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IS STRATEGIC ANALYSIS
Chapter Contents
2
y PEST Analysis
y Political Forces
y Economic Forces
y Social Forces
y Technological Forces
y PEST and Strategic Information Systems
y Information Leadership
1‐ PEST Analysis
3
Is used to help to determine any threats to the strategy of any
organization and identify areas for expansion of the
organization.
The four headings of PEST stand for:
y Political
y Economic
y Social
y Technology
2‐ Political Forces
4
y P = Political forces and relates to social pressure and
attitude of the current political climate
attitude of the current political climate.
y Government is made up of multiple political parties
Government is made up of multiple political parties
and their forces.
Introduction to Political Forces
5
Examples of political trend:
y Taking action against monopolies and restrictive practices.
y Exercising direct and indirect control over tariffs, quotas, working
conditions, hire‐purchase restrictions, and so on.
y Providing financial assistance to selected ailing industries and
companies.
y Controlling the economy by monetary and fiscal policies.
y Taking actions to protect the environment.
Planning for Political Change
6
y Planning for political change can be difficult. Information systems must
be planned so they can adapt to political changes.
y Managers within each organization will need to ensure that
information systems are capable of meeting this new requirement, or
amend those systems if the information cannot be produced.
y Trying to ‘second‐guess’ what government policy will affect the
information strategy of a specific organization, is very difficult,
gy p g , y ,
especially as policy changes with different governments.
Legislation
7
y Information system must be able to comply with a
significant amount of legislation.
y One of the main functions of government is to produce
legislation to regulate the individuals and organizations in
g g g
a country. This is a complicated area covering the
companies Acts, employment legislation (determining the
basic employment rights) healthy and safety regulations
basic employment rights), healthy and safety regulations,
consumer legislation (credit regulations, etc), and so on.
Legislation (Cont.)
8
The aims of regulation of businesses include:
y Protection of business entities from each other
y Protection of consumers from business entities
y Protection of employees from their employers
Protection of employees from their employers
y Protection of society against excessive business behavior.
Example of Legislation Affecting Business
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Trade
Planning
Taxation
Permission
Example of
Labor
legislation Anti-trust
affecting
business
Consumer
Social
Protection
Company
3‐ Economic Forces
10
E= Economic forces including the general economic
= Economic forces including the general economic
environment and actions of competitors.
The Economic Environment
As organizations work within a specific economic
g p
environment, then knowledge of that environment is
essential to ensure that the business is producing the
appropriate goods and services and that planning takes
appropriate goods and services, and that planning takes
account of forecast changes to that environment.
The Strategic Relevance of Economics
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The level of economic activity has a bearing on: input costs,
labor costs, interest rates, cost of capital, foreign exchange
rates, inflation rates, sales turnover levels, unemployment
levels, and so on.
levels, and so on.
International Organizations
International Organizations
Planning systems will need to draw information on a
worldwide basis to help managers make correct decisions
p g
in a world economy.
Economic Effect of Specific Government Policies
p
12
Areas in the economy affected by government policies can include:
1‐ Economic growth:
¾ Means an expansion in national income in relation to the
M i i ti li i l ti t th
size of population.
¾ An increase in the economic growth should help an
A i c ease i e eco o ic g o s ou epa
organization sell more .
¾ Governments may also affect the growth rate within
specific industries by the use of various economic tools.
ifi i d t i b th f i i t l
Economic Effect of Specific Government Policies
p
13
2‐ Inflation:
¾ Inflation has the main effect of increasing the price of
products.
d t
3‐ Privatisation:
¾ The market model followed by individual governments
will also affect organizations.
Example of Economic Forces Affecting Business
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Inflation
Example of
economic forces
affecting business
Taxation
Political
rate in
stability in
different
a country
countries
Wage level
4‐ Social Forces
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S= social forces including social rules in society, and other
= social forces including social rules in society and other
factors influencing the pace of social change.
Types of social forces
Social forces arise from within society itself. The precise
Socia o ces a ise o i i socie y i se e p ecise
forces depend in part on the type of society and the
excising social morals of that society.
4‐ Social Forces (Cont.)
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Technology
How technology may bring about social changes?
¾ Technology provides a potentially faster method of
doing something but this do not mean that socially
doing something but this do not mean that socially
that method is acceptable!
Social Attitude and Expectations
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¾ Changes in social attitude can influence the production
decisions of organizations, how?
¾ Keeping track of social changes may assist organizations in
K i t k f i l h i t i ti i
deciding which products to manufacture.
Information Provision
¾ The provision of more up‐to‐the –minute (or even second)
The provision of more up to the minute (or even second)
information also has effects on society.
Example of Social Forces
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Example
p of
Social
Forces
Social
Information
Technology
gy attitudes /
Provision
Expectation
5‐ Technology Forces
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T = technological forces and how those forces influence
technological forces and how those forces influence
society and organizations.
Technological Changes
¾ Technological change affects almost every aspect of
business. Traditional industries decline and others emerge
g
as a result of technological innovation.
