Recent orders
the extent to which customer relations management is related to corporate productivity as a means to optimizing sales revenue
Table of Contents
Table of Contents
TOC o “1-3” h z u Chapter one – Introduction PAGEREF _Toc366877866 h 81.1 Introduction PAGEREF _Toc366877867 h 91.2 Background of the study….. PAGEREF _Toc366877868 h 101.3 Rationale of the research study PAGEREF _Toc366877869 h 111.4 Development of research idea, question, objectives and hypothesis PAGEREF _Toc366877870 h 111.5 Research Access, Limitations & Resources PAGEREF _Toc366877871 h 131.6 Outline of the research PAGEREF _Toc366877872 h 13Chapter two – Literature Review PAGEREF _Toc366877873 h 152.1 Introduction PAGEREF _Toc366877874 h 152.2 Review on customer relationship management PAGEREF _Toc366877875 h 162.3 Defining customer relationship management (CRM) PAGEREF _Toc366877876 h 162.4 Goals of customer relationship management PAGEREF _Toc366877877 h 182.5 Types of customer relationship management PAGEREF _Toc366877878 h 192.5.1. Proactive and reactive customer relationship management PAGEREF _Toc366877879 h 192.5.2 Operational CRM PAGEREF _Toc366877880 h 202.5.3 Collaborative CRM PAGEREF _Toc366877881 h 202.5.4 Analytical CRM PAGEREF _Toc366877882 h 202.6 Definition of productivity PAGEREF _Toc366877883 h 212.7 Significance of productivity PAGEREF _Toc366877884 h 212.8 Single productivity concepts PAGEREF _Toc366877885 h 222.9 Typical Calculations of Productivity PAGEREF _Toc366877886 h 222.9.1 Physical Productivity PAGEREF _Toc366877887 h 222.9.2 Functional Productivity PAGEREF _Toc366877888 h 222.9.3 Economic Productivity PAGEREF _Toc366877889 h 232.10 Business value impact of customer relationship management on productivity PAGEREF _Toc366877890 h 232.11 Summary PAGEREF _Toc366877891 h 25Chapter three – Research Methodology PAGEREF _Toc366877892 h 263.1. Introduction PAGEREF _Toc366877893 h 273.2 Defining research philosophy and the selection of research philosophy PAGEREF _Toc366877894 h 293.3 Defining research approach and the selection of research approach PAGEREF _Toc366877895 h 293.4 Defining research design and the selection of research design PAGEREF _Toc366877896 h 293.5 Preferred research Strategies PAGEREF _Toc366877897 h 303.6 Time Horizon PAGEREF _Toc366877898 h 303.7 Research Instruments PAGEREF _Toc366877899 h 313.7.1. Sampling framework PAGEREF _Toc366877900 h 313.7.2. Data Collection mechanism PAGEREF _Toc366877901 h 313.7.3. Data analysis tools PAGEREF _Toc366877902 h 323.8 Applicability of research validity and reliability PAGEREF _Toc366877903 h 333.9 Ethical considerations PAGEREF _Toc366877904 h 333.10 Summary PAGEREF _Toc366877905 h 33Chapter 4 – Findings and Analysis PAGEREF _Toc366877906 h 344.1 Introduction PAGEREF _Toc366877907 h 354.2 Findings from the descriptive study PAGEREF _Toc366877908 h 374.3 Hypothesis testing PAGEREF _Toc366877909 h 454.4 Finding from the regression study PAGEREF _Toc366877910 h 464.5 Conclusion PAGEREF _Toc366877911 h 48Chapter 5 – Discussion PAGEREF _Toc366877912 h 495.1. Introduction PAGEREF _Toc366877913 h 505.2. Comparing the first finding with literature PAGEREF _Toc366877914 h 505.3. Comparing the second finding with literature PAGEREF _Toc366877915 h 515.4. Rationale for research gaps PAGEREF _Toc366877916 h 515.5. Chapter Summary PAGEREF _Toc366877917 h 52Chapter Six – Conclusions and Recommendations PAGEREF _Toc366877918 h 536.1 Introduction PAGEREF _Toc366877919 h 546.2 Summary of the major findings PAGEREF _Toc366877920 h 546.3 Covering of the aims and objectives PAGEREF _Toc366877921 h 546.4 Recommendations for improvement PAGEREF _Toc366877922 h 556.5 Recommendations for further research PAGEREF _Toc366877923 h 556.6. Chapter Summary PAGEREF _Toc366877924 h 56Appendix PAGEREF _Toc366877925 h 57Reference PAGEREF _Toc366877926 h 61
List of figures
TOC h z c “Figure” Figure 1 Types of CRM mapped against degree of personalization PAGEREF _Toc366877935 h 19Figure 2 Research onion model PAGEREF _Toc366877936 h 28
List of tables
TOC c “Table” Table 1: Concurrent corporate social responsibility dynamics PAGEREF _Toc366877928 h 36
Table 2: Demography of respondents PAGEREF _Toc366877929 h 38
Table 3 Process of data coding PAGEREF _Toc366877930 h 42
Table 4: Descriptive statistics results PAGEREF _Toc366877931 h 44
Table 5: Hypothesis testing results PAGEREF _Toc366877932 h 46
Table 6 unit root test PAGEREF _Toc366877933 h 47
Table 7: Autocorrelation test PAGEREF _Toc366877934 h 47
Chapter 1 – Introduction
Introduction
The high rate of growth in the business sector over the past few decades has increased the level of competition between the players. One aspect of this increased competition that has become significant and remained so in a sustained manner is the customer. Bose (2002) reiterates the concept of a good understanding of the importance of the customer in all business growth and productivity endeavors as key. Coupled with economic uncertainty, tough competition has continued to drive the strategy of many business organizations as they seek not only to remain afloat in these tough economic times, but also to grow in a sustainable manner.
All successful business enterprises have come to acknowledge the importance of a satisfied customer as one of the prime ingredients of growth and productivity. On the other hand, dissatisfied customers are sure to affect the sales performance due to a spread in the bad buying and business experience (Chou et al, 2002). Consequently, these two factors, business growth and reputational factors have both come to rely on a relatively new aspect of the business’s promotional and marketing practice – customer relations management.
The need and importance of the customers’ feedback cannot be ignored in any discussion or even mention of marketing and promotional activity as they relate to the business organization. Chen and Popvich, 2003) state the importance of this crucial aspect of the business’s endeavor to improve its customer experience. As part of the interdepartmental approach to the business organization’s customer relations management, customer feedback and related aspects contribute a great deal to the organization’s awareness of the performance of its services and goods with regards to the customer’s satisfaction. Therefore, customer relations management is a combination of customer relations management tools and information management instruments, all combined to create an increased organizational productivity through customer satisfaction (Chou et al, 2002). Peelan (2003) also reiterates the same point by stating how customer relations management is a specialized information technology that fosters customer segments, organizes customer satisfaction variables, and enables processes, which cater to customer satisfaction all in a bid to optimize revenue growth within the organization.
Chou et al (2002) categorize Syngenta AG as a leading specialized chemicals firm that originated from Switzerland and majors in agricultural seeds and pesticides. In addition, the company also deals with biotechnology and genomic research in many European countries such as the UK, all centered around improving on the seeds and their disease-resistance, or productivity properties. From a commercial perspective, Syngenta AG takes the third place globally in terms of total volumes of seeds sold and marketed (Chen and Popvich, 2003). Bose (2002) states that Syngenta AG employs more than 3000 workers globally who assist the company’s operations in more than 90 countries rake in gross annual revenues in excess of 12 Billion US Dollars. Therefore, these facts place Syngenta AG in the top tier globally in terms of performance among its industry competitors.
