This article relates to chapter 15 regarding global business strategy in that it describes IBM’s move to expand its global strategy. According to the Wall Street Journal, IBM is planning to lay off about 5000 employees and transfer those job opportunities overseas to India. This move will not be viewed favorably in public opinion, but it is a smart move that will cut costs and improve service delivery for the company’s Global Services division; it will allow IBM to become more efficient and to more effectively deliver its services. The cost of labor in India is lower than in North America and the costs associated with building and maintaining facilities is also cheaper. An engineer in the US can be paid $120,000 whereas one in India can be paid $25,000. Besides salary and compensation costs, customers will also ultimately benefit from this decision. The savings in cost can be translated into savings in price, thus making IBM more price-competitive with offshore providers in India. Offshore service providers are growing at a dramatic rate and that is forcing all service providers to be more efficient in their delivery mechanisms. IBM’s move overseas is a good move because it will lower costs, improve efficiencies, and help in lowering prices for customers all the while offering a broader set of services. These days, customers are trying to engage with outsourcers with shorter contract durations, smaller deal sizes, and targeted services. Service providers are trying to leverage the savings and productivity global delivery can offer largely because it translates into better options for clients, who can choose to have their delivery done where they want. This is why IBM, as a service provider, chooses to offer these options and savings to its customers. IBM has made it a point to maintain its geographic presence, however. It plans on expanding its US presence as well. In its 2008 annual report, IBM explained its global intentions as trying to adjust towards emerging geographies to tap into their higher growth, technological infrastructure, and talent pool. This move is justified by the new markets opened by integrated global economies that offer new opportunities and new sources of skill. The internet has allowed for communication and collaboration around the world and has introduced a new model on continuous global connection. The number of employees in the US has dropped somewhat whereas the number of employees in global divisions has increased. IBM operates in over 170 countries and it is trying to refocus its business on the higher value segments. It is trying to rebalance its workforce globally in order to improve its global reach and competitiveness and to emphasize its changing geographic mix. These job losses in the US will not be taken positively, but in terms of IBM’s strategy, globalization is a smart move to help improve its business structure.
Reference:
Dubie, Denise. (2009). After Layoffs, Will IBM Send More Jobs Overseas? Retrieved from PC World on May 27, 2009.
Website: http://www.pcworld.com/article/162049/after_layoffs_will_ibm_send_more_jobs_overseas.html
Tuesday, June 9, 2009
Nestle and Its Global Strategy
2) Nestle decided to transform itself from implementing a multinational strategy to implementing a transnational strategy, so instead of each facility in each nation tending to the needs of the culture around it, all facilities around the world would format and store data identically and use the same set of information systems. There would be no more adhering to local customs, unless legal matters arise. In this way, all the value-adding activities are managed from a global perspective, without reference to national borders. This strategy optimizes the sources of supply and demand, and leaves room to take advantage of any local competitive advantages. Nestle essentially will now take the globe as its management frame of reference, as opposed to the home country or multinational facilities. This strategy is highly appropriate for Nestle’s business model because it desires to eliminate that inconsistency of having its various facilities use the same suppliers at different times for different needs, all of which only serves to increase costs and prevent the electronic side of the firm’s business from emerging. Transnational firms are truly globally managed firms that represent a larger part of international business, and Nestle has made an excellent choice to pursue such a goal.
3) The major technological challenge facing Nestle was the fact that all the global facilities were using the SAP R/2 ERP software, but they each ran it differently and used different schemes for formatting data and managing forms. This resulted in increased maintenance costs and made the compilation of financial reports to gain company-wide views of performance that much more tedious. The management and organizational challenge was that the different global facilities largely ignored this initiative for a unified corporate culture. The Asian market managers developed a common system for managing their supply chains, and the American division had its own system, different from the Asian one. Managers resisted the idea of giving up control over their business processes to participate in this centralized solution. They feared losing decision-making power and felt the initiative was impractical. Standardization would be acceptable to them, but only if their particular practices were the ones being implemented globally. Thus, it was nearly impossible to satisfy these managers, who would pinpoint every problem that would come up in the execution of the GLOBE standards.
