Week 3 - Strategic Framework and eBiz

Source / Reference:
1. Definition of PEST Analysis

http://www.writeawriting.com/business/pest-analysis/

2. SWOT Analysis Nike, Inc.
http://www.marketingteacher.com/swot/nike-swot.html

3. PEST Analysis Example
http://www.buzzle.com/articles/pest-analysis-example.html

4. Marketing Audit of Nike's Stategies
http://gwendolyncuizon.suite101.com/marketing-audit-of-nikes-strategies-a94402

5. Nike, Inc.
http://en.wikipedia.org/wiki/Nike,_Inc.

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In this lecture, we have learnt about 2 strategic framework including PEST and SWOT. They enable us to identify the business objective through specifying the internal and external factors affecting the business. These two strategic analysis are often used together in a complementary manner.

Component of SWOT

1. Strengths 

- Unique, competitive advantages that the company possessed attributing to the business objective achievement.

- Some possible strengths are superior product/ service quality or successful development of an innovative information system (its competitor didn't have and achieve operational efficiency improvement). 

2. Weaknesses

- Limitation, competitive disadvantages of the company which should be improved and avoided.

- Some possible weaknesses are lack of resources/ skills and poor management.

3. Opportunities

- Favorable external condition, environmental trend for achieving business objective. 

- Some possible opportunities are change in technology like the emergence of e-commence helps the companies to perform transactions over the Internet in a more effective and customized manner.

4. Threats

- Unfavorable external condition, environmental trend for achieving business objective. 

- Some possible threats are the increase in inflation rate leading to the increase in cost of production..

Classification of internal/ external and positive/ negative impact as well as more example of the 4 aspects are shown as below.

Simply problem/ issue identification is insufficient. Of course, accurate and clear identification do take credit to the objective specification as well as further development of business process. We should do more than that. Below are some question we can ask ourselves after identifying the SWOT. 

We can then think of which specific type of strategy we should implement according to our analysis. Below are some reference.

SWOT - Case study (Nike)

Here come Nike as an example to illustrate the point. Nike is a multinational company which has contracted with more than 700 shops around the world and has offices located in 45 countries apart form the US.

1. Strengths
- Global, well known brand name

- Long history of development (founded in 1964)

- Strong Research and Development (fashionable design)

- Competitive organization, significant market share in footwear product

2. Weaknesses

- Not diversified product range (focus on sports products)

- Vulnerable, over-concentrated income source (footwear market)

- Price sensitive retail sector

3. Opportunities

- High demand on footwear (sports event or casual wear, highly replaceable)

- Offer associated high value, profitable product (e.g. sunglasses, sportwear, etc.)

- Strong global brand recognition, many market segments

4. Threats

- International nature of trade (transaction in different currencies leading to unstable cost and profit margin)

- Stiff competition for sports shoes and garments market

- Price sensitive retail sector

More example can be found in the website below which I found quite useful for my understanding.http://www.cps.ca.gov/workforceplanning/documents/SampleCompletedSWOTAnalysis.pdf

Component of PEST

1. Political

- Government policy/ regulation and legal issue that intervene the economy

- Example: Trading policy(Terms of Trade), taxation and tariff control, etc.

2. Economic

- Impose direct impact on the customers' purchasing power and organization's cost of capital

- Example: Inflation rate, unemployment rate, interest rate, etc.

3. Social/ Socio-Cultural

- Cultural and demographical aspects affecting customers' need and potential market

- Example: Education level, changing lifestyle, attitude towards career and environment, etc.

4. Technological

- Leading to more efficient production and globalization 

- Example: Machine and Automation, R&D, technological innovation rate etc.

