Entropy Internationals Current Business Strategy - Essay Example

Q1. In 2003, although Entropy International is making a loss, the business environment is changing in ways that might change s’ perceptionsof the value of Entropy’s services. Assess the suitability of this strategy to meet these changing expectations and achieve sustained profitability? Entropy International’s Current Strategy Founded in 1996, Entropy International was a pioneer in the field of Environmental and information management. It was the first company to provide a web-based portal for compliance, performance, information and risk management. Its seamless integration of these components in one software program was instrumental in facilitating a rapidly expanding enterprise with the capability of enabling businesses to realize a marked improvement in its underlying environmental management without any detrimental fiscal effects. In order to accomplish this, Entropy International utilized a unique business strategy. At the heart of this strategy is the notion that there is a singular vision throughout the organization. This vision serves as a guiding force for strategic planning and incorporates the necessary components for the systematic expansion of Entropy’s customer base and its quest for the lion’s share of the market. One of the most significant focal points of Entropy’s business strategy is a dedication to addressing the needs of the customers. In so doing, the management of Entropy ensured that in developing their product, the customer was consulted first and foremost. As a direct result of consulting with the customer and obtaining feedback, Entropy was able to develop a product which satisfied the current needs of its customers and the up-and-coming needs of the market. Secondary to its focus on product development was its commitment to sales and marketing. Entropy was able to realize a great deal of success by expanding its marketing and sales force. In so doing, the company went from one full-time sales person in 2002 to a complete sales and marketing force consisting of three dedicated marketing and five sales managers. The marketing and sales managers worked to procure contracts with new organizations by utilizing an in-house software product which coordinates the sales process. This software has been very effective in that it has been responsible for a 40% sales conversion rate for leads and a 60% rate for proposals. These figures far exceed the current market rates. An integral part of Entropy International’s business strategy is its relationship with governmental bodies. In 2002 Entropy forged a strategic partnership with British Telecom (BT) wherein the two provided services to central and local government agencies as well as departments and authorities throughout the UK. This proved significant for the compliance segment of its market as an integral part of the daily operations of governmental agencies involve ensuring that these agencies are compliant with the many statues. These statutes are often overlooked and their monitoring becomes cumbersome while failure to adhere to them can have significant ramifications the least of which is monetary. In taking an active role in the formation of a strategic partnership, Entropy has made a significant step in ensuring that the momentum established through customer-centric product developmental and marketing initiatives is maintained despite the change in market trends. Essentially, it has ensured that the needs of governmental agencies have been met by partnering with an agency with a long-standing relationship with governmental agencies. A Strategic Analysis A strategic analysis of Entropy International revealed that Entropy was a fiscally sound company between the years of 1996 and 2003. It had expanded significantly between those years and its growth in equity can be attributed to its strong and unwavering vision which was shared by all the employees within the company. This vision was one which placed Entropy at the heart of the “visionary market”. During that time, the growth was fostered by the utility of profits generated from the sales of its products in lieu of outside investments. There was no need to rely on outside investment to fuel development as Entropy had been successful in developing a cost-effective integrated suite of products. In so doing, Entropy was able to sell the three modules of its product for the price of one product. This strategy proved to be beneficial in that it positioned Entropy as a leader in the sustainable development market. This business strategy, however, incorporated tunnel vision in that the rapid expansion of the company was envisioned but there was no clear strategy to handle this expansion. Entropy went from startup to a market leader within a seven year period by establishing strategic partnerships which exploited the many needs of the governmental organizations with regards to compliance. It was the vision of Entropy to develop a marketing strategy guided by the desires of the customers. This vision worked successfully for a great deal of the lifespan of the company. Much of this can be attributed to the fact that the needs of the customers were somewhat uniformed when those needs became divergent, Entropy was unable to cater to the needs in the manner in which it had grown accustomed to in the past. Essentially, the varying needs of the customers facilitated a need for Entropy to seek outside resources to fuel its product development segment. The Response of Entropy’s Business Strategy to the Changing Business Environment In 2003 Entropy International faced one of the most ironic and precarious positions a company which prides itself in ensuring sustainable development for its many customers could face. For the first time since its inception, Entropy International had to rely on outside sources for a significant portion of its new product development and its diversification effort. This was potentially detrimental to product development in that the lion’s share of its products was aimed at sustainable development for its customers. How could a company produce software products to ensure sustainable development for its customers when it could not do the same for itself? The solution to this question was at the heart of the desire for Entropy to critically evaluate its strategic plan and to ensure the viability of their company. One of the most important aspects of ensuring the viability of Entropy was the notion that the underlying market was undergoing a transformation wherein more companies were taking the initiative to be more environmentally responsible. This meant that Entropy was in a position to attract new customers whose primary concern was not compliance with regulatory authorities. The new customers Entropy stands to attract would be customers who operate with a desire to make a contribution to sustainable