katherine m. aguilar
TRANSCRIPT
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Chapter 1
THE PROBLEM AND ITS BACKGROUND
Introduction
Cloud computing or cloud technology refers to the use of
computing hardware and software to deliver service whenever and
wherever you need it. It may also be called hosting services. The
cloud basically is defined as a set of hardware, services, networks,
and interfaces that combine to deliver various aspects of computing as
a service.(Gartner).
Cloud computing offers its benefits through three types of
service or delivery models namely infrastructure-as-a-service (IaaS),
platform-as-a-service (PaaS) and software-as-a-Service (SaaS). It also
delivers its service through four deployment models namely, public
cloud, private cloud, community cloud and hybrid cloud (NIST).
In a 2011 study of the information technology (IT) research and
advisory firm Gartner, cloud computing tops the Asian and global
technology priority list.
Despite the global economic crunch, cloud technology spending
is forecast to reach $207 billion by 2016. Gartner also said in their
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statement, current global spending on cloud is expected to increase
from last years $91 billion to $109 billion this year.
What makes Cloud Computing particularly interesting from a
research perspective is mainly due to its promises of Growth and
opportunities to the enterprises particularly in the software Industry.
As Crosby(1988) defined Growth is something for which most
companies, large or small, strive. Small firms want to get big and big
firms want to get bigger.
Most of the organizations want to grow for prosperity, and not
just only to survive. There are many components to measure said
growth; thus: profit, net profit, revenue, sales figures, number of
employees, physical expansions, among others. The same are the
most common indicators of growth.
It is not always true that such growth depends on an
organizations size; nevertheless, superior performance of small firms
can lead to a proportionate growth that can be high. There are many
alternative ways to achieve growth such as joint ventures or alliances,
licensing of own new technology, and approaching a new market or
new product development, to mention a few (Dan et al., 1985 and
Crosby, 1988).
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To achieve the aforementioned growth, one needs a strategy as
maintained by Joel Ross and Michael Kami: Without a strategy, an
organization is like a ship without a rudder, going around in circles. Its
like a tramp; it has no place to go (David, 2011, p. 35). Strategic
management can be defined in various ways. According to David
(2011), Strategic management is the art and science of formulating,
implementing, and evaluating cross functional decisions that enable an
organization to achieve its objectives. As this definition implies,
strategic management focuses on integrating management, marketing,
finance/accounting, production/operations, research and development,
and information systems to achieve organizational success (David
2011).
The present study deals primarily with the operations of
Commerce One Business Solution, Inc. To be sure, this undertaking
conforms to the standards prescribed by the University of Perpetual
Help System Dalta (UPHSD) and is anchored on the components of the
Strategy Formulation Stage of the Comprehensive Strategic-
ManagementModel of Fred David.
Several evaluation tools will be used to ascertain the most
recommended strategy that will be presented in the later part of this
thesis; thus: External Factors Evaluation (EFE) Matrix, Internal Factors
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Evaluation (IFE) Matrix, Strengths-Weaknesses-Opportunities-Threats
(SWOT) Matrix, Internal-External (IE) Matrix, Grand Strategy Matrix
(GSM) and the Quantitative Strategic Planning Matrix (QSPM).
Background Information
Commerce One Business Solution, Inc. was established to
support and further expand the presence of Exacts ERP and e-
Business Software, as well as Orisofts Human Capital Management
System, which Exact Philippines started in 1998. Exacts global
restructuring opened an opportunity that led to the companys
formation, with the majority and key members of Exacts local core team
making a unified commitment and founding Commerce One Business
Solution, Inc. (Commerce One, 2012).
As a provider of business solutions, Commerce One offers a
wide array of products and services to suit the clients needs. These
are: EXACT Globe Enterprise, EXACT Synergy Enterprise, EXACT
Event Manager, EXACT Macola ES, Orisoft Technology; HRMWIN,
PAYWIN, TMSWIN and Payroll Outsourcing Services.
The Company in study has no existing Vision and Mission.
Hence, the researcher formulated the companys Vision and Mission
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with the assistance of its General Manager and employees since these
are integral part of creating a business strategy. In fact, David (2011),
asserts that Mission and Vision are viewed as two different concepts.
Mission describes what the organization is now. It emphasizes the
current situation and goals. A business Mission is the foundation for
priorities, strategies, plans, and work assignments. It is the starting
point for the design of managerial jobs and, above all, such affords
design of managerial structures (David, 2011). Vision is used to
describe what the company would like to become in the future.
Wheelen and Hunger (2006) believes that Vision puts into words not
only what the company is for the moment, but what it wants to become.
In the other words, it has been referred to as managements strategic
vision of the firms future.
Cognizant of the foregoing; the following was adopted:
Vision
To become the leader in the software industry in the Philippines
and around the world.
Mission
To deliver value-added business solutions and services tailor-fit
to client's requirements in the Philippines. Focusing on Small and
Medium enterprises to give them a competitive edge by offering
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innovative and practical solutions available in the market and will
continue to maintain expertise in this field by having highly-competent
Consultants.
The stakeholders are composed of: top Management, staffs,
customers, and suppliers. The business is stationed in the Central
Business District of Makati City which is known the financial capital of
the country.
The organizational structure of Commerce One is very simple. It
consists of the top management, finance and administrative,
consultancy and support, and marketing. All the directives come from
the General Manager who is the designated Sales Consultant and
handles recruitment for new employees. Meanwhile, the Support and
Consultancy Department takes charge of Pre-Sales Activities, Product
Implementation, and Post Sales Support. They likewise handle IT,
Research, and Development concerns that are responsible for other
products' customization. The researcher is under the Support and
Consultancy Department as A Senior Support/Consultant. Finance and
Admin handles Accounting and Administrative works, including billing
and collections. On the other hand, the Marketing Department is
responsible in lead generation and other marketing activities.
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Commerce One was incorporated in the Philippines on March
28, 2011 as an exclusive partner of Exact Software of the Netherlands,
a foreign software solution provider thereat in Delft. Exact has been
listed in the New York Stock Exchange (NYSE), Euronext Amsterdam,
since June 1999. It offers business software to entrepreneurial
businesses in a wide variety of industries such as Exact Synergywhich
brings people, information, and business processes together; Exact
Globe Next which streamlines and automates business processes;
Exact Online, an online business software; and other products. Other
services offered are: Support, Consultancy, Training and Education,
Custom Made software, and Business Process Assessment. After a
quarter of a century of providing global solutions, it has already 100,000
customers with 48 branches worldwide as of December 2012.
In 2011, due to Global organizational restructuring, some of its
branches including the Philippines, were constrained to cease
operations. To continue rendering services to existing local customers,
Exact Head Office offered Partnership to the affected Management and
employees; thus, Commerce One was born. To date, Commerce One
has more than 30 active clients nationwide in different industries like
Construction, Pharmaceutical, Trading, Logistics, and Manufacturing.
Most of the same was handed over by the aforesaid Partner. In 2011-
http://www.exact.com/software-services/our-software/exact-synergyhttp://www.exact.com/software-services/our-software/exact-synergyhttp://www.exact.com/software-services/our-software/exact-globe-nexthttp://www.exact.com/software-services/our-software/exact-globe-nexthttp://www.exact.com/software-services/our-software/exact-globe-nexthttp://www.exact.com/software-services/our-software/exact-onlinehttp://www.exact.com/software-services/our-software/exact-onlinehttp://www.exact.com/software-services/our-software/exact-onlinehttp://www.exact.com/software-services/our-software/exact-globe-nexthttp://www.exact.com/software-services/our-software/exact-globe-nexthttp://www.exact.com/software-services/our-software/exact-synergy -
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2012, the Return of Investment was 2.09, with a Liquidity ratio of 1.14,
considered as Very Promising for the first year of its operations.
