Week 12: Process Redesign (3) and Implementation

References:

Mabin, V.J., Forgeson, S. and Green, L. (2001), “Harnessing resistance: using the theory of

constraints to assist change management”, Journal of European Industrial Training,

Vol. 25 Nos 2-4, pp. 168-91.

Mumford, E. (1999), “Routinisation, re-engineering, and socio-technical design: changing ideas on

the organisation of work”, in Currie, W.L. and Galliers, B. (Eds), Rethinking Management

Information Systems: An Interdisciplinary Perspective, Oxford University Press,

New York, NY.

Lewin K. 1951. Field Theory in Social Science. New York: Harper & Row

Davenport, T. (1995), ``SAP: big change comes in big packages'', CIO, October 15.

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Week 12: Process Redesign (3) and Implementation

Introduction

Week 12’s lecture talks about the IT integration for BPR and change management during the BPR project implementation.

IT tools assist in IT integration for BPR

1. ERP systems

Enterprise resources planning systems (ERP) allow the sharing of real-time information

between manufacturers, customers and business partners.

Benefits of using ERP systems include: shorter manufacturing cycles; increased communication between consumers and business partners; better supply-chain management; and greater control of cost and operation management.

One application used commonly in ERP application is SAP, an enterprise software application that allows a tight coordination between sales, manufacturing, procurement, finance and accounting. Many companies utilize SAP for global integration across geographical business units. For instance, AutoDesk company implemented SAP with significant business results. The quote to time shipped reduced from two weeks to 24 hours and quarterly accounting preparation time was decreased by 50 per cent (Davenport, 1995).

2. Outsourcing

One of the most common trends in the IT industry in the past several years has been the use of project outsourcing. Outsourcing is an attractive choice because it allows companies to implement new technologies quickly, cut costs or improve IT services.

Companies seeking radical change might not be able to find outsourcing a source of substantial productivity gain. However, for smaller projects, outsourcing can be a cost-effective solution.

3. Services of consulting firms

Consulting firms and the use of analysts are key during the planning and implementation stages of reengineering. The major reason that companies turn to these types of companies is to prevent making poor business decisions. The use of outside consulting firms is critical success factor for BPR projects as it allows the company to receive the timely, precise information regarding new technologies. However, the use of consulting firms should be limited to aiding the company in making informed decisions, that is, a consulting firm should not be in charge of the internal decision-making process.

4. Enterprise software

Apart from ERP systems, other enterprise software that can lead to dramatic improvements in information processing can be used. Supply chain management systems allow suppliers, distributors and retailers to connect. Furthermore, supply chain management systems focus on supplier issues and are often more affordable than larger, more functionally integrated systems like SAP. Sales and business process automation is also becoming an increasingly

popular area for reengineering. One reason for its rising popularity can be attributed to the falling prices of software.

Another popular area for software implementation is in business process reengineering (BPR) software. Although some of these software applications are limited in capabilities because each company has different situation, the majority of packages will give companies a good start with the planning aspects of a reengineering project.

Change management

For a BPR project to become successful, the organization should know very well about how to manage the impact of change in the organization. The top management should have the “art” of dealing with people in the changing environment. Effective change management should consider soft issues around human. It would avoid resistance to change among employees (Mabin et al., 2001). Only with the full participation of employees can a BPR project run smoothly.

Change management refers to how a manager or leader manages the potential impact of change to make people accept it in order to implement change of business process. It is the process of continually renewing an organization’s direction, organizational structure, and capabilities to serve the ever-changing needs of external and internal customers.

Change management is not just about managing change of business processes. According to Mabin et al. (2001), based on the theory of constraints, they stated that this theory provides a management model that incorporates the utility of resistance actively, directly and positively. To make radical business process change a success, the concern for people is vital, and that is what top management should consider. Mumford (1999) highlighted that lack of concern for people will make BPR not succeed. In addition, Mabin et al. (2001) discussed the importance of training and development in change management to make people well equipped with knowledge and skills of different aspects, which therefore would reduce the fear of uncertainty due to changes. The top management should figure out the right way of managing people for adapting to and adopting change so that the changes will make succeed and the company would receive a benefit from this in the long run.

Top management should also lay the emphasis on the employees’ satisfaction and treat them in the best way. The organization should employ a number of proactive methods to ensure employees develop their full potential. Examples include identification of training and development needs, encouraging grants and research, fellowships, and professorships. Thus, to make BPR work successfully, it must be executed by people within the organization. Most importantly, the organization should know the art of managing possible impact of change.

