Strategy: Business and IT Alignment
Strategy tests whether you can connect business goals to IT choices. Expect framework definitions, matching a situation to the right strategy, and simple investment calculations rather than deep financial theory.
Core rules and concepts
- SWOT: strengths and weaknesses are internal; opportunities and threats are external. Do not place a competitor's move under strengths.
- 3C: customer, competitor, company.
- Porter's five forces: rivalry, new entrants, substitutes, supplier power, buyer power.
- Competitive strategy: cost leadership, differentiation, focus.
- Value chain: primary and support activities; IT can support either.
- Business systems: CRM manages customer relationships; SCM manages supply-chain flow; ERP integrates core functions on one database; BPR is radical process redesign, not minor improvement.
- Performance management: CSF and KPI; balanced scorecard perspectives are financial, customer, internal process, and learning and growth.
- Investment appraisal: ROI, payback period, NPV, IRR. NPV accounts for the time value of money; payback does not.
Worked example
A project costs ¥10 million and returns ¥2.5 million net cash inflow per year. Cumulative inflow is ¥7.5 million after 3 years and ¥10 million after 4 years, so payback is 4 years. If the company's rule is a maximum 3-year payback, reject the project. Note that payback ignores cash flows after the cutoff and ignores discounting; a positive NPV would be the stronger accept signal.
Traps that cost marks
- Writing a mission or vision when the question asks for a strategy.
- Classifying external opportunities as internal strengths.
- Assuming cost leadership means cutting price without controlling cost.
- Treating the balanced scorecard as financial-only.
- Confusing CRM with SCM, or ERP with a single-department system.
- Forgetting that payback ignores the time value of money.