Though ones business is doing good, the growth and stability of
a company is very essential. In a world with compressed business
cycles, new technology, international competition, and very fast
information availability, running a business is ever more difficult and
challenging. To remain competitive, companies, without the luxury of
time to think, must react quickly to outside influences or else be left
behind. Here, a good strategic plan is very vital.
Statement of the Problem
This study aimed to formulate strategies for Commerce One
Business Solution, Inc that will help them achieve their vision in the
area of Applications or Product Development.
Specifically it has:
1. Identified and eliminated the major weaknesses of the
organization
2. Identified and defended the status against major threats to the
organization
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3. Identified the major opportunities that the organization is
currently facing
4. Identified and preserved increase the major strengths of the
organization
Hypothesis
There is no strategy that will provide software solutions vendors
strategies that will help them achieve their vision according to:
1.1 Product Development
1.2 Market Penetration
Scope and Delimitations of the study
This study involved the formulation of the best strategy for the
Case company using strategic management matrices of Fred David
which started in the companys environmental scanning were it focuses
on its Internal and External environment. Internal analysis covers the
current situation of the company, Vision, Mission and objectives while
External Analysis covers the technological and competitive environment
in the software industry. However the result cannot be applied to all
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kinds of organization it only offers a theoretical knowledge for any
company who wants to adapt strategic management well. The
organization should formulate the best strategy based on its current
situation.
Definition of Terms
The following terms are given their operational definitions
according to the content of the study.
EXACT Globe Enterprise is a traditional back office ERP solution
focusing on automating administrative processes. Financial accounting,
as well as logistics systems and processes, are directly linked to
account management, human resources, manufacturing, among others.
EXACT Globe is available in more than 40 languages and supports
more than 40 legislations wherein the same is seamlessly integrated
with EXACT Synergy.
EXACT Synergy Enterprise is a fully-integrated, browser-based front
office solution that works in conjunction with traditional ERP
applications. It offers a platform for online communication and
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collaboration through which it facilitates sharing information among all
resources in and around an organization. It focuses on automating
value creation and delivery processes and covers solution areas such
as HRM and CRM as well as document, workflow, and project
management.
EXACT Event Manager: with EXACT Event Manager, one can define
events and actions that one would like to take in response. EXACT
Event Manager becomes an early warning system and a first line of
defense against a rapidly-changing business environment inherent in
todays global economy. By being pro-active, one can improve
efficiency and response time, minimize errors, and provide key
decision-makers with immediate real-time information.
EXACT Macola ES: next to EXACT Globe, Commerce One offers
various additional local ERP back office solutions. This includes
manufacturing-oriented products such as EXACTMacola. This product
works in conjunction with EXACT Synergy.
Orisoft Technology: in 2008, EXACT acquired all shares of Orisoft
Technology, a key Asian HRM software company based in Kuala
Lumpur, Malaysia.
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The addition of EXACTOrisoft HCM Suite further expanded Commerce
Ones product offerings that are centered on three main modules:
HRMWIN: is a human resource management system which assists
users in managing human resources optimally and with greater
effectiveness and efficiency. It contains various functions and features
which meet the essential requirements of Human Resource
Management.
HRMWIN available functionalities are: Manpower
Planning, Recruitment, Employee Profile, Leave, Training,
Claims, Performance Appraisal, Career Succession Planning,
Industrial Relations, Report Writer, Transportation Route, Hostel,
Locker, Exit Procedures, Benefits, Business Alerts, Organization
Chart, Medical Record, Security, Correspondence, and
Employee Self-Service Workflow
PAYWIN is a payroll system that allows multiple databases of
information to be accessed by more than one user simultaneously. It
assists users in handling the entire payroll function, ranging from
capturing employees information to calculation of salaries. It is
embedded with standard reports such as government reports, pay slips,
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bank listings, and many more that meet payroll static requirements. In
addition, it provides flexibility to print reports for other management
purposes.
TMSWIN manages employee attendance records through a system
which covers employee clock-in and clock-out times using a time-
recording terminal. It integrates Orisofts Payroll System with electronic
Time Clocking Devices. The software generates standard reports
pertaining to daily attendance, monthly attendance, daily exception,
overtime, irregularities in clocking, late attendance, absenteeism,
working less than a particular number of hours in a day, summary for
overtime, total work hours, and location (department) analysis.
Payroll Outsourcing Services: one of the products or applications that
Case Company is offering.
Cloud Computing. This refers to the pay per use model using the
internet model .
Mission statement. The Case Company Mission Statement To deliver
value-added business solutions and services tailor-fit to client's
requirements in the Philippines. Focusing on Small and Medium
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enterprises to give them a competitive edge by offering innovative and
practical solutions available in the market and will continue to maintain
expertise in this field by having highly-competent Consultants.
Strength. This refers to the factors that are internal to the organization,
particularly referring to something valuable or useful assets or qualities
that must be enhanced by people managing the organization.
Strategist. This refers to the individuals who are most responsible for
the success or failure of an organization.
Strategy Formulation. This refers to the development of a vision and
mission, identifying an organizations external opportunities and threats,
determining internal strengths and weaknesses, establishing long term
objectives, generating alternative strategies and choosing particular
strategies.
Strategic Management. This refers to the art and science of
formulating, implementing, and evaluating cross-functional decisions
that enable organization to achieve its objectives
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Strategy. This refers to a carefully devised plan of action to achieve a
certain goal or objective of the company.
Threats. This refers to the factors that are external to the organization,
particularly referring to something bad or unpleasant, or dangerous to
the organization that must be minimized or eliminated by people
managing the organization.
Weaknesses. This refers to the factors that are internal to the
organization, particularly referring to the weak points or frustrations,
experienced by the members of the organization disguised in the form
of technical problems that must be improved or changed by people
managing the organization.
of the organization.
Vision Statement. This refers to the aspirational description of what an
organization would like to achieve or accomplish in the short-term or
long-term future. It is intended to serve as a clear guide for choosing
current and future courses of action.
http://www.businessdictionary.com/definition/description.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/achieve.htmlhttp://www.businessdictionary.com/definition/accomplish.htmlhttp://www.investorguide.com/definition/long-term.htmlhttp://www.investorwords.com/9809/future.htmlhttp://www.businessdictionary.com/definition/current.htmlhttp://www.businessdictionary.com/definition/current.htmlhttp://www.investorwords.com/9809/future.htmlhttp://www.investorguide.com/definition/long-term.htmlhttp://www.businessdictionary.com/definition/accomplish.htmlhttp://www.businessdictionary.com/definition/achieve.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/description.html -
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Chapter 2
REVIEW OF RELATED LITERATURE AND STUDIES
This chapter deals with the summary of the readings on related
literatures and abstract of related studies which have significant bearing
in the present study.
Related Literature (Foreign)
Cloud Computing According to the United States National
Institute of Standards and Technology (NIST), Cloud Computing is a
model for enabling ubiquitous, convenient, on-demand network access
to a shared pool of configurable computing resources (for example,
networks, servers, storage, applications, and services) that can be
rapidly provisioned and released with minimal management effort or
service provider interaction. This cloud model is composed of five
essential characteristics, three service models,
Essential Characteristics:
On-demand self-service - A consumer can unilaterally provision
computing capabilities, such as server time and network storage, as
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needed automatically without requiring human interaction with each
services provider.