Below is a video showing the important issues of change management. The speaker has suggested that motivation, leadership skills, development and styles and business as the major factors of change management.

Change Process Model - Lewin's 3 Stage Model

This model states that organisational change involves a move from one static state via a progressional shift, to another static state. The model, also known as Unfreeze-Change-Refreeze, comprises a three-stage process of 1) unfreezing, 2) changing and 3) re-freezing.

Stage 1: Unfreezing

This stage involves creating the right conditions for change to occur. By resisting change, people often attach a sense of identity to their environment. In this state, alternatives, even beneficial ones, will initially cause discomfort. The challenge is to move people from this 'frozen' state to a 'change ready' or 'unfrozen' state.

This first stage involves creating the right conditions for change to occur. This includes preparing the organization to accept that change is necessary, which involves break down the existing processes before you can build up a new way of operating business processes.

Key to success of first stage is to show why the existing way of doing things cannot continue. For instance, declining sales figures, poor financial results or worrying customer satisfaction surveys.

To launch BPR successfully, organizations need to start at its core – organizations need to challenge the beliefs, values, attitudes, and behaviors that currently define it.

This first part of the change process is usually the most difficult and stressful. When organizations start cutting down the "way things are done", it will cause discomfort to employees. Top management should avoid resistance to changes among employees. It is the responsibility of top management to gather the employees to participate in the BPR project fully. This can move people in the organization form “frozen” state to “unfrozen” state for changes.

Stage 2: Changing

Good leadership is important, and coaching, counseling or psychological support may be needed. The end goal of this stage is to get people to the 'unfrozen' state and keep them there.

The changing stage is the stage where people begin to resolve their uncertainty created in the unfreezing stage and look for new ways to operating the business. People start to believe and act in ways that support the new business direction.

The transition from unfreeze to change does not happen overnight. People take time to embrace the new direction and participate proactively in the change. In order to accept the change and contribute to making the change successful, people need to understand how the changes will benefit them. Not everyone will fall in line just because the change is necessary and will benefit the company. Therefore a reward system should be well set to reward the employees.

Good leadership, coaching, counseling, psychological support, good time management and communication between different levels are the keys to success for the changes to occur. Good leadership can ensure the smoothness of BPR project implementation. People need time to understand and adapt to the business changes. They also need to feel highly connected to the organization throughout the changing stage.

Stage 3: Refreezing

The organization is ready to enter the refreezing stage when the changes are taking shape and people have embraced the new ways of working. The outward signs of the refreeze can be a stable organization chart or consistent job descriptions. The refreezing stage requires the organization and people within the organization to ensure that the changes are used all the time and that they are incorporated into everyday business. By re-establishing a new place of stability and reconnecting people back into their safe and familiar environment, employees feel confident and comfortable with the new ways of working.

Some people might question about creating a new sense of stability because of the rapid changing business environments. Without the refreezing stage, employees get caught in a transition trap where they are not sure how things should be done, so nothing ever gets done to full capacity. In the absence of a new frozen state, it is very difficult to tackle the next change initiative effectively and employees might lost motivation to business changes.

Organizations should celebrate the success of the change with employees during the refreezing stage. This helps people to find sense of belongings and they can feel that the company thanks them for enduring a hard time for changes. This helps them believe that the BPR project will be successful.

Examples of change management

British Airways (Past example)

Early in 1981, British Airways brought on board a new chairperson. When this chairperson started, he noticed that the company was very inefficient and was wasting a lot of valuable resources. To make the organization more profitable, this chairperson decided to restructure the entire organization. He realized that the best way to do this was through change methodology management plan.

Systematically, the company began reducing their workforce. But, before they did this, through his change management leadership, the chairman gave the company the reasons for the restructuring and privatization of the company in order to prepare them for the upcoming change. Thus, through leadership and communication, he directed his company through a difficult time that could have been disastrous without effective change management resistance communication.

California State University (Recent example)

A more recent example can be found at California State University (CSU). Any IT system change that happens at the main campus has to go through every satellite campus, meaning those 23 campuses and thousands of employees, staff, and students must adapt their IT systems as well. Dealing with change at a smaller organization can be a nightmare by itself; it’s worse at a larger organization like CSU.

