Advent case

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					Case study analysis - Advent Corporation                                               1



I.      Advent corporation background



1.1.    Advent's initial strategy, Advent's strengths and weakness

        Riskiness of each of Advent's products based on technology and market newness.

1.1.1. Advent's initial strategy

 Corporate strategy: specialized in manufacturing electronic products for home
     entertainment, focused on a special niche of audio market (roughly 5%). Growth was
     always a primary goal.

 Business strategy: the company followed differentiation strategy with consistent focus
     on innovation and quality. Besides, it kept closed eyes on controlling cost so as to
     make the most efficient piece of equipment at the lowest possible price to the
     consumer.

        For example: Advent Loudspeaker was good in every measurable and audibly
        useful way as any speaker system of any size or price-at a cost slightly below what
        most people consider the “medium price” category.

     To facilitate differentiation strategy, Advent highly appreciated imitation, copying from
     others, and improvement. One of another important philosophy at Advent was “never
     does market research”. Experience and intuition told them where to go.

 Marketing & distribution strategy: Marketing management is an autonomous activity
     which emphasis on “continually optimizing its position” through production efficiency
     and rapid response to daily marketing problems rather than responding to a long-range
     plan.

     Nationwide distribution network through 150 careful-selected dealers helped to sell and
     service Advent products effectively. Exposure to trade press and public through press
     conference also strengthened Advent image and reputation.

1.1.2. Advent's strengths and weaknesses

 Strengths
Case study analysis - Advent Corporation                                        2


    With the centralized structure, the company could make quick decisions as long as
       the company was small. Its structure was particularly suitable with its business
       nature.

    Advent had operated in niche market with almost no competition.

    The experience, knowledge and reputation of Mr. Kloss - president of the company.
       He was a well-known figure in consumer electronic product design and
       manufacturing.
Case study analysis – Advent Corporation



    Strong innovative capabilities and internal-external scanning mechanisms helped
       the company to continuously add more unique features to existing products and
       reap the first mover advantage. Besides thanks to excellent scanning mechanisms,
       R&D expenditure could be efficiently saved.

    Since the 5 main products of the company were developed in sequence (organic
       style) sticking on audio field, company„s knowledge was cumulatively accumulated.
       As the result, cost for product development was not only substantially decreased,
       but also the company history and reputation were assured and increased.

 Weaknesses

    Product development was mostly based on one person's decision (Mr. Kloss).
       Besides his decisions were not backed up with sufficient market data (mainly relied
       on experience and intuition). It is very risky especially when the company became
       bigger.

    Products of the company were not based on market needs so it was more risky
       than those based on customers' expectations.

    Production itself was typical of the small manufacturers in the industry. So the
       company could not take the advantage of economies of scale.

    Since Advent mostly bought technology for product development from others, it is
       quite difficult to guarantee if that technology could be really adjusted to fit Advent
       product innovation purpose.

1.1.3. Riskiness of each Advent's product based on technology and market
newness

The company had 5 products: The Advent Loudspeaker, The Advent Frequency Balance
Control, The Advent Noise Reduction Units (Models 100 and 101), The Advent Tape Deck
(Model 200), Advocate Crolyn Tape. We denote these product as A, B, C, D, E
respectively. We also would like to show the interrelationships between different aspects of
technology and market newness in the following matrix.




                                                                                      2 of 6
Case study analysis - Advent Corporation                                            3


                                                                     Technology newness

                       Low                   Medium                         High

   High

                                     E
   Medium

                                     B,C,D
   Low
                                     A
Market
newness

 Rationale for riskiness allocation along 2 dimensions

Product E: Medium technology newness because its technologies was used extensively in
critical video recording applications. However, market newness was very high because no
one had made the leap to marketing it for audio purposes for home use.

Product B, C, and D: medium newness to both market and technologies. The technologies
applied in these products were well established in other fields, and because Advent
developed these products in sequence with just some added unique features, then it had
mastered the technologies. Core features of these products were almost same as other
offerings in the market.

Product A: low market newness, and medium technology newness. The technologies
applied in product A were also very well established in audio industry, particularly in
producing speaker system. Market was very familiar with speaker system. The only
difference that created Advent „s great success on quality and cost was their experience in
design and manufacturing techniques.

