CHAPTER 5 : Organizational Structures That Support Strategic Initiatives

➤ORGANIZATIONAL STRUCTURES

• Organizational employees must work closely together to develop strategic initiatives that create competitive advantages.

• Ethics and security are two fundamental building blocks that organizations must base their businesses upon.

➤INFORMATION TECHNOLOGY ROLES AND RESPONSIBILITIES

• Information technology is a relatively new functional area, having only been around formally for around 40 years.

Recent IT – related strategic positions:

⏩ Chief Information Officer (CIO)
⏩ Chief Technology Officer (CTO)
⏩ Chief Security Officer (CSO)
⏩ Chief Privacy Officer (CPO)
⏩ Chief Knowledge Officer (CKO)

Chief Information Officer (CIO) – oversees all uses of IT and ensures the strategic alignment of IT with business goals and objectives.

Broad CIO functions include;

• Manager – ensuring the delivery of all IT projects, on time and within budget.
• Leader – ensuring the strategic vision of IT is in line with the strategic vision of the organization.
• Communicator – building and maintaining strong executive relationships.

                               

Chief Technology Officer (CTO) - responsible for ensuring the                                                                                                                       throughput,speed,accuracy,availability and realibility of IT.

Chief Security Officer (CSO) - responsible for ensuring the security of IT systems.

Chief Privacy Officer (CPO) - responsible for ensuring the ethical and legal use of information.

Chief Knowlegde Officer (CKO) - responsible for collecting,maintaining and distributing the                                                                     organization's knowledge.

➤THE GAP BETWEEN BUSINESS PERSONNEL AND IT PRSONNEL

• Business personnel possess expertise in functional areas such as marketing, accounting and  sales.
•  IT personnel have the technological expertise.
• This typically causes a communications gap between the business personnel and IT personnel.

➤IMPROVING COMMUNICATIONS

• Business personnel must seek to increase their understanding of IT.
• IT personnel must seek to increase their understanding of the business.
• It is the responsibility of the CIO to ensure effective communication between business personnel and IT personnel.

➤ORGANIZATIONAL FUNDAMENTALS – ETHICS AND SECURITY

• Ethics and security are two fundamental building blocks that organizations must base their businesses on to be successful
• In recent years, such event as the 9/11 have shed new light on the meaning of ethics and security

➧ETHICS 

Ethics – the principles and standards that guide our behavior toward other people.

Privacy is a major ethical issues;

Privacy – the right to be left alone when you want to be to have control ever your own personnel possessions and not to be observed without your consent.

Issues affected by technology advances:

Intelligent property	Intangible creative work that is embodied in physical form
Copyright	The legal protection afforded an expression of an idea, such as a song, video game and some types of proprietary documents
Fair use doctrine	In certain situations, it is legal to use copyrighted material
Pirated software	The unauthorized use, duplication, distribution or sale of copyrighted software
Counterfeit software	Software that is manufactured to lock like the real thing and sold as such

• One of the main ingredients in trust is privacy
• Primary reasons privacy issues lost trust for e-business

1.	Loss of personnel privacy is a top concern for Americans in the 21st century
2.	Among Internet users, 37 percent would be “a lot” more inclined to purchase a product on a websites that had a privacy policy
3.	Privacy/security is the number one factors that would convert Internet researchers into Internet buyers

➧SECURITY

• Organizational information is intellectual capital it must be protected.

• Information security-the protection of information from accidental or intentional misuse by                                           persons inside or outside an organization.

• E-business automatically creates tremendous information security risks for organizations.

CHAPTER 4 : Measuring The Success Of Strategic Initiative

➤MEASURING INFORMATION TECHNOLOGY’S SUCCESS

• Key performance indicator – measures that are tied to business drivers
• Metrics are detailed measures that feed KPIs
• Performance metrics fall into the nebulous area of business intelligence that is neither technology, nor business centered, but requires input from both IT and business professionals

➤EFFICIENCY AND EFFECTIVENESS

• Efficiency IT metric – measures the performance of the IT system itself including throughput, speed, and availability
• Effectiveness IT metric – measures the impact IT has on business processes and activities including customer satisfaction, conversion rates, and sell-through increases

➤BENCHMARKING – BASE LINING METRICS

• Regardless of what is measured, how it is measured, and whether it is for the sake of efficiency or effectiveness, there must be benchmarks – baseline values the system seeks to attain
• Benchmarking – a process of continuously measuring system results, comparing those results to optimal system performance (benchmark values), and identifying steps and producers to improve system performance

Efficiency IT metrics focus on technology and include :

                               

Effectiveness IT Metrics focus on an organization's goals,strategies,and objectives that include :

➤THE INTERRELATIONSHIPS OF EFFICIENCY AND EFFECTIVENESS IT METRICS

-Security is an issue for any organization offering products or services over the Internet.

-It is inefficient for an organization to implement Internet security, since it slows down processing

      ·However, to be effective it must implement Internet security.

