Business_Management

Introduction Today we observe and are the evidence of a huge transformation in the business practices. The culture of doing business and looking after the customer has changed in a dramatic way. Gone are the days when mostly businesses were focused on transactions rather than relationship building. The environment transformed from traditional marketing practices to Relationship integrated marketing environment. Organisations transformed into relationship building institutions and focused on implementing the strategies with the help of modern marketing scientific theories and models not only to serve customer better but also to retain them. The role of Customer relationship management is hugely significant in current brutal, ruthless and highly competitive business environment. No matter what business and where, geographical limitations are story of the past, information barriers are ditched somewhere so deep and Choices are countless. Gone are the days when today’s necessities were the luxuries of elites. The economic wheel and media invasion changed attitude, preferences and buying habits of the customers. In our report we look into the highly important and critical business tool, which is known as Customer relationship management (CRM). Its importance in an organisation’s successful business operations, how and by what it helps and give provisions the organisations to build up their customer data base, customer profile , so they can identify each individual customer according to their desire and demands. More importantly how CRM helps organisations not only to serve customers better but also retain them for a longer time to maximise their profitability and competitiveness in the market. We also look into the E-business activities that how organisations use IT infrastructure to communicate across the supply chain and serve the customer adequately and minimise the cost of serving them. The CRM and logistics are two strategic tools by integrating them both organisations can build their reputation, reliability and profitability. We by past research (literature review) and critically evaluating a chosen organisation try to build up a relation between theory and its application in real time. We selected Dell computers to evaluate the Role of CRM in its successful business operations. Secondly we look into the E-Business activities of Dell computers to find out how its IT oriented information structure helped the Business process to integrate with each other. Literature Review Customer relationship management has taken the businesses like a storm. Almost in every type and size of organisation looking into CRM model, so they can align their processes to be more competitive and successful. As far as the theory and concept is concerned, CRM is not a very new tool. According to William Boulding, etl, (2005) CRM is the outcome of the continuing evolution and integration of marketing ideas and newly available data, technologies, and organizational forms Year-(2002) What is Customer Relationship Management (CRM) What it does for an Organisation Customer relationship management (CRM) according to is strategic approach which utilises a combination of * Information * Technology * Policies * Business Process * Employees And give organisation a competitive advantage in the market place to do and perform the Customer retention activities in an appropriate manner to develop and retain profitable customers over a long time. The Effective CRM The effective CRM defined as in IBM research paper CRM Today (2oo4), as * Develop the closed-loop CRM process to share knowledge which is obtained as a result of customer data analysis within all relative business units * It develops the strategy and process for the flexible flow of this obtained knowledge across the organisation’s business process Objectives of Customer relationship management (CRM) The core objectives that an organisation set and seek by applying an appropriate CRM strategy is defined by Rigby etl, (2002) are. * The acquisition of new customers * To retain old customers as profitable source * Develop high spending customers from the existing casual customers * Convert bad customers into profitable customers or if not , then get rid of them Types of Customer relationship management (CRM) Various research and literature suggested different types or approaches of CRM, but the most used and agreed types discussed by Perrien, J., Filiatrault, P. and Ricard, L. (1993) are * Operational : It defines the automation of customer related business process such as marketing, sales and customer services * Collaborative: It provides the appropriate channels of communication with the customers in upstream and downstream of the supply chain by the use of emails, multimedia tools, internet (Intranet and Extranet) and customer portals. * Analytical: It provides an understanding of the behaviour of the existing and potential customer by conducting an in-depth analysis by using the customer data. Note: We only define in more detail only the Analytical aspect of CRM, only to give the reader an insight Architecture of Analytical CRM Source: Berry, M. and Linoff, G. (2000) Analytical CRM Process Source: Berry, M. and Linoff, G. (2000) Technologies for Analytical CRM There are certain ways to analyse the data in CRM model as defined by Fayyad, U. Piatetsky, Shapiro, G. and Smyth P. (1996), they are * On-line analytical processing (OLAP) * Data Warehousing * Data mining They provide an integrated, reliable, historical and analytical view of each set of customer. Customer data warehouse, how it constructs and record the customer behaviour and change in product preferences over the time Source: E. W. T. Nagi, (2005), What is Important for successful Implementation of Customer relationship management (CRM) There are many evidences