Introduction
At the request of senior management I have put together a report detailing the options Montclair Computer (MC) is currently faced with. Do to the success we have experienced with our store front in the Montclair, New Jersey, market we are now faced with the opportunity for growth. A natural next step would be to expand into the online market through launching a website, however as we grow as a company there is also a need to implement an ERP system. In the following report I take you through each option as well as my recommendation based on this information on how to proceed. If you have questions or require further information, please don’t hesitate to follow up with me.
Strategic Assessment
As we begin discussions to move into the online space we need to be aware of that market place. Please reference the information below for a SWOT analysis of MC.
Strengths
- Established customer base in Northern New Jersey/Montclair area
- Specialized product
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Weaknesses
- High level of competition
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Opportunities
- Launch Website
- Differentiation through services/unique characteristics
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Threats
- Constantly changing technology
-
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Below is a snapshot of the three top competitors in the online space that MC would have to face.
Competitor 1
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Competitor 2
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Competitor 3
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Name
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Alienware
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Digital Storm
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Cyber Power PC
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Website
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High End
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Alienware Aurora
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Black Ops
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Xplorer X7-7500
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Price
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Starts at $1,499
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Starts at $1,481
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Starts at $1,539
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Low End
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Alienware X51
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Special Ops
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H61 Configurator
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Price
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Starts at $699
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Starts at $799
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Starts at $489
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Custom
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Yes
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Yes
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Yes
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SWOT Analysis: Alienware
Strengths
- Established customer base online
- Specialized product
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Weaknesses
- High level of competition
-
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Opportunities
- Differentiation through services/unique characteristics
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Threats
- Constantly changing technology
- New compeition
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SWOT Analysis: Digital Storm
Strengths
- Established customer base online
- Specialized product
- Award recognition |
Weaknesses
- High level of competition
-
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Opportunities
- Differentiation through product
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Threats
- Constantly changing technology
-
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SWOT Analysis: CyberPower PC
Strengths
- Established customer base online
- Specialized product
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Weaknesses
- High level of competition
-
|
Opportunities
- Differentiation through pricing
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Threats
- Constantly changing technology
-
|
As you can see, by entering the online space we will be facing a high level of new competition that has been operating in this space for some time now. By looking at the SWOT Analysis for each company we will be facing most of the same issues. Our only option is to look for ways to differentiate ourselves and set ourselves apart from our competition.
Porter’s 5 Forces for Montclair Computer
1 - Existing Competitive rivalry: Rivalry is high because there isn’t that much difference in the technology that is available. Any true innovation that happens is quickly mimicked by competitors and therefore becomes irrelevant. MC currently competes against companies both online and offline even though they only operate offline.
2 - Threat of New Market Entrants: The threat of new competitors is low to moderate because there is a high investment needed to get into the market of high end gaming computers. There is a high level of brand loyalty for positive experiences with the consumers as well assuming nothing technologically changes.
3 - Bargaining Power of Buyers: The bargaining power of buyers is high because of the technology used in these high end computers is similar across models from competitor to competitor. Also, being a niche market to begin with the number of consumers is limited to the number of firms there are that sell these computers. There is a high chance of a consumer switching brands if they have a bad experience.
4 - Power of Suppliers: The power of suppliers is high because the best technology with a reliable reputation can be hard to come by. For example, MC uses nVidia graphics cards, which is a high end product with a strong reputation, so a lot of our competitors could use the same technology.
5 - Threat of Substitute Products (including technology change): The threat here is substantial. Technology changes every day, so today you could have the top product, but tomorrow you could become outdated. You would need to keep a system and budget in place to keep up to date with upgrades. In addition, since the power of suppliers is strong here if your system and a competitor use similar hardware or software the product becomes less the driver of a purchase then other services or pricing.
Strategy Analysis of Options
Through differentiation we can choose to set ourselves apart by pricing, services, unique characteristics, niche markets, direct communication, packaging, or by the product itself.
Our current options are to launch a website or implement an ERP system. Both are reasonable next steps and needs to fit the growing company. However, we need to choose how to move forward carefully to maximize our investments while maintaining/growing our current customer base.
By launching a website, we are increasing our market share and visibility. Implementation of the website would take 3-6 months and have an initial investment of approximately $54,000, but it would allow for MC to bring in incremental revenue of $6,500 a month. The issue is would this incremental revenue be truly additional revenue from consumers outside of the Northern New Jersey area or is this revenue from consumers who are already aware of MC, but just decided to purchase online and not through the store front. This would allow MC to differentiate itself through direct communication via the website and making the market aware of the unique offerings and customizations that only MC offers.
By implementing an ERP system, it would take up to two years to implement and time still after that to fully realize the savings due to the system. However, it would allow for you to have the control over your processes to maximize efficiency across your business. Focusing first on the SCM module and then the others over time, you recognize savings through ordering materials, timing, and customer satisfaction. This would allow MC to differentiate itself through service, by connecting each step of the process through the ERP system it increases efficiency and customer satisfaction over time.
Strategically, implementing the ERP system initially and waiting on the website would be the best fit for Montclair Computers. As a growing company, there needs to be a strong foundation in place to support the organization as it evolves. An ERP system would be just the foundation that MC needs to move forward successfully.
Schedule Analysis
In a separate email I sent to you a MS Project file with the schedule for the ERP implementation with all of the information provided as well as the expected duration dates which were established using PERT Analysis along with a network diagram which shows the critical path for the project.
Based on the information in the MS Project file I sent, it is estimated that this project will take approximately 1 year and 10 months. This estimation is just shy of the 2 year estimate that was provided to me. However, if you decided to do this implementation and the website it would put it over the 2 year limit with the additional 3-6 months for building and implementing the site.
In addition, if task E2, deciding what processes needed to be customized, took double the amount of time it would not affect the timeline for implementation of this project. In looking at the critical path, this task is not one that would push back the deadline at this duration. The next task that has E2 as a predecessor is E3 which also has E1 as a predecessor. Task E1 would still take longer to complete then if E2 took double the duration to be completed.
However, if task E1 took twice the amount of time to complete it would delay the deadline of the project because this task does fall on the critical path. Therefore, delaying this task delays multiple steps between now and the completion of the project by the amount of which this task is delayed.
Based on the above information I would go with the ERP implementation because it shows a greater return year over year and covers the initial investment quicker than the website would recover the intitial investment.
References:
Investment Analysis
| Website - 6 months duration | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Initial Expense | 54,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 |
| Revenue | 6,500 | 6,500 | 6,500 | 6,500 | 6,500 | |
| -54,000 | 1,500 | 1,500 | 1,500 | 1,500 | 1,500 |
ERP Implementation | |||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Expenses | 100,000 | 50,000 | 50,000 | 40,000 | 40,000 |
| Savings | 50,000 | 90,000 | 90,000 | 90,000 | |
| -100,000 | 0 | 40,000 | 50,000 | 50,000 |
Based on the above information I would go with the ERP implementation because it shows a greater return year over year and covers the initial investment quicker than the website would recover the intitial investment.
References:
- Alienware: http://www.alienware.com/
- Digital Storm: http://www.digitalstormonline.com/
- CyberPower PC: http://www.cyberpowerpc.com/
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