2

							Developing Strategic Planning,
 Business Strategy and Their
 Implication to IS/IT Strategy
             Session Review
• The changing roles of IS/IT from support to
  enabler
• The strategic context of Information systems
• Exploring IS/IT demand
• IS/IT plan in the Indonesian context, where
  are we?
           Session Objectives
• Understand how to formulate strategic plan
• Understand how to formulate business
  strategy
• Understand how to formulate business
  objectives
• Understand the implication of strategic plan to
  IS/IT plan
                  Agenda
I.  What is Strategic Planning?
II. Strategic Planning Model
III.Evolution of Strategic Planning
IV. Strategic Planning and Business Strategy
V.  Technique to Develop Business Strategy:
    Competitive Forces in Industry (Porter, 1980)
VI. Generic Competitive Strategy
     I. What is Strategic Planning
            (source: Matt H. Evans, matt@exinfm.com)

• Process to establish priorities on what you will
  accomplish in the future
• Forces you to make choices on what you will do
  and what you will not do
• Pulls the entire organization together around a
  single game plan for execution
• Broad outline on where resources will get allocated
   Fundamental Questions to Ask
• Where are we now? (Assessment)
• Where do we need to be? (Gap / Future End
  State)
• How will we close the gap (Strategic Plan)
• How will we monitor our progress (Balanced
  Scorecard)
         Another Model of Strategic
                 Planning
Establish                          Define                          Achieve
strategic                          strategies                      strategies
direction
                                    feedback


                                 Strategic planning of
•Define mission and objectives   options selected          Implement strategies
•Assess situation and options
•Select options




                           Strategic thinking and opportunistic
                           decision making
III. Evolution of Strategic Planning

  Effectiveness of
  strategic decision
  making                                                                Well defined strategic
                                                                        framework
                                                                        Strategically focused
                                                                        organization
                       Multi-year budgets     Situation analysis and    Widespread strategic
                       Gap analysis           competitive assessments   thinking capability
                       Static allocation of   Evaluation of strategic   Reinforcing management
                       resources              options                   processes
  Annual budgets                              Dynamic allocation of     Supportive value system
  Functional focus                            resources                 and climate




  Stage 1                Stage 2                  Stage 3                Stage 4
  Financial              Forecast-based           Externally             Strategic
  planning               planning                 oriented               management
  (meet budget)          (predict the             (think                 (create the
            future)                   strategically)         future)
    Discussion and Explanation….
   Does focus of each stage bring specific
    characteristics and determine an appropriate
    business strategy?
   Developing from one stage to another stage, most
    likely in sequence, but with “special” treatment,
    “leapfrog” is possible. What do you think?
   The role of “business manager” change over time,
    so does “ICT manager”. Hence, the way they
    interact must be adapted accordingly. How this
    interaction should take place?
                 Strategic Framework for Strategic
                              Planning
External Environments         Economic             Political            Ecological
                              Technological        Social               Legal
                                                                            Pressure
                  Values
  Customers
                                                                            Groups
  Suppliers       Objectives Identify current Identify future Threats and   Competitors
  Shareholders      strategies     strategies       opportunities           Customers
  Employees                                                                 Suppliers
                  Evaluate     Analyze        Evaluate                      Shareholders
  Unions
                  feedback    internal        strategies                    Employees
  Government                  resources
  Public                                                                    Unions
                  Monitor    Implement        Select
                                                                            Public
 Stake            Strategies Strategies       Strategies
                                                                            Media
 Holder                                                                     Financial Ins.
       Input to Strategic Planning
• External environments - sources of important signals
  to organizations
• Pressure groups - demand recognition and rapid
  management response
• Stakeholders - demand fair share of created wealth
• Business planning is usually carried out for each
  strategic business unit
   – A unit that sells a distinct set of products or services, serve
     a specific set of customers, and competes with a well-
     defined set of competitors
IV. Strategic Planning and Business
               Strategy
    Definition of Business Strategy
• Definition of business strategy: An integrated set of actions
  aimed at increasing the long-term well-being and strength of the
  organization relative to its competitors.
• Definition of business strategy:An integrated set of actions aimed
  at increasing the long-term well-being and strength of the
  organization relative to its competitors
• The definition of business strategy is a long term plan of action
  designed to achieve a particular goal or set of goals or objectives.
• Business Strategy is a term used in business planning that
  implies a careful selection and application of resources to obtain
  a competitive advantage in anticipation of future events or
  trends.
• Business Strategy is concerned more with how a business
  competes successfully in a particular market. It concerns
  strategic decisions about choice of products, meeting needs of
  customers, gaining advantage over competitors, exploiting or
  creating new opportunities etc.
                  Business Plan
   A business plan is a document that summarizes
    the operational and financial objectives of a
    business and contains the detailed plans and
    budgets showing how the objectives are to be
    realized.
   A business plan is a formal statement of a set of
    business goals, the reasons why they are believed
    attainable, and the plan for reaching those goals. It
    may also contain background information about
    the organization or team attempting to reach those
    goals.
   Business plans may also target changes in
    perception and branding by the customer, client,
    tax-payer, or larger community
 V. Technique to Develop Business Strategy:
Competitive Forces in Industry (Porter, 1980)

