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One of the most significant strategic decisions that a firm can make is to understand what business processes need improving (Laudon and Laudon, 2007); the company has identified a desire to expand its operations in to new territories and thus the review of a process analysis the company should conduct prior to doing this, is appropriate. Figure 1.1 shows a process analysis framework for global operations.
Source: PWC (2007)
Figure 1.1: Process Analysis Framework for Global Operations
Segmenting the framework's processes and critically reviewing them individually, should highlight the tasks within each constituent, the Company should perform in relation to operations in a new country, as well as stressing the limitations of this framework  .
Develop Production Plan
Prior to starting up in a new country it is often useful to conduct a PESTLE analysis, to give an idea of political, economic, social/cultural, technological, legal and environmental issues involved. Once a country for operations has been established, developing a production plan becomes a priority.
Wild et al (2007) suggest new global operations, in particular, requires the planning of two production processes: facilities location planning and capacity planning.
Facilities location planning is the process of selecting of the location for production facilities; the Company should analyse cost and availability numerous resources, prior to deciding on location of its operations:
Labour and Management
Capacity planning is the assessing of a company's ability to produce enough output to satisfy market demand; the company should consider the following:
Estimating the demand in the new country
Scheduling and deploying resources to meet this demand
This process is mapped in Figure 1.2.
Conduct PESTLE Analysis
Analyse Costs and Availability of Resources
Determine Location of Operations
Estimate Country's Demand
Assess Resources Required to meet Demand
Determine Operations Capacity
Figure 1.2: Process for Developing Production Plan
Design Products and Services
The design of products and services is a careful consideration for the Company. Standardized Products and services are often unsuited to the tastes and requirements of global consumers (Morrison, 2006); when expanding operations to another country, it is essential that firms ensure their products and services are suited to local tastes and requirements; more often than not, firms are required to redesign and update their existing products and services to suit foreign markets (Hitt et al 2007). The company should assess consumer feedback/requirements in a new country as a good starting point for the design of products/services, and eventually eliminate the outdated products and services currently being deployed. This process is mapped in Figure 1.3.
Assess Country's Customer Feedback/Requirements
Decipher Customer Requirements into the Design of New Products and Services
Develop Specifications for New Products and Services
Ascertain Enhancements for New Products and Services
Eliminate Outdated Products and Services
Figure 1.3: Process for Designing Products and Services
Source Materials/Manage Suppliers
The Company needs to firstly evaluate which suppliers in a new country could meet its requirements; after identifying which suppliers are capable, the Company should conduct a 'Vendor Analysis' to refine and choose the most appropriate supplier on this basis (Morrison, 2006). This may entail analysing the following criteria, in relation to each supplier:
Quality- What quality controls/assurances does the supplier have?
Flexibility- How flexible is the supplier in handling changes to delivery schedules and quantities?
Location- How close is the supplier to the operations?
Price- Is the price being charged reasonable considering
Reputation- What is the reputation of the supplier?
Once the Company selects a supplier, it should continuously monitor and examine its relationship with the supplier, in order to improve performance; this may include the supplier taking an active role in the design of the company's products, for example.
This process is mapped in Figure 1.4
Determine Suitable Suppliers
Analyse Suitable Suppliers
Choose Suitable Supplier
Monitor Suppliers Performance
Make Amendments to Supplier/Company Relationship
Figure 1.4: Process for Managing Suppliers
Manage Marketing and Advertising
Marketing management has 4 basic principles; these are product, price, promotion and place (or distribution), which are referred to as the 'marketing mix'; when entering foreign markets, these decisions can become much more complex (Griffin and Putstay, 2007). The Company must analyse at least the following factors of a new country when managing features of its 'marketing mix';
This process is mapped in Figure 1.5.