Recently, Chen and Popvich (2003) reported how top management at Syngenta AG noticed the need to optimize their customer relations management practice by improving its information technology aspects. Subsequently, this research will try to establish if there exists any relationship between the performance attributes of Syngenta AG and its customer relations management practices.
Background to the Study
All business firms that understand the importance of productivity optimization rely on a wide variety of tools and techniques to improve it. Chou et al. (2003), attaches Syngenta AG to this fact by recognizing its modernized approach to customer relations management as part of the wider endeavor to optimize revenues through customer satisfaction. However, the firm’s management has noticed some slight deficiencies in the CRM aspects of the company in the currently dynamic competitive business environment. According to Chen and Popvich (2003), these deficiencies affected the company’s utilization of resources thus affecting work flow by incurring more-than-optimal resources such as time and funds. Ideas were suggested to the effect that information technology was one of the avenues through which the organization would improve its customer relations management practice. However, these suggestions faced the immensely crucial problem of probability of success. Thus, Syngenta AG’s management faced a huge dilemma concerning the existence of the relationship between improved performance and customer relations management. The company needed to ascertain the extent of the relationship between productivity and customer relations management and identify the resultant collaborative and operational customer relations management strategies would assist the organization boost its performance in terms of corporate productivity (Bose, 2002).
Rationale of the Study
As the global business and corporate scene faces a recessionary wave, many business organizations face stiff business conditions that continue to affect their sales revenue and profit margins. Syngenta AG is no exception. As Chen and Popvich (2003) point out, the global agricultural inputs magnate also faces periods of hardship that the management thinks can be reversed through an age-old, proven, productivity-based strategy. According to the strategists, the currently unfavorable business indicators can be driven back to favorable levels through the productivity-based strategies redeeming performance and reputational losses the company has been incurring alongside other international companies in the current economic downshift.
Scholars and industry heavy weights have identified the effects blends of customer relations management and customer feedback through optimized information technology has on the firm’s performance. Therefore, customer feedback could be essential as part of Syngenta AG’s endeavor to return profitability levels back to the desired levels through satisfying customers in a more pronounced manner (Chou et al, 2002).
A major determinant of productivity is customer relationship management whose efficient process will increase the overall organization’s productivity in multiple views (Bose, 2002). In academic perspectives, this study will add huge valued towards Syngenta AG’s concerns and towards aspects of customer relationship management by figuring out the level of association between corporate productivity terms and customer relationship management in a material business sense.
Development of the research idea, question, objectives, and hypothesis
Research aim: The concerned research endeavor aims at identifying the extent to which customer relations management is related to corporate productivity as a means to optimizing sales revenues.
Research objectives:
Obtain a relevant definition of the term and concept of productivity through Syngenta AG’s perspective.
Identify the extent of the relationship between organizational productivity and customer relations management.
Establish the extent of the present rate of success in Syngenta AG’s customer relations management.
Identify the presence of deficiencies in Syngenta AG’s customer relations management.
Research questions:
How is the term and concept of productivity defined from Syngenta AG’s perspective?
How are concepts of customer relations management and organizational productivity related?
Identify the present status of Syngenta AG’s customer relations management.
What deficiencies exist in Syngnenta AG’s customer relations management?
Hypothesis:
Null hypothesis 1: There is no relationship between customer relationship management and organizational productivity.
Alternative hypothesis 1: There is relationship between customer relationship management and organizational productivity.
Null hypothesis 2: There is no relationship between operational customer relationship management program and organizational productivity.
Alternative hypothesis 2: There is relationship between operational customer relationship management program and organizational productivity.
Null hypothesis 3: There is no relationship between collaborative customer relationship management program and organizational productivity.
Alternative hypothesis 3: There is relationship between collaborative customer relationship management program and organizational productivity.
Null hypothesis 4: There is no relationship between analytical customer relationship management program and organizational productivity.
Alternative hypothesis 4: There is relationship between analytical customer relationship management program and organizational productivity.
Research Access, Limitations, and Resources
Due to the status of authorization attached to this research endeavor, based solely on the university’s permission to proceed, the opportunities to collect relevant information from various sources among other data collection efforts presented no problems. In addition, due to the applicability of the research endeavor and any accurate findings on an international agricultural company, the issues of research material applicability would be met. So much, the researcher anticipated her research findings to find use in other similar industrial and corporate scenarios.
The fundamental limitations of this research endeavor would revolve around the limited sample size and resource pool. Additionally, some degree of bias was expected from the respondent resulting in both systematic and non-systematic disorders in the research findings.
Finally, the researcher should be noted to be fully competent and a holder of all pertinent skills, conceptual and analytical, required in executing such business-oriented research.
Research outline
In the dissertation, the researcher is going to discuss about the definition of customer relationship management, the definition of productivity, the ways productivity can be measured using tools and techniques for efficient customer relationship management using tools and techniques.
Furthermore, in the research methodology part of the study, the research philosophy, research designs, research approaches, data collection techniques, sampling framework and the ways to cover ethical aspects of this business research are explained.
Within the discussion and analysis portion of the business research, the researcher has delineated the statistical tools and techniques, which had been used to depict the different layers of relationship that exist between customer relationship management and productivity. The researcher compared research outcomes with the academic findings and tried to explain the gaps among the literatures. Finally, the conclusion portion of the study depicted with a set of actionable recommendations to improve the present condition of the organizational productivity.
Chapter 2 – Literature Review
2.1 Introduction
This part of the research is primarily concerned with identifying the series if academic evidence relating to the researcher’s area of research. As such, the section will present a discussion that forwards the pertinent issues, supporting views, as well as any conflicting perspectives the academic community related to this research area has identified and put on record. Therefore, the various definitions of customer relations management, productivity concepts, and goals as well as objectives of customer relations management will be discussed. In addition, the significance and measurement procedures of the value of customer relations management on the business’s value will be investigated from the literature available.
2.2 Reviews on customer relations management
Both scholars and industry players have identified the importance of investigating the relationship between the customer’s satisfaction and their organization’s productivity as a subject of great interest. According to Baird and Parasnis (2011), the idea of CRM is new and with the concurrent advancement of information and enterprise software, it has adopted a great importance in real life business practices. The idea of customer relationship management has evolved from the relationship marketing techniques with the core objective of CRM being to promote a long-term profitable relationship with customers’ thorough improved productivity and customer service in organizations. CRM practices have been augmented in practical organizations because of the diverse customer base with differentiated preferences and buying behavior (Baran et al, 2008).
The currently competitive nature of business operations, especially in a global perspective, has forced the business community to embrace CRM practices in order to increase their customer’s portfolio value as one of the marketing and promotional methods of increasing profitability through tailored offerings (Buttle, 2008). In addition, Buttle (2012) points out how the customer relationship management efforts encompass a coordinated effort of all the departments in an organization. The application of CRM is a complicated process, which includes mining of all the customers’ data in order to obtain a good overall view of all the customers’ organized information for enabling firms to provide much efficient services (Chaturvedi, 2009). CRM helps a firm to focus effectively on the exact type of customers and market segments for sustainable future profitability and corporate growth (Coltman, 2007).
Consequently, the idea of CRM has been identified as one of the most crucial tactics that business organizations can manipulate as part of the larger marketing and promotional business practice to achieve two core goals – satisfy the customer better, and achieve increased profitability.
2.3 Defining customer relations management (CRM)
Customer relationship management has been defined as the core concept surrounding the business strategy and information technology concepts, integration of which helps an organization improve their efficient service criteria and promote productivity while catering to customers’ demands. Ernst et al (2011) define CRM as a collection of strategies that the organizations use to augment business value and create increased productivity through more customer-focused offerings.