 Risk assessment for each product

Product E: as a highly new product for the market, the most significant risk would rest on
Advent marketing capabilities on getting customer‟s acceptance. Other risks arising from
pioneering costs, financial constraints, low cost imitators, unexpected uncertainties were
quite similar across companies whenever launching any new product.
Case study analysis - Advent Corporation                                             4


Product B, C, D: it is hard for customers accepting new product brand with almost same
core funtionalities unless price is cheaper and product has unique features matching
customer‟s expectation. The potential low cost imitators would be very high because the
small incremental innovation of Advent on added features could not guarantee sustained
competitive advantage in the long run. However, risks from market newness would be
lowest in comparison with product A and E because of no danger from saturated demand
or customer acceptance.

Product A: Risks include saturated market demand, high competition from existing
suppliers, and emerging new technologies that would greatly affect market demand.



1.2.   Kloss ‘s characteristics and his role at Advent

As the founder and the president of the Advent Corporation, Mr. Kloss was famous in the
consumer electronic industry. His characteristics were of typical entrepreneur in 1970s.
Those characteristics have significantly affected his success on business. Some of the his
skills, management style and approach toward innovation are identified as follows:

 Characteristics: Mr. Kloss had a strong confidence on himself that made him very
   decisive in business activities without consultation from others. He was so decisive. He
   believed strongly on his intuition and experience. Mr. Kloss was a risk seeker and
   change agent, as he was not fear of the uncertainties and having confidence that
   uncertainties would be clarified. He had foresight and seen unmet needs as
   opportunities. Another characteristics was persistence and patience, he understood he
   could not achieve his goals (i.e. large screen TV) overnight.

 Skillful: As one of leaders in electronics industry, Mr. Kloss was expert at electronic
   product design and manufacturing, especially in audio and TV fields. He was rich of
   knowledge, experience and management expertise in electronics after involving in AR,
   Inc. and KLH Company. His technical skills were invaluable for Advent Co.

 Toward innovations: As people, who could foresight and envision the future, Mr. Kloss
   always looked for new innovations. He kept closed eyes on monitoring and scanning
   technology. He had modern thinking and business concept (as compared to other
Case study analysis - Advent Corporation                                                5


      managers at the time) that the innovations should stem not only from market needs but
      also from imitation, and incremental improvement. “ Working hard never been our way
      of doing things, continuously looking around to see what thing possible to do”. He
      thought there is no limit for innovation, everything could happen. For instance, he
      supposed that there would be very small amplifier with not-yet-born class D circuitry or
      large screen TV. He also was eager to launch new innovations, with very quick
      decisions and little consideration on market researches. He said, “ Kinds of products
      people may want are not limited to what people have said they want”.

 Management style: As a decisive and rather autocratic person, Mr. Kloss applied
      awareness style of management. He was a directive leader, and vision creator. He
      closely supervised production operation. At the time, he still continuously optimized the
      company „s position rather than long-term plan which involved much time and efforts
      on operational routine and spent no time for foresight thinking. He managed rather
      intuitively and mainly based on experience. This style of management was suitable
      only for the initial period of the company, but when Advent expanded with the more
      complexity on management work, a new style that must be more professional and
      team-based should be applied. The current style with the vague separation between
      leadership and management-ship role is not appropriate in the long term.

 Mr. Kloss ‟s personality and management perception had great influence on the culture
      and operations of the company. His role was critical for Advent development, as the
      manager and the envision creator.



II.      Full screen television



2.1      Required sources for successful development

There are many requirements for Advent Corporation (AC), which has been popular in the
market as an acoustic systems manufacturer, to successfully develop an absolute new
product- large screen TV.
Case study analysis - Advent Corporation                                                6


2.1.1   Key components and technology facilities

    The projection tube: even though Mr. Kloss believed that “competitive projection
        systems would require two years minimum after Advent set was introduced”, other
        competitors can easily imitate since the production was based on “no unusual
        technology”. Thus, no automated line should be installed.

    The receiver should be purchased outside rather than make by themselves.