Analyse Economic Forces, Cultural Influences, Target Customers and Competition
Determine Customization of Products
Determine/Develop Pricing Strategy
Determine/Develop Promotion Strategy
Determine/Develop Distribution Strategy
Figure 1.5: Process for Managing Marketing
Inventory is the stock of any item or resources used in an organization (Chase et al, 2004); the basic purpose of an inventory analysis is to specify when items should be ordered and but most importantly how large orders should be. For the Company, the most vital inventory stock ranges from the raw materials used to produce machinery and accessories to such goods themselves. The difficulty placed upon the determining the size of inventories, is getting a balance between the costs incurred and meeting demand (Simchi-Levi et al, 2008).
The Company should analyse the following when managing its inventories in a new global operation:
Variation in Demand
This process is mapped in Figure 1.6.
Estimate New Country's Demand
Estimate Variation in Demands
Analyse Costs of Inventories
Determine Optimal Inventory Sizes
Figure 1.6: Process for Managing Inventories
Manage Logistics and Distribution
Logistics refers to the movement and transportation of materials within the supply chain (Krajewski et al, 2007); for the Company this is predominantly in the form of transportation of raw materials to its operations and finished goods ready for delivery. It is unviable for companies to manage their own logistics in foreign countries and most usually have to select a third party provider of such services (Chase et al, 2004). In choosing a provider, the Company should analyse the following with regards to logistics service providers according to Wild et al (2008):
Customers' service expectations
Safety measures in place
The problems here obviously hinge on the fact that it is often difficult to assess punctuality, and thus monitor its performance and change service providers if required (Wild et al, 2008).
This process is mapped in Figure 1.7.
Analyse Customer Service Expectations
Analyse Logistics Providers on Costs, Punctuality and Safety Measures in Place
Choose Logistics Provider
Change Provider (if necessary)
Figure 1.7: Process for Managing Logistics/Distribution
Manage Store/Channel Operations
The physical path a product follows on its way to customers is called a distribution channel (Wild et al, 2008); relative to the Company, the services it offers would not actually take a physical route. With view to operations in a new country, the overriding factors considered by firms on determining a channel for its products are:
Degree of exposure required to promote its products
Channel length and cost- e.g. number of intermediaries from producer to buyer
These will obviously be somewhat influenced by the characteristics of the Company's products and how they are perceived in a new country.
This process is mapped in Figure 1.8.
Analyse Customer Perception of Company's Products
Determining Degree of Exposure Required
Analyse Costs of Channel Lengths
Determine Suitable Channel
Figure 1.8: Process for Managing Channel Operations
Managing Sales and Services
The Company must ensure it has in place the effective infrastructure to manage sales and services effectively; this is more so the case as the rise of globalisation means customers are becoming increasingly demanding in the quality of after-sales services on offer (Hitt et al, 2007); the Company must ensure it also has the necessary resources in place to assess feedback and thus giving it the capabilities to improve its operations.
This process is mapped in Figure 1.9.
Provide After Sales Service
Make Service Improvements
Figure 1.9: Process for Managing Sales and Services
The overall purpose of this task is to formulate a suitable E-business strategy for the company; E-business strategy formulation involves the review of the way Information Sytems (IS) and Information Technology (IT) (including the internet) are used in businesses to create value and achieve objectives (McKay and Marshall, 2004) Of course, it also involves the search for new opportunities to enhance such facets based on existing or investments in new IS and IT (Chaffey, 2007); informing such decisions and central to this process, is an analysis of internal/external environments with emphasis on IS and IT; it is decisive to conduct such analysis' as a basis for formulating a suitable E-business strategy for the Company; the approach for this task will follow that suggested by Mckay and Marshall (2004) who suggest that external/internal analysis' can create an 'e-vision', from which a suitable e-business strategy can be formulated.
A SWOT analysis is a relatively simple tool that can help organisations analyse their internal resources in terms of strengths and weaknesses, as well as scrutinize their external environment in terms of opportunities and threats (Chaffey et al, 2006). Figure 2.1 shows a graphical representation of a SWOT analysis, and highlights it usefulness in the formulation of strategy.
Source: Adapted from David (2007)
Figure 2.1: A graphical representation of a SWOT Analysis
Application of tool
This tool has been applied widely to the company, to give a generic view of the Company.
