Strategic Options
Option 1: Transformation
Transformation, as the word suggests, is a radical method of reengineering a business. It usually takes a clean slate approach where fundamental questions are asked about the business purpose and goals. Then alternative ways of achieving those goals are examined. The resulting systems and business can be substantially different from current operations. Features of a successful trans- formation could include the following [14]:
• Significant improvements in business performance;
• Significantly improved staff satisfaction;
• Significantly improved perception of the business by customers and suppliers;
• Mission, purpose, and direction are clearly articulated and understood across the organization.
Besides a change in processes, there is a cultural change within the business.
The impact of transformation is far reaching, radical, and involves considerable risk.
Creative Destruction
Radical transformation sometimes cannot take place without the replacement of certain parts of the business. Traditionally in the business world the empha- sis has been placed on adding new business directions to current operations.
However, in today’s competitive environment it may be impossible to develop a radically transformed business without destroying some aspects of the existing business. This process has been termed creative destruction by Harvard econo- mist Peter Schumpeter. For example, the goals of the Web strategy and existing business goals may be in conflict or be competing, and therefore they may be difficult to maintain.
Global Strategy
The growth of the Internet has created a large global market of more than 100,000,000 consumers. Some companies are able to take advantage of the global opportunities provided by the Internet. National borders, time zone dif- ferences, and the cost of advertising in remote areas become less of a problem.
The flexibility provided by the Web means that a one-person operation can
Transformation
Process reengineering
Process improvement
Low Risk High
Paradigm shift
Cultural change
None
Local Scope Business wide
Incremental Level of change Evolutionary
Business process reengineering
Figure 4.4 Various forms of BPR. (Based on a diagram by Talwar [14].)
develop a global strategy and implement it in a cost-effective way. A global strategy needs to consider the differences in culture, language, and distribution mechanisms. The Web can be used to gather information or source products and services from suppliers to cut costs or provide a stimulus for improvement.
A small environmental protection consultancy, for example, could use the Web to find suitable projects and research grants. Their expertise may be in demand worldwide, but they may only be applying for projects within a restricted geo- graphic domain because the publications they use as a source of information are locally or nationally oriented. Through the Web, however, the company can apply for projects on a global basis.
Although many companies are considered global entities, there is no generally accepted understanding of what makes a business successful globally.
Companies that have managed to sustain a competitive advantage globally have certain characteristics (for instance, see http://www.deloitte.com/davos/
global.html). These can be applied to developing a global Internet commerce strategy.
Governance and Responsibility
The directors need to be knowledgeable about the regions to which they are going to market. The company should disclose data and information so that it is readily accessible to other countries, and the ethical standards of the organiza- tion need to be understood by employees worldwide.
Strategy and Planning
Projects need to be given the go-ahead according to their potential to create value for shareholders, customers, and employees. The company should have the ability to develop alliances with other companies in other regions and the world should be seen as a single economic and operating entity.
Marketing and Service
Marketing should be on a global basis and attempt to develop a global brand but it should take into account local needs.
Operations and Technology
The company should source materials from the most cost-effective supplier.
Core processes should be standardized yet allow for specialization at the local level. The Web can play a leading role in the technological infrastructure by improving the supply chain management systems and in the marketing and retailing of services and products.
Research and Development
Researchers require information about global markets, and knowledge sharing should be encouraged. This again can be facilitated by Web technology, which can also be used in developing strategic partnerships across the world.
Human Resources Management
Staff should be moved to geographical locations where they can both dissemi- nate knowledge and absorb it.
Travel Agency Case Study, Part 2
Travel agencies that have decided to reengineer in a more radical sense have substantially changed the nature of their businesses. Some have specialized in particular travel destinations or in types of holidays such as historic tours or skiing holidays. Many have transformed their businesses from having a transac- tion and reservation focus to becoming information providers. This change in emphasis can be supported by using the Web to search for specialized informa- tion or by providing large amounts of information in Web sites with links to other sites. The aim behind this is to provide the customer with information first, which will then hopefully lead to a transaction later. The specialized knowledge of niche holidays coupled with the information service attitude are part of a reengineering process that some travel agencies are undergoing to compete with the changes in the distribution chain discussed in Part 1 of the case study.