Broad network access - Capabilities are available over the
network and accessed through standard mechanisms that promote use
by heterogeneous thin or thick client platforms (for example, mobile
phones, laptops, and PDAs).
Resource pooling - The providers computing resources are
pooled to serve multiple consumers using a multi-tenant model, with
different physical and virtual resources dynamically assigned and
reassigned according to consumer demand. There is a sense of
location independence in that the customer generally has no control or
knowledge over the exact location of the provided resources but may be
able to specify location at a higher level of abstraction (for example,
country, state, or datacenter). Examples of resources include storage,
processing, memory, network bandwidth, and virtual machines.
Rapid elasticity - Capabilities can be rapidly and elastically
provisioned, in some cases automatically, to quickly scale out and
rapidly released to quickly scale in. To the consumer, the capabilities
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available for provisioning often appear to be unlimited and can be
purchased in any quantity at any time.
Measured Service. - Cloud systems automatically control and
optimize resource use by leveraging a metering capability at some level
of abstraction appropriate to the type of service (for example, storage,
processing, bandwidth, and active user accounts). Resource usage
can be monitored, controlled, and reported providing transparency for
both the provider and consumer of the utilized service.
Service Models:
Cloud Software as a Service (SaaS). - the capability provided to
the consumer is to use the providers applications running on a cloud
infrastructure. The applications are accessible from various client
devices through a thin client interface such as a web browser (for
example, web-based email). The consumer does not manage or control
the underlying cloud infrastructure including network, servers, operating
systems, storage, or even individual application capabilities, with the
possible exception of limited user-specific application configuration
settings.
Cloud Platform as a Service (PaaS). - the capability provided to
the consumer is to deploy onto the cloud infrastructure consumer-
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created or acquired applications created using programming languages
and tools supported by the provider. The consumer does not manage
or control the underlying cloud infrastructure including network, servers,
operating systems, or storage, but has control over the deployed
applications and possibly application hosting environment
configurations. Cloud Infrastructure as a Service (IaaS). the capability
provided to the consumer is to provision processing, storage, networks,
and other fundamental computing resources where the consumer is
able to deploy and run arbitrary software, which can include operating
systems and applications. The consumer does not manage or control
the underlying cloud infrastructure but has control over operating
systems, storage, deployed applications, and possibly limited control of
select networking components (for example, host firewalls).
Deployment Models:
Private cloud. - the cloud infrastructure is operated solely for an
organization. It may be managed by the organization or a third party
and may exist on premise or off premise.
Community cloud. - the cloud infrastructure is shared by several
organizations and supports a specific community that has shared
concerns (e.g., mission, security requirements, policy, and compliance
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considerations). It may be managed by the organizations or a third party
and may exist on premise or off premise.
Public cloud. - The cloud infrastructure is made available to the
general public or a large industry group and is owned by an
organization selling cloud services.
Hybrid cloud. - The cloud infrastructure is a composition of two or
more clouds (private, community, or public) that remain unique entities
but are bound together by standardized or proprietary technology that
enables data and application portability (for example, cloud bursting for
load-balancing between clouds).
Cloud Computing Challenges
Furth (2010), cited Leavitt (2011) the new paradigm of cloud
computing provides a number of benefits and advantages over the
previous computing paradigms and many organizations are adopting it.
However there are still a number of challenges, which are currently
addressed by the researchers and practitioners in the field. They are
briefly presented below.
Performance - The major issue in performance can be for some
intensive transaction-oriented and other data-intensive applications, in
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which cloud computing may lack adequate performance. Also, users
who are at a long distance from cloud providers may experience high
latency and delays.
Security and Privacy - Companies are still concerned about
security when using cloud computing. Customers are worried about the
vulnerability to attacks, when information and critical IT resources are
outside the firewall. The solution for security assumes that that cloud
computing providers follow standard security practices.
Control - Some IT departments are concerned because cloud
computing providers have a full control of the platforms. Cloud
computing providers typically do not design platforms for specific
companies and their business practices.
Bandwidth Costs - With cloud computing companies can save
money on hardware and software; however they could incur higher
network bandwidth charges. Bandwidth cost may be low for smaller
Internet-based applications, which are not data intensive, but could
significantly grow for data-intensive applications.
Reliability - Cloud computing still does not always offer round-
the-clock reliability. There were cases where cloud computing services
suffered a few-hours outages.
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In the future, we can expect more cloud computing providers,
richer services, established standards and best practices. In the
research arena, HP labs, Intel, and Yahoo have launched the
distributed Cloud Research Test Bad, with facilities in Asia, Europe, and
North America, with the objective to develop innovations including cloud
computing specific chips.
Six principles for successful Cloud adoption
Global non-profit IT association ISACA has issued Guiding
Principles for Cloud Computing Adoption and Use, a useful guide
featuring six key Cloud Computing principles to ensure, or at least
improve the chances of, successful adoption.
The Enablement Principle - Plan for Cloud Computing as a
strategic enabler, rather than as an outsourcing arrangement or
technical platform. To plan strategically for Cloud adoption and use,
enterprises need to: (1) Treat Cloud Computing adoption and use as a
strategic business decision. (2) Make informed decisions, considering
both business and operational needs and the benefits that can be
provided by Cloud Computing. (3) Communicate Cloud Computing
arrangements and agreements to internal parties to ensure proper
alignment and consistent oversight. (4) Periodically review
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organizational strategies and the contribution of IT to ensure that Cloud
initiatives maximize value delivery, risk management and resource
utilization.
The Cost/Benefit Principle- Evaluate the benefits of Cloud
acquisition based on a full understanding of the costs of Cloud
compared with the costs of other technology platform business
solutions. To properly evaluate the costs and benefits of Cloud
Computing, enterprises need to: (1) Clearly document expected
benefits in terms of rapid resource provisioning, scalability, capacity,
continuity and the cost reductions that the Cloud services offer. (2)
Define the true life-cycle cost of IT services provided internally or
through a provider to have a basis for comparing expected and received
value. (3) Balance cost with functionality, resilience, resource utilization
and business value. (4) Look beyond cost savings by considering the
full benefits of what Cloud services and support can provide. (5)
Periodically evaluate performance against expectations
The Enterprise Risk Principle - Take an enterprise risk
management (ERM) perspective to manage the adoption and use of
cloud. To understand the risk implications of Cloud Computing,
enterprises need to: (1) Consider the privacy implications of co-mingling
data within the virtualized computing environment. (2) Evaluate privacy
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requirements and legal restrictions, considering client needs as well as
provider restrictions and capabilities. (3) Determine the accountability
addressed in SLAs, the ability to monitor performance and available
remedies.
The Capability Principle - Integrate the full extent of capabilities
that Cloud providers offer with internal resources to provide a
comprehensive technical support and delivery solution. To leverage
both internal and Cloud provider resources effectively, enterprises need
to: (1) Understand the human and technical resource capabilities that
exist in the current infrastructure and how a Cloud strategy will impact
the need for these or other resources. (2) Define the capabilities that a
Cloud provider will make available as well as constraints on these
resources, including periods of unavailability or priority of use. (3)
Consider emergency situations and resource requirements necessary
to determine causes, stabilize the environment, protect sensitive and
private information, and restore service levels. (4) Determine how
policies, practices and processes currently support the use of
technology; how transitioning to a Cloud solution will require policy,
practice and process changes; and the impact these changes will have
on capabilities. (5) Ensure that service providers can demonstrate that
personnel understand information security requirements and
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are capable of discharging their protection responsibilities. (6) Ensure
that internal staff members have the skill and expertise to coordinate
activities with Cloud providers and that they are engaged in Cloud
service acquisition and ongoing management. (7) Ensure that effective
channels of communication are provided with provider management
and key specialists, particularly for problem identification and resolution.