    Screen: there would be no special requirement for facilities because production
        mostly involved with handwork

2.1.2   Market information

The weakest point in large screen TV development project would be the lack of market
information.      ” Yes, I feel that”, said Mr. Kloss, “ large screen TV will be popular but
there‟s no way to prove this until you spend the money to produce it”. Conducting a market
survey is necessary despite the customer will be difficult to express their opinion toward a
product that they have never seen. The market demand should not be based on the
feelings of neither Mr. Kloss nor Mr. Pressman.

2.1.3   Capital

The required capital should be taken into careful consideration when comparing the
retailed prices of large screen TV and other five existing Advent‟s products. This is in
range of $2,000 to 2,500 per large screen TV whereas the maximum price of Advent
existing products is just $260 for M200. Since the price of large screen TV was calculated
with normal margin, its production cost would be 10 times higher than other products.
Hence, Advent should fully aware all financial contraints and risks involved in this project.

2.1.4   Marketing

The distribution for large screen TV would be different from acoustic products. Since large
screen TV is new for customers as well as for dealers, the 150 existing dealers will have
difficult to convince customers about the advancements that they even not well
understand. Thus, product training for dealer should be organized at Advent‟s cost.
Case study analysis - Advent Corporation                                                7


Concerning the way the new product would approach customers, larger screen TV should
not only rely on press conferences and “let‟s products speak for itself” but technicians are
also required for first installation. It would be reasonable for each dealer to have one
technician. However, Advent should share with dealers the cost of hiring technician which
is not small since large screen TV is absolutely new for those technicians.

2.1.5    Workforce

New production line, which is based on new technology, would require a different set of
skills from workers as well as from production managers. Since no one has experience
with large screen TV, it would be difficult to setup a perfect production routine without trial
and error. Moreover, Advent should hire a good quality inspection because the unit
production cost is high and scrap will not be accepted. This is even requires strong
involvement of Mr. Kloss.




Conclusion

In order to be successful in large screen development, Advent Corporation should work
backward from customer needs. Bases on these needs, it would identify what size the
production would be. All the required resources are then justified in term of expected
economic profit whether it could offset the setting-up cost.



2.2      Options available to Kloss. Pros and cons of each option

There were three options for Kloss: no investment, self-investment, and joint venture. All
the above mentioned, required resources must be considered before making decision.
Normally, it involves remarkable tradeoff among profit, risk, and control.

 No investment

       Pros: As Kloss mentioned, large screen TV seemed to be so new for customers
         that there were uncertainties of market needs and customer acceptance. Besides,
Case study analysis - Advent Corporation                                              8


       financial requirement to pursue large screen project would be very significant.
       Moreover, the birth of large screen TV required recorders having sufficient
       capability to reproduce most of information content of signal broadcast so that the
       playback on large screen would be of quality. The quality of programs and signals
       at the time were not good enough to ensure the quality of pictures on the screen.
       Therefore, if Advent don‟t invest on this project, it would be free of potential big
       loss.

    Cons: Investment on large screen TV would bring good opportunity to expand the
       product line of Advent and to earn a lot of profit as the first mover (no direct
       competitors). In addition, Mr. Kloss had thought of the idea for a long time, and he
       had technology to make his dream come true. Therefore, Advent would be very
       regret for not making investment if the market, in deed, may turn very favorable.

Though no investment is one of the options, it is not a good option that Advent should
follow because without investment and diversification, the invented technology will not be
exploited efficiently and company growth would be impossible in the long run.

 Self-investment

    Pros: Developing TV is viewed as expanding the product line and technology
       capability of Advent. Because Kloss was so confident about his ability in
       developing and launching TV to the market, then obviously, the success possibility
       is very high. The attractive benefits include not sharing profit, full management
       control, reputation, image, defining industry standards, locking in key suppliers,
       distribution channel selection, learning effects, and of course profit.

    Cons: Some requirements in terms of finance technology and marketing may not
       allow Advent to work on it own. It is also very risky to bear all the uncertainties
       relating to external environment (e.g. market) and internal capability (e.g. marketing
       distribution).

