Competitive Forces And Value Chain Models Information Technology Essay
In order for a company to survive in its area of business it must be superior compared to its competitors and therefore strive for competitive advantage. According to Bocij et al (2006 pg 57) competitive advantage is when a organisation or business strives to be the market leader in the area they offer their business or service. Competitive advantage can be achieved by a organisation in a variety of ways such as implementing some of the following techniques; restructuring the business, processes to reduce overheads, offer extra services to existing customers as well as looking for new customers and always looking at the changes in the internal and external environment and respond to changes that may affect the businesses profitability. By implementing some of these techniques this will allow the organisation to increase its profitability and increase its market share.
For a company to be achieving competitive advantage the organisation can be analysed in two ways. These two ways are Porters Five Forces and The Value Chain Model. Both of these analysis techniques look at different aspects of the business. In this case Panasonic will be analysed using both of these techniques.
According to Laudon and Laudon (2005 pg 102) Michael Porter developed the five forces in 1979. Michael Porter says there are five forces that influence the competitive advantage of a firm. The five forces that that Michael Porter has come up with looks at what influence the external environment (macro environment) has a affect on the internal environment (micro environment). These are the five forces that Michael Porter came up with:
Traditional competitors – every business has a share in the market they specialise in. with this share of the market the organisation develops their brand and identity and devise new ways of offering extra services that other businesses in their market do not offer. This will attract new customers so and the extra cost of this will be past on to existing customers.
New market entrants – this is when a organisation or a individual person is able to set up and offer a service or product that will have a large customer base that is able generate profitability for offering a service or product.
Substitute products – these are alternative products that are available on the market that people may be inclined to use as these products are cheaper compared to others.
Customers – a organisations profitability is determined how it keeps hold of existing customers and how it attracts new customers. The customer holds the key power of determining how successful a organisation is as customers can easily switch to another brand if the current organisation does not match or beat the price of the product or service they are receiving.
Suppliers – the supplier has a big impact on how the end product is marketed as the organisation is able to offer its product to the end customer at a competitive price compared to its rivals. So if a organisation has more than one supplier the organisation can have more control over the pricing of the product, replenishment and availability.
Above: shows Porters Five forces that affect the stability of a organisation and what are responsible for any actions that may be taken to keep the organisation at a competitive advantage and keep it in profitability. The five forces are Traditional rivals , Customers , Suppliers , New market entrants and Substitute products. (Essentials of Management Information Systems Managing The Digital Firm, Laudon and Laudon 2005 pg 103)
Value Chain Model
Laudon and Laudon (1995 pg 53) the Value Chain Model was developed by Michael Porter in 1985. The Value Chain Model highlights specific activities within the business where competitive strategies can be applied and where information systems are likely to have a strategic impact. The Value Chain Model identifies precise, critical leverage points where a organisation can use information technology most effectively to increase its competitive advantage within its market share. The increase in the market share will allow the organisation to become more profitable, reduce operating costs and improve communication within the organisation internally and externally.
The Value Chain Models looks at a organisation as basic set of chain activities that add a margin of value to a firms products or services. These activities are categorised in to two activities. These activities are known as Primary and support activities.
Laudon and Laudon (1995 pg 54) says the primary activities of a organisation are related to the production and distribution of the final product or service that a organisation provides. Primary activities include inbound logistics, operations, outbound logistics, marketing and sales and service. Inbound logistics includes the receiving and storing of materials ready to distribute to the appropriate department for the end product to be mage. Operations create to the materials in to the final product. Once the product has been created outbound logistics distributes the made products to the correct sorting point. Once the product has been sorted and stored sales and marketing promote the organisations products and sell them when they receive orders for them. The service activity makes sure that the organisations products are repaired (when needed) and are maintained to make sure any future problems (if any) cause the minimal amount of disruption.
Laudon and Laudon (1995 pg 54) to make sure that the Primary actives are delivered to the highest standard support activities are in place to make sure the infrastructure is functioning. Support activities include administration and management, human resources, technology and procurement. Administration and management is in charge of how the organisation functions on a day to day basis and is in charge of how the organisation is structured. Human resources take care of the welfare and benefits of the employees within the organisation in terms hiring, training and retaining its employees. Technology allows the organisation to improve the production of goods and procurement supports by purchasing inputs.