The Accountability Principle - Manage accountabilities by clearly
defining internal and provider responsibilities. To ensure that
responsibilities are clearly understood and individuals and groups can
be held accountable, enterprises need to: (1) Understand how
traditional responsibilities are assigned and implemented within the
existing organizational structure and as a part of policies and practices
to determine how these are addressed within Cloud solutions. (2)
Determine how responsibilities between tenant and provider
organizations for Cloud solutions are assigned and how
communications between accountable individuals and groups will be
facilitated. (3) Ensure that processes and procedures provide a
mechanism to ensure that responsibilities are accepted and
accountabilities are clearly assigned. (4) Maintain within the governance
structure a means of reviewing performance and enforcing
accountabilities. (5) Consider the risk to the enterprise as part of the
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enterprise risk management program, the impact of potential lapses in
assigned responsibilities, or the impact of not being able to assign
accountabilities.
The Trust Principle - Make trust an essential part of Cloud
solutions, building trust into all business processes that depend on
Cloud Computing. To ensure that business processes that depend on
Cloud Computing can be trusted, enterprises need to: (1) Clearly define
confidentiality, integrity and availability requirements for information and
business processes. (2) Understand how reliance on Cloud Computing
solutions may impact trust requirements. (3) Structure the efforts of
security, risk management and assurance professionals within both
tenant and provider organizations to ensure that trust requirements are
known and satisfied. (4) Monitor changes in business use of Cloud
Computing, vulnerabilities associated with Cloud solutions, and
implementations across tenant and supplier environments to ensure
that threats to trust can be identified and resolved. (5) Ensure that
Cloud infrastructure, platform and software service providers
understand the importance of trust and create solutions that can be
trusted. (6) Provide ongoing assurance that information and information
systems can be trusted.
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Related Literature (Local)
Cloud Computing Benefits
According to Microsoft Philippines, Microsoft Cloud Computing
for SMBs Philippines, the benefits of Cloud Computing are apparent.
Here, it has been said that subscribing to software delivered over the
web enables ones business to take advantage of enterprise-class
software without the burden or cost of managing the technology
yourself. There are many benefits to cloud computing, including the
following: (1) cost savings: renting software in the cloud on a pay-
as-you-go basis eases cash flow; (2) lower IT support costs: one
always has to have the latest versions of software without the need for
IT support; (3) mass storage: renting storage is cheaper than buying
extra disk space for PCs; (4) reduced risk: data security is hosting a
companys problem instead of personal ones; (5) access anywhere: get
ones documents over the web from home or just about anywhere else.
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Strategic Management
Related Literature (Foreign)
Definition and Concepts
Strategic management is a set of managerial decisions and
actions that determines the long-term performance of a corporation. It
involves environmental scanning (both external and internal), strategy
formulation (strategic or long range planning), strategy implementation,
and evaluation and control. They emphasize analyzing and evaluating
external opportunities and threats in terms of an organizations
strengths and weaknesses (Wheelen & Hunger 2006).
From the perspective of David (2011), Strategic Management
can be defined in various ways; thus, it is the art and science of
formulating, implementing, and evaluating cross-functional decisions
that enable an organization to achieve its objectives. As this definition
implies, strategic management focuses on integrating management,
marketing, finance/accounting, production/operations, research and
development, and information systems to achieve organizational
success.
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Kaplan and Norton (2004) saw company strategy as an added
value that is planned to be produced to customers and shareholders.
Here, continuous, specific capability improvements and alignments with
customer needs are crucial.
Coulter (2005) defined strategic management as those
organizational decisions and actions, in which organizational members
analyze the current situation, decide on strategies, put those strategies
into action, and evaluate, and modify or change strategies. Strategy
implementation means putting the organizations various strategies into
action. It is putting theory into practice. Strategy evaluation is the
process of examining how the strategy has been implemented as well
as the outcomes of the strategy. The same takes stock of the actual
implementation of the strategy and its effectiveness. Employees should
monitor both the actual implementation of the strategy and the
performance outcomes of strategies that have been implemented. If
these do not measure up to the expectations or strategic goals, then the
strategy itself or the implementation process may have to be modified
or totally changed. The discrepancies identified will inform the
organization what action to take next if need be. Definitely, an
organizations employees play an important role in strategic
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management. Although an organizations top managers have several
important strategic leadership responsibilities in the strategic
management process, managers and employees at other levels
throughout the organization are also important to the process (Coulter,
2005).
Benefits
As per David (2011), the benefits of strategic management is
dispensable for a company to be more pro-active than reactive in
shaping its own future; it makes an organization to initiate and affect
activities so that it can exert control over its own destiny. At present,
the benefits of strategic management begin to be recognized and
realized by more and more people, no matter small business owners,
chief executive officers, or presidents and managers of many for-profit
and non-profit organizations.
The basic benefit of strategic management has helped
organizations formulate sound strategies by using the more systematic,
logical, and rational approach to strategic choice (David 2011).
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Figure 1.Benefits of Strategic Management
Figure 1 above illustrates the benefits of a firm that does
strategic planning. An efficient strategy requires all employees to help
accomplish a mission; thus, the whole process of strategic management
is a good way to motivate all managers and employees to develop
dedication to the company. First of all, it helps them enhance
communication, the employees began to know what the company is
doing, how to achieve the goal so that they involve themselves with the
firm and maintain a greater commitment for it. Here, the managers and
employees become more creative and hard-working when they
gradually understand each other. Finally, the company will succeed
with the effort of the employees (David, 2011).
To be specific, benefits consist of financial benefits and non-
financial benefits. Financial benefits include improvement in sales,
profitability, and productivity. A good strategic management can
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achieve the mission and objectives of the company; hence, the profits
will come naturally (David, 2011). Meanwhile, there are many non-
Financial Benefits; these are: (1) it can improve understanding ofcompetitors strategies. A good SWOT can help us to understand the
difference with competitors, including awareness of threats; and (2) it
allows reducing resistance to change. Here, more and more
opportunities can be exploited in the process; (3) It defines
management problems objectively; (4) it provides a framework for a
company to coordinate and control the activities; (5) it promotes the
communication among employees and managers; and (6) it encourages
strategic thinking, inspiring people think more on the future of a
company (David, 2011).
Figure 2The Strategy-Formulation Analytical Framework
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The Input Stage
The input tools require strategists to quantify subjectivity during
early stages of the strategy-formulation process. Making small
decisions in the input matrices regarding the relative importance of
external and internal factors allows strategists to more effectively
generate and evaluate alternative strategies. Good intuitive judgment is
always needed in determining appropriate weights and ratings (David,
2011).
The Matching Stage
The matching stage of the strategy-formulation framework
consists of five techniques that can be used in any sequence: the
SWOT Matrix, the SPACE Matrix, the BCG Matrix, the IE Matrix, and
the Grand Strategy Matrix. These tools rely upon information derived
from the input stage to match external opportunities and threats with
internal strengths and weaknesses. Matching external and internal
critical success factors is the key to effectively generating feasible
alternative strategies (David, 2011).
