Intellectual Capital and Competitiveness of an Organisations - Case Study Example

?Intellectual Capital and Competitiveness Intellectual capital, and related intangible assets and intellectual property, are the core assets of our time. The intellectual capital of an organization consists of intangible resources and/or assets that are available for use to achieve organizational goals and create value (Choo and Bontis, 2002). How well a business performs all depends on how efficiently its resources are managed. Therefore, it is important to consider the implications that intellectual capital, intellectual property and other intangible assets have on organizational management (Jennewein, 2005). Not so long ago, business resources consisted of 80% tangible assets and resources. However, the picture today is quite different. By 1999, 80% of organizations’ assets were intangible (Andersen and Striukova, 2010). Today’s economy is characterized by intellectual property and assets forming a major part of business assets and resources. Therefore it is paramount to identify how intellectual capital and resources may influence management for the organization’s benefits. According to economic theorists, there are three major components of intellectual capital: human capital, structural capital and customer capital. Human capital represents employee competence, brainpower and knowledge (Berry, 2005). Customer capital on the other hand designates the organization’s relations with its suppliers, customers and distributors. Structural capital represents culture and systems, processes and practices (Bosworth and Webster, 2006). Recognizing the three components of intellectual capital is important for managers who are responsible for ensuring that the organization runs and performs as well as expected. Customer capital is one of the most important aspects of any organization. Customers are invaluable sources if organizational competitiveness in terms of market dominance, financial performance, dynamic capabilities and technological advantage. In today’s business environment, most companies have turned to e-business as a way to boost their businesses (Al-Ali, 2003). This means that a large percentage of an organization’s customers are found online. Managers need to evaluate the way they manage their entire customer capital so as to ensure that they maximize on this important part of the organization (Daum, 2010). This paper evaluates how an organization’s online and offline customer capital may impact on management, and how this influence affects the organization on a whole. Managing Customer Loyalty and Branding It is important for companies to develop strong long term relationships with their target customers so as to build a sustainable business (Choo and Bontis, 2002). ICT has changed the conventional methods used by managers to manage their intangible customer base asset. More and more people are opting to use the internet to do business. In some ways, the online customer base has some needs that are different from those of conventional customers (Bosworth and Webster, 2006). It is for this apparent reason why managers have to come up with ways to work within the new e-market environment so as to satisfy the needs of the customers. The creation of processes or platforms to build and maintain e-business customer loyalty is not a task that a manager can achieve by himself (Jolly and Philpott, 2004). He has to bring on board other customer relations experts to help him draft strategies that will appeal to most of the customers. The first thing that should be considered when creating customer loyalty management strategies is the organizations end goal (Daum, 2010). Although the aim of customer loyalty management is pegged on the idea that the customer has to be satisfied at all times, the way this is done should be determined mainly by the organizational objectives, that it, what the business aims to achieve in the short and long term. The operational front of an e-business should also be considered when managing e-business customers (Bryer, Lebson and Asbell, 2011). This means that the managers have to think about the development and organization of software so as to develop value for their customers as well as for the organization. Coming up with the right technological support to maintain a website and to create a conducive business environment is paramount in any e-business environment (Jennewein, 2005). The technology used should enable the company to manage its customer relationships profitably. Strategies for Managing Customer Loyalty in E-Business Best Product Strategies Customer loyalty in e-business can be managed by developing price mechanism and differentiation which adds value to products so that they can appeal to a wider customer base (Al-Ali, 2003). The strategic focus for best product competitiveness is based on the core business, the industry and the company’s competitors. Competitors are used as benchmarking tools for competitive positioning (Nappo, 2011). Customer value proposition in best product strategies are dependent on product economics, while emphasis is normally placed in the internal rather than external supply chain. The focus for innovation is placed on internal product development and mass distribution channels. Information technology is mainly used for internal support and customer bonding is minimal (Cohen, 2011). The products offered are normally standardized. If an organization plans to use the