Anda di halaman 1dari 19

Page 1 of 19

EXECUTIVE SUMMARY
This is a report based on the Managing information systems in an organization module. It is a group work (consisting of two members per group) and the requirements are as follows. We are required to select an organization of our choice and take a close look at how the company operates by speaking to any representative of the company. Also it requires us to prepare a discussion document for the board of directors. This should be a formal report that includes full referencing of material used and also full discussion on the assumptions made. The report also depicts the structure of the company and current position of the company (acquired from questionnaires set up). And lastly, a personal recommendation of strategic procedures that could benefit the company based on the acquired information. Any structural shortcomings and typographical errors are deeply and sincerely regrettable.

Page 2 of 19

Table of Contents
EXECUTIVE SUMMARY.................................................................................................1 Table of Contents....................................................................................................... 2 ..................................................................................2 INTRODUCTION...........................................................................................................3 MARKET POSITION...................................................................................................... 3 S.W.O.T Analysis......................................................................................................4 Strengths ............................................................................................................. 4 Weakness.............................................................................................................4 Opportunity..........................................................................................................4 Threats................................................................................................................. 4 Porters 5 Forces Analysis........................................................................................5 Power of buyer.....................................................................................................5 Power of suppliers................................................................................................5 Threat of substitute goods...................................................................................5 Threat of new entrants.........................................................................................5 Rivalry..................................................................................................................5 CURRENT IT POSITION................................................................................................6 Vertical Integration..................................................................................................6 THE USE OF IT TO UNDER PIN FUTURE STRATEGY......................................................6 SUGGESTION OF FUTURE STRATEGY BASED ON IT...................................................10 RISKS INVOLED.........................................................................................................12 SECURITY AND RECOVERY OPTIONS TO COUNTER RISKS.........................................13 CONCLUSION............................................................................................................14 References and Bibliography....................................................................................15 APPENDIX................................................................................................................. 17

Page 3 of 19

INTRODUCTION
Al Tuwairqi Holding is one of the leading business concerns in the Kingdom of Saudi Arabia. Accompanying a mild start in 1977, ATH has grown like "The Big Bang". During the last two decades, Al Tuwairqi Holding has become a well-known name in the Kingdom of Saudi Arabia due to its monolithic steel manufacturing activities. Al Tuwairqi Holding is sighted recently at 26th position holding company among the top hundred companies of the Kingdom with the rating of 2nd fastest growing group. Al Tuwairqi Holding's growth today has gone beyond the boundaries of Saudi Arabia and encompasses areas of the Middle East, South Asia & Europe. (Al Tuwairqi.com, 2010) Al Tuwairqi mission is to become a socially responsible, efficient and professionally managed Global Steel Player by capitalizing on the competitive advantages and natural resources of the GCC and Middle East region and to become an employer of choice for qualified and competent human resources.

MARKET POSITION
According to Mr. Adnan Khawaja, a SAP consultant in al Tuwairqi group the current market position of al Tuwairqi is strong as they stand second in the entire kingdom of Saudi Arabia, Al Hadeed being the first one. Since the development in Saudi Arabia is rapid, there are new mega projects on their way, thus the current market position for Al Tuwairqi is good. (Adnan Khawaja, 2010) As they stand second in the entire kingdom in terms of steel production, the market position of Al Tuwairqi seems more than stable. Then again, in order to prove the stability of an organization, word of mouth isnt just enough. Certain business models need to be applied and analysis must be carried out in order to prove businesss stability. In this research, we will carry out the S.W.O.T analysis and the Porters 5 Forces business model in order to identify the current market position of Al Tuwairqi.

Page 4 of 19

S.W.O.T Analysis
The S.W.O.T analysis is an internal external analysis of an organization which is used to measure the strengths, weaknesses, opportunities and threats of an organization.
Strengths

One of the major strengths of Al Tuwairqi is that they have expanded their boundaries internationally in regions such as Europe and south Asia. Not only they have their industries in Saudi Arabia, but they also carry out their business in other regions. Even though their major market share is in Saudi Arabia, their constant expanding of business and introducing themselves to new markets could prove very important in the process of becoming one of the major Steel industries in the world. Therefore, one can say that Al Tuwairqi is highly globalized and is recognized well in othere parts of the world.
Weakness

