined, with a discussion of data administration, knowledge management, and content management.

Keywords

💡External Analysis

External analysis refers to evaluating the external factors that impact a firm's competitive environment. This concept is key to understanding the video, as it discusses how businesses assess their position relative to competitors, customers, and suppliers using models like Michael Porter's Five Forces.

💡Michael Porter’s Five Forces

Michael Porter’s Five Forces model is a tool used to analyze a firm's external environment and competitive position. It includes the power of suppliers, the power of buyers, the threat of new entrants, the threat of substitutes, and the intensity of competition. This model helps businesses understand the dynamics of their industry and adjust their strategies accordingly.

💡Power of Suppliers

The power of suppliers refers to the influence suppliers have over a business, particularly regarding pricing and the quality of materials. If suppliers hold significant power, they can affect a company’s profitability. The video explains how the internet can both empower suppliers by giving them access to more customers and weaken them by enabling more competition.

💡Power of Buyers

The power of buyers is the ability of customers to influence prices and demand better terms. When buyers are concentrated or purchase in large volumes, they hold more power, which can pressure firms to lower prices. The video discusses how undifferentiated products make buyers more powerful in driving competition among suppliers.

💡Threat of New Entrants

The threat of new entrants refers to the potential for new competitors to enter the industry, which could reduce profitability for existing firms. Barriers to entry such as capital requirements, economies of scale, and brand loyalty can deter new players from entering the market. The video highlights how industries aim to create such barriers to protect themselves from new competition.

💡Threat of Substitutes

The threat of substitutes involves the risk of customers switching to alternative products or services that fulfill the same need. The ease with which a substitute can replace an existing product increases competition. The video explains how the internet has amplified this threat by making alternatives more accessible and providing customers with more choices.

💡E-Business Strategy

E-business strategy focuses on integrating information and communication technologies (ICT) with business operations. It involves planning for both organizational and informatic strategies to adapt to the digital economy. The video outlines three viewpoints of e-business strategy: corporate strategy, business unit strategy, and process strategy, each addressing different organizational needs.

💡Competitive Advantage

Competitive advantage is the edge a business holds over its competitors, enabling it to generate greater sales or margins. The video references Michael Porter’s three generic strategies for gaining competitive advantage: cost leadership, differentiation, and focus. These strategies help firms position themselves more effectively in the market.

💡Business Process Re-engineering (BPR)

Business Process Re-engineering (BPR) is the radical redesign of core business processes to achieve significant improvements in productivity, efficiency, and quality. The video discusses how ICT plays a crucial role in redesigning business processes, making operations more streamlined and aligned with modern technological advancements.

💡Informatics Management

Informatics management refers to managing the information systems and technologies that support business operations. This includes overseeing data administration, knowledge management, and ICT infrastructure. The video explains how informatics strategy aligns with organizational strategy to create synergy between a company’s activities and its information systems.

Highlights

Introduction to external analysis using Michael Porter's five forces model.

Explanation of the five forces: bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitutes, and competitive rivalry.

Discussion of the impact of the internet on supplier power, including access to more customers and the reduced power due to ease of entry into the industry.

Explanation of how buyers' bargaining power can erode industry profitability by forcing lower prices.

The role of competition intensifying due to price transparency and customer expectations in the internet era.

Barriers to entry are crucial in protecting existing firms from new competitors, including capital requirements, economies of scale, product differentiation, switching costs, and access to distribution channels.

Threat of substitutes is heightened due to the ease of entry into markets and availability of alternatives.

E-business strategy integrates both organizational and informatics strategies, which are essential for aligning business operations with technological innovations.

Three viewpoints on e-business strategy: corporate strategy, business unit strategy, and process strategy.

Organizational strategy typically has a long-term horizon, while e-business strategy requires shorter, more iterative planning cycles.

Strategic analysis includes understanding the environment, setting objectives, and leveraging internal and external resources.

Michael Porter's three generic strategies for competitive advantage: cost leadership, differentiation, and focus strategies.

Informatics strategy encourages closer alignment between business processes and information systems, reducing data fragmentation and inconsistency.

Business process re-engineering is essential for redesigning organizational processes using ICT to improve efficiency.

Three fundamental functions of information management: data administration, knowledge management, and content management.

