CHAPTER 3

STRATEGIC INITIATIVES FOR IMPLEMENTING COMPETITIVE ADVANTAGES

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

•Four basic components of supply chain management include:

1.Supply chain strategy – strategy for managing all resources to meet customer demand

2.Supply chain partner – partners throughout the supply chain that deliver finished products, raw materials, and services.

3.Supply chain operation – schedule for production activities

4.Supply chain logistics – product delivery process

•Wal-Mart and Procter & Gamble (P&G) SCM

•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

Effective and efficient SCM systems effect on Porter’s Five Force

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

EXAMPLE:

•CRM systems help organizations understand and manage their customers

•Charles Schwab recouped the cost of a multimillion-dollar CRM system in less than two years

•The system allowed Schwab to segment its customers in terms of serious and no serious investors 

•The CRM system looked for customers that had automatic withdrawal from a bank account as a sign of a serious investor

•The CRM system looked for stagnant balances as a sign of a no serious investor

•Charles Schwab could then focus efforts on selling to serious investors, and spend less time attempting to sell to no serious investors

•CRM is not just technology, but a strategy, process, and business goal that an organization must embrace on an enterprise wide 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

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

•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

•Progressive Insurance Mobile Claims Process

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 enterprise wide information on all business operations

•Keyword in ERP is “enterprise”

•ERP systems collect data from across an organization and correlates the data generating an enterprise wide view