E-Business Strategy of Omar Abu Bakr Balubaid Co Ltd - Case Study Example

E-Business Strategy of Omar Abu Bakr Balubaid Co Ltd Table of Contents Introduction 1 I.Current IT Strategies 3 II.Futuristic IT Strategies 4 III.Evaluation of IT Strategies 7 IV.Conclusion 10 References 12 Bibliography 16 Introduction The world is witnessing development in a globalizing economic change and rapid economic and technological level and as a result of the depth and speed of this development in information technology in the world entered the era of the Information Society, currently under intense competition in information and informatics have become raw material for any human activity, we find most of the world are racing with including international and local companies to develop a strategy and plans for the development of information technology and this is sought by Omar Abu Bakr Balubaid. Founded in 1952 in Jeddah, the Omar A. Balubaid Co. Ltd. (Balubaid) was among the first car companies in Saudi Arabia. Currently the company has a heritage of more than half a century which has ensued from its rich experience in car sales and in allied activities such as leasing, maintenance, etc. The company has a wide network that comprises fifty branches through which it sustains its operations. Balubaid owns vital agencies of General Motors (GM) and Peugeot and “markets each brand through a separate management, sales force and dealership network” (Omar A. Balubaid Co. Ltd.-website-a, 2006, “Business Sector”). It deals in two major brands of GM, viz. Chevrolet and GMC, and is recognized as one of the best dealers for the company in Saudi Arabia. It has won numerous accolades for its exemplary customer service as well as after-sales service which are in coherence with the standards and professional image of GM. The company continually strives to enhance its standards in terms of services and customer experience by recruiting the best talents, and developing a wide network of showrooms and after-sales service facilities. The company has also diversified its business into real estate, manufacturing, etc. (Omar A. Balubaid Co. Ltd.-website-b, 2006, “Growth and Performance”). Located in the main branch of the company (Center for the Management Company) are six main sections viz. sales, customer relations section, and department of follow-up clients (collection), department of quality management section, credit, marketing department, as well as department managers, supervisors and branch managers. The company's capital is about $300 millions. The corporate objective of Balubaid is, “To be a market leader in the region, with global interests”. It also aims to be “Renowned for its high quality in providing products and services, in a cost-effective and friendly manner that exceeds customer expectation, through the efforts of everyone” (Omar A. Balubaid Co. Ltd.-website-c, 2006, “Market Leader”). In order to manifest these, the company aims at an overall development of employees and processes and at the same time it attempts to gain the trust and loyalty of its agents and customers. I. Current IT Strategies The company was based on records and paper files since its inception in 1997; the company began using MS Office programs to the year 2000, and had introduced EMIS system. The EMIS package provides data manipulation as well as packaging options and at the same time it is helpful in reducing marginal costs. This package also helps in task tracking and auditing (Raasch & Jenks, 2006, “SAP xEM – Benefits”), and hence is necessary for Balubaid for obvious reasons. The company also uses an intranet to maintain connectivity between its different departments, facilities and employees. The EMIS is a software package that is employed by many organisations for the purpose of executing daily activities. The technical foundation of EMIS uses Oracle forms and its back office is in the form of an Oracle database. The other software packages that are currently used in the company are Microsoft Office (Excel, Access), Expenditure Management Information Service (EMIS), and organizational intranet. The primary objective that is manifested by these software packages is enhancing performance in a cost effective and less labor-extensive manner. MS Excel is used for carrying out huge volumes of calculations, while MS Access is an effective data-management tool. It is true that MS Excel and MS Access are necessary for various corporate functions related to accounting, budgeting, database management and other miscellaneous activities. The corporate versions of these packages are quite economical for Balubaid given its