But, instead of merely throwing their hands up in disgust, the IT department decided to institute an automated change management system. Using Cisco’s Pace functionality, the company can now make upgrades that will automatically make changes to the entire system. And, to make their change management strategy even more effective, they are now defining who can use what system and what changes they can make to their designated area. Their change management strategy considered the human factor and not only included the automated system, but also defined roles of change so that it would minimize the confusion and issues when a change has to be instituted.

======= End of Week 12 Review =======

Week 7 - BPR Methodologies

References:

Hammer, M., Champy, J., 1993. Reengineering the Corporation: A Manifesto for Business Revolution. Nicholas Brealey, London.

Ovdienko (2005), Process Improvement Through Benefits Management (PITBM)- Price Waterhouse Coopers. Available from: http://www.pwc.com/en_UA/ua/assets/pwc_pitdm_eng.pdf [Accessed: March 2, 2012].

Week 7 – BPR Methodologies

Introduction

In week 7’s lecture, we have studied the BPR methodology. There are 5 main phases of the BPR methodology introduced in the lecture. In each phase, there are specific objectives to achieve before the BPR project goes to the next stage. In fact, there are many different kinds of BPR methodology as every reengineering project needs its own different attitude, because every company has different business processes and organizational structure. Therefore every company requires a unique BPR methodology in order to have dramatic improvement.  

In this lecture review, I will introduce two BPR methodologies, one by Hammer & Champy(1993) and one by Price Waterhouse Coopers (PwC). The former one uses the classic BPR view while the latter one uses the modern BPR view, i.e. by improving the existing BPR methodologies to achieve better business benefits through BPR implementation. 

1.      Hammer & Champy

Hammer and Champy methodology was developed in 1993. This methodology breaks into six steps:

1.1.Introduction into Business Reengineering

The first step is the initiation of BPR project by company top management. The top management is supposed to communicate with the employees about the current situation and the need for reengineering. During this stage, there is a vision formulated. Hence, there is limitation that this step does not include learning process prior to vision creation.

1.2.Identification of Business Processes

The second step is identification of all business processes of the company. These processes are studied in the interaction point of view, how they interact with other processes within the company or outside the company and how do they interact with external factors as customers requirements. Examples of output of this stage include list of processes in form of graph, tables, etc.

1.3.Selection of Business Processes

Based on the collected data in stage 2, the critical processes (processes that affect customer the most) are identified. Another group of processes (the processes that are the easiest for reengineering) is selected –– that means troubles are less likely to occur while reengineering those processes.

1.4.Understanding Selected Business Processes

Aim of step 4 is to understand the basics of the processes. After understanding of the business process, there is benchmarking taking place. This benchmark should find the difference between the current state of the processes to the state of the processes after the reengineering. In this step process is viewed as a whole, but not functionality-based.

1.5.Redesign of the Selected Business Processes

This phase is the key step of the Hammer & Champy’s methodology. This step should redesign the process both technically and socially (the work environment). Output of this stage could be development plan of the company.

1.6.Implementation of Redesigned Business Processes

During this step, organization launches the implementation of the reengineered processes. This methodology deals with the implementation stage only at the project management level.

2.      Price Waterhouse Coopers (PwC)

Price Waterhouse Coopers is one of the leading consultancy companies in the world. It has its own methodology for business process reengineering. The name of its BPR methodology is Process Improvement Through Benefits Management (PITBM). This methodology is not information system oriented. The main benefits of PITBM are to achieve largest benefits for the organization by applying only the changes. 

Unlike Hammer & Champy’s methodology, this methodology breaks into five stages:

2.1.Assess

During first stage, the scope of the project is finalized. The core BPR team is also created. All the business processes, performance measures and facilities are assessed. There could also be optional benchmarking part for this stage. The most important aim of this stage is to prepare whole project management benefits – to ensure management involvement. 

2.2.Design

The design stage serves to design all the TO-BE business processes and organizational changes as well as required technology and facilities. The BPR team will explore the implementation alternatives and select the most optimum one for the company. 

2.3.Construct

During this stage, the technology, which is going to be implemented is selected and installed. The job description, performance measures and targets are prepared. Documentation for the whole project is created in this step, this documentation have to be prepared according to the standard established in this stage. The last step of this stage is the implementation of information systems, processes and changes to organization structure.

2.4.Implement/Operate

During this stage, benefits realization activities are launched and monitored. After the successful launch of selected activities, the continuous improvement program is also launched.

