How New Technology Can Build Competitive Position - Case Study Example

Batesville Casket Company Table of Contents Table of Contents 2 Introduction 3 The Rise of Integrated System 6 Implications for Corporate Strategy 7 Technology and Strategy Formulation 9 Conclusion 11 11 References 12 Bibliography 13 Introduction Batesville Casket Company has been a subsidiary of Hillenbrand industries and its headquarters is situated in Batesville. They have been in the business of producing hardwood and metal caskets for burial. They held a significant market share in the US market and had geographical presence in the USA, Puerto Rico and Canada. They had six manufacturing plants and, customer service being their prerogative, they had established 66 customer service centers that delivered caskets to their customers and had their own truck fleet. They held the opinion that handling their customer’s needs was the path to success. They placed the utmost importance on customer satisfaction and consistently introduced improvement in their processes through technological innovation to provide speedy and better service to their customers. How New Technology Can Build Competitive Position The revolution in information technology is causing significant reduction in the cost of getting, processing and transmitting information. Information technology involves not just computers but encompasses the entire information that is used and created in a business, and the interlinked and convergent technologies that carry out processing of the information. The company faces a wide array of questions, namely how the technology can help them gain competitive advantage, what strategies can be used to obtain the maximum benefit of the technology and out of many options investment in which technology would yield the maximum benefit. The revolution in information system has changed the structure of the industry and impacted competition. It has shown ways to companies to outperform their rivals; it creates the opportunity for businesses to realize the scope of new businesses from their existing ones (Porter & Miller, 1985). The implementation of new technology helps an organization to achieve competitive advantage over their competitors. James J. Kuisel, the MIS Director of Batesville Casket Company believed that the implementation of new technology would help them to gain leadership in the market. They were able to achieve remarkable cost reduction through the use of client/server network at the PC of the customer service center rather than the mainframe computer. The data was transferred from the client server to the mainframe. They were the pioneers in adopting a new PC development tool known as Knowledge-Man in the 1980s which helped them to reduce the cycle time. It was implemented by them faster than their competitors. The MIS and the logistics department worked in conjunction and were able to reduce paperwork and thus serve customers faster. They did this at a time when competitors were still using paper based system. Initially, in 1990 the hardware that was used for customer service center was an early IBM PC. The system was obsolete and needed to be replaced. The software was required to be upgraded to the latest version of Knowledge –Man. The logistic department expected upgrade of the distribution and manufacturing system. Bar coding of the model number of each casket helped in automated tracking and identification of caskets. A bar code reader was placed at the loading dock of the customer service center that was connected via radio frequency link to the PC of the customer service center. A system for maintaining records of orders, maintaining inventory based on model number was established to serve customers better. Batesville continuously upgraded their technology to provide better service to customers. They replaced their hardware, decided on operating systems and revised their software. They introduced IBM PS/2 Model A16 which had a memory of 4 megabytes, colored monitor, math coprocessor, mouse and hard disc of 160 megabyte. They installed Epson LQ1170 and Hayes 9600 Ultra external modem. Uninterrupted power supply was maintained to reduce downtime and error. They selected an operating system that enabled multitasking. They realized how important object oriented programming would become in the future. The implementation of this new technology would place them at a much higher pedestal than their competitors. Batesville Casket Company has consistently introduced several technological innovations that have enabled them to provide greater customer satisfaction. The Rise of Integrated System The new technologies that are implemented in an organization have the potential to integrate the diverse functions in the organization. Information technology itself has changed the mode of operation of companies and their way of dealing with customers and suppliers. Technology has enabled improvement in communication and accessibility of data which has led to system integration. This has further enhanced communication and integrated business processes across diverse geographic and product lines (Rockart & Short, 1988). The MIS and the logistic department were integrated in Batesville Casket Company through the installation of the PC based distribution system at the customer service centers. This helped in integration of the operations and the logistics. It helped in order entry, maintaining inventory and helped in tracking the location of the caskets in the warehouse. A dial up network enabled the transmission of the current order from the customer service center to the central computer and the central computer then transmitted information on the next day’s shipment of caskets to the PC at customer service center. This system not only enabled better communication but also reduced paperwork and customer demands could be met quickly. The production and distribution system was better integrated with the customer service center through the bar coding of caskets. A radio frequency link had connected the bar code reader at the loading dock with customer service center PC. This enabled streamlining of processes. They selected IBM’s OS/2 and UNIX as operating system since they required an OS that would enable multitasking. Thus, the implementation of new technology enabled better integration of production, manufacturing, distribution and marketing and the MIS. Implications for Corporate Strategy The strategic importance of information technology is gradually increasing in an organization. Information technology affects corporate strategy in an organization at three levels, namely business portfolio, internal and competitive levels. Internal strategy involves the use of information technology to develop effective and efficient organizational structure for achieving objectives and goals. Competitive strategy involves making