SAP’s Case Study
Strategic Management
NEMAH ALSAYED
5/12/2015
Outline
Introduction External Environment Analysis
ERP SWOT
SAP Evolution Competitive analysis
Strategy Solutions/ Recommendations.
Organizational Structure
Strategic Decisions
Dilemmas
Internal Environment Analysis
Introduction
What’s ERP Systems?
ERP stands for Enterprise recourse planning.
Business management software.
Divided to smaller integrated applications that collect, store, manage and
interpret data from business activities.
Share data across the various departments.
Facilitates information flow between all business functions.
Manages connections to outside stakeholders.
SAP Evolution
In 1972, 5 German IBM computer analysts founded SAP.
Systems Applications and Products in Data Processing.
software allows information in a company's value chain to be coordinated and
processed centrally.
Resulting in enormous savings in time and expense.
In 1973, SAP unveiled accounting transaction processing program called R/1.
Followed by R/2, and R/3.
Differentiation Focused strategy
Differentiation
very sophisticated state of art software application.
high focus on R&D to create competitive advantage.
charge its customers a premium price.
Market leader in starting business solutions through IT.
Focused
SAP focused on niche market of multibillion dollar leading companies to help
develop global base.
Organizational Structure
Flat structure
To support their innovative environment.
Developers contribute the most to product development.
Product driven not service driven company.
Decentralized operations of the US/global subsidiaries.
Believes in organic growth.
SAP’s Strategic Decisions
First, Global Expansions.
Aims to increase its customer base quickly.
So they focused primarily on developing ERP software.
Second, Outsourcing consulting.
Deciding to outsource consulting serveries.
Through strategic alliances with major global consulting
companies such as IBM, Accenture.
Dilemmas
Challenging needs of global environment.
Very standardized platform across functions and divisions.
Outsourcing consulting services consequences included
Billions of Dollars revenue were earned by the consulting companies.
Consulting companies became the experts in after sales services.
SAP began to lose knowledge of its customers' emerging problems.
Focusing only on R&D result in neglecting global marketing.
Specially for smaller companies (unserved potential).
Internal Environment
Analysis
Core Competencies
state of art product.
Research and development.
Offer potential customer a broad, standardized business solution. (across
the whole supply chain)
Able to charge premium price.
Primary Activity: Operations
Decentralized Global operations.
of marketing, sales, and installation.
Centralized R&D of software in Germany.
workflow design follow “German engineering mindset”
Scope of SAP culture of technical innovation and best practices.
focused on R&D
Neglects other functions.
Result in each subsidiary carrying its own operations.
Primary Activity: Outbound Logistics
Associated with collecting, storing, and distributing the product or service to
buyers
Long implementation process.
Very expensive.
Lack of training from SAP. Few for external consultants.
Small amount of internal consultants.
SAP spending little many to improve services.
Primary Activity: Marketing and Sales
Improper identification of customer segments and needs
External consultant had all the knowledge about customer problems/requirements.
SAP focused on Large companies.
Unserved need for others.
Lack of SAP customization.
Innovative approaches to promotion and advertising
SAP neglected marketing as they believe their product will sell itself.
Support Activity:
Human Resource Management
They did not have good HR
Employees were leaving to competitors.
No defined career path.
Pressure on developer to do all the work and product development
decisions.
Primary Activity: Service
Slow response to customer needs.
Relying on external agencies.
Lack of ongoing training.
Customers blame SAP for bankruptcy.
Due bad implementation process.
External Environment
Analysis
Industry characteristics
Information Technology Industry
Characteristics
Huge Market size
Rapid growth rate
Difficult to enter/ exit.
Industry Driving Forces
Globalization. Marketing.
Web-based serveries/the Internet. Trade Secrets.
Innovation. Privacy.
Competition.
Industry Key Success Factors
Fast Development.
Outsourcing.
Up to date with latest trends.
Highly skilled HR.
Filling customers requirements.
Efficient implementation cost.
Security.
Privacy.
Porter’s Five Forces Analysis
Threat of new entrants Bargaining power of buyers
Medium to low Low
Product highly differentiated. Purchases once/ very expensive.
High capital requirements. Product purchased are differentiated.
High switching costs. Buyer faces huge switching costs.
Bargaining power of suppliers Limited Sellers.
Not relevant in the case.
They have all the knowledge in house.
developing their products by themselves.
Porter’s Five Forces Analysis
Threat of substitutes
Low Intensity of competitive rivalry
SAP is the leader. Medium to high
substitute serve similar purpose. Equally balanced competitors, Oracle and Siebel.
SAP higher quality, features, performance. Fast industry growth.
High switching costs. High fixed costs.
High exit barriers.
SWOT and Competitive
Analysis
SWOT
Weakness Strength
• SAP is very standardize and lack of customization
• High innovative product
• Good Market Position
• They don’t have internal consultant agent • Global leader of the business
• Customer faces huge implementation problems application software
• Very long product life cycle
• SAP did not develop its own database management software package
• Premium price
Threats Opportunities
• Sever Competition are the biggest threat to SAP • They target potential market for small and medium
company
• Outsourcing consulting
• Merging into the new web-based software technology
Competitive assessment chart
Ratings (Scale =1-5) 1-poor 5-Excellent
Attributes
SAP Oracle IBM Siebel Systems Microsoft
Customers awareness 5 4 5 3.5 4
Product Quality 5 4.5 3.5 3 4
Product availability 4 4 3.5 5 5
Technical assistance 3 5 5 4 5
Score (Average) 3.4 3.5 3.4 3.1 3.6
Solutions/ Recommendations
SAP management has to know even if their product is superior, implementation problems can leave
businesses with bankruptcy.
SAP has to develop a flexible platform & operations software across all functions and divisions.
Efficient global structure with defined plan for expansion.
Focus on corporate infrastructure.
Lack of communication between different subsidiaries can impairs core competency.
focus on marketing and sales development and building a top management team expertise not only on
R&D but also on global market sales and services.
Solutions/ Recommendations
Training some external agents only not enough, other companies who became experts about SAP
implementation later became biggest threat. (Trade Secrets)
Stop the strategic alliance and instead acquisition them or start your own consulting.
Improving human resources to meet the needs of employees to get the employees loyalty.
Recruit a sufficient number of consulting employees (have their own consultants) so in the long run
the company won’t lose potential profit.
Making their product customized to other unserved markets.