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PFM Devices Complex Project Initiatives Case Solution
PFM Devices has attained success in different regions of the world in a few years of operations. The success can be attributed to the important role that the company’s leadership has played. Currently, Gary Lunde finds himself in a dilemma as the financial position of the company in the current year depicts losses and constraints in the company’s ability to deliver for its customers. The CEO felt a major restructuring was required in the company’s information management in order to meet the requirements of internal and external customers. Therefore, after an assessment was conducted in the three regions that the company operates, it was observed that the company lacked in its software capabilities and data warehousing techniques. Both these technologies are extremely important for PFM Devices in order to survive in the long run in the artificial cartilage industry.
Following questions are answered in this case study solution:
Diagnosis and supporting evidence
PFM Devices Complex Project Initiatives Case Analysis
However, the problem for PFM Devices lies in the fact that it currently does not have sufficient funding to finance both projects at once, that is, customer relationship management (CRM) software and data warehousing too. While both aspects are important to the success of the company, the decision has to be based on whether the company prioritizes increase in sales revenue or reduction in costs. Although costs and revenues contribute and impact the balance sheet and profit and loss account, the company is looking for immediate benefits to turn the situation around in its European region where costs are high and the company is suffering losses.
Diagnosis and supporting evidence
While analyzing the current situation of the company, it must be noticed that different regions in which the company operates, Europe, United States, and Asia, all have different dynamics. Hence, the requirements for CRM software and data warehousing vary based on regional requirements. An important factor in deciding is the distribution model that the company pursues in different parts of the world. For example, in the United States, the company follows the agency model and operates through subsidiaries in Europe. As for Japan, it follows a normal distribution model involving intermediaries. The supporting evidence in the case suggests that the largest losses currently are in Europe while the Asian market, primarily in Japan, is a fast developing market for artificial cartilages.
Due to its international operations, the company is bound to choose different distribution models as it would not be economically viable to operate independently in all regions. Hence, PFM Devices goes for taking on board the local expertise, employing local resources and choosing a distribution model which would ensure efficient distribution in the relevant region. Digging deeper into the situation of the company, it is observed that the subsidiary model currently works best in the European region. Distributors in the United States prefer the agency model as they have done so successfully previously for various companies. Asia, while being a developing market, is currently being explored by the company through a conventional distribution model.
The decision options can be broken down into two broad categories: development and implementation of a customer relationship management (CRM) software, and having a centralized data warehouse which can be utilized by the company’s internal stakeholders. The CRM Software is likely to improve the company’s relationship with its customers and be responsive to their requirements. Ultimately, the CRM software concept is likely to increase revenue for the company.
On the other hand, data warehousing is likely to improve operations and their efficiency. Having a centralized database and data warehousing techniques would result in cost reductions for the company which would ultimately have positive effects on the company’s financial statements, including the Profit and Loss Statement. Both decision options, therefore, are likely to impact the company’s performance in the long run and are strategic decisions.
If other options are to be considered, it would mean that the company has to rethink its distribution models that it employs in the three regions. If Europe region is currently not giving good returns to the company’s operations, does the company has to redesign its distribution network or continue with the subsidiary model? Given the success of the Asian model, the company should start thinking implications and implementation of the model to the European market. The agency model and the intermediary model in Asia both have high costs in terms of commissions and royalties; however, the returns have been higher with more productive agencies and intermediaries.
The decision criteria have to be based on which option has more urgent impact, short run impact or long run impact. While it has been established earlier that both decisions are likely to have long run implications, one option may have a more immediate impact on the company than the other. As the company’s costs are rising and profits falling, the company would like to see immediate benefits to its customers and ultimately reflected on the company’s profit and loss account. Hence, a Customer Relationship Management (CRM) software model would likely impact the customers more directly than data warehousing techniques.
While improved sales revenues and reduction in costs are both vital to the company’s long run success, it has also to been seen that how many stakeholders are being impacted with each decision. While it is apparent that customers would be immediate beneficiaries of the CRM software, a centralized data warehousing would positively impact a large labor force and vendors in different parts of the world. With improved and instant access to data, various suppliers can replenish their stock urgently and serve customers more effectively. At the same time, internal working staff, IT staff and laborers will feel more involved due to the warehousing techniques.
Ultimately, both CRM software and data warehousing will lead to improved customer relations and communications at all levels. This has to serve as the main criterion for the decision as customer came is becoming increasingly important due to the rising competition in the global cartilage industry. The following model may be utilized as the company is short listing its options:
After weighing the decision options and discussing the decision criteria above, it is recommended that the company initially go for installation and implementing the CRM software in all its three regions. The performance of the CRM software can be evaluated after three months of being in place. If the recommended option goes on successfully, the company can go for centralized data warehousing globally in about six months. The data warehousing and cost reduction plans can then be evaluated in another three months.
The recommended option will be easier said than done. The staff, including sales staff, operations, human resources, will all have to be informed and trained in different parts of the world for successful implementation of the software. The dynamics and software requirements may also vary in the different regions of United States, Europe, and Asia based on the complexities and understandings of customers in those countries. At the same time, various vendors may have to be approached to find the best deal as the CRM software option is a costly affair for the company.
The recommendation is also based while keeping the financials in mind. As the case exhibits depict, the CRM software option is likely to lead to an annual increase of 10 % in the company’s revenues. While the marginal costs are also high, the returns seem to be greater. On the other hand, the data warehousing option would initially not lead to cost savings of above 5 %. As has been discussed above, the company also wants to earn quicker gains given its current loss position in Europe region.
The action plan mainly contains details of how the recommended action will be implemented. The company will have to evaluate different vendors and their software solutions. For example, would an Oracle or SAP enterprise be the correct solution, or company has to go for more customized options. PFM Devices and its CEO should go for the request for proposals (RFPs) like it has done so previously for its various operations. Such an approach will help improve accountability and transparency in selecting the best proposal in CRM software implementation.
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