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Effect of ERP System on the Competitive Strategy of the Company

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How ERP Affects Competitive Strategy of a Business?

The need of companies to gain a detailed understanding of their current and future markets propels companies to focus on their business strategy. The well accomplished businesses prove as examples for other businesses to set their strategies.

In order to understand how ERP affects competitive strategy of a business, we need to first understand the factors which provide a competitive advantage to a company.

The focus of any business is typically on the customer. It is all about what is going to make the customer happy. Thus a major factor which drives the competitive strategy of a company is about how the strategy can bring about improvements in the service to the customer, responsiveness to the customer's needs and how well the customer's needs can be met.

In addition to this the next important criterion is how the strategy increases the profitability of the business. It boils down to how much revenue advantage the strategy will eventually provide. These two factors can however prove to be conflicting interests. Hence it is imperative that the company strategy department weighs their options carefully and adopt a strategy which maintains a balance between the two factors.

Micro level market analysis is necessary in order to sustain a competitive advantage of a business. A company generally caters to more than one varied markets in order to sustain a competitive advantage. Therefore the company decision making needs to account for the different markets they cater to. It is not possible to adopt the same strategies for two markets which are different in nature and cater to different markets. The strategies need to be adopted at the process level.

Every business needs to identify their order qualifying and order winning goals efficiently in order to prove competitive in the industry. An order qualifying criteria is one which is absolutely necessary for a business to even bid for an order in the market. This may be a kind of certification, or benchmark that the company needs to comply by. This will make the company eligible to enter the market. One the other hand an order winning advantage is one which draws customers and orders. This is a competitive advantage of the company which helps the company raise its worth and profitability in the industry. These criteria which distinguish one business from the other and provide a competitive advantage are price, delivery reliability or on-time delivery, its delivery speed, the quality of the products delivered, responsiveness to increase in demands, and the range of the products delivered by the business.

ERP systems are so designed that they portray the best standards within the market that they cater to. These are designed to reduce the lead times, ensure the delivery of products on time and at the best possible speeds. The ERP systems help to strategize the improvements in the business functions and the ERP consultants with their industry expertise help to fine tune the system and improve the quality of the deliverables. The best workflows and document management strategies can be employed in order to lubricate the various business functions in the system. This reduces the loss of information and helps increase the productivity and thereby the profitability of the business.

There is however one disadvantage of the process. There are a lot of changes that happen in the system due to establishment of an ERP system. New procedures need to be introduced; employee trainings need to be conducted and sufficient technical and product support needs to be arranged for. This is however unavoidable and help to standardize the business processes. Finally, markets are dynamic and optimizing and strategizing various business functions is an ongoing process. Thus the ERP systems need to be maintained to be aligned with this goal.

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