One of the major weaknesses that I was able to point out is that even though Al Tuwairqi is expanding their business and are entering the global market now, they still have a long way to go. Having their head office in a country like Saudi Arabia where both the climatic and environmental atmosphere is very unforgiving, it is not very easy to attract FDI (foreign direct investment). Besides the law in the kingdom of Saudi Arabia is not very investment friendly for foreigners. Having the headquarters in such a country certainly is a weakness.
Opportunity

The biggest opportunity that I believe Al Tuwairqi has is that they are already very experienced in the Steel industry as they are the second largest steel company in Saudi Arabia. This might help them in order to successfully expand their business in the form of outsourcing etc globally which they have already started. Having experience in such areas previously, plays an important role. The newly built branch or company will not have trouble in order to implement the business models and the hierarchy structure followed in the headquarters back in Saudi Arabia.
Threats

The major threat faced by Al Tuwairqi is the fierce competition in the steel industry business. In order to prove themselves as one of the most promising and upcoming steel industries globally, Al Tuwairqi will have to face extreme competition from the steel industries present in the

Page 5 of 19

respective country where Al Tuwairqi wants to introduce its business (for example Al Hadeed Corporation).

Porters 5 Forces Analysis


Michael porters 5 forces analysis states that there are five major external forces that can influence a business which are Power of buyer, Power of supplier, threat of substitute goods, threat of new entrants and rivalry. Power of buyer

In the case of Al Tuwairqi, the power of buyer is very vital as Al Tuwairqi performs B2B business. The customers have the power to choose between Al Tuwairqi and other steel industries.
Power of suppliers

In the case of Al Tuwairqi, the power of suppliers is not as high as the raw material input for Al Tuwairqi is metal scrap which is easily available. Al Tuwairqi, in this case holds the upper hand over its suppliers as it has many to choose from.
Threat of substitute goods

One of the major benefits Al Tuwairqi enjoys is that there are not many substitute goods to what Al Tuwairqi produces i.e. iron bars and billets. In other words, Al Tuwairqi enjoys a monopoly as far as the value of the product they are offering is concerned.
Threat of new entrants

The threat of new entrants remains constant in any business whether it is big or small. New and upcoming industries always pose a threat to the older ones as they come up with new ideas, innovations and technologies.
Rivalry

Just because the environment nowadays is so diverse, rivalry, which can also be taken as competition, exist in every business. It is healthy for a business to have rivalry as it leads to a lot of improvement and innovations.

Page 6 of 19

CURRENT IT POSITION

When asked about the current IT position of al Tuwairqi, Mr. Adnan Khawaja replied our group is both backwards as well as forward integrated, not only we are in the Billet business but also DRI & Scraps which is the Input for Billet production, also on the other end, we are into Wire Rods and rebar business, and transportation, in such a complex integrated business we required a good ERP (Enterprise Resource Planning) software, customized to fulfill our past, current and forecasted future, therefore I must say our IT position is very good as compared to our competitors, which gives us a SCA a strategic competitive advantage over our competitors. (Adnan Khawaja)

Vertical Integration
The degree to which a firm owns its upstream supplier and the downstream buyers is referred to as vertical integration. Because it can have a significant impact on a business units position in its industry with respect to cost, differentiation and other strategic issues, the vertical scope of the firm is an important consideration in corporate strategy. Expansion of activities downstream is referred to as forward integration, and expansion upstream is referred to as backward integration. (QuickMBA.com, 2007) As Mr. Adnan Khawaja mentioned earlier, that Al Tuwairqi is both backward and forward integrated with the help of ERP software, it pretty much explains that the current IT position of the company is quite stable as implementing ERP software in such a big organization is both difficult and expensive on the same time.

THE USE OF IT TO UNDER PIN FUTURE STRATEGY


In this area, the Supply chain management and Enterprise resource planning will be taken into consideration. Due to the fact that the company (Al Tuwairqi) is both backward and forward integrated (vertical integration); the supply chain is kept at close contract with the organization. This means that the company has acquired if not all, then a portion of both its suppliers and

Page 7 of 19

distributors. The principle of integrating both ways can be useful because it paves way for business strategies which expands the companys core competencies. It also increases the coordinating of the supply chain and reduces cost (such as transportation cost). Another benefit is that monopolistic or competitive advantages can be derived from acquiring suppliers that supply scares raw materials and resources. And lastly, Al Tuwairqi, being an organization which operates under the Just in time principle (JIT), will have it easier because raw materials are always readily available to meet up with demands. And because of it forward integration; distributors are always in place to market the products. Diagram of Al Tuwairqis backward and forward integration is illustrated below: Backward Integration
Raw Materials

