THE SCENARIO:
Montclair Computer (MC) is a
local computer maker specializing in very high end gaming systems. These computer systems typically have high
speed CPUs (from AMD) that are
over clocked (tweaked to perform even faster).
In addition, they come with two high end nVidia graphics cards and very
large, high speed disk drives (Seagate).
MC is also known for its customization of computer cases. They paint various designs on the case and
use clear panels and fiber optic lighting to create computer systems that have
a unique look. As you might expect MC
computers sell for much more than the average system. A typical MC computer retails for more than
$4,500.
MC has served the local market
(Montclair area) well, but it is now contemplating opening an online
store. This option is strongly supported
by the Chief Information Officer (CIO).
However, the Chief Operating Officer has proposed postponing the Web
store and implementing an ERP system, with a strong supply chain management (SCM) module first. Other proposed modules include: finance,
manufacturing, and customer relationship management. This would push back the Web store for at
least another 2 years. The Web store
would take about 3-6 months to fully develop and implement.
The CEO is not sure how to
proceed and has hired you to provide advice.
She has four specific questions.
Please write your response in the form of a formal report to the CEO.
1. Strategic Assessment
Do a Web
search to find at least three of MC’s competitors (other high end gaming
computer sellers). For each
competitor develop a table that provides the following information – its
URL (Web address), information about its least expensive system, most
expensive system, and whether they offer custom case designs.
ZOOMED IN
Perform a
SWOT analysis for MC and each competitor.
-
Montclair
Computer (MC)
o
Strength
§
Efficiently serve the local customers
§
Provide better customer service
§
Help customers face-to-face
o
Weakness
§
Services are limited to the people around
Montclair
§
Difficult to expand
o
Opportunity
§
Expand the business to global level
§
Franchising
§
Making cover design as their main strength
o
Threat
§
Other competitors offering better price/product
§
Economies of scale
§
New entrants opening a store in Montclair
-
Alienware
o
Strength
§
Advantage of the supply capabilities that Dell
brings to the table to streamline its production process and increase
productivity
§
Tremendous brand appeal with consumers and
creative business professionals
§
Sold globally
o
Weakness
§
High class brand name – People thinks that
Alienware are not particularly good for the money and there is believe that
better service is provided by other companies.
o
Opportunity
§
Subsidiary of Dell Inc, Alienware may offer
variety of gaming computer hardware in a very cheap price to compete against
other competitive companies.
§
Expand their custom made products to monitors,
printers, webcam, and other hardware. (Increasing their Brand name)
o
Threat
§
New entrants may capture the market by focusing
on being cost effective or creating a more attractive brand appeal
§
Technology change (Substitutions like Xbox and
Play Station)
-
Cyberpower
Gaming PCs
o
Strength
§
Providing personalized cutting edge technology
at wholesale prices
§
Providing an extensive range of technological
support
o
Weakness
§
No physical store
§
No way for the customers to actually test the
product before purchase
o
Opportunity
§
Enter Non-gaming computer industry
§
Selling other input and output hardware
§
Expanding to sell video games and other
non-computer consoles
o
Threat
§
New entrants may capture the market by focusing
on being cost effective or creating a more attractive brand appeal
§
Copycat
-
Centaurus
Computers
o
Strength
§
Fastest assembly time with no extra charge for
rush service
§
Lowest failure rates in industry
§
Highest overclocks
§
Focused on customer’s satisfaction
§
Connects the computers with different types of
games
o
Weakness
§
Weak Brand name
§
No physical store
§
Pricy
o
Opportunity
§
Lower their cost to compete against other gaming
computer sites
§
Coming up with a marketing strategy to
strengthen their Brand name
o
Threat
§
New entrants may capture the market by focusing
on being cost effective or creating a more attractive brand appeal
Reference
|
|
http://www.brighthub.com/computing/hardware/articles/69052.aspx
|
Perform a 5
Forces analysis for MC. Think about
who has the power in terms of the company’s supplier and customer
relationships.
-
Threat of New
Entry
o
MC really does not have a barriers to entry
since any company can copy MC’s product and services
o
Since MC does not make their own product except
doing a custom case design, they do not have any technology protection
o
Right now they have no control of Economies of
scale
-
Competitive
Rivalry
o
There is a large number of competitors
o
Since MC is just starting their online store, MC
does not have any customer loyalty outside their local area
o
Other companies can provide better quality and
price than MC
-
Supplier
Power
o
No real power against the suppliers (in cost)
o
Some customers may know exactly what they want,
meaning it is hard to switch suppliers
o
Not too many suppliers. More you need supplier’s
help, the more power suppliers are
-
Buyer Power
o
Buyers may drive prices down
o
Limited number of customers
o
Buyers have a lot of substitution
o
A lot of individual customers (No group purchases)
-
Threat of
Substitution
o
Other companies
o
Ability for the customers to build computers
themselves
o
Change in technology in gaming industry
(Computer vs Xbox)
Reference
- Which
generic strategy would you recommend MC use in order to gain a competitive
advantage? Why?