scale of operations. The intranet is an absolute requisite for the purpose of uninterrupted connectivity that in turn enhances internal communication. However the problem lies with the EMIS package. Though it is easy to implement, use, maintain and upgrade this cost-effective software, there are a lot of problems associated with it (Hawking, n.d. “Implementing ERP Systems Globally: Challenges and Lessons Learned for Asian Countries”). Firstly, there is limited scope of integration and the software lacks in decision-realization. These impede fruitful alignment of the strategic outcome and organizational goal. Secondly, it requires frequent re-indexing which makes it very slow. The most serious drawback of EMIS is that it fails to achieve effective automation of business processes and it is not integrated with daily processes such as linking to e-mail, automatic export, etc. Hence, the company should look into the matter seriously and rethink on its futuristic IT strategies. II. Futuristic IT Strategies As Balubaid aims at expanding its business network as well as sector diversity in order to attain market leadership it needs to incorporate and institutionalize futuristic strategies that are sustainable and cost efficient. In the light of these two primary criteria, the company should think of optimizing its operational excellence through the E-Business Suite which is the ERP software package of Oracle provided it realizes that the “support is far superior to SAP” (Governance World Watch, 2007, “SAP Arabia Looks to Make Up Lost Ground in the Saudi IT Space”). This decision will be justified as it has been observed that the prospective customers of SAP Arabia are experiencing a lack of adequate support and as a result SAP has started to lag behind Oracle as well as Microsoft. With an aim of expanding the scope of its E-Business, Balubaid should decide to procure software as well as hardware solutions from Oracle Middle East (Oracle Systems) (The Saudi Gazette, 2007, “Balubaid Selects Oracle for e-Business”). The disadvantages of EMIS include limited integration, software design related drawbacks, lack of business as well as process automation, time consuming and limited connectivity. The company should zero in on Oracle’s E-Business Suite as it is believed to be the best technological alternative to maintain its leadership position as well as to augment best practices. The company’s move will again be justified given the features of this software package. The E-Business Suite incorporates solutions for asset lifecycle management, customer, relationship management, enterprise resource planning, procurement, product lifecycle management, supply chain management and manufacturing (Oracle, n.d., “Oracle E-Business Suite”). Though the company has a diverse range of business operations, in terms of strategies, structure and even management, all of them are harmonized by a single corporate vision and they unanimously prioritize customers. Taking this factor into consideration the company should opt for Oracle to offer the best to the customers through systems as well as technology and at the same time achieve cost efficiency, strategic alignment and technical viability (Oracle Middle East, 2007, “Balubaid selects Oracle to Grow Best Practice and Improve Competitiveness”). Voice over Internet Protocol (VoIP) is another strategic alternative that can be opted for by Balubaid to counter the high cost of phone bills. The USP for VoIP is its cost effectiveness (Anonymous-b, n.d., “Is VoIP a Cost Effective Solution for Your Organization?”). According to the product manager of Cisco Systems, this technology is helpful in converging networks while saving costs and increasing productivity (Paulson, 2002, “VoIP Case Study #1”). Reduction in expenses in terms of equipment, toll call and training has been observed to be achieved significantly. Thus VoIP is a sustainable strategy for a company like Balubaid which should reduce operational expenses and other overheads along with time to market (TTM) to improve its profitability and returns on investment (ROI) (Casajoana, n.d., “Hosted VoIP Services for Customers and Providers”). In order to achieve expansion and maximum market penetration Balubaid has to strategically position itself in the market. For this purpose it has to advertise its range of products and services for drawing enhanced attention from the target audience. General avenues for advertising comprise conventional alternatives such as television, radio, magazines, newspapers, etc. (Al-Marwai & Jayashree, 2010, “Strategic Advantages of Creative Advertising Modes-A Saudi Arabian