Above: shows Porters Value Chain showing the primary and secondary activities of a organisation and which department adds value to the organisation.(Essentials of Management Information Systems Managing The Digital Firm, Laudon and Laudon 2005 pg 96)
Porter’s Five forces: Panasonic analysis
Traditional competitors – Since Panasonic was founded in 1918 it has steadily become the largest Japanese electronics maker. Panasonic owner Konosuke Matsushita first started the company selling lamps for bicycles and then diverse to sell other electronic products. Later in 1961 after being rebranded under different names the Panasonic brand was formed in 1961 when it started the produce televisions (TV’s ) for the American market. From than it has become one of the most competitive and leading companies for research and development in the electronic sector. As the competiveness in the electronic sector is so reliant on technology it is important for a organizations to innovate new ideas in to products. Panasonic is based in North America, Asia and Europe. As mentioned before Panasonic has found success on the TV industry. The global sales figures for Plasma TV ‘s show that Panasonic ( 40.7%) is the leading supplier in terms of shipping volume around the world closely followed by Samsung on (33.7%), LG on (23.3 %) and other brands accommodated for the (2%). (HDV TEST ,2011)
New market entrants – There is no threat of any other brand entering the market and become dominant. This is due to the barrier entry system of some one entering the market with a product or service. These two barriers are known as high barrier and low barrier entry products / services. High barrier service / products is for high end products or services for example if somebody wanted to open a new bank the interested party will have to go through tough regulation and be approved and regulated by a outside firm for example FSA to make sure they are operating within the guidelines set by the government. The other barrier is known as low entry barrier markets. This entry barrier is for a low entry product or service. A example of this is if somebody wanted to open a corner shop little government regulation is needed and there is little set up costs. Along with the barrier entry system the new entrant must have the technology know how that will allow them to develop their products further.
Substitute products – The threat from substitute products is fairly low as people are more inclined to use brands that they are familiar with so if they wanted to switch brands for a alternative cheap brand the costs are low but they can be high if they wanted to switch to a much alternative brand such as Sony which is generally seen more expensive. Technology can also be a factor for example now people can watch TV on mobile phones and laptops. Another example is when Sony In 2005 Panasonic has reacted well to change and development in technology this was seen when Sony, Panasonic and Philips launched Bluray technology against the HD DVDs that were launched by Toshiba, Microsoft and Hitachi. Much of the success of the format was dependent on which retailers favoured and marketed products their products.
Customers – Panasonic is a international brand and is recognisable all over the world. It has posted respectable results. In 2010 Panasonic posted the following sales Japan 54% Asia 23% , North America 12 % and Europe 11% .(These figures accommodate for Panasonic products only). As technology evolves Panasonic has kept up with the pace for example 3D films produced by Hollywood such as Avatar has enabled Panasonic to develop their 3D LCD TV that enabled them to obtain (50.5%) of the market share from 230,000 units sold all around the world. Samsung came second with a 3D market share of 41.7%, followed by LG with less than 10% at the end of 2010.(HDV TEST ,2011)Panasonic has ensured that the end customer is able to understand the end product having a strong relationship with its retailing outlets that sell its products. This is very important because loyal customers that use and buy the Panasonic brand and do not switch to a alternative brand. Consumer demand for electric products is broken in to two segments. People who will have a more disposable income will go for products with good quality such as high definition and wide screen plasma technology and people who do not have a less disposable tend to stick with less expensive products that are easier to use.
Suppliers – Panasonic has a intimate relationship with its suppliers. This is due to how the business structure is set up and operates. The Panasonic brand is under the brand of the parent company called Matsushita Electric Industrial Co. Ltd under this band there are another 15 subsidiary companies for example SANYO and Technics that specialise in their own department. With each company specialising in their own department Panasonic understands what they can offer to the new product that is being developed.
Value Chain model: Panasonic analysis
Primary activities / support activities
As the Panasonic brand comes under the parent company of Matsushita Electric Industrial Co. Ltd, when it became a global company it had a decentralized strategy as none of the offices outside of Japan had a centralized database that they could retrieve information from. Altogether Matsushita Electric Industrial Co. Ltd had set up 13 major labs in foreign countries -in the US, three in Asia and three in Europe. Many of these labs were established to modify and customize products for the local markets. They also took advantage of locally available technological information and skilled personnel so only catered for the country they operated in instead as a company as a whole. Components that were to be manufactured and used in Panasonic products are internally outsourced to the other brands it owns so the relationship between all of its suppliers is strong. This relationship is also important as Panasonic as a company can relay on that the components needed to make its products are of the highest standard and there are minimal chance of defects within its products and it a defect occurs they can locate the problem quickly and solve the problem causing minimal negativity about the products. The distributors who sell Panasonic are well educated and informed by Panasonic to make sure that their product stands out when the end customer is purchasing the end product.
Provide a critical analysis of how Panasonic’s information management problems affect its business performance and ability to execute its strategy.
Panasonic’s information problems affected its business performance and ability to execute its strategy. Panasonic was enjoying the number of successes factors however this success did not take in to the account on what Panasonic was spending on its administration costs.
