Core Computers - Strategy and Changes - Case Study Example

Strategy and Changes Contents Organisational Change Analysis 3 History, Growth and Development of Corecompute 3 Internal strengths and weaknesses of the company 3 External Environment Analysis 4 Life Cycle 5 Opportunities and Threats 5 Analysis of SWOT and TOWS 6 Corporate Level Strategy 7 Business Level Strategy 8 Analysis of control systems and organisational structure 9 Recommendations 9 Current key problems confronting Corecomputer 10 Strategic recommendations 10 Change Plan 12 References 14 Organisational Change Analysis History, Growth and Development of Corecompute Corecompute was started by Harry in the form of a repair lab in the year 1995. The initial core function was as an offsite facility for computer repairs. The company quickly expanded by including an onsite repair facilitator. Corecompute quickly grew by solving administratively and technically difficult computer repair, maintenance, support and needs for Corecompute. This rapid growth of Corecompute can be attributed to the fundamental principles which were focused entirely on customer satisfaction. The initial market for Corecompute included the Pacific Northwest. However, with the expansion of its client base and inclusion of some high end clients such as Boeing, the company is now a worldwide server of computer repair and maintenance. Being Boeing’s subcontractor also opened many opportunities for Corecompute in terms of new clients. Internal strengths and weaknesses of the company Right from the start, Corecompute have been pressing on extraordinary service satisfaction as a long term growth and development strategy. Never the less, the company has been facing few challenges and weaknesses. These strengths and weakness are; Strengths The company’s major strengths include offering services during critical equipments failure and focussing on fixing technology rather than just fixing other manufacturer’s products and competency in fixing equipments of other manufacturers. Apart from that, Corecompute is also known for providing quick service and straining from any kind of political conflicts with the customers. Regular employee meetings are conducted to avoid rumours, keep all employees abreast and updates about changes and developments in the company and open communication lines with the employees enable better communication between employees and management. Offering service at a lower price attracts customers who are then retained though excellent customer service. Weaknesses High turnover among technical, support staffs and personnel support staff has increased service delivery gap. The firm is excessively overloaded with employees in every department because of which the morale is low among employees. Almost 70 percent of the revenue comes from Boeing indicating that many businesses are not generating any profit. Some departments such as time and material customers and warranty business have been constantly unprofitable (Ridgman, 1996). The pressure among technical support staffs is high and there is an urgent need to provide them appropriate training. Decision making process at Corecompute is highly democratic which results in excessive wastage of time and very few attainable results. There is an acute absence of any formal strategy right from the start of Corecompute. As a result, the company has not defined any clear strategic plan for future development and growth External Environment Analysis Corecompute falls in computer services sector which is inventory and labour intensive. Thus, companies are constantly making strategies for reducing the inventory and labour intensity and holding the diminishing profit margins. Porter’s five forces will briefly analyse the current trends and practices in the computer service industry. Industry Rivalry: Industry rivalry can be considered as high and the computer service industry is filled with companies providing repair and maintenance services such as IBM, Vanstar, DEC and HP. Apart from big names, the repair and maintenance of computers is also done by numerous local and individual contractors having outlets and shops in nearby localities. Threat of new entrants: Original manufacturers of equipments are now expanding their business to service operations as customers prefer one-stop solution for all technical and computer related issues. The capital required is low and an already established customer base among these equipment manufacturers makes threat of entry high in this industry. Bargaining power of Suppliers: Large organisations prefer one single service provider for nationwide service which can threaten the existence and expansion of smaller suppliers such as Corecompute. So, supplier’s bargaining power is low. Bargaining power of customers: Bargaining power of customers in the repair and maintenance industry is high because of existence of numerous big and small services provides, diminishing profit margins and low customer loyalty. Threat of Substitutes: A possible substitute for repair and maintenance industry is customers repairing their computers themselves. Engineers and technicians generally fall in this category. Never the less, the threat of substitutes is low in this sector. Life Cycle At present, Corecompute is in a mature stage. The repair and maintenance service department overloaded with employees and clients. The company needs to diversify into new areas and expand its business opportunities for a continuous growth and development (Ridgman, 1996). Opportunities and Threats The external threats and opportunities are described as below; Opportunities New business opportunities for the company are numerous. For instance, Corecompute can become subcontractor for larger manufacturers. Being a small service provider gives Corecompute the opportunity to get those businesses which are outsourced by bigger firms. The company can also expand its business by offering a total service, maintenance and recommendations package for its customers. Apart from that, Corecompute can also expand its network services business by offering services in hardware compatibility, software design, maintenance, installation and integration. Including strategic human resource strategies such as incentives and promotions can enhance the motivation level of employees and reduce overall turnover. Threats Companies are increasingly focusing of providing one-stop services for its customers. This could result in closure of Corecompute’s business. At