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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

1.0

Why is business integration important to Reebok?


1.1

Increase supply chain efficiency


1.1.1 Cooperation across the supply chain is being made easier by
the availability of enterprise systems by own acts together internally.
1.1.2 By the way, via business integration across Reebok, it begins to
seem possible to attack the larger issues of the extended supply chain.
Once Reebok have good information on their own sales, inventory, or
production figures, it is much easier to share that with other companies.
For example major systems alike SAP vendors are also making it an
explicit part of their strategy to support Reebok communications in their
product package offerings.
1.1.3 Besides that, implementation of business integration allow
Reebok to

incorporate its manufacturing partners and customers

around the globe through Internet EDI links as well as ultimately plans
to tie its systems directly to theirs.
1.1.4 Reebok can also utilize this integration platform by offering
customers access to enterprise information through its official web
sites. Through these internet sites customers can use to order the
products from their home or just check on availability and pricing. The
Web site helps to advertise their products in a wider scale. It will give
the customers information about the new product release and company
information. This literally helps to increase the brand popularity of the
company among the customers.
1.2

Enhanced customer service and network relationships


1.2.1 The main reason implementing business integration for
construct strong customer service and also key to growing corporate
businesses.

Some

studies

have

suggested

that

the

typical

manufacturer stands to cut the time between customer's order and


the arrival of the shipments by 15-40 per cent with well-implemented
business integration software.
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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

1.2.2 Reebok can use integration data to manage its entire business
better. These are emphasis via System a like SAP, systems software
etc. when everything Reebok know about their customers available at
every touch point across their business and meet the needs throughout
the customer life-cycle.
1.3

Cost-cutting in internal operations


1.3.1 At the most fundamental level, integration systems offer ways to
squeeze costs out of internal supply chain operations. They accomplish
this mainly by cutting across and linking together the traditional
functions of the business, in the same way that good business process
management does. This always refers to replace inventory with
information.
1.3.2 Reebok has all the typical supply chain problems such as
storage

of

raw materials,

stock turn

over,

product

forecast,

procurement etc. Its product line experiences seasonal sales peaks


that make a hard time for product forecasting. So Reebok can use
business integration system to link its forecasts to production
scheduling and ultimately to procurement. Through this it dramatically
can cut inventory levels (liability). By the way, help to translate to
higher warehouse capacity with good projection and planning with the
profit earn.
1.4

Strategic Insight
1.4.1 Integration of all the communication tools, avenues and sources
within a company into seamless business intragroup systems will
maximize the impact on consumer and also minimal cost.
1.4.2 Therefore Reebok can use business integration system to link
all internal group communication in one hub. As result, when
everything is integrated its easier for Reebok employees or even
management to understand how their organization is operating and
ensure processes are as streamlined as possible which indirectly
increase customer satisfaction.
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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

2.0

Diagram what information is collected and how s it is used in the new

system at Reeboks. Specify the format of data collected at each point


New system in Reebok:
2.1

Re engineering

Re engineering is the analysis and design of workflows and business process


management within an organization. A business process is a set of logically
related task performed to achieve a defined business outcome. Process
reengineering began on private sector technique to help organization rethink
how their do work in order to improve customer service , cut operational cost
and become world class competitor .Business is basically fundamental
rethinking and radical re design, made to an organization existing resources.
2.2

Private architecture

Reebok installed a privately designed architecture for voice, video, and data.
Reebok communicates not only with its worldwide distribution base but also
with its ad agency and other suppliers. IT currently developed an electronic
image library to enable product shots to be distributed to every country where
Reebok does business. The system dropped the new product lead time from
six months to three, and, in some case.
2.3

Passport

To improve this process, Trainer developed a software package called


Passport. Passport rationalizes product codes and shoes size. It does also
give small distributors and subsidiaries access to the system.
2.4

Lotus Notes

Lotus Notes is used to store the catalogues with mail links through cc: Mail
2.5

Electronic data interchange

Electronic data interchange with 10-15 percent of its retailers. This


commitment enables goods to be tracked through shipping companies,
customs, and warehouses.
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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

2.6

Hoover

A data capture system to information from databases around the world, is


linked to customer database that track what customers have ordered and
what they want.

