E-Business Strategy Analysis
Table of Contents
Strategic Management Planning is about understanding the business enviornment and choosing the direction for the future of a business organisation. We analyse the type of business the company is in, the current competitors, current performance and how the business and markets are changing.
This report describes a strategic e-business initiative based on ZETA communities case study. It is divided into three parts which includes business and environmental analysis of the ZETA using appropriate business analytic tools taught in the module such as PEST, SWOT and Porters 5 Forces Model to analyse the current competitive enviornment and identifying opportunities. Second part would be on suggestion on implementing certain information systems tools and concepts to provide competitive advantage and customer satisfaction. The third part of the report focuses on assessment of organisational transformation focussing on people, processes and organisational aspects and change management issues.
ZETA or Zero Energy Technology and Architecture Communities was launched in January 2008 by Naomi Porat, marc Porat and Shilpa Sankaran. ZETA’s goal was to create new method for delivering affordable, energy efficient, urban residential and commercial buildings using offsite construction.
The co-founders saw a huge opportunity to improve upon the traditional building methods utilizing factory construction to achieve higher quality, 50 percent faster time to maker and reduced costs, while delivering improved health and environmental performance. Naomi Porat is the CEO, Marc Porat is the Chairman and Ship Sankaran is the Vice president of marketing and communications. ZETA established a research partnership with Department of Energy’s (DOE) “Building America program”, which was a widespread initiative to promote the development of cost-effective, energy efficient building strategies. Current issues in the market are high cost of urban housing, inefficient construction practises and rapidly rising CO2 emissions.
This venture started in 2007, during this time US was facing one of the largest housing crises in the recent history. Both the local and national real estate markets were at near standstill, public funding for affordable housing had all but disappeared and housing prices were falling every day. Global levels of carbon dioxide were growing exponentially, reaching the highest levels in human history at 380 parts per million by 2006. The liberal distribution of subprime mortgages in 2003 through 2005 sent home ownership rates and home values skyward, creating what is now known as the U.S. housing bubble. It was at the intersection of these various market forces; the crash of the housing bubble, a deepening economic recession, rising energy prices and growing interest in green building practices when Marc, Naomi and Shilpa were crafting their new venture. (STANFORD BUSINESS SCHOOL, 2011)
The aim of this part is to provide an understanding of the forces and influences upon the organisation in order to be able to identify the strategic choices. So, the main objective is to analyse and understand the Enviornment, Culture and Resources of the ZETA and the construction industry.
The three tool we are using today are
PEST Analysis – To analyse the nature of the environment
Porter’s Five Forces Model – To analyse the competition in the market
SWOT Analysis – To analyse the opportunities and threats.
The Pest Analysis is the analysis of the environment in which a business operates or tends to offer its trade. It is an analysis of the external macro-environment that affects all firms. P.E.S.T is an acronym for the Political, Economic, Social and Technological factors of the external macro- environment. Pest analysis gives you an overview of the whole situation the business might be in. Precisely it’s a bird’s eye view of the stimulus and the scenarios that surround your trade and business.
|The United States green building council (USGBC) was founded in 1998 which had the goal of establishing a standardized set of national green building guidelines as well as raising awareness of green building principles. The USGBC subsequently created Leadership in Energy and environmental Design (LEED), a nationwide green building certification system.||In 2007, US was facing one of the largest housing crises in the recent history. Both the local and national real estate markets were at near standstill, public funding for affordable housing had all but disappeared and housing prices were falling every day.
The cost of building materials rose almost 200 percent since 1983, with half that growth taking place in the four years between 2004 and 2008.
|labour union membership in construction industry had declined consistently over the previous thirty years a reaching an all-time low of 13 percent of total wage and salary workers in 2006.
Compartmentalization prevents industry stakeholders from sharing or retaining the knowledge gained from newly demonstrated innovations and even from natural ingenuity.
|A bay area-based company called ConXTech manufactured an innovative structural steel system which allowed buildings to be constructed at the rate of one floor per day, versus conventional one floor per week.
The idea of a prefabricated home was introduced in the mid twentieth century with approximately 200,000 prefabricated homes, manufactured by more than 70 companies by the end of World War 2.
SWOT Analysis is a powerful tool that can be used to develop a business strategy by considering all the business’s strengths and weaknesses, as well as opportunities and threats it faces in the marketplace. We classify there again as Helpful and Harmful and Internal and External. Existing business can use this tool to access changing enviornment and respond proactively. (BERRY, Tim)
The Five forces Model is a framework for understanding the competitive forces at work in an industry and can be used for identifying your strategies potential profitability. This business tool was created by Harvard business school professor Michael porter to analyse industry’s attractiveness and likably profitability. The five forces that make up the competitive enviornment are:
- Rivalry among existing competitors
- Threat of substitute products or services
- Bargaining power of suppliers
- Threat of entrants
- Bargaining power of buyers
Rivalry among existing competitors
ZETA’s pioneering role in the industry has given few head-head competitors in this industry such as Pulte/Centex, Palm harbour, champion, Clayton, toll brothers, Guerdon, Project Frog, Clarum and Living homes. Pulte had recently announced a collaboration with the residential Energy Services Network (RESNET), a well-known independent authority on home energy performance, to provide home energy efficiency labels to help consumers compare energy saving across their homes. This has led Pulte to be ranked second in a 2010 study evaluating, the green building practises of the country’s ten largest home builders based on energy use, building material use, eater use and land use. Silvercrest built between 200 to 300 homes every year at a price of $70-$100 per square foot (not including transportation, installation or site preparation costs). Silvercrest’s homes could be found in subdivisions throughout California and the Pacific Northwest and included primarily single family and town home products. Project Frog, founded in 2006, and backed since late 2008 by New England’s Rockport Capital Partners, had made inroads with the school’s market using state of the art energy efficient and green materials ―kits‖ for advanced modular buildings. Like ZETA, Project Frog had broadened its focus, first delivering exclusively to the educational market and more recently expanding to the light commercial sector.