Forward Integration
Raw Materials

Al Tuwairqi Integration model


Raw Materials

Intermediate Manufacturing

Intermediate Manufacturing

Intermediate Manufacturing

& Assembly Assembly

& Assembly

& Distribution/Distributor Distribution/Distributor

& Distribution/Distributor

End Customer

End Customer

End Customer

Thus, now the question is how does IT fit in these situations? Simply, with the help of ERP. Supply chain is an important process that includes the controlling and deciding the direction of resource movement in an organization. It also includes all other sub process involved in coordinating them. The concept of supply chain and its management is not a new one.

Page 8 of 19

However ERP has helped to coordinate, reduce their inaccuracies and increased the performance of the Companys Supply chain management. ERP is simply an integration of business management practices and modern technology. Information Technology (IT) integrates with the core business processes of a corporate house to restructure and accomplish specific business objectives. ERP main objective is to integrate information and processes from all functional divisions of an organization and merge it for effortless access and structured workflow. Note that integration is exceptionally a significant factor to ERP systems. The integration between business processes helps develop communication and information distribution, leading to remarkable increase in productivity, speed and performance with the help of ERP systems. The ERP helps in coordinating inventory management, supply chain planning, supplier scheduling, claim processing, sales order administration, procurement planning, transportation and distribution along the supply chain of the organization (Al Tuwairqi). The ERP integrated SCM diagram is illustrated below:

Thus, from the above illustrated diagram, ERP integrates all the processes. It actually starts from the demand generated by the customers, and then the distribution and marketing department communicates and informs the production/manufacturing plant where they themselves demand for raw materials from their suppliers. The purchasing department then confirms the amount of raw materials needed then forwards the demand towards the suppliers who then provides the raw materials.

Page 9 of 19

A confirmation is made right after delivery of the resources (raw materials) where the payment occurs by the purchasing department to the suppliers. Once all the requirements are met, production of the actual product subsequently follows. Afterwards, the products are assembled then sent to factory outlets for marketing and distribution. This is how customer demands are met. Note that any excess product remaining will generate inventory of stock and will be move to the warehouse. Also with the help of IT, warehouse inventories are identified and tallied easily by the use of RFID (radio frequency identification). Also, Al Tuwairqi is almost at the verge of accomplishing the best ERP model. Considering the fact that ERP system employed in the organization has integrated their complete functions/processes into one central database platform. These integrated functions are: Manufacturing: these consist of engineering, resource & capacity planning, material planning, workflow management, quality control, bills of material, manufacturing process, etc of the organization. Financials : these are accounts payable, accounts receivable, fixed assets, general ledger, cash management, and billing (contract/service). Human Resource: these include recruitment, benefits, compensations, training, labour rules, people management carried out in Al Tuwairqi Supply Chain Management Customer Relationship Management: These have to do with Sales and marketing, service, commissions, customer contact and after sales support Data Warehouse Lastly, the company makes use of SAP (systems, applications and products) and according to Mr Adnan Khawaja, SAP is world one of the best ERPs available if not the best, all our operations are integrated, and we are able to generate reports on real time. SAP is an ERP software system designed by a German company. It also consists of SAP SCM and CRM.

