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In Which Quadrant Does MDCM Fall? Why?
The Accenture IT governance model classifies companies using the rate of change and the basis of competitive advantage. This framework is helpful in offering an understanding of information technology adds value to the organization. The two criteria create four quadrants, which include efficient, predictable operators; new capacity enablers; responsive solution providers; and information integrators. Efficient, predictable operators are organizations having a low rate of change and compete basing on operational efficiency. Information integrators refer to low rate of change organizations competing using product/service differentiations (Van Grembergen, 2004). Responsive solution providers refer to firms with a higher rate of change competing using operational efficiency, whereas new capability enablers refer to high rate of change firms competing using product/service differentiation. Using this framework, it is evident that MDCM falls under the information integrator quadrant.
MDCM is an information integrator because its business model is characterized with low rates of change and emphasis on the product and service differentiation, which is used as a basis for achieving its competitive advantage. It is apparent that changes in growth strategies adopted by the company are slow-rate, usually implemented after long periods. In addition, MDCM uses information to improve its decision-making framework and develop new products and services. The differentiation strategy by MDCM is evident by the fact that the company was renowned for its ability to produce custom-made versions of equipments for unique applications. The optimized designs for manufacturability by MDCM were used to lower manufacturing costs, which provided an opportunity through which the company established its competitive advantage. This is because optimized designs served to increase customer satisfactions, and ultimately competitive advantage.
Define, Based On the Information Given In the Case, the Overall Strategic Goals of This Firm at This Time
The first strategic goal of MDCM is to operational costs; currently, the company has a bloated working capital and the least cost efficient structures in the industry. This implies that the company needs significant operational and cost improvements. The second strategic goal of the company is to increase its revenue and profitability; it is apparent that MDCM had faced five consecutive quarterly losses because of the lack of an effective cost and operational improvement strategy leading to shrinking margins for eight successive quarters. The third strategic goal is to improve its operational efficiency through enhancing information flow, which will in turn facilitate employee productivity. The fourth strategic goal is to align the company’s IT initiatives with the firm’s corporate strategy. There is the need to have an understanding of how IT plays a significant role in the achievement of the strategic business goals.
Define the Competitive Environment in Which the Firm Operates
The competitive forces analysis helps in assessing the forces that influence the competitive intensity and ultimately the industry profitability. Porter’s five forces analysis makes use of five core areas including the competitive rivalry, the threat of entry, the power of suppliers, the bargaining power of buyers, and the threat of substitutes (Wheelen & Hunger, 2008).
With regard to competitive rivalry, MDCM faces intense competition from a large number of small and efficient rival firms that use to low internal costs for competitive pricing, unlike the case of MDCM that has high internal costs. The second factor that intensifies competitive rivalry for MDCM is a low level of differentiation, as evident with the increase in the number of foreign competitors having global capabilities that MDCM could not match. This also indicates that the strategic stakes are high in the industry, which served to intensify rivalry when MDCM began losing its market share. A low level of differentiation is evident in the case of MDCM pioneering partnership arrangements with its customers to share rewards and risks, a model that has been commonly adopted by competitors; this serves to constrain its brand identification. However, high switching costs in the products helps in reducing competitive rivalry since customers cannot freely switch between products because they are constrained by costs (Williamson, 2003).
The threat of substitutes refers to the impacts on competition associated with the possibility of similar products outside the industry. With regard to the threat of substitutes, it is evident that there are no substitute products to lower the profitability and attractiveness of the industry and impose price levels. It is apparent that MDCM faces minimal threats of substitute products and services because of potentially high buyer switching costs, perceived degree of its differentiation, and no substitute products available currently in the market.
The buyer power refers to the capability of customers to exert pressure on the firm. In this regard, it is apparent that buyers are powerful because they are concentrated within a significant market share and they purchase a considerable percentage of the output. This is evident by the fact that MDCM lost a significant part of its market share and profitability when it lost only four of its ten largest customers during 1998-1999.
The supplier power refers to the influence that suppliers exert on the firm’s strategies for growth. In the case of MDCM, the suppliers are weak because the buyers are concentrated and consolidated, posing a considerable backward integration threat by the purchasers. The threat of new entrants entails the impacts on competition posed by new firms entering the industry. MDCM is multinational, implying that its competitiveness depends on the different government regulations. In addition, the firm faces significant competition from new foreign companies entering the US having more capabilities than MDCM.
Based on your Competitive Force Analysis; Determine the Strategic Response(S) MDCM Should Employ to Address the Most Critical Strategic Threats Identified above
The strategic responses that MDCM can deploy should focus on lowering prices to attain competitive advantage. This requires MDCM to reduce its operational costs and exploit this position to adopt a low pricing strategy in order to have an edge over its competitors. The second strategic response entails adopting high degrees of product differentiation, which can be used as a platform for establishing competitive advantage over rival firms. Product differentiation will also be helpful in addressing the threats posed by buyer power. The third strategic response entails establishing good relationships with customers by ensuring that the firm meets the demand of customers in terms of quality standards, price and quality specifications.
Finally, Based on Your Analyses Above and the Information Provided in the Case, What are the Critical Tactical Objectives for MDCM
It is apparent that poor information flow is a significant issue causing all the problems in the firm; this implies that the foremost critical tactical objective for MDCM is to integrate IT in its strategic goals. The second critical tactical objective is to reduce operational costs so that the company can exploit this position to make use of a competitive pricing strategy and increase customer satisfaction.