those organisations failed in implementing the CRM and eventually gone back to the back foot where they were. According to the study on CRM conducted by IBM “Doing CRM Right”,(2004) they come up with findings that are critical in the success and failure of the CRM implementation process. Reasons of Failure * Too much dependability on technology “ perceived that by massive IT enforced CRM model will sole all the problems with a magic click” * Misconception of senior management towards the complexity of CRM at the implementing phase * The employee capabilities to adopt the CRM Model implemented * Reasonably failure in integrating the old (existing) customer services process to new strategic CRM approach. Key Success factors in implementing and use of CRM * Adoption of right culture across the board * Very committed and determined attitude of senior management * Understanding of the employees in a positive sense about CRM * Lining the employee’s own priorities with CRM so both are aligned and integrated to produce positive results In the nutshell the CRM if successfully planned, devised and implemented, it virtually transforms organisation culturally, structurally and strategically in its length and breadth. Strategic Value chain of CRM As we discussed CRM in detail, we discuss the value chain in CRM, its strategic importance and how it works in the organisations overall business process. Many years ago, economists introduced the concept of value maximization, in this context the organisations devise the strategies to maximise profits and the customers maximise utilisation. Now we have the concept of CRM, the practitioners and theorists, William Boulding, etl, (2005) say that CRM should not only be measured on the basis of successful customer build-up but it should value the internal organisational processes. In CRM the organisation Value performance and Customer value creation are directly related to each other. CRM Strategic Value Chain Source: Francis Buttle (Macquarie University Sydney NSW 2109 Australia) The CRM value chain “Continued” The value chain of CRM, which is also known as CRM strategic value chain is a strategically proven model. The organisations when implementing the CRM always put great emphasis on the application of value chain, as this helps the organisations to develop and implement the CRM core business strategies. The ultimate objective and the purpose of value chain process, is to ensure that the organisation successfully builds a long term mutually agreed –beneficial relationships with its customers, those who are significantly valued in terms of their strategic importance in the business of the organisation. We all know that not all the customers have significant importance, as some buy too little, some are very casual in their preferences, some are very prone to switching and some are too expensive to retain. The core function and purpose of CRM strategic value chain is to Identify, sort, analyse and build up a portfolio for each customer which is or can be profitable for the organisation. Strategically significant customers (SSC) are categorised in four types, defined by Francis Buttle, * High Life time value customers : These customers should be the focus of the organisation to retain them The Life time value potential is the present day value of all the future transactions that organisation might earn by developing a relationship with this particular type of customers. * Benchmark customers: These are the customers who set the trend, or in simple words the customers copy them. * Inspirational Customers: These are the customers that inspire changes in the organisation to whom with them doing the transactions. They could be the most demanding and high attention seekers type of customers. * Cost magnets: these are the customers who traditionally absorb the most value of the fixed cost, so they make other customers possible to become profitable for the organisation. The purpose of Value chain is to identify the customers according to the type so the business process can integrate its activities to address their needs and keep them involved in business transactions so they are retained. E-Business activities According L. Fahey, (2001), “E-business, In spite of its pervasiveness, visibility, and impact, e-business often remains a poorly understood phenomenon. What is e-business' In simple terms, e-business constitutes the ability of a firm to electronically connect, in multiple ways, many organizations, both internal and external, for many different purposes. It allows an organization to execute electronic transactions with any individual entity along the value chain—suppliers, logistics providers, wholesalers, distributors, service providers, and end customers” E-Logistics The logistic activity in an organisation is always related to the organisation’s Supply chain management (SCM). In the case of E-logistics it is subject to E-Scm. The E-Logistics as defined by Gunasekaram, (2003), “ E-Logistics is one subset of a large external logistics market, e-logistics can be defined as the transfer of goods and services using Internet communication technologies such as electronic data interchange (EDI), e-mail and world wide web (WWW)”. Primarily the e-logistics involves the transfer of information not the goods by using any of the available electronic medium. The case of Dell computers We choose the Dell computers to investigate how this organisation revolutionarily changed the business practice in the computer industry. The implementation of CRM and E- Business strategies especially in logistics and supply chain and integrating with IT based infrastructure to provide optimum, prime and very reliable customer services to it well spread customers across the globe. As we know Dell computers is a market trend setter in many ways and many computer