present, the company is overstaffed which can lead to unnecessary office politics, loss of talented employees and increase is overall costs due to new hiring and training requirements. Intense competition is the repair and maintenance industry makes it difficult for small organisations such as Corecompute to get new business and clients. Majority of service failure occurs due to unavailability of proper equipment or part while working on-site services. This increasing gap between supply and demand for parts might lead to dissatisfied and lost customers in future. Analysis of SWOT and TOWS With the help of SWOT analysis, various findings can be put forward further helping in making strategic recommendations. The SWOT analysis can be further stretched to TOWS matrix for analysis the findings. SO Strategies: The firm is known for its excellence service delivery process. Corecompute promises to provide service parts within 24 hours. This service delivery competency can be utilised to expand its service into other areas such as software design, consulting and sub-contracting businesses. WO strategies: The firm focuses on maintaining strong employer-employee relationship. For this, the company has established many strategies such s regular meetings and open communication channels. These strengths can be used while improving the motivation level among employees and reduce turnover, especially among technical and support staff. Another major weakness of Corecompute is absence of a strategic framework for future. By introducing a strategic future plan for growth and development, the company can not only increase the overall morale of employees but also provide a definite direction to them increasing employee loyalty towards the organisation (Van Woerkum, Aarts & De Grip, 2007). ST strategies: Corecompute’s major strengths include repairing equipments of other manufacturers quicker than its closest competitors and providing services at a very low cost. This low cost advantage can be utilised to convert potential manufacturing companies into clients. WT strategies: At present, the company is facing overstaffing issues and few departments are overcrowded leading to high office politics and attrition. These staff can be transferred to the new business and can also be given new roles and responsibilities such as online customer service handling and in-house online marketing strategies. Overstaffed departments can be reduced by expanding into new service-providing businesses. Findings from TOWS matrix While Corecompute have specific competencies such as competitive pricing, fast service delivery and efficient human resource, it has lost its competitive advantage due to intense competitive rivalry, entry of new firms in the repair and maintenance business and reducing profit margins. The company has been generating substantial profits and revenues in the past and this can be utilised for future expansion. The high turnover can be reduced by offering employees with new job responsibilities. Overall, developing new business and corporate strategies will help in turning around the ailing business and improve its position in the computer repair industry. Corporate Level Strategy The mission of Corecompute is to provide effective repair maintenance as well as support services to numerous information processing companies. It is a major service provider for microcomputer hardware. Corecompute’s business is inwardly directed and its gives emphasis to its employees and customers in a similar manner. The corporate level strategies are heavily influenced by the culture of the Corecompute. The company makes sure that the employees are provided with a flexible, nurturing and supporting work environment. Therefore, layoff and employee termination rarely occurs, even if an employee has not been able to perform for a considerable period. The corporate level strategy of Corecompute includes diversification into related businesses such as computer maintenance, supply of equipments and parts and hardware services. With the expansion of its business, the corporate level strategies have also changed. For instance, requirements of new clients lead to frequent hiring of salesman and technical staff. Also, the company has increased its investment in software and systems for enhancing the overall efficiency of the operations. Corecompute also developed a comprehensive information system for generating information on inventory, labour usage and cost structure of the overall business. While the company’s core business of computer repair service has been the major source of revenue and profits, other extended services such as serving one-time customers and warranty business have not been profitable (Lynch, 2005). Business Level Strategy The major competitive strategies followed by Corecompute have been low cost strategy. During the initial period, this low cost strategy proved to be extremely fruitful by giving Core Compute a competitive edge over other computer services and maintenance firms. Also, the company is quicker in servicing equipments of other manufacturers. New business acquisition occurs through the bidding process. After successfully establishing Boeing as a client, Corecompute has been excessively trying to acquire new clients. These clients are both government and commercial. Pricing has been the major strategy during these bidding processes. However, profitability and feasibility of the contracts is determined based on intuition and relationship history with clients, as opposed to financial analysis. The company’s business level strategy also involves internal promotion so that employees remain loyal to the organisation. The company has successfully established various functional level strategies since its inception. The major functional competencies are competitive and low cost pricing, technical competencies, experienced managers and supervisors, quick customer responsiveness and innovation in terms of qualitative service. For instance, Corecompute’s 24 hours delivery promise provides an edge over its competitors. Another functional level strategy deployed by the company is recycling and using repaired and recycled used parts in its maintenance service. Field engineers, lab/depot services and technical support are the major service providers in the operations department. The development strategy included establishing a separate purchasing department linked with the company’s inventory system. At present, top five accounts generate