CASE 01 GM’S E-BUSINESS STRATEGY
US-based General Motors (GM), the largest automobile company in the world, was in trouble in the late 1990s. The company’s market share in the US automobile market had been steadily declining from a high of 50% in the late 1960s to a low of 28% by 1999.Analysts pointed out that GM had been in the grip of a vicious circle.
The company faced low demand for its automobiles as they were not developed in line with the changing customer needs and preferences. However, GM continued producing automobiles which did not met customer requirements, leading to excess inventories at its factories and dealers.
The building up of inventory at the dealers made the company even more desperate, and most often it resorted to higher dealer incentives which reduced the company’s profits significantly. This again forced GM to produce more cars to compensate for the eroded profit margins. Commenting on the dilemma GM faced in the late 1990s, John Paul MacDuffie, Professor, Wharton Business School, explained, “That belief in volume, and doing whatever it takes to keep volume, has driven a lot of their decisions.
GM’s labor costs are fixed, meaning they remain the same regardless of what the volume of sales is. GM wanted to keep factories open as much as possible. There was some value in that strategy, but I think they overdid it.” Analysts added that the reason for the decline in GM’s US market share was that it had failed to introduce new models that customers wanted in quick time. To address this challenge, GM made e-business a strategic priority. It wanted to reinvent itself by embracing e-business across its value chain.
In August 1999, after a year of research in collaboration with Forrester Research, GM launched a business division called e-GM that was responsible for all of the company’s websites and its On Star communication system. Through this initiative, the company planned to reduce costs, improve quality and boost demand for its products.
Ult also wanted to position itself as a provider of Internet-based information services and a major player in the e-commerce arena. Commenting on this, Computerworld magazine quoted, “GM wants to be more than your car company. Think in-car, real-time stock quotes, talking e-mail messages and video games.
Think satellite-based radio services and online car financing. Think of a multibillion-dollar online trading exchange. These are just a few of the businesses in which GM is making huge information technology investments. “The philosophy that drove GM e-projects was the ‘launch and learn’ approach. The company launched e-business projects, did pilot tests for them and then decided whether to abandon or continue them. However, analysts expressed doubts whether GM would be able to successfully implement its e-business strategy, and if it did, what the significance of this strategy for the company would be.
Commenting on this, Derek Slater, Executive Editor of CIO Magazine said, “Can e-business make a difference for an old economy, big and slow manufacturer the way it can for nimble, information based businesses?” Raising similar doubts, an Internet World magazine article queried, “Will Internet hardware and services become GM’S best products? And this in turn raises this question: Will Internet services become GM’s core product some day?”
NEED FOR E-BUSINESS STRATEGY
With the advent of the Internet wave in 1999, GM wanted to reposition itself strategically. It wanted to make use of its vast customer base and huge assets to emerge as a leading player in the new economy businesses of entertainment and e-commerce. The 1999 annual report of GM stated: “Besides mergers and acquisitions, there is no bigger trend in business today than that towards electronic business.
1. What do you understand by the E-Business strategy implementation across an organization’s value chain?
2. What are the rationale and benefits associated with e-commerce initiatives in an automobile company?
3. What are the Channel conflict arising from e-business initiative?
CASE 02: MARRIOTT’S CUSTOMER – FOCUSED E- BUSINESS STRATEGY
Headquartered at Washington in the US, Marriott International (Marriott) is a world leader in the hospitality industry. In year 2003, it had a network in excess of 2,600 operating units in the US and a workforce of 145,000 employees, spread over 65 countries across the world. Marriott’s diverse portfolio of popular hotel brands included leading brands such as Marriott, JW Marriott, Renaissance, Ramada International, Courtyard, Residence Inn, and The Ritz-Canton, among others.
Marriott became the first hospitality company to win the CIO – 100 award from CIO magazine for four consecutive years (2000-03). The award was based on the company’s exceptional customer service and relationship capability. Reacting to the receipt of award in 2003, Carl Wilson, Executive Vice President and Chief Information Officer of Marriot said, “This award is the result of a culture and commitment among Marriott’s information technology leadership team, associates and business partners to create great value for our company.”
Since its inception, Marriott has focused on providing excellent customer service. The company offered personalized services to its clients, whom it referred to as its ‘guests.’
It had introduced several innovative technologies and impIemented them even before its competitors did. For instance, in the 1980’s, the company launched Marriott Automated Reservation System for Hotel Accommodation (MARSHA), a totally new concept of hotel reservation in the hospitality industry at that time.