manufacturing organisations follow the Dell way. We also look into the E-logistics activities in Dell and establish a link between the CRM strategies and E-logistics activities. Though they are both different to each other as far as their strategic implications are concerned, but they are in many ways inter-related as well. The E-Logistics in Dell is not only for the upstream side of the supply chain but it is more significantly play an important role in the downstream side of the supply chain. The downstream side of the supply chain in Dell is precisely the end-user of their components and / or services. The Company Overview A company that revolutionarily changed the face of doing business in the Computer industry in a very short span of time is Dell Computers. Dell is One of the most successful and profit generating organisation in computer industry of modern era. Dell is known for its innovative ideas in CRM, Logistics and agile supply chain. The business process across Dell is very swift, responsive (reaction time is very sharp) and reliable. These are the attributes of Dell business process model that made it very distinctive and successful even in bad and financial crisis times. History and the Business practice of Dell Dell was the idea and the brain child of Michael dell, who founded dell in 1984 .At that time Michael Dell, was still a student at University of Texas in Austin Dell started selling IBM upgraded compatible PCs over the telephone, after a success and good response from the market Dell in 1985 started its own assembling and marketing its own brand. As the business started growing and by 1990 it was well spread .revenues grew so rapidly. In 1994 Dell pulled itself out of the retail channel and started selling computers directly to the end users or customers. This strategic decision proved right and showed wonderful results and Dell enjoyed a well earned growth over its competitors in the same industry. During the 1994-1995, Dell prospered virtually at a rocket speed, sales grew enormously, and market share jumped from 3% to 9%, share value grew by 40% More importantly Dell managed its reputation as committed and quality product supplier to its customers. During that time Dell was the most talked company among the investment and financial institutions. As it continues to grow, it is faced with the challenge of how to maintain its customer relationships and inventory management, while continuing to meet the demands and requirements of its customers. To encounter these challenges, Magretta, J. (1998). Dell implemented enterprise-wide computing software, which profiles and targets its customers, as well as streamlines the flow of its products throughout the supply chain. Dell’s collaboration with other computer software companies has allowed it to become a leader in customer relationship management (CRM) and supply-chain management (SCM). These initiatives have resulted in net revenues of between $30 and $60 million over the last five years. Business Model of Dell Starting the business by using the retail channels and then pulling out of it, Dell did not stop its core business practice, which is direct sales and build-to-order production system Gunasekaram, A., Ngai, E.W.T. (2005). Dell emphasised on to carry out its practice for doing business that in return put a huge pressure on suppliers, logistic operations, assembly line and of course on information system Direct sales The direct sales model consist of two key (basic) elements * Direct customer relationship (CRM) * Pin point customer segmentation for its products and services Indirect Distribution Channel of the Computer Industry Dell’s Direct Distribution channel Direct Customer Relationship Dell use direct approach by eliminating all the intermediaries, by using web based Information system that enables Dell and its customers to communicate during the transition stage of sales and also after the sale don. It also enables Dell to communicate its suppliers and Third (3rd) party logistic suppliers. The value web model also enables customers to track directly their orders and status of delivery. This approach provides Dell advantages such as * Knowledge about its customers * Close coordination with its suppliers * To maintain minimum level of inventories Dell’s Value Web Model Source: Lawton, T.C., Michaels, K.P. (2001). Dell implemented the CRM model and used it to develop and maintain * Customer data base and customer profile * To overcome the drawbacks of direct sales such as marketing, support services and after sale support to small customers in far reach markets. By using CRM approach dell maintained it contact with customers and even provided better support services than its competitors. Dell’s CRM model Processes | Know-What | Know-How | Know-Why | CRM |    | What are your customers' wants and needs' |    | What “separate” sources of customer knowledge must be united to maximize the effectiveness of your CRM project' |    | What elements of your existing operations must be integrated into your e-business processes to improve your customer focus' |    | How are your competitors interacting differently with their customers' | | |    | How can you collect relevant information that can be used to accurately fulfil customer wants and needs' |    | How is your Web-enabled CRM creating enhanced customer focus and interactive capabilities' |    | How are you interacting with your customers differently or better as a result' |    | How has e-business affected your ability to react to changing customer needs' |    | How has e-business allowed for more effective feedback loops' How is that feedback incorporated into other processes and into learning' | | |    | Why is the CRM process changing' |    | Why do you need to change the ways in which you interact with your customers' |    | Why