S.A.P.

Case Study Analysis

Group 9
 SAP
• SAP is an acronym for "System Application &
Products" which creates a common centralized
database for all the applications running in an
organization. The application has been
assembled in such a versatile way that it handles
all the functional department within an
organization.
 Basic Use
• It constantly searches for ways to perform Business
Processes more efficiently, and thus lower its cost
structure.
• Improvement and service of the products, thus
raising their value to the customers.
• E.g., Nestle installed SAP’s ERP software across more
than 150 US food divisions in 2001, and discovered
that each division was paying a different price for the
same flavouring, Vanilla, on the basis on bargaining
power of the consumer.
 SAP Before 1999
• Before 1999, SAP had many weaknesses in its value chain
because it ignored marketing & sales, and outsourced customer
service.

• Its flat structure caused the loss of control over marketing, sale,
installation and relationships with external consultants and its
product-oriented culture made it less responsive to customers.

• The weak value chain did not allow SAP to transfer its
competencies into value to customers and caused
implementation problems.
 SAP After 1999
(mySAP.com)

• Together with the change of strategy, SAP has strengthened

its value chain through series of activities such as building its
own HRM, centralizing marketing & sales.

• Developing consulting capabilities, changing organizational

structure from divisional to matrix structure, building a new
corporate culture based on customer-oriented concept.
 Implementing mySAP
• The Central German Development Group split into 3.
• Team 1: Development of new products and features.
• Team 2: Refining and updating functions in SAP’s
existing products.
• Team 3: Making SAP products easy to install.
• The loose Matrix structure
• One side: World regions, national subsidiaries, sales
people and consultants.
• Other side: Centralized Engineering, Product groups,
Marketing and Training.
 PORTER’S Five Force Model
• Potential Competitor – High. Microsoft is now
focusing on PC software but may become competitor
in ERP software market because it has bought 2 and
it has competencies in a wide range of software
products and resources.

• Power of Buyer – Low because the switching cost is

very high but this power is increasing due to
complementors.
• Power of Supplier – High but decreasing. Before 1999 SAP depended
heavily of consulting companies to market and promote its ERP system
to both local and overseas markets. After 1999, SAP focused more on
developing in-house consultants and has became stronger in consulting
service related to ERP solutions.

• Rivalry – High because competitors like oracle catch up SAP technology

in developing ERP by exploiting weaknesses of SAP software.

• Threat of Complement – High. Sun has provided Java Platform and Free
Linux Platform that enable computers to work with any software
systems.
 SWOT Analysis
• STRENGTHS -
- Superior product innovation and development capabilities.
- Brand name and reputation.
- Loose matrix structure that allows SAP to be very
responsive.
- Cross-functional product development teams.

• WEAKNESSES -
- Cooperation between sub-units.
- Control over external consultants.
• OPPORTUNITIES –
- Large market segments of small and medium-sized firms.
- Large untapped overseas markets.
- Opportunities for consulting and maintenance service
that comes along with ERP solutions.

• THREATS –
- Oracle developed its own ERP that have features that SAP
does not have.
- Competitors exploit weakness of SAP software and offer
products more customized and less expensive.
 CONCLUSION
• SAP is vulnerable and risks losing market shares
due to intense competition from Oracle and
niche players and threats from fast changing
technology and complementors.

• The question is that how SAP uses its

competencies to develop its technology and
create new solutions to offer such large
markets.
 RECOMMENDATIONS
• Build corporate culture to enhance cooperation between subunits and
implement strategies in the entire company.

• Hire qualified people who fit into SAP’s culture; inspire passion, promote
team-work spirit and experience sharing.

• Offer equal career opportunities to all employees through reward systems.

• Have a flat and flexible structure.

• Strategic alliances, network and partnership with external consultants and

other software firms being done carefully.

• Create a learning environment to learn competencies from the partners

while working with them.
THANK YOU