about 84 percent of Corecompute’s entire revenue. This indicates the possibility of a major chunk of clients being unproductive. Customer retention has been one of the fundamental strategies for Corecompute and the company has been constantly upgrading its technical and human resource competencies. an analysis of Corecompute’s business level indicates that with increasing competition, increasing gap between inventory and supply and diversified customer demand, the company can longer rely on low cost as a competitive strategy. The business level strategy should focus on diversifying into new businesses to achieve competitive advantage and increase functional level competencies to achieve differentiation (Caldwell, 2006). Analysis of control systems and organisational structure The control system and organisational structure of the company include its vertical and horizontal differentiation. After the CEO and Chairman, the organisational hierarchy includes four senior managers. The company horizontal differentiation includes sales, technical services, human resource and operations. Being a small organisation allows the higher managers to have a long reach over the middle and ground level executives. The operations department involves in accounting, logistics, purchasing and information system development. While the company has outsourced its information management and control system, it is yet to be fully functional and effective. Overstaffing has become a major administrative issue in the organisational structure subsequently resulting in high employee attrition. The management has also recognised the need for training its senior managers in areas such as management development. Corecompute is basically a medium sized company will few big accounts and numerous smaller accounts. In such a situation, the senior managers believe that establishing such big and comprehensive information system might not be profitable. Corecompute has maintained a closed-loop promotional policy where only internal employees are hired for managerial and supervisor position. While, this strategy has been fruitful in developing long term relationship with its employees, the policy has restricted entry of outside talents and subsequently external knowledge. As a result, the level of creativity and new idea generation has become stagnant for a while. Off late, the company is also facing issue such as conflicts among senior members regarding job responsibilities, growing office politics due to over-crowded departments. A major reason for employee attrition, apart from over staffing, has been due to ineffective operations. Recommendations The above case study analysis of Corecomputer facilitated identification of key issues within the firm. Current key problems confronting Corecomputer 1. Ambiguous mission and vision: the mission and vision of the company is not clear, resulting in ambiguity among employees, management and customers. 2. Lack of a strategic business plan: Since its inception, Corecompute have been working without any form strategy or business plan. Lack of a proper future plan can threaten the company’s long term growth and development intentions. 3. Imbalanced staffing: In the past, Corecompute has been mindlessly adding employees, sometimes without any immediate requirement. As a result, many of the departments have become overcrowded leading to unnecessary organisational politics and loss of talented managers. 5. Lack of skilled staff: some departments such as technical support lack skilled staff leading to inefficient service delivery process. 4. Too many unprofitable and tedious business arms are pulling down the overall revenue and profits of the company. 5. Ineffective IT systems: The present IT is not integrated properly and is causing more loss in terms of cost and time. 6. Loss of price edge: the company is losing its price competitiveness as many new entrants in the repair and maintenance industry are also offering services at similar price range. From the above organisational analysis of Corecompute, it is clear that the organisation will have to undergo changes in its strategies and structure. Strategic recommendations 1. Related business diversification At present, the company is majorly a computer repair and maintenance service provider. However, customers are increasingly demanding a one-stop solution for their technical queries. Corecompute strengths include a vast resource of skilled and dedicated human resource professionals, strong mission and value holding the firm and zeal to grow and develop. These competencies can be utilised by the management while diversifying into new business. These businesses can include providing networking services, hardware repair and maintenance and consulting services. Consulting service will be a viable business option as the company has a huge pool of highly experienced senior staff (Macdonald, 2000). 2. Operating on tight-loose principles Corecompute can greatly enhance the efficiency of its employees by encouraging a mixed control. While the central decision making process will be firm, employee should be encouraged to show entrepreneurship quality and handle tough decisions with little external help. This means employees can make their own strategies and action plan to finish their task. This will increase creativity among these employees as well as increase their efficiency. At the same time, Corecompute should also ensure that all activities and tasks are conducted within the purview of the company’s ethical policies. Daily submission of employees and worker’s activity can be an effective method of monitoring the work completion process (Henry & Mayle, 2002). 3. Recruitment of senior managers from external sources While internal promotion is an effective strategy to ensure employee loyalty, it also stagnate creativity and innovation within a firm. Recruiting external professionals from diverse backgrounds and rich experience in the decision making position will induce innovative and new ideas among the team members. 4. Training activities at all management level Training of senior managers and upper management is as important as training of ground level employee and field executives. Being a small and closed organisation, it is crucial for Corecompute’s management to keep themselves abreast of latest market and industry information and changes in customer buying patterns and demands. Junior and middle level executives can be kept engaged and motivated by giving them new challenges and projects and also reshuffling their job responsibilities according to skills and experiences. 