2.5.Change Management

This stage is marked as the fifth step, however it is taking place all over the reengineering project. This is very important in order to fulfill the need to communicate change to all the employees. This is also to resist the rapid change in business environments.

Further Analysis on the two methodologies

The worst imperfection within Hammer & Champy‘s methodology is lack of the involvement workforce into the project. Just top management starts projects. The PwC methodlogy is able to achieve this as it starts to choose the core BPR team at the first stage of BPR implementation. Another flaw of the Hammer & Champy‘s methodology is that it does not include performance measurement step after reengineering. Therefore, there is a lack of BPR project evaluation. Nevertheless, the PwC methodology will launch and monitor the benefits realization activities to evaluate the effectiveness of the BPR implementation. It will also implement the continuous improvement program for further improvement

Conclusion

The above-mentioned two methodologies are just some well-known BPR methodologies. To have a successful BPR project, the company should use a tailor-made BPR methodology in order to meet its unique business objectives

Comment on Li Dick's week 7 lecture review

His lecture review focuses on the redesign phase of the BPR methodology. He has clearly explained the 5 main stages of the BPR methodology. He states clearly the 4 main factors of evaluation of a business process, namely, efficiency, accuracy, extendibility and the determination of whether the workload of process can be accomodated. I think he can compare his methodology with other successful methodology to have broader insight of BPR methodology. Overall, he has done a great job in his lecture review.

====== End of Week 7 Review ======

Week 6 - Basics of BPR(2)

References:

1. The role of information technology in business process reengineering, by A. Gunasekaran & B. Nath(1997)

2. Identification of the critical factors of TQM, by Simon A.Black & Leslie J. Porter(2007)

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Week 6 – Basics of BPR(2)

Introduction

The week 6 lecture mainly focus of role of information technology in BPR, BPR evolution and introduction of BPM & TQM. In this review I will further investigate on role of IT in BPR, BPM and TQM.

What advantages do information technology brings to a company?

1.     save operational costs

2.     improve the accuracy of managing information

3.     avoid human mistakes inherent when dealing with complex and repetitive tasks

4.     save money because IT reduces errors and the time it takes to accomplish tasks

5.     integrate and coordinate of different functions

6.     improve the organizational efficiency and effectiveness by eliminating administrative intermediaries and redundant processing steps

7.     provide better access to information

Role of IT in BPR projects - A Facilitator for BPR Project

Today's business environment is demanding firms to quickly develop and offer products that will satisfy customers' needs. These changes are often very fast and frequent. Companies may not be able to do this if they keep using the old processes with

many steps and scarce collaboration. IT can help in a change of business processes to feature reduced mediation and increased collaboration.

IT is often be regarded as the enabling technology of BPR. IT promotes changes in organizations, mainly changes in the nature of the work, the integration of business functions, and the transformation of competitive forces.

IT promotes electronic data exchange and electronic funds transference. Shared computing resources make the business possible for different functions to have

access to information at any time. IT also makes collaboration easy among

different people by different communication technologies. These allow information transfer by using tools such as email, video conference, Smartphone apps and file transfer protocol.

What is Business Process Management (BPM)?

Business process management provides governance of a business's process environment to improve agility and operational performance. It is a structured approach to analyze and continually improve fundamental activities such as manufacturing, marketing, communications and other major components of a company’s operation. 

BPM focuses on customers through horizontal linkages between key activities. BPM relies on measurements to assess the performance of each individual process, set targets and deliver output levels which can meet corporate objectives. It bases on a continuous approach of optimization through problem solving and looking for extra benefits.

BPR vs BPM

BPR refers to radical changes of business processes. It aims at redesigning the existing business processes in order to gain dramatic improvement. BPM is a management technique that provides incremental changes of business processes for further improvement. Actually, one of the reasons why BPR projects’ failing rate is above 70% is that the changes are sometimes too radical. Therefore, actually, we would not try to redesign every business process. We would use BPM to improve the current condition of the business process so as to achieve continuous improvement.

What is Total Quality Management (TQM)?

Total Quality Management (TQM) is management approach to long–term success. Organizations use TQM to improve their internal processes and increase customer satisfaction. When it is properly implemented, this style of management can lead to decreased costs related to corrective or preventative maintenance, better overall performance, and an increased number of happy and loyal customers. This can be achieved by integrating all quality-related functions and processes throughout the company. TQM looks at the overall quality measures used by a company including managing quality design and development, quality control and maintenance, quality improvement, and quality assurance. TQM takes into account all quality measures taken at all levels and involving all company employees.