4) To improve the technological challenge, Nestle adopted the newer SAP R/3 ERP software for its divisions to help integrate material, distribution, and accounting applications into a single-minded e-business. Nestle initiated its GLOBE team experts to challenge its processes, find its weaknesses, and configure a list of the best practices to use for each process. This information was gathered into a Best Practices Library, which is an online database of step-by-step guidelines for processes and solutions. During meetings to convince the market managers to participate in the centralization process, one of the market managers stated that the system would be implemented regardless, and after several arguments and problems, the system itself proved to show its benefits for the firm. Unfortunately, costs rose as well, so the project was revised to maintain a spending cap to protect the company’s profits. Each country was also asked to appoint a GLOBE manager who would help facilitate the adoption of the new system. A steering committee at the headquarters would schedule and manage rollouts. These strategies were pretty successful in that about 30% of the business had converted to GLOBE, but there still remains a great percentage that has resisted the change. Results have not been up to par with the firm’s expectations, but Nestle is still working towards its goal of operating as a single unit on a global scale. This type of transnational business strategy is the hardest to achieve, but also yields the greatest results. So, Nestle has not been too successful in terms of profits, but it has been tremendously successful in implementing such a tough strategy in even 30%of its facilities.
3) The major technological challenge facing Nestle was the fact that all the global facilities were using the SAP R/2 ERP software, but they each ran it differently and used different schemes for formatting data and managing forms. This resulted in increased maintenance costs and made the compilation of financial reports to gain company-wide views of performance that much more tedious. The management and organizational challenge was that the different global facilities largely ignored this initiative for a unified corporate culture. The Asian market managers developed a common system for managing their supply chains, and the American division had its own system, different from the Asian one. Managers resisted the idea of giving up control over their business processes to participate in this centralized solution. They feared losing decision-making power and felt the initiative was impractical. Standardization would be acceptable to them, but only if their particular practices were the ones being implemented globally. Thus, it was nearly impossible to satisfy these managers, who would pinpoint every problem that would come up in the execution of the GLOBE standards.
4) To improve the technological challenge, Nestle adopted the newer SAP R/3 ERP software for its divisions to help integrate material, distribution, and accounting applications into a single-minded e-business. Nestle initiated its GLOBE team experts to challenge its processes, find its weaknesses, and configure a list of the best practices to use for each process. This information was gathered into a Best Practices Library, which is an online database of step-by-step guidelines for processes and solutions. During meetings to convince the market managers to participate in the centralization process, one of the market managers stated that the system would be implemented regardless, and after several arguments and problems, the system itself proved to show its benefits for the firm. Unfortunately, costs rose as well, so the project was revised to maintain a spending cap to protect the company’s profits. Each country was also asked to appoint a GLOBE manager who would help facilitate the adoption of the new system. A steering committee at the headquarters would schedule and manage rollouts. These strategies were pretty successful in that about 30% of the business had converted to GLOBE, but there still remains a great percentage that has resisted the change. Results have not been up to par with the firm’s expectations, but Nestle is still working towards its goal of operating as a single unit on a global scale. This type of transnational business strategy is the hardest to achieve, but also yields the greatest results. So, Nestle has not been too successful in terms of profits, but it has been tremendously successful in implementing such a tough strategy in even 30%of its facilities.
Tuesday, June 2, 2009
Quality in Transforming GE Completely Into An E-business
This article relates to chapter 13 with respect to six sigma and total quality management in the world of information technology. The CEO of GE turned to the leader of the company’s Six Sigma quality-improvement project when he decided that GE needs to totally become an e-business. There was a tough transition program across 36 GE business units with an overall $7 billion in online transactions in the previous year, and now $1.5 billion was looking to be saved on streamlined internal processes. According to the CEO, GE was frightened after witnessing a dramatic change in the brokerage industry, so it decided to launch a Destroy Your Business initiative to find out how the internet would destroy its business. An e-commerce leader was appointed in each business unit to spend six to eight months studying issues and reporting back to the CEO. After looking closely at its dot-com competitors, it found that mostly websites posed a threat. The business models were not good and people still needed to go to the manufacturer to pick up parts. The tools these other companies were using, however, showed some potential to help out GE. The major tips given for GE’s e-business push were to focus on the sell side, make sure the company grows as much as possible from the online channel, and to add value to the customers so they will have a reason to transact electronically. Internal productivity is also key. Major challenges included migrating customers. GE decided to allow them to have their workflow for purchasing online, which translates to increased productivity. In the firm, it was difficult to shut down parallel processes, or other ways of conducting business not online. GE had a big initiative to get more deflation by asking suppliers to go through auctions online to bid for it. This did not introduce much opposition on behalf of the suppliers, largely because it helps eliminate the need to travel for negotiations for a contract, and communication is considerably faster. GE employees have been forced to work differently due to the elimination of options (travel reservations can only be done through the company’s website for example). The last piece of advice granted to other companies trying to become e-businesses is to achieve complete company commitment towards the goal. One department cannot drive it, top management needs to implement the ideas of quality and six sigma.
Reference:
Q&A: Gary Reiner. (2001). Retrieved from PC Magazine on May 26, 2009.
