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Stratégies du changement dans les systèmes et les territoires

Lise Viera
Nathalie Pinède

Axe 1. Entre terroirs et territoires : les TIC au cœur du réel

Information Systems Strategy and Small and Medium Sized Enterprises

Liam Doyle

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1This paper describes an approach to information systems strategy planning appropriate for small and medium-sized enterprises. While e-business is an approach to business that depends upon information technology it cannot simply be treated as a technology application. The means by which the organisation competes can be enhanced through the use of information systems, which are built using information and communication technologies. Becoming e-business enabled involves a decision on how the organisation will compete, what information will be used within the organisation, and how technology can support the use of information. This paper sets out an approach to information systems strategic planning that enables SME managers to develop an awareness of the operational and strategic benefits of information systems. In order to make effective use of information systems, including e-business systems, organisations should seek to align their information systems strategy with their business strategy. In doing so the contribution of information systems to the organisational objectives can be maximized.

1. Small and Medium-Sized Enterprises

2Small and medium-sized enterprises (SMEs) have a number of characteristics that distinguish them from their larger counterparts. The most obvious characteristic is that of number of employees. The European Union (EU) defines a SME as an enterprise with less than 250 employees. The European Union also applies annual turnover and balance sheet criteria to the definition of an SME. SMEs are further categorized as micro, small or medium sized as shown in Table 1 (European Commission, 2003). The number of employees in an enterprise is an important defining characteristic when studying the role of information systems strategy in an organisation. This characteristic has the greatest impact on the structure of the organisation, which impacts significantly on the strategy formulation process. In general, the more employees there are in an organisation the more differentiation there will be between functional units and the greater the need for integrating mechanisms. Increased employee numbers also leads to more layers in the organisational hierarchy.

SME definition

Number of Employees

Annual Turnover

Balance Sheet Total













(Source : European Commission, 2003)

3As SMEs have fewer staff than their larger counterparts employees tend to take on more general roles. Their employees must engage in multitasking. SMEs therefore have a lack of specialist staff. SMEs are also characteristic by having less ready access to funds. This impacts on IS strategy formulation in a number of ways. Firstly, SMEs may be slower to invest in IS. SMEs have been described as regarding investment in IS as a ‘necessary evil’, where money is spend on IS only when unavoidable. Secondly, the amount of funds available to SMEs restricts the sophistication of the information systems that can be implemented. Thirdly, SMEs expect to make use of their IS for a longer period than is expected in larger companies. The information technologies found in SMEs therefore tend to be older than those found in larger organisations.

2. Organisational Responses to Business Pressures

4A business strategy attempts to provide a means of competing based upon the characteristics of the organisation and the nature of the competitive environment. Quinn (1996) states that “a well formulated strategy helps to marshal and allocate an organisation’s resources in an unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingents moves by intelligent opponents”. A business strategy involves an organisational response to external factors. This response can be facilitated through the use of information technology (Turban et al., 2006).

5Organisations need to consider their external environment in the development of their IS strategy. A number of models are available to assist the SME in assessing the external environment. At a macroenvironmental level PEST analysis can be employed. This focuses on political, economic, social and technological issues that set the wider context within which the SME operates (Narayanan, 2001). In the modern economy, social and technological factors perhaps play a more important role than previously. Technology is developing at an ever-increasing pace. This is driven largely by developments in information and communication technologies. At a social level, there has been widespread adoption and diffusion of these newer technologies that have become embedded within the daily activities of many people. This can be seen for instance in the widespread adoption of mobile phones, music download devices, and social networking sites (Hitt and Tambe, 2007).

3. The Macroenvironment

6The political, economic, social and technological macroenvironmental factors are interlinked and influence each other. Different conditions exist in different countries based upon the local political and social conditions. Technological and economic factors have a more global influence, although there will be local variations, for example the availability of broadband access or the demographic composition of the population (Narayanan, 2001).

7Macroenvironmental influences are important as they set the context within which industries operate and within which SMEs must compete. For example, due to the opening of markets SMEs are increasingly facing foreign competition. This can result from changes at a political or regulatory level. The expansion of the European Union since its establishment has led to the development of a large European market with a consequent reduction in trade barriers. Similar reductions in trade barriers can be seen on a global basis (Lissowska, 2002). At a societal level, people are increasingly aware of the goods and services that are available, expect to be able to obtain these, and are willing to purchase from non-local sources. This is facilitated through developments in technology such as the widespread availability of satellite television, mobile communication devices and the Internet.

4. Competitive Forces

8While PEST analysis serves to identify the general environment in which an SME operates, an analysis of the enterprise’s more immediate environment is required. Porter’s five forces model provides a tool that allows this analysis to be conducted (Porter, 1985), (Porter, 2001). Porter describes five major forces that shape the competition within an industry, as follows:

  • the threat of entry of new competitors
  • the bargaining power of suppliers
  • the bargaining power of customers
  • the threat of substitute products or services
  • the rivalry among existing firms in the industry.