Comment on Felix Hung's Week 6 review


Felix focus on discussing the Leavitt Diamond mentioned in week 6 lectures, he clearly shows the relationship between the 4 factors - structure, task, technology, people. He is also able to describe what will be changed when one of the 4 factors changes. However, he can pay more effort in investigating BPM & TQM as mentioned in the lecture. He can also compare the difference between BPR and BPM.

======== End of Week 6 Review ========

Week 5 - Basics of BPR (1)

References:

1. Examining the Relationship between Business Process Reengineering and Information Tchnology, by Natasha La Rock(2003)

2. BPR implementation process: an analysis of key success factors and failure factors, by Al-Mashari, Majed., & Zairi, Mohamed. (1999)

3. What went wrong with the business-process reengineering fad. And will it come back? by Thomas H. Davenport and Laurence Prusak with H. James Wilson(2003)

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Week 5 - Basics of BPR (1)

Introduction to BPR

The following 4 key points summarize the characteristics of BPR.

1. Radical change and assumption challenge

BPR is in nature a radical change rather than incremental change. According to Harvard Business Review(1990), Dr. Michael Hammer states that "Reengineering Work: Don’t Automate, Obliterate“. This suggests that BPR requires rethinking of things built up before. A successful BPR should challenge its assumption made before so that their business will not be trapped by business processes and organizational structure built up before.

2. Process and goal orientation
   
   BPR is Process-based rather than structure-based. BPR aims to redesign the business processes that require improvement. Most of the time, BPR project is implemented to achieve certain business goals.

3. Organizational restructuring
   
   Organizational restructuring is often aligned with implementation of BPR project. This is to redistribute the job, job duties and departments to achieve better efficiency.

4. Exploitation of enabling technologies, particularly information technology
      

BPR often requires the exploitation of information technology. This is to launch business-IT alignment to facilitate the business processes. This can improve efficiency and also provide better allocation of resources.

Why launching BPR project?

—  To provide a sense of direction to the company

—  To eliminate the redundant resources

—  To improve efficiency and profitability

—  To gain competitiveness

—  To achieve certain business objectives

BPR – with failure rate higher than 70%?

Although I have stated a lot of pros of implementing BPR project. According to Business Process Redesign: An Overview, Malhotra(1998) said that the failing rate of BPR project is over 70%. Therefore, there is a lot to to done to have a successful BPR project.

Reasons of failure of BPR project:

1. Lack of sustained management commitment and leadership
2. Unrealistic scope and expectations
3. Resistance to change
4. Too radical changes
5. Lack of use of improvement techniques (e.g business process management and total quality control)
6. Poor handling techniques of partially successful business processes (see the video by Dr. Michael Hammer)
   

5 key factors to make BPR projects successful:

1.      Change Management

BPR requires change of management systems and culture. These management systems should be designed to be workable in the company and resist rapid change of business environment. Also, company has to let their staff support the changes to ensure smooth process of BPR project implementation.

Effective communication with internal and external stakeholders is also required. Meetings with staff of top management level and grass-root level are required to adopt opinions form workers of different levels. Surveys have to be done to strive for customers’ satisfaction. For external stakeholders, the company should communicate with supplier, logistics and transportation companies to ensure the correct direction of BPR project.

Empowerment is also launched so that decision making process will not be concentrated on top management level. Grass-root level workers can make more decisions to eliminate the time that requires them to ask for managers’ approval.

Consultations have to be done to staffs to ensure they understand the process of BPR project and knows clearly their job duty. This is also to make sure that they adapt to new changes when launching BPR. Consultations should also be done to customer so that the business process after redesign can meet customer needs. Experiments have to be done during the BPR implementation to test whether the redesign can meet the business objectives set up before.

2.      Management Competence & Support

Top management commitment and leadership are required. A good leader with a good top management team can provide a clear vision of future for the company. A good management team can keep the grass-root level workers work at a correct pace. Resources and other support should be provided for low-level staff.          