Additionally, Homburg and Seiben (2008) add value to the process of creating an all-inclusive definition of CRM by stating that it is a collection of all business practices surrounding marketing, sales, and customer relations that aim at creating more productive business relationships between the customer and business organization. CRM adds extra advantage to the cost reduction, increase interaction values that ensure high sales revenue with the same resources. The theory of total quality management, backed by technological advances, has a severe impact over the development and shaping up of the modern customer relationship management, at least in recent times (Huang, 2007).
Although there is confusions around different definitions of customer relationship management by different authors in their researches but the core ideas evolve around customer relations and management, customer retention, personalization and marketing strategies (Huang, 2007). Some firms in technology intensive industries consider CRM as the ultimate technological solution to the customer management and tools for sales force automation, which integrates marketing and sales activities too (Iriana and Buttle, 2007). According to Keramati et al (2010), CRM is a function of sales and marketing departments wholly concentrated on individual customer communication management functions. On the other hand, King and Burgess (2008) argued that CRM has its major focus on two-way communication between customers and suppliers to build profitable long run relationship over time with the help of information technology strategies and resources.
From an information technology perspective, CRM entails an organization-wide integration of all the data warehouse, internet, intranet, extranet, phone, production, marketing and sales technologies. As per Knox et al (2012), CRM must use information technology to amass data for developing organized information to build up much personal interaction with customers to ensure a higher lifetime value to the firm. According to Krasnikov et al (2009), customer relationship management, if implemented successfully, enables businesses to maintain a customer driver, cross-functional and technology oriented business process strategies for maximizing relationship benefits. Krasnikov et al (2009) also argued CRM as not a mere technology application but rather a systematic combination of sales, marketing and service activities.
2.4 Objectives of CRM
From an industrial and practical perspective, Kumar (2010) stated that the goals of CRM surround two major issues: developing promotional processes efficiency and augmentation of process organizational efficiency. The ultimate goal of any business-focused firms’ investment in customer relationship management activities is to reduce operational costs and augment profitability (Kumar, 2010). Such objectives can better be achieved thorough activating sales and customer centric CRM activities from all aspects. As per Lin et al (2010), increased customer contentment and building customer loyalty should be the major CRM objectives for a business organization. Any organization can achieve business goals such as efficient sales management, simplified marketing and sales process, gathering new customer and retaining the old ones through improved customer service with an improved focus on customer relationship management (Berry and Linoff, 2011). Such activities will also provide room for more sales revenue and long run profit potentials.
Hence, any CRM practice needs to be at the intersection of customer processes augmentation, and an enhancement of organizational processes aimed at boosting both organizational performance and customer satisfaction.
2.5 The types of CRM
There are five broad categorizations of CRM. The most basic is between reactive and proactive CRM practices. The next include analytical, operational, and collaborative.
2.5.1 Operational CRMWithin the realm of operational CRM, customers can interact with a company through a number of approaches. The organization itself and its employees facilitate the direct connection with customers with several junctions called as touch points (Ngai et al, 2009). Customer relationship management aspects that are enabled with sale transactions, due payments, seeking information, suggestions, queries and complaints through operational touch points are called operational CRM or front office customer relationship management. Such CRM practices affect the promotional and marketing aspects of the organization quite severely if not well addressed.
2.5.2 Collaborative CRMOsarenkhoe and Bennani (2007), outline the specific functions of a corporation, which facilitate any two-way communication among companies and its customers via number of channels for enabling and improving customer interaction quality, are defined as collaborative CRM. Collaborative CRM concentrates on establishing a cooperative effort with the business partners of a business organization. These partners can be business agents, distribution channels and/or other stakeholders (Raab et al, 2008). Interestingly, collaborative CRM does not encounter direct customers for the purpose of increasing productivity. Rather, such CRM’s idea is to maintain a well performing relationship with partners for better business coordination.
2.5.3. Proactive and reactive customer relationship managementMendoza et al, (2007) state that proactive CRM comes into being while a company forecasts the market movements and responds to customers’ trending needs by itself with innovative strategies. Conversely, when a company adapts to the suggestions, requests, recommendations and complaints of customers, suppliers and other parties, the activities are defined as reactive customer relationship management (Nambisan and Baron, 2007). Proactive business firms concentrate on analyzing the customers changing demands and market movements to be prepared for future product and service needs and offer superior values through such actions at the evolution of customers’ need. Firms practicing proactive customer relationship management focus more on the personalization needs and individual marketing efforts.
Figure SEQ Figure * ARABIC 1 Types of CRM mapped against degree of personalizationSource: Baird, C. H. and Parasnis, G. (2011) ‘From social media to social customer relationship management’ Strategy & Leadership, Vol. 39, No. 5
2.5.4 Analytical CRMAnalytical customer relationship management, otherwise called strategic CRM, sits at the top tier of CRM types in terms of importance from a business productivity perspective. Business analysts are the key persons with responsibilities such as sort of customer relationship management (Reimann et al, 2010). Such analysts facilitate the major objective of analytical CRM by sorting out various preferences, tastes and activities of customers for offering custom-made solutions of their needs. Such analytical CRM works with capturing data from numerous touch points and subsequently analyzing them to find generalized consumer behavior. In addition, they develop solutions according to the findings of their analysis (Richards and Jones, 2008). Analytical CRM requires widespread use of management information system and information technology.
Seemingly, the principal focus of any organization is naturally remains over the operational items. Nevertheless, being proactive in CRM tactics and attending these policies from the analytical point of view will help to cater a better level of results in business indicators.
2.6 Definition of productivity
Sharma et al, (2008), describe productivity as the relationship between one or more related resources consumed, and the output produced in the process of business-oriented processes of production. The choice of a suitable concept of productivity relies on the objectives of measurement, data availability, and a research preference. A measure of productivity is considered a ratio of outputs produced to that of inputs used. Besides, Sinisalo et al (2007) discuss the need for the observer to contemplate over different choices regarding the nature and scope of both the resources and outputs considered. For instance, outputs may be measured for delivered product while resources may be measured for cost or effort. Numbers of productivity may be used in many various means, e.g., for the estimation of project and the evaluation of process. A measure of productivity assists an organization in making effective decisions about investments in methods, tools, processes, and outsourcing (Tamošiūniene and Jasilioniene, 2007). In addition to the wide area of inputs and outputs to be measured, other factors such as changes in requirements and quality of service delivery may influence the interpretation of the outcome of productivity measure.
2.7 Importance of Productivity
The significance of productivity revolves around what can be measured to determine growth rate or level. A high level of productivity or high growth rates point out a forceful and growing economy or prospective industry. Therefore, to keep alive in the competitive marketplace, a nation or her discrete industry will try to make efforts to develop her growth of productivity (Urbanskienė et al, 2008).
Commonly, productivity can be used at four levels: project/site, organization/firm, individual industry and entire economy. As measures of productivity, prevail largely to be compared, it is better to use measures of production as performance indices (Venkatesan et al, 2007). By means of empirical production functions, when inputs and outputs have been calculated in constant prices, ratios of real outputs to individual real inputs can be measured to determine single productivity measures; and ratios of real outputs to all related real inputs can be measured to determine a MFP or TFP (Buttle, 2008). Single productivity measures reveal both productive efficiency changes and factor substitutions resulting from relative factor prices changes. Conversely, MFP or TFP has widely been recognized as a better sign of efficiency of productivity than conventional partial productivity for the measurement of effective resources utilization.
2.8 Single productivity conceptsThe first measure of productivity, Labor productivity (Q/L), is a ratio measure of outputs produced to labor inputs used (Chaturvedi, 2009). Since labor is the only one of the factor of inputs, changes in productivity of labor are influenced by changes in factor substitution and by changes in factor substitution as calculated by multi-factor or total factor productivity (Coltman, 2007).