Page 10 of 19

SUGGESTION OF FUTURE STRATEGY BASED ON IT


Personally, we think the strategies employed by Al Tuwairqi have been very effective and successful (evidently seen in their current marketing position). However, what we fail to understand is why the company has not taken e-Commerce into consideration. Upon evaluating the companys well organized website, we notice that there was no form of e-Commerce as such the well design site was just for advertisement and providing information about the organization. Therefore, we personally would recommend e-Commerce to Al Tuwairqi based on the fact that the nature of their business and their product (steel manufacturing and marketing) will best suit e-Commerce unlike a company which product highly perishable goods. Besides due to the advantages generated by e-Commerce, Al Tuwairqi ought to have an e-Commerce system. Some of these merits are enumerated below: Source of competitive advantage: E-Commerce can be use to differentiate Al Tuwairqi from its competitors and will also provide them with the competitive advantage needed to take control and posses a favorable position in the market. We went as far as researching on Al Hadeed, the company with the biggest chunk on the local market (Adnan Khawaja). And surprisingly, they too do not employ any form of e-Commerce (for confirmation see Al Hadeed website in references). Hence, by Al Tuwairqi adopting and adapting to eCommerce, it will become an arsenal and a very significant source of competitive advantage. Eliminates the barrier of time and distance with carrying out transaction (note that eCommerce provides 24 hour business transactions). It is also easier for customer to make demand virtually online than going to the physical outlets. Though e-Commerce may not be cheap, but it eliminates middle men and sells directly to customers which can reduce the cost drastically. E-Commerce will also help in globalizing Al Tuwairqi as transactions can occur globally without obstructions. Lastly, due to the fact that Al Tuwairqi operates under a niche market (markets with usually few but vast customers); e-Commerce will be an ideal way of going about such businesses.

Page 11 of 19

Hence, one can see the benefits Al Tuwairqi could derive upon application of e-Commerce. So on implementation of the e-Commerce, the company is advised to take other factor and aspects into consideration. Factors like online ordering and measurement systems. An online ordering and measurement system is needed in other to accomplish business on the internet. Al Tuwairqi should have a section in their website where potential customers (mostly businesses) can place and order for the product. Steel and billet being the companys core production (are tangibles) can also be measured and quantifying before ordering that is why a measurement system is needed. Also, with the help of 3d view on the website, customers can actually view and perceive the texture of the steel product by the company. This is a way of make online product more tangible. Another important aspect is the e-Payment methods. Surely there has to be a way for customers to pay for the product and services rendered. E-payment is a subset of an ecommerce transaction to include electronic payment for buying and selling goods or services offered through the Internet. (http://www1.american.edu/initeb/sm4801a/epayment1.htm). Simply e-payment is a type of payment done without the physical exchange of case. There are numerous types of e-payment some of which are; traditional card payments, mail order, online payments, payment bureaus etc. We are recommending he direct online card payment for Al Tuwairqi. Customer can just make payment online with the use of Visa cards etc to a designated and secured bank portal refer to by the company. Note that customers shouldnt use site not recommended by the company. Though e-payment may be costly and challenging but they will give a company the competitive edge and it is the way of payment for the new era. To prove, in the US, for example, checks have declined from 85% of non-cash payments in 1979 to 59% in 2002, and electronic payments have grown to 41% (http://www1.american.edu/initeb/sm4801a/epayment1.htm). Diagram of the e-payment procedure is illustrated below:

Page 12 of 19

Source www.epayment.com Lastly, the delivery system of Al Tuwairqi is adequate and well structured enough. A bridge is only needed to link the online order and demand made to the delivery system. And we personally trust that the ERP integrated SCM will have that essentially covered.

RISKS INVOLED
For every advantage there is a disadvantage, whereas for every plan taken, risks are involved. Thus, these are the possible risks likely to occur during the implementation of the e-Coomerce system:

Page 13 of 19

Crackers and intruders: Any unidentified and unwanted users or software such as spywares, Trojans etc. Note that there is a difference between hackers and crackers because of the intention to destroy. Internet fraud: These are fraudulent activities that occur over the internet for example pin code and serial theft online etc. Natural disaster: Natural disasters such as flood, hurricane, earthquake etc can be a threat to the online server thereby disrupting online transactions and communications.

SECURITY AND RECOVERY OPTIONS TO COUNTER RISKS


The security measures Al Tuwairqi can take in order to prevent the above mentioned risks are: The company should ensure that they hire a certified and professional hacker to test and verify the strength of their firewall software in order to prevent unwanted access by cracker spyware etc on their online system. Again, Al Tuwairqi should also implement a back-up system (an incremental backup system precisely) in order to secure their data and document from unavoidable threats like natural disasters. The company should also not focus their back-up in one location but rather segment it into pieces and designate the keeper of each piece. Al Tuwairqi already has a backup of their entire database. They should also make sure that they install the latest and the most up to date anti-virus and firewall system which will help them in getting rid of any unwanted intruders such as viruses, Trojans etc. Note incremental back-up should be considered because though it is expensive, it is easier to back-up and recover. Also, the company can recover from fraud threat by changing their code and serial on a monthly basis and keep the stakeholders informed about the change.