Perception”). The conventional avenues involve huge financial expenses and they cater to a limited audience. Balubaid may take the more advanced routes of online advertising and/ or e-marketing in order to benefit from their inherent benefits. The major benefits of online advertising include cost effectiveness, scalability and accurately targeted marketing. Enhanced competition in the online environment has led to reduction in advertisement costs and hence it is becoming increasingly cost effective and at the same time maximum reach may be achieved through targeted messages. As advertisers get the chance to track the details of the viewers, they may utilize that data to improvise marketing strategies (Anonymous-a, n.d., “The Benefits of Web Advertising”). III. Evaluation of IT Strategies The ERP installation decision has to be evaluated against two main criteria, viz. total cost of ownership (TCO) and functionality. It has been observed both these aspects of ERP are equally significant from the customers’, i.e. the organizational perspective. It has been observed that large organizations, despite being financially strong, prefer to keep their TCO low (West & Daigle, 2004, “Total Cost of Ownership: A Strategic Tool for ERP Planning and Implementation”). Moreover, they are also concerned over the functionality of the software owing to obvious fact that the software forms a part of their developmental strategy. If they lack in their functionality, it will pose a potent obstacle to the manifestation of the organizational mission (Moon & Pathak, 2005, “Enhancing ERP System's Functionality with Discrete Event Simulation”). To be on a safer side Balubaid should procure the necessary software from Oracle for the simple reason that the latter is a market leader in its segment. Figure 1: Comparative Significance of TCO and Functionality (Source: Jutras, 2006, “The Total Cost of ERP Ownership”). Three components of TCO with respect to ERP implementations are the amounts deployed for software, for external service and the company-specific internal costs. Survey findings show that the costs per user/ employee vary with the size of the company. As the organizational size increases, there is an increase in the number of employees and a proportional increase in software costs. This cost has been observed to increase till a certain level of organizational growth after which it decreases. Balubaid being a large business house, it can be forecasted that its software costs per employee won’t reflect a humongous figure. Figure 2: Company Size vs. Software Cost (Source: Jutras, 2006, “The Total Cost of ERP Ownership”) Finally the decision also depends to a great extent on the choice of software vendor. It has been found that Oracle enjoys the highest customer base and hence it will be logical if Balubaid chooses to procure its required software from it. However, if the company wishes to reduce the software cost per employee, it can opt for QAD, Lawson or Infor. Whoever is the vendor, Balubaid’s highest priority in terms of IT strategies is ERP installation. Figure 3: Comparative Analysis of Software Vendors (Source: Jutras, 2006, “The Total Cost of ERP Ownership”) Coming to VoIP, it is found that the components of cost that are involved with this technology are operational start-up cost, capital expenses and ongoing operational cost. The operational start-up cost includes planning and installation, and also troubleshooting. They also include the external consulting costs. The capital expenses include phones and IP switches, i.e. the hardware. Ongoing operational costs, as the name suggests, cover expenses that go towards the management and maintenance of VoIP systems (Gareiss-a, 2007, “How to Reduce Hidden Costs and Find Secret Savings in a VoIP Roll-Out”). Quite obviously, all these costs can be substantially reduced within manageable limits by wisely selecting the vendors and having flexible seletion criteria in terms of requirements. The costs also vary with scale of operations, i.e. the roll-out size (Gareiss-b, 2007, “How to Reduce Hidden Costs and Find Secret Savings in a VoIP Roll-Out”). It goes beyond saying that the cost per employee decreases with a hike in roll-out size. Hence, Balubaid can safely opt for VoIP as its large scales of operation will be able to sustain this technological integration in a cost efficient manner. By virtue of its industrial experience of more that fifty years, the company can also expect certain advantages while selecting the VoIP vendor and may enjoy some price advantage. This should follow ERP in terms of priority. Finally, online advertising may be