5. Setting distinctive organisational culture Corecompute can greatly enhance its competitive positioning by creating a distinct and supportive organisational culture. While the company organises regular employee meeting and has open communication channels, information meetings between top management and lower and middle level executives can also help in enhancing the quality of communication. Being the small company, Corecompute’s can include informal office parties where employees can bring their families, invite employee’s children into office for children’s day celebration and granting one or two emergency leaves during critical conditions. 6. Increasing technical competencies Being a repair and maintenance service firm, it is crucial for Corecompute to increase its technical competencies. For instance, better technology will help in enhancing communication between field task force and technical team members. Change Plan An organisational change plan will help in proper implementation, review and monitoring of the recommended strategies; 1. Readiness of organisation for change Before strategy the organisational change plan process, it is important to understand the readiness for change among organisational members and structures. These include contacting the business units and action groups about the change process. The readiness for change also includes selecting and notified the business units and functions which where changes will be implemented. The training and business integration facilities such as IT implementation, types of training and schedule of training should also be notified in advanced to the target departments and functions (Fenton & Pettigrew, 2000). 2. Planning the change process The organisational change process will be rational and non-rational. The rational change process will include setting up of a new organisational structure and implementation of new software for operational efficiency. Non-rational change process will include informal exchange of information and notification building horizontal and vertical relationship within the organisation and increasing collaboration among employees for an effective change process (Cole, 2004). 3. Stakeholders analysis While conducting any organisational change process, it is important to evaluate the stakeholders and the influence of organisational plan on them. This analysis will further help in analysis the resistance level of stakeholders. The major stakeholders in this change plan will be employees, customers, clients and suppliers. While employees will be directly affected, suppliers and customers will have an indirect impact (Government of Western Australia, n.d). 3. Action plan Action plan will include communications plan, training activities, resistance plan, and review and monitoring process. Communication activities: The communication activities for employees will include notifying them through emails, formal and informal meetings and announcements by team leaders. The change process within the organisation will occur in intervals reducing the pressure among employees. Every department will be notified separately about the changes such as implementation of new software, inclusion of new employees and managers and changes in job responsibilities. Training activities: Training activities form a crucial part in the change management process. Current level of knowledge and skills of the target groups will be identified. Prerequisite knowledge can be provided through one-to-one interactions for better prepared target audience. Training program will be conducted by in-house trainers as well as external consultants. The training will be divided into two categories; technical training and soft-skills development training. The preferred training delivery mode for technical training will be seminars, on-site training activities, workshops and lectures. Soft-skills training will be conducted through brain-storming sessions, leadership activities, role-reversal trainings and communications training. The training sessions should be continuously monitored through regular assessments and tests during the training process (Government of Western Australia, n.d). Resistance plan: One of the major hindrances to a successful organisational change is the resistance from employees. Root causes for change resistance can be fear of lay off and increased competition, disparity among employees, inability to handle pressure and fear of failure (Burnes, 1996). Corecompute can identify relevant resistances by supervisor input, employee feedback, compliance audits and issues within the project teams. The company can also conduct a survey tool where employees can freely raise their issues, fears and worries regarding the change process. After the identification of the resistance, Corecompute can provide coaching for managers and employees who are unwilling to accept to the change process. Apart from that, clear communication should be made regarding the consequences of not supporting or continuously resisting the change process. Ongoing review and monitoring process: Continuous assessment of the change process will help Corecompute to implement corrective actions as well as celebrate the successful implementation in various departments and business units. References Burnes, B. (1996). Managing Change: The Emergent approach to change. London: Person Education Limited Caldwell, R. (2006). Agency and Change. London: Routledge. Cole, G. (2004). Management Theory and Practice: Organizing for Management. New York: Thomson. Fenton, E. & Pettigrew, A. (2000). The innovating organization. London: SAGE Publications Ltd London. Government of Western Australia. (n.d.). Change management plan workbook and template. Retrieved From http://www.nrm.wa.gov.au/media/10528/change_management_plan_workbook_and_template.pdf Henry, J. & Mayle, D. (2002). Managing Innovation and Change. London: The Open University. Lynch, R. (2005).Corporate Strategy: The Implementation Process. London: Pearson Education. Limited. Macdonald, S. (2000). Information for Innovation. London: Oxford Ridgman, T. (1996). Windows of opportunity: Timing and entry strategies. Industrial Management & Data Systems, 96(5), 26 – 31. Van Woerkum, C.M.G., Aarts, M.N.C. & De Grip, K. (2007). Creativity, planning and organizational change. Journal of Organizational Change Management, 20(6), 847 – 865. Read More