Diversification:
- Look at other equipment that could be manufactured using existing capabilities within the group but for new sectors.
- Offer a test and analysis service for customers who do not want to purchase equipment i.e. Small companies unable to fund equipment, or companies carrying out activities outside of their normal business, ‘one-off’ tests etc.
Value Chain Analysis
Michael Porter introduced the value chain model in his book ‘Competitive advantage’ (1985). The model allows companies to better understand what actions are required in order to develop competitive advantage. These actions can be broken down into a series of activities that generate value. Porter suggests these activities “represent a best guess of important differences in cost behaviour.” (Porter, M, 1985, p.65). As illustrated in Fig. 3, “value activities can be divided into two broad types Primary activities and Support activities” (Porter, M, 1985, p.38).
Fig.3: Porters Value Chain: Adapted by Wikimedia (2009)
Value Chain:Support Activities:
Value Chain:Primary Activities:
McFarlan’s Strategic Grid
The Strategic Grid was introduced by McFalan et al. (1983). The grid allows managers to use the framework to “identify the different roles played“ (Kangasp, K, 2003, p.229) within the organisation with regards to Information Management, such as planning, organisation, control and technological approach. The position of a company within the grid allows us to to establish the type of information management used within the organisation.
Fig.4: Adapted from Blower, J, (2010) McFarlan’s Strategic Grid.
The grid position currently held by the company is shown in fig.4. The company is situated within the ‘Turnaround’ quadrant. This positioning suggest therefore that the company currently views IT/IS as playing a crucial part in it’s future business development. The appointment of the IT Director and drive by the MD and General Manager suggests strategic focus to re-orientate IT/IS in pursuit of competitive advantage. (Kangasp, K, 2003)
PEST Analysis
PEST analysis helps to understand applicable macro-environmental factors that may need to considered when developing e-business strategy. Ward et al. (2005, p.60) suggests that PEST allows the exploration of “the broader external environment in which the organisation will operate”.
Fig. 5: PEST Analysis adapted from:
The Marketing Teacher (2011)
Political Factors:
The company has an international customer base mostly in the USA & Europe, countries that are generally accustomed to relatively stable political systems. However, nations with more turbulent and varied political systems could have unstable governments, varied types of government i.e. dictatorship or democratic and may be involved in diplomatic events in surrounding countries.
Economic Factors:
“It is normal to divide the economic environment in which a firm operates into two levels” (Sloman, J, 2005, p.12)
‘The microeconomic environment’ which affects the companies local market of which it operates within. Downturn in manufacturing within the UK may directly impact equipment requirements domestically.
‘The macroeconomic environment’ During poor economic growth the company may see devaluation of currency increasing purchasing costs on materials purchased from abroad as well as further reduce margins on sales in international currency.
Sociocultural Factors:
Employees may view new technologies and efficiencies as a threat to their job.
Existing work ethic appears traditional which may clash with the companies mission to innovate and be more creative.
Increased awareness of the environmental impact of manufacturing.
Changes in immigration laws brings different & varied cultural attitudes.
Technological Factors:
Availability of technologically advanced components and processes may influence the companies innovation and creativity drive.
Advances in design and prototyping may reduce time to market.
New and more efficient processes and manufacturing equipment may help to increase margin and maintain cost advantage.
PROPOSED E-BUSINESS STRATEGY
E-Business – Strategic Objectives
Objectives established from internal and external analysis as well as the companies implied vision with respect to e-business strategy:
-
Re-model IT/IS infrastructure to Incorporate ‘transactional E-commerce1’
- Develop new innovative product range
- Establish strategic alliances with global agents & manufacturers
E-business – Strategic definition
1In this paper ‘transactional e-commerce’ is defined as the ability to conduct electronic transactions including ‘buy side’ and ‘sell side’. 'E-business' is applied as a broader term encompassing e-commerce but also including all electronic transactions within an organisation (Chaffey, 2007 p, xiv) Greenstein and Feinman (1999) argues that the term e-business may eventually replace the term e-commerce. (1999, p.2)
The companies existing online presence is limited, although informative their website restricts how much the customer can interact with the company. Adoption of transactional e-commerce is noted by authors to offer many benefits. Buyers tend to grow familiar with a companies web interface and once established tend to prefer not to integrate a competitors system with its own. (Porter, M, 2008, p.107).
Porter (2008) argues e-commerce allows companies to monitor customers purchasing patterns and behaviour allowing them to provide more “tailored offerings” to the customer as well as improved service and “greater purchasing convenience.” (Porter, 2008, p.107). Additional benefits like better integration of suppliers, lower transaction costs, improved market understanding and expanded geographical coverage may also be attained. (Damanpour, 2001, p.18).
