Electronic Business and ICT for Competitive Advantage.
Electronic Business and ICT for Competitive Advantage
Introduction
The idea that information can be used to give an organisation an advantage over its competitors is according to the Porter's generic strategy: differentiation, cost leadership and focus, the utilisation of information technology can give the organisation on the terms of: reducing the cost, such as the new process with lower cost, improving quality relative to costs, reducing distribution costs and after-sales cost, and the linkages in the value chain; differentiating from the other competitors make the organisation improve product quality, packaging, distribution and after-sales service; more focusing on the low cost and quality (David Wainwright, 2003). Information within an organisation may be seen the 'superset' which information system and technology are used to support. To some degree, gaining the competitive advantage depends on the use of information system, herein the researcher refers to E business and ICT.
In the case study, the researcher will analysis the E business and ICT of Proctor & Gamble corporation.
Literature
E-Business and ICT are the transformation of key business processes through the use of information technologies, which support internet as E business, or in other word, they help the organisation do what it do better, faster, easier and with greater benefits for its customers (http://home.ust.hk/~westland/p&g_note.htm), covering a range of technologies---computers, communications, audio, and video (Mike Powell, 1999), they also are the fundamental to business strategy and process execution; any more, they help to fully change the core competence of an organisation and exploit its weakness (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000) .
E business and ICT merge the long reach and rich information delivery of the Internet and information with the organisation's selected core business processes to give it real business value. Streamlining the processes to gain efficiencies what the organisation can then pass back to its external and internal customers as a value that gives it serious competitive advantage.
They are not about reinventing the business, it's about identifying which of the organisation's core processes would give the most benefit from the huge potential of information technology. The focus here is on business process. The impact of E business and ICT are about managing customer relationships, integrating supply chain more effectively, enabling customers to buy online, etc, these solution will let the organisation pilot and prove E business and ICT as the basis for future growth.
With the Internet and information as an enabling technology, they change the way conducting business and allowing new working structure to develop among customers, suppliers and employers. It is important to the process change, especially on the channel enhancement and value chain integration (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000). It is of importance to the value chain with the technology, e.g. EDI, EPOS, networking and open systems, CAD/CAM, accounting/personnel/stock control, telecommunications and mobile devices (David Wainwright, 2003). It enables company to take advantage of a host of new opportunities by allowing access to broader markets, increasing the speed of transactions and improve the relationship with the customer.
On the other hand, the IT strategy of using E business and ICT support and drive the corporate strategy, from the strategic to operational activity. There is a strategic model in which all the elements of corporate and information system strategy are aligned: (Steve Clarke, 2001)
Information need
The E business and ICT are functional strategy that responds to the chosen business strategy. The key objectives to emerge from this are a need to:
·Align information strategy with the organisation's overall strategic mission.
The organisation should adapt the sub strategy to its vision and mission, which will give an positive influence to determine the development of IS strategy.
·Enable planning and monitoring of ICT.
The investment on IS is costly to an organisation, so the planning, budgeting and forecasting is very important.
·Identify the resources necessary to deliver the strategy.
The IS strategy is the process of coordination and configuration of all kinds of resource, which is across the whole organisation. How to fully utilize the resource externally and internally is the key issue to an organisation.
The researcher will use the value chain to state the above theory and give a more explanation in the following case study.
To be more in detail, E-business and ICT can link the organisation to customers and suppliers, this utilisation creates effective integration of the use of information in value-adding process. It enables the organisation to develop, produce, market and deliver new products or service based upon information. Internally, this technology gives senior management information to help develop and implement strategy (Wendy Robson, 1997).
For an organisation, it is e-nabled through E business and ICT, which improve the relationship management, revenue enhancement and cost reduction (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000), also as the activities to add value. Integrating the value chain fully is the most important function of E business and ICT, the organisation can provide internal and external customer a higher level of service, which confers a true competitive advantage. On the other hand, enabling the supply chain with E business and ICT has helped organisation achieve 20 percent or better reduction in supply chain cost ...
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For an organisation, it is e-nabled through E business and ICT, which improve the relationship management, revenue enhancement and cost reduction (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000), also as the activities to add value. Integrating the value chain fully is the most important function of E business and ICT, the organisation can provide internal and external customer a higher level of service, which confers a true competitive advantage. On the other hand, enabling the supply chain with E business and ICT has helped organisation achieve 20 percent or better reduction in supply chain cost (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000).