-
Strategic
scope (Demand-side dimension)
o
The size and composition of the market MC intend
to target is already popular and crowded
-
Strategic
strength (Supply-side dimension and core competency of the firm)
o
Product differentiation
§
Except for the customize cover design, it is
hard for MC to differentiate itself from the other competitors
o
Product cost
§
It is hard for MC to compete against other
competitors on price since they have no control of economies of scale
Recommendation:
I would advise MC to concentrate their generic strategy on differentiating
themselves from the others. I would advise them to build a brand name that
represents the MC Company. For example, if MC can expand their cover designs to
keyboard, mouse, speakers, and other devices in a designs that customers wants,
I believe this may help MC differentiate themselves from the others. This also
would allow new customers to buy only MC’s product that is pure blank (no
design) devices so that MC can put the designs exactly how customers would want
it. From there, MC can expand to customizing the looks and the shape of the
products to give exactly what the customers want.
Reference
2. Strategy Analysis of Options
How well do each of the proposed options fit with the
generic strategy identified?
I feel that
opening an online web store would fit in the product differentiation category.
The website can allow them to show their customers why they should do business
with MC. Every major gaming computer companies have their own web site; however
each individual website has their own culture and themes. Sometimes we judge
people by their first impression. And for computer industries that does
business only by website, only first impression they can get from customers are
the main page of their website.
Implementing
the ERP system before the website would fit into the product cost category.
Having the right ERP system with good SCM module for their business would help
them be cost effective. Also, a successful ERP system would give MC a strong
back bone to support their business. In today’s volatile electronics
manufacturing industry, efficiency is the key to success.
What are the main benefits and drawbacks of each proposed system?
-
Website
o
Pros
§
Can start expanding globally right away
§
Create a stronger brand name
§
Give options to customer (they don’t always have
to make the drive)
o
Cons
§
If successful, they have no system to handle
this project efficiently
§
May create many redundant activities
-
ERP system
o
Pros
§
Design Control
§
Maintain an accurate and up-to-date system
§
Manage your vendor list, trend analysis, audit
trail, and etc…
§
Better Inventory management
§
Better recall processes
o
Cons
§
ERP system might fail
§
Costly
§
Pushes the web store plan to 2 years (Technology
is changing so fast that we don’t know where computer games will stand at that
period)
Based on your analysis, which project provides the best
strategic fit and why?
-
Short term
– For a short strategic fit, I believe making the website could be a better
option. If they wait 2 years, MC cannot predict how the gaming industry will be
like. Gaming industry is a fast growing industry. Going with the website might
lack efficiency, but at least they can keep up with the technology and grow
their market and their brand name.
-
Long term
– If MC has the financial capability and is looking to invest long term, going
with the ERP system would be the best strategic fit. It might push their online
sales for 2 years, but it would defiantly be the safest way. ERP system not
only would help MC’s online store, but it would also help the company itself.
It will help them monitor every process from product design to purchasing to traceability.
Reference
http://sysprousa.com/us/marketoweb/industry-electrorics.asp?res=18860
[Complete
this section after you complete everything else] – Provide your overall
recommendation to the CEO. Which project
should she choose? Why?
My overall
recommendation to the CEO of MC is to proceed with the ERP system. Even though,
Web Site has its positive impact on the company short run, it is determined
that in long run the web site will not be efficient. I believe eventually MC
will have a web site up and running. But to be efficient and have a strong
foundation in the company, the MC Company should take the CIO’s advice and
start by implementing ERP system to the company. Also, since MC is a small
company, I would recommend working with companies like Syspro who are
experienced in ERP system in the computer industry who handles small
businesses.
3. Schedule Analysis
- Use the
attached work breakdown structure to develop a PERT chart for the ERP project
(you can use a project management tool, such as MS Project or you can do
this neatly by hand).
- Determine
the critical path for the project.
Is the estimated 2 year timeline accurate?
A1 -> A2 -> B2 -> B4 -> C2 -> D2 -> D4 -> E1 -> E3 -> E4 -> F3 -> F4
Yes, the estimated 2 year timeline
is accurate. The project will be done within the timeline.