Focus on exceptional quality and satisfying customers; possible source of competitive advantage
200 years experience in its workforce
Highly educated and enthusiastic general manager
Competitive pricing strategy
Good relationships with a number of organisations
Number of functional IT applications
Often forced to accept low profit margins
Appears to be a lack of creativity/innovation amongst company's workforce, as well as
Limited resources, so company has so far been unable to make significant capital investments
Non transactional website- 'bricks and mortar' organisation
Limited use of IS/IT in management of its supply chain
Disintegrated use of IS/IT
Large organisations are unwilling to take on certain projects, which company can benefit from
Possibility of developing strategic alliances with sector manufactures and developers across the world
Potential opportunity to setting up global agencies
Possibility of improving IS/IT facilities extensively thoroughly
Potential to make more commercial use of its website
'Bigger Players' in the market
Company heavily reliant on dated product, with various obsolete accessories, for a significant proportion of its revenue; susceptible to the threat of new technology
PEST analysis involves considering how political, economic, socio-cultural and technological external environmental influences can impact on organisations (Johnson and Scholes, 2002); in terms of E-business it is particularly noteworthy to consider whether any of these factors are driving change in the other arenas.
Source: MT (2008)
Figure 2.2: A graphical representation of a PEST factors
Application of Tool
Inter-country policies - The Company has an international customer base and relationships with sector manufacturers across the world; governments are also widely taking interest in the ascendancy of e-business (Chaffey et al, 2006) any changes in countries policies regarding this could potentially affect the company's strategic goals and the way it conducts business
Overseas/Home Economy- Fluctuations in home/overseas economy prosperity can impact on the purchase of Company's products
Actions of competitors- in terms of marketing or technology adoption for example, can influence Company's turnover
Business consumer's attitudes- towards the internet and online transactions may affect Company's future strategy
Business consumer's demands- may soon want extra 'value' or additional services
Cultural attitudes -across the globe may affect company's future direction
Advances in technology- may provide further tools for Company to increase manufacturing efficiency further; may also assist Company in developing new products quicker
Innovations- may allow Company to develop new advanced products that its Business consumers are likely to want in near future
Security Advances- may make deeper e-business adaptation a more practical option for the company
Internet Usage- Rise or fall in the number of businesses using the internet can potentially influence the value of using E-commerce for the Company
McFarlan's Strategic Grid
McFarlans's Strategic Grid is used to indicate the strategic importance of IS/IT currently utilised by businesses and the potential importance of future IS/IT investments.
Source: Adapted from Cash et al (1992)
Figure 2.3: McFarlans Strategic Grid (with Company analysis)
Application of tool
Figure 1 shows McFarlan's strategic grid and indicates the position currently held within in it by the company; the company is located within the 'turnaround' quadrant of the matrix. Although the company uses IT intensively, it is not currently highly dependent on this for its business; e.g. the company does not rely on IS/IT for its competitive advantage. Thus although it is close to the 'strategic' quadrant, the company cannot be placed there just yet. However, future IS/IT investments can be of huge benefit to the company; the company has identified IS/IT can potentially improve its efficiency, productivity and competitiveness. It is therefore of great strategic importance, the future investments the company makes in IS/IT
Porters 'Five Forces' Model of Competition
A widely used technique for the analysis of market/industry competition is the 'Five Forces' model of competition suggested by Porter (2004), illustrated in Figure 2.4; Porter argues that market/industry competition is the function of five groups of variables or 'forces'.
Source: Porter (2004)
Figure 2.4: Porters 'Five Forces' model of competition
Application of tool
Rivalry amongst existing firms
There appears to be a fairly intensive degree of rivalry within the company's industry; this is suggested by the company's pricing policy and the presence of bigger organisations. The company is also the subject of competition from global firms due to the international nature of its customer base and the presence of the internet.
Bargaining power of buyers
Buyers have a certain degree of bargaining power because of relatively large figures involved in the purchase of the company's products and the competitive nature of the industry; this is suggested by the company's inclination to accept minimal profit margins. Buyers are also free to purchase from other companies, as there are few barriers to stop them.