Other concepts of single productivity are intermediate productivity and capital productivity, which measure the relationship between output and intermediate input and the relationship between output and capital input, respectively. The most commonly used measure is labor productivity among the three concepts of single productivity.
2.9 Typical Calculations of ProductivityInterestingly, and from a perspective of unitary productivity measurement, measures of size and resources may be integrated in many various manners. The three common approaches to outlining productivity are referred to as physical, functional, and economic productivity.
2.9.1 Physical ProductivityHerein, the ratio of the amount of products to the resources used (usually effort) is calculated. Ernst et al, (2011) identify how products may be calculated with respect to screens, classes, code, or any other unit of product. Normally, effort is calculated with respect to staff hours, days, months, or years.
2.9.2 Functional ProductivityHere, the ratio of the amount of the functionality delivered to the resources used (usually effort) is calculated. The functionality may be determined with respect to requirements, use cases, features, or function points as suitable for the type of the software and the method of development. Usually, and as pointed out by Homburg and Sieben, (2008), effort is determined with respect to staff hours, days, months, or years.
2.9.3 Economic ProductivityIn this ratio, the amount of product produced to the cost of the resources consumed to produce it is calculated (Homburg and Sieben, 2008) as part of a larger economic productivity identification endevor. Economic productivity assists in assessing the efficiency of an organization’s economy. For the calculation of economic productivity, we ha
Topic One Theories of Competitive Advantage
Topic One: Theories of Competitive Advantage
Introduction
Recent trends in business highlight the need for organizations to develop competitive advantage. The term “competitive advantage” refers to the fact that a firm possesses or develops a feature or collection of traits that allows it to perform better than its competitors. Having access to natural resources such as high-grade ores or low-cost power, as well as highly qualified and trained people and resources, are examples of such advantages (Bartosik-Purgat & Ratajczak-Mrożek, 2018). It is possible to use new technologies, such as robotics and information technology, to either assist or hamper the creation of a product. Robots and information technology are examples of such technologies. The importance of information technology in today’s business climate has increased to the point where it may aid a company in gaining a competitive advantage by outperforming its competitors when it comes to having a strong online presence (Nkuda, 2017). The aim of this section is to present theories of competitive advantage and show their relevance to managers in the current competitive business environment. overall, competitive advantage remains an important aspect of business as it enables a firm to have leverage over rival firms, attained through differentiation or cost advantages.
Competitive Advantage and is Use in Strategic Management
When it comes to allocating resources and activities, a strategy is a plan of action for dealing with the environment, gaining a competitive edge, and achieving the organization’s objectives. The term “competitive advantage” refers to what distinguishes a firm from its competitors and provides it with a distinct advantage in serving the demands of customers in the marketplace (Haseeb et al., 2019). The essence of strategy formulation is the selection of an alternative that will distinguish the firm from the competition. According to Nkuda (2017), businesses must concentrate on the most important skills, create synergies, and produce value in order to remain competitive. Organizational strategic management refers to the collection of decisions and activities that contribute to the formulation and implementation of strategies that are intended to achieve the goals of an organization. This process is also one that is continual and iterative, with the goal of retaining an organization’s overall fit with its environment. One of the objectives of strategic management is to identify a company’s performance as well as its strategic considerations and competitive advantage (Jones, Harrison, & Felps, 2018). In the course of the strategic decision-making process, the firm selects which markets to join and how it will position itself within those markets. It is focused with the large-scale planned and emergent activities undertaken by general managers in their capacity as agents of the owners, which Kuncoro and Suriani (2018) observed to include resource allocation in order to improve a company’s performance in its external environment. When assessing greater performance, competitive advantage is a critical factor to consider. Greater performance of a corporation comes as a result of the accumulation of long-term competitive advantages.
Theories of Competitive Advantage
On the issue of firms gaining an edge over their rivals, Michael Porter asserts that a company’s competitive advantage derives from its ability to perform certain tasks at a lower cost than competitors, or from its ability to conduct specific activities in innovative ways that add value to the consumer while permitting the company to charge a higher price than competitors (Khan, Yang, & Waheed, 2019). The following theories explore this relationship.
Structure Conduct Performance Framework
The Structure Conduct Performance (SCP) structure is the way an organization acts with reference to external forces that determine the market or industry’s direction. In this school of thought, it is argued that an industry’s structure determines the conduct (strategies) and that these strategies impact the performance. Konno and Itoh (2018) report that the key features of the SCP framework include market structure, conduct, and performance. In order to establish market structures, factors such as the degree of market concentration, product differentiation, entrance and exit barriers, vertical integration, and diversity are taken into consideration. Conduct, on the other hand, is determined by a company’s objectives, strategies, anti-competitive actions, research and innovation, and advertising, among other factors (Wood et al., 2021). Performance may be measured in a variety of ways, including output growth, sales revenue growth, profitability, technological innovation, employment, efficiency, increased shareholder value, and added economic value, among others.
According to the above analysis, the industrial structure is an important consideration in establishing a strategy. The majority of tactics are not suitable to all industries. Attempting to apply successful tactics in their existing form in a different environment might result in failure (inability to achieve the intended result). This linear paradigm, on the other hand, exhibits an excessive degree of deterministic behavior. When strategic managers use this approach, Konno and Itoh (2018) express that they are presumptively accepting of the existing industrial structure. As a result, it is their responsibility to automatically adjust to external pressures and create their goals in the context of a competitive environment assessment. However, in many organizations, the environment changes as a result of volatility in the marketplace (Wood et al., 2021). Strategy professionals aggressively shape change to their own interests and advantage, rather than simply observing it from a distance. In these circumstances, rather than the other way around, as the SCP paradigm suggests, the tactics dictate the industrial structure.
Resource Based View (RBV)
When it comes to resources and strategy, environmental competitive advantage models imply that all businesses within an industry are equal in terms of their resources and strategy. Furthermore, they predict that if resource heterogeneity develops inside a sector, it will not be able to thrive for long owing to the high mobility of essential resources (which can be sold or brought). Those assumptions are rendered obsolete by the resource-based approach that has been proposed (Dionysus & Arifin, 2020). The RBV model, according to Hoskisson et al. (2018), is predicated on the assumption that strategic resources are diversified and not completely transferable. The term “organizational resources” refers to all of the assets, capabilities, procedures, qualities, information, and knowledge that an organization has control over and that enable it to adopt efficiency-enhancing methods. It includes all of the assets, capabilities, procedures, qualities, information, and knowledge that an organization has control over and that enable it to adopt efficiency-enhancing methods.
When it comes to having the potential for sustained competitive advantage, a resource must have four criteria in order to be effective. First, it must be valuable in a way that enables exploiting of opportunities as well as the neutralization of possible threats. Second, resources must be rare when compared to the existing and possible competitors (Dionysus & Arifin, 2020). Rarity is a way to ensure sustained competitive advantage (Hoskisson et al., 2018). It is impossible to treat a valuable resource that is shared by a large number of firms as a source of competitive advantage since all organizations will have the potential to exploit it and will be driven to pursue the same strategic objectives. Third, a resource is required to be imperfectly imitable. If a firm is able to obtain rare and valuable resources, then they will achieve sustained competitive advantage (Dionysus & Arifin, 2020). Fourth, a resource must be such that there are no strategically equal substitutes in order for it to be considered as a source of sustained competitive advantage. When organizational resources may be deployed independently of one another to carry out the same plan, they are considered to be strategic similar. To put it another way, Hoskisson et al. (2018) assert that an organization may be able to use a similar resource to design and implement the same strategy as another business. Furthermore, resources that are diametrically opposed to one another might constitute strategic options. Therefore, as argued by the resource-based viewpoint paradigm, resource heterogeneity and immobility within an industry allow organization resources to be valuable and rare while also being imprecisely imitable and difficult to substitute. A long-term competitive advantage will be gained as a result of the deployment of such resources to exploit opportunities and counter threats.