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The Decision Stage
Analysis and intuition provide a basis for making strategy-
formulation decisions. The matching techniques just discussed reveal
feasible alternative strategies. Many of these strategies will likely have
been proposed by managers and employees participating in the
strategy analysis and choice activity. Any additional strategies resulting
from the matching analyses could be discussed and added to the list of
feasible alternative options. Participants could rate these strategies on
a 1 to 4 scale so that a prioritized list of the best strategies could be
achieved. Quantitative Strategic Planning Matrix is being used.(David,
2011)
Related Literature (Local)
Strategic Management Process
According to Camatog (2012), citing Cruz (2007), there are five
Inter-related tasks: (1) forming a strategic vision of what the companys
future business make up will be where the organization is headed so
as to provide long-term direction, delineate what kind of enterprise the
company is trying to become, and infuse the organization with a sense
of purposeful action. The vision of a company must ideally be a
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balance between its big, hairy, and audacious long-term goals and its
core values and core purpose which is a companys reason for being;
(2) setting corporate objectiveswhich means converting a companys
vision into performance outcomes for the company to achieve. These
must be specific, measurable, attainable, and time-bound results of
activities; (3) crafting corporate strategies to achieve desired
objectives. These strategies must be based on an analysis of the
different external environments as well as the internal environment of
the corporation, the personal values of the decision-makers of the
corporation, and societal expectations; (4) implementing and executing
the chosen strategies efficiently and effectively. This means that any
change in strategies will also require changes in the companys
structure, systems, staff, skills, styles, and shared values or culture; and
(5) evaluation performance and initiating corrective adjustments in
vision; long term direction; objectives; strategies or implementation in
the light of actual performance, experience, changing conditions, new
ideas, and new opportunities. This requires the installation of a
monitoring and control system.
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Chapter 3
METHOD AND PROCEDURE
This chapter presents the research frameworks, methods used,
sources of data, respondents of the study, research instruments and
techniques.
Research Design
To gain better understanding of the dimensions of the problems,
an Exploratory Research is employed. According to Ghauri (2005),
Exploratory Research exists when the problem is not specific or not
clear at the start of the research. Although the need for a research or
search for knowledge is evident, the actual problem is still to be
discovered in the course of the research. Applying it to this
undertaking, the researcher made observations on the current situation
of the organization and conducted informal interviews with the General
Manager and employees.
The Descriptive Method shall likewise be had to achieve
research objectives. In descriptive researches, the problem is clear and
understood at the start of the research (Ghauri 2005). Data is
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systematically gathered to address this problem indicating a very
focused and very directed research methodology. Three main
methodologies were used for data collection: first, the researcher
undertake a management audit; this covers the companys Internal and
External Environment. Afterwards, the list was classified as: Strengths,
Weaknesses, Opportunities, and Threats based on the Key Result
Areas identified in the Mission of the company. Second, a Management
Survey was distributed to get quantified results to answer the research
questions. Third, Interviews with the General Manager and employees
was done to understand and analyze the results.
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Research Framework
1. Theoretical Framework
Figure 3A Comprehensive Strategic-Management Model
The study focus on the Commerce One Business Solution, Inc.
current situation Utilizing Strategic Management Model of Fred
David(2011) as presented in the Figure 3 above.
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There are 3 stages of strategic Management: (1) strategy
formulation includes developing a vision and mission, identifying an
organizations external opportunities and threats, determining internal
strengths and weaknesses, establishing long term objectives,
generating alternative strategies and choosing particular strategies to
pursue; thus: A Vision is a road map of companys future. A Mission
statement is the purpose of, or reason for, the organizations existence.
A strategies is a comprehensive plan stating how the organization will
achieve its Vision-Mission and goals objectives. They maximize
competitive advantage and minimize competitive disadvantages;
External opportunities and external threats refer to economic, social,
cultural, demographic, environmental, political, legal, governmental,
technological, and competitive trends and events that could significantly
benefit or harm an organization in the future. Internal strengths and
internal weaknesses are an organizations controllable activities that are
performed especially well or poorly. They arise in the management,
marketing, finance/accounting, production/operations, research and
development, and management information systems activities of a
business. (2) strategy implementation requires a firm to establish
annual objectives, devise policies, motivate employees, and allocate
resources so that formulated strategies can be executed. Strategy
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implementation includes developing a strategy-supportive culture,
creating an effective organizational structure, redirecting marketing
efforts, preparing budgets, developing and utilizing information systems,
and linking employee compensation to organizational performance; (3)
strategy evaluation is the final stage in strategic management.
Managers desperately need to know when particular strategies are not
working well. Indeed, strategy evaluation is the primary means for
obtaining this information. All strategies are subject to future
modifications for external and internal factors are constantly changing.
The three fundamental strategy-evaluation activities are: (1) reviewing
external and internal factors that are the bases for current strategies; (2)
measuring performance: and (3) taking corrective actions. This
undertaking will focus on Strategy Formulation.
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Proposed CloudComputingStrategy forCommerce OneBusinessSolution, Inc.
INPUT PROCESS OUTPUT
Analysis of the
capability of the
company
Using the
following
Matrices;
IFE, EFE, IE,SWOT, GRANDand QSPM
From Review ofRelatedLiterature -Cloud Computing: definitions,essentialcharacteristics,
model, services,advantages,disadvantages,adaptation
Basic StrategicManagementModel of FredDavid:EnvironmentalScanning (SWOTanalysis)
Develop VISIONand MISSION
FEEDBACK :Strategy Monitoring and Evaluation
2. Conceptual Framework
Figure 4Research Paradigm.
In the Input stage, it contains the Review of the Related Literature
pertaining to Cloud Computing definitions, essential characteristics,
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model, services, advantages, disadvantages, adaptation. it also includes
the Develop VISION and MISSION and the Basic Strategic
Management Model of Fred David, Environmental Scanning (SWOT
analysis).
In the Process stage is the analysis of the capability of the
company through observation this is then used as a management
survey. The survey was then tabulated and used several matrices to
come up with the best strategy. These matrices are ; External Factors
Evaluation (EFE) Matrix, Internal Factors Evaluation (IFE) Matrix,
Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, Internal-
External (IE) Matrix, Grand Strategy Matrix (GSM) and the Quantitative
Strategic Planning Matrix (QSPM).
In the Output stage is the Proposed Cloud computing Strategy
for Commerce One Business Solution, Inc.
Research Instrument
Management Survey Form shown in Appendix A was used in
conducting Management survey to Case Companys Stakeholders . The
responses will identify what are the Strengths, Weaknesses,
Opportunities and Threats affecting the organization. (Direction : Please
check answer in the appropriate column beside each statements.)
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Data Management
Data Population
In this study the researcher used purposive or judgement
sampling technique. Under this scheme, the participants are chosen
based on the judgement of the researcher to be representative of the
population. The researcher selected almost all the members of the
companys stakeholder except for the customers where in the
researcher selected only those customers that contribute 70% to the
total revenue of the company.
Sample Size
Table 3.1 Statistical Population.
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The population used in the survey is composed of the companys
stakeholders; they are: the Board of Directors, which is also the Top
management, Finance and Admin, and personnel. Only one supplier
was included in the survey, which is the Exact partner; here, 100%
output was attained.
Data Collection
The researcher observed the following procedures in collecting
the data:
a. The researcher talked to the Companys Managing Director
concerning the researchers intention;
b. Once approved, the questionnaires were distributed to Top
management and the employees.
c. An e-mail was sent to the supplier and customers with a
request to answer the survey attached to the document.
d. The respondents were given one week in answering the
questionnaires;
e. After one week, data was collected from the respondents;
and
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f. After collection, the questionnaires were checked; data was
then collated, tabulated, and computed.
Statistical Treatment of Data
As per the Research Instrument used and shown in Research
Instrument, the following were used to treat the data described in Data
Management. Note that the survey used was directed to predetermined
participants, and not thru random sampling population. The same
implies that the validity of the data is based on specific and identified
people for the whole strategic model revolves around business
applications controlled by a few and directed individuals (as in the
matter on who would be the top management of organizations).