competitive moves using IT and business portfolio strategy is concerned with the organization’s choice regarding the industry in which it intends to compete. The dynamic business and economic environment pose challenges to the businesses. Information technology enables an organization to exploit many capabilities at much lower cost. Decision support system and transaction processing provide a platform for organizations to build competitive advantage. Often businesses fail to utilize their IT capabilities to the optimum level because of the lack of knowledge of the senior management, lack of effective communication between IT and other functions, inability to exploit opportunities to gain competitive advantage, resistance to change shown by IT people as well as people from other disciplines, absence of instruments to measure benefits from IT (Bakos & Treacy, 1986). Batesville’s corporate strategy was to use IT to reduce cycle time of processes, cost reduction since transportation of such heavy items involved high costs and speedy delivery to ensure customer satisfaction. Keeping these motives in mind, they carried out integration of systems. They pioneered in the development of PC based distribution system which gave them an edge over competitors. Paper work and cycle time was reduced. The company continued to introduce innovations to enhance customer satisfaction. They introduced a bar code reader at loading docks which directly transferred data to the computer. This made it imperative to introduce a multitasking computer and, thus, a new operating system, namely UNIX and IBM’s OS/2. They replaced their existing hardware. They felt the need to introduce an intuitive graphic user interface which could be controlled by mouse. They brought about changes in their database management system controlled by a database manager who was skilled enough to use it. These technologies were introduced with the sole intention to serve customers better than competitors. Technology and Strategy Formulation Technology is gradually becoming a very crucial source for companies to gain competitive advantage. The distinction between a winning and a losing strategy lies in the ability of skillfully incorporating technology in the business strategy of an organization. Industries are now being restructured by technological forces and are showing new ways of competing. Managers have to keep introducing technological innovations faster than their competitors (Scott Morton, 1996). Batesville gradually started implementing object-oriented programming because it could significantly increase development productivity. It involved creating programs that were composed of independent code modules. The building blocks could be used for different programs so as more such modules would be developed, lesser new codes would be required and maintenance also became much easier. Their existing technology was functioning well but yet they wanted to introduce improvements and were thus investing on object oriented programming. They used Object/1 as a tool to create their graphic user interface capability. The reason for using Object/1 was due to the fact it provided outstanding support for multitasking, ease of maintenance, fast paced development and efficient access of database management system. Object/1 was based on object oriented paradigm. The basis for using Object/1 was the fact that object-oriented programming was believed to be the future of software technology. They provided the necessary training to the customer service center managers in this regard. They were able to save on the training by clubbing it with national meeting they had to attend in Batesville. The conversion to the new system was accomplished within a short duration of two months. They created a conversion system which guided the customer service center manager through the steps in installing OS/2 operating system, loading of new software and conversion from the old to the new software. The system was first tested in service center of Indianapolis and later in four other service centers. A bug was discovered in OS/2. Once the object oriented approach was adopted completely, an evaluation was done about the existing system and it was realized that more development was required in program design and systems. The object-oriented tool was found to be successful. However, the team at Batesville had an approach of continuous evaluation to find out better tools and adopt better technology. Conclusion Batesville Casket Company was committed to provide better service to their customers. They introduced improvements in their existing processes by adapting new technology which placed them at a higher pedestal than their rivals. They had integrated systems that incorporated disparate functions, namely logistics, sales, marketing and manufacturing. They used technology to reduce cost at various levels such as, for example, the use of a client server network instead of the mainframe reduced costs to a great extent. They were the first of their kind in establishing a PC based distribution system. This system was established in the customer service centers and enabled order entry, tracking of inventory and speedy delivery. Technology enabled them to streamline their processes. They continued to bring about technological innovation. They replaced their hardware, introduced a new database management system, revised their software and deployed a new operating system that enabled multitasking of computers. They were smart enough to identify the benefit of using object-oriented programming. The company was always ahead in terms of technology than their competitors and, thus, was able to serve customers better. References Bakos, J. Y., & Treacy, M. E. (1986). Information technology and corporate strategy. Retrieved from http://archive.nyu.edu/bitstream/2451/27825/2/CeDER-PP-1986-01.pdf Porter, M. E., & Millar, V. E. (1985). Strategic significance. Retrieved from http://zaphod.mindlab.umd.edu/docSeminar/pdfs/Porter85.pdf Rockart, J. F., & Short, J. E. (1988). Management in the 1990s. Retrieved from http://dspace.mit.edu/bitstream/handle/1721.1/2220/SWP-2076-21308817.pdf?sequence=1 Scott Morton, M. S. (1996). Premises. Retrieved from http://dspace.mit.edu/bitstream/handle/1721.1/2155/SWP-1845-21289360-CISR-149.pdf Bibliography Bakos, J. Y. & Treacy, M. E. F. (2011). Information technology and corporate strategy: A research perspective. USA: BiblioBazaar. Coveney, M. (2003). The strategy gap: Leveraging technology to execute winning strategies. USA: John Wiley & Sons. Pearson Education. (n.d.). Batesville Casket Company. Retrieved from http://wps.prenhall.com/wps/media/objects/5547/5681051/4e_Cases/Case_Study_I-2.pdf Tidd, J., Bessant, J. R., & Pavitt, K. (2005) Managing innovation: Integrating technological, market and organizational change. USA: John Wiley & Sons. Read More