done through various processes such as search engine optimization (SEO), social media, sponsored search or paid search. The last alternative, i.e. paid search may be further categorized into cost per click (CPC) and cost per mille (CPM). If an advertiser opts for CPM, it has to make payments on the basis of the number of banners/ impressions that is generally determined through an official contract. Whereas, CPC is a more targeted method to tap the desired audience and in this process payment is made on the basis of the number of advertisements clicked by the viewers. By using this method the advertising budget can be tailored and even the time as well as placement can be planned carefully. CPC should be selected strictly on the bases of budget, brand awareness and objectives, owing to the fact that its prices vary with relevance and other strategic factors (Optimum7.com, 2009, “Pay per Click (PPC) vs. Pay per Impression (CPM)”). It can be suggested that Balubaid should opt for CPC to attract a more targeted audience from diverse markets. Efficient integration of AIDA principle will further enhance its success in terms of the click through rate (CTR). After factoring out the possibilities of spam mails, the company can also adopt e-Mail marketing as another strategic alternative to advertise (Markotter, Higgs & Lusk, n.d., “AIDA & Effective eMarketing Strategy”). Once ERP and VoIP are in place, Balubaid may think over switching over to online advertising from the costlier conventional avenues. The figure below will be helpful in giving an idea about the comparative priorities of different strategic implementations by Balubaid. Figure 4: Gantt chart highlighting the Quarterly Priorities of Strategic Implementations IV. Conclusion It has been observed that Balubaid is a strong organization in the Saudi Arabian automobile industry and over the years the company has successfully diversified its business into several verticals such as real estate, transportation, etc. given the fact that the company wants to be a market leader and at the same time wants to expand its business further while winning the trust and loyalty of employees as well as customers, it has realized the importance of cost effective operations. In order to achieve all these futuristic objectives the company is required to implement strategies that will help it achieve the much desired cost effectiveness without compromising with quality and customer delight. Some such strategic alternatives are an efficient enterprise resource planning (ERP) software package, economical and yet efficient e-Marketing and a voice over internet protocol (VoIP). The first alternative, i.e. the ERP software has already been procured by Balubaid back in 2007 from Oracle. The other two strategic interventions have already proven to be economical and favorable for enhancing operational excellence as well as organizational profitability. It can be concluded that Balubaid should shortlist the vendors on the bases of product features and cost, and should institutionalize them for achieving its goals. References 1. Al-Marwai, A. S. & Jayashree, S. Strategic Advantages of Creative Advertising Modes-A Saudi Arabian Perception. 2010. Science Alert. February 28, 2010 < http://scialert.net/fulltext/?doi=jas.2010.349.353&org=11>. 2. Anonymous-a. The Benefits of Web Advertising. No Date. February 27, 2010 < http://www.bmapgh.org/BenefitsOnlineAdv.pdf>. 3. Anonymous-b. Is VoIP a Cost Effective Solution for Your Organization? No Date. February 27, 2010 < http://www.broadllyne.com/IsVoIPCostEffectiveSolutionforyou.pdf>. 4. Casajoana, X. Hosted VoIP Services for Customers and Providers. No Date. February 27, 2010 < http://www.gdspublishing.com/ic_pdf/bme/vozt.pdf>. 5. Gareiss, R. How to Reduce Hidden Costs and Find Secret Savings in a VoIP Roll-Out. September 3, 2007. Cutting the costs of VoIP. February 28, 2010 < http://howto.techworld.com/networking/3633/cutting-the-costs-of-voip/>. 6. Gareiss, R. How to Reduce Hidden Costs and Find Secret Savings in a VoIP Roll-Out. September 3, 2007. Cutting the costs of VoIP. February 28, 2010 < http://howto.techworld.com/networking/3633/cutting-the-costs-of-voip/?pn=2>. 7. Governance World Watch. SAP Arabia Looks to Make Up Lost Ground in the Saudi IT Space. June 2007. February 27, 2010 < http://www.unpan.org/directory/worldNews/include/displayIssueDetail.asp?issueID=30#1206>. 8. Hawking, P. Implementing ERP Systems Globally: Challenges and Lessons Learned for Asian Countries. No Date. Journal of Business Systems, Governance and Ethics. Vol. 2. No. 1. 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