The Capability-Based View
Capabilities can be said to be the main sources of a firm’s competitive advantage. Resources, on the other hand, are thought to be the main source of a firm’s capabilities. A similar point may be made about how, although resources do not contribute to a company’s long-term competitive advantage, its capabilities do (El Hanchi & Kerzazi, 2020). Researchers stress the relevance of capabilities, arguing that a company’s capacity to apply its knowledge to critical internal tasks can provide it a competitive advantage over its competitors. While capabilities are distinct from resources, they refer to a company’s capacity to deploy resources in order to achieve a certain purpose. According to Karimi-Alaghehband and Rivard (2020), this is frequently done in combination with organizational procedures. This category includes processes that are distinctive to a firm, data-driven, physical or intangible in nature, and that have formed through time as a result of complex interactions among the organization’s resources. The capacity of a corporation to integrate, extend, and reorganize internal and external skills in response to rapidly changing situations is referred to as dynamic capabilities.
It is believed that internal resources and core competencies developed via differentiated capabilities serve as the strategic foundation for a company’s long-term success. Capability-based strategies are founded on this notion. The assessment of these capabilities begins with the development of a corporate capacity profile, which evaluates a company’s strengths and weaknesses in four essential areas: management, marketing, finance, and technical (El Hanchi & Kerzazi, 2020). Organizational capability is the ability of a business to perform continuously given a productive activity that relates directly or indirectly to the organization’s capacity to create, value by implementing the transformation of various inputs to outputs. Some of the subcategories of capability that may be found include: broad-functional capabilities, cross-functional capabilities, specialized capabilities, and activity-based capabilities (Karimi-Alaghehband & Rivard, 2020). On the relevance of organizational learning, it is underlined that capacity and organizational learning are both implicit and explicit components of every firm’s strategy, which is supported by the literature. Many people believe that the capacity to learn and generate new information is essential for getting an advantage in a competitive environment.
The Positioning School
The basic premise of the positioning school is a strategic analytical approach centered on the notion of putting a corporation inside its industry, which is partially inspired by Michael Porter’s five forces paradigm. When viewed from an economic standpoint, the fascinating question that led to a positioning school of thought was why varied firms (in the US domestic brewing industry) achieved varying degrees of success despite being in the same industry with similar external environment. Using a different eight-variable model that comprised manufacturing strategy, marketing strategy, and environmental strategy, the researchers examined the impact of altering market structure on an individual firm’s profitability, as measured by return on common stock. The relevance of market structure may be found in the way it influences the behavior of businesses (Stonehouse & Snowdon, 2007). A gauge of the firm’s performance is provided by their actions in terms of adjusting price, outputs, product features, selling expenses and research expenditures. An environmental hazard is defined as any external factor or organization that has the ability to negatively impact the degree of performance of a company from a strategic standpoint (Hodgetts, 1999). In developing the positioning model, the goal was to assist managers in contrasting a competitive environment and analyzing and neutralizing potential threats. It was also intended to assist management teams in taking a more comprehensive view of the industry than is typically the case, resulting in the development of more competitive strategies that are uniquely tied to an individual firm and its resources or capabilities.
Conclusion
From the discussion of theories from various schools of thought, it is clear that competitive advantage arises from a company’s ability to do critical operations at a lower cost collectively than competitors, or to execute particular activities in a unique way that adds value to the client and allows the business to charge a higher price as a result. The SCP school of thought argues that an industry’s structure determines the conduct (strategies) and that these strategies impact the performance. The RBV environmental competitive advantage models imply that all businesses within an industry are equal in terms of their resources and strategy and predicts that if resource heterogeneity develops inside a sector, it will not be able to thrive for long owing to the high mobility of essential resources (which can be sold or brought). The capability-based perspective offers that capabilities are the main sources of a firm’s competitive advantage and the resources, on the other hand, are the main sources of a firm’s capabilities. Finally, the basic premise of the positioning school is a strategic analytical approach centered on the notion of putting a corporation inside its industry, which is partially inspired by Michael Porter’s five forces paradigm. Whichever perspective a firm decides to adopt, the key point is that there must be a way to gain an advantage over rival firms either through cost minimization or through differentiation advantages.
References
Bartosik-Purgat, M., & Ratajczak-Mrożek, M. (2018). Big data analysis as a source of companies’ competitive advantage: A review. Entrepreneurial Business and Economics Review, 6(4), 197-215.
Dionysus, R., & Arifin, A. Z. (2020). Strategic Orientation on Performance: The Resource Based View Theory Approach. Jurnal Akuntansi, 24(1), 136-153.
El Hanchi, S., & Kerzazi, L. (2020). Startup innovation capability from a dynamic capability-based view: A literature review and conceptual framework. Journal of Small Business Strategy, 30(2), 72-92.
Haseeb, M., Hussain, H. I., Kot, S., Androniceanu, A., & Jermsittiparsert, K. (2019). Role of social and technological challenges in achieving a sustainable competitive advantage and sustainable business performance. Sustainability, 11(14), 3811.
Hodgetts, R. M. (1999). A conversation with Michael E. Porter: a” significant extension” toward operational improvement and positioning. Organizational Dynamics, 27(1), 24-24.
Hoskisson, R. E., Gambeta, E., Green, C. D., & Li, T. X. (2018). Is my firm-specific investment protected? Overcoming the stakeholder investment dilemma in the resource-based view. Academy of Management Review, 43(2), 284-306.
Jones, T. M., Harrison, J. S., & Felps, W. (2018). How applying instrumental stakeholder theory can provide sustainable competitive advantage. Academy of Management Review, 43(3), 371-391.
Karimi-Alaghehband, F., & Rivard, S. (2020). IT outsourcing success: A dynamic capability-based model. The Journal of Strategic Information Systems, 29(1), 101599.
Khan, S. Z., Yang, Q., & Waheed, A. (2019). Investment in intangible resources and capabilities spurs sustainable competitive advantage and firm performance. Corporate Social Responsibility and Environmental Management, 26(2), 285-295.
Konno, Y., & Itoh, Y. (2018). Empirical analysis of R&D in the Japanese construction industry based on the structure conduct performance model. Cogent Business & Management, 5(1), 1429347.
Kuncoro, W., & Suriani, W. O. (2018). Achieving sustainable competitive advantage through product innovation and market driving. Asia pacific management review, 23(3), 186-192.
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Stonehouse, G., & Snowdon, B. (2007). Competitive advantage revisited: Michael Porter on strategy and competitiveness. Journal of Management Inquiry, 16(3), 256-273.
Wood, B., Williams, O., Baker, P., Nagarajan, V., & Sacks, G. (2021). The influence of corporate market power on health: exploring the structure-conduct-performance model from a public health perspective. Globalization and health, 17(1), 1-17.
Topic Two: Organisational Structures, Innovation & Globalisation
Introduction
In today’s increasingly and aggressively competitive global business environment, firms are trying all possible strategic structures, innovations, and other practices to gain a sustained competitive advantage over rival firms. Several traditional and contemporary approaches have been favored by different research bodies as being relevant and useful to firms in different periods and in a variety of industries. For example, in terms of functional and effective organizational structures, Naqshbandi and Kaur (2013) argue for the use of strategic business units, a traditional subsystem that is specialized and separate in a firm that acts independently to plan strategies based on markets and segments. Similarly, others (such as Herrera (2015) and Ireland and Webb (2007)) advocate for more modern approaches such as the matrix or flat organizational structures that remove the traditional rigidity to include more inclusiveness and better and faster decision making in the organization. Regardless of the approach preferred, organizations are continuously trying to improve. This section looks at the VRIO analytical framework, against its claim that for a firm to achieve a competitive advantage, the firm should have resources that are valuable, rare and inimitable and should be organised to take advantage of its resources and capabilities. Specifically, Using Apple as a case study, the section discusses how contemporary firms have organised themselves to support their strategy with a particular focus on innovation in an era of globalisation.