Furthermore, since this research is exploratory in nature, data
gathered followed a strict flow of logic which must not be confused with
simpler descriptive type of researches.
Regarding Statistical Measurements, for data to be meaningful,
measurements have to be applied in the data. These measurements
create the necessary parameters on how to analyze the data to provide
the needed conclusions and recommendation addressing the problem
of this research.
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There are different levels of measurements used in this
research. The first is the nominal level where numbers are used to
classify objects or observations (Ghauri, 2005). Such are seen in the
observation tables where various items in the surveyed were needed to
be classified between two outcomes. The first is to determine if an
observation is positive or negative anchored on its effect on the
organization. The second is to determine if the observation is internal
or external based on the stakeholders being affected or are
responsible for the effects of the observation. A correlation is then
made between the two sets of observations where something that is (i)
positively internal is a strength; (ii) negatively internal is a weakness; (iii)
positively external is an opportunity; (iv) and negatively external is a
threat. By classifying the observations, the organizations SWOT is
thus determined.
The second level is the ordinal level wherein some numbers
used have specific relationships indicating rank or priorities (Ghauri,
2005). The same are manifest when the classified SWOTs are
measured based on its importance or effect to the organization.
Nevertheless, due to the nature of synthesizing SWOTs into one
strategy, careful consideration must be made when determining
ordinals. A scale from 1 to 4, where 4 indicates the strong side of the
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scale and 1 represents the weak side of the scale was had. Getting the
midpoint indicates that a score of 2.5 indicated the neutral ground of the
scale. Applying it to the thesis, each SWOT is consequently measured
as to whether it promotes something positive (4) or denotes something
negative (1) with respect to its effect on the organization. A strong
strength garnering a score of 4 or above 2.5 indicated that the strength
has a big effect on the organization; that a need to preserve or improve
its capabilities can be a reason for any strategies to be formulated.
Taking into account that weaknesses have a negative effect on the
organization, a rating of 1 or lower than 2.5 indicates the weakness has
a big effect on the organization; that a need to eliminate the weakness
must be a top priority in strategy formulation. The same will hold true
for opportunities and threats. Opportunities with ratings of 4 or above
2.5 means opportunities that must be realized, while threats with scores
of 1 or below 2.5 deals with threats that the organization must be
conscious of and defend against its disastrous effects.
In the survey, however, considering that the participants may not
have the proper training to analyze the scales characteristics, the
survey must be carefully analyzed. The survey provides 5 choices per
observation; namely, highly agree, agree, neutral, disagree, and highly
disagree with options for being not applicable or refuse to answer. For
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the positive observations, such as strengths and opportunities, any
totally agree answer can merit the score of 4 and follows the decreasing
rule of 1 as a totally disagree answer; on the other hand, for the
negative observations, such as weaknesses and threats, any totally
agree answer merits the score of 1 (reverse of strengths and
weaknesses) for the rule of strategic management requires that all
SWOTs must be synthesized and positive observations have a reverse
effect as compared to negative observations.
The third level is the interval level where the number of constant
intervals between numbers are significant (Ghauri 2005). These are
obvious in two aspects of the survey depicted in the IFE and EFE
tables. The first is when each observation is weighted according to its
importance to the general condition of the organization. Ascertaining
the weights can be subjective; thus, an equal weight distribution is often
suggested to the researcher. Still, if there is time and enough data in
the industry, a more sophisticated assignment of weights for each
observation can be made. The second application is when quantifying
the importance of each participant in the survey. Since this is a
strategic management research, it is important to value the source of
information and the status of each survey participant. Using a total sum
of 1.00 or 100%, the participants are weighted where the most
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influential participant should garner the highest weight. The actual
percentages are only significant when the participants are compared to
each other based on the assumed weights. Participant A may be twice
as important as participant B; hence, the weight assigned to participant
A is doubled as compared to participant B. Although the assignment of
weights must be verified as well using other variables, the error in the
measures can be compensated by the reason why the participants are
being weighted. Stated otherwise, the weights can be debatable, but
the aspect of ranking the participants according to their importance is
taken cared of, making the final ratings of each observation valid
(logically speaking).
Another application of the interval level method is when each of
the observations is rated based on the weighted average of each
participant and their individual ratings. Each rating given by each
participant us subjected to the weight assigned to each participant and
a weighted average is computed to get a very objective rating for each
observation. For instance, the rating that will be given to a particular
strength was computed by averaging the ratings given by the
participants of the survey; however, such rating did not use straight
averaging but was even subjected to the weight of each participant.
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The fourth level is the ratio scale level where the measurement
starts from an absolute value (for example, zero) and the distance from
the absolute value indicates significant information regarding the item
being measured (Ghauri, 2005). These are noticeable when adding all
the weights computed for each observation to craft a statistical
conclusion. In the IFE and EFE tables, since the scale used in the
rating is between 1 and 4 (and the measurement does not start with an
absolute value of zero), the midpoint indicates the neutral ground when
assessing an organization. Having a score greater than 2.5 tells one
that the organization is internally stable (or it can manage its strengths
and weaknesses) or externally stable (or it can manage its opportunities
and threats). The same logic appears in the QSPM, another table used
to determine the final strategy of the organization.
Validity and Reliability of Data must also be valid and reliable
before any analysis is done. As a matter of fact, a significant step in
data management is to (i) determine if a particular data is usable; (ii)
disregard or remove useless data; and (iii) determine if the remaining
valid data can still produce an objective and reliable analysis. Various
techniques were employed to determine the validity of the data;
moreover, since the sampling is directed or the participants are
identified, there is a significant probability that the data gathered is valid
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and reliable. Another aspect that needs to be validated is on the
observations made by the researcher; the same truly depicts the true
SWOTs needed to formulate a strategy for the organization. This is
covered when each of the observations are ranked not by the
researcher but by the participants of the research. Such removes
subjectivity/bias and pre-conclusions on the part of the proponent.
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Chapter 4
PRESENTATION, ANALYSIS AND INTERPRETATION
OF DATA
This chapter presents the findings and interpretation of data
collected via the management surveys. The data were presented and
analyzed using Fred David Strategic Management Matrices. The
interpreted data formed the basis of discussions upon which
recommendations and conclusions were drawn and presented in
Chapter 5.
Respondents Assessment of the Instrument using the following
Matrices.
Modified IFE Matrix
Table 4.1 Modified IFE Matrix
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The Internal Factor Evaluation (IFE) Matrix is a strategy-
formulation tool that summarizes and evaluates the major strengths and
weaknesses in the functional areas of a business; in the table 4.1
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above the first column contains the Key Internal Factors identified in the
management audit. This was group to Strength and Weaknesses of the
Case Company. The second column is the weight assigned to each
internal factors. The assigned weight is based on the effect of each
internal factors on organizational performance. The greatest effect was
assigned with the highest weight. It is important that sum of all weights
must equal 1.0. The column for Top Management, Admin and Finance,
Supplier and customers are the major stakeholder of the Case
Company. They are also weight according to their importance to the
Case Company. Scores under each stakeholders columns are
composed of the weight assigned to each stakeholder multiplied to the
scale assigned to each internal factors. For internal factors denoting to
strength the scales are 3, 3.25, 3.5, 3.75, and 4, where 4 indicates the
strong side of the scale and 3 represents the weak side of the scale. On
the other hand, internal factors denoting for Weaknesses the
corresponding scales are 1, 1.25, 1.50, 1.75, and 2 where 2 indicates
the strong side of the scale and 1 represents the weak side of the scale.