ZETA has one main investor called North West Venture Partners, a bi-coastal venture capital company. They were interested in ZETA because they were the only investor that understood ZETA‘s idea of a 50 percent reduction in time to market, coupled with a new energy efficient building technology would be a game changer in the construction industry. They invested $5 million.
In 2007, US was facing one of the largest housing crises in the recent history. Both the local and national real estate markets were at near standstill, public funding for affordable housing had all but disappeared and housing prices were falling every day. This state of economy meant that the demand of ZETA’s product would be limited, no matter how limited the solution will be.
Threat of Substitution
In 2009, American Modular Systems, a national modular building company that manufactured commercial and institutional modular buildings, developed a green classroom product, Gen7. Gen 7 was the first modular classroom to receive the California High Performance Schools (CHPS) stamp of approval for new school construction. Other players such as Meehleis, Enviroplex and William Scotsman had been in the modular building space for over a decade and had just recently begun to adapt their classroom products to a more environmentally-friendly design
Threat of New Entry
A new company to enter into the market currently is a bit tough because, other competitors in the construction business have 30-40 years of experience and reputation being in the business and have suppliers who have trust in them. For a new company to enter this market its brand, arrange suppliers, arrange funds and get enough profit to run would be a bit tough in the current scenario.
|Forces||Current situation||Near Future|
Value chain analysis is a way to visually analyse a company’s business activities to see how the company can create a competitive advantage for itself. Value chain analysis helps a company understand how it adds value to something and subsequently how it can sell its product or service for more than the cost of adding the value, thereby generating a profit margin. In other words, if they are run efficiently the value obtained should exceed the costs of running them i.e. customers should return to the organisation and transact freely and willingly. (VISUAL PARADIGM, 2016)
ZETA ‘s goal is to create a new method for delivering affordable, energy efficient, urban and residential and commercial buildings using offsite construction.
Value proposition describing the added value and the competitive advantage it provides
Enhance or redefine products and services
- Customer profitability
- Super service
- Convenient solutions
Clear description of the e-business tools that are needed for the new IT enabled service described earlier in the value proposition and the way that these tools could improve the current situation in terms of efficiency, effectiveness, innovation and justification of the proposals • Justification and feasibility of the proposals according to the environmental analysis carried out in section 1 (explain how the business tools will help the organisation at its strategic direction)
ZETA can be benefited by introducing some new e-business too to improve the business efficiency, communication and resource planning. An ERP system, an EDI system and a CRM system can do this function. I will go into each one in details below.
ERP systems ink front office (CRM) with back office (operational support). This system is used by organizations to manage day-today business activities such as accounting, procurement, project management and manufacturing. They are usually designed around a common, defined data structure that has a common database. ERP works on the principle of central coaction of data for wide distribution rather than several standalone databases. (ORACLE, 2013)
Business Value of an ERP system incudes
- Improved efficiency – Through a common user experience across many business functions and managed business processes
- Improved business insight – From real-time information generated by reports
- Consistent infrastructure – From the back office to the front office, all business activities have the same look and feel
- Lower management and operational costs – Through uniform and integrated systems
- Reduced risk- Through improved data integrity and financial controls
- Exceed existing eves of customer satisfaction.
ERP system in ZETA can hep the ZETA employees with a helping hand as the data maintained in spreadsheets and excels needs a lot of manual work and updating requires a lot of time. ERP can be accessed from anywhere and anytime from any device and the reports can be readily printed from the system, thus by saving time and increasing productivity. ERP system can help the management make prompt and strategic business decisions as they have accurate date in a timely manner. It will provide data security by making the information available only to those employees who have been assigned the rights to view them. Also cuts down operational cots by maintaining co-ordination between various departments such as manufacturing, construction and business development.
Electronic Data Interchange (EDI) enables the exchange of business documents between organisations in a standardised format. The purpose of EDI is to eliminate duplicate data entry and to improve the speed and accuracy of the information flow by linking computer applications between companies. (NETEDI, 2009)
Business Value of an EDI system incudes
- EDI is cheaper than traditional paper-based methods
- Can Eliminate manual entry and reduce errors
- Office employee’s workload can be lifted from doing manual paper work
- Increases operational efficiencies and data accuracy
- Exchange of business documents such as Purchase orders, shipping manifests, invoices and receipts between trading partners through computer networks are faster than traditional mail
- Just-in-Time Support- Speeding up communications enhances intercompany operations, which significantly reduces inventory costs. Only the necessary items are shipped by the vendor and arrive directly at the manufacturing or assembly line.