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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

3.0

When problems arise with the network, or the software, how can they be
identified and resolved? How do we set up an IS group to solve
problems and help users?
The problem that arise can be identified by the complain that had being make
by the customer. For example compliant regarding the size or colour of the
product. The problem that happens also can be detected by doing a checking
of the product inventories and raw material stocks when retailers and
distributions placed orders. Once it have the order but the inventories are not
being reduce it means have a problem regarding the system that had being
use and the company need to make faster corrective action to make sure the
business can be success. The company see the problem that they facing in
the AFS system so the company taking action by push for new features such
as a Web-based system to handle business-to-business transaction with their
suppliers.
The company learned about the problem almost immediately. It prove went
the company pays VML to run its computer programme Seer to scan Internet
blogs from the comment of their customers. Based on this immediate action
take the company told customer to treat their product before sell it.
Through the information system the company use news media approach such
as Youtube and Second Life to market their product. The company also use
the website to help them emphasizes the benefit of information system to
create flexible supply chain and they use this platform to share information to
produce and ship he right product to each market. Reebok installed Radnet
Inc Webshare groupware system to maintain its website. The system has tool
for email, discussion group and bulletin boards.IT currently developed an
electronic image library to enable product shots to be distribute to very
country where the company do a business and this help a lot to improve the
communication between company and their customer.
Information system (IS) also helps to improve the process in the business.
Reebook itself use passport which is rationalizes product code and shoe size
which means gives small distribution and subsidiaries access to the system
through the personal computer it will help the customer and make customer
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feel easily doing business with the company. Lotus Notes also being use to
help to store the catalogues with mail link through cc:Mail
IS also help the company by using hoover to help the company capture
system to suck in information from database around the world and it linked
to customer database that track what customers have orders and what they
want. Use electronic data interchange with 10-15 percent of retailers it will
enables goods to be tracked through shipping companies, customs and
warehouse.

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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

4.0

How has Reebok been hampered by its information system?


Peter Burrows as chief technology officer (CTO) was counting on the system
to handle the major transactions at Reebok, so he could avoid the necessity
of rewriting the old applications to become Y2K compliant. By May, 1999, the
system was still not fully operational. Among other problems and bugs, the
system was too slow to check product inventories and raw material stocks
when retailers and distributors placed orders Peter Burrows as chief
technology officer (CTO) was counting on the system to handle the major
transactions at Reebok, so he could avoid the necessity of rewriting the old
applications to become Y2K compliant. By May, 1999, the system was still not
fully operational. Among other problems and bugs, the system was too slow to
check product inventories and raw material stocks when retailers and
distributors placed orders.
In year 1993 assessment identified major problem with Reeboks information
system incompatible databases, system that were old and inflexible and both
costly and time-consuming to change. Many critical business processes were
manual and paper based, such as financial consolidation, factory purchase
order placement, and there was a notable lack of standardization of hardware
and software.
Based on this assessment, Reeboks management was faced with a
challenge. Given a fragmented global technology infrastructure, how would
Reebok international archive a truly transnational configuration leading to the
global efficiencies it sought and yet maintain the local responsiveness
required for its customer.
Reebok management recognizes that in order to archive sustainable
competitive advantage it was necessary to proactively develop on enterprise
information system architecture that would facilitate global efficiencies in
production and distribution.

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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

5.0

Write a report to management that describes the primary cause of the

problems, a detailed plan to solve them, and show how the plan solves the
problems and describe any other benefits it will provide.
5.1

INTRODUCTION

On August 3, 2005, Adidas-Salomon AG announced its plans to buy all


outstanding shares of Reebok International Ltd.'s stock at $59.00 per share,
for a total of $3.8 billion. Upon announcement, Reebok stock rose 30% while
Adidas climbed 7%. As stated by Herbert Hainer, CEO of Adidas, "This is a
once-in-a-lifetime opportunity to combine two of the most respected and wellknown companies in the worldwide sporting goods industry. Together, we will
expand our geographic reach, particularly in North America, and create a
footwear, apparel and hardware offering that addresses a broader spectrum
of consumers and demographics" (Adidas.com). A primary goal of the
acquisition has been to challenge industry leader Nike for a higher share of
the United States sporting goods market as well as the global sporting goods
market. The acquisition has prompted much discussion as to what the future
holds for the sporting goods industry and its major players.
5.2

MAJOR PROBLEM FACING REEBOK ON 1989 TO 1990

Reebok's share of the athletic shoe market fell to 28% in 1988, and Nike
made serious inroads into Reebok's market share and threatened to regain
the market leader position. By the year-end 1989, Nike had regained the
position. Nike used new technology to design for its new products and the
new casual shoe would be introduced in the spring of 1990. Therefore, this
would be a strong competitor for the company. Not only did the Nike go back
to the No 1 position, but also in 1988, Converse was making efforts to
become competitive in the area of high-tech and women's athletic footwear.
Thus, it gave Reebok lots of pressure on its products development and
market share in the coming years. The problem was not only from outside
competitors, the problem was also within the internal operation. Since the
management styles conflicting was with the those of Fireman, President and
Chief operating officer, Joseph Labonte and Chief Marketing officer, Mark
Goldston both resigned from Reebok in 1989. After their resignation, Fireman
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MANAGEMENT INFORMATION SYSTEM (BPMN6053 GROUP B)

reorganized the company, and this movement may lead to delay the reaction
to competitor's movement. Of operation result side, from 1989 to1990, the net
revenue increases, but the net income slowdown.
5.3