 Joint venture or Licensing

    Pros: Obtaining skills and resources that Advent lacked is one of advantages of
       joint venture. For instance, Advent could take advantages of technology and
Case study analysis - Advent Corporation                                        9


       distribution network. The fact clearly showed that Advent is not a giant in TV
       industry and its marketing power is weak. Joint venture or licensing may be the
       only way to exploit its TV technology, taping in market, avoiding imitation and
       competition.

    Cons: Leakage of the technology could be the most concern. In addition, some
       other disadvantages are loss of control over technology and management, creating
       potential competitors, damaging Advent image if it works with unsuitable and
       trustful partners.
Case study analysis - Automobile Korean Industry                                       1



1. THE PATTERNS OF HYUNDAI’S CAPABILITY BUILDING

The learning process in accumulating technological capabilities at Hyundai developed
through 3 main stages.



Stage 1: Assimilation
 Level 1 of technological capability

Learning from suppliers: At its birth in 1962, Hyundai‟s initial capability in automobile
production relied on engineers with strong engineering background from Hyundai
Construction and experienced technicians with necessary tacit knowledge from military
depots. At this time, Hyundai‟s level of knowledge in the industry was just sufficient to
enter an Oversea Assembler Agreement to assemble a Ford compact car. Explicit
information was transferred from Ford to Hyundai through blueprints, technical
specifications, and production manuals. Not to stop there, Hyundai also required training in
the agreement with Ford and all other equipment suppliers. This action facilitated the
explicit-tacit translation at Hyundai not only operative capabilities (such as product,
process engineering, painting and welding) but supportive capabilities (such as
procurement planning, coordination and production management).

Self-learning: To Hyundai, the technological accumulating did not only focus on the most
competent engineers, transferring knowledge throughout the organization was critical and
had to be done quickly. Engineers, technicians and workers lived together, strongly
interacted to intensify the knowledge. Furthermore, operative capabilities were gained
much among teams by reverse engineering. This allowed internalize the explicit into tacit
knowledge more deeply and quickly, making it become their own production know-how.



Stage 2: Imitation
 Level 2 of Technological Capability

Hyundai made its second jump in the learning process when it shifted from assembling
foreign cars to designing its own cars. However, in respect to the independent
management strategy which was set at the beginning, they decided to buy technologies by
Case study analysis - Automobile Korean Industry                                        2


entering licensing agreements in unpackaged form. This kind of mechanism, to some
extent, restricted the level of knowledge, especially know-hows to be transferred. To
overcome this difficulty, the creative Hyundai engineers had found another way to
approach to suppliers‟ technologies. Before selecting suppliers, they approached 26
companies in Japan, US, UK and Germany. They did not miss the opportunity to tour their
sites and more important, “those of the leading automobile manufacturing plants” that
these companies provided. Therefore, Hyundai upgraded its tacit knowledge to the lively
practical experiences: Now, they could not only know component technologies (such as
style design, casting and forging) but also learn how the other auto makers in the world
used them in their practices, then they could imitate. Furthermore, suppliers‟ training,
hiring technical experts from Britain to integrate individual tacit knowledge into a workable
system and getting assistance from Japanese engineers for troubleshooting, all of these
actions promoted Hyundai engineers to absorb knowledge not only from the foreign
countries but also among members in the organization. This integrating learning improved
considerably Hyundai operative, transaction and supportive capabilities. These gains were
obviously shown in their first local car: the Pony.

Level 3 of Technology Capability

The capability level at Hyundai went up to a higher step when Hyundai decided to acquire
the FF (front wheel drive) technology. With enough experience of Pony, by licensing
agreements to many sources again, now, Hyundai could master the new technology and
CAD/CAM learning without outsiders’ assistance. With Hyundai capability level at that
time, technology suppliers were reluctant to share with them. To get over this hurdle,
Hyundai engineers pursued the self learning and transferring knowledge method which
proved the most appropriate one. For example, to deal with the CAD/CAM problem, a
project team to study new knowledge was organized, then some real systems such as
IBM, Mitsubishi are bought for comprehensive study. Up to this point, explicit knowledge of
technology owners (literature, catalogs) was moved to Hyundai in an secret way and were
translated into tacit knowledge by reverse engineering tactic. After all, project team
members “socialized” their learning to the other colleagues. Hyundai obtained much of
Case study analysis - Automobile Korean Industry                                        3


operative, supportive capability during this period of imitation which resulted in the FF
Excel unveiled.



