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STRATEGIC MANAGEMENT
Lesson 10
Contemporary Issues

Welcome to the final recorded lesson of your module, Strategic Management. In this lesson,
we shall be considering some of the contemporary issues which today’s strategic managers
need to consider when determining strategy for their organisations.
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Lesson 10 Contents

SECTION 1 E-Business and Information Technology

SECTION 2 Customer intimacy
SECTION 3 Power of strategic alliances
SECTION 4 Globalisation

Whilst there are others, the contemporary issues that we are going to look at are e-business
and information technology; customer intimacy; the power of strategic alliances and
globalisation.
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E-Business and Information Technology

E-Commerce – carries out trade electronically

E-Business – organisation exploiting web technologies to extend market
reach and improve performance
Power in market reach – no geography is out of reach but equally new
competitors

Objectives of an e-business are to seamlessly link:

• employees
• customers
• supply chain
• strategic partners.

Competitive advantage can be gained by adding value to the customer by

using technology to transform business activities to achieve greater
efficiency and effectiveness.

Firstly, when we consider e-business and information technology it is important to be clear

on distinctions and definitions.
E-commerce is where an organisation carries out all or part of their trade electronically.
E-business, on the other hand, is where the organisation exploits web technologies to
extend their market reach and improve performance.
Market reach means that no geographical location is out of reach but also means that they
will encounter new competitors. This is akin to having a prominent web page meaning that
customers seeking a supplier will find that organisation whereas previously they may not
have done.
Improving performance is achieved by seamlessly linking through technology employees,
customers, the supply chain and strategic partners. Frequently this can be achieved through
web-based technologies and the sharing of key information across all of these stakeholders.
For example, when you make purchases online, you now frequently receive tracking
information from couriers advising when your parcel will be delivered. This can only be
achieved through your order with the organisation being linked to the courier organisation
as part of their supply chain to speed up delivery of your goods and provide you with more
detailed information about your order’s progress.
Competitive advantage can be gained by adding this type of value for the customer through
effective use of technology.
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Customer intimacy

Service sector and knowledge economy superior customer service is a

valuable differentiator. One of the value disciplines in the layers of the
competitive advantage framework:

We have mentioned customer intimacy several times throughout the module. As a value
discipline, it is one of the ways in which an organisation can enable differentiated offerings
to potential customers. Especially within the service sector and knowledge economy,
superior customer service is a valuable differentiator and a good case study which I believe
you are asked to consider within the online notes is First Direct Bank in the UK who receive
95% in their customer satisfaction surveys and year on year beat every other bank in the UK
for customer service. Consider how they take a different approach to banking.
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Power of strategic alliances

• With regards to the value chain, companies voluntarily align to create

benefit for customers and to share rewards of cooperation.
• Strategic alliances frequently considered a necessity.
• Strategic alliances are collaborative relationships where partners invest
in people and resources to create new markets and intellectual property.
• Formed from complementary vendors, suppliers, customers and even
competitors.
• The strategic challenge is to make the right value chain connections.
• Technology enabling increased collaboration.

Strategic alliances are growing in popularity in today’s globalised markets. With regards to
the value chain, companies voluntarily align to create benefit for customers and to share the
rewards which result from that cooperation. Increasingly, they are considered to be a
necessity as partners invest in people and resources to create new markets and intellectual
property. These partners are usually complementary vendors, suppliers, customers and
sometimes even competitors. The strategic challenge is to make the right value-chain
connections and it is technology which is enabling that increased collaboration which
enables this to happen.
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Globalisation

When firms expand outside of their home market they are considered to be
operating globally.

Globalisation is driven by market-orientated production or cost-orientated

production.

Dunning (1998) suggests that there are three conditions required:

1. The firm should possess some owner-specific advantage (patents and
knowledge, for example). The greater the competitive advantage of a firm,
the more likely it is to internationalise (it can compete in overseas markets).
2. There must be location-specific advantages (markets, resources, costs,
politics, culture etc.).
3. The firm should decide to internalise the use of this advantage. There
must be advantages to the firm keeping production internal rather than
producing through other external means (a joint venture or through
licensing).

When firms expand outside of their home market they are considered to be operating
globally. Globalisation can be driven by market-orientated production or be cost orientated.
I.e. – the need to expand to improve efficiencies and drive down the cost of producing each
unit i.e. improve economies of scale or to produce goods or services where costs are
cheaper.

Dunning (1998) suggests that there are 3 conditions required for firms to globalise:
1. The firm should possess some owner-specific advantage (patents or knowledge for
example). The greater their competitive advantage, the easier it will be to compete in
overseas markets.
2. There must be specific location-specific advantages for moving production abroad –
closer to markets, resources, costs of production etc.
3. The firm should decide to internalise the use of this advantage – i.e. still own the value
chain rather than enter into a joint venture or licence production of goods.
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Push factors for globalisation

Grown due to convergence of political, technical and social and

competitive factors – the push!

Political – development of free trade.

Technology – improvements in transport and communications, IT and the

internet-enabling global sourcing.

Social – convergence of customer needs across the world.

Competitive – improved economies of scale for standardised products with

minimal customisation and decreased costs from organising value chain
based on location factors.

There are, therefore, factors which encourage organisations to globalise.

Political – development of free trade across the world.

Technology – improvements in transport and communications, IT and the internet enabling

global sourcing and communication.

Social – as customer needs have tended to converge, it has been possible to seek efficiency
and economies of scale in production by selling abroad without major changes and
localisation of products and services being needed.

Competitive – improved economies of scale can be achieved from those standardised

products and services with minimal customisation and decreased costs from organising the
value chain based on location factors.
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Push factors for localisation

Competitive advantage can be gained, however, by being specific to local markets.

Push factors include:

• Cultural – different attitudes, tastes and social codes.
• Technical – different standards, language barriers, poor communications
infrastructure.
• Commercial – distribution networks, customisation demands and responsiveness.
• Legal – legislation, national security, restricted flow of people, goods and
information.
• Protectionism – growing trend towards ‘local’ to save jobs as production moves
abroad.
• Demand for flexibility and customer orientation

Conversely, there are still push factors for localisation. These include:

Cultural – different attitudes, tastes and social codes

Technical – different standards, language barriers, poor communication infrastructure

Commercial – distribution networks, customisation demands and responsiveness

Legal – legislation, national security, restricted flow of people, goods and information

Protectionism – growing trend towards ‘local’ to save traditional jobs

Demand for flexibility and customer orientation – especially as new technologies become
‘older’ and that ‘one size fits all’ is no longer applicable.
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Yip’s Drivers for Globalisation

Yip encapsulated this within his Drivers for Globalisation model

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THANK YOU

So, that brings us to the end of lesson 10 and indeed your Strategic Management module. I
hope that you have enjoyed it and found it useful. Once again, do check the online lesson
notes and links to further reading. Good luck in your end of module assignment and don’t
hesitate to contact your tutor and/or post any questions to the discussion forums relative to
the module content and your assignment.

Goodbye.