Problem and issue
To an organisation, undertaking that strategic initiatives, the first important is planning, budgeting and measurement, one organisation must concentrate on the effective use of the IT and IS, refer to the E-business and ICT, in line with the objectives and goals of the organisation as a whole. Then the analysis of competitive advantage, includes industry analysis, positioning the organisation within the industry, regard the information as a strategic resource. (Steve Clarke, 2001)
For the implementation of management on the information system and the utilisation of E-business and ICT, the organisation should be facing some problem and issues which determine the IT system, structure and culture are fundamental factors, also cause the management change.
Structure
No matter what exiting structure the organisation is, bureaucratic, flexible or matrix, it should support the IS system, system thinking must be instilled into. The organisation needs to reengineer the existing process, such as marketing, customer service, procurement and finance etc. At the same time, the role of human resource management in the e-nabled organisation is to manage expectation relating to changes in role and jobs responsibilities (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000). ICT and E business change the industry structure and in so doing alters the rules of competition, the organisation must tailor its structure to be suitable for this change (Dr David Wainwright 2003).
Culture
Implementing E-business and ICT in one organisation, culture therefore needs to be understood so that it is in a better position to incorporate information strategies in line with existing culture and any cultural change seen to be in process (Steve Clarke, 2001).
They bring cultural change of the highest magnitude, The members across the organisation will share the value, belief and attitude and change the behaviour to be in accordance with the requirements of E-business and ICT. It is necessary for the organisation to change its culture to be suitable to the implementation and formulation of IS strategy,
Management change
The implementation of IT strategy results from the key business drivers, which include technology drivers, business drivers and internal customer drivers (David Wainwright 2003), all these will effect on the management, before this, the organisation should analysis the importance of IS using, IS strategy option and manage the evolving portfolio in direct proportion to business value, there is a growing awareness that an organisation's IS strategy can be used to focus on action and hence lower cost, so management attention has moved from the debate about competitive advantage, a super-set of competitive advantage (Wendy Robson, 1997).
On the other hand, the implementation of E business and ICT will make the organisation undertake the risk, such as the implementation of and support of new products, service and markets, security concerns around the internet; tax and legal issues surrounding the internet (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000), the effectiveness of the communication, the controls and governance over the core process in an organisation, and so on.
The impact of E business and ICT
Moreover, as a subset strategy, E business and ICT will give the impact on the strategic, technical and organisational level of an organisation.
Strategic
The management of IS strategy should be a holistic view of an entire range in one organisation, it is a strategic and system thinking. It may influence every sector of an organisation and should be in line with the vision, mission and strategic direction, the success of E business and ICT is directly affected by the organisation's ability to develop a strategic plan, which must identify their growth initiatives for all areas of the organisation (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000). It is redesign of process and restructure of the organisation, these must cause a influence on strategic level, from the leadership, it is a up-bottom process, on the culture, knowledge, system, market position etc.
Identifying a business' goal and objectives should lead to articulating an overall business strategy and process more deeply. E business and ICT lay the systemic relationship to the organisation, IS can be regarded a divisional strategy permeating across all divisions (Wendy Robson, 1997).
IT strategy, which is a sub-strategy, will influence the overall strategy. Developing the IS strategy that support business strategies is a difficult task, from the strategy formulation to implementation, defining the mission, planing the strategy, and tactical planing, the organisation should make the PEST and SWOT analysis, this is a continuous improvement process.
Technical
Information system is a technical process, it reduces the complexity of the system study and attempts to define it in terms of rules and procedures by which given inputs can be turned into predictable outputs. The process can be addressed through scientific method (Steve Clarke, 2001). Especially, E-business and ICT can change the past human-based activities, such as TQM and BPR, affecting the job satisfaction, security (E Turban, E Mclean, J Wetherbe, 2001), quality, employment, continuous improvement, human resource and so on. Moving to the E business and ICT environment impacts an organisation's technology in different ways. Hardware and software advances have made them reality, the combination of affordable computing power, simple and standard telecommunications protocols, and enhanced security allow E business and ICT to flourish (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000).
Organisational
The E-business and ICT demand that thought and activity are structured, they can impose their own structure of thought and action on an organisation (Mike Powell, 1999), support the collaboration in one organisation. Like team working, communicating with the stakeholder, learning, complementary subtask and participation in decision making (E Turban, E Mclean, J Wetherbe, 2001). The implementation of E-business and ICT will bring many changes to business, which are being felt in areas of structure, authority, power, job content, employee career ladders, supervision, and the manager's job (E Turban, E Mclean, J Wetherbe, 2001). Also function in management and supporting the decision making, it is helpful to form the learning organisation (Wendy Robson, 1997). In this regard, leadership is especially important, it must identify and communicate behaviors consistent with targeted culture and process models. Moreover, leadership must ensure that message is disseminated throughout the organisation accurately, in a timely fashion and with sufficient details (Martin V. Deise, Conrad Nowikow, Patrick King, Amy Wright, 2000).