VRIO Analytical Framework
Key questions that companies must answer today include what makes the organization special, how close the competitors are to overtaking the company, and if the strategies to achieve these aspects can be sustained in the long term. When used in conjunction with other strategic analytical tools, Ariyani and Daryanto (2018) report that the VRIO framework assists organizations in identifying and protecting the resources and talents that provide them a long-term competitive advantage. Note that this is not merely a list of corporate strengths, which are things that a firm does very well but which are not necessarily unique to the organization. This also excludes benefits that are just transient in nature. A sustainable competitive advantage includes the advantages that rivals will find difficult to reproduce in the near future; they are also a key component of business success since they are tough to imitate. VRIO stands for a 4-part framework that looks at the value, the rarity, inimitability, and organization, which are the criteria used to look at an organization’s resources and/or capabilities.
Figure 1: the VRIO structure
Source: (Buzatu et al., 2019)
From the above, the VRIO framework can be termed as a strategy tool that assists firms in determining what resources and capabilities they possess that will enable them to remain competitive for a long period of time. Companies often have a diverse variety of resources and capabilities. In the case of financial resources, they may be used in a variety of ways, while human resources, organizational resources, physical resources, and technology resources could all be utilised. VRIO is a type of internal study that helps firms determine how excellent and helpful their resources and abilities are in comparison to their competitors (Buzatu et al., 2019). The basic premise is that for a firm to achieve a competitive advantage, the firm should have resources that are valuable, rare and inimitable and should be organised to take advantage of its resources and capabilities.
Figure 2: VRIO framework in attaining sustained competitive advantage
Source: (Murcia, Ferreira, & Ferreira, 2022)
When used in conjunction with other analytical methodologies, the VRIO analysis can help in the comprehensive evaluation of available resources. For example, when it comes to financial resources, there are a number of distinct financial indicators that may be used to determine a company’s financial performance. Other specialized indicators, in a similar vein, describe the performance, efficiency, and quality of other departments or services, respectively. The simplicity and clarity of a VRIO analysis are its primary advantages. The VRIO framework is a subset of the RBV management framework, which is concerned with the link between an organization’s internal characteristics and performance. As a result, RBV complements Industrial Organization (IO) perspectives, which include external factors such as competition when assessing performance and profit potential (Murcia, Ferreira, & Ferreira, 2022). Therefore, organizations should seek competitive advantage within their own organization rather than outside it.
Valuable
The framework’s first question is whether a resource adds value by helping a corporation to capitalize on opportunities or mitigate dangers. If the response is yes, the resource is considered valuable. Resources are crucial if they help organizations boost consumer perceived value. This is done by increasing the product’s uniqueness or decreasing its cost. Those resources unable to meet this demand will be at a disadvantage. It’s vital to track resource value since changing internal and external situations may render them unusable.
Rarity
Only a single or a limited number of firms have access to rare resources. Rare and valuable resources can provide a competitive edge for a short length of time. In contrast, competitive parity occurs when a large number of enterprises share a resource or employ a capacity in an equal or similar manner. The reason for this is because businesses can pool their resources to achieve identical objectives, and no organization can constantly outperform the others (Ariwibowo, Saputro, & Haryanto, 2021). Even if achieving competitive parity is not the aim, a company should not overlook the existence of significant yet shared resources. The loss of essential resources and competencies would have a negative impact on a company’s ability to compete in the marketplace.
Expensive to Copy/Imitate
If other organizations that do not have access to a resource, are unable to replicate it, acquire, or substitute it for a fair price, it is termed as a resource or capability that is expensive to imitate. Imitation may involve directly replicating (imitation) resources or delivering similar products or services through substitution. Firms with resources that are rare, valuable, and whose features make it difficult to duplicate stand a better chance of attaining long-term competitive advantages. According to Miethlich and Oldenburg (2019), three reasons exist regarding why resources are expensive to imitate: historical conditions (resources developed over extended period of time), causal ambiguity (inability of rival firms to identify specific resources that may provide competitive advantage), and social complexities (a firm’s culture and its products including the interaction of people in an organization as a resource and capability).
Well Organized to Capture Value
If a company doesn’t do a good job of trying to get the most value out of its resources, it will be at a disadvantage. To fully utilize the potential benefits of its precious, uncommon, and costly to copy capabilities and resources, a company must organize and arrange its management frameworks, procedures, policies, organisational structures, and the corporate culture (Lee, Kim, & Park, 2020). Only then will businesses be able to maintain a competitive advantage in the long run.
Contemporary Organizational Strategies Focusing on Innovation: Apple Inc.
In an era of globalization, modern organizations have arranged themselves to support their strategy, with a special emphasis on innovation. A substantial source of growth and an important determinant of competitive advantage for many businesses is innovation. In order to generate innovation, a large number of different participants must work together, and activities must be integrated across specialist positions, knowledge disciplines, and application contexts. As a result, the establishment of organizational structures is critical to the process of innovation (Kaletnik & Lutkovska, 2020). For a corporation to be successful in its use of innovative resources and new technology, it must have the ability to innovate, a case that is perfectly exemplified by Apple Inc.. As a market leader in its industry, Apple regularly confronts significant possibilities and problems as a result of the introduction of new technology, which can result in changes in management practices and the formation of new organizational structures. From its success and practices over the years, Apple has shown that the advancement of organizations and the advancement of technology are inextricably linked (Podolny & Hansen, 2020). Previously, some experts believed that organizational changes, new things and processes, and new markets were the primary causes of creative destruction. This view has since been challenged.
Organisational Structural Designs and VRIO in Creating Sustained Competitive Edge
On its way to the top, Apple, headed by late founding genius Steve Jobs, continues to defy expectations and change the narrative of firms in its industry. As a result, the tech titan has set long-term technical trends throughout the world. Even more astounding, Apple continues to deliver game-changing gadgets on a regular basis, despite the fact that most other tech companies are struggling to stay afloat. Grimm et al. (2021) attributes a lot of this success to its innovative organizational structural design, innovative strategies, and its active intention to create sustained competitive advantage using the aforementioned elements.
Apple combines resources and capabilities that meet the VRIO criteria while also using a unique organizational structural design to create a lasting competitive advantage over other tech firms (Podolny & Hansen, 2020). One of the most important advantages created through innovation at Apple is the ability to establish a structure of the organization that aligns all of its resources and capabilities (especially the alignment of its employees, skills, finances, and stakeholder support) to create innovative products that drive exceptional performance. Apple uses a unitary organizational structure or a functional organizational framework. The company is structured by skills as opposed to products. The design function is organized under one department, product marketing in another, and operations is organized under a third function. The idea is to increase specialization while maintaining high levels of innovativeness and effectiveness of policies and ideas. This organizational structure is specifically meant to fulfil the O in VRIO. In short, Apple is organized to capture the value of its large base of resources and capabilities.
Apple has a great alignment between its organizational structure and culture, and innovation strategy because of the way it started with its mission statement and designed its internal business structure and development methods appropriately. An organization’s ability to compete in the IT, internet services and products, and consumer electronic markets depends heavily on how closely its corporate culture and its innovative thinking are aligned (Podolny & Hansen, 2020). It’s what sets Apple distinct from its rivals in the market. Therefore, Apple is truly built upon a system of innovation, one that continuously looks at ways of adding value, increasing rarity, reducing the chance of being imitated, and is ruthlessly organized to attain value of its resources and capabilities.