Stage 3: Innovation
 Level 4 of Technology Capability

Due to the external pressure (its foreign suppliers were unwilling to reveal their latest
versions), Hyundai had to produce its own technology. They began to develop many R&D
centers in its home country and in Michigan, Los Angeles, Frankfurt and Japan. All of
these locations were very strategic. They were found near to the most famous inventors in
the world‟s automobile industry so that Hyundai was able to catch up most quickly the
latest technological changes. Moreover, Hyundai Styling Studio was established at the
center of the most profitable market-America-to sense the trend of consumer preference.
These tactics gave Hyundai the always-updated information about market, competitors
and technological changes, thus drive the R&D activities towards the right direction.

Besides, its huge investment in R&D personnel and projects such as hiring Korean
engineers from U.S universities, with experience at GM or Chrysler, joining laboratories
with local universities and further training for researchers played crucial role for a
sustainable Human Resource development. Hyundai learning was changed from follower
and imitator to initiator. The technological knowledge from competitors, other countries and
US universities flowed to Hyundai in the form of “brain drain”.

However, in the early stage of innovation, Hyundai still lacked of capability and needed
assistance from outside. It acquired capability from other countries by sending 300
researcher abroad for training. Also, Hyundai learning jumped to systematic problem
solving which was shown in the task force for engine design. Six groups learned all of 6
major aspects related to the engine. From collected foreign literature, they mastered it in
the form of tacit knowledge. Also through experiments, experiences of the experts
improved the innovation capability. Alpha and beta engine generations were the result of
Hyundai incremental innovation.

Level 5 of Technological Capability
Case study analysis - Automobile Korean Industry                                         4


Hyundai capability is moving up. It now wants a breakthrough in technology: a
environmentally friendly car. To achieve the goal, its learning strategy is different. Through
joint R&D with US Ovonic Battery, Hyundai expects to accumulate more capability enough
for it to offer a new radical innovation in the future.

To brief the process of technological capability accumulating at Hyundai, the operative and
transactions capabilities were to develop first, then supportive and innovative was the last.




2. THE ROLE OF GOVERNMENT IN THE CAPABILITY BUILDING PROCESS IN
KOREA

The strong and highly centralized development of Korean government was relatively
effective in orchestrating technology learning in the 1960s and 1970s. Government created
and imposed series of crises on the firm to accelerate technological learning in order to
survive and develop.

In 1962, in the first five-year economic development plan, Korean government enacted the
Automotive Industry promotion law. The law not only provided tariff exemptions for imports
of parts and components but also for the assemblers. By issuing the law, government
provided local market protection from foreign Car Companies. It was a suitable period of
time for government to establish this law. At that time, automobile industry in Korean was
not developed, just was young industry that step by step went on the way to find how to
develop. Government created strong barrier to prevent competition and help encourage
citizens to buy domestic products. Government action led to create the first assembly plant
in Korean and three locally owned assemblers soon later including Hyundai that began in
1967 to assemble Ford cars.

After the first oil crisis and structural adjustment toward heavy and chemical industry,
Korean government rapidly shifted its automobile industry policy from CKD assembly of
foreign car to develop of local design car. The policy implementation was highly
centralized by government. In 1973, government formulated the automobile industry long-
term promotion plan to promote native model development and foster industry growth.
Case study analysis - Automobile Korean Industry                                        5


Government plan was very specific. In this plan, the government stated the product
design, local content, cost, time, etc. The situation led to appearance of two original new
vehicles: Hyundai‟s Pony and Kia‟s Brisa. It was the time that marked the sudden jump of
domestic firms from the first level of capability to the second one. At this stage, firms
simultaneously continued to import foreign technologies and carry out actions to enhance
the knowledge accumulated from various lisencing agreements. It required learning
effectively to strengthen local firms‟ capability. As a result, the first model Pony with 90%
local content developed in 1975.