Using ICT people can discover if others are available to communicate and collaborate, correspond quickly through instant messaging and present information and improve customer satisfaction through information communication. Today's business teams are comprised of colleagues, suppliers, partners and customers h are dispersed across campuses, countries and around the world. ICT and E business provide the flexible, efficient and instantaneous workforce communication that condition demand, specifically they function on the terms as follows:
Add presence awareness.
Speed communications is by allowing people to initiate instant messaging sessions directly from within applications and documents.
Link communities.
Simplify and speed distribution of information to suppliers, customers and partners by securely connecting with their respective instant messaging communities.
Customize and embed.
Extending the capabilities and reach of ICT easy for a broad range of developers because ICT supports the tools needed to integrate with Web- and Windows-based applications.
Case study
In today's electronic age, P&G needs the best systems, innovative technical solutions and people developing them to stay ahead. In P&G's IT community, there is global team of 4000 IT specialists who play a leading role in multi functional teams worldwide. Through the configuration and co-ordination, the technical solutions is designing and implementing to add genuine value to each business function. E business and ICT across a wide range of crucial disciplines; including business re-engineering, e-commerce, global SAP implementation, knowledge management and business analysis (John Millen, Vice President of P&G).
Proctor & Gamble is a successful multi-national corporation, which is operating in many countries, and with many products, besides the marketing, R&D, logistics and management etc, the utilisation of E business & information and communication technology is another critical success factor. P&G reengineer its core process through information technology, adding value to its business activities, further more, to be suitable for its complex distribution channel on efficiency and effectiveness (http://home.ust.hk/~westland/p&g_note.htm).
Strategic level
P&G's "Plan Global, Win Local" strategy is to create strong brand equities, robust strategies and ongoing innovation in product and marketing to build major global brands. Thinking globally and locally is its philosophy, as a multinational company, P&G invest a lot in the local market on R&D, distribution, sales, marketing and finance, the HQ in USA support to the strategic activities at the local market, all these result in a high cost, e.g. FDI, training and education for localisation, in order to sustain the competitive advantage in the market, especially on the distribution, P&G utilised E business and ICT to meet its generic strategy, differentiation, low cost and focus.
P&G is working together with retailers to build consumer loyalty, driving efficiency and driving differentiation. On the term of efficiency, much progress has been made through ECR but differentiation remains a major opportunity for P&G to work with retailers to help them differentiate their consumer offering from their competitors.
Efficient Consumer Response (ECR) System.
Channel innovations that allow grocery chains to compete with mass-market and club stores. The information from the retailer and distributor through E business reflect the changing requirements from the customer make P&G can response to the market quickly and accurately (http://home.ust.hk/~westland/p&g_note.htm).
IS help to reengineer the core process, ICT co-ordinate and reconfigure the organisation to form the strategic and system thinking. Communicating the vision, mission then to correct the strategic direction, the success of E business and ICT make P&G develop a strategic plan on strategic level, from the leadership to the culture, knowledge, system, market position etc.
P&G uses E business and ICT for its globalization strategy to fit for the world economy, supplying the similar products to the consumers, how to differentiate its distribution and customer service is the key factors, also need to tailor to the local market, P&G views the world as a market and utilising the production, technology and ICT to support the globalisation.
According to the value chain of P&G:
Support activities:
Value
Added-cost
=MARGIN
E business and ICT add the value to the business process. It also give a positive influence on the other aspects of an organisation. In other word, the vertical and horizontal linkage internally and externally can be implemented by the ICT and E business in a flexible and feasible way. They enable adding value to every node in the process.
Technical level.
On the information and communication technology, P&G uses EDI and Order Service systems to meet their objective, these technologies drop down the carrying cost of inventory, keeping the reasonable stock to satisfy the manufacture ability and customer demand, increasing the turnover of the inventory; the Order Service System make P&G give the quick and accurate service to the customer, increasing the demand and quantity of sales; these technologies improve the service through the fast deliveries and eliminate costly.
Less-Than-Load shipments.
Through the E business and ICT, P&G improved the logistics, the specific information system is as follows:
Continuous Replenishment (CRP) System.
EDI implementation with objective to minimize stockouts and inventory carrying cost,
Error correction and control constitutes 75% of processing expense and effort.