More examples will be shown below:

PEST - Case Study (Nike)

1. Political

- Government policy (US) : low interest rate, stable currency condition

- Minimum wage policy 

- Different term of trade/ trading policy in different countries

2. Economic

- Global economic recession/ downturn 

- High inflation rate

- Fluctuating exchange rate

(reducing customers' purchasing power/ increasing labour and raw material cost)

3. Social

- Increasing health conscious (increasing exercise time/ participation in fitness club leading to increase in demand in sports product)

- Fashionable trend (middle class product, people especially teenagers are willing to purchase and replace the non-stylish sports shoes according to the trend)

- Labour right exploitation problem

4. Technological

- Effective marketing information system 

- Online product review/ catelogue

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Comment on Jane Leung's Lecture 3 - Strategic Framework and eBiz

She gives a clear definition of SWOT and PEST. ParknShop is a good example demonstrating the application of SWOT and PEST. She give a comprehensive and detailed analysis of it which deepen my understanding on the theory. For the social aspect in SWOT, I indeed agree that inflation rate do affect the demand of products. Therefore, customers often rely on the price cut or special discount. For the technological aspect, apart from the collection of customers' data, the use of the Internet enable customers to   compare price of different supermarkets more easily. The competition between those supermarkets is intensified due to the increasing transparency. 

Week 5 – Basics of BPR(1)

Source/ Reference:

1. H. Davenport, L. Prusak, H. James, "Reengineering revisited" (2003) 

2. V. Grover, K. Malhotra, "Business process reginnering: A tutorial on the concept, evoluation, method, technology and application" (1997)

3. Success Factors of Business Process Reengineering

http://www.ehow.com/list_6775695_success-factors-business-process-reengineering.html

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This lecture further our understanding on the concept of Business Process Engineering (BPR) which has been mentioned briefly in the previous lecture.

Component of BPR

1. Business: 

- Define the process via the eyes of the customer (outside-in perspective) 

2. Process:
- Cross functional sequence of activities involving input, output and sub-processes

- Deliver outcome to customer (recipient of the process outcome rather that simply the consumer of product / service ) 

3. Reengineering:

- Quantum improvement with the use of IT and value adding maximization

Classical characteristic of BPR

1. Radical redesign and improvement

2. Emphasis on business process rather than cross functional BP

3. Dramatic performance achievement

4. IT as an enabler

Here is an video demonstrating the definition of BPR. 

It raises the main point that BPR is not simply the redesign of process but the concurrent examination & redesign of information technologies & organization supporting these process.

Business Process - organization structure transformation

The organization has been changed from Bureaucracy towards Customer-Centric (Horizontal organization) which possess the following characteristic:

1. Process/ Customer focus - increase consumer responsiveness via putting people in charge

2. Empowerment - replacing the top down approach and get employee involved in the decision making process

3. Interaction - integration across different functional unit with management and joint responsibility

I believe that this change can possibly attribute to the improved business performance. Especially for some large company which composed of many different department, every decision take times and common agreement will be hard to achieve. The command is often get vague or distorted when it reached to the implementation level. Customers should the the key to business. Meanwhile, the front line workers should be the one who can understand customers' need the most given their direct access to the customer. Adopting this organizational structure can certainly increase the flexibility as well as the market responsiveness, thereby increasing the operational efficiency and profit.   

Why would Reengineering fail?

As mentioned in the Davenport's paper, there are several problem regarding process reengineering. First, some people criticize BPR as neglecting human aspect. Managers often have a misunderstanding towards BPR as downsizing and process automation. According to the paper I read [Reference 2], the author give us a clear comparison between downsizing, automation and reengineering which is shown as below:

Apart from neglecting the human dimension, the greatest shortcoming as Hammer mentioned is the failure to acknowledge the difficulty of reengineering. In reality, most BPR does involve huge cost and time towards success. This leads to the wrong expectation of rapid success of BPR but this kind of project often fail when several difficulties are encountered and deadline is approaching.

In addition, over focus on process and under focus on practice is another reason that ideas are usually exaggerated and repacked rather than practical. Although dramatic and radical change is required from BRP. However, if that change is merely occurred theoretically and ideally, it means nothing.