Transcripts

thank you very much for watching the

third parts of video lectures on E

business planning strategy and

management in this video we will discuss

external analysis using Michael Portos

model U business strategy and management

and informatics

Management in the previous video we

discussed tool that used to assess

internal factors of a firm well known

tools is value chain developed by M

Water Michael pters also has the tool to

assess in the external factors that

influence firm especially the firm

competitive Advantage which is p Force

Michael pter P force model is very

wellknown model to assess external

factors those five forces are the powers

of suppliers the powers of buyers thread

of new entrance threat of substitutions

and intensities of

competition baining power of suppliers

or power of suppliers in short the power

of suppliers depends on the natures of

competition in an industry the internet

has both positive and negative effects

on Supply Power the positive effect is

the internet provide supplies with

access to larger numbers of customers

the negative one the internet is of

entry into the industry and the

empowerment of customers this will

reduce suppliers power suppliers can try

to increase their power by

discriminating on price to different

customers suppliers can also increase

power by differentiating their surface

as long as it cannot be easily imitated

by

repuls buning power of bias

profitability of an industry can be

eroded where buyer can accept power of

supplies is for for FM into selling at

lower prices Key issues include how

concentrated buyers are or if they buy

in a large volume if the product both

are undifferentiated buyer will seek to

ensure supplies compete on price

distance of switching cost lock in the

buyers and regist their beginning

position if firm have low profits they

will seek to lower the cost of buying if

firm who are buyers become integrated

backwards along the supply chain

then they can improve their beginning

position the intensities of refer or

intensities of

competition the internet has caused is

of Entry meaning that any firm can enter

the industry easily competition is

intense because of differentiation and

low cost are difficult to sustain over a

long term as refiles seek to match or

exceed customer expectation price

comparison sites make the market more

transparent and more difficult for firm

to sustains an advantage in the face of

increasing

competition threat of new entrance

threat of new entrance refer to the

possible reductions in profitability for

the existing swims in the industry due

to increased competition by news the

existing firm try to create a barrier of

Entry so that new entrance difficult to

penetrate there are five main entry

barriers discussed in the liter this

include Capital requirements and the

cost of entering industry if the capital

requirement is high it is difficult to

penetrate the industry economic upscale

where cost of Productions are spread

over a large numbers of unit produced

leading to low average cost this is also

create difficulty for new entrance to

penetrate the industry product

differentiation strong brand Image

Design or application this is also

create barrier entry for the new

entrance to ENT industry switching cost

time energy or money incurred by

customer wishing to switch loyalty to

rival firm this how to create bar rry

and finally access to destion channel

fulfillment depending on the assessing

of customer this one also create barrier

of

Entry threat of substitution ease of

entry into a business makes the threat

of substition products High the ease of

Entry LEDs to high competitions and the

great deal of consumer Choice brand

loyalty only exist exist until a Repel

offers a product of surface that exceeds

customer expectations suppliers need to

build a switching cost to deter customer

from switching to

arrival the internet has a great impact

to all forces this table give you the

ideas what the impact of the internet on

the five competitive

Force e bus strategy e business concerns

itself with the junctures of icts and

the organization therefore e business

must concern with the development of

both the strategy for the organizations

and the strategy for informatics e

business strategy is the Integrations of

both organizational and informatic

strategy at least there are three

different viewpoints as to what e

business strategy constitutes the first

one e business strategy is organization

or corporate strategy in this Viewpoint

there is little or no distinction

between organization strategy and E bus

strategy this is only appropriate if e

business is effectively the entire

corporation like Amazon the second one e

business strategy is business unit

strategy in many companies the E

business strategy may only be applicable

to a particular business unit for

example some companies run their e

business as a separate but parallel

operation with their traditional one for

the third one e business strategy as a

process strategy in this strategy a key

organization process or human activity

system or perhaps an integrated set of

such processes may be chosen for radical

redesign with ICT Innovation

organization and business strategy there

are a number of key differences between

organization strategy and E business

strategy in the planning Horizon

planning process and business purpose

the planning Horizon organization

strategy tend to work with a 3 to 6

years Horizon for planning because of

the technologial progress a business

stud may only be able to work with 3 to

6 month planning Horizon planning

process organizational strategy tends to

be produced in one off or periodic

manner a business strategy has to be

cyclical in Naturals reflecting

continuous interaction between Technical

and social infrastructures business

focus organizational strategy has

traditional focus on Productions of

goods or services a business strategy

focus on information and CM

Focus organization planning and

informatics planning organization

planning is the process of formulating

an organization strategy informatics

planning is the process of formulating

an informatics strategy an organization

strategy will critically affect the

directions of an informatic strategy

stry however in the modern business

World organizational and informatic

strategy are typically in a mutual cycle

of