The company should also have barriers-overcoming power. It should be able to deal with political, economic and organizational risks. Continuous risk assessment is needed during the BPR process. The company should also has anticipation and Plan for risk handling. This is to ensure that the company can handle the risks due to rapid change of business environments

3.      Organizational Structure
Integration of human resources is done to ensure no waste of company resources. This can improve the efficiency. Formulation of new jobs and responsibilities has also been done carefully as this will affect the organizational structure of the company. New jobs and departments should have clear description of their job duties to make sure there is no duplication of jobs and ensure good collaboration between departments.

      The company should has effective cross-functional teams so that the company can deal with different kinds of tasks. Choosing team members with different abilities can guide the BPR project to success. Company should choose team members with competence, creditability, creativity, motivation and effective leadership to launch the BPR project.

4.    Project Planning & Management

      Company should be able to identify the performance of their existing business processes. This can ensure suitable improvements can be done to the unsatisfactory business processes. Also, the company should also monitor the business processes after redesign, this can let the company to choose the correct improvement tactics to align with.

      Adequate resources are must for launching BPR project. Effective use of consultants is needed to ensure correct direction of BPR project. Adequate time frame has to be set up to make sure that the project can be finished on time.

5.   IT Infrastructure

The company should be equipped with information technology. An effective IT infrastructure follows a top-down approach, beginning with business strategy and IS strategy and passing through designs of data, systems and computer architecture. Linkages between the IT infrastructure components are important for ensuring integrity and consistency among the IT infrastructure components. IT standards also have a major role in reconciling various infrastructure components to provide shared IT services that are of a certain degree of effectiveness to support business process applications. The IT infrastructure shared services and the human IT infrastructure components, in terms of their responsibilities and their expertise, are both vital to the process of the IT infrastructure composition.


Case study - Successful implementation of BPR - Ford Motor Company


Overview of purchase system before BPR

•        500 head count
•        accounts payable has to match 14 items between purchase order, good received note and invoice 

Overview of purchase system after BPR

•          automatic matching of 3 items (part number, unit of measure, supplier code) between purchase order and good received note
•         faster, smoother, simpler process
•         higher efficiency and accuracy
•         75% reduction in head count
•         invoice less processing

=== End of Week 5 Review ===

Lecture 3 – The Strategic Framework and BPR for e-Business

Source:

1. SWOT Analysis: It’s time for a product recall, by Terry Hill and Roy Westbrook (1997)

2. A knowledge-based SWOT-analysis system as an instrument for

strategic planning in small and medium sized enterprises, by G. Houben, K. Lenie, K. Vanhoof (1999)

3. PEST Analysis – by D. Nobburn (1997)

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Lecture 3 – The Strategic Framework and BPR for e-Business

Strategic Framework

Strategic framework refers to mapping out of strategy for a firm. It considers a broader context of the firm, including both internal and external factors, together with the people involved in the business. By this management approach, the firm can choose the most optimum business strategy.  

PEST analysis and SWOT analysis are introduced in the lecture.

PEST Analysis

The diagram below shows the components and content of PEST analysis.

1. Political (P)

Usually refer to government issues. Examples of political factors include employment laws (minimum wage law in Hong Kong), tax policy, product labeling requirements and environmental regulations.

2. Economic (E)

Examples of economic factors includes changes of interest rates, inflation rates, GDP and consumer spending power

3. Social (S)

Usually refer to demographic and social-cultural issues. Examples of social factors include ethical and religious issues, age distribution of customers and living standards.

4. Technical (T)

Examples of technical factors include technical legislation, automation of systems, the Internet and change of technology needed.

Below is a useful video demonstrating the use of PEST analysis on animation industry.

SWOT Analysis

The diagram below shows the components and nature of SWOT analysis.

1. Strength (S)

Strengths often refer to a well-known brand name and reputation, products and services of high quality. Or more internally, strength of a company can also be a strong team of staff with strong management technique. Also, it may also refer to expertise or strong experiences in some particular aspect.

2. Weakness (W)

Some typical weaknesses in a company are inefficient inventory systems, a poor planning process, little innovation in products or services over a period of time, lack of expertise, weak marketing strategies and wrong allocation of company resources.

Strengths(S) and Weaknesses(W) are factors internal to the organization. By their nature, internal factors are possible to control and change. Firms can therefore grasp their areas of advantage and improve unsatisfactory areas. 

3. Opportunity (O)

Exploiting golden opportunities can help a company improve its profitability. One must-state example is use of e-Business and Smartphone apps. Most companies are using their websites to let customers know the details of their products and products online. Creating a Smartphone app is also an opportunity to find new customers. It also can cut business costs effectively.