Page 14 of 19

CONCLUSION
Finally, one can see the procedures Al Tuwairqi follows as a steel production company in order to maintain a favorable position in the market. Also with the help of SAP software, the company already had a well structured and monitored supply and delivery system. Nevertheless, ERP can also help integrate the main core function of the organization. Therefore, in conclusion, Al Tuwaiqi should consider implementing the recommendation of e-Commerce because the world is now going digital. And also the nature of their product (steel and billet) will best suit the e-Commerce strategy. Ultimately, it may be the competitive advantage needed to surpass Al Hadeed in the market. However, the company should consider other factors like the e-payment methods, risk, security and recovery.

Page 15 of 19

References and Bibliography


2007, e-Commerce, < http://www.isos.com.my/ecommerce/advantages.htm>. Accessed on 17th February 2010.

2007, e-Commerce benefits, < http://www.ecommerceeducation.com/benefits-ofecommerce.asp>. Accessed on 17th February 2010.

2007, Porters five forces, < http://www.quickmba.com/strategy/porter.shtml>. Accessed on 15th February 2010.

2007, Vertical integration, <http://www.quickmba.com/strategy/vertical-integration/>. Accessed on 15th 2010.

2009,ERP & Supply chain management <http://www.gartner.com/it/products/research/asset_129495_2395.jsp>. Accessed on 19th February 2010.

Page 16 of 19

2009, How has ERP facilitated Supply chain functions?, < http://www.erpwire.com/erparticles/erp-and-supply-chain-management.htm>. Accessed on 21st February 2010.

2010, Al Tuwairqi, <http://www.altuwairqi.com/index.php>. Accessed on 15th February 2010.

2010, ERP, < http://www.topbits.com/erp.html>. Accessed on 19th February 2010.

Diagram on e-Payment gotten from <www.epayment.com>. Accessed on 17th Febraury 2010.

N.d, Electronic payment methods, < http://www.electronicpayments.co.uk/epayment_index.jsp>. Accessed on 20th February 2010.

N.d, SAP Supply Chain Management, < http://www.sap.com/solutions/businesssuite/scm/index.epx>. Accessed on 16th February 2010.

N.d, What is E payment, <http://www1.american.edu/initeb/sm4801a/epayment1.htm>. Accessed on 17th February 2010.

Page 17 of 19

APPENDIX
Questionnaire sent and Feedback gotten from Al Tuwairqi. The questionnaire was answered by Mr. Adnan Khawaja (SAP analyst of Al Tuwairqi corp.) 1. What is the target market of the company? Steel Industry, Builders etc.

2. What is the companys current market situation? Here in Saudi, Hadeed would have the bigger chunk of the local market; however we are the second place as the current development in the country is rapid, new mega projects on the way, the situation is good

3. What is the companys current IT position? our group is both backwards as well as forward integrated, not only we are in the Billet business also DRI & Scraps which is the

Page 18 of 19

Input for Billet production, also on the other end, we are into Wire Rods and rebar business, and transportation, in such a complex Integrated business we required a good ERP (Enterprise Resource Planning) software, customized to full fill our past, current and forecasted future, therefore I must say our IT position is very good as compared to our competitors, which gives us a SCA - an strategic competitive advantage over out competitors.

4. What are the companys operations based on IT? SAP is world one of the best ERPs available if not the best, all our operations are integrated, and we are able to Generate reports on real time.

5. What are the present benefits derived from the use of IT in the organization? Real time reporting, accurate forecasts, targeted decisions Total integration between all the processes within the organization, many more

6. What future benefits does the company hope to gain from the use of IT (any future master plan/idea/innovation to be implemented based on IT). We try to stay up to date as far as our requirements are concerned, i.e. we keep adding SAP Modules to compliment our current SAP System, to enhance performance and fine tune the system.

Page 19 of 19

7. If possible, kindly inform us on the risks IT has placed on the company Short term costs for setting up an IT infrastructure or implementing and maintaining an ERP system Also, sometimes scarcity of some ERP Resources and their high costs.

8. And what measures (security) did the organization apply to counter those risks We have literally pampered out ERP intellectual capital, we try to encounter the risks or skill shortage by providing them good remuneration and other benefits.

9. at worst case scenario, (that is if the risk happens), what will be the recovery plan/process the company employs? N/A (Not answered) 10. And how long does the recovery process take? N/A (Not answered)