A information system would have allowed Panasonic to access and centralize its information so it could be easily retrieved when needed. A information System (IS) is defined by Avison and Fitzgerald (2003 pg 20)is when a organisation collects and stores key business processes on a single database and saved on a computer network and information can be accessed and data can be manipulated to create a series of reports and queries. This usually helps a organisation when it spreads its business dealings around the globe and therefore trades on a international platform which allows the organisation to expand in new markets which in turn will increase the profitability of the company. This is known by the term of ‘Globalisation’. (Avison and Fitzgerald 2003 pg 8). This is seen when Panasonic expanded its operations throughout Europe, Asia and North America. This included 15 subsidiaries, 14 manufacturing facilities, and five research and development centres, and seven administrative offices. A Management Information System (MIS) was also needed as this would have combined different sectors of the business and will help it to make different decisions at different levels. A typical system has four processes that work on three levels and have certain characteristics an is used by the appropriate level of management. They only see the data that may affect their area of the organisation they are looking at. A Executive Support Systems (ESS) produces reports and responses to queries a Decision Support Systems (DSS) helps the organisation to make decisions on important decisions that the organisation may face these two systems are used by senior management, a Management Information Systems (MIS) allows the organisation to access past records and view current performance of the organisation this will allow the organisation to find any trends or patterns to make any decisions these decisions are made by middle management and a Transaction Processing Systems (TPS) records transactions and events these records are seen by operational management. ( Laudon and Laudon 2004 , pg 53)
As Panasonic was also experiencing problems managing its data efficiently as product and customer data was inconsistent, duplicate, or incomplete. Different segments of Panasonic used their own data management operations that were isolated or different from other locations within the company. Panasonic also had problems when it launched a new product as each product included photos, product specifications and descriptions, manuals, pricing data and point of sale marketing information. When this information was sent out to the various locations each location adapted this information for the region and country they resided in. this resulted in problems when Panasonic launched a product globally as information about the product had to be condensed to a common set of data for launching the product globally. This problem delayed the launch of new products so competitors seized upon this opportunity to seize infiltrate in to markets did not reach in its first phase of the launch.
Analyse the management, organisation, and technology factors that were responsible for the problems identified in the previous question.
A IS system is just more than inputting and outputting business processes to consolidate information together. From a business point of view a IS system also looks at other environmental factors within the organisation. From a business perspective a IS system is a organisational and management solution based on information technology to a challenge based on the environment it is in. to understand how a organisation operates and what obstacles it may face a manager must understand the environment it is in a organisation is much more than computers it also has to understand the broader organisation, management and information technology.
Above: a diagram showing that information systems are more than just computers. Using Information Systems effectively requires and understanding of the organisation, management and technology. (Essentials of Management Information Systems, Laudon and Laudon 1995 pg 9)
IS systems are a major part of a organisation structure and without this they may not able to exist at all for example a credit reporting firm without this system they will not be able to operate at all.
The major elements of a organisation are its people, structure and operating procedures, politics and culture. Formal and large organisations are different as they are divided in to hierarchal structure. This structure is a pyramidal structure with management being at the top middle management in the middle and operational staff at the bottom. There are different types of employees within a organisation and work at different levels. Knowledge workers are people such as engineers and architects who innovate ideas for the organisation. These people work at the top of the organisation, data workers such as secretaries and bookkeepers who work with the middle management and at the bottom level are the production or service workers who work on providing the service or creating the final product. (Laudon and Laudon 1995 , pg 9)
Managers are responsible for innovating new ideas so that the organisation is always developing new products or delivering new service. The three type of managers are senior management who are responsible for making long term decisions, middle management who are responsible for helping the senior management to make these decisions and operational management to take of day to day running of the organisation and tackle any short term problems. (Laudon and Laudon 1995 , pg 9)
IS systems are one of the tools that a organisation uses to deal with change and more importantly it holds the organisation together. This is done through a number of different technologies such as computer hardware that enables the organisation to input, out put and process information throughout the organisation. A example of computer hardware is monitors, keyboards and printers. Computer software is a sequenced programming instruction that allows the hardware to function. Storage technology allows the data to be stored and can be transferred between computers a example of storage technology is disks, tapes and pen drives. Telecommunication technology allows all of the physical hardware to connect together. This also includes out put components such as printers. This allows programs and information to be accessed anywhere within the organisation. (Laudon and Laudon 1995 , pg 9)
As Panasonic was not managing its data within the organisation properly. This is shown when the different divisions of Panasonic (Europe, North America and Asia) did not share a single platform as they should have because of the size of the company and the different countries and time zones they were in for example they had inconsistent data on its products and customers. This problem in turn affected the culture of the organisation as each office in each time zone were not working towards the same goal and objective set out by Panasonic instead they were totally focused on their own region on a product launch instead. this resulted in a decrease in operational efficiency and higher costs from the company. This shows that Panasonic did not have any control over the data it possessed and therefore was useless possessing this data as it was not in any logical order to use.
