The Art of Business in the 21st Century - Essay Example

THE ART OF BUSINESS IN THE 21STCENTURY This paper intends to explore the Porters model for identification of key business drivers. It goes on to examine case studies of business in five different industries, which capitalize on different industry drivers to gain competitive advantage. It identifies and analyzes the scenarios that these businesses found themselves in, and strategies that they developed and implemented to remain attractive and gain competitive advantage in the industry. The paper then goes on to explore the available Information Technology solutions in the form of ERP software, which businesses can be used to integrate and analyze business information from different departments in an integrated manner. Recognizing the value of information to the 21st century business, the paper recommends the use of ERP software for business. Every enterprise strives to be profitable and dominant in its industry, but it is only those firms that continually strive to understand their areas of operation through application of industry research and innovation that eventually register significant success. Michael Porter a professor at the Harvard Business School suggests a model that can enable business to understand the key drivers or factors, which can contribute to business success and competitive advantage. Porter’s value-chain model represents a framework that can enable a business analyze specific activities, which will create value and guarantee competitive advantage. First and foremost, the business has to analyze its inbound logistics and processes that include the processes of receiving goods and raw materials, storage and inventory control as well as transportation scheduling. The business must aim at bringing efficiency and effectiveness by changing and improving inbound logistic processes. It therefore calls for innovation and creativity on the part of everybody within the organization. Inbound logistics represent one side of the coin, outbound logistics, which entails all the activities necessary to get the completed product to the clients, such as warehousing, order fulfillment, transportation and distribution management, must also be looked into. Streamlining inbound and outbound processes will guarantee efficiency. Another area that the business must seek to improve on a continually basis is its operations. This includes machining, packaging, assembly, equipment maintenance, testing and any other value-creating activities that seek to transform the inputs into the finished product (Porter 3). Customers need to be aware of the existing products that the firm produces. Therefore, marketing and sales department is an indispensable part any business that wants to be profitable. Sales and marketing entails all activities related with getting buyers to buy the product including pricing, channel selection, retail management advertising, selling and promotion. The business must also look into its service delivery. Service delivery involves all activities that aim at enhancing and maintaining a product's value. This also includes customer support, repair services, management of spare parts and upgrading. In addition to service delivery, the enterprise must streamline its procurement processes. These processes include the procurement of raw materials, servicing, spare parts, buildings and machines. A successful business also takes advantage of technology. Therefore, the business must be able to budget for technology development to support the value chain activities. Technology development initiatives may include research and development, process, automation as well as design and redesign. Lastly, the general management, legal, planning management, finance, accounting, quality management, public affairs, which form the firm's infrastructure must be aligned in a way so as to provide for efficient business operation. Porter also continues to argue that a business is usually affected by a number of forces that will either act positively to ensure business success or if not well managed, bring down an entire business. A business if affected by how easy or difficult it is for newcomers to start competing within the existing market. Some industries may be easy to establish a business due to low barriers to entry while some, for example, the airline industry, are difficult to establish industry due to its capital intensive nature (Porter 5). Another feature, which is of huge importance in failure and success of an enterprise, is the threat of substitutes. The key decision makers in any business must establish how easy the product or service can be substituted with another product, especially with a cheaper product. In certain industries buyers may have a bargaining power where they can work together to place orders of large volumes. In such a case, they have a bargaining power and may influence the prices or quantities of the product. The number and influence of suppliers may also affect key areas of the business. Lastly, there is always rivalry among the existing players in a given market. Strong competitions between the existing players affect profitability of the business. CASE STUDIES Better Place, a business company started by Shai Agassi in 2007, identified an opportunity in electric cars and a demand for ways to recharge them. Based on the rationale that oil is finite and that petroleum prices would definitely rise and that global warming initiatives are bent toward reducing carbon emissions, electric cars would form part of the emissions-reduction answer. The Better Place case study is a true demonstration of technological development that business must engage in order to open new markets and businesses. Although the political, legal and social infrastructure was not in place, Better Place took the initiative to move to countries such as Israel, Denmark and United States of America, where the infrastructure was in place. In doing so, Better Place created a value-chain for being the first to venture into the electric car industry. Likewise, in a different case study, Nike was confronted by consumers and workers who were against its labor exercises in the late 1990’s. The company embarked on a process to innovate in the areas of its operation and ensure sustainability by 2020. As a result, Nike began to implement a zero waste strategy and streamlined its production of athletic shoes and apparel. Under the new design and production method, Nike was able to reduce waste by 67 percent, cut energy use by 37 percent, and reduce solvent use by 80 percent (Berns 2). In Rio Tinto, a company with a big footage in the mining industry sought to win the support of local communities, governments, and society in what it terms as the “social license”. This was attempted to nurture the local labor with what it requires. As a result, Rio Tinto created a theory of working within outreach communities and economic as well as social development. A plan was put into development to protect the environment and also to create economic openings in the local communities. The company recognized a global brand risk if it operated without a “social license”. Rio Tinto has reduced the political and economic risk and thus ensures profitability. Another case that demonstrates the value-chain creation through streamline of operations to ensure sustainability is that of General Electric. General Electric initial perspective of sustainability was that of cost. Through an initiative called ecomagination, General Electric created and sold products and services within its departments and also to the outside companies. General Electric began to view sustainability as a component of a demographic tendency, realizing that shortage would rise with growth in population. It aimed at providing products and services ensuring sustainability and efficiency of energy use and water use, waste and carbon emissions within companies. General Electric, therefore, built a profitable business in assisting companies through the sustainable path, as such, creating attractiveness for its products and services. Another interesting case is that of the largest retailer in the world called Wal-Mart. Wal-Mart’s story is one of a business striving to ensure sustainability in its operations through the provision of green solutions. Wal-Mart embarked on an initiative to ensure efficient trucking of fleet and supply chain. The greatest challenge was how to bring the concept of green solutions in the supply chain. The first step Wal-Mart took was to adopt the strategy in 2005, establishing goals of being 100 percent fueled by renewable energy, producing zero waste, and selling products that would guarantee sustainability of the environment. By implementing the strategy, the company was able to reduce waste by 57 percent between 2008 and 2009. This achievement was as a result of improving its inventory management, and increasing donations. From the analysis of these case studies, information is clear that for any business that aims at creating a value-chain and competitive advantage in its industry, change is inevitable. A business may require analyzing every aspect of its operations and developing a strategy to guarantee the value-chain creation and a step ahead of the competitors. For example, Nokia had to change its operations to achieve sustainability through a zero waste strategy. On the other hand, Better Place had to do extensive research and come up a new alternative of travel (electric car) as a way to embark on the problem of depleting oil reserves and harmful carbon emissions, thereby creating value in this area and gaining competitive advantage over other players in the industry. To achieve this, Better Place had to move to countries with existing political and social infrastructure to embark on the project. Businesses therefore, may be required to change locations of operations in order to gain an upper hand. Creating value chain and competitive advantage also requires a change of perception. A good example is that of General Electric, which had to see the problem of sustainability as a business opportunity. In contrast to Rio Tinto's value chain and competitive advantage, was in engaging local communities and governments in which they operated by ensuring a safe environment, in the places they mined minerals and also by creating economic opportunities in for the local communities, thus obtaining what it terms as a “social license”. Generally, creation of value-chain and competitive advantage is specific to an industry and the challenges of the moment. Businesses need to have sufficient information of the key business drivers within their areas of operation. There is a need for companies to have department integrated and a central informational analysis so that managers and key decision makers are able to understand trends and make substantial business decisions without any difficulty (Berns 7). TECHNOLOGICAL DEVELOPMENT (THE USE OF ERP's) Information technology provides ERP's, back-office software that seeks to improve order fulfillment processes. With an ERP, people in different departments are able to view the same information and can as well update it. As one department is done with the order, it is routed automatically through the ERP system to the subsequent department. In order to find out the exact point the order is, you need only to log in to the system of ERP and track down its pathway. The processing of orders is done with minimal errors, and customers are able to get their orders faster. ERP software is able to increase service delivery to any business processes, such as employee benefits and financial reporting. With an ERP, customer service representatives have all the information necessary to complete customer orders. Analysis of sales figures can be done with ease through presentation of visual information which sales managers, can use to make a decision on advertisement campaigns and media to use. ERP's can also integrate suppliers, thereby streamlining the procurement process by reducing time and effort required to place and process supplier orders. CONCLUSION In conclusion, ERP software solutions usually provide a centralized business information analysis tool, which can enable a manager’s monitor key value-chain analysis and competitive advantage parameters such as prices and thereby ensuring sustainability. Businesses should integrate ERP software so as to monitor key business drivers and be able to gain competitive advantage in their industries. Works cited Berns, M. et al. The Mini-cases: 5 companies, 5 strategies, 5 transformations. MIT Sloan Management Review Special Report. Web 3 February 2009 http://files.meetup.com/ Interview with Michael Porter: The Five Competitive Forces That Shape Strategy. Harvard Business Publishing. Video file: Web 27 June 2008 http://www.youtube.com/watch?v=mYF2_FBCvXw NetMBA: The value chain. Business Knowledge Center. Web 3 June 2011. http://www.netmba.com/strategy/value-chain/ Porter, M. The Magazine Harvard Business Review. “The five competitive forces that shape strategy.” Web 1 January 2008. http://hbr.org/2008/01/the-five-competitive-forces-that- shape- strategy/ar/1 Wailgum, T. ERP: Definition and Solutions. CIO. Web 4 April 2008 http://www.cio.com/article/40323/ERP Read More