reinforcements with the advancements of

Information Technology the formulations

of an informatic strategy is likely to

critically affect the formulation of

future business strategy a business

planning is therefore a socio technical

activity we are assuming of course that

such planning will include V

of not only internal but also external

process hence e-commerce strategy will

be subsumed by E bus

strategy strategic analysis strategic

choice and strategic implementation are

stages in formulations of strategy

strategic analysis involves analysis of

the environment expectation objective

power and culture in the organization

and organizational resources strategic

analysis inop determining the ionization

missions and goals strategic analysis

inop answering the questions what should

we be doing and where are we going

strategic Choice invols generating

strategic options evaluation of such

options and the selection of a suitable

strategy to achieve the selected option

strategic Choice involves answering the

question what Roots have we selected

strategic implementation involves

organizing resources restructuring

elements of the organization and

providing suitable people and systems

strategic implementation comprise

determining policies making decision and

taking actions strategic implementation

improves answering the questions of how

do we guide our collective decision to

get there what choice we have and how

shall we do

it organizational Strat stres in

commercials environments an organization

takes up a particular position in

relation to its competitor this we might

Define as a competitive positions of the

organization how we determine a

competitive position of an organization

at the beginning of this video we learn

about micop pipos so we use this pipos

model to determine a competitive

position of an organization according to

Michael berter a competitive advantage

can be gained by engaging in one or more

of the three generic organizational

strategies because the advantage

strategy this essentially aims to

establish organization as a low cost

leader in the market differentiation

strategy the organization's undertaking

the strategy aims to differentiate it

product or service from its competitor

location of focus strategy a location

strategy involves the organization

attempting to find a new market

informatic strategy and organizational

fit one of the propose benefits of

having an explicit informatic strategy

is to encourage a closer fit between an

organization's activities and its

information systems how do we measure

this fit fragmentation forit is evident

in the situation in which data is

fragmented redundancy for is evident

where large amounts of data are

unnecessarily replicated across

Information Systems usually because

interface do exist between systems

causing the same data to be entered many

times

inconsistency forit is evident when some

data are held differently in different

system or processed differently by

different systems leading to

inconsistency in the ways in which

information is produced

interoperability the reer to the level

to which system communicate and

cooperate within the infrastructures the

system which are fragmented redundant

and inconsistent are likely to suffer

from poor level of

interoperability e business management

in general the focus on organizational

change through ICT is critical a key

emphasis has been on the redesign of

so-called business processes with ICT

such process redesign sometimes called

business process re-engineering is

likely to infor the following activities

process mapping process selections

process specification process design and

process implementation process mapping

this involves the constructions of high

level map of organization processes

process connections and key processes

process selection from the process map

particular process or subprocess need to

be prioritize in terms of the importance

of redesign to them three set of

criteria may be used to rank process for

redesign the health of the process it's

important to organizational performance

and the visibility for

redesign process design will improve the

re-engineering team identifying the

problem with the existing process

challenging assumptions about ways of

doing things and the brainstorming of

new approaches to organizational

activities design Workshop will be held

in which various stakeholders will

participate process specification this

generally involves the modeling of both

existing processes and the design of new

processes using some agreed

representation prism such as some system

modeling rotation process implementation

this is probably the most difficult

piece of process redesign and invol in

using new work practices and Associated

technology into

organization informatics management

Michael ear has distinguished between

three forms of informatics management

information management which is

concerned with the off strategic

directions of the organization and the

planning regulation and coordinations of

information in support of this direction

information system management is

concerned with providing information

handling to support organizational

activities

and ICT management which is concerned

with providing the necessary technical

infrastructure for implementing desired

information

handling for many organizations

information system and ICT servfaces

will be organized in one functions the

department that responsible running is

and ICT will be improved in setting up

and managing development related project

it will also be critically involved in

evaluating ICT system for the

acquisation in various

ways these are three fundamental

functions of Information Management data

Administration Knowledge Management and

content management data Administration

is the administration of data resources

Knowledge Management is the management

of organizational memory content

management is the management of web

based

material we are reaching toward the end

of this video video lectures here are

some questions for you describe three

viewpoints of e business

strategy what are the five competitive

Force which force is the most important

in this internet era what are the three

Forest generic strategies for a

competitive Advantage explain briefly

each thank you very much for watching to

learn more please read the relevant

chapter in the text box