Chapter 3

Strategic Initiatives for

Implementing Competitive
Advantages

McGrawHill/Irwin © 2008 The McGrawHill Companies, All Rights Reserved
 Learning Outcomes
3.1 List and describe the four basic
components of supply chain
management

3.2 Explain customer relationship

management systems and how they can
help organizations understand their
customers

3-2
 Learning Outcomes
3.3 Summarize the importance of enterprise
resource planning systems

3.4 Identify how an organization can use

business process reengineering to
improve its business

3-3
 Strategic Initiatives
• Organizations can undertake high-profile
strategic initiatives including:
– Supply chain management (SCM)
– Customer relationship management (CRM)
– Business process reengineering (BPR)
– Enterprise resource planning (ERP)

3-4
Supply Chain Management
• Supply Chain Management (SCM) –
involves the management of information
flows between and among stages in a
supply chain to maximize total supply
chain effectiveness and profitability

3-5
 Supply Chain Management
• Four basic components of supply chain management
include:
1. Supply chain strategy – strategy for managing all
resources to meet customer demand
2. Supply chain partner – partners throughout the supply
chain that deliver finished products, raw materials, and
services.
3. Supply chain operation – schedule for production
activities including testing, packaging, and preparation for
delivery.
4. Supply chain logistics – product delivery processand
elements including orders, warehouses, carriers, defective
product returns, and invoicing. 3-6
 Supply Chain Management
• Wal-Mart and Procter & Gamble (P&G) SCM

3-7
 Supply Chain Management
• Effective and efficient SCM systems can
enable an organization to:
– Decrease the power of its buyers
– Increase its own supplier power
– Increase switching costs to reduce the threat of
substitute products or services
– Create entry barriers thereby reducing the threat
of new entrants
– Increase efficiencies while seeking a competitive
advantage through cost leadership 3-8
Supply Chain Management
• Effective and efficient SCM systems effect
on Porter’s Five Forces

3-9
 Customer Relationship
Management
• Customer relationship management
(CRM) – involves managing all aspects of a
customer’s relationship with an organization
to increase customer loyalty and retention
and an organization's profitability

• Many organizations, such as Air Asia,

Maxis, other on9 businesses have obtained
great success through the implementation
of CRM systems 3-10
 Customer Relationship
Management
• CRM is not just technology, but a strategy,
process, and business goal that an organization
must embrace on an enterprisewide level

• CRM can enable an organization to:

– Identify types of customers
– Design individual customer marketing campaigns
– Treat each customer as an individual
– Understand customer buying behaviors
3-11
 Customer Relationship
Management
• CRM overview

3-12
Business Process Reengineering
• Business process – a standardized set of
activities that accomplish a specific task, such
as processing a customer’s order

• Business process reengineering (BPR) – the

analysis and redesign of workflow within and
between enterprises
– The purpose of BPR is to make all business
processes best-in-class

3-13
Business Process Reengineering
• Reengineering the Corporation –
– book written by Michael Hammer and James Champy
that recommends seven principles for BPR:
– radical redesign and reorganization of an enterprise
(wiping the slate clean)
– necessary to lower costs and increase quality of service
and that information technology was the key enabler for
that radical change.
– They suggested seven principles of reengineering to
streamline the work process and thereby achieve
significant improvement in quality, time management,
and cost.
3-14
3-15
Finding Opportunity Using BPR
• A company can improve
the way it travels the road
by moving from foot to
horse and then horse to car

• BPR looks at taking a

different path, such as
airplane which ignore the
road completely

3-16
Finding Opportunity Using BPR
• Progressive Insurance Mobile Claims Process

3-17
 Finding Opportunity Using BPR
• Types of change
an organization
can achieve,
along with the
magnitudes of
change and the
potential
business benefit

3-18
Enterprise Resource Planning
• Enterprise resource planning (ERP) –
integrates all departments and functions
throughout an organization into a single IT
system so that employees can make
decisions by viewing enterprisewide
information on all business operations

• Keyword in ERP is “enterprise”

3-19
 SCM systems focus specifically on
suppliers
 CRM systems focus specifically on
customers
 ERP systems focus on everything,
all processes, departments, and
operations for an enterprise
3-20
Enterprise Resource Planning
• Sample data from a sales database

3-21
Enterprise Resource Planning
• Sample data from an accounting
database

3-22
Enterprise Resource Planning
• ERP systems collect data from across an
organization and correlates the data
generating an enterprisewide view

3-23
Why it is important to have an
enterprisewide view of data

3-24