STRATEGIC CHANGES IN NATIONAL IT
Introduction
The principal activity of National IT is to import, store and distribute IT hardware from Asia into the Australian market. However, even though with stable growth in sales and profit, the operations of National IT can be considered risky due to the fact that it has business contacts in Asian countries. There are currency fluctuations and labor situations in Asian countries which may affect its pricing strategies in Australia. As it profit from bulk purchase and incomplete information and merely acting as an intermediary between Asian exporters and Australian resellers/ customers, there is also a risk of loosing the business instantaneously once local and overseas partners decided to transact business directly or without the help of an international intermediary. In effect, there is a need to diversify business stakes away from hardware importation and through other value-added investments or acquisitions.
Overview of Potential Investment in Five Sectors
In most countries, the software sector is composed of mostly small and medium scale enterprises (Software Patents vs. Parliamentary Democracy 2006). However, even with this sector structure, big companies such as Cisco remained on top because of large cost associated in addressing the biggest obstacle for small players which is application for patents. In the software sector, local or isolated technical talent has its available global market (2004 pp. 484+). This is why small players could sell their software to large companies and still stay in business by profiting from selling software technologies that they created in their own laboratories. Seventy percent (70%) of the cost structure of the sector comes from personnel-related costs. It is labor intensive which makes employees in third world countries (e.g. most nations in Asia) a good investment because investors will get quality skill at minimum cost. The Australian software sector enjoys well-developed communications and information technology infrastructures as well as legal and regulatory framework (UNPIN 2007). This makes it a very competitive and world-class provider of software-related applications. As skills support, most of Australian universities engaged in software research and development studies while most business also engaged on the same feat.
In turn, National IT can outsource the technical expertise of the labor force in the Asian countries in which presently it imports hardware products. From its current pool of hardware resellers, it can offer software products and other software-related services outsourcing Asian labor. According to transaction cost theory, export intermediaries like National IT exemplifies greater performance over counterparts because of its ability to minimize its transaction cost. In this case, National IT has contacts and information about cheap but quality labor force in Asia because it has years of experience transacting in the region. It can profit from software business by selling it to the high-income Australian market and paying Asian labor costs in disproportionate terms.
Furniture output of manufacturers is affected by consumer’s demand in which level is varied by economic and financial situation as well as residence mobility of consumers (Falk & Moth 1994 pp. 35+). The primary purchasers of furniture are head of the family while sixty percent (60%) of all sales are financed through credit. The demand of furniture products is also affected by oil price changes that led people to stay in their homes rather to take a vacation or a tour. In this regard, families have greater incentive to buy high-end furniture because of ample time staying at home. The growth of furniture manufacturers in Asia is an incentive for developed countries to import low-cost but quality outputs as developing countries have also exercised growing interests on furniture (COIL Consulting 2007). Computers and its hardware accessories necessitate reliable and durable furniture to accommodate for handles, locks and ventilation (The Journal 2001 p. 74). Alternatively, furniture that supports complete multi-media systems can give cost advantages to purchasers which would typically be a bestseller.
In this view, National IT can again partner with Asian contacts to pinpoint furniture manufacturers in Asian countries in which it can buy-and-sell furniture products compatible for IT hardware. The familiarity of National IT in export system would make it easy to ship, price and monitor the ability of furniture as complementary products for IT hardware. In addition, furniture products can also be highlighted in another proposed DIY shop investment of National It. With furniture, the shop can achieve complimentary set-up in which a buyer of IT hardware can have convenient and one-stop shopping. Furniture can varied in quality which can have metal components or purely wooden structure but all of them are ready-to-use. Customized furniture will be avoided because it can cost tremendous transaction and communication expense for National IT. Mass production is preferred on the type of production scheme of furniture. The company can profit from furniture business through economies of scale from the large volume of imports coming from other countries and integration of offered products within the DIY shop which can also be used in packaged pricing/ deals.
Mobile sector is still the prominent form of communication despite the looming significance of internet (Scales 2003). Fixed network voice revenues are shrinking as broadband access is being dispersed while overcapacity of bandwidth deters other players from gaining access to the market. For its part, the mobile sector exploits this loophole for its own competitive strength. However, to maintain mobile efficiency, mobile networks have to create bilateral agreements with other networks that can cause small mobile players with large amount of money. Mobile networks compete for coverage and network quality which means a greater customer focus is necessary which leads to creation of pre-sales support to make customers more informed in purchase and usage decisions. [SD1] (already justified below)
National IT is primarily engaged in computer hardware business which hardly involves mobile phones. Computer hardware involves the physical part of computer including digital circuitry excluding the computer softer (Wikipedia 2007). By importing mobile gadgets from Asian countries particularly China, National IT can exploit the advance communications technology of Australia where almost all of the population are connected and offer cheap mobile phones. This would be sold in the DIY shop together with other proposed products. It will contact its current partners in Asian countries to deal business in mobile technology. The opening of this business can also be supported by the proposed investment in electronic repair which is discussed below.