CORE COMPETENCIES & COMPETITVE ADVANTAGE

Competitive advantage is a special edge that allows an organisation to deal


with market and environmental forces better than its competitors. Whereas,
sustainable competitive advantage is one that is difficult for competitors to
imitate. This distinction is essential when evaluating the acquisition and its
effects.
A merger of this scale is inherently complex, dealing with issues such as
global positioning of companies, corporate cultures, and the allocation of
resources. To better understand the advantages gained from the AdidasReebok merger, it has been examined the following: Through these various
analyses, it has been have discovered that the importance of branding is
paramount for success in this industry.

Our research also identifies the

specific danger of competition between Adidas and Reebok.


Our analysis of the Adidas-Reebok merger shows how it will gain a
sustainable competitive advantage that may one day dominate the footwear
industry both domestically and internationally. The fact that Adidas and
Reebok control such different aspects of the shoe industry will help to ensure
their success.
To fully understand how Adidas-Reebok will gain a sustainable competitive
advantage over Nike, the situation must be looked at from several different
points. These include industrial, customer and competitor analyses, as well
as a look at the different marketing strategies and changing marketing trends.

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5.4

Using Michael Porters Industry Forces Model


Threat of New Entrants
Barriers to Entry

The athletic shoe industry is slowly becoming a global oligopoly. There are
many barriers to entry preventing new entrants from capturing significant market
share. Large athletic shoe manufacturers enjoy economies of scale that create cost
advantages over any new rival. Todays athletic shoes are highly technical. An
extremely large capital investment is required for new firms to open athletic shoe
factories and conduct research and design to create a popular athletic shoe.
Recently, Nike has incorporated forward vertical integration into their
corporate level strategy. Nike opened discount factory outlet stores in rural areas
and retail stores in urban shopping meccas.

Monolithic athletic manufacturing

companies utilize economies of scale by spending millions on product endorsements


and advertisements by spreading the high cost over their entire yearly sales. The
aggressive marketing campaigns turn their products into household names making it
arduous for new firms to compete.
Athletic shoe manufacturers greatly attempt to differentiate their products from
all shoe manufacturers. For example, Nike aggressively markets their shoes with a
visible air chamber in the sole. Reebok pushes their Pump feature to increase
product differentiation.
The capital requirements can be a high entry barrier to a new firm to the
industry. However, an existing dress shoe manufacturer may enter the athletic shoe
industry simply by re-tooling their manufacturing plant.
Access to athletic shoe distribution channels is a moderate barrier to entry.
This all depends on the status of the entering firm. If they are a startup firm, it is
extremely difficult to get shelf space at major shoe retailers. If the firm is currently in
the dress shoe industry, and is entering the athletic shoe industry, they may use their
existing connections to easily access athletic shoe distribution channels.
Switching costs are very low for the athletic shoe industry.

Shoes are

relatively inexpensive personal goods that are frequently replaced.


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Cost disadvantages independent of scale are moderate. Many athletic shoe


customers are brand loyal and are reluctant to try a new athletic shoe. Additionally,
previous aggressive marketing campaigns have increased not only brand and
individual product name recognition. Government policy is a low entry barrier, as all
manufacturers in every industry are subject to factory safety laws.
Threat of Retaliation
The threat of retaliation is high in the athletic shoe industry. For example, if a
small new competitor attempts to gain market share by dumping their products, the
much larger computer firms are more capable of absorbing losses associated with
driving the new competitor out of business.
The threat of new entrants to the profit potential of athletic shoe
manufacturers

is

minimized

through

high

entry

barriers,

but

incumbent

manufacturers must stay aware of other shoe manufactures attempting to enter the
athletic shoe industry.
Rivalry Among Existing Firms
In the athletic shoe industry, corporations are mutually dependent.

competitive move by one firm directly effects competitors, forcing retaliation or


counterefforts. For example, Reeboks expansion of the womens walking shoe,
inspired other firms to follow.
The number of competitors is stable, partially due to high entry barriers. This
adds to the rivalry among existing firms. Manufacturers watch each other carefully
and make appropriate countermoves to match a competitors move.
The rate of industry growth is stable, but the quest for global market share is
eminent. Nike and Reebok are not as dominant globally, compared to the U.S. This
increases global rivalry. Product characteristics are related to market share. Name
recognition alone sells athletic shoes.

The larger the market share, the greater

advertising capabilities and hence increased name recognition.


