IT and Strategic Systems
IT and Strategic Systems
IT and Strategic Systems
Primarily, businesses are established with the sole objective of providing a service or product to a consumer all the while intending to make profit. The resources, effort, and time are tailored to generate profit. Thereafter, the profit is dependent on the effectiveness of the business’ activities such that the consumer is able and willing to pay for the product or service. Idyllically, such products and services should overcome competition (Harvard Business Publishing, 2008). To achieve this, Michael Porter states that a company should maintain profitability. He holds that one needs to consider beyond direct competitors. As such, he explains this premise in a 1979 HBR commentary that identifies five forces that determine the nature of competition in an industry. In this regard, this paper endeavors to analyze competitive forces and value chain forces based on mini cases: 5 companies, 5 strategies, 5 transformations.
Mini Case 1- Nike
With Nike’s activities hampered by a campaign opposing its labor practices, the company undertook a process to redesign its operations and comply with broad sustainability requirements. The challenge however, involved moving beyond compliance and capitalizing on sustainability. As such, this involved integrating it into the company’s fabric- from manufacturing and design towards the supply chain (Wailgum, 2008). Nike Company undertook a key move of analyzing its activities in the 90s after facing criticism regarding labor practices. The first efforts were centered on a team focusing on social responsibility and compliance.
A turning point occurred when the team enquired about the long-standing implications of Nike’s manufacturing decisions and product designs. In terms of manufacturing, the team found that two shoes were produced with material worth three. In effect, one shoe ended up as waste thus costing the company 700 million dollars annually. Resultantly, the aspect of zero waste became a priority among senior managers was included among long-term goals to be achieved by 2020. Other goals included profitability, sustainable growth, closed loop systems, and zero toxic materials. By outlining these goals, the company satisfied Porter’s model on value chain and competitive forces (Berns et al., 2009).
To facilitate this initiative, the company purchased partners in the process such as DuPont, BASF, AND Dow Chemical since it understood these goals could not be achieved without working inside the supply chain. Thereafter, Nike began reconstructing the design process. If shoes were designed to cut material and waste, then production efficiencies could counterbalance the cost of required materials. With the route towards change identified, IT had a major impact on Nike’s competitive forces and value chain. The strategy on streamlined production and zero waste was applied around Nike’s line of clothes and athletic footwear. Under this strategy, energy use was cut by 37 percent and waste reduced by 67 percent.
Mini Case 2- General Electric
Primarily, General Electric considered sustainability a business opportunity instead of a cost. The challenge in this regard involved steering the business towards sustainability and cultivating competitiveness. The key moves in this situation involved acknowledging sustainability as a demographic trend under the premise that scarcity increases with population increase. Water and energy use and carbon and waste emissions would all decline among sustainable and efficient companies. As such, General Electric became part of a climate partnership and non-governmental organizations to facilitate a cap-and-trade system (Berns et al., 2009).
Additionally, the company also engaged employees to identify areas of saving energy. Such measures included turning off lights and recycling water. These measures defined the company’s IT changes towards value chain and competitive forces. After implementing these changes, General Electric have cut down on greenhouse has emissions by 39 percent and saved 100 million dollars. The strategies targeted C-level management since most problems came from divisions. Up to this point, General Electric has put forward 4 billion dollars to this cause through research and development. Ultimately, the company identified value forces that required change in order to become more competitive.
Mini Case 3- Rio Tinto
Rio Tinto is a major company judging its activity of mining an excess of five million tons of rock every day. However, mining is expensive and requires a lot of time to develop fully. Hence, steady returns can be only be ensured by reduced and economic and political risks. The company’s task involves looking to gain approval from societies, governments and communities where it operates. The key move in this situation came through working with communities on economic and social development (Berns et al., 2009). At the time, Rio Tinto was constructing a mine in Madagascar that sparked worries from NGO’s that were worried about threats to the local community and biodiversity. The challenge in this situation involved creating an operation that respects the environment, the employees and is sustainable.