This was then tallied and totaled per group. The average weighted
column is the sum total of all stakeholders scores while the weighted
score column is the product of the Average weighted score and the
weight of each variables. Under IFE matrix, regardless of how many
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factors are included, the total weighted score can range from a low of
1.0 to a high of 4.0, with the average score being 2.5. Total weighted
scores well below 2.5 characterize organizations that are weak
internally, whereas scores significantly above 2.5 indicate a strong
internal position. Based on the result of the study, total weighted score
is 2.73. This means that through the use of IFE Matrix and the given
factors identified, the company was interpreted to have a strong
internal position. Though the result represents a strong side is not very
strong because it is near to the average factors this indicates that the
case company needs to strengthen more its internal aspect of the
company.
EFE Matrix
Table 4.2 : Modified EFE
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The External Factor Evaluation (EFE) Matrix allows strategists to
summarize and evaluate economic, social, cultural, demographic,
environmental, political, governmental, legal, technological, and
competitive information. In the table above the first column contains the
Key External Factors identified in the management audit. This was
group to Opportunities and Threats of the Case Company. The
second column is the weight assigned to each external factors. The
assigned weight is based on the effect of each external factors on
organizational performance. The greatest effect was assigned with the
highest weight. It is important that sum of all weights must equal 1.0.
The column for Top Management, Admin and Finance, Supplier and
customers are the major stakeholder of the Case Company. They are
also weight according to their importance to the Case Company.
Scores under each stake holders columns are composed of the weight
assigned to each stakeholder multiplied to the scale assigned to each
internal factors. For external factors denoting to Opportunities the
scales are 3, 3.25, 3.5, 3.75, and 4, where 4 indicates the strong side of
the scale and 3 represents the weak side of the scale. On the other
hand, External factors denoting for Threats, the corresponding scales
are 1, 1.25, 1.50, 1.75, and 2 where 2 indicates the strong side of the
scale and 1 represents the weak side of the scale. This was then tallied
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and totaled per group. The average weighted column is the sum total
of all stakeholders scores while the weighted score column is the
product of the Average weighted score and the weight of each
variables. Under EFE Matrix, the highest possible total weighted score
for an organization is 4.0 and the lowest possible total weighted score is
1.0. The average total weighted score is 2.5. A weighted score of 4.0
indicates that an organization is responding in an outstanding way to
existing opportunities and threats in its industry. In other words, the
firms strategies effectively take advantage of existing opportunities and
minimize the potential adverse effects of external threats. A score of
1.0 indicates that the firms strategies are not capitalizing on
opportunities or avoiding external threats. Based on the result of the
study, total weighted score is 2.74. This means that through the use of
EFE Matrix and the given factors identified, the company was
interpreted to have a strong external position. Though the result
represents a strong side, the Case Company is not very strong because
it is near to the average factors. This only indicates that the case
company needs to strengthen more its external aspect of the company
specially in its competitiveness to other vendors.
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IE Matrix
Figure 5IE Matrix
The IE Matrix is based on two key dimensions: the IFE total
weighted scores on thex-axis and the EFE total weighted scores on the
y-axis. The result scores is based from IFE Matrix and EFE Matrix
discussed above discussions. On the x-axis of the IE Matrix, an IFE
total weighted score of 1.0 to 1.99 which represents a weak internal
position; a score of 2.0 to 2.99 is considered average; and a score of
3.0 to 4.0 is strong. Similarly, on the y-axis, an EFE total weighted
score of 1.0 to 1.99 is considered low; a score of 2.0 to 2.99 is medium;
and a score of 3.0 to 4.0 is high. The IE Matrix is divided into three
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major regions that have different strategy implications. First, the
recommendation for divisions that fall into cells I, II, or IV can be
described as grow and build. Intensive (market penetration, market
development, and product development) or integrative (backward
integration, forward integration, and horizontal integration) strategies
can be most appropriate for these divisions. Second, divisions that fall
into cells III, V, or VII can be managed best with hold and maintain
strategies; market penetration and product development are two
commonly employed strategies for these types of divisions. Third, a
common recommendations for divisions that fall into cells VI, VIII, or IX
is harvest or divest. Successful organizations are able to achieve a
portfolio of businesses positioned in or around cell I in the IE Matrix
(David, 2011).
The result of the study based on IFE weighted score is 2.73
while the EFE weighted score is 2.74. Plotting both scores in the IE
Matrix, Case Company falls under Quadrant V, which manage best
with hold and maintain strategies. The recommended strategies are the
following: (1) Market Penetration and (2) Product Development.
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Table 4.3SWOT Matrix
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The Strengths-Weaknesses-Opportunities-Threats (SWOT)
Matrix is an important matching tool that helps managers develop four
types of strategies: SO (strengths-opportunities) Strategies, WO
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(weaknesses-opportunities) Strategies, ST (strengths-threats)
Strategies, and WT (weaknesses-threats) Strategies.
SO Strategies use a firms internal strengths to take advantage
of external opportunities. All managers would like their organization to
be in a position in which internal strengths can be used to take
advantage of external trends and events. Organizations generally will
pursue WO, ST, or WT strategies to get into a situation in which they
can apply SO strategies. When a firm has major weaknesses, it will
strive to overcome them and make them strengths. When an
organization faces major threats, it will seek to avoid them to
concentrate on opportunities.(David, 2011) In this study the following
are suggested for SO strategies (1) Introduce Internet based product
that can cater to Small and medium enterprises with lower cost (O13,
O14, O15, O16, O 17, S11, S17, S2) (2) Intensify Market Penetration
Strategy (S5, S6,S7,S8,S9, S10, S11, O10, O11,O121) (3) Create
"add-on" to existing product like Purchase Requisition (S6, O9)
WO Strategies aim at improving internal weaknesses by taking
advantage of external opportunities. Sometimes key external
opportunities exist, but a firm has internal weaknesses that prevent it
from exploiting those opportunities. In this study WO suggested
strategies are (1) Increase Marketing efforts to penetrate other market
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specially the Small and Medium enterprises by strengthening web
advertisement (W6, W7, O10, O11, O12) (2) Provide continuous
training in both software and hardware to staff that will contribute in
providing customer satisfaction (W1,W8,W9,W10,W3, W4, O9,
O13,O15).
ST Strategies use a firms strengths to avoid or reduce the
impact of external threats. This does not mean that a strong
organization should always meet threats in the external environment
head-on. Ins this study ST strategies are (1) Invest in new technologies
such as SaaS that promise lower cost (T10, T8, T6, T10, S2, S11) , (2)
Partner with other big players in the industry (T7,T8,T5, S3, S17)
WT Strategies are defensive tactics directed at reducing internal
weakness and avoiding external threats. An organization faced with
numerous external threats and internal weaknesses may indeed be in a
precarious position. In fact, a firm may have to fight for its survival,
merge, retrench, declare bankruptcy, or choose liquidation (David,
2011). Recommended Strategies are (1) Acquire/develop local product
that has lower cost (W5, T10 T4, T3), (2) Strengthen Customer
relationship (T1, T7,T8,T9,T5, W7).
The overall strategies recommended by the SWOT matrix are;
(1) Product Development, (2) Market Penetration and (3) Joint Venture.
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A. Grand Strategy Matrix
Figure 6 Grand Strategy Matrix (David, 2011)
The Grand Strategy Matrix is based on two evaluative
dimensions: competitive position and market (industry) growth.
According to (David, 2011) Any industry whose annual growth in sales
exceeds 5 percent could be considered to have rapid growth.