best product strategy to manage its customers, the management needs to consider the best competitive positioning so as to achieve the best results (Ricceri, 2008). Total Customer Solutions Total customer Solutions are management mechanisms aimed at adding value directly to the customers themselves. The strategic focuses for customer solutions are the components that make up the corporation (Brooking, 2005). These are the customers, the organization and suppliers. Customers are used for benchmarking success while their value proposition is determined by customer economics. This strategy makes use of an integrated supply chain that consists of the company, suppliers and customers. Distribution is done through targeted direct channels while the focus of innovation is jointly held by the company and its customers (Lev, 2001). The level of customer bonding is likely to be high, given the customization of services and products offered by the company (Amit and Zott, 2001). With this kind of strategy, managers should formulate their company policies to engage directly with the customer who in this case is the main point of focus. Total System Lock-In Total systems lock-in involves building network economics so as to lock in consumers to an organization’s products (Teece, 2001). The strategic focus in this case is normally the extended enterprise that comprises of the organization, customers, suppliers and complementors. Relevant benchmarking is done through complementors with the customer value proposition being system economics. The system supply chain is composed on the suppliers, company, customers and complementors. This strategy utilizes massive direct channels while brands are harmonized around and integrated into the system (Ricceri, 2008). Complementors are the key innovators whose focus is on open architecture. This strategy has the highest level of customer bonding which is further reinforced by complementor lock in and competitor lock out. Developing Business Models Value creation in e-business is done to benefit both the organization and its intangible customer base (Anson and Drews, 2007). The creation and use of relevant business models goes a long way in enabling the organization meet the needs of its customer base, thereby improving its profitability. A business model is a structural system that is designed to create value by exploiting business opportunities. As sources of value creation within the e-business environment, business models have to cover those aspects of business that touch directly on the customer. These aspects include: efficiency, complementarities, lock-in and novelty (Jolly and Philpott, 2004). Managers have to come up with new ways of formulating business models that are relevant to the changing e-business environment so as to maintain their customer base and maximize their organization’s profitability and competitiveness. The business model structure has to ensure that efficiency, complementarities, lock-in and novelty are achieved (Holsapple, 2003). To achieve efficiency, the business model structure has to have mechanisms for efficient exchange, bargaining, sales, marketing, communication and transaction costs, transaction speed and simplicity, demand and supply aggregation and transaction volume scalability. The model structure also has to offer complementarities in terms of cross selling, participants’ activities and links between off-line and online transactions (Amit and Zott, 2001). In other words, the e-business has to be managed in a way that offer quality services both online and offline. Managers in e-business also have to consider how efficiently they can lock in their customers to their products and services. To do this they have to structure their business models in a way that will enable the company to offer reliable and secure transactions, direct and indirect network externalities and affiliate programs. To achieve novelty the business model structure should rely on copyrights, patents and trade secrets (Brooking, 2005). This will keep the competition from using the same model to attract the organization’s target customers. The organization’s management should also ensure that the business model content and governance are crafted to meet the individual needs of customers and keep them coming back for the company’s products and services (Al-Ali, 2003). To achieve this, the content of the business model has to be readily available and understandable to the business’s core customers. When information is made readily accessible to customers, it acts as a basis for making informed decisions when purchasing or ordering the organization’s goods or services. The content also has to ensure that there is transparency in transaction processes (Rivette and Kline, 2000). This creates trust among customers who are then likely to return to the company if they need the products or services again. To achieve complementarities, the business model content has to integrate both its online and offline capabilities and resources so as to offer all round services to customers. Complementary products and services from the organization, its partners and customers have to be made easily accessible. The content of the business model has to offer complementarities in terms of vertical and horizontal products so that the intangible customer base and the firm both can benefit (Anson and Drews, 2007). To lock in customers, the business model content has to appeal to a wide range of customers and