To facilitate this strategy, Rio Tinto applied measures such as protecting biodiversity and water quality in mining zones and employing aboriginal people residing near the mine. Through such initiatives, the company was able to obtain a social license to conduct its operations (NetMBA, 2011). Rio Tinto acknowledged a global risk to its brand if it operated without this license.
Mini Case 4- Better Place
Better Place Company identified the business idea of electric vehicles but the problem was when such an idea would become feasible. The challenge therefore lay with brining future technology to the current market. To achieve quick advantage in this new market, Better Place considered the value chain and the cost advantage. Oil is a limited resource hence petroleum prices are bound to rise and global warming creates an impetus of reducing carbon emissions (Porter, 2008). The advantage of this idea is that electric cars do not require petroleum and do not emit green house gases. The main challenge to competitive forces was creating an underlying market and identifying cordial locations for operations.
The company worked to identify regions where people normally drive for long distances daily to their destinations. By identifying such locations, Better Place was able to accrue competitive advantage by removing a major obstacle to the use of electric cars. The company also moved quickly to become the first to reap benefits from battery recharging infrastructure and facilities (Berns et al., 2009).
Mini Case 5- Wal Mart
Wal-Mart is the largest global retailer with more than 7,500 stores. The company is striving to improve the supply chain. Since 2005, it has been pursuing this goal by adopting a vision of becoming fueled by renewable energy 100 percent, selling products that sustain environment and producing zero waste. As such, the competitive forces would be strengthened by a reputable brand. The IT had massive impact on the chain value and competitive forces of the company. Wal-Mart was able to reduce its waste by 60 percent between 2009 and 2010. By 2025, the company plans to eliminate its landfill.
In 2005, Wal-Mart collaborated with Unilever to reconstruct the packing of detergent (Berns et al., 2009). As such, this new initiative used less plastic material and became a standard for the industry. At first, the company encouraged its suppliers to recycle and waste less. The company also compiled data on product life cycles and in turn informed consumers about their sustainability.
In conclusion, applying new approaches by the five companies above benefits the environment as well as improves their competitiveness. Sustainability is current trend and is an approach that allows companies to save on costs and become more profitable altogether. However, it is prudent to understand that sustainability is not a strategy that fits all companies. Rather, it comes from challenges a company undergoes in its environment. As such, Porter’s model regarding competitive forces and the value chain requires companies to identify these challenges and formulate methods of sustaining long-term profitability (NetMBA, 2011).
According to Porter’s model, companies use common elements centered on utilizing sustainability through methods such as becoming less wasteful and reducing energy consumption among others. However, every company undertakes a strategy it considers critical to its operations. For a company such as Better Place, this implies establishing location in regions receptive to electric vehicles. As companies gain understanding, they also consider issues to accomplish. In other words, learning about their business activities leads them towards necessary changes. As Porter states, such changes require commitment and investment. Their return is measured in new product designs, employee commitment, customer engagement, and energy cost savings (Wailgum, 2008). Ultimately, Porters model on competitive forces and value chain forces is revealed in ‘The mini cases: 5 companies, 5 strategies, 5 transformations’ article and cases.
Berns, M., Townsend, A., Khajat, Z., Bagopal, B., Reeves, M. (2009). The Mini-cases: 5 companies, 5 strategies, 5 transformations. The Magazine MIT Sloan Management Review Special Report. Retrieved from http://files.meetup.com/1325336/MITSloan%20Mgmt%20Review%20The%20Biz%20of%20Sustainability.pdf
Harvard Business Publishing. (2008) Interview with Michael Porter: The Five Competitive Forces That Shape Strategy. [Video file]. In Tom Steward. Retrieve from http://www.youtube.com/watch?v=mYF2_FBCvXw
NetMBA. (2011). The value chain. Business Knowledge Center. Retrieved from http://www.netmba.com/strategy/value-chain/
Porter, M. E. (2008). The five competitive forces that shape strategy. The Magazine Harvard Business Review. Retrieved from http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1
Wailgum, T. (2008). ERP definition and solutions. CIO. Retrieved from http://www.cio.com/article/40323/ERP_Definition_and_Solutions
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