The Strategic Implications of Technological Change
The Strategic Implications of Technological Change
¾ The strategic planner should know the technological
environment and the nuances of technology. Why?
The Technical Limit
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The concept of the technological limit assumes that
p g
most technologies have a theoretical limit beyond
which they are capable of only minor development.
Key Signals that Indicate Proximity to Technical Limit
¾ An intuitive feeling among top management that the
A i t iti f li t t th t th
company’s R&D effort, in terms of cost and performance, is
declining.
g
¾ A perceived lose of R&D innovation.
¾ A trend toward R&D delays and missed deadlines.
Key Signals that Indicate Proximity to Technical Limit (cont.)
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¾ A trend towards process improvement rather then
product innovation.
¾ Disharmony and disenchantment among the R&D
staff.
staff
¾ Poor return on capital invested on projects.
¾ Profit that accrue from increasingly narrow market
gy
segments.
¾ R&D staff are taking radical approaches that ‘probably
won’tt work
won work’
¾ Difficulty in replacing R&D staff and leaders from
p
universities and the technical professions .
Effect on Business of Technological Change
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May increase
investment
risk profile of
p y
company
Amend
Short term
duration and
opportunity
p of
shape
demand >
product life
supply Effect on
Business of cycle
Technological
Change
Emphasize
Shorten
on R&D
lead times
capability
6‐ PEST and Strategic Information Systems
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Introduction
This section provide more detail on the linkages
p g
between PEST analysis and information systems
planning and the need to create information
l d hi
leadership within an organization.
ithi i ti
IS Planning
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Information systems planning means looking at these
sections of the IS functions:
¾ Information System
I f ti S t
¾ Information Management
¾ Information Technology
Information Technology
The IS plan is an impression of the future.
p p
IS Planning (Cont.)
25
There are many approaches to strategic IS planning. On
principle outlined by Mintzberg argues that three basic
principle, outlined by Mintzberg, argues that three basic
premises underpin strategic planning:
¾ Strategy Information should be conscious and controlled, as
St ate y I fo atio hould be o iou a d o t olled a
well as a formulized and elaborate, process.
¾ In principle, responsibility for the overall process is with the
I i i l ibilit f th ll i ith th
shift executive.
¾ Strategies come out of this process fully developed, typically
St t i t f thi f ll d l d t i ll
as generic positions that can be implemented through
detailed plans.
Strategy Levels
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There are three different type of strategy formation:
yp gy
¾ Information Systems (IS) Strategy
y ( ) gy
¾ Information Technology (IT) Strategy
¾ Information Management (IM) Strategy
g ( ) gy
Strategy Levels (Cont.)
27
Information Systems (IS) Strategy
¾ IS Strategy is considered to be long term in orientation.
¾ IS strategy related to using the information resource in an
organization to help generate new business ‐
i ti t h l t b i h ?
how?
Information Technology (IT) Strategy
Information Technology (IT) Strategy
¾ IT is considered with how IS strategies will be
implemented. IT strategy is described as activity‐based,
supply‐oriented and technology‐focused.
¾ IT strategy relate to the practical application into an
organization.
organization
Strategy Levels (Cont.)
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Information Management (IM) Strategy
¾ IM is distinguished from the IS and the IT strategies
because it is involved in the ‘wherefores’. It is described as
organization‐base, relationships‐oriented and
management‐focused.
g
¾ IM strategy relates to the management of the information
function within an organization.
Strategy Levels (Cont.)
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Four tasks of information management “according Earl”:
g g
1. Planning to integrate IS and IT strategies
2. Organization of the IT function
3. Control of IT expenditure
4. Technology and priorities of the IT strategies
PEST as a Planning Tool for Information Systems Strategic
Planning
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PEST analysis can assist in the setting of strategic planning
process. Although the actual assistance will depend on the
nature of the organization and the actual environment it
faces, some general pointer can be provided as outlined
faces, some general pointer can be provided as outlined
below:
¾ Political Indicators
¾ Economic Indicators
¾ Social Indicators
S i l I di t
¾ Technological Indicators
7‐ Information Leadership
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Introduction
Information leadership relates to using information systems
to create “develop” competitive advantages .
IT and Porter’s Five Forces Model
Michael Porter identified the five forces that determine the
competitive position of a business within its industry.
This model can be applied to the use of IT by a company,
because IT can be used to change each of these forces, and
saw improve the competitive position.
saw improve the competitive position.
Porter’s Five Forces Model
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The five competitive forces according to Porter are:
p g
¾ Potential Entrants
¾ Competitive Rivalry
¾ Threats form Substitutes
¾ Buyers Bargaining Power
¾ Supplier Bargaining Power
Porter’s Five Forces Model
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Porter’s Model (Cont.)
34
y Porter’s model maybe used to help clarify the overall
business strategy.
y Management should use the model to determine which of
M t h ld th d lt d t i hi h f
the forces poses a threat to the future success of the
organization.
g
y Information technologies’ strategic role can be assessed by
it biliti i d li
its abilities in dealing with the five competitive forces.
ith th fi titi f
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