4. Threat (T)

Threats for companies typically include international competition, market weakness, changes in customer needs, and environmental concerns. Market changes and environmental changes are main cause of threats. For example, most banks need to develop e-banking because they are afraid that their market shares will be lowered as their main competitors might have e-banking for years.

Opportunities (O) and Threats (T) are factors external to the organization. It refers to microenvironment analysis of a firm.

Below is a useful video to help you understand more about SWOT analysis.

E-Business Models

Below is a picture that clearly show the 4 most ordinary types of e-business models and its respective examples.  There are also more  e-business models like B2B2C or B2G models.

B2B (Business-to-Business)
Companies doing business with each other such as manufacturers selling to distributors and wholesalers selling to retailers. Pricing is based on quantity of order and is often negotiable.

B2C (Business-to-Consumer)
Businesses selling to the general public typically through catalogs utilizing shopping cart software. By dollar volume, B2B takes the prize, however B2C is really what the average Joe has in mind with regards to ecommerce as a whole.

C2B (Consumer-to-Business)
A consumer posts his project with a set budget online and within hours companies review the consumer's requirements and bid on the project. The consumer reviews the bids and selects the company that will complete the project. Elance empowers consumers around the world by providing the meeting ground and platform for such transactions.

C2C (Consumer-to-Consumer)
There are many sites offering free classifieds, auctions, and forums where individuals can buy and sell thanks to online payment systems like PayPal where people can send and receive money online with ease. eBay's auction service is a great example of where person-to-person transactions take place everyday since 1995.

Case study - McDonald's SWOT analysis

Strength

• more than 23,500 restaurants in 109 countries
• able to operate effectively during economic downturn due to the social need to seek out comfort food
• successfully adapt their global restaurants to appeal to the cultural differences
• Successful adoption of franchisees, 85% of McDonald's restaurant businesses world-wide are owned and operated by franchisees
• efficient and smooth food preparation process
• able to maintain food quality and freshness
• focus on food safety 
• pioneer to provide nutrition information of food

• Weaknesses

• high employee turnover --> High training costs
• problems with fluctuations in operating and net profits which ultimately impact investor relations. (Operating profit was $3,984 million (2005) $4,433 million (2006) and $3,879 million (2007). Net profits were $2,602 million (2005), $3,544 million (2006) and $2,395 million (2007)).

• Opportunities
• 
  

• healthy hamburger (people are now more willing to have a healthy lifestyle
• better restaurant settings to attract more upscale target market
• provide optional allergen free food items, such as gluten free and peanut free.

• 
  
• Threats

• critics on marketing issues targeting children is unethical
• blame for "unhealthy" products
• contamination of food during the food supply and production
• existence of strong competitors - Burger King, Starbucks, Taco Bell, Wendy's, KFC and other fast food restaurants

Case study - PEST analysis of Nike

Political factors

The government must create economic policies that will foster the growth of businesses. Nike has been benefited by the US policies which enable it to advance its products. The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth.

Economic factors

In economy, the biggest threat for Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The US economy is experiencing a downturn right now. Consumer purchases are slowing down. Currently, Nike's feeling the pinch of the economic recession. The Asian economic crisis also affects Nike since its goods are manufactured in Asia. The labor costs and material prices are going up.

Nike's growth is not just affected by the local economy but also in the international economy. A weak Euro and an Asian recession could mean weak sales for Nike. The overall results in the sales generated by Nike in athletic footwear, however, remained stable. The global market makes up for the variances in sales particularly between peak and lean seasons.

Social factors

People are more health conscious nowadays. Diet and health are getting more prominence. Consequently, more and more people are joining fitness clubs. There is an accompanying demand for fitness products particularly exercise apparel, shoes and equipment. Nike is at the forefront of this surge in demand as people are looking for sports shoes, apparel and equipment.

Nike, however, failed to foresee problems brought about by a sweatshop expose pertaining to labor and factory conditions at production locations in Asia. This caused bad publicity and declining sales as society and consumers demand more socially responsible companies.

Technology factors

Nike uses IT in its marketing information systems very effectively. Nike applies marketing information systems to the economics of innovation, segmentation and differentiation for most of its businesses. Nike’s leadership status owes in large part to the use of extremely valuable Information Technology, and applying it to every aspect of the product from development to distribution.

~End of Week 3 Lecture Review~