Threat of Substitute products: Substitute products refer to the products having ability of satisfying customer’s needs effectively. By constantly upgrading their services, SkandiaBanken ensured that they differentiated their products.
Analysing SkandiaBanken according to the value chain:
Primary activities
These are activities that are directly concerned with creating and delivering a product. These are the following:
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Inbound logistics: This refers to receiving, storing and disseminating inputs. In the case of SkandiaBanken the inputs are the raw data pertaining to all activities in the organisation. Examples are customer information and customer suggestions.
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Operations: This refers to transforming inputs into the final product. The raw data is then used in brainstorming sessions for customized and team oriented product design. All the necessary issues are addressed in order to come up with the services that the customers require. This is done by building a team of people involved, that is, business managers, IT developers and product managers. IT then develops the product.
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Outbound logistics: This refers to collecting, storing and distributing the product to customers. SkandiaBanken uses business interfaces for delivering their products to the customers.
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Sales and marketing: This refers to the process of providing a means and incentive which allow buyers to purchase the product. SkandiaBanken uses online credit application systems, online insurance application systems, interest rate information, online car registration systems and e-learning among others.
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Servicing: this refers to providing service to enhance or maintain the value of the product. SkandiaBanken has personalized customer reports for follow-up business for car dealers. It also has personalized sales statistics for individual car dealers.
Support activities
These are the activities not directly connected to the production process. They increase efficiency. They are the following:
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Administration and management: this refers to Planning, Finance, Accounts and Legal functions in the organization. SkandiaBanken senior managers developed a management philosophy to guide the development of business capabilities mainly focused on customer satisfaction. They used Information Technology such as e-mails and call centers.
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Human Resources: This is concerned with employee recruitment, selection and training. SkandiaBanken trained call centre customer representatives to respond to telephone and internet information requests and problems. Through outsourcing non value adding systems the IT group was very small, that is, 15 out of a total of 2000 employees. They also use database systems for employee information.
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Technology: This refers to Information systems, software, hardware used in the organization. SkandiaBanken used ERP systems to link database systems, telephone activated pop up screens at the call center, call center monitoring system among many others.
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Procurement: Refers to the function of purchasing inputs used in the Value Chain. The bank buys software from vendors and hardware they would use in conjuction with this software for example, ATM machines. Procurement is also in charge of outsourcing.
- SkandiaBanken’s business model is the direct model based on e-business. A direct business model is one where an organisation carries out all transactions directly with its customers. Their business strategy is premised on 3 core principles which are truthfulness, simplicity and high interest rates. Information systems support their strategy through:
- Information sharing between the customers and the organisation is made more transparent through use of IT. Since SkandiaBanken wanted to enforce transparency through capitalising interest every month, this could be done by making sure that the customer’s account is updated and the statement is readily available at request. The bank could have also used newsgroups to always keep customers updated, help lines,
- IT is meant to simplify things. SkandiaBanken opened an All-in-One account. This could have been done through use of a database management system. Enterprise Resource Planning systems would also be of great help to support this strategy.
- Good marketing and sales services allowed SkandiaBanken to persuade customers to channel savings deposits into revenue creating areas. This allowed the bank to then have interest rates averaging between 2% and 3% more than those of competitors. To manage this they used telemarketing through use of the call centre.
- Being an organisation whose model is e-business based, the internet was of great help to ensuring that the business operates successfully.
- The systems put in place at SkandiaBanken are always first hashed out by a management team which represents all stakeholders in the organisation. This team comes up with products based on customer needs and addresses what’s, who’s, whens and whys that affect product formulation. By the time the product has been Okayed, this team would have clarified the customer needs, organisational needs, and processes. This shows that there is top management buy in at conception.
There is no formal reporting hierarchy therefore cutting bureaucracy which tends to slow down the decision making process. The company CEO has an open door policy ensuring that anyone who needs to talk to him can do so at any time. To also push this agenda, there are no secretaries at the organisation to ensure that there is no filtering of information thus information flows freely.
The culture of the company encourages innovation based on customer needs. It is a learning organisation as it allows employees to make mistakes in a quest to better their services. The company has managed to focus their energy as a company, banish all biases that get in the way of clear communication, build a shared vision, work as teams and work together concurrently.
This makes the organisation a smooth running machine because there is top management buy in, adequate flow of information and also a sense of ownership for the employees as they are allowed to be part of the whole system
- SkandiaBanken’s competitive advantage is sustainable because their strategy conforms to Porter’s Generic Strategies which promote the competitive advantage of a business. The generic strategies are:
- To become the low cost producer.
- To differentiate your product or service
- To change the scope of competition by either narrowing market or enlarging market (globalise).
Forces
Factors used to carry
organisation through
the forces
cost leadership
focus
differentiate product
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SkandiaBanken is quoted as having lower fees than other banks by the Jury, Best Bank of the Year, Privata Affarer (2000). They also managed to cut out ATM fees thereby leading to attainment of absolute cost advantage.
- The bank manages to differentiate its products by giving customers what they ask for. They respond quickly to information supplied by customers thus ensuring customer satisfaction. They are also constantly coming up with new products and modifying old ones to keep ahead of the pack.
- The bank serves a niche market with its “branchless” banks. This means that there is minimal competition in that area.
All this allows them to operate competitively even though market forces may pull against success of the organisation.
MIDLANDS STATE UNIVERSITY
GRADUATE SCHOOL OF BUSINESS LEADERSHIP
FACULTY OF COMMERCE
MANAGEMENT INFORMATION SYSTEMS (MBA 702)
RUDO V CHAMUNORWA (R13794Q)
DUE DATE: 14/O4/13
QUESTION:
SkandiaBanken Case Study:
- Analyse SkandiaBanken using the competitive forces and value chain models.
- What is SkandiaBanken’s business model and business strategy? How do information systems support this strategy?
- Describe the relationship between SkandiaBanken’s systems and its management, organisational structure, and culture.
- Is SkandiaBanken’s competitive advantage sustainable? Explain your answer.
References
- Svondo P. E (2011), “Management Information Systems”.
- Porter M. E (2008), “The Five Competitive forces that Shape Strategy”, Harvard Business Review.
- Gundy T. (2006), ‘Rethinking and reinventing Michael Porter’s five forces model.”
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Value chain analysis (2008). Retrieved April 11, 2013 from .