                  Threat of new
                  entrants



 Bargaining       Rivalry among      Bargaining
 power of         existing           power of
 suppliers        competitors        buyers

                  Threat of
                  substitute
                  product
      Factors Affecting The Impact of
            Competitive Forces
• New entrants
  – Capital requirements
  – Patents and specialists skill required
  – Distribution channels available
  – Achieved/required economies of scale and resultant
    cost advantages
  – Number and size of existing rivals and intensity of
    competition
  – Differentiation and brand establishment/loyalty
  – Access to raw materials/critical resources etc.

   Business strategy: “how to discourage new entrants to come
   into the business”
   Strategic Choices: Factors Affecting The
        Impact of Competitive Forces
• Substitute products/services
  – Customer awareness of needs and means of
    satisfaction
  – Customer sensitivity to value for money and
    ability to compare
  – Existing loyalty of customer—impact of “industry”
    promotion
  – Ability to differentiate products etc.

     Business strategy: “how to create a loyal customers?”
  Strategic Choices: Factors Affecting The
       Impact of Competitive Forces
• Competitive rivalry will be intensified by:
  – Market growth slow (or in decline)
  – Small number of similar sized competitors
    dominate
  – High fixed costs and/or high exit barriers for all
    rivals
  – Overcapacity and/or capacity increments are
    large units
  – Commodity-like, undifferentiated products.
   Business strategy: “how to differentiate your products?”
       Strategic Choices: Factors Affecting The
            Impact of Competitive Forces
  • Buyers’ power will be increased by:
      – Concentrated/few buyers making high volume and/or high
        value of purchases
      – Low switching costs across suppliers
      – Price sensitive and many alternative sources of supply
      – Weak brand identities, products not differentiated
      – Buyers capable of backward integration due to low entry
        cost.


Business strategy: “how to make the buyers depend on your business”
       Strategic Choices: Factors Affecting The
            Impact of Competitive Forces
  • Suppliers’ power will be increased by:
     – Few suppliers—high switching costs for rivals and
       suppliers deal with many small customers
     – Potential substitute supplier/resources not easily
       available
     – Supplied goods make up large part of firm’s costs
     – Suppliers capable of forward integration or bypass
       to customers


Business strategy: “how to make the suppliers depend on your business”
VI. Generic Competitive Strategy

              Low
              Cost


           Competitive
           Advantage


             Differen-
             tiation
        Characteristics of Generic Strategies
Generic           Commonly Required                              Commonly Organizational
Strategies        Skills and Resources                           Requirements
Overall cost      Sustained capital investment and access to     Tight cost control, frequent, detailed control
                         capital                                 reports.
leadership        Process engineering skills                     Structured organization and responsibilities.
                  Intense supervision of labor                   Incentives based on meeting strict
                                                                 quantitative targets


Differentiation   Strong marketing abilities and creative        Strong coordination among functions in
                  flair.                                         R&D, product development, and marketing.
                  Product engineering skills.                    Subjective measurement and incentives
                  Strong capability in basic research.           instead of quantitative measures (market
                                                                 based incentives).
                  Corporate reputation for quality or
                  technological leadership.                      Amenities to attract highly skilled labor or
                                                                 creative people.
                  Strong cooperation from distribution
                  channels.                                      Looser, more trusting organizational
                                                                 relationships.


Focus             Combination of the above policies              Combination of the above policies directed
                  directed at the particular strategic target.   at the particular strategic target.
          Exercise Your Thought
   Explain the development processes of strategic
    planning?
   What are the components of strategic planning?
   How to develop business strategy?
   How external forces influence business strategy
    and IS/IT strategies?
   What are the implications of strategic plan to IS/IT
    plan?
    Group assignment and the answers of the
    exercise are sent to affia007@yahoo.com, the
    latest at april, 15 2011 23.59 pm
Jelaskan perkembangan proses perencanaan strategis?

Apa saja komponen dari perencanaan strategis?

Bagaimana mengembangkan strategi bisnis?

Bagaimana pengaruh kekuatan eksternal strategi bisnis / TI dan
strategi?

Apa implikasi dari rencana strategis untuk IS / TI rencana?