One of the most critical factors in a company’s long-term success and survival is innovation. Traditional meaning of innovation is to create new products or improve existing ones in quality. Using a new industrial approach is considered an innovation in a more current definition of the term (Ul Haq, Paracha, & Shakeel, 2020). As a company’s resources and the ways in which they are changed by inventive skills are characterized as its particular technological competence, it seeks to acquire and expand upon this. Changes in industrial functions and processes necessitate innovation. Technology expertise is sought out in these processes and services by companies. Apple’s technological competence is defined as the resources it has and the inventive capabilities it uses to change these resources (Podolny & Hansen, 2020). It has achieved this through using its large resources to create value in every process within the firm. Apple’s example shows that in order for a firm to flourish in dynamic marketplaces, it must have a distinct advantage over its rivals. Innovating is one way to achieve a competitive advantage. Existing products and services can be improved, or new ones can be introduced, via the use of innovative approaches. Businesses must innovate if they want to stay competitive and acquire an advantage over their competitors.
Conclusion
The present increasingly and aggressively competitive global business environment has forced firms to try all possible strategic structures, innovations, and other practices to gain a sustained competitive advantage over rival organizations. Regardless of the approaches preferred by organizations, the main idea is to improve via creating value through innovative means t create competitive advantage. The VRIO framework is an essential tool in helping firms to gain competitive advantage. Key questions that companies must answer today include what makes the organization special, how close the competitors are to overtaking the company, and if the strategies to achieve these aspects can be sustained in the long term. Apple’s example shows how well it has achieved value, rarity, inimitability, and a well-organized structure. From its success and practices over the years, Apple has shown that the advancement of organizations and the advancement of technology are inextricably linked.
References
Ariwibowo,
The extent Supply chain management can be seen as the latest tool to reinforce the position of major players within the food
The extent Supply chain management can be seen as the latest “tool” to reinforce the position of major players within the food sectors
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Contents
TOC o “1-3” h z u Introduction to Supply Chain Management PAGEREF _Toc384392844 h 3International businesses PAGEREF _Toc384392845 h 3Methodology PAGEREF _Toc384392846 h 5Importance of Logistics and Supply Chain management (SCM) in Waitrose PAGEREF _Toc384392847 h 5Effectiveness of IT in Managing Supply Chain within Waitrose PAGEREF _Toc384392848 h 8Relationship between Ethical Supply Chain Management and competitiveness (and menu design) PAGEREF _Toc384392849 h 9The difference between a supply that is responsive PAGEREF _Toc384392850 h 10Contribution of IT to SCM within Waitrose PAGEREF _Toc384392851 h 10How the supply chain can help a company reach its strategic goals PAGEREF _Toc384392852 h 11Why many companies choose to contract with third-party logistics companies PAGEREF _Toc384392853 h 12
Introduction to Supply Chain ManagementThe concept of supply chain has different meanings in different times, while the understanding also varies from one research to another (Lemke et al., 2003). In relevant field, researchers illustrated supply chain from different perspectives. However, it is generally believed that formal researches on supply chain started at the 1960s. Stadtler (2005) pointed that Forrester (1961) first used system dynamics model to optimise the dynamic relationship between industrial upstream and downstream and put forward the term of supply chain, so that Forrester is recognised as the father of supply chain. Many modern supply chain design principles can track back to the production distribution system of Forrester. Since the 1990s, researches on the theories and application of supply chain management have attracted wide attention, while, with the continuous evolution of corporate development, there emerged many representative definitions of supply chain. Early researches defined supply chain as a network. Lee and Billington (1992) pointed out that supply chain is a network in which an enterprise obtains raw materials, produces semi-finished products or finished products and then delivers the products to consumers through sales channels.
Ganeshan and Harrison (1995) pointed out that supply chain is a logistics distribution selection network instrument, which enables enterprises to obtain raw materials, transform raw materials into semi-finished or finished products and then distribute the products to consumers. Later, researches defined supply chain as a dynamic process. Kalalota and Whinsto (1996) argued that supply chain is a series of independent steps and enterprises can meet customer needs if following these steps. Harrington (1997) pointed out that supply chain includes product flow, information flow, and capital flow, while supply chain is a two-way process which links all members from suppliers to consumers into a virtual aggregate, while supply chain also links procurement, manufacturing, and product/service distribution activities. At that time, supply chain took suppliers, manufacturers, and customers into account, while the entire supply chain was divided into different organically-linked processes. After 2000, the definition of supply chain emphasised that supply chain is a dynamic process and that the management plan needs to be continuously adjusted. Chopra and Meindl (2001) maintained that supply chain is a dynamic chain of information, product, and capital flow in various stages, while supply chain is made up of the mutual linkage between a series of upstream suppliers and downstream customers.
International businesses
With increase in international businesses and exploration of the emerging markets in developing countries, global supply chain management is becoming a very important aspect of the business cycle. Just like the traditional supply chain management that is aimed being cost effective by decreasing the costs of inputs and the process of procuring the inputs. The major difference is that global chain supply chain management comes with a more detailed variety of options and challenges as opposed to the local supply chain management.
At a global level the issue of differences in the currency is a major challenge, this is because buying and selling is not based on simply the forces of demand and supply, it is also based on the exchange rate, whether a currency is appreciating or depreciating. Differences in the countries technological advancements also pose as a challenge to global chain management as it becomes difficult to sell or buy certain commodities in some countries because there is no market for them. The benefit that firms can get to enjoy is that it can easily outsource labour and inputs from a cheaper country and this goes a long way in reducing the operational cost. Increase in the market is a benefit as it offers the company a new slate to build a clientele base.
Supply chain manager are involved in organizing and planning of what inputs require to be purchased, from where and how they will conveniently get to the firm while ensuring the cost is at its minimum. The main roles of a supply chain manager are to ensure that there is proper facilitation and collaboration of the factors of production. In doing so they ensure that there minimize costs, stabilize operational expenses and increase revenue through increase in sale s and quantity produced.
Different companies have different roles for their supply chain managers, but at the end of the day it is an action oriented position that requires flexibility, swiftness and adaptability to the changes in the business cycle.
MethodologyIn examining and providing an analysis of the effects of ethical supply chain management on menu design and competitiveness of restaurants in their market segments, a comprehensive overview of literary and scholarly works was done. This is especially for scholarly works specific to the United Kingdom written within a timeframe of the last 15 years. While literary and scholarly works that are specific to the hotel and restaurant industries would have been preferred, the research was not limited to those works that target this field rather it also incorporated works covering ethical supply chain management in the market in general.
Importance of Logistics and Supply Chain management (SCM) in WaitroseLogistics plays an important role in the supply chain management due to its importance in procurement among other functions. Logistics plays a multifaceted role in the supply chain management of the supermarket. First, it is essential in the management of the flow of inputs from the suppliers into the warehouses, stores and within the company. Logistics is further responsible for the management of the flow of materials and information resources within the company through the different operations. Finally, it ensures that the flow of these materials to customers is well managed to guarantee success and efficiency. Therefore, logistics can be seen on two perspectives or angles in terms of inward logistics and outbound logistics where the former is responsible for managing the flow of resources and materials from the suppliers to the company while the latter manages the flow of the materials and necessary resources from the firm to the customers. The flow chart below provides an overview of the inward and outbound logistics for Waitrose Supermarkets.
Figure SEQ Figure * ARABIC 1: Waitrose Logistics
The flow chart above has assumed that the suppliers adhere strictly to the value challenge given by the company and thus there are no backorders. However, in case of any backorders from either suppliers or external customers, it is assumed that they are not significant to affect the judgment on the performance and efficiency of the supply chain management strategy. The functions of procurement, which are integral part of logistics, are generally present in the network facilities and distribution options of a supply chain. This makes a supply chain a very important part of logistics. For this reason, transformation of the materials into intermediate and final products is part of the functions that a supply chain performs and which are of importance to logistics as the goods are distributed to the final customers.