Marriott made continuous improvements in its business processes in its efforts to ‘delight’ its customers. In 1998, the company adopted an e-business strategy to re-orient itself to serve its customers better. The company was operationalizing a strategy to switch over from a decentralized property-orientation to a centralized customer- orientation in its services. The company invested $70 million (mn) over a two-year period to implement a variety of IT applications in diverse functional disciplines such as sales, accounting and personnel. A key component of Marriott’s e-business system was its CRM applications, developed in association with the leading CRM software company – Siebel Systems.
By installing eCRM applications, Marriott was able to offer several new services that enhanced its hospitality services. The company’s website, www.marriott.com became one of the most frequently visited sites in the hospitality industry, giving clients access to the services offered by the entire Marriott chain of hotels and resorts. Il these initiatives boosted the company’s ability to serve its clients, and also contributed to its own strong financial performance. For the financial year ending 2001-02, the company reported revenues of $84.41 billion (bn) and a net profit of $2.77 bn.
In 1927, J. William Marriott (William) set-up a nine-seat root beer shop in Washington. After some time, William started serving hot food along with root beer and named the shop as The Hot Shoppe’ In 1929, Hot Shoppe was officially incorporated as Hot Shoppes, Inc. In 1937, Hot Shoppe ventured into airline catering at Washington airport, serving the Eastern, American and Capital airlines. Over the next three decades, Hot Shoppes diversified into other businesses including food services management by starting a cafeteria at the US Treasury Building and Highway division. e-business strategy and the time involved for implementation.
To execute e-business strategy successfully, organizations also require the best network and systems management tools available. It is also important to develop a framework for organizational alignment and decision-making and a more complex IT management and governance structure. A clear framework that establishes who can make which decisions, and where and how the e-business project will be managed is required.
1. Bring out the facts of the case.
2. Identify the various E-business initiatives.
3. What are the strategies an organization to focus in order to excel in the E-business.
4. Apart from the facts provided in the case, what other initiatives you can project keeping in mind the success of an organization towards E-business.
In 1966, the company ventured overseas, acquiring an airline catering kitchen in Caracas, Venezuela. In November 1967, its name was changed to Marriott Corporation (Marriott).
In 1982, Marriott acquired Host -International, a leading hospitality services provider in the US, becoming the largest operator of airport terminal food, beverage and merchandise facilities in the US. In the 1980s, Marriott acquired several companies including American Resorts Corp. (vacation business, 1984), Gladieux Corporation (food service company, 1985), Service Systems (contact food service company, 1985), Howard Johnson Company (hotels & inns, 1985) and Residency Inn Company (1987). With the acquisition of Saga Corporation, a diversified food service management company in 1986, Marriott became the largest food service management company in the US.
1. Taking out the facts of the case, Bring out the importance of a customer-focused e-business strategy in the hospitality industry.
2. Establish the role of IT in integrating different business processes to make them more customer oriented based on your understanding of the case.
E-STRATEGIES – CASE STUDIES
In the e-business environment, organizations must focus on their core competencies and should rely on external partners for all their non-core activities. The Internet enables a significant reduction in the cost of inter-organizational coordination and transactions, which fundamentally changes the nature of business relationships and encourages greater use of business partners over internal departments. Business managers have more choice to outsource business processes they require.
E-business strategies can significantly improve various organizational functions including supply chain management (SCM), product development, marketing, HR and so on. It will also enhance the benefits for organizations adopting e-business including shortening of new product development cycle time, providing better information to suppliers and vendors, reducing data integrity issues, significantly enhancing customer experience and more. The e-SCM initiatives typically start with e-procurement with answering questions such as whether there is a need for e-market places for procurement and how to transform SCM from the organization driven inventory building to customer driven order approach.
Another e-SCM initiative, e-sourcing is a cross-functional and cross-enterprise process that aims at optimizing supply chain lifecycle performance through the Internet.
Organizations have to develop new partnerships, create new e-intermediaries (e-supply network) and develop appropriate standards for data exchange and inter-organization related processes. They also have to decide on what services they will source via the-Internet and have to develop robust KM systems to improve internal efficiency, enable faster decision-making and facilitate information and knowledge sharing.
E-Strategies have to be developed for the sell side of an organization solving distribution related issues such as shall the organization serve directly to its customers and how will the organization’s existing channels react if it uses the web as a new channel. Other sell side issues include how to manage customer relationships online and online marketing and how to use online channels like B2B e-marketplaces, online retailers and virtual distributors. One of the major hurdles to overcome includes solving conflicts between old and new channel successfully.
Getting prices right on the web is one of the critical success factors for establishing an e-business. However, few companies have been able to develop a right online pricing strategy. Organizations must ensure that their e-pricing strategy should not conflict with their core business principles and strategic objectives. They should employ the right software tools and related skills to enhance their online pricing performance. Moreover, the tools for optimizing e-pricing, for example, software for monitoring competitors’ prices do not require much investment.