The second energy crisis led to another change in government policy to bring about
greater scale economics at cost of market competition, reducing numbers of passenger
car producers to two companies. The government wanted to reduce the numbers of
producers because many reasons. They realized the need to increase power of R&D in
automobile industry. In addition, two large companies that implemented policy to invest in
the same areas in R&D cause to waste of resources and insufficient. It was better to
centralized to one firm. Korean government supported chaebols but they could not provide
fund for R&D in both firms. It helped to enhance firm technology capacity.The domestic
oriented automobile business moved to highly export-oriented. Korean government
supported for export-oriented transformation and chaebols to influence technology
learning. The reason why chaebol played a major role in expediting technology learning
was that their demonstrated economic and political viability enabled them to obtain new
business licences and preferential financing from government. Chaebols helped
strengthen Korean technology capability because they had necessary organizational,
technical and financial resource. Thanks to government‟s help, Korean chaebols could
have enough money to acquire foreign technologies, thus creating an independent
management strategy. Moreover, they could invest more in R&D and R&D personnels.
Hyundai opened Advanced Engineering and Research Institute, Commercial vehicles R&D
center, joint laboratories with research oriented local universities.

However, while focusing on nourishing chaebols, Korean government did ignore the small
one such as Kia and Asia. This policy had killed all opportunities of growth in these
companies where innovation ideas often emerge and develop.
Case study analysis - Automobile Korean Industry                                             6


Korean automobile industry could not develop without government‟s stimulating role in
directing chaebols and selectively allocating resources to them to achieve ambitious
growth objectives in the early years and its support role in lowering corporate R&D costs.




3. IMPLICATION FOR MANAGEMENT OF TECHNOLOGY TRANSFER AND OF
R&D

From the case, we can learn many lessons in management of technology transfers and of
R&D.

Management of technology transfer

Firstly, it is important for managers to understand deeply their firms‟ technology
capabilities at a given time to have right strategy in dealing with lisensors. Knowing our
strength and weakness of our own and transferers will enhance our bargainging power.
Secondly, managers should consider when selecting the right suppliers for firms. In some
cases, firms have to share equity with suppliers but note that it should not give suppliers
management participation. Managers need to have full control power in their companies.
Daewoo is an example reflecting a failure lesson to avoid when they lose their
independence to GM. Thirdly, all explicit knowledge will become their own technology
capabilty and competitive advantages if they rely on self-reliance, total quality learning,
continually accumulate learning to get power to make sudden jump. Fourthly, companies
should find the most appropriate and effective way to change explicit knowledge to tacit
knowledge in a time as short as possible.
    Management of R&D

    Diversify the method to train firms‟ human resource: send to foreign countries or
     suppliers, create team works, attract foreign specialists to train your workers, etc.

    Invest more at the right time when companies achieve a high level of technology
     capability, especially in R&D personnel. Specifically, in the early time, when the
Case study analysis - Automobile Korean Industry                                       7


     company concentrate to develop its operative capabilty and innovation is a weak
     requirement, R&D should not be invested.


    Implication for Vietnam

Vietnam and Korea have similar situation after wars but why Korea can develop
successfully. It is a big question with many reasons. This case gives Vietnamese people
lessons to study and apply in correct way.

    It is obvious that government plays a stimulating role to create incentives for the
     development of an industry. Vietnamese government should concern to support both
     strategic and potential infant industries, which contribute to country‟s growth. Unlike
     Korea, in Vietnam small and medium promising enterprises, not chaebols, should be
     supported through laws, policy, investment, connecting to suppliers, etc.

    Technology capability of Vietnamese firms is just in the first or seconds stage. It is
     important to choose appropriate suppliers to make technology transfer.

    Find the way to accumulate learning knowledge from partners and foreign countries
     effectively.
Case study analysis - Automobile Korean Industry                                 8




  Patterns of capability accumulating at Hyundai



  Capability

                                                                             INNOVATION


                                                    Beta engine-Avante




                                               Alpha engine-Accent

                                                   Technology dilemma
                                                                              IMITATION
          Government stimulus

                                      Licensing FF technology



                               Local designed car-Pony


                                     Government stimulus                 ASSIMILATIO
                                                                         N




               Assembling Ford car


                  Government stimulus


                                                                                     Time
Objectives

After reading and discussing the case, we can recognize the impact of technology
changes on the competitive advantage of the Fields‟ company as well as find out some
problems behind the application of technology. This case help us apply the new base
concepts of technology management to better understand. Uncovering new things and
sharing experience is those that the case offers us as well.