development. These customers were in need of information with regards to risk identification, assessment and response as well as intimate knowledge of the behaviors within their organizations, environmental control and monitoring. These customers realize that there is a dire need to identify the risks associated with running their organizations and prompt response to those risks are needed. In so doing, they can utilize this information in a proactive manner. In responding appropriately to risks identified during the risk assessment phase, the companies were able to avoid risks that were able to be avoided, accept those risks that were unavoidable and to reduce and share responsibility for those risks that could be ameliorated. This response to identified risks is inextricably linked to the corporate strategy and objectives and it is one that has to remain flexible. While Entropy facilitated this when dealing with its customer, it was unable to incorporate this level of flexibility within its own corporate strategy. This notion was made salient by Mr. Hewitt Roberts when he expressed the fact that Entropy had operated utilizing a singular vision from its inception until 2003 when the market trends made it necessary for Entropy to impact a change in its long-standing business strategy. This necessity was made concrete in 2003 when the financial data indicated a ytd loss of £94,344. One of the most fundamental strategic challenges facing Entropy International in 2003 was the fact that it had established a market share in environmental and health & safety management as well as quality control and monitoring. Much of the customer base for these products proved to be governmental agencies and Entropy had saturated this market as a direct response to its strategic alliance with BT. This coupled with the fact that new product development was necessary in order to meet the needs of both the current and new customers served to create a situation wherein it was necessary for Entropy to seek external funding to meet its productivity needs. In so doing, Entropy was placed in a position where it faced pricing as well as competitive issues. Q2. Entropy International’s managers have identified opportunities for the extension of its existing product range to embrace corporate social responsibility (CSR) and corporate governance modules. Assess the attractiveness of these two product extension options in the light of the current strategic issues confronting the firm. Your answer should incorporate an analysis of the salient stakeholders within the company and the likely acceptability of these options to them. Strategic Issues facing Entropy International The most fundamental strategic issue faced by Entropy as a direct result of the need to restructure the production end of its business was that of a change in the underlying pricing strategy. Prior to 2003, Entropy had undertaken a pricing strategy whereby its products were developed as an integrated set of products which were made cost-effective by ensuring that there was a deep discount for using the different products in unison. The price of this product has served to establish a market share for Entropy as a leader in the compliance and control markets. As a direct response to the divergent needs of its customer base, Entropy felt the need to sell its products separately and to minimize the discount for utilizing multiple products within its product suite while instituting additional service and maintenance fees. The new pricing strategy proved to be very detrimental to the business of Entropy in that both the current and potential customers did not respond favorably to the increased prices. What had previously worked to establish the market share for Entropy now served as a deterrent to customer retention and new clientele acquisition. Much of this was a direct result of the increased cost incurred by Entropy during the setup process and served as a hindrance to the recruitment process involving large corporations. Despite the fact that Entropy was able to articulately demonstrate the advantages of a computerized management system over the traditional paper-based system, the cost associated with the transition was seen by many large corporations as unjustifiable. Another strategic issue faced by Entropy lied in the arena of its competition and the loss of its competitive edge as a direct result of the increased production costs which had to be passed on to its customers in order to ensure that Entropy remained viable. When Entropy entered the market, it produced a unique product—one with very little competition and an unsaturated customer base. Operating in this environment, meant that the demands place on production were limited in that the production cycle was one that was very flexible in that there was no need to accelerate production in order to compete with the other companies within the market. As time progressed, the competition faced by Entropy increased and many of its competitors only produced one product to satisfy the market demand. In producing only one product, the production cycle was somewhat contracted from a standpoint of time constraint. Additionally, the current market trend was one in which there was a great fragmentation in services provided across the various competitors. Entropy was in a position where it created a full scale product which evolved to be very costly while its competitors were producing very specialized modules which proved to be cost-effective. This position essentially meant that Entropy had lost its competitive edge and was in dire need of restructuring in order to remain viable and to compete with the influx of new competitor. Stakeholder Analysis In assessing the potential for profitability of Entropy it is evident that the stakeholders need to make drastic changes in order to positively affect the company’s bottom line. In so doing, the following analysis was conducted. Stakeholders Attitude Influence Actions Estimate Confidence Estimate Confidence European Union Strongly in Favor / M / To develop and market software products which facilitate voluntary corporate social responsibility by showing that such actions can be beneficial to the company’s bottom line by enhancing the desirability of their products. United Nations Strongly in Favor / M / To develop and market software which facilitates compliance with human rights, labor and environmental statutes and standards. Aggregate, pharmaceutical, telecommunications, automotive, transportation, financial services, manufacturing, household goods and food & beverage Customers Strongly in Favor / M / To develop and market cost-effective software Environmental, health and safety and quality management systems as well as monitoring solutions to meet the needs of its long-term customers as well as new customers who are in search of the same level of services. Read More