EDI is an application to application layer protocol and requires four tasks in order to create and deliver and EDI message.
- Mapping – Identifying the elements within the database that are needed.
- Extraction – The data is extracted from a database and restructured into a flat file
- Translation – Arranges the data in the exact structure to meet the EDI requirement.
- Communication – Actual transmission of the EDI message which is controlled by communications software
- ZETA raises a purchase order of the raw materials for a new construction project
- This is converted into an EDI format and then transmitted to their supplier electronically
- The supplier receives the data as a Sales order in EDI format.
- The Sales Order can be read, printed or processed into an accounting system
- The Order can now be turned into an invoice which can be sent back to ZETA
electronically using EDI.
Customer Relationship Management is a strategy that business used to manage interactions with customers and potential customers. CRM System is a tool that helps the organisation streamline processes, build customer relations, increase sales, improve customer service and increase profitability. CRM too is used for contact management, saes management, productivity and more. It digitises processes and automates tasks to improve the efficiency in customer relationship management. (SALESFORCE, 2016)
CRM System can hep ZETA in various ways such as:
- Enhanced contact management
- Cross-team collaboration
- Heightened productivity
- Empowered sales management
- Accurate sales forecasting
- Reliable reporting
- Improved sales metrics
- Increased customer satisfaction and retention
- Boosted marketing ROI
- Enriched products and services.
Three phases of CRM
- Acquiring new customers
- Enhance the possibility of existing customers
- Retaining profitable customers
For ZETA a CRM system can increase sales through telesales, cross-selling and up-selling, identifying specific customer needs and provide any customisation for the project if possible. It can be used to provide a necessary information to influence or make a purchasing decision of the property. Also, can provide ongoing customer support with the Zero Energy homes pre and post-sale. You can eliminate quiet a bit of paper work through this system (except for contract signing), such as electronic bill presentation, payment and management. As CRM holds previous customers information, ZETA can use this to provide loyalty schemes and offers
Strategic change means the directions and developments of a long-term vision of a firm’s strategic intent to change. In this section we talk about how the organization will change with the new e-business strategy in place and how ZETA will do this transition smoothly.
A manager or leader can help achieve strategic change by leading and implementing organizational challenges, in our case I think Shilpa Sankaran is qualified and experienced enough to do this role. Her work in management consulting to General Motors, Wells Fargo Bank, AAA, Nike, Verizon Wireless, and Blue Cross Blue Shield Association has proved that she is we capable to do this role.
The change process consists of 5 parts
1) Recognise change
2) Diagnose change
3) Plan change
4) Implement and review change
5) Sustain change
McKinsey 7s Model (7s):
We will follow Mckinseys 7s mode to decide the change plan. This framework upholds the viewpoint that there are multiple factors which influence on an organizations ability to change. It is a powerful expository tool as it highlights several organizational interconnections like staff and skills, strategy and systems which have critical significance for affecting organizational change. (MANAGEMENT STUDY HQ, 2011)
McKinsey’s 7s can help an organization to:
- Determine how it is going to achieve its target goals
- Identify as to how it is going to align departments and processed during merger or acquisition
- Improve the style of the organization
- Examine the effects organizational changes within the company
- Implement policies to improve the skills and competencies of the employees
McKinsey’s 7s model
|Strategy||50 percent reduction in time and new energy efficient building technologies|
|Structure||ZETA has a functional structure|
|Systems||z-Therm, offsite construction, heat recovery system|
|Skills||Architecture, construction, management, engineering|
|Staff||Some staff are full time and others are subcontractors|
|Style||Quick efficient and quality.|
|Shared values and goals||Delivering affordable, energy efficient, urban residential and commercial buildings using offsite construction|
BERRY, Tim. What Is a SWOT Analysis? [online]. [Accessed 22 Nov 2018]. Available from World Wide Web: <https://articles.bplans.com/how-to-perform-swot-analysis/>
NETEDI. 2009. NetEDI. [online]. [Accessed 26 Nov 2018]. Available from World Wide Web: <https://www.netedi.co.uk/edi/>
ORACLE. 2013. What Is ERP? [online]. [Accessed 26 Nov 2018]. Available from World Wide Web: <https://www.oracle.com/uk/applications/erp/what-is-erp.html>
Pest Analysis. 2002. [online]. [Accessed 19 Nov 2018]. Available from World Wide Web: <http://www.netmba.com/strategy/pest/>
SALESFORCE. 2016. What is CRM? [online]. [Accessed 26 Nov 2018]. Available from World Wide Web: <https://www.salesforce.com/uk/learning-centre/crm/what-is-crm/>
VISUAL PARADIGM. 2016. What is Value Chain Analysis? [online]. [Accessed 26 Nov 2018]. Available from World Wide Web: <https://www.visual-paradigm.com/guide/strategic-analysis/what-is-value-chain-analysis/>