Moreover, Some companies may have heavy reliance on enterprise software package where competitive advantages, which is a expected result from BPR, cannot be yielded with standardized system. 

Taking too many change at once and resisting to change may be some other factors leading to the failure of the project.

Critical Success Factors of BPR


To facilitate the success of the BPR, here are some better-to-have but not guarantee factors which the company should take into consideration.

1. Sufficient executive support

2. Clear vision

3. Comprehensive and practical project plan

4. Effective communication

5. Appropriate reward/ motivation system

6. Empowerment to low level employees

7. Adequate resources

8. Adapt to organizational change 

Week 4 – The Strategic Alliance Model

Source / Reference:
1. J C Henderson and N Venkartraman, "Strategic Alignment: Leverage Information Technology for    transforming organization" (1993)
http://search.proquest.com/docview/26252741/134A6C8B53F19A4F606/1?accountid=16210
2. P Coleman and R Papp, “Strategic Alignment: Analysis of Perspectives” (2006)
http://sais.aisnet.org/2006/Coleman-SAIS2006-paper.pdf

Subject: 
In Lect 4 - Which alignment strategy in SAM model is the best? and why?

Response:

In my opinion, I believe that “the best perspective” will never exist. Instead, there is only what so called the most appropriate perspective given a certain situation. Different strategies have its own merits and we should carefully choose the suitable one depends on the nature of our own organization as well as the current environment.

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Background

In nowadays technological advanced world, despite the adoption of technology with significant investment, value cannot be derived for some companies. The obvious reason should be the lack of alignment between the business and the IT strategies of the organization.

The Strategic Alliance Model (SAM)

In lecture 4, the concept of Strategic Alliance Model (SAM) is introduced.

As the above diagram shown, the 4 arrows represent that 4 major particular perspective of the mode, which will be illustrated as below:

1. Strategy execution (arrow1)

This is the most commonly adopted perspective which consider IT as an extra unnecessary expense. With well-defined business strategy and the follow-up infrastructure, IT is merely an assistance supporting the strategy.

2.  Technology transformation (arrow2)

On contrast to the above one, this perspective is not limited by the existing organization design. Rather, the business strategy creates need for the IT strategy development. IS infrastructure is then a necessary tool for implementation and the company normally seek to identify the best possible IT competencies.

It will be more suitable for technological-based industry. For example, for the electronic appliance producer like the mobile phone and computer supplier (e.g. samsung, IBM, etc.), IT is an necessary element for business development and acquisition of comparative advantage. 

3.  Competitive potential (arrow3)

This strategy imply the adoption of business strategy via the emerging IT capabilities. In other words, IT enables strategic opportunities for new product and service. Business strategy and infrastructure are then determined based on the IT strategy for successful implementation.

4.  Service level (arrow4)

The perspective demonstrate the effective use of IT to satisfy the customer. Business strategy is indeed indirect for customer’s demand stimulation. 


It will be more suitable for service-based industry. For example, for most of online shopping cart like Amazon.com and online food ordering system like pizzahut, cookies, database and web server (IS infrastructure) will be used to track customer preferences and purchase history. In this way, a customized shopping environment will be provided so as to increase the satisfaction of the customers.

Conclusion

Like what Henderson and Venkartraman mentioned in the article, I share their view that there is no “one universally superior mode to formulate and implement strategy”. Apart from choosing the most suitable perspective based on the organization characteristic, given the dynamic environment, we should be responsive and prepare for any change of “the most appropriate perspective” over time.


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Comment on Kama Tsui

After reading Kama Tsui's blog for week 4, I like her practice of adding some common industry category adopting the above 4 perspectives so as to make the theory more realistic and practical. I indeed like the one for strategy execution (suitable for business which has a stable execution process and clear business strategy) and competitive potential (suitable for industry with low barrier of entry and large number of competitors) which I cannot categorize about. I suggest her to add some real company example like the Nokia example she mentioned for the technology transformation.