Brief case

Mrs. Fields opened her first cookie shop in Palo Alto, California, in 1977 and then she
established more and more shops in other cities. She wanted to maintain control and
personal involvement in all of them, however, it became apparent that conventional
methods of conducting a far-flung business would not allow her to do what she wanted.

Having 248 domestic cookie stores, the Fields solved the problem off retaining direct
control over their far-flung enterprises by developing a very flat organizational structure
and an effective information system. In her enterprises, communication takes place
between people as needed, regardless of title or position.

With MIS (Management Information Systems), almost everything is done easily with the
support of the computer, very little tasks is left for the store managers to do but input data
for the system. Also, the store managers do not have authority to make any decision
regarding the business. That leads to the 100% turnover rate of store managers.

In April 1987, Mrs. Fields planed to acquire from another company a 119 store French
bakery/sandwich chain with the purpose of combining full lines of both cookies and bakery
products in each outlet. And the Fields wonder what should be done to MIS to maintain the
control and information for better decision making in both products.
    Study question and answers



In what way has the management information system created a competitive advantage for
       Mrs. Fields?

Competitive advantages



1.1 Control

All information about company‟s activities is gathered and processed centrally and exactly
by the computer system. This system allows the management control business in any
places and any time effectively and efficiently. (The system keeps information about store
sales and allows reviewing daily. It helps headquarter learn immediately when a store is
not meeting its objectives and able to respond quickly. By the way, the company can save
cost and time for transportation, paperwork and the like.



1.2 Decision-making

Better decision making is made because it is supported by the well – designed information
system which systematically provides updated information concerning all of the company‟s
activities such as marketing, production and finance and so on



1.3 Expand store

-    The company plans to acquire another company with 119                    store    French
     bakery/sandwich chain. It is very difficult for the company to manage successfully such
     a board operation by the flatting organizational structure. The MIS is a good solution
     for this challenge. It helps the company can expand operation not only in geography
     but also in volume and scope without incurring the cost of hiring more staff.
     (Assumption that the company does not find any difficulties of operation scale)
-   Furthermore, MIS is also new technology that is not only applied within the company. It
    becomes a commercial product, a new business opportunity for the company.



1.4 Sale marketing

-   The system provides marketing support. Sales are entered into computer. This
    information can be processed to adjust marketing activities adequately such as sales
    forecast, advertising, customer service. (If average sales was down, the system may
    recommend that more suggestive selling be done).



1.5 Finance and accounting

-   The system monitors the financial record. It stores, processes, and integrates
    information into report. (It helps store managers saving time for selling and supports
    Mrs. Fields control finance situation tightly as the management is able to review
    financial and accounting database, make adjustment and comparison if necessary)



1.6 Production

MIS are also useful to

-   Schedule operations in the stores (use mathematics model to outline the day‟s
    schedule)

-   Strake inventory (compute how much flour, chocolate are stored, should be ordered)

-   Thus, it contribute to reducing cost and maintaining product‟s quality (MIS keeps
    prescription that employees base on to use exactly quantity of each component to
    make final products, avoid material wasting )



1.7 Human resource management

-   Recruitment (suggest appropriate techniques for job opening)
-   Selection (compare applicant‟s qualification with that of the company‟s employees)

-   Job performance appraisal (set hourly quota for each store manager)

Communication (support electronic mail, voice mail and other telecommunication
equipment)



1.8 Research and development

-   The company‟s policies emphasize to encourage employees working with the
    technology to think up new, creative application

-   Also, advanced technology is a basic for development of new product or new business
    field (financial software)

There is wide variety of comparative advantages that the Mrs. Fields attains through
applying the management information system. However, the store manager‟s turn over
rate of 100% per year after the system was put into the operation is too high and it should
be taken account into consideration.



