SAP’s Case StudyStrategic Management

GROUP:NEMAH ALSAYED

SHAIMAA ALAIDROSHADEEL SULEMANI

Outline

Introduction ERP SAP Evolution

Strategy Organizational Structure

Strategic Decisions Dilemmas Internal Environment Analysis

External Environment Analysis SWOT Competitive analysis Solutions/ Recommendations.

Introduction What’s ERP Systems?

ERP stands for Enterprise recourse planning. Business management software. Divided to smaller integrated applications that collect, store,

manage and interpret data from business activities. Share data across the various departments.  Facilitates information flow between all business functions. Manages connections to outside stakeholders.

SAP Evolution

In 1972, 5 German IBM computer analysts founded SAP. Systems Applications and Products in Data Processing. software allows information in a company's value chain to be

coordinated and processed centrally. Resulting in enormous savings in time and expense. In 1973, SAP unveiled accounting transaction processing program

called R/1. Followed by R/2, and R/3.

Differentiation Focused strategy

Differentiation very sophisticated state of art software application. high focus on R&D to create competitive advantage. charge its customers a premium price. Market leader in starting business solutions through IT.

Focused SAP focused on niche market of multibillion dollar leading

companies to help develop global base.

Organizational Structure

Flat structure To support their innovative environment. Developers contribute the most to product development. Product driven not service driven company. Decentralized operations of the US/global subsidiaries. Believes in organic growth.

SAP’s Strategic Decisions

First, Global Expansions. Aims to increase its customer base quickly. So they focused primarily on developing ERP software.

Second, Outsourcing consulting. Deciding to outsource consulting serveries. Through strategic alliances with major global consulting companies such as IBM, Accenture.

Dilemmas

Challenging needs of global environment. Very standardized platform across functions and divisions.

Outsourcing consulting services consequences included Billions of Dollars revenue were earned by the consulting companies. Consulting companies became the experts in after sales services. SAP began to lose knowledge of its customers' emerging problems.

Focusing only on R&D result in neglecting global marketing. Specially for smaller companies (unserved potential).

Internal Environment

Analysis

Core Competencies

state of art product. Research and development. Offer potential customer a broad, standardized business

solution. (across the whole supply chain) Able to charge premium price.

Primary Activity: Operations

Decentralized Global operations. of marketing, sales, and installation.

Centralized R&D of software in Germany. workflow design follow “German engineering mindset” Scope of SAP culture of technical innovation and best practices. focused on R&D Neglects other functions.

Result in each subsidiary carrying its own operations.

Primary Activity: Outbound Logistics

Associated with collecting, storing, and distributing the product or service to buyers Long implementation process. Very expensive. Lack of training from SAP. Few for external consultants. Small amount of internal consultants. SAP spending little many to improve services.

Primary Activity: Marketing and Sales

Improper identification of customer segments and needs External consultant had all the knowledge about customer

problems/requirements. SAP focused on Large companies. Unserved need for others. Lack of SAP customization.

Innovative approaches to promotion and advertising SAP neglected marketing as they believe their product will sell itself.

Support Activity: Human Resource Management

They did not have good HR Employees were leaving to competitors.

No defined career path. Pressure on developer to do all the work and product

development decisions.

Primary Activity: Service

Slow response to customer needs. Relying on external agencies. Lack of ongoing training. Customers blame SAP for bankruptcy.

Due bad implementation process.

External Environment

Analysis

Industry characteristics

Information Technology Industry Characteristics

Huge Market size Rapid growth rate Difficult to enter/ exit.

Industry Driving Forces

Globalization. Web-based serveries/the

Internet. Innovation. Competition.

Marketing. Trade Secrets. Privacy.

Industry Key Success Factors

Fast Development. Outsourcing. Up to date with latest trends. Highly skilled HR. Filling customers requirements. Efficient implementation cost. Security. Privacy.

Porter’s Five Forces Analysis

Threat of new entrants Medium to low Product highly differentiated. High capital requirements. High switching costs.

Bargaining power of suppliers Not relevant in the case. They have all the knowledge in house. developing their products by

themselves. Bargaining power of buyers

Low Purchases once/ very expensive. Product purchased are differentiated. Buyer faces huge switching costs. Limited Sellers.

Porter’s Five Forces Analysis

Threat of substitutes Low SAP is the leader. substitute serve similar purpose. SAP higher quality, features,

performance. High switching costs.

Intensity of competitive rivalry Medium to high Equally balanced competitors, Oracle

and Siebel. Fast industry growth. High fixed costs. High exit barriers.

SWOT and Competitive Analysis

SWOT

Weakness • SAP is very standardize and lack of customization

• They don’t have internal consultant agent

• Customer faces huge implementation problems

• SAP did not develop its own database management software package

Strength • High innovative product • Good Market Position• Global leader of the

business application software

• Very long product life cycle• Premium price

 Threats• Sever Competition are the biggest threat to SAP• Outsourcing consulting

Opportunities• They target potential market for small and

medium company • Merging into the new web-based software

technology

Competitive assessment chart

Attributes Ratings (Scale =1-5) 1-poor 5-Excellent

SAP Oracle IBM Siebel Systems

Microsoft

Customers awareness

5 4 5 3.5 4

Product Quality 5 4.5 3.5 3 4Product availability 4 4 3.5 5 5Technical assistance 3 5 5 4 5Score (Average) 3.4 3.5 3.4 3.1 3.6

Solutions/ Recommendations

SAP management has to know even if their product is superior, implementation problems can leave businesses with bankruptcy.

SAP has to develop a flexible platform & operations software across all functions and divisions. Efficient global structure with defined plan for expansion. Focus on corporate infrastructure. Lack of communication between different subsidiaries can impairs core competency.

focus on marketing and sales development and building a top management team expertise not only on R&D but also on global market sales and services.

Solutions/ Recommendations

Training some external agents only not enough, other companies who became experts about SAP implementation later became biggest threat. (Trade Secrets)

Stop the strategic alliance and instead acquisition them or start your own consulting.

Improving human resources to meet the needs of employees  to  get the employees loyalty.

Recruit a sufficient number of consulting employees (have their own consultants) so in the long run the company won’t lose potential profit.

Making their product customized to other unserved markets.