are your competitors changing the ways in which they interact with customers' |    | Why have customer expectations changed' | | Source: www.ibm.com As the purpose of CRM is to gain, obtain and maintain information about the customers and then use it appropriately, so that organisation is able to retain the customers and eventually increase its customer profile. Dell by using this model is very successful in all these strategic aspects of CRM model The three letter word “CRM” has been interpreted in many ways by many over the time, the role of CRM defined in different ways, Srinivasan, Raji and Christine Moorman (2005), quoted some most said phrases about CRM such as , “For some, CRM is simply a bridge between marketing and IT: CRM is therefore an IT-enabled sales and service function. For others it’s little more than precisely targeted 1- to-1 communications. But both of these views deny CRM its great potential contribution. Because CRM, at its most advanced, answers questions like ‘who should we serve'’ and ‘what should we serve to them'’ and ‘how should we serve them'’ it could, and often should, be positioned as the fundamental strategic process around which the business is organised”. The Business strategy model of Dell completely integrated with its CRM model. As Dell’s customer segmentation is based on * Relationship * Transaction * Public and international customers * Corporate and Government customers In this aspect the CRM and Business Model with the integrated E-Business model made Dell to retain far better control over its customers and enabled Dell to provide the required and value added services to them without involving into lengthy traditional transactional procedures. CRM and its E-logistics Inter-relationship as in Dell We clearly know that CRM and E-Logistics are two different models and strategies in Dell. They are different in terms of functionality and operations. The inter-relation of both is actually that CRM provides the in hand, viable, accurate and customer need requirement information, once the supply chain get this information it is easy to manage the delivery of the product from the closest geographical source of Dell. Secondly the information received from the CRM data warehouse gives e-logistics advantage to put less efforts and time to prepare shipping papers. There are some more inter-related activities that CRM and E-logistics integrate with each other to make sure the accurate transfer of product and necessary documents. * Corporate and individual (domestic) customers share the information on common portal which is set up by Dell. * Suppliers have the access in real time access to Dell portal, so they can track the volume of sales both in quantity and geographically. this enables suppliers to build up their inventories * By linking the suppliers, customers and business partners in one common data base and web portal enables Dell to achieve the Virtual integration in its value Chain. * The build to order strategy, which is based on the customer data information primarily build up in the CRM model. This build to order process enables the suppliers to determine that how much each of the parts and components are required and when. So they can manage their own production cycles and logistics accordingly. * The inter-relation of CRM and e-logistics enables the customers to track its order by login to Dell’s web site and communicate with Federal express Bibliography Berry, M. and Linoff, G. (2000), Data Mining Techniques for Marketing, Sales, and Customer Support, John Wiley & Sons E. W. T. Nagi, (2005), “Customer Relationship Management Research91992- 2002)”,Marketing Intelligence & Planning Vol. 23 No. 6, 2005 pp. 582-605 Gunasekaran A., E. W. T. Nagi (2003),”Research paper” International Journal of Physical Distribution & Logistics management. Vol. 33, issue, 09 Gunasekaran, A., Ngai, E.W.T. (2005). "Build-to-order Supply Chain Management: a Literature Review and Framework for development". Journal of Operations Management, 23: 423-451. Executive summary view, CRM global study IBM Business Consulting Services, (2004), “Doing CRM right: What it takes to be successful with CRM” Francis Buttle, Professor of Management MGSM Macquarie University Sydney NSW 2109 Australia Email: francis.buttle@mq.edu.au Julian ChuIBM , (2002), “Bringing the Customer experience full Circle:The CRM value Cycle”, Institute for Business value-IBM Lawton, T.C., Michaels, K.P. (2001). "Advancing to the virtual value chain: learning from the Dell model". Irish Journal of Management 22:91-112, ISSN: 1649-248X. L. Fahey, R. Srivastava, J. S. Sharon, and D. E. Smith, (2001),” Linking e-business and operating processes: The role of knowledge management”. IBM SYSTEMS JOURNAL, VOL 40, NO 4, Magretta, J. (1998). "The power of virtual integration: An interview with Dell Computer’s Michael Dell", Harvard Business Review, 76 (2): 73-8 Perrien, J., Filiatrault, P. and Ricard, L. (1993), “The implementation of relationship marketing in commercial banking”, Industrial Marketing Management, 22 (2), pp 141- 148. Rigby, Darrell K., Frederick F. Reichheld, and Phil Schefter (2002), “Avoid the Four Perils of CRM,” Harvard Business Review, 80 (February), 101– 109. Srinivasan, Raji and Christine Moorman (2005), “Strategic Firm Commitments and Rewards for Customer Relationship Management in Online Retailing,” Journal of Marketing, 69, pp.193–200. William Boulding, Richard Staelin, Michael Ehret, & Wesley J. Johnston,(2005 a), “A Customer Relationship Management Roadmap: What Is Known, Potential Pitfalls, and Where to Go “ Journal of Marketing Vol. 69 pp. 155–166 William Boulding, Richard Staelin, Michael Ehret, & Wesley J. Johnston,(2005 b), “A Customer Relationship Management Roadmap: What Is Known, Potential Pitfalls, and Where to Go “ Journal of Marketing Vol. 69 pp. 155–166