9A number of factors determine the strength of each force within a given industry. The threat of entry of new entrants is determined by factors such as economies of scale, brand identity, switching costs, and access to distribution. The threat of substitute products is determined by the relative price/performance of substitutes, switching costs and buyer attitudes to change. The bargaining power of suppliers is determined by factors such as switching costs, differentiation of inputs, presence of substitute inputs, supplier concentration and the importance of volume to supplier. Factors that determine the bargaining power of buyers include buyer concentration versus firm concentration, buyer volume, buyer switching costs, product differences and availability substitute products. Within some industries there is intense rivalry among existing firms. However, within other industries there may be little rivalry, in which case the existing firms do not compete aggressively. Intensity of rivalry is determined by factors such as industry growth or contraction, fixed costs, intermittent overcapacity, brand identity, diversity of competitors and exit barriers (Porter, 1985), (Porter, 2001).

5. Generic Competitive Strategies

10It is the unique combination of factors within an industry, or an industry segment, which determines the forces at play within that industry. These forces shape the competitive landscape within that industry and determine the options available to firms. Firms can choose to respond to industry forces in a number of ways. The manner in which a firm responds to the competitive forces is known as the firm’s competitive strategy. Porter described three generic strategies available to firms. Firms that aim to produce a product or service at the lowest cost in an industry adopt a cost leadership strategy. Firms pursue a differentiation strategy to distinguish their products or services from those available from their competitors. Firms that wish to concentrate on a narrow market segment employ a niche strategy. Within the chosen niche the company may pursue a cost or differentiation strategy. Firms employing a niche strategy seek to find market segments where the forces at play are more favourable than in the industry in general. By doing so they hope to avoid high levels of competition, avoid large industry players who may not be interested in small industry segments, reduce the number of direct competitors and find a sector in which it is easier to survive and prosper.

6. Supply Chains

11While Porter’s five forces model examines the bargaining power of suppliers and buyers, the supply chain concept recognises that there is interdependence among the participants in an industry. The supply chain concept links entities from the initial producers of raw materials through to the final consumer in an interconnected sequence. Interdependencies exist between the participants in the supply chain. In order to compete effectively participants in the supply chain must cooperate with other participants in the chain, in particular with those participants with whom they have direct dealings, i.e. their immediate suppliers and their immediate customers.

12A firm is linked to its immediate suppliers, known as first tier suppliers. These first tier suppliers may have their own suppliers who are known as second tier suppliers to the focal firm. The number of tiers in the supply chain varies from industry to industry. From the viewpoint of the focal firm, its suppliers and their suppliers are known as the upstream section of the supply chain. The downstream section of the supply chain consists of those entities that purchase the goods and services that the focal firm produces and pass these on to other entities until such time as they reach the final consumer of the product or service. Participants in this section of the supply chain may include entities such as wholesalers, distributors and retailers.

13The nature of supply chains vary from industry to industry and between industry segments. Variations include the number of tiers, the number of participants in each tier, the nature of the relationship between participants and the relative size of participants.

7. Firm Value Chain

14PEST analysis, Porter’s five forces model and the supply chain concept enable the development of strategy by providing an understanding of the organisation’s environment in an increasingly focused manner. In the development of an organisation’s strategy the characteristics of the organisation itself must also be examined. Porter’s value chain model provides an appropriate means to examine the internal aspects of the organisation. This follows on well from supply chain analysis, which examined the upstream and downstream sections of the supply chain. The value chain represents the internal supply chain of the organisation, connecting the upstream and downstream portions of the supply chain.

15The activities of an organisation can be divided into primary and support activities. Primary activities are those involved in accepting inputs from suppliers, transforming those inputs thereby producing outputs that are sent into the downstream section of the supply chain. These activities add value to the inputs as the outputs are worth more than the cost of the inputs. For example, a car is more valuable than the cost of the components such as tyres, engine, brakes etc. and the labour involved in making the car.

16Support activities do not directly add value to the company’s products. These activities exist to support the primary activities and other support activities. In order for a company to be profitable, the value added by the primary activities must exceed the costs incurred by both the primary and support activities. The excess of value added over total costs is the margin.

8. SWOT Analysis

17A SWOT analysis addresses the organisation’s strengths, weaknesses, opportunities and threats. This is informed by the models already described. PEST analyses, five forces analysis, supply chains analysis and value chain analysis examine the organisation’s external and internal environment at different levels of granularity and from different viewpoints. The threats faced by the organisation and the opportunities available can be identified from the information gathered. The weaknesses and strengths of the organisation can also be identified. Through an understanding of its strengths and weaknesses the organisation can decide how to respond to the threats and opportunities that it faces.