Analysis carried out using McFarlans Strategic grid, SWOT analysis and Ansoff’s Matrix all imply that the company should adopt transactional e-commerce. This may include the sale of standard equipment, the ability to purchase spares and accessories as well as order service calls online.
As identified in the PEST analysis the company should carry out research into various regulations with respect to e-commerce of the countries they intend to do business with. Most governments are proactively encouraging e-business within their country. Many support this by providing the necessary infrastructure as well as policies, training and skills development, regulatory frameworks and legislation (Chaffey, 2007, p.187).
Consideration should be given to transaction security and privacy. Also taxation within trading countries varies as do standards regulating saleable items as well as statutory rights.
A strategic alliance can assist in the move to transactional e-commerce and visa versa. Most companies in operation in the current economic climate do not have the “capacity or resource to grow without help from other aligned partners” (Bidgoli, H, 2004, p.340).
Forming partnerships globally can not only increase sales channels but also bring outside influence to spark innovation and creativity. Both of which are required in order for the company to replenish their dated product range. Consideration should be given to development costs, patents, copyright and intellectual property rights not only in the country of manufacture but also in the country of sale. (Trott, 2008, pp.146,149,320).
B: CRITICAL SUCCESS FACTORS
Introduction
The Author has identified Several Critical Success Factors aligned to the e-business strategy.
Human Resource
Companies often have to market e-business within the organisation in order to make it a success. Employees and managers alike can feel threatened by new technology and may resist change, therefore change must be be managed effectively.
E-business can significantly affect the organisations structure and processes causing employees to feel uncertain. With excellent management and communication throughout the organisation this “fear factor” can be eliminated (Lientz & Rea, 2001, pp.165-166). E-business not only changes the way employees work, it also changes behaviour, which must be positively managed (Somers & Nelson, 2004). Involving the right people in the implementation process and motivating employees, Khan suggests, is critical to success (Khan, 2002).
Outsourcing
In order to achieve successful implementation of e-business, Somers and Nelson (2004) advise companies often use specialist IT consultants for installation of suitable IT/IS infrastructure as well as setup and software design. Although the company has relatively strong IT skills, consultants can offer valuable assistance providing expertise in relevant areas that may not currently be available within the company (Khan, 2002). Adversely, consultants that lack knowledge of business processes can dramatically affect the implementation of e-business (Chuang and Shaw, 2005).
Information Management
The implementation of transactional e-commerce should be primarily customer-centric and enable a bidirectional stream of information. Adoption of e-business makes information available that was previously difficult or impossible to obtain (Porter, 2008, p.79), used appropriately this will assist improvements to services through customer feedback. Also monitoring of customers behaviour as well as the ability to adapt products and services in line with customers needs. Porter suggests that the way in which we are able to obtain, transfer and process information at low cost is changing the way in which we conduct business. (Porter, 2008, p.73)
New product range
Information obtained from from feedback and customer behaviour should be harnessed and used to positively affect innovation and creativity.
The company should also consider opportunities to increase margin when developing new products whilst maintaing competitive advantage on cost. Outsourcing manufacturing of sub-modules to global low cost manufacturing facilities as well as standardising components across the full range can help to reduce manufacturing costs (Hanse et al., 2007, p.395).
Investment
All of the above of course has a cost, limited investment has been available to the company in the past but the current management team are highly IT focussed and should be prepared to make appropriate investment in this venture. According to McFalan’s Strategic grid the company falls with the ‘turnaround’ quadrant of the matrix. Companies in this quadrant should consider “future investment in this area has the potential to positively affect the business’s competitive position” (Chaffey et. al., 2005, p.594)
Strategic Alliance
The company already has some relationships with manufacturers and developers which the General manager is looking to further develop by forming strategic alliances with similar global organisation. Modern e-business offers many potential opportunities to form “collaboration within and across organisations” (Pradeep, 2003 ,p.17). Working with other companies especially companies that do not posses the same skills can help gain a competitive advantage within an industry. (Pradeep, 2003)
The main types of strategic alliance include ‘Joint Venture’ and ‘Value Chain Partnership’. (Pradeep, 2003) The latter partnership may be more suitably orientated towards the companies vision of strategic alliance.
Senior Management
Senior management must be proactive in perceiving the impact of technological advancements, understanding when and how they will affect e-business strategy and overall business strategy (Kalakota and Robinson, 2000). Substantial resources are required in order to successfully implement e-business, this can only come to fruition with full backing of senior management (Lertwongsatien and Wongpinunwatana, 2003). Senior management “who delegate responsibility for relating technology to overall business strategy to IT management, Kalakota and Robinson advise, do so at their own peril”. (Kalakota and Robinson, 2000, p.26).