Athletic shoe manufacturers relentlessly try to minimize fixed costs. Many
shoe manufacturers reduce their costs by assembling athletic shoes abroad where

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labor is less expensive and tax laws are minimal.

This increases rivalry, when

manufacturing savings pass to the consumer.


Capacity has minimal impact on rivalry, because most firms have means to
manufacture the demanded amount of athletic shoes. This ability to meet demand
reduces market because most firms overproduce and drive down the selling price.
Low exit barriers and diversity among competitors has minimal impact on
profit potential. If the athletic shoe industry becomes too unprofitable, firms could
switch to other shoe markets. Additionally, diversity among firms is small because
every firm follows one another.
The rivalry among existing firms is high where weak firms are easily acquired
by fierce competitors. This may have a high impact on profit potential.
Bargaining Power of Buyers
Woolworthss shoe chains account for 23% of the U.S. athletic shoe
sales. Their dominant retail market share gives them a large amount of power.
Furthermore, Woolworths dominant market position contributes to concentration of
the buyers industry. Smaller firms have difficulty competing with mighty Woolworths
chains and other large shoe retailers.
Woolworths chains pose a moderate to low threat of backward
integration. In the event of backward integration, Woolworths would be subject to
some of the high barriers to entry. Plus, they would have to continue to sell their
competitors products because retail shoe sales are the core competency of their
corporation.
Buyers have high switching costs in regards to opportunity cost. If an
athletic shoe retailer decided to drop one of the popular athletic shoe brands, their
sales would fall due to high consumer brand loyalty. Most buyers have a medium
profit margin so price sensitivity of buyers is moderate. In the athletic shoe industry,
price increases pass to the consumers.
The overall impact from buyers bargaining power to profit potential is
moderate.

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Bargaining Power of Suppliers


Athletic shoes are manufactured primarily from raw materials including rubber,
leather and nylon. These materials could be classified as commodities, where the
manufacturing process adds to their value.

For this reason, the suppliers have

limited bargaining power, and little impact on profit potential.


Threat of Substitute Products and Services
Athletic shoes are designed to improve comfort and personal safety during
periods of increased movement. Substitutes for athletic shoes are using other forms
of shoes, or going barefoot. A large population of athletic shoe consumers wear
athletic shoes strictly because they are comfortable. Comfortable dress shoes or
sandals are equally interchangeable with minimal switching costs. If the athletic
shoe is used for sports, then there are relatively few substitutes.

Given these

reasons, the threat of substitute products is moderate and the impact to profit
potential is moderate to high.
Relative Power of Other Stakeholders
The U. S. government has low power over the athletic shoe industry.
Many shoe manufacturers have plants outside the United States, where U.S. laws
are not applicable.

To minimize the relative power of other stakeholders

corporations strategically locate their plants throughout the world. Forces driven by
market demand are the only forces that may significantly affect profit potential.
Therefore, the relative power of other stakeholders ability to impact profit potential is
moderate to low.

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5.5 Overall Assessment

The threat of new entrants to the profit potential of athletic shoe

manufacturers

is

minimized

through

high

entry

barriers,

but

incumbent

manufacturers must stay aware of other shoe manufactures attempting to enter the
athletic shoe industry.

The rivalry among existing firms is high where tender firms are easily

acquired by fierce competitors. This may have a high impact on profit potential.

The overall impact from buyers bargaining power to profit potential is

moderate.

Suppliers have limited bargaining power, and little impact on profit

potential.

The threat of substitute products is moderate and the impact to profit

potential is moderate to high.

The relative power of other stakeholders ability to impact profit potential

is moderate to low.

The overall profitability on the industry is moderate to low level and

could increase with future consolidation.

This is because of high rivalry, many

substitute products and a little buyers bargaining power.

5.6 The Integration


Also, by standardizing processes of using information technology implement
in Reebok company like SAP, AFS , BW, Retail Inventory Management if having
advance information technologies and processes to meet the changing requirement
to-re-engineering, improve its communication, supply chain system, use electronic
data interchange and improving organizational data and process. This will result in
increased operational efficiency and lowers cost across their power generating
products. This will shift company to meet the world requirement for sport shoes
industry.

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REFERENCES

http://faculty.lebow.drexel.edu/KwakH/lecture/ppt/MKTG634/Web/swot_analysis.htm.
http://www.articlesbase.com/marketing-articles/adidasreebok-merger-1983240.html
http://faculty.lebow.drexel.edu/KwakH/lecture/ppt/MKTG634/Web/swot_analysis.htm.
http://www.articlesbase.com/marketing-articles/adidasreebok-merger-1983240.html
Reebok International, Ltd. (1995): The Nike Challenge - Case Authored By :Thomas
L. Wheelen, Moustafa H. Abdelsamad, Shirley E. Fieber, and Judith D. Smith

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