18These responses can be enabled through the use of information technology. Information systems can be deployed to support the business strategy. Increasingly this is being done through the use of e-commerce. In order to make effective use of information technologies, the IT strategy should be aligned with the business strategy.

9. Alignment of Strategies

19The IS strategy is based upon the needs of the business and as such it is driven by the demand placed upon it by business objectives. The focus in an IS strategy is to provide applications to support the business activities. The IT strategy is based upon activities that supply services to enable the IS strategy to be implemented. The focus in an IT strategy is on developing, deploying and managing information and communication technologies. The IT strategy provides the infrastructure and services that are required to implement the IS strategy. While the IS strategy is concerned with what is required in terms of information processing to meet the demands of the business, the IT strategy is concerned with the details of how this is to be delivered.

20Separating the concerns of what is required from how it is to be implemented allows consideration to be given to how the business can best be served through the use of information systems, including e-business systems. An organisation will have requirements for a number of different types of information systems. Each of the primary and support activities in the value chain has its own information processing requirements that may benefit from the use of information systems. In addition to internally focused information processing requirements, there may be externally focused information processing requirements. Linking to other organisations and individuals, both upstream and downstream in the supply chain, can be supported by information systems. In e-business terms, these systems can be classified as buy-side or sell-side e-commerce systems. A company may attempt to use e-commerce systems to overcome any negative forces in the organisations environment. For example, the bargaining power of suppliers may be decreased through the use of e-procurement. Also, providing greater levels of service and creating switching costs may decrease the bargaining power of buyers. McKay and Marshall (2004) recommend examining how information systems can support the business by examining the interfaces between different parts of the value and supply chains and the efficiencies of each component of the value chain.

10. Application Portfolio

21Different applications will perform different roles within the organisation. Some applications, such as payroll systems, may provide a useful aid to the organisation but not provide any strategic advantage, while other applications may have greater potential to benefit the organisation. An organisation may have a portfolio of applications, both existing and planned, which vary in the contribution they make to the success of the organisation. The IS strategy focuses on this portfolio of applications and must take account of the contribution of the application.

22Ward and Griffiths (1996) provide a portfolio model, which is a variation of the strategic grid developed by McFarlan (1984). This model can assist in achieving a balanced allocation of resources to different applications and in deciding on investments for new applications and for maintenance and modification of existing applications. Companies must seek to ensure that sufficient resources are allocated to systems necessary for the existing needs of the business, while at the same time investing in systems that will support the future business strategy.

11. Strategic Planning in SMEs

23E-commerce systems hold out the promise of providing competitive advantage. However, if resources are invested in e-commerce systems without reference to the strategic business needs of the organisation, it is unlikely that competitive advantage will accrue. It is therefore likely that an adequate return will not be achieved on those investments. Given that SMEs have limited resources and are often slow to invest in IT, it is important to ensure that the money they do invest is spent wisely.

24The models described above have been widely applied within the setting of large organisations. Much has been written about the distinction between small businesses and large organisations and the impact that this has on strategy development process. However, it can be seen that the difference between small and large organisations decreases as we move along the size continuum from small to medium to large organisations.

25The assumption behind the formal strategic planning approach is that planning follows a top-down methodology, where the planning process following a number of predefined steps. The less formal management approach often found in smaller enterprises may not be suited to this highly structured method. However, it has been show that in reality, many large organisations do not follow a top down approach. A bottom up approach has been show to be followed in many organisations. In addition, the strategic development process has been show to be impacted by organisational politics and cultural influences. Strategy development is not always rational and deliberate. It takes into concern unique aspects of the organisation and leads to an emergent strategy. This can be seen in large organisations and small organisations. However, the models that have been described provide a useful means of understanding the organisation and its environment. They can usefully be employed whether a top down or bottom up approach is used and are applicable within SMEs as well as in larger organisations.

26Strategy development within SMEs must take a number of factors into consideration that may not impact larger organisations, at least to as great an extent. SMEs have less influence over their environment. They cannot exert influence in the same manner in which larger organisations can and must therefore be more adaptable to influences within their environment. SMEs generally are more resource constrained than their larger counterparts. Therefore, when investing in information systems, including e-business systems, they often regard the expenditure as an expense to be avoided or minimized rather than as a strategic investment. Within SMEs the owner manager is central to strategy development. The strategy development process is highly influenced by the characteristics of this person. The experience, educational background, personality, ambitions and attitude of this person are tightly woven into the direction to be taken by the organisation. A distinction can be made between lifestyle owner-managers, who do not necessarily want to achieve high levels of growth, and entrepreneurial owner-managers who are focused on growth.

27As SMEs often find it difficult to hire people with specialist skills the company may not have access to specialist computer personnel. Therefore, the owner-manager’s understanding of the potential of information technology to support the business has a large influence on the development of an information systems strategy.