C: PROCESS ANALYSIS
Introduction
The managements vision for the company is to establish operations in a new country. In considering this the company should critically analyse the process. Many modern companies strive to improve their business process in order to cope with “market dynamics” (Lee et al., 2009, p.193). In reviewing the process the author will asses requirements and potential improvements for each process step. Fig. 6 shows a summary of the process involved in setting up operations in a new country.
Fig.6: Adapted from Schniederjans, M.J. (1999)
Facility Location:
Facility location decisions are typically long-term and are critical in terms of a companies profitability and success (Swamidass, 2000, p.201). According to Schniederjans (1999), companies are acquiring, merging or building new facilities at a rate never seen before in the word of commerce. (1999, p.5). Schniederjans (1999) suggests there are four options for locating an international facility:
- Acquisition
- Strategic alliance or merger
- Purchase outright of facility
- Build a new facility
The company should critically analyse which option would be most suitable. Schniederjans (1999, p.20) suggests completing ‘International Facility Acquisition Analysis’ this frame work looks at the environment and organisation through to the companies objectives for setting up international operations. Following this review the company can decide which option to take. When completing the analysis the company should also consider location capacity to ensure long-term suitability.
Consideration should be given to HR when selecting a location. Ensuring the correct management team are in place in an international facility is critical. Also sociocultural values of the local work force should be considered as well as local labour rates. Moving to a country where labour rates are low may give the company a significant cost advantage.
Marketing:
According to Swamidass, (2000, p.256) an international company should adopt a global marketing concept. This is considered the overall marketing framework encompassing design, introduction, distribution, promotion and ability to maintain products within the global arena.
It would be advisable to conduct a PESTLE analysis to gain an understanding of Political, Economic, Sociological, Technological, Legal and Environmental factors. The marketing strategy should be country specific and should consider product design, packaging and labelling, brand, warranty and advertising. (Swamidass, 2000, p.256)
Effective marketing in a different country may offer the company an opportunity to promote products in different sectors than they are able to in the home market.
R&D and Design:
Requirements and tastes differ greatly on an international basis. It is important that the product design is aligned with the need to the specific country. International companies must carefully asses the decision to design product specific to the local market or modify an existing product that has been successful in the home market (Paul et al., 2008, p.209).
Considerations should me made for details such as language options for software and differences in mains voltages available in other countries which may effect performance of equipment. (Paul et al., 2008, p.209).
Designs should also be influenced by the laws and regulations of the country that the product will be marketed in. The company will have to strictly adhere to the countries statutory standards with regards to safety, health and quality standards. (Paul et al., 2008, p.210).
This may offer an opportunity to review the existing dated product range and also look to standardise components across the product range which could considerably increase manufacturing efficiency and reduce costs.
Sourcing:
The company needs to initially look locally in the country they intend to conduct business in for material supplies. Many benefits can be gained from sourcing materials internationally such as (Koslow, 1996, p.52):
- Cost reductions
- Quality improvements
- Availability of material that are unavailable in home markets
- Fast delivery
- More advanced technologies
- More competition
However, Koslow, also advises their may be difficulties in sourcing within a foreign country. (Koslow, 1996, p.53) Problems such as:
- Evaluating and selecting suppliers
- Quality (control and assessment)
- Delivery (local transport systems)
- Labour issues (Reliability of suppliers workforce)
- Regulatory issues such as ROSH and WEEE compliance.
Warehousing and storage regulations may differ in other countries limiting the amount of commodities can be stored and restricting the use and storage of dangerous and harmful substances.
Sales & Servicing:
The company should initially decide if they plan to sell goods domestically or manufacture for export, or both. Also will they recruit national personnel from the host country to sell or utilise the sales team from the home country? If using the sales team from their home country it is critical that they understand language and terminology specific to the industry as well as local culture and business ethics.
Bradley, (2004, p.367) suggests that there are many advantages to hiring a sales team from the host country since they often already have extensive market and cultural knowledge. As well as potentially being less expensive than the sales team from the home country they will likely have the relevant language skills and familiarity with local business customs. Adversely, they may not have the relevant product knowledge or an understanding of the company and its culture.
The company should maintain a low cost position which Porter suggests is the best strategy to secure sales. Porter also argues companies within a group can often gain a cost advantage over global competitors since they “potentially gain experience by sharing improvements among plants, even if production is not centralised but takes place in each national market.” (1998, p.279)
Customer feedback is essential to allow the company to improve and develop products and services, therefore a robust system should be implemented. An interactive website can play a prominent part as a feedback mechanism.
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