As an important part of the supply chain management (SCM), logistics management is responsible for planning, implementation and control of the efficient, operational flow and storage of the merchandise and all related information between the points of origin and the consumption destinations with the purpose of meeting customer requirements. The flow may be forward or reverse. Logistics entails “getting in the right way, the right product, in the right quantity and right quality, in the right place at the right time, for the right customer at the right cost” (Bales et al 2004).
A good supply chain strategy must be one that integrates information, resources, transportation and time in a way that ensures efficiency and continuous flow of these vital elements within the supply chain. Since there are possible risks associated with supply chain management, an integrated supply chain must have well-laid measures intended to manage these risks. Therefore, having a supply chain risk management strategy is an important indicator of success in performance and management of risks associated with supply chains. Some of the risks and vulnerabilities in the supply chain are caused by lack of access to information or a lag in the supply chain information system. To mitigate this and ensure that the supply chain is efficient, the company must ensure it achieves supply chain visibility. This visibility ensures that the reaction time is minimized and the event is detected in time, the projected or apparent consequences are determined in time and evaluated and relevant responses put in place.
An integrated supply chain strategy must therefore have mechanisms that pull together the different players in the supply chain network. These mechanisms must be able to carry out thorough and accurate risk assessment and come up with mitigation strategies and offer appropriate responses to any unanticipated disruptions in the supply chain network. Aqua Management Consulting (2010) provides five essential drivers to achieving an integrated supply chain strategy.
For a company to have an integrated supply chain strategy, it needs to have an integrated supply planning where the supply planning processes are synchronized with the consumers, manufacturing, suppliers and logistics. Within this aspect of supply planning, the business needs to incorporate other aspects such as vendor managed inventory processing and supplier rationalization. This implies that as the supermarket strives to have an optimal demand-supply matching at the consumer end, this must also be worked for at the supplier side. This factor when pursued ensures increased efficiency and reduced costs of operation.
Another driver is the product deign and development that targets concurrent engineering as a tool of achieving differentiation of the business from other competitors. As an example using the current case, Waitrose came up with a strategy of product engineering and brand image differentiation in 2010 when it launched its products as essential Waitrose and using simple white packaging for the products. In order for this approach to be effective, all the stakeholders must be involved.
Effectiveness of IT in Managing Supply Chain within WaitroseIn recognition of the importance of information technology, Waitrose has taken various steps to embrace information technology as a way of improving performance within the supply chain. In January 2011, the company adopted the Aldata Ordering system, which is retail and distribution software solution that enhances performance in the ordering operations. This information technology system has improved performance of the Waitrose ordering system of the frozen warehouses since it went live in 2011. It enabled the company to adopt the new multi-channel environment easily and sustain high availability with low inventory since it helps in calculating, optimizing and managing supplier orders for replenishment of the warehouses. The Aldata project has led to a rapid turnaround helping Waitrose to increase its efficiency since the suppliers replenish stocks to the branches with increased efficiency. In addition, the design of this solution gave chance for integration with the existing systems within a short time and with no hurdles.
Earlier on, in 2007, the grocery chain had witnessed another important benefit of information technology when it adopted the Datalogic scanning technology. Through this, the company was able to cut on customer queuing time in the Rickmansworth grocery store. Among the factors that prompted for the choice of this solution against the others is its flexibility and the fact that it provides an option for use of the scratch resistant sapphire glass. To demonstrate that information technology solutions have played an effective role in the operations of the company, in mid 2012 Waitrose VoiteQ to provide a voice-directed interface for the new warehouse management system. This solution includes about a thousand Talkman A500 terminals. It also includes more than 3,000 headsets that can support several shift patterns.
Relationship between Ethical Supply Chain Management and competitiveness (and menu design)The relationship between ethical supply chain management and competitiveness and menu design in restaurants has been an open secret in the recent times. This is especially considering the changing consumer preferences pertaining to foods, as well as the dynamics of the workforce.
Scholars and researchers in the food and beverage industry have noted that there has been a shift in the consumer behavior in the recent times. Previously, individuals were least or even not concerned as to the kind of foods that they consumed. In fact, inorganic foods were the in-thing and could even be more preferred as they could be seen as more aesthetically pleasing that the organic foods. Inorganic foods are those that are produced using synthetics such as pesticides and fertilizers. A 2004 survey showed that 80 percent of Europeans saw the making of a healthy diet as too difficult, with 90 percent of UK citizens calling on retailers and restaurants to enhance the ease with which healthy diets could be obtained. However, recent times have seen an increase in the popularity of organic foods, thanks to the increased concern of consumers as to the manner in which their foods or the end-products are made.
The difference between a supply that is responsive An efficient supply chain is one that adds value to the business cycle experienced by the company at any part of the financial year. This means that it should be clearly outlined and executed in a way that is able to reduce any losses that can be experienced. Efficiency comes in ensuring that all the roadblocks are all removed, these include lack of enough raw materials and labour, lack of funds to pay for supplies and the lack of market for the final products (Wang, 2007). All these should be easily avoided with an efficient supply chain because it is based on information and data collected coupled with the experience of the firm.
A supply that is responsive is one where changes in the factors that affect the supply of goods and services, raw materials involved, lead to changes in the quantity supplied to the firms and to the market (Leeman, 2010). These factors can be price and government policies, for instance changes in the tax rate leads to increase in the price for the final buyer, this reduces the purchasing power and ultimately the quantity supplied. This is a responsive supply chain.
Contribution of IT to SCM within WaitroseAs mentioned under AC 3.1, Waitrose has taken technology seriously and this is seen from the way the company has adopted the use of information technology platforms to enhance efficiency. As for the company’s supply chain management, IT application infrastructure is an important element in providing a strong pillar for the various operations within the supply chain network. The IT infrastructure within the Waitrose SCM has contributed in putting the company in a competitive position in the market. By providing a platform for quicker and easy access to information, information technology has also contributed to the efficiency within the SCM and led to reduced costs of managing the supply chain. Information technology infrastructure in place has enhanced visibility within the supply chain network. In addition, it has become easier for the business to standardise many procedures and processes within the organisation and with the partners. The IT application infrastructure has also promoted accountability and the departmental automation that accompanies the infrastructure has enhanced efficiency in operations and this brings the benefits to the entire supply chain hence improving SCM. Lastly, information technology has also improved supply chain management practices by boosting supply chain integration thereby allowing for partners to enjoy more visibility, efficiency, cost effectiveness and timely sharing of crucial business intelligence.
How the supply chain can help a company reach its strategic goals
Increase in profits- It can lead to increase in the quantity produced, this will increase the revenue earned and consequently the profit will be ploughed back.
Cost effectiveness-Increase in quantity produced due to a proper flow of raw materials will allow the firm to enjoy economies of scale and be cost effective; the costs of production will decrease with increases in quantity produced.
Increase in customer satisfaction- constant supply of the products ensures there is no deficit and creates a clientele base that has a well structured and satisfied market.
Why many companies choose to contract with third-party logistics companies
To be cost effective – this is because third party logistics companies reduce the amount of facilities and physical capital and labour required by a firm to conduct proper logisyics.
Economies of scale- the third arty companies can offer discounts on large volumes of shipments and transportation of goods.
Qualified service and reduce used up space in the firm- the third party companies are specifically for logistics and being in the industry they have connections and qualified employees for the work (Langley et.al. 2008). They also do all the billing and reduce on the space that would have otherwise been used up in the firm.
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