Organizations not only have to redefine their core business processes but non-core processes such as human resources as well to derive the full potential of the Internet. By developing effective Internet based business-to-employee (B2E) systems, organizations can persuade their employees to embrace change. The benefits of these systems include reduced interaction costs, allowing employee self service and mass customization.
Online brand management is another issue that must be tackled by organizations. In their rush to establish a presence on the Internet, most organizations have failed to build strong, distinctive online brands. Questions such as if one branch of an organization develops a website, will it not confuse customers of other branches of the company and how to differentiate local and global brands on the Internet has to answered.
After addressing all issues related to electronically enabling the functional areas mentioned above, an organization is ready to manage the execution of its overall e-business strategy. Organizations must also work out detailed estimates of costs involved in implementing its
CASE 4: A PROACTIVE APPROACH TO ENVIRONMENTAL RESPONSIBILITY
Dell is a premier provider of computer systems world-wide. Through its direct usiness model, Dell designs, manufactures and customises products and services to customer requirements.
Dell’s European manufacturing operation is located in Limerick with a European Business Centre located at Cherrywood in Dublin. The company has been in Operation in Ireland since 1990, and employs around 4,500 people. Dell is Ireland’s largest exporter, largest technology company and second largest company overall.
Dell’s manufacturing facility operates a Just-in-Time manufacturing strategy. Dell’s suppliers deliver the required materials at regular intervals during the day and load them onto the manufacturing line. The final product is boxed and loaded directly onto transport trucks and shipped to supplier-owned merge centres. There, the monitor and other requested peripherals are added before final shipment to the customer.
SOCIAL RESPONSIBILITY TO STAKEHOLDERS
The need for a business to be responsible for its actions is widely accepted. Businesses do not exist in isolation; they provide goods and services to people and make use of’ materials and labour supplied by people. Businesses have responsibilities to stakeholders to ensure their actions do not cause harm.
CHARACTERISTICS OF AN ENVIRONMENTALLY RESPONSIBLE COMPANY
Dell is committed to a culture of environmental sustainability and responsibility. It continually reduces its impact on the environment through product design, manufacturing, product ownership experience and product end-of-life solutions.
The characteristics of an environmentally responsible company include:
- Awareness — of how the company’s policies can impact on stakeholders
- Sensitivity — to the requirements of local community and environment
- Honesty — about the actions of the company
- Consultation — with stakeholders prior to developing new policies or products
- Openness — transparency with stakeholders about company practices
Dell has developed a Code of Conduct, which correlates closely to the above characteristics. It allows stakeholders to understand that they can believe what Dell says and trust what it does.
Socially responsible companies conduct environmental audits to assess the impact of their businesses on the environment. Dell complies with all the environmental laws and regulations, including ISO 14001 and OHSAS 18001, and manages its facilities with the environment in mind. Dell designs products with up-to-date recyclable materials, using the Reduce, Reuse, Recycle initiative at ts manufacturing site. It commits to taking back old computer parts for recycling.
Dell continually explores all kinds of recycling options to rind the stateof-the-art best practices for recycling of its old IT equipment.
CORPORATE ENVIRONMENTAL GOALS
Dell has identified corporate environmental goals to work towards in the future. This environmental policy provides a framework designed to ensure sustainable practices throughout the entire product life cycle.
Dell’s vision is to create a company culture where environmental excellence is second nature. The following environmental policy objectives have been established to achieve its mission.
PRODUCT CONCEPT & DESIGN
Dell designs products with a focus on:
- Safe operation
- Extending product life span
- Reducing energy consumption
- Avoiding environmentally sensitive materials
- Promoting dematerialisation
- Using parts that can be recycled
In 2000, Dell began a programme called ‘Design for the Environment’, which evaluates the environmental performance of a product and the impact of its packaging, energy and materials.
Many Dell systems (and virtually all Dell monitors) comply with the U.S. Environmental Protection Agency (EPA) Energy Star programme for energy efficient computers, which reduces air pollution. The EPA estimates that offices can save 5O% of equipment electricity costs by taking advantage of power management, where inactive computers go into “sleep mode”. This decrease in electricity usage can reduce emissions of carbon dioxide, which causes the greenhouse effect, and sulphur dioxide and nitrogen dioxide —, two primary causes of acid rain.
PREVENT WASTE & POLLUTION
Dell operates its facilities in a way that minimises harmful impacts on the environment. It also places a high priority on reducing waste, recycling and reuse programmes and pollution prevention.
100% of all boxing material, cardboard boxes and protective foam are recycled or recovered through Dell’s local recycling facilities.