Bargaining power of suppliers
The company has access to internet via the Wider Area Network; this can often lead to a reduced bargaining power of suppliers as organisations have greater access to a number of suppliers to source materials from and hence lower costs (Bocij et al, 2006); however, it is not evident that the company has utilised this.
Threat of new entrants
There appears to be only a couple of barriers to entry in the company's industry; most notably a moderate amount of start up capital, and experienced work force seem essential prerequisites for potential entrants. However, apart from this barriers are limited, suggested by the company's desire to develop a competitive advantage.
Threat of substitutes
There is a big threat of substitutes present. Although, the company has sole rights to manufacturer products for the organisation who initially sold it, much of the company's revenue is from a somewhat dated product, making it vulnerable to substitute products that are technically more advanced.
Value Chain Analysis
Porter (1980) devised the value chain analysis arguing it can highlight the activities where a firm creates a valuable product/service for its customers and can accentuate a basis to develop a competitive advantage.
The value chain represents a collection of activities that every firm performs in order to design, produce, market, deliver and support its products or services; it is an important tool for considering the role of IS/IT and e-commerce technologies organisation's presently employ and also for highlighting opportunities to exploit (Ward and Peppard, 2002); activities a firm performs can be segregated in terms of primary and support activities, as illustrated in Figure 3.
Source: Porter (1980)
Figure 2.5: Value Chain Analysis
Application of tool
Inbound logistics: Raw materials
Operations: Wide range of activities including: Design/manufacturing of machinery, service support contracts, engineer training, information systems design, etc. The company emphasises creating quality products and services.
Outbound Logistics: The company delivers its products/services to an international customer base, but seeks expansion to new areas
Sales and Marketing: company employs a competitive price strategy to encourage sales; the company's web site can provide initial contact with customers, but does not enable the completion of transactions
Services: Website offers feedback mechanism; focus on customer satisfaction
Administration and Infrastructure: Local Area Network provides range of functional applications, whilst the Wider Area Network enables access to email and the internet. Good relationship with sector manufactures, although no direct communications link or formal alliances.
Human Resource Management: The General Manager has placed a focus on the creation of a more flexible work environment; also a desire for a new recruitment policy.
Product/Technology/Development: The Company utilises Computer Aided Design (CAD) which can provide great assistance in the number of design activities the company undertakes. However, there appears a need for innovation and quicker product development.
Procurement: The Company has the benefit of a new stock control system, which can offer significant help in the control of inventory
E -Business Strategy Objectives
On the basis of the company's vision and application of the analytical tools, the author recommends the following objectives for the Company's e-business strategy:
To innovate new products and reduce product development time
Widen revenues from new geographical markets
To become more focused on customer satisfaction/customer orientation
To increase efficiency and effectiveness across its supply chain
Proposed E-Business Strategy (Including Evaluation and Alignment with Business Objectives)
As a basis for meeting the objectives set, it is a requirement that the company forges effective strategic alliances, with suitable organisations across the globe; collaboration amongst companies often forms the foundation for the of development of new products due to combined increase in R&D, resources and time input (Papazoglou and Ribbers, 2006); to enable effective collaboration, organisations often utilise tools such as extranets/intranets to allow convenient interaction amongst partners and within the organisation itself (Laudon and Laudon, 2000), whilst the Company could also employ particular project management tools; the need to innovate products is highlighted as a priority based on the SWOT and Competitive forces analysis', which underlines the Company's dependence on an obsolete product and a general lack of innovation, as a threat; innovations and faster product development can also often create a barrier for potential new entrants (Porter, 2004).
Strategic alliances will not only enhance the Company's product development process, but also assist the company it to gain revenues from other geographical markets; in order to successfully achieve this objective, it would be advisable that the Company creates an e-commerce facility on its website, forms alliances and assigns foreign agents to concentrate on exploiting this; the Company is limited in the ways it could adapt e-commerce, largely down to the nature of its products. However, it can do this to a certain degree via the sale of any standardised products it has; the analysis' highlights that the website is non-transactional and thus does not generate revenue, which this will remedy; in succeeding with this objective, also forms the foundation of a for the long-term business objective of expanding its operations to new territories.
