Strategic Initiatives for Implementing Competitive Advantages CHAPTER 3 Strategic Initiatives for Implementing Competitive Advantages

LEARNING OUTCOMES 3.1 List and describe the four basic components of supply chain management 3.2 Explain customer relationship management systems and how they can help organizations understand their customers

LEARNING OUTCOMES 3.3 Summarize the importance of enterprise resource planning systems 3.4 Identify how an organization can use business process reengineering to improve its business

STRATEGIC INITIATIVES Organizations can undertake high-profile strategic initiatives including: Supply chain management (SCM) Customer relationship management (CRM) Business process reengineering (BPR) Enterprise resource planning (ERP)

SUPPLY CHAIN MANAGEMENT Supply Chain Management (SCM) – involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability

SUPPLY CHAIN MANAGEMENT Four basic components of supply chain management include: Supply chain strategy – strategy for managing all resources to meet customer demand Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services. Supply chain operation – schedule for production activities Supply chain logistics – product delivery process

SUPPLY CHAIN MANAGEMENT Wal-Mart and Procter & Gamble (P&G) SCM

SUPPLY CHAIN MANAGEMENT Effective and efficient SCM systems can enable an organization to: Decrease the power of its buyers Increase its own supplier power Increase switching costs to reduce the threat of substitute products or services Create entry barriers thereby reducing the threat of new entrants Increase efficiencies while seeking a competitive advantage through cost leadership

SUPPLY CHAIN MANAGEMENT Effective and efficient SCM systems effect on Porter’s Five Forces

CUSTOMER RELATIONSHIP MANAGEMENT Customer relationship management (CRM) – involves managing all aspects of a customer’s relationship with an organization to increase customer loyalty and retention and an organization's profitability Many organizations, such as Charles Schwab and Kaiser Permanente, have obtained great success through the implementation of CRM systems

CUSTOMER RELATIONSHIP MANAGEMENT CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprisewide level CRM can enable an organization to: Identify types of customers Design individual customer marketing campaigns Treat each customer as an individual Understand customer buying behaviors

CUSTOMER RELATIONSHIP MANAGEMENT CRM overview

BUSINESS PROCESS REENGINEERING Business process – a standardized set of activities that accomplish a specific task, such as processing a customer’s order Business process reengineering (BPR) – the analysis and redesign of workflow within and between enterprises The purpose of BPR is to make all business processes best-in-class

BUSINESS PROCESS REENGINEERING Reengineering the Corporation – book written by Michael Hammer and James Champy that recommends seven principles for BPR

Finding Opportunity Using BPR A company can improve the way it travels the road by moving from foot to horse and then horse to car BPR looks at taking a different path, such as an airplane which ignore the road completely

Finding Opportunity Using BPR Progressive Insurance Mobile Claims Process

Finding Opportunity Using BPR Types of change an organization can achieve, along with the magnitudes of change and the potential business benefit

ENTERPRISE RESOURCE PLANNING Enterprise resource planning (ERP) – integrates all departments and functions throughout an organization into a single IT system so that employees can make decisions by viewing enterprisewide information on all business operations Keyword in ERP is “enterprise”

ENTERPRISE RESOURCE PLANNING Sample data from a sales database

ENTERPRISE RESOURCE PLANNING Sample data from an accounting database

ENTERPRISE RESOURCE PLANNING ERP systems collect data from across an organization and correlates the data generating an enterprisewide view

OPENING CASE STUDY QUESTIONS Apple – Merging Technology, Business, and Entertainment Evaluate how Apple can gain business intelligence through the implementation of a customer relationship management system Create an argument against the following statement: “Apple should not invest any resources to build a supply chain management system Why would a company like Apple invest in BPR?

CHAPTER THREE CASE Got Milk CHAPTER THREE CASE Got Milk? It’s Good For You – Unless it is Contaminated! A contamination crisis shattered the dairy industry in China when babies mysteriously started developing kidney stones from contaminated baby formula A chemical called melamine – an additive used to make plastic - was discovered in the milk supply of one of China's third-largest dairy producers

CHAPTER THREE CASE QUESTIONS Explain why the supply chain can dramatically impact a company’s base performance? List all of the products that have could possibly be affected by a problem in the United States milk supply chain? How can a CRM system help communicate issues in the supply chain?

CHAPTER THREE CASE QUESTIONS How could BPR help uncover issues in a company’s supply chain? What are the pros and cons for Starbucks outsourcing the growing of its coffee beans to Chinese farmers?