Harvard Case - Value Chain and IT Transformation at Desko (A)
"Value Chain and IT Transformation at Desko (A)" Harvard business case study is written by Jean Ethier, Pierre Hadaya. It deals with the challenges in the field of International Business. The case study is 9 page(s) long and it was first published on : May 20, 2011
At Fern Fort University, we recommend Desko pursue a strategic IT transformation focused on building a robust, scalable, and secure platform to support its ambitious international expansion plans. This transformation should prioritize global supply chain management, international marketing, and customer relationship management (CRM) functionalities, enabling Desko to effectively manage its growing international operations, cater to diverse customer needs, and navigate the complexities of global business.
2. Background
Desko, a leading manufacturer of office furniture, faces a critical juncture. Its success in the domestic market has fueled ambitions for international expansion, particularly in emerging markets. However, Desko's current IT infrastructure, built for a primarily domestic focus, lacks the agility and scalability required for global operations. This poses a significant challenge to Desko's growth strategy, as it struggles to manage international manufacturing processes, navigate diverse regulatory landscapes, and effectively market its products across different cultures.
The case study focuses on the challenges faced by Desko's CEO, Mike Desko, who must decide how to leverage IT to support the company's internationalization strategy. He must balance the need for a robust IT infrastructure with the financial constraints of a growing company.
3. Analysis of the Case Study
This case study can be analyzed through the lens of several frameworks:
1. Porter's Five Forces:
- Threat of New Entrants: Desko faces competition from both established international players and local emerging market companies. A robust IT system can help Desko build a competitive advantage through efficient operations, innovative product offerings, and superior customer service.
- Bargaining Power of Buyers: Global customers increasingly demand personalized experiences and efficient service. Desko's IT system needs to support global marketing efforts and provide customers with seamless access to information and support.
- Bargaining Power of Suppliers: Managing a global supply chain requires a sophisticated IT system that can track materials, optimize logistics, and ensure compliance with international regulations.
- Threat of Substitutes: The office furniture industry faces the threat of substitutes, such as co-working spaces and remote working solutions. Desko's IT system should support innovation and development of new product lines to stay ahead of the curve.
- Competitive Rivalry: The global office furniture market is highly competitive. Desko needs to leverage IT to gain a competitive edge through data-driven decision making, efficient operations, and effective marketing.
2. Value Chain Analysis:
Desko's IT transformation should focus on strengthening its value chain across various stages:
- Inbound Logistics: The IT system should facilitate efficient global sourcing, inventory management, and logistics optimization.
- Operations: The system should support international manufacturing processes, quality control, and production scheduling.
- Outbound Logistics: IT should enable efficient global distribution, warehousing, and order fulfillment.
- Marketing and Sales: The system should support international marketing campaigns, customer relationship management, and sales channel optimization.
- Service: IT should provide customers with online support, product information, and personalized services.
3. SWOT Analysis:
- Strengths: Desko's strong brand, established manufacturing capabilities, and experienced workforce are valuable assets.
- Weaknesses: Desko's IT infrastructure is outdated and lacks the scalability and security required for global operations.
- Opportunities: The growing demand for office furniture in emerging markets presents significant opportunities for expansion.
- Threats: Competition from established international players, economic volatility, and geopolitical risks pose challenges to Desko's internationalization strategy.
4. Recommendations
Desko should undertake a phased IT transformation with the following key components:
Phase 1: Foundation Building (6-12 months)
- Build a Secure and Scalable Infrastructure: Implement a cloud-based infrastructure that can support global operations, data security, and scalability.
- Implement Enterprise Resource Planning (ERP) System: Select and implement a global ERP system that integrates all business processes, including finance, manufacturing, supply chain, and human resources.
- Develop a Global Data Management Strategy: Establish robust data governance policies and procedures to ensure data security, compliance, and effective utilization for decision-making.
Phase 2: International Expansion Enablers (12-18 months)
- Implement Global Supply Chain Management System: Integrate supply chain management software to optimize sourcing, logistics, and inventory management across international operations.
- Develop a Global CRM System: Implement a CRM system that supports international marketing campaigns, customer relationship management, and customer service.
- Invest in International Marketing Tools: Develop a digital marketing strategy that leverages online platforms, social media, and content marketing to reach international customers.
Phase 3: Continuous Innovation and Optimization (Ongoing)
- Develop a Data Analytics Capability: Implement business intelligence tools to analyze data from across the business and identify opportunities for improvement.
- Foster a Culture of Innovation: Encourage employees to leverage technology and data to develop innovative products, processes, and solutions.
- Continuously Monitor and Evaluate: Regularly assess the effectiveness of the IT transformation and make adjustments as needed to optimize performance and achieve strategic goals.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The IT transformation aligns with Desko's core competencies in manufacturing and design, while supporting its mission to become a global leader in the office furniture industry.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who demand personalized experiences and efficient service, and internal clients, who require a robust IT system to support their work.
- Competitors: The IT transformation will help Desko compete effectively with international players by enabling efficient operations, innovative product development, and targeted marketing.
- Attractiveness: The transformation will improve Desko's operational efficiency, enhance its ability to manage global operations, and increase its market share, leading to increased profitability and shareholder value.
6. Conclusion
Desko's IT transformation is a critical investment in its future. By building a robust, scalable, and secure IT infrastructure, Desko can effectively manage its international expansion, navigate global challenges, and achieve its strategic goals. The proposed phased approach allows Desko to manage the transformation effectively, while ensuring a smooth transition to a globalized business model.
7. Discussion
Alternative options include:
- Outsourcing IT: Desko could outsource its IT infrastructure and operations to a third-party provider. However, this could lead to loss of control over data security and potentially limit Desko's ability to innovate.
- Incremental IT Upgrades: Desko could choose to make incremental upgrades to its existing IT system. However, this approach may not provide the necessary scalability and security for long-term growth.
Key risks and assumptions:
- Cost of Transformation: The IT transformation will require significant investment, which could impact Desko's short-term profitability.
- Change Management: Implementing a new IT system will require significant change management efforts to ensure employee buy-in and adoption.
- Data Security and Compliance: Desko must ensure that its IT system complies with international data security and privacy regulations.
8. Next Steps
- Form a Steering Committee: Establish a cross-functional steering committee to oversee the IT transformation project.
- Conduct a Detailed Assessment: Conduct a detailed assessment of Desko's current IT infrastructure and identify specific areas for improvement.
- Develop a Detailed Implementation Plan: Develop a detailed implementation plan that outlines timelines, budgets, and resources required for each phase of the transformation.
- Communicate with Employees: Communicate the IT transformation strategy and its benefits to employees to ensure buy-in and support.
- Monitor Progress and Adjust as Needed: Regularly monitor the progress of the IT transformation and make adjustments as needed to ensure success.
By taking these steps, Desko can successfully navigate the complexities of international expansion and become a truly global player in the office furniture industry.
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Case Description
This case describes the history of Desko, a Canadian manufacturer of wood office furniture, as it faced a crisis that threatened its own existence. The president and CEO needed to decide which actions to take to improve the effectiveness of the value chain activities of the firm and the information technology (IT) supporting it. He was considering outsourcing parts of certain value chain activities, including manufacturing, to specialized partners. The case also depicts the main characteristics of the Canadian wood office furniture industry and the external factors that played an important role in the development of Desko.
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