The Company's current competitive strategy is a combination of cost leadership and a differentiation strategy; Porter (2004) argues this will usually be ineffective in the long run causing the Company to become 'stuck in the middle'; in line with its business objectives, the Company should emphasise being perceived distinctly from other firms on the basis of innovation, quality, customisation and customer service; this involves becoming more customer-centric; E-business tools such as Customer Relationship Management (CRM) applications are particularly of importance in increasing customer satisfaction and becoming more customer centric (Laudon and Laudon, 2007).
To increase efficiencies across its supply chain, requires the company to extensively invest in a wide range of IS/IT applications and enhance its infrastructure; the analysis has highlighted that future IS/IT could be of potentially high strategic significance to the Company.
Evident from the analysis is that the current IS/IT in the Company is largely fragmented and non existent in areas, highlighted by the Value Chain Analysis; the Company is clearly not exploiting the activities in its value chain to full effect; investing in the correct IS/IT, should enable the Company to enhance productivity and become more competitive, two of its major business objectives.
The Company faces numerous challenges in successful adoption of e-business; the author has approached this task by isolating the associated sections within which the challenges are positioned, in which sub challenges of each are recognised and discussed.
An immediate challenge is that of finance. The company has already been prevented from making significant capital purchases to date; Ward and Pepper (2002) suggest the following costs are prominent when adopting e-business:
The Costs of Implementing -. The cost of setting up E-Business technologies includes planning, procuring IS/IT software and hardware, as well as installation and potentially subsequent reorganisation
The Costs of Maintenance- continuous maintenance and servicing costs represent a strong challenge for Small and Medium-sized Enterprise's (SME's) despite a recent drop in prices of such provisions (Bocij et al, 2006)
Although the Company has an IT department, it would nonetheless face a number of issues in this division relative to adopting E-business;
Training- its workforce needs to be accustomed to any new technology adopted
Recruiting qualified personnel- there's been a shortage of IT skilled labour within Europe in recent years (Levy et al, 2005); organisations often fail in the adoption of E-business because they rely heavily on IT 'generalists', as oppose to 'specialists' (Bocij et al, 2006)
Security is a prime concern for the successful adoption of e-business (Chaffey, 2007); Information used within the Company must be safeguarded against a number of hazards; sub challenges of security for the Company, include guarding against:
Viruses or other malicious software
Theft or Fraud
Systems Failure and Data corruption
The Company, in managing alliances, faces substantial new challenges. The initial challenge is of course recognizing suitable partners to cooperate with; although the Company does evidently have good relationships with a number of organisations, picking a partner for a strategic alliance should depend on complementary/compatibility between organisations' size, skills, strengths and objectives (Hill and Jones, 2007); thus picking a suitable partner can be challenging.
Once they have been formed, alliances often reshape the structure and boundaries of organisations in unprecedented ways (Adobor and McMullen, 2002); this potentially leaves the Company to manage a number of sub challenges, especially as the management of strategic alliances is disreputably strenuous. Other challenges it is likely to have to overcome include:
Strategic 'Gridlock'- unanticipated alterations often occur in operations and objectives between organsiations, which may affect the viability of an alliance (Xie and Johnston, 2004)
Ensuring unison- the Company must ensure organisations involved in any strategic alliances work together for mutual benefit, as opposed to self-benefit
Organisational differences- the Company may form alliances with organisations with different embedded perspectives on a wide number of issues, for example the way they conduct business, which must be dealt with; this is more so the case as it is may form alliances with foreign organisations, where perspectives may differ considerably
Although the Company appears has succeeded to a certain degree in maintaining a rapport with its customers, it still faces certain challenges in becoming a customer orientated organisation, which forms a significant segment of its business model and the adoption of e-business. The main challenges to become customer-centric are suggested by Shah et al (2006) as:
Organisational Culture- the Company faces the challenge of embedding and ensuing the importance of customers in to its workforce
Organisational Structure- Evidently the Company has a functional organisation structure in place; the company must overcome this as ideally customer-centric organisations are structurally aligned to deliver superior customer value (Shah et al, 2006)
Processes- the Company faces the challenge of re-engineering a number of its processes to make them customer focused; for example, the Company must develop the ability to optimally match its customer's requirements with the appropriate product/service, although previously suggested technology can help to some extent.