2. How might the management information system contribute to a reported 100 percent
    turnover of store managers?

In general, the turnover rate is normally unequal zero in any some company. It may be
high or low depending on the business kind of company. In this case, before the
management information system have been applied in the Fields‟ company. The store
managers had to do something like making financial records, schedule operations of the
store, recording employee work hours, tracking inventory, etc. And the store managers
had to make monthly the business reports. Moreover, they are not allowed to make their
own decisions for operating the key business of stores such as financial affairs, marketing
decisions, etc. Therefore the store managers will be bored by the routine work of the store.

In addition, the Fields‟ store managers are too young comparing with their works and
positions. It means that the routine work of the store manager should be done by middle-
age man (or woman) because the young person can be suitable with dynamic jobs than
the routine job.

Finally, the company‟s board believes that with the effective information system and flat
organizational structure the company‟s managers only focus on managing people and less
managing the key business processes. As a results, the store managers only supply daily
information for the computer system and receive the work guideline such as the day‟s
schedule, preparing material quantity, inventory stock, etc even suggestion for increasing
the sales. So the store managers‟ workday now include selling cookies and offering
information. The monotonous of the workday will make their boredom increase more.



3. Will the management information system support or inhibit the expansion of Mrs.
    Fields’ outlets? Why?



3.1 What did the MIS do for the Fields?

Since the beginning expansion of the Fields, the MIS has been developed to help the
management control a very flat organizational structure, including 248 domestics‟ cookie
stores. To do this, one of the advantages of the MIS has been effectively utilized was the
communication capacity, which can take place without any barrier between people as
needed. Besides, it also helps the Fields in paperwork, business functions, as well as
decision making. With the MIS‟s support, the staff is only focusing on some very specific
kinds of activities. In addition, the MIS can also be developed to undertake new tasks as
required because is has evolved into a spin-off business.

Therefore, it is suggested from the case that the second expansion of Mrs. Fields‟ outlets
would be continuously facilitated regardless of some problems that can be confronted due
to the acquisition. However, as presented in the case, there are two criteria to conclude
whether the MIS will support for the business, those are control and decision-making
support abilities.
3.2 Why support?

The common problems may include management constraints and corporate culture. The
management problem can be occurred because of the additional number of stores. A 50%
of scale increase is never a small growth! The structure becomes flatter and flatter. The
real problem here is the span of control. However, as with the first expansion, the MIS can
be expanded to support the new product line with the same characteristics of the previous.
It is possible because of the “spin-off” business as well as the current MIS running.

The corporate culture is another problem that may become serious if it was not addressed
properly. What will happen if the French store chain was not familiar with such a MIS? The
argument here is that the French store chain might not be applied the existing technology
of the Fields into its operations because of its traditional practices, or its culture in a sense.
The technology may become a people problem. Again, the MIS, fortunately, can be used
to support training programs to solve the problem. So, the expansion is supported!



3.3 Why inhibit?

In one side, we can expect that the MIS should be ready for the new expansion for some
reasons. In another side, however, it should be risky to believe that. From the standpoint of
financial management, the expansion of business trigger the expansion of the MIS, i.e.
new equipment, training, and utility. Can Mrs. Field invest more for the facilities? That is
not a problem of MIS but a problem behind it. In a way, the problem may inhibit the new
expansion, even more serious than that if the acquisition takes place – a financial crisis.




Recommendation

Undoubtedly technology application supports Mrs. Field very much in her business. MIS
reduce the paperwork for managers, help the Field in decision making and business
functions, it is also useful for communication capacity. Beside that, Mr. Field sees
information as a way for the company to growth without incurring the cost of expanding
staff. This information system also plays an integral part in the hiring of employees.
However, technology also has its own limitation. In this area, company may face some
management constraints and corporate culture. So the Fields should pay attention and
have proactive solutions to overcome the problems related to people.

Furthermore, the additional investment on the new store may be very significantly large.
Therefore, the fields should need to conduct a study about the problem before making any
expansion decision. With new 119 store French bakery/ sandwich chain, company have to
study carefully in advance to evaluate the system cost and upgrade its system if needed to
prevent some problems in new location associated with quite different culture and view of
technology.

				
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