Various alternative terms exist to refer to the phenomenon of IS and business strategy alignment in the current literature. First, IT and IS are very frequently interchangeably used when followed by “strategy” (see Henderson & Venkatraman, 1993, p.6). Second, regarding the term “strategy”, there are two other alternatives:

• · plan (Lederer and Mendelow, 1989, p.6),
• · objectives (Reich and Benbasat, 1996, p.55).

Regarding the term “alignment”, other alternatives are as follows:

• · coordination (Lederer and Mendelow, 1989, p.7),
• · integration (King & Teo, 1996, p.279),
• · linkage (Reich and Benbasat, 1996, p.55).

Different combinations of these terms refer to one and the same phenomenon in current related literature. It is beyond the scope of this study to take up the responsibility to further clarify the subtle differences among those alternative terms. However, the literature survey conducted here is not limited to those articles that use the exact phrase of IS and business strategy alignment and actually covers the related articles that use alternative terms.

Different ways exist to describe information systems strategy in the relevant literature (see Henderson & Venkatraman, 1993, p.6; Brown & Magill, 1994, p. 375; Brown & Magill, 1998, p. 179; Hirschheim & Sabherwal, 2001, p. 89). The best suitable one for this study is the definition given by Henderson & Venkatraman (1993, p.6), largely due to its concreteness, comprehensiveness and close relation with the concept of business strategy. They argue that “IT strategy should be articulated in terms of an external domain – how the firm is positioned in the IT marketplace – and an internal domain – how the IS (information systems) infrastructure should be configured and managed”. They propose that the position of the organization in the IT marketplace involves three sets of choices:

1. Information technology scope – those specific information technologies (for example, electronic imaging, local- and wide-area networks, expert systems, and robotics) that support current business strategy initiatives or could shape new business strategy initiatives for the firm. This is analogous to business scope, which deals with choices pertaining to product-market offerings in the output market.
2. Systemic competencies – those attributes of IT strategy (for example, system reliability, cost-performance levels, interconnectivity, flexibility) that could contribute positively to the creation of new business strategies or better support of existing business strategy. This is analogous to the concept of business distinctive competencies, which deal with those attributes of strategy (pricing, quality, value-added service, superior distribution channels) that contribute to a distinctive, comparative advantage to a firm over its competitors.
   
3. IT governance – selection and use of mechanisms (for example, joint ventures with vendors, strategic alliances, joint research and development for new IT capabilities) for obtaining the required IT competencies. This is analogous to business governance, which involves make-versus-buy choices in business strategy. Such choices cover a complex array of interfirm relationships such as strategic alliances, joint ventures, marketing exchange, and technology licensing.
   

In a similar vein, the internal IS domain must address at least three components, namely:

1. IS architecture – choices that define the portfolio of applications, the configuration of hardware, software, and communication, and the data architecture that collectively define the technical infrastructure. This is analogous to the choices within the internal business strategy arena to articulate the administrative structure of the firm dealing with roles, responsibilities, and authority structures.
2. IS processes – choices that define the work processes central to the operations of the IS infrastructure such as systems development, maintenance, and monitoring and control systems. This is analogous to the need for designing the business processes that support and shape the ability of the firm to execute business strategies.
3. IS skills – choices pertaining to the acquisition, training, and development of the knowledge and capabilities of the individuals required to effectively manage and operate the IS infrastructure within the organization. This is analogous to the skills required within the business domain to execute a given strategy.
   

To the contrary of the definition of IS strategy, IS and business strategy alignment is defined in a quite simple way. Luftman et al. define IS and business strategy alignment as “the extent to which the IS strategy supports, and is supported by, the business strategy” (Luftman, et al., 1993, p.204, as cited in Maes et al., 2000, p.5). This definition is continuously repeated with only slight alterations in current related literature (see Tallon and Kraemer, 1998, p.2; Reich and Benbasat, 1996, p.56).

Theoretical Foundation [IS and Business Strategy Alignment]

Prior research on aligning business strategies and IS strategies has examined the nature of such alignment in terms of one-way relationship with business plans influencing IS plans (King, 1978, as cited in King & Teo, 1996, p.282), two-way relationships with business and IS plans influencing each other (King & Zmud, 1981, as cited in King & Teo, 1996, p.282), and integrated relationships with business and IS plans being developed together concurrently in the same planning process (Goldsmith, 1991, as cited in King & Teo, 1996, p.282). Other researchers have proposed a typology of alignment relationships (Synnott, 1987, as cited in King & Teo, 1996, p.282) and empirically tested a stage hypothesis of IS planning alignment (King & Teo, 1996).

Based on Miles and Snow’s (1978) well-established typology of business strategy, including Defenders, Analyzers, and Prospectors, Sabherwal and Chan (2001) argue the theory-based IS strategy should be developed corresponding to the business strategy, including IS for efficiency, IS for flexibility, and IS for comprehensiveness.

In terms of mechanisms for alignment, Lederer and Mendelow (1989, p.7) proposed three main mechanisms – content, timing and personnel. Content linkage is concerned with consistency between business plans and IS plans. Timing linkage is concerned with whether IS plans are developed before, after or simultaneously with business plans. Personnel linkage is concerned with whether participants in the strategic business planning process are also involved in the strategic IS planning process and vice versa.

In contrast to Lederer and Mendelow’s three mechanisms of linkages, Reich and Benbasat (1996) defined linkage in terms of intellectual and social dimensions. The intellectual dimension is a refinement of content linkage in that the content of IT and business plans should be internally consistent (i.e., the IT mission, objectives, and plans are consistent with stated business mission and objectives) and externally valid (i.e., the plans are comprehensive and balanced with respect to external business and IT environments). Similarly, the social dimension is much broader than personnel linkage as it emphasizes that both business and IS planners should understand each other’s objectives and plans.

Reich and Benbasat also pointed out that “In the IT literature, there has been little distinction between linkage as an organizational process or as an outcome of these processes” (Reich and Benbasat, 1996, p. 56) and called to pay attention to this distinction.