promote trust (Teece, 2001). The participants on the business process should be able to make use of specialized assets that may include software, dominant designs and personalized services. For novelty the content should have information about new products and services that the company has to offer. Business model governance has to be open and honest so as to achieve efficiency (O’Sullivan, 2009). For complementarities, the governance can come up with incentives that will ensure specialized resources are well developed. Business models governance can also be structured to lock in customers by allowing loyalty programs as well as secure and smooth information flow. Business model governance should also make new incentives easily accessible to customers (Bryer, Lebson and Asbell, 2011). Case Study: Autobytel.com Autobytel.com is a U.S. based automobile retailing firm which uses value sources attributes to run its e-business. To maintain efficiency, the company has put in place measures that ensure consumers can make informed decisions that are invariably enabled by extensive information available on online content, inspection reports, photos and valuation report s for new as well as used vehicles. The dealers themselves benefit from reduced inventory costs since they use high-volume, low selling costs as well as online order taking and delivery. The reduced advertising, marketing and personnel costs are also beneficial to the organization. The e-business’s product research models are faster and more efficient than offline ones. The organization also offers complementary services to its customers and other partners such as financers, suppliers and insurance companies. This is made possible by the fact that there is no barrier of shelf space constraint. Autobytel has a mechanism of combining its rich virtual market opportunities with brick and mortar services to fully satisfy customers’ needs. These brick and mortar services include: test driving, delivery, viewing and car servicing. This way, the company is able to maximize on its intangible customer base to achieve both vertical and horizontal complementarities. To achieve lock in of customers, the company makes use of repeat purchase strategies which are further supported by a reward point system which acts as an incentive to customers. Autobytel has invested heavily on extranet connections as well as subscription contracts. This gives them an advantage over their competitors since their dealers would have to deal with the ensuing high switching costs. However, many of these dealers opt to stay with the company rather than lose huge amounts of money for switching. The company’s website enables its users to enjoy personalized products and services which are made possible by use of cookies, targeted emails and click stream analysis. To achieve novelty in its e-business, Autobytel makes use of a reverse online markets-to-auto retailing system. This is a unique business model that is not in use by many of the company’s competitors. The company also boasts a unique connection between all its business model members, an aspect that is normally absent in many offline companies. This increases competence in terms of service delivery and value creation within the e-business. Autobytel is often considered a pioneer in the area of online automobile business. It is known to have innovative services that are tailored to meet the individual needs of customers in a way that they have never experienced before. Conclusion The e-business environment has greatly influenced changes in management structures in many organizations. The current business environment demands that managers should at all times be aware of the ever changing needs of online customers. Therefore they have to consider those factors that are needed for an organization’s value generation. The creation of customer value proposition as envisaged in the e-business models is something that managers today should adopt. Managers should ensure that their business models cater to the needs of customers who are the company’s foundation for economic value creation. The business model structure has to ensure that efficiency, complementarities, lock-in and novelty are achieved. Company’s manager has to therefore consider those aspects of his e-business which will bring maximum returns after all the aspects of the e-business. There are different strategies for managing customer loyalty in e-business. Making use of the best product strategies, total customer solutions and total system lock-in are some of the managerial decisions that organizations have to make when deciding the best way to carry out their online operations. These strategies should always be implemented by managers with the organization’s goals and objectives in mind. This way it will be possible to efficiently run organizations while at the same time taking care of the business, core intangible customer base. References Al-Ali, N. 2003. Comprehensive Intellectual Capital Management: Step-by-Step. Hoboken, NJ: John Wiley & Sons. Amit, R., and Zott, C. 2001. Value Creation in E-Business. Strategic Management Journal. Vol. 22: 493-520. Andersen, B and Striukova, L. 2010. Where Value Resides in the Modern Enterprise. Strategies of Change. Vol.19: 103-123. Anson, W. and Drews, D. 2007. The Intangible Assets Handbook: Maximizing Value from Intangible Assets. Washington, DC: American Bar Association. Berry, J. 2005. 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