SAPs PEST Analysis - Assignment Example

Introduction SAP organization was started in the year nineteen seventy two. It deals with development of systems commonly referred to as enterprise resource planning (ERP) in the twenty first century. This organization has grown and currently is renown in the global market. This paper therefore analyses the firm’s platform strategy in the year 2006. This is in terms of the organization’s PEST analysis, its target customers and its new offerings. The paper further analyses how SAP configures and mobilizes its resources. Finally an evaluation will be carried out on how well SAP’s strategy exhibits strategic fit between internal strengths and external forces. (Tsang, 2006) SAP’s PEST analysis PEST analysis is a common tool used to analyze an organization’s political, economic, social and technological environment. This is in relation to how these factors have affected the firm’s operations. Analysis of political environment and how it affected SAP organization shows that the firm enjoyed a favorable political environment that enabled it to thrive. (Baker, 2000) Being a German based firm, the government therein at that particular time encouraged many organizations to increase efficiency and service delivery through incorporation of advanced technology. This explains why many companies like Dell and Nestle USA. The political environment was favoring businesses and this prompted SAP to improve on its products. It is also very important to note that changes in government regulations also prompted SAP to come up with the new strategy in order to increase its market share in the IT business. Sarbanes-Oxley accounting reform law also forced many organizations to purchase accounting software. This enabled SAP to make many sales. (Derek, 2003) Analysis of SAP organization shows that it suffered a great deal because of the poor economy growth in the nation. This occurred early 2000s. This negatively affected the organization’s revenue. Around the year 2003 the economy in Germany was performing so well. This affected profits in very many organizations. Within a short time, companies had very stringent rules concerning channeling finances in the IT sector. Many CIOs had to prove the ROI in relation to purchasing new technology. During this time of economic downturn SAP decided to carry out integration from its subsidiaries key offerings. Another economic factor that affected SAP’s operations were the Sarbanes-Oxley accounting reform law. This law required that organizations use updated software in their accounting operations. This would enable the government to easily carry out auditing and collect tax. This was because it was noted that many organizations were evading payment of taxes. This definitely increased sales in SAP. (Derek, 2003) This definitely made the firm to survive the harsh economic times. Social aspects in the environment also affected SAP’s operations. Population distribution of many large firms in the nation made SAP to strive to give them systems that would improve operations. The culture among organizations from the year 200 to the year 2006 was generally adopting new technology. This made the firm to have ready market. There were times when technology played against and for the organization’s benefit. There were periods of decline in technology which negatively affected the sell of SAP’s products. The market also had a period of ‘digestion’ of technology. During this period administrators in organizations were not willing to invest in technology. This therefore meant that many firms spent less on technology. This also negatively affected SAP but it soldiered on amidst the hard times. Target customers Research on SAP firm shows that its target customers were large business organizations based in Germany and other global markets. SAP targeted organizations or companies that carried out accounting, human resources and manufacturing processes among others. This organization targeted these companies because its systems were able to link all these processes together therefore making operations easier in the businesses. Large companies would benefit from SAP’s products because it would then have a system that would support activities like organizational planning, customer service, inventory maintenance and order tracking among others. (Baker, 2000) Its target market consisted of organizations which could afford millions of dollars to carry out the overall integration of the system. This included organizations like BASF Aktiengesellschaft, Dell Company, Kmart and Nestle USA etc. With the introduction of the new strategy, SAP intends to reach out more to small and medium level businesses. This is after implementation of an attractive pricing policy to suit all its diverse customers. This also still includes large business organizations. (Tsang, 2006) SAP’s new offerings In order to handle technological, regulatory and even global changes in the industry, SAP decided to have new offerings. Research shows that the Company’s CEO and chairman decided to come up with a new strategy to steer the business to greater heights. This was in relation changes in SAP’s business design and general way of doing things. The Company started a NetWeaver. This is a platform that helps in accessing web services. It also helps in linking diverse applications therefore simplifying work. These applications could be enterprise based or even enabled by the internet. Through the use of the NetWeaver SAP is in a position to smash software products into modular and open pieces. This would therefore enable customers to add any other modules that they desire from other Companies. This was on condition that the module meets NetWeaver’s specifications. This means that customers can then modify or even create their own application. This would help customers reduce costs. This is a very viable offer to the market. The firm also changed its pricing strategy to incorporate small, medium and high income earners. These offerings will definitely increase the organization’s customer base and increase its profits. (Tsang, 2006) SAP’s configuration and mobilization of resources Initially SAP highly relied on its internal human resources to carry out product development. These were mainly programmers who were based in Germany. It also had an online network consisting of 132,000 experts. This was in the year 2005. With the onset of the new strategy of NetWeaver, the firm decided to carry out outsourcing of experts to join in the fundamental development team. (Garth and Jennifer 2007) Management in SAP convinced Paolini George to join the team. He has vast experience in the job. SAP is also known to have recruited managers from other competitor Companies like Siebel, BEA and Oracle. Evaluate how well SAP’s strategy exhibits strategic fit between internal strengths and external forces? With the new strategy, SAP has maximized on strength of skilled labor, goodwill in the market and its stability. The organization however should not rest at that as its key competitors; IBM, Oracle and Microsoft Companies. The management in SAP needs to strategize in order to overcome future stiff competition. (Tsang, 2006) Conclusion SAP organization was started in early seventies. It has continued to grow amidst tough times in the business environment. The management came up with a new strategy of NetWeaver that will help customers modify and even access applications. This strategy will definitely mean the organization has to be prepared for a tougher battle with its key competitors like Oracle, IBM and Microsoft Companies. Read More