Ana Lysing It Strategy of Smes : A Critical Analysis

ASSIGNMENT

   ANA LYSING IT STRATEGY OF SMES : A CRITICAL ANALYSIS

a) Identify and briefly discuss four major theoretical frameworks/models that are consulted by business organizations in support of formulating their IT/IS strategies.

b) Perform a comparison of the frameworks/models identified above, and highlight any noticeable similarities and differences. A comparison table is suggested as a clear means to present the findings of this exercise.

a)

Nowadays, the high-speed development of information technology (IT)^[1] has made more business organizations realize the importance of integrating IT with the management and processes within a company or an organization (IT 1993). Meanwhile, effectively formulating an information technology strategy (ITS)^[2] in a business organization plays a tremendous role in achieving its business goals (ITS 2011). Business goals are specific objectives or aims planned by the business organization that will conduct staff work behaviors and bring it business benefits. In addition, IT strategy is considered as a deliberate plan that includes sufficient and effective application of the technology which in order to maintain a sustainable competitive advantage over rivals in a company^[3] (Lin,and Clark 1993, p. 2).

There are four major conceptual frameworks that are generally concerned and more consulted by business organizations as follows:

Porter five forces analysis framework;

Value chain analysis framework;

Market- hierarchy framework;

Strengths, Weakness, Opportunities and Threats (SWOT)^[4] analysis framework (SWOT 2011)

Porter five forces analysis framework

It is an essential ability that a superior manager or an executive should have that the individual must get a clear perspective of the market and analyze thoroughly throughout every element of the competitive situation. Porter (2008, pp.25-26)^[5] states that there exist five competitive forces: bargaining power of suppliers, bargaining power of buyers, threat of new entrants, threat of substitute products or services, and rivalry among existing competitors. The bargaining power of suppliers mainly embodies on the fact that dominant product and service suppliers squeeze high profitability by continuously 'charging high prices, limiting quality or services, or shifting costs to industry participants' (Porter 2008, p.29).^[6] The bargaining power of buyers results from rising demand of product and service quality with lower prices. The threat of new entrants focus on the challenges which come from new entrants and numerous factual examples have proved that this kind of power could not be neglected and underestimated. The most classic example is the Apple achieved its tremendous success in the music distribution business when it first entered this area(Porter 2008, p.26).^[7] Another significant force that should be concerned with is the threat of substitutes. The appearance of substitutes and the functional similarities or superiorities made customers' choices multiple, which result in a loss of profitabilities within the company. The fifth force which is the rivalry among existing competitors indicate executives should have a clear understanding of rival situation and dedicate time and energy to implementing strategic actions.

Value chain analysis framework

With value chain analysis, business organizations could get detailed information of all the value-adding activities, meanwhile the information flows should also be tracked. Value is something which customers would be willing to pay for. Levy, Powell and Galliers(1999, p.249)^[8] claims that a value chain is used to identify information flows in values through two types of activities: primary activities and support activities. Primary activities include logistics, marketing and sales,  and a series of relevant activities throughout the production of goods. Support activities contain company's human resource, research and design, and any other important activities. Both of the two activities directly or indirectly contribute to adding values for customers.

Market- hierarchy framework

Market-hierarchy framework which focuses on the two major strategic choices: 'market' and 'hierarchy' choices could be influenced by the application of information and technology. Blili and Raymond (1993, p.442) suggested that strategic choices are mainly concerned with analysis of product costs and coordination.^[9] A specific and fully analysis of product costs,  transaction and coordination between different organizational segments would provide sufficient information supporting the strategic choices. Where there is a new production, a new value chain would add to the previous value chain. Analyzation of the whole value chain indicates that the product costs would be high while other support activities would be low(Malone, Yates&Benjamin 1987, pp.484-497).^[10] 'Hierarchy' choice would be a good choice if there exists a effective integration between vertical functional units. Meanwhile information technology plays significant role in formulating market segments.