Appropriate strategies for an organization to consider are listed in
sequential order of attractiveness in each quadrant of the matrix. Firms
located in Quadrant I of the Grand Strategy Matrix are in an excellent
strategic position. For these firms, continued concentration on current
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markets (market penetration and market development) and products
(product development) is an appropriate strategy. It is unwise for a
Quadrant I firm to shift notably from its established competitive
advantages. When a Quadrant I organization has excessive resources,
then backward, forward, or horizontal integration may be effective
strategies. When a Quadrant I firm is too heavily committed to a single
product, then related diversification may reduce the risks associated
with a narrow product line. Quadrant I firms can afford to take
advantage of external opportunities in several areas. They can take
risks aggressively when necessary.
Firms positioned in Quadrant II need to evaluate their present
approach to the marketplace seriously. Although their industry is
growing, they are unable to compete effectively, and they need to
determine why the firms current approach is ineffective and how the
company can best change to improve its competitiveness. Because
Quadrant II firms are in a rapid-market-growth industry, an intensive
strategy (as opposed to integrative or diversification) is usually the first
option that should be considered. However, if the firm is lacking a
distinctive competence or competitive advantage, then horizontal
integration is often a desirable alternative. As a last resort, divestiture or
liquidation should be considered. Divestiture can provide funds needed
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to acquire other businesses or buy back shares of stock. Quadrant III
organizations compete in slow-growth industries and have weak
competitive positions. These firms must make some drastic changes
quickly to avoid further decline and possible liquidation. Extensive cost
and asset reduction (retrenchment) should be pursued first. An
alternative strategy is to shift resources away from the current business
into different areas (diversify). If all else fails, the final options for
Quadrant III businesses are divestiture or liquidation.(David, 2011).
Finally, Quadrant IV businesses have a strong competitive
position but are in a slow growth industry. These firms have the strength
to launch diversified programs into more promising growth areas:
Quadrant IV firms have characteristically high cash-flow levels and
limited internal growth needs and often can pursue related or unrelated
diversification successfully. Quadrant IV firms also may pursue joint
ventures. .(David, 2011)
Case Company has an annual growth in revenues of 13 percent
increase in Financial Year 2012 compared to Financial Year 2011, but
has weak competitive position to compete effectively because of more
big players in the software industry on the other hand local competitors
has better leverage because it offers more flexible software cost
compared to the case company where in the cost is dictates by the
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principal. Case Company is positioned itself in Quadrant II wherein
recommended strategies are product development, market penetration,
market development, horizontal integration, divestiture, and liquidation
are the possible strategies.
Recommended Business Strategies
Table 4.4: Recommended Business Strategies from SWOT, IE and
GSM
The table 4.4 above is a summary of the derived recommended
strategies utilizing the three matrices which are SWOT, IE and GSM.
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Result shows that the top two among all strategies identified are Market
Penetration and Product Development.
Product development is creating new product to the current and
prospective markets while Market Penetration is an extensive strategy
to acquire more clients and /or customers in the market, selling COBSI
products and services in the current market.
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Quantitative Strategic Planning Matrix
Table 4.5 :
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75
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The Quantitative Strategic Planning Matrix (QSPM)is objectively
indicates which alternative strategies are best. It is a tool used that
allows strategists to evaluate alternative strategies objectively, based
on previously identified external and internal critical success factors.
Like other strategy-formulation analytical tools, the QSPM requires
good intuitive judgment.(David, 2011). At the left side of the table is the
list of Case Companys key external opportunities/threats and internal
strengths/weaknesses which was directly taken from the EFE and IFE
Matrix. The second column is the weight where in each key factors are
assigned particular weight according to their importance to the case
company. Strategies columns is derived from the recommended
strategies table 4.5. For the Case Company Strategy Column 1 is
Product Development while strategy column 2 is Market Penetration.
Attractiveness Scores (AS) was assigned to each key external or
internal factor, one at a time, considering the question Does this factor
affect the choice of strategies being made? for the factors answering
YES to the question the researcher assigned the following
Attractiveness Scores ; 1 = not attractive, 2 = somewhat attractive, 3 =
reasonably attractive, and 4 = highly attractive. For the factors that
answering NO to the questions means there has no effect to choice
being made then it was leave blank. The Total Attractiveness Score is
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the product of Weight assigned to each factors by the Attractiveness
scores in each rows. The Total Attractiveness Scores indicate the
relative attractiveness of each alternative strategy, considering only the
impact of the adjacent external or internal critical success factor. The
higher the Total Attractiveness Score, the more attractive the strategic
alternative (David, 2011). Higher scores indicate more attractive
strategies, considering all the relevant external and internal factors that
could affect the strategic decisions. For the group under Strengths the
total score was 1.7362 for Product development while 1.6969 for
Market Penetration. For group under Weaknesses the total score was
0.5655 for Product Development while 0.6897 for Market Penetration.
The total scores for Internal Environment factors are 2.3017 for Product
Development while 2.3866 for Market Penetration. Meanwhile for the
Group under Opportunities the total score was 1.8813 while 1.7642. for
the group under Threats the total scores was 1.1222 and 1.0444. Total
External Environment Scores 3.0036 and 2.8087. Finally the QSPM is
the sum of the scores of Internal and External Environment with
3.0036 for Product Development and 2.8087 for Market Penetration
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Chapter 5
SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
This chapter discusses the summary of findings, conclusions and
recommendations of the study.
The main object of this study was to provide the best
management strategies for the Case Company that can be utilized to
stay competitive and become preferred partner in the software industry.
To accomplish the objective of study, the data gathered were treated,
analyzed and finally interpreted. The particular issues that the study
attempted to work into the following:
Identify and eliminate Major weaknesses of the
organization
Identify and defend against major threats to the
organization
Identify the Major opportunities the organization is
currently facing
Identify and preserve or increase the major strengths of
the organization
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Conclusions
For the basis of the finding, the researcher presents the following
conclusions;
1. IFE : the matrix total average result is 2.74 indicating that
the organization is internally strong
2. EFE : the matrix total average result is 2.73 indicating that
the organization is externally strong
3. SWOT under this matrix upon consolidating all the
suggested strategy, the three strategies are Joint
Venture, Market Penetration, Product Development
4. IE based on the IFE 2.74 and EFE 2.73 this is under the
Quadrant V which suggested Hold and Maintain and
suggest the following strategy; Market Penetration and
Product development.
5. GRAND - the matrix results the recommended strategies
are Market Penetration, Market Development, Product
Development, Horizontal Integration, Divestiture and
Liquidation.
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Strategies from the QSPM Matrix
As a result of QSPM, Product development strategy obtained
the highest score. In table 4.4 of this chapter, market penetration and
product development all got the score of 6, which means that most of
the matrices suggested these two strategies. But only stand out and the
main business strategy that attained highest score in QSPM is Product
development.
Looking into the results of QSPM assessment, there are several
strategies that the company can adopt. On top of it, these strategies
can actually be combined to be able to maximize desired results to be
able to achieve the corporate objectives set. Going into critical
assessment of the companys internal scanning; it is obvious that it has
a lot of improvement that needs to work on particularly to its Marketing.
The brand and product awareness of the consumers will depend on this
aforementioned sector. Thus, it will create greater impact if the
organization will focus on Product Development strategy.
Since the bulk of the work will fall under the consultancy and
support division the management should create a development team
that will focus on the development of the pilot project.
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A second strategy to follow after a successful implementation of
Product Development is Market Penetration.
Recommendations
In view of the findings and conclusions, the researcher offers the
following recommendations;
1. Case Company should embark on a Product Development
program. Foremost in the plans of the company is an adoption of
the Cloud Computing Sy