MDCM Inc. (A): IT Strategy Synchronization As a member of the MDCM executive team, given the information in the case study we as a team were tasked to define the overall company strategy, business goals and high level IT objectives. MDCM Inc. corporate strategy is to run the company under one single brand across all its subsidiaries geographically based. The company needs to boosts it profits by increasing productivity, to solve this requirement IT Systems and the implementation thereof needs to be addressed. This is due to current lack in forecasting, scheduling, inventory and supply chain problems. We need to match/ align the IT objectives with the company strategy. We want to be a market leader in the medical product manufacturing industry and we want to increase our market share. We need to reduce internal costs by identifying functional areas where IT can be applied to assist in reducing costs, i.e. IT systems will replace some of the workforce. The risk here is that currently we have so many different / complex systems in place that that also leads to higher admin costs. Not all of the staff understands all the systems. This leads to previously mentioned lack in forecasting, scheduling, inventory and supply chain problems. If one overall system is put into place, the system will replace some staff members that is supposed to look after these tasks and thus increase efficiency. Sharing of information between various departments will improve the services offered to our customers and that would ensure we meet the customers’ requirements in a timely manner. This will also assist us to acquire products at better prices because we will know what it is in stock at our other facilities. With the acquisition of other companies, we will be able to share information between these companies to gain competitive pricing of products over customers pricing and that would lead to an increase in the selling price of our products and that would lead to a higher profitability. If we incorporate IT systems in the production of products we will be able to increase the speed of the production which would lead to better quality and standards.
Main business goals for the company is to reduce production costs associated with the process of producing products, re-active and not proactive i.e. ordering works on old information, different IT systems, outdated hardware and software Proper implementation of IT during the production process will also reduce the maintenance costs. Information flow/ communication between departments to receive timely and up to date information. Identify the areas in MDCM where IT has caused a lapse in information flow to ensure that of timely, accurate data received to make correct decisions. With all the different IT systems in play, training sessions should be setup for the staff to get familiar with the systems and become more efficient. With all these IT systems we should consider integrating as many of these systems into one system if possible and reduce the location of accessing all these systems (geographically based systems should be centralized). With the one system in place, the sales, finance and materials are accessible by all (a standard infrastructure to be put into place). The IT objectives after investigation, it came to light there are about 10 categories of systems / processes that requires intervention, different hardware and software, different versions, legacy systems etc. We need to consolidate all these systems in one centralized location and to one platform (standard infrastructure). A phased approached will be taken to invest in new infrastructure and systems. Identify the most important systems in use and evaluate which systems are going to be upgraded now to improve the issues currently faced with regards to forecasting, scheduling, inventory and supply chain problems. A core IT team needs to be assembled to perform a requirement analysis of what systems are needed and how to move ahead, setting standards for integration of the different IT systems currently in use. They need to look at how other subsidiaries will gain access to our new system (geographically based in one location). Regular meetings between the IT team and the management team must be held to update all involved about the progress of project.
MDCM Inc. (B): Strategic IT Portfolio Management “You and your team are the ITPM executive committee working with the CIO of MDCM. Based on the information given in this case and MDCM case A, prepare a recommendation for the MDCM board. You may find it useful to create a scorecard to evaluate each project and to compare the projects using the Portfolio Application Model Matrix exhibit in the case. You should also consider the approximate sequence for executing the initiatives and may find that drawing a simple network diagram including the dependencies is a useful tool for discussion.” (Jeffery, 2006) Evaluation of Projects To remodel the IT structure of MDCM Inc. we need to focus on the standardization of processes and increasing operational efficiency. Due to the fact that the current systems are geographically dispersed and running on different versions, MDCM is wasting time and productivity, no coordination between subsidiaries when it comes to IT. By standardizing the hardware and software, MDCM can implement a set standard of computing platforms and email system. As mentioned before this will be a long term phased approach to reduce costs and maintenance. When looking at the projects in question the following business objectives* are recommended: * Consolidate * Increase overall scale efficiencies * Single global company * Focus on core competencies * Customer Relationships Once the IT design / structure has been upgraded MDCM’s operational efficiency will increase which will result in a competitive advantage in the market by savings costs (projects relying on IT the procurement of stock i.e. arriving on time and then products being supplied on time due to IT systems being in place).