The do-it-yourself (DIY) sector has high fixed costs, seasonal sales (especially on semi-fixed asset products like furniture) (EPPS 2004) and reliance on strategic forward (for consistent order) and backward (for supplier priority) alliances. The sector is more profitable under a less restrictive business arena that involves both local and foreign retailers due to free-flowing of goods and customers (Euro Monitor 2003). According to Careers in Asia 2006, industry players are optimistic about the higher profits associated with the on-going industry expansion. Although there is an obvious benefit for the community due to higher taxes and lower prices, more effort is needed to the industry players since they are competing under a slow cycle market. This seemingly placed giant retailers in the upper hand as they can compete in price to attract customers (TIC Trade 2006). Since big companies have more leverage and marketing prowess, small players can be easily driven out of the market. However, the latter can be shielded from the harsh effects of economies of scale through competing on value and creation of market niche. (Already resolved) below
[SD2]
National IT will do just like the last statement in the preceding paragraph. It will compete on value and create a market niche of its own through establishing an Asian low-cost but quality DIY shop for computer hardware, furniture accessories, computer software and mobile gadgets. The shop will be an integrated and one stop shop for IT-related needs including repairs and consultancy which is discussed below. The incentive to establish a DIY shop emerge from value-added features of these proposed products that an all-stop shop is necessary to reach not only the needs of resellers but also their end users. However, the location of DIY shops should be strategic and away from resellers to avoid “cannibalism” of customers which can lower the share of reseller’s sales on the revenues of National IT. Furthermore, the priority of DIY is to cater the needs of its resellers while DIY shops can open opportunities for National IT to think on catering the needs of end-users.
The last proposed venture is to enter the service sector specifically IT repair and consultancy in which IT experts will administer. In Australia, three fourths of economic output is derived from the service sector and four out of five jobs in the country are in this sector (Productivity Commission 2007). There are 59% service sector employees who work in high-skilled jobs while most of these jobs are full-time. The fastest growing service industry is in communications. Presence of natural persons (e.g. expatriates) is also prominent trend in the service sector. There are few employers and employees that are engaged in repairs and after-sales support for electronic products. These factors will serve as an incentive for National IT to enter the service sector as a support business area to cater to after-sales needs.
Customer service is a source of competitive advantage (Jones 2000). According to Carothers (cited in Lowenstein 1997), quality is an insufficient source of best net value that makes customer service an augmentation of the uncompleted value strategy (p. 47). National IT can request its Asian suppliers to train Australian employees on the technology of the imported products. Again, the value of the business relationship has many advantages for National IT. The company can profit from fees being paid for the service as well as deepening reliability with customers. The service also increases the ability of National IT to sell its spare parts and mitigate devastating effects of troubleshooting. Lastly, this business area can also perform quality assurance on the imports to assure that only quality products are bought by customers.
Potential Destination from Five Australian Companies
In its three-year operations, Atlas Sian is named as third fastest growing company in Australia with 427% yearly growth rate (Atlas Sian Bog 2005). It caters to collaboration and project management needs of companies such as Oracle, Citigroup, GE, Pfizer and United Nations. In Australia, its main customers are Telstra, Optus, News Interactive and local government departments within the country. Its core competency arises from its ability to deliver customer needs through excellent service and keen attention to details. The recognition is also attributed to its staff, corporate culture and strong developer communities which let the company adapt to drastic changes in technology without loosing customer focus. Their software products enable teams within organizations to share documents, discuss strategies, manage tasks, and search information in a fast and easy manner (Atlas Sian Bog 2005).
Furniture Manufacturing Company of Australia [SD3] (This is already cleared in the sector part) (FACE) is a Brisbane-based company which has three niche markets; namely, the supply of custom-designed furniture for hotels and resorts, interior designs of yachts and customer-designed furniture for homes (National Innovation Website 2007). The company adopts a business model into which movement in new markets is supported by detailed business management plan. Although successful in the early years, the company begun to confront problems like decline in hospitality boom as well as loosing its major factory from a fire. Despite the losses, FACE relived its mission and gained a stable Million turnover until it grew quickly to Million. This recovery and growth would not become possible without employee empowerment and admission of the owner in changing its governance structure to provide platform for creativity and innovation among its workers. The fast growth of the company from three-employed personnel to almost a hundred required different control (National Innovation Website 2007).
Tin Can Telecom is a major Australian provider of state of the art communications equipment distinguished for its customer service and business partners in mobile phone industry such as Vodafone (Tin Can Website 2007). The company supply, install and support different products lines such as Motorola and Apple available for hire or purchase basis. Their personnel are high-trained which make them specialist in their field-of-work. The operations of Tin Can Telecom can also be applied in the proposed investments of National IT like consultancy and other services. The partnership can be useful for the future outlook of National IT competitiveness.
(Kindly suggest Australian companies under DIY shops and repair companies)
Conclusion
The risk minimization goal of National IT through this discussion is obtained by acquiring, investing or partnering with these five companies. Its knowledge of Asian manufacturers as well as customers in Australia can implore the intermediary information National IT has which can add value to these engagements. As it also has Million stocks in Sydney, it can also use them to finance a strategic alliance among the five companies. Their combination in resources can create economies of scale and scope and this can be attained as the sectors involved in the plan are those related to the hardware and importation operations of the company. As a result, the partnership would not require overall and drastic changes in the operations and strategy of National IT because target companies tend to be with similar goals, resources and markets. Altogether, National IT can have a more secure outlook through this feat and is not completely at risk in loosing to its hardware competitors such as Cell net, Sinned and Ingram Micro.
[SD1]National IT ALREADY INVOLVED IN IT THROUGH IMPORT OF HARDWARE
[SD2]How national IT CAN BE INVOLVED IN IT
[SD3]IT`S A FURNITURE DESIGNER…NATIONAL IT IS AN IT COMPANY
Credit:ivythesis.typepad.com
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