- What is the
impact on the project’s schedule if it takes twice as long to determine
which processes to customize (task E2)?
Since E2 is not part of the
critical path, E2 will be twice as long but will not delay the project itself.
- What if it
takes twice as long to install the basic modules (task E1).
Since E1 is part of the critical
path, E1 will become twice the duration which will impact the project to go
over deadline.
4. Investment Analysis
MC’s CIO has determined that the
up front costs of developing their new Web site will be $54,000. The site will take 6 months to become
operational. Once operating, the monthly
cost for running the site is $5,000 (this includes hosting fees, data entry,
marketing, fulfillment, and a Web master).
The company expects the site to result in $6,500 per month in additional
after tax revenue.
The cost for the ERP project is
$100,000 the first year and $50,000 in years 2 and 3. After year 3 the annual cost of maintaining
and upgrading the system will be $40,000.
The company expects to begin reaping the benefits of the project in year
2 when it will save $50,000. Beginning
in year 3 and continuing into the future the annual projected savings is
$90,000.
- Develop a
spreadsheet to perform a cost benefit analysis to determine how much the
company will make or lose over the next five years for each project. What is the company’s annual return on
investment for each project? Based
solely on this analysis which project would you recommend?
Recommendation: Even though the website project has a
shorter payback period, I recommend the ERP system. Looking as a long term
project, ERP system brings more annual cash inflow. ($32,000 more) Also,
comparing the total benefit in 5 years, ERP system project exceeds the Web site
project by $13,000.
- Determine
the net present value (NPV) for each project (use a discount rate of
10%). What is the company’s annual
return on investment? Based solely
on this analysis which project would you recommend? How would your analysis change if the
discount rate increased to 13%? How
would you revise your recommendation?
Recommendation @ 10% Discount rate: Go with ERP System since
it has a higher NPV.
Recommendation @ 13% Discount rate: Go with Web Site since
it has a higher NPV.
Work Breakdown for ERP
Task ID
|
Task Description
|
Predecessor(s)
|
Duration (pessimistic)
|
Duration (optimistic)
|
Duration (likely)
|
A
|
Preliminary Analysis and
Scope
|
|
|
|
|
A1
|
Discuss needs with senior
management
|
None
|
10
|
3
|
5
|
A2
|
Determine preliminary
budget and timeline
|
A1
|
8
|
4
|
5
|
A3
|
Identify key personnel
|
A1
|
4
|
1
|
3
|
B
|
Process Analysis
|
|
|
|
|
B1
|
Administer questionnaires
|
A2, A3
|
20
|
12
|
15
|
B2
|
Conduct interviews
|
A2, A3
|
25
|
18
|
20
|
B3
|
Examine reports and forms
|
A2, A3
|
14
|
7
|
10
|
B4
|
Develop data flow diagrams
|
B1, B2, B3
|
25
|
15
|
20
|
C
|
Request for Proposals
|
|
|
|
|
C1
|
Identify potential bidders
|
A1
|
15
|
8
|
10
|
C2
|
Develop requirements list
|
B4
|
14
|
8
|
10
|
C3
|
Develop proposal evaluation
criteria
|
C2
|
20
|
12
|
15
|
C4
|
Identify budget and
schedule constraints
|
A1
|
8
|
3
|
5
|
C5
|
Publish RFP
|
C1 – C4
|
20
|
12
|
15
|
D
|
Proposal Evaluation
|
|
|
|
|
D1
|
Receive proposals
|
C5
|
40
|
35
|
40
|
D2
|
Perform delta analysis
(requirements versus features)
|
D1
|
25
|
18
|
20
|
D3
|
Evaluate budget and
schedule proposals
|
D1
|
18
|
12
|
15
|
D4
|
Choose a bid
|
D2, D3
|
12
|
8
|
10
|
E
|
Customization
|
|
|
|
|
E1
|
Install basic modules
|
D4
|
75
|
50
|
60
|
E2
|
Determine which processes
to customize
|
D4
|
25
|
18
|
20
|
E3
|
Perform customization
|
E1, E2
|
180
|
100
|
120
|
E4
|
Test system
|
E3
|
120
|
50
|
60
|
F
|
Implementation
|
|
|
|
|
F1
|
Develop a change management
plan
|
A2, A3
|
25
|
18
|
20
|
F2
|
Deliver training to all
personnel
|
E4
|
15
|
15
|
15
|
F3
|
Install system in working
environment
|
E4
|
30
|
15
|
20
|
F4
|
Test system in working
environment
|
F3
|
60
|
15
|
20
|
F5
|
Cutover to new system
|
F2, F4
|
10
|
3
|
5
|