      ·Secure Internet connections must offer encryption and Secure Sockets Layers                    (SSL denoted by the lock symbol in the lower right corner of browser)

                                 

➤METRICS FOR STRATEGIC INITIATIVES

• Website metrics.
• Supply chain management (SCM) metrics
• Customer relationship management (CRM) metrics
• Business process reengineering (BPR) metrics
• Enterprise resource planning (ERP) metrics 

CHAPTER 3 : Strategic Initiative For Implementing Competitive Advantages

Strategies initiatives

Organizations can undertake high-profile strategic initiatives including:

• Supply chain management (SCM)
• Customers relationship management (CRM)
• Business process re engineering (BPR)
• Enterprise resources planning (ERP)

➤Supply Chain Management (SCM)

It involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

Four basic components of supply chain management include:

• Supply chain strategy – strategy for managing all resources to meet customers                                             demand
• Supply chain partner – partners throughout the supply chain that deliver finished                                        products,raw materials and services
• Supply chain operation – schedule for production activities
• Supply chain logistics – product delivery process

Effective and efficient SCM systems can enable an organization to:

• Decrease the power of its buyers
• Increase its own supplier power
• Increase switching costs to reduce the threat of substitute products or services
• Create entry barriers thereby reducing the threat of new entrants
• Increase efficiency while seeking a competitive advantages through cost leadership

➤Customers Relationship Management (CRM)

                       

-Its involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization’s profitability.  

-Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems.

-CRM is not just technology, but a strategy, process and business goal that an organization must embrace on an enterprise wide level.

CRM can enable an organization to:

• Identify types of customers
• Design individual customer marketing campaign
• Treat each customer as a individual
• Understand customer buying behavior

➤Business Process Reengineering (BPR)

                                      

- It is a standardized set of activities that accomplish a specific task, such as processing a               customer’s order.

-The analysis and redesign of workflow within and between enterprises.

• The purpose of BPR is to make all business processes best in class

      - Reengineering the Corporation – book written by Michael Hammer and James                                                                     Champy that recommends seven principles for BPR

     
      - Finding Opportunity Using BPR

• A company can improve the way it travels the road by moving from foot to horse and then horse to car
• BPR looks at taking a different path, such as an airplane which ignore the road completely
• Types

➤Enterprises Resource Planning (ERP)


                   

-It  integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprise wide information on all business operations.

-Keyword in ERP is “enterprise”.

-ERP systems collect data from across an organization and correlates the data generating an enterprise wide view.

CHAPTER 2 : Identifying Competitive Advantage

             

Introduction

What is competitive advantage?

•   A product or services that an organization’s customers place a greater value on than similar offerings from a competitor
• Unfortunately, CA is temporary because competitors keep duplicate the strategy.
• Then, the company should start the new competitive advantage.

• Michael Porter's Five Forces Model is useful tool to aid organization in challenging decision whether to join a new industry or industry segment.

1.       Buyer Power

·         High – when buyers have many choices of whom to buy

·         Low – when their choices are few

·         To reduce buyer power (and create competitive advantage), an organization must make it more attractive to buy from the company not from the competitors

·         Best practices of IT based

 -  Loyalty program in travel industry.For example, rewards on free airline tickets or hotel stays.

The Competitive Environment

Bargaining Power of Customers/Buyer Power

• Customers can grow large and powerful as a result of their market share.
• Many choices of whom to buy from.
•  Low when comes to limited items.
• Example, used loyalty programs (Jusco card, Tesco card, being a members to get the discount).

2.       Supplier Power

·         High – when buyers have few choices of whom to buy from

·         Low – when their choices are many

-    Best practices of IT to create competitive advantage

-    Example, B2B marketplace – private exchange allow a single buyer to posts it needs and then open the bidding to any supplier who would care to bid. Reverse auction is an auction format in which increasingly lower bids.

3.       Threat of Substitute products and services

·         High – when there are many alternatives to a product or service

·         Low – when there are few alternatives from which to choose

·         Ideally, an organization would like to be on a market in which there are few substitutes of their product or services.

- Best practices of IT.

- Example, Electronic product – same functions different brands.

The Competitive Environment

Threat of Substitutes : 

• To the extent that customers can use different products to fulfill the same need, the threat of substitutes exists.
• Example, electrical product – same function different brands.
• Switching cost – costs can make customer reluctant to switch to another product or service.

4.       Threat of new entrants

·         High – when it is easy for new competitors to enter a market

·         Low – when there are significant entry barriers to entering a market

·         Entry barriers is a product or service feature that customers have come to except from organizations and must be offered by entering organization to complete and survive

·         Best practices of IT.

-     Example, new bank must offers online paying bills, acc. monitoring to compete.

The Competitive Environment

Threat of New Entrants :

•  Many threats come from companies that do not yet exist or have a presence in a given industry or market
• The threat of new entrants forces top management to monitor the trends, especially in technology, that might give rise to new competitors
•  Example, new bank (online paying bills, acc. monitoring)

5.       Rivalry among existence competitors

·         High – when competition is fierce in a market

·         Low – when competition is more complacent

·         Best practices of IT

-    Wal-Mart and its suppliers using IT – enabled system for communication and track product at aisles by effective tagging system.

-    Reduce cost by using effective supply chain

The Competitive Environment

Rivalry Among Existing Firms :

• Existing competitors are not much of the threat: typically each firm has found its “niche”.
• However, changes in management, ownership, or “the rules of the game” can give rise to serious threats to long term survival from existing firms
• Example, the airline industry faces serious threats from airlines operating in bankruptcy, who do not the debts while slashing fares against those healthy airlines who do pay on debt. (MAS & AIR ASIA).

The Value Chains – Targeting Business Processes

• Supply Chain – a chain or series of processes that adds value to product and service for customer.
•  Add value to its products and services that support a profit margin for the firm.