Assessment of the effectiveness and efficiency of ICT systems within the Adolf Würth GmbH & Co. KG Executive Summary Improving and adapting its information and communication technology is a key focus for many organisations. An effective and efficient application of IT support systems make a contribution to the achievement of objectives and the value enhancement of companies. The present essay will display how effectively and efficiently the company Adolf Würth GmbH & Co. KG uses its information and communication technology (ICT) to achieve objectives. To assess the efficiency and effectiveness of Würth’s use of (ICT), different business models and frameworks are used; the Work Centred Analysis to define existent and missing ICT systems; Porter’s Five Forces analysis and the Balanced Scorecard are used to define opportunities and threats, leading to a SWOT analysis of ICT. In the light of environmental conditions and influences, the results of internal analysis shows that Würth is missing an adequate knowledge management system to store and conserve (a) customer information and preferences and (b) knowledge of employees; Furthermore, Würth does not adequately observe competitors and environmental chang- es. According to the strong orientation towards customers and marketing it is recom- mended to implement both a customer relationship management system and a competi- tor and risk management system. If the recommended systems are implemented, they will excellently fit into the system landscape of the company. Both the BI system and the ERP system possess interfaces, which enable an integration of the recommended systems. Consequently, it is possible to align processes and structures to the customer and monitor the effectiveness and efficiency of customer orientation within the BI sys- tem. Additionally, monitoring environmental changes through the lenses of competitor and risk analysis enables to react at an early stage and to align current strategies to these changes. With the help of an implementation plan it is shown how to implement the recommended ICT systems. Table of Contents Introduction Improving and adapting its information and communication technology is a key focus for many organisations. This is often being driven by a range of factors, such as to im- prove the efficiency of business processes, demands of institutional regulations or the desire to supply new products or services. The degree of efficiency for information and communication technology in companies is steadily increasing. An effective and effi- cient application of IT support systems make a contribution to the achievement of ob- jectives and the value enhancement of companies. The present essay will display how effectively and efficiently the company Adolf Würth GmbH & Co. KG uses its information and communication technology (ICT) to achieve objectives. First, there will be an evaluation of its use of ICT systems in the light of en- vironmental changes and challenges. Second, recommendations will be given of how the company can improve its use of ICT systems to better adjust it to its objectives. Third, an implementation plan of the recommended measures will be provided. Presentation of Adolf Würth GmbH & Co. KG The holding company of the Würth Group was founded in 1945 in Künzelsau (Germa- ny) by Adolf Würth. Since 1954, under the direction of Reinhold Würth, the company has turned from a small company selling screws to an internationally active trading en- terprise which is today´s global market leader in trade in assembly and fastening materi- al (Adolf Würth GmbH & Co. KG 2013a). In the fiscal year 2012, the company gener- ated an annual turnover of 1.4 billion Euros with over 6,000 employees, of whom 3,000 are sales representatives (Adolf Würth GmbH & Co. KG 2013b). Adolf Würth GmbH & Co. KG offers a product line of over 100,000 products. The business model is based on canvassing: 3,000 sales representatives distribute screws, anchor bolts, furniture and building fixtures and tooling equipment to over 500,000 customers from the areas me- chanical art, production and industry (Adolf Würth GmbH & Co. KG 2013a). The com- pany’s objective is to offer premium product quality and premium quality in services (Würth Group 2013). Würth wants to inspire its customers ‘all over the world, with identical quality and the same brand promise’ (Würth Group 2013, n. p.) to ensure that every customer has a Würth product (Würth Group 2011). Achieving objectives by applying classic themes of informatics To achieve its objectives, Würth uses services of technology based on the classic themes of informatics naming and knowing, language and communication, discovery and presentation, recording and remembering as well as systematisation and construc- tion according to Gammack et al (2007). It will be briefly discussed how Würth applies these classical themes within its company. The classical theme naming and knowing deals with defining and labelling things and establishes rules for handling those things efficiently and effectively (Gammack et