Website: http://www.pcmag.com/article2/0,2817,33527,00.asp
Reference:
Q&A: Gary Reiner. (2001). Retrieved from PC Magazine on May 26, 2009.
Website: http://www.pcmag.com/article2/0,2817,33527,00.asp
Maine's Medicaid Issue
1)Maine provides medical coverage for over 260,000 people via their Medicaid program. Doctors, hospitals, clinics, and nursing homes all submit claims to Medicaid for payment of their services. Maine had to process thousands of claims per week using an outdated mainframe system, all the while adhering to HIPAA guidelines. With so much information stored in the database and with so many people trying to access that information, it is crucial for a custom-built system to be employed for such a purpose. Information systems are important to help increase the efficiency of the state Medicaid system, but the technology has to work correctly. The claims processing system used by the state was faulty and only served to exacerbate the problem. It was rejecting claims much more frequently than the old system, most of which were being held up as suspended. This suspended file grew quickly and lead to millions of dollars in claims being held back; in a two-month interval, 300,000 claims were frozen. The Bureau of Medical Services could not keep up with the number of phone calls or the processing of suspended claims. Providers who weren’t being paid were forced to turn away Medicaid patients or to shut down their operations, while others sought bank loans. The state’s budget was also negatively impacted. The system software was also prone to errors in overpaying doctors. The claim forms also had 40 fields of information that usually confused the providers and so incorrectly filled out forms were suspended. Furthermore, only 13 people were on staff to deal with customer service calls from 7000 providers. This disaster in the end cost the state an additional $30 million. Obviously, the impact of the faulty Medicaid claims processing system is tremendous.
2)The major risks of the Medicaid claims processing system project include a number of factors, all of which proved to have a negative impact on the entire state system. The system was very error-prone, issuing checks for overpayments and later trying to recover the extra money given out. The claims forms were difficult to fill out so some errors were made and the system would automatically classify those claim forms as suspended. To circumvent such problems, CNSI recommended that all providers re-enroll so their information would be complete according to the new system’s requirements, but the department chose instead to transfer the existing information from the old system to the new one. There is a risk of the new system still recognizing this information as incomplete, which is what happened. Another risk factor was the low number of staff members trying to satisfy thousands of providers at once. Other risk factors include that this was the first time a Medicaid claims system was being designed by CNSI. There were only two proposals for the system and it went ahead with the more problematic one, unknowingly. The president of CNSI even admitted that his company lacked the experience of working Medicaid systems, which is a risk factor for increasing the amount of error. Another major risk factor was the lack of money within the budget to even train any members of the staff to use the system.
3) The major problems faced in implementing the new system include an increase in technological errors that would lead to the system classifying a great number of claim forms as erroneous and thereby suspending them. This left thousands of providers unpaid, which lead to a decrease in the acceptance of Medicaid patients and even the closing down of some providers. After several attempts to alleviate this mess, the suspended claims backlog only grew in size. In terms of management and organization, the project managers were weak and there was no communication between departments, so that multiple departments would work on the same project simultaneously oblivious of the others’ doings. The staff members had no experience with the new system technology, nor were there enough money in the budget to train any of the staff members on how to use the system.
2)The major risks of the Medicaid claims processing system project include a number of factors, all of which proved to have a negative impact on the entire state system. The system was very error-prone, issuing checks for overpayments and later trying to recover the extra money given out. The claims forms were difficult to fill out so some errors were made and the system would automatically classify those claim forms as suspended. To circumvent such problems, CNSI recommended that all providers re-enroll so their information would be complete according to the new system’s requirements, but the department chose instead to transfer the existing information from the old system to the new one. There is a risk of the new system still recognizing this information as incomplete, which is what happened. Another risk factor was the low number of staff members trying to satisfy thousands of providers at once. Other risk factors include that this was the first time a Medicaid claims system was being designed by CNSI. There were only two proposals for the system and it went ahead with the more problematic one, unknowingly. The president of CNSI even admitted that his company lacked the experience of working Medicaid systems, which is a risk factor for increasing the amount of error. Another major risk factor was the lack of money within the budget to even train any members of the staff to use the system.
3) The major problems faced in implementing the new system include an increase in technological errors that would lead to the system classifying a great number of claim forms as erroneous and thereby suspending them. This left thousands of providers unpaid, which lead to a decrease in the acceptance of Medicaid patients and even the closing down of some providers. After several attempts to alleviate this mess, the suspended claims backlog only grew in size. In terms of management and organization, the project managers were weak and there was no communication between departments, so that multiple departments would work on the same project simultaneously oblivious of the others’ doings. The staff members had no experience with the new system technology, nor were there enough money in the budget to train any of the staff members on how to use the system.
Subscribe to:
Posts (Atom)