28Planning within SMEs often takes place within the context of one or more projects rather than as a formalized strategic planning process. Therefore, when project planning takes place it is important that strategic issues are considered. Each project should be considered within a strategic context. Failure to do so will result in potential benefits not being achieved, fragmented applications being developed and the opportunity to obtain synergies between projects being missed. Without a strategic awareness, projects will have a short-term focus, may need to be replaced more quickly and will have a reduced return on investment.

29The strategic plan development process in SMEs tends to be highly iterative and is characterized by a high degree of learning on behalf of the owner-manager. Information required for the development of a strategic plan is likely to be acquired personally by the owner-manager (Gibb and Scott, 1988), (Marsden and Forbes, 2003). Given the restricted resources and time-constraints typical of SMEs it is important that any process used for strategy development should not be overly complex, should not be time-consuming and should be capable of being undertaken without the need for specialist strategic analysis skills. The models described above are relatively simple and easy to understand. They provide a framework within which the owner-manager can consider both the organisational strategy and the role that information systems and e-business can play in support of that strategy. The owner-manager can apply these models within the context of the particular business and its industry and general environment. The models can serve as a guide to the issues that need to be addressed by the owner-manager and can assist in identifying information that needs to be considered.

30The models described earlier can serve as frameworks that can assist in the development of an information systems strategy. Earl (1989) developed a ‘Framework of Frameworks’ to explore the usefulness of these models to information systems development. Earl classified the frameworks into three headings, awareness frameworks, opportunity frameworks and positioning frameworks. Awareness frameworks are useful for examining how IT can be used for competitive advantage. These frameworks can raise awareness of the useful role of IT and serve as an educational tool. Opportunity frameworks can help an organisation identify strategic opportunities from the use of IT. Positioning frameworks address the importance to the business of existing and proposed information systems. They also address the importance of the management of information and information systems to the business. (Levy et al., 1999). Levy et al. assessed the usefulness of various frameworks for information systems strategy development. They identify Porter’s generic strategies as a useful awareness framework, Porter’s value chain model and Porter’s five forces model as useful opportunity frameworks. They also identified McFarlan’s application portfolio grid as a useful positioning framework.

31It can be argued that it is the planning process rather than the finished plan that provides a benefit to the organisation. In many cases finished plans are left to gather dust with little or no reference or attention being paid to their content. In this case the plan itself may provide little valuable assistance to the organisation. However, the planning process in itself may prove to be useful. The process involved in producing the information system strategic plan serves to focus the attention of the owner-manager on the strategic issues facing the business and on the strategic contribution that information systems can make to the organisation. E-business planning requires the organisation to consider business strategy, information systems strategy and information technology strategy.

12. Recommendations for SME

32The following steps are recommended for SMEs when formulating an e-business strategy.

331. Identify the managers and other personnel to participate in an IS strategy development steering group.

342. Establish an overview of the existing information systems applications and underlying information technology infrastructure.

353. Conduct the following analyses in order to consider the business strategy:
A: PEST analysis
B: Competitive forces analysis
C: Supply chain analysis
D: Value chain analysis
E: SWOT analysis

364. Conduct an application portfolio analysis. Consider the strategic contribution of existing applications in light of the analyses carried out in the previous step

375. Revisit step 3 with an emphasis on how information systems can support the business strategy. In this step consider how information systems can assist in the following ways:
Improving relationships with customers
Improving relationships with suppliers
Improving the flow of information among primary activities
Improving the efficiencies of each primary activity
Improving support for primary activities
Improving efficiencies of support activities
Countering actions taken by competitors

386. Revisit the application portfolio. Identify the contribution of potential applications in light of the analysis carried out in the previous step.

397. Develop an information systems architecture outlining the links between business functions and existing and proposed applications.

408. Identify the information technology infrastructure required to support the various applications.

419. Prioritize allocation of resources to projects considering the following:
The tangible and intangible benefits of each project
The once-offand recurring costs of the project
The forecast payback period and return on investment.
The need to achieve a balance between different categories of applications
The need to achieve a balance between application development and infrastructure provision
The potential to leverage synergies between applications.


42All organisations, including SMEs, must respond to changes in their environment by updating their strategy, which defines they way they compete. Increasingly organisations are using information systems, including e-business systems, to support their strategic responses. SMEs do not enjoy the level of resources available to larger organisation including access to funds and technical expertise. SMEs must ensure that they optimize the value they receive from the resources they allocate to their IS projects. The approach as outlined above allows SMEs to balance their portfolio of IS projects in a manner that supports their strategy. The tools used are easy to apply and their use enables SMEs to align their IS strategy with their organisational strategy.



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Waterford Institute of Technology, Waterford, Ireland.

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