The management of Panasonic had changed the CEO in 2006 to a person called Fumio Otstubo. In 2006 Panasonic was operating margin was only 5% and the goal for 2010 was 10%, in the industry where consumers expect the price of new technology to decrease over time. It was impossible to expect to increase profit margin by increasing prices, instead there was a need to reduce costs and increasing sales. To achieve this target he decided on the strategy was reducing the cost and increasing sales.
To solve the problem Panasonic decided to collect their data pursue a “single vision of truth”. This information gathered came through a variety of formats for example fax machines, mail, e-mails and phone calls. How ever using this system also had a risk of inaccuracies and inefficacies.
Evaluate how the master data management address these problems and discuss the effectiveness of this solution.
Panasonic decided to change the strategy of how it obtained its data from within the company. The strategy that Panasonic was using was the “pull “model and replace it with a “push “strategy. These models differ in how data is obtained and affects how a organisation is run.
The push model is also known as the build to stock model. In the push model production within the organisation is based on forecast sales it has made. The forecast are guesses and demands for the actual product or service that the organisation is going to provide. (Bocij p et al 2006, pg 170)
Above: a diagram showing the push model. Note that the suppliers production is based forecasts throughout the chain except from manufacturer pulls from the supplier. . This goes from the supplier, manufacturer, distributor and retailer. (Management Information Systems Managing The Digital Firm, Laudon and Laudon 2006 pg 366)
The pull model is also known as the demand driven model or made to order model. A actual product or service is only manufactured once a ordered. The main difference between both of the models is a organisation only makes what they sell, not what they make. (Bocij p et al 2006, pg 170)
Above: a diagram showing the pull model. Note that each process is pulled from the customer through each process to the supplier. A product is only made when a customer orders the product to reduce costs in wastage.(Management Information Systems Managing The Digital Firm, Laudon and Laudon 2006 pg 367)
When Panasonic implemented a “push” model to replace a “pull” model to interpret and sort data as previously when employees in marketing looked for specific information they had to look in many different locations. Using the push model allowed Panasonic to create a centralized data bank then this sends the requested information to employees in marketing and sales immediately and constantly. Retail partners such as Wal-Mart who are recipients of the data can view the data at all phases of a product rollout. Therefore, specific employees can have better visibility of their products and services. The outcome of this push model is that customers are less likely to become confused while researching Panasonic products.
Panasonic’s Europe’s data management was upgraded with master-data-management (MDM) software and this was provided from IBM’s Web Sphere line. The software enabled Panasonic Europe to gain better control of their data and better streamline the business process. The MDM implementation included the business process analysis, data assessment, data cleansing, and a master data service layer. The MDM allows employees with access to view the company’s data and activities throughout the organization. The aim of the MDM was integrate all of the various departments and consolidate them so any information can be accessed from the master file. Within a year and a half, Panasonic Europe was getting products to market faster and spending 50 percent less time creating and maintaining product information. Time-to-market for a product was reduced from five to six months to one to two months.
Critically analyse the challenges Panasonic faced when implementing this solution.
During the installation stage Panasonic faced some problems when they implemented the new system. When Implementing MDM system it is a multi-step process that includes business process analysis, data assessment, data cleansing, data consolidation and reconciliation, data migration, and development of a master data service layer. The MDM bought together all of the business processes this required information from all of the departments to come together. There was the issue of levels of authenticity of accessing data at different levels. Another problem that Panasonic faced was at its North America that it had to confront a number of countries that spoke different languages and each country had its own currency. Each country would have its own culture and therefore would have contributed more problems for Panasonic. The culture within a organisation or country is defined as being shared values, in written rules an assumptions within the organisation and how the organisation works. This problem was also faced by its European arm had to do when implementing its system. (Laudon and Laudon 2004 , pg 390)
Panasonic also faced another problem this was reorganising and consolidating data information for its products for Wal-Mart. Then Panasonic stated to look closer on what information was needed for Wal-Mart and looked at what was adhered by the industry standards. Panasonic decided to look in its legacy systems for this data. Panasonic then turned to IBM to help them to create an interface apparatus to collect the required data for a repository.
Bob Schwartz made a strong case to the corporate office in Japan that integrating a data management strategy globally would be a major benefit to the company’s infrastructure. This was going to be hard as traditionalists would have resisted change. This is due the culture of fear that is within a organisation when implementing change as employees fear that the way they are working is fine and there is no need for change as new change within the organisation will be a threat to their jobs. Bob Schwartz also realised that Panasonic needed to integrate their new system with MDM technology. Bob Schwartz increased profits by integrating shared data inventory among the vendors such as Best Buy and Circuit City. As a result of them implementing MDM, Panasonic had become more competitive and could produce new products for the global market.Order Now