Combined changes reduced billing errors by 50% from 1992 to 1994, and billing disputes resolved in P&G's faver rose by over 300%.
Information and communication technology provides:
• Search, selection & summarization from large databases.
• Communication over networks,
• Of useful information output
• In support of decisions - strategic, operational and control
• Critical Information for Process Reengineering.
(http://home.ust.hk/~westland/p&g_note.htm)
Organisational level.
E business and information & communication technology boost the capability of the organisation on the terms as below:
Productivity of knowledge and customer service
E business and ICT reduce cost on sales, marketing, distribution and management, therefore resulting in a higher performance than before, E business and ICT enable the company to manage the distribution channel and retailer more flexible; the timely and accurate collection and feedback of customer information make P&G can personalised customer service on one to one model.
Quality
The quality of product and service in P&G is more based on the information utilisation. It help P&G to understand the fast changing market, they can transform the needs and desires from the customer into the production and promotion. Focusing on the quality through the ICT.
Responsiveness
According to the global and local thinking of P&G, response fast to the local market under the decentralised system is the critical success factor, information technology is the key driver to this success.
Outsourcing
The E business and ICT linked P&G to its customers and suppliers to support the outsourcing, it is the re-configuration of all resources of P&G, focusing on the people, process and management. Information technology plays the role of the developing, analyzing, planning and communication in P&G (Wendy Robson, 1997).
All above is based on the information technology, which is the current state of the art in Information Technology, they provide (in comparison to paper-based systems):
• Fast searching and matching with large databases.
P&G constructed market development organisation to serve to the individual market, connecting the manufacture and retailer.
• Massive and accurate data storage.
(http://home.ust.hk/~westland/p&g_note.htm)
First, it enables to manage customer relationships, through the analysis of the data, P&G can give the best service to the manufacture and retailer so as to maintain the loyalty of them.
The second, it integrates supply chain more effectively, at the same time, keeping the good relationship with the supplier to fit for the whole organisation's strategy direction, which determine the competitive advantage.
The third, enabling customers to buy online, P&G can obtain the information from the retailer through the easy access to it on the basis of the B2B model.
• Fast, accurate communication of data.
This is helpful for external and internal customer to communicate with each other, to share the information accurately.
Internally, it is a reengineer of the core process, from the strategic level to the operational level, it is helpful to the co-ordination of the whole organisation to increase the efficiency, also adding the value to P&G. Across the organisation, the top management, manufacture, R&D, finance etc, all departments can function to fit for the objective of P&G; on the other hand, the resource is re-configured to be suitable to the development of the organisation.
Externally, the business process on the distribution, logistics and architecture differentiate P&G from the other competitor, therefore, meet the global strategy and strengthen the local responsiveness to the local market.
Discussion
In the current situation, E business and ICT e-nabled the organisation to differentiate it from the competitor and breakthrough the traditional business, how to plan and measure the information system is the key problem, this sub-strategy must support the overall strategy, every organisation should make strategic and systemic thinking on that. During the implementation of IS and IT, care formulation and analysis is necessary, it is a strategic change.
On the other hand, the utilisation and technology should be suitable to the development of the organisation. The management of ICT is the key, sometimes it tend to fall disproportionately on ICT professionals, this is largely caused by a failure of communication between ICT professionals and other managers. It is necessary for the organisation to take full consideration of the impact on the strategy, technical and organisational.
Potential disadvantages can exist in the implementation of the E business and ICT, such as the cost, flexibility, organisational issues, the training and education of the users, and so on, how to solve such problems and comply with the strategic direction should be taken as a holistic view in an entire range in one organisation.
Reference
Checkland, P. & Holwell, S., (1997) Information Systems and Information Systems, John Wiley & Sons Ltd.
Clarke, S., (2001) Information Systems Strategic Management, Routledge,
Deise, M V., Nowikow, C., King, P., Wright, A., (2000) Executive's Guide to E-Business, John Wiley & Sons, Inc.
Mckean, J., (1990) Information Masters, John Wiley & Sons Ltd.
Powell, M., (1999) Information Management for Development Organisation, Oxfam GB
Robson, W., (1997) Strategic Management & Information Systems, 2nd edition, Pearson Education Limited.
Turban, E., Mclean, E., Wetherbe, J., (2001)Information Technology For Management, 2nd edition, John Weley & Sons.
Millen, J. Vice President, Customer Business Development at Procter & Gamble Plan Global, Win Local? Available FTP: www.kamcity.com Directory: library /articles / P&G.htm
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