In 2005, Dell developed a Forest Products Stewardship Model that established three main goals with respect to paper products: protecting endangered forests, improving forest practices and reducing demand on forests.
CONTINUALLY IMPROVE PERFORMANCE
Dell uses an Environmental Management System (EMS) to establish goals, implement programmes, monitor technology and environmental management practices, evaluate progress, and continually improve environmental performance. Dell also encourages a culture of environmental responsibility among employees and management.
Dell-owned buildings are monitored and controlled by an automated building management system, which monitors energy usage and controls temperature. By monitoring building occupancy, energy consumption and cost per unit are reduced.
DEMONSTRATE RESPONSIBILITY TO STAKEHOLDERS
Dell acts in an environmentally responsible manner to ensure the health and safety of its employees, neighbours and the environment.
COMPLIANCE WITH THE LAW
Dell conducts business with integrity and complies with environmental laws and regulations.
RECYCLING AND DONATING
As computers become more common in homes and businesses, there is a growing concern about the environmental impact of old computers.
CONSUMER EQUIPMENT END-OF-LIFE STRATEGIES
As part of Dell’s policy that ‘No Computer Should Go to Waste’, Irish consumers can recycle used computer systems, monitors or printers through the Dell website at no cost with a new purchase.
BUSINESS EQUIPMENT END-OF-LIFE STRATEGIES
In November 2004, Dell Ireland launched recycling services for business and consumer customers. The new service is part of Dell’s global effort to increase product recovery by 50% in 2005.
Dell offers business customers Dell Asset Recovery Services (ARS), which allows customers to recycle or re-sell used computer equipment of any brand.
Reuse is also a critical element of the product life cycle and Dell also supports donation as a responsible means of disposing of computers.
In November 2004, Dell hosted a free recycling event in Limerick to raise awareness among consumers and small businesses of the importance of electronics recycling. More than 540 cars dropped off 19.1 tonnes of old computer equipment for recycling. 630 computers, 825 monitors, 330 printers and other peripherals filled three 40-foot freight trucks.
At the event, Nicky Harterv, Vice President of Dell’s Manufacturing and Business Operations commented “As an environmentally responsible company, offering a whole range of recycling services to both the consumer and business customer, it is important that we help raise the awareness of the importance of recycling to the environment and of the options available.”
In January 2004, Dell was a partner in the Reuse Technology (RT) Centre, a scheme that facilitates the reuse of computers by community and non-profit groups. Dell customers are encouraged through Dell’s website to donate used systems to the RT Centre, who refurbish them, reload software and give them to suitable non-profit organisations. This makes hundreds of used computers available to communities that would not otherwise be able to afford them. Dell also contributes a percentage of its own used computers to the RT Centre.
COMMUNICATING THE MESSAGE
In March 2005, Dell called on all Irish consumers to “Go Green” for St. Patrick’s Day, following research which highlighted a lack of awareness among consumers of the computer recycle and reuse options. The study found while 85% of the public recycle household waste at least once a month, only 9% plan to recycle their home computer.
Dell announced in June 2005 that Irish consumers are leading the way in the use of its computer recycling services in the Europe, Middle East and Africa (EMEA) region. Irish online recycling and computer donations accounted for over a quarter of Dell’s total EMEA numbers in the first quarter of 2005.
“Last year alone, Irish customers recycled over 22 tonnes of computer equipment through Dell. These figures emphasise the importance of having these services available,” said Jean Cox-Kearns, Dell’s Senior Manager for Asset Recovery Services.
The costs to Dell of meeting its ethical and environmental responsibilities include:
- Resources for a take-back and recycling organisation.
- Promoting recycling and its benefits can incur costs (advertising, transportation, sorting etc.).
The benefits include:
- A well managed company that understands its impact on the communities in which it operates.
- Improved working conditions and higher motivation amongst employees.
- Meeting expectations of “green” customers.
- Positive publicity for the corporation.
In December 2004, Business Ethics magazine presented Dell with its Environmental Progress Award for the company’s commitment to the environment and industry-leading computer recycling initiatives.
Dell’s success is based on its ability to meet and exceed the requirements of customers. The same focus on business efficiencies and customer satisfaction helps Dell’s environmental programme to conserve product energy consumption, reduce or eliminate materials for disposal, prolong product life span and provide effective and convenient equipment recovery solutions. Dell’s philosophy is that “No computer should go to waste” and key to meeting that goal is making customers aware that it provides recycling services that are easy-to- use, safe and affordable.
(1) Why does Dell treat its stakeholders in a socially and ethically responsible manner?
(2) In your opinion, which of Dell’s strategies makes the most impact on the environment? Explain your answer.
(3) Explain the importance of the “Energy Star” programme for consumers and businesses.