Marketing- the Company faces the challenge of forming a focused marketing strategy which is managed effectively to satisfy customers
The Company must also overcome a number of the challenges associated with globalization. The Company's adoption of e-business technologies and processes must meet the challenge of differing cultures if it is to be successful across territorial boundaries (Afuah and Tucci, 2003); globalization also poses the challenge of a more competitive business environment.
The technological challenges of E-business are sometimes identified as one of the key reasons why SME's often resist its adoption (Taylor and Murphy; 2004; Levy et al, 2005). The Company faces the following technological challenges:
Procurement- the Company must make sure it invests in the right software/hardware; E-business adoption often fails due to poor technological purchasing decisions (Chen, 2005)
Adaptation- The challenge of adapting the workforce to automated business processes can often be a tedious process (Robson, 1997)
Utilisation- Organisations often fail to get the best out E-business technologies because used for the wrong purposes (Chaffey, 2007); the Company faces the challenge of getting optimal usage out any technology it employs
Critical Success Factors (CSFs) represent those things which must be done right, if a function/specific business area is to flourish and thus contribute effectively to an organisation's overall performance (Bocji et al, 2006; Robson, 1997); they can typically be identified for each business objective. CSFs can also be useful in aligning e-business objectives with business objectives.
There are numerous CSFs which exist relative to the Company and E-business.
Investment in IS/IT
It is imperative the Company invests accordingly in the IS/IT to ensure that E-business contributes to its success; this is not to suggest the Company should simply invest heavily in IT, but more so that it should invest appropriately. There are a number of techniques, which can be used to pre-evaluate the potential impacts particular IT investments can have; however, a balanced scorecard technique is particularly useful for pre-evaluating IT investments (McKay and Marshall, 2004).
Successful marketing involves the identifying, anticipating and satisfying consumer requirements, profitably (Combe, 2006); it is the Company's requirement to ensure the four components of its marketing 'mix', price, place product and promotion, achieve its business objectives. The Company's successful use of E-business is highly dependant on this, as effective marketing often forms the basis of demand and thus increased revenue streams (Afuah and Tucci, 2003).
Developing New Products
Developing new products can form the basis of a competitive advantage, the Company is seeking; technological development of products is desirable if it lowers cost or enhances differentiation, adding value for consumers (Porter, 2004). The other main success factor linked to this is the rate at which the Company develops products, which needs to be far quicker than present.
Adopting E-Business is inconsequential for Company if it is unsuccessful in doing this; it is evident that the Company's growth has stagnated because of its reliance on outdated products and a lack of innovation.
Strategic alliances if shaped correctly can significantly increase a firm's competitive position (Morden, 2007); for the Company this may be through developing new products collaboratively, but notably these should eventually allow it to enter new foreign markets and strongly improve the value it generates throughout its supply chain; working in synergy is the often the key to successful strategic alliances (Hitt et al, 2007). Forming successful strategic alliances is highlighted as a fundamental CSF for the company, not only for E-business, but its overall business strategy.
The company must ensure that it fully overcomes the challenges of becoming customer-orientated to maximise its E-business and corporate potential; customer-orientation forms a significant proportion of the robust 'differentiation' competitive strategy currently being deployed by the Company, which as highlighted previously it should build upon for E-business success.
The Company's proposed expansion to new markets, in terms of new countries as well as new product markets must be managed effectively in compliance with its E-business/business strategies; new markets can bring a variety of problems for effective E-business, and it is critical the Company manages these successfully. The Company's progression to E-business brings with it wider management issues, a number of which have been discussed, and it is of precedence that these dealt with accordingly in order to provide the platform for E-business success.