A quick delve into the initiatives: MDCM needs to make information available to all subsidiaries, networking will improve the quality of products produced because sharing timely information between various departments in all subsidiaries will add value (so if faults are found in the process it is quickly relayed to all stakeholders in MDCM). In the case study it has come to light that MDCM is still using a multiple number of hardware platforms (LINUX, Windows NT, Windows 2000 etc.) standardizing on one operating system will reduce support costs and maintenance costs and further investment in a set standard hardware and software and train all staff on the same software will enable them to understand and work more effectively with the system (more productive workforce and our turnover will be bigger) Storing the company data in a centralized networked database, for easy retrieval and storage of data. The way you store the information and how staff can access the data, will aid in decision making and adoption of software that aids in decision making, will help the company gain competitive advantage A standardized messaging system should be put into place, the current systems are outdated and running on different messaging platforms. If we use one standard messaging system if will improve communication channels to suppliers and customers and improve customer delivery. Having an up to date website interface will add value to our products, enquiries and orders can be placed online and our products list online will be more accurate (up to date) and will contain more information about products. The website will assist customers with online ordering, online payment and self-service.
1. In Which Quadrant Does MDCM Fall? Why? The Accenture IT governance model classifies companies using the rate of change and the basis of competitive advantage. This framework is helpful in offering an understanding of information technology adds value to the organization. The two criteria create four quadrants, which include efficient,
predictable
operators;
new
capacity
enablers;
responsive
solution providers; and information integrators. Efficient, predictable operators are organizations having a low rate of change and compete basing on operational efficiency. Information integrators refer to low rate of change organizations competing using product/service differentiations (Van Grembergen, 2004). Responsive solution providers refer to firms with a higher rate of change competing using operational efficiency, whereas new capability enablers refer to high rate of change firms competing using product/service differentiation. Using this framework, it is evident that MDCM falls under the information integrator quadrant. MDCM is an information integrator because its business model is characterized with low rates of change and emphasis on the product and service differentiation, which is used as a basis for achieving its competitive advantage. It is apparent that changes in growth strategies adopted by the company are slow-rate, usually implemented after long periods. In addition, MDCM uses information to improve its decisionmaking
framework
and
develop
new
products
and
services.
The
differentiation strategy by MDCM is evident by the fact that the company was renowned for its ability to produce custom-made versions of equipments
for
unique
applications.
The
optimized
designs
for
manufacturability by MDCM were used to lower manufacturing costs, which provided an opportunity through which the company established its competitive advantage. This is because optimized designs served to increase customer satisfactions, and ultimately competitive advantage. 2. Define, Based On the Information Given In the Case, the Overall Strategic Goals of This Firm at This Time
The first strategic goal of MDCM is to operational costs; currently, the company has a bloated working capital and the least cost efficient structures in the industry. This implies that the company needs significant operational and cost improvements. The second strategic goal of the company is to increase its revenue and profitability; it is apparent that MDCM had faced five consecutive quarterly losses because of the lack of an effective cost and operational improvement strategy leading to shrinking margins for eight successive quarters. The third strategic goal is to improve its operational efficiency through enhancing information flow, which will in turn facilitate employee productivity. The fourth strategic goal is to align the company’s IT initiatives with the firm’s corporate strategy. There is the need to have an understanding of how IT plays a significant role in the achievement of the strategic business goals. 3. Define the Competitive Environment in Which the Firm Operates The competitive forces analysis helps in assessing the forces that influence the competitive intensity and ultimately the industry profitability. Porter’s five forces analysis makes use of five core areas including the competitive rivalry, the threat of entry, the power of suppliers, the bargaining power of buyers, and the threat of substitutes (Wheelen & Hunger, 2008). With regard to competitive rivalry, MDCM faces intense competition from a large number of small and efficient rival firms that use to low internal costs for competitive pricing, unlike the case of MDCM that has high internal costs. The second factor that intensifies competitive rivalry for MDCM is a low level of differentiation, as evident with the increase in the number of foreign competitors having global capabilities that MDCM could not match. This also indicates that the strategic stakes are high in the industry, which served to intensify rivalry when MDCM began losing its market share. A low level of differentiation is evident in the case of MDCM pioneering partnership arrangements with its customers to share rewards and risks, a model that has been commonly adopted by competitors; this serves to constrain its brand identification. However, high switching costs
in the products helps in reducing competitive rivalry since customers cannot freely switch between products because they are constrained by costs (Williamson, 2003). The threat of substitutes refers to the impacts on competition associated with the possibility of similar products outside the industry. With regard to the threat of substitutes, it is evident that there are no substitute products to lower the profitability and attractiveness of the industry and impose price levels. It is apparent that MDCM faces minimal threats of substitute products and services because of potentially high buyer switching costs, perceived degree of its differentiation, and no substitute products available currently in the market. The buyer power refers to the capability of customers to exert pressure on the firm. In this regard, it is apparent that buyers are powerful because they are concentrated within a significant market share and they purchase a considerable percentage of the output. This is evident by the fact that MDCM lost a significant part of its market share and profitability when it lost only four of its ten largest customers during 1998-1999. The supplier power refers to the influence that suppliers exert on the firm’s strategies for growth. In the case of MDCM, the suppliers are weak because the buyers are concentrated and consolidated, posing a considerable backward integration threat by the purchasers. The threat of new entrants entails the impacts on competition posed by new firms entering
the
industry.
MDCM
is
multinational,
implying
that
its
competitiveness depends on the different government regulations. In addition, the firm faces significant competition from new foreign companies entering the US having more capabilities than MDCM. 4. Based on your Competitive Force Analysis; Determine the Strategic Response(S) MDCM Should Employ to Address the Most Critical Strategic Threats Identified in Question 3 The strategic responses that MDCM can deploy should focus on lowering prices to attain competitive advantage. This requires MDCM to reduce its operational costs and exploit this position to adopt a low pricing
strategy in order to have an edge over its competitors. The second strategic
response
entails
adopting
high
degrees
of
product
differentiation, which can be used as a platform for establishing competitive advantage over rival firms. Product differentiation will also be helpful in addressing the threats posed by buyer power. The third strategic response entails establishing good relationships with customers by ensuring that the firm meets the demand of customers in terms of quality standards, price and quality specifications. 5. Finally, Based on Your Analyses Above and the Information Provided in the Case, What are the Critical Tactical Objectives for MDCM It is apparent that poor information flow is a significant issue causing all the problems in the firm; this implies that the foremost critical tactical objective for MDCM is to integrate IT in its strategic goals. The second critical tactical objective is to reduce operational costs so that the company can exploit this position to make use of a competitive pricing strategy and increase customer satisfaction.
A decision to overhaul an entire information system of a company and replace it with another requires critical assessment and consideration. At Mdcm Inc, the overall goal of the restructuring of the IT is to establish a well coordinated unit that could successfully and effectively deliver the IT capabilities of MDCM on a global scale (Mark, & Norton, 2006). Successfully restructuring the IT system would require that the differing information systems standards utilized across the company are unified for easy access and management (Mark, & Norton, 2006). Such modification and restructuring will definitely affect the employees in the IT departments as well as the IT professionals some of whom may require new training on how to apply the new systems in their daily duties. Mdcm has only 195 IT professionals it would therefore be preferable if the company determined the most crucial changes that should first be implemented. The company also has a budget of 56.1 million dollars. It was however estimated that the entire revamping process would require close to 175 million dollars (Mark, & Norton, 2006). It is thus apparent that the company may not have the financial capabilities to implement the entire project in one go.
ERP Implementation would be the first IT strategy to consider for implementation. Adoption of the ERP system in the company will enable all the departments’ functions to be integrated through simplifying of information accessibility and saving (Mark, & Norton, 2006). This system will save on time, energy as well as costs as the department will be utilizing a single information system. The IT professionals will also be useful in determining the most appropriate and effective mode of conducting business using the new system. Since the project had already been begun continuation will not be so difficult. Cost of consultancy can be cut by first looking it the various vendors available and determining who is most affordable. Atkins and his team had established twelve projects that they felt would be essential in improving the IT infrastructure. Implementation of ERP will have covered other projects mentioned such as consolidation of data centers and networks. Since ERP aims at unifying the IS of the organization it will have achieved these objective by implementing a single unit of data system. Unification of the system will also entail the standardization of the server hardware and plat form. This would save the company millions in terms of maintenance cost of the different platforms (Mark, & Norton, 2006). ERP implementation will also strive towards streamlining and upgrading of the collaboration system. Collaboration systems such as emails will be improved to allow for effective communication across the company. Determining effective ways to manage internal purchasing is another way of ensuring that costs are saved. This can be done through the implementation of a system to consolidate such purchases. The implementation of the information system technologies that will improve the overall operations of Mdcm will be the overall objective of the company. The completion of the ERP implementation process will go a long way ion streamlining most of the activities suggested by the committee (Mark, & Norton, 2006). Integration of the numerous functions and well as simplification of the information and communication systems in the company is the overall objective. Thus by implementing EPR in phases to cater for costs, the company will have achieved most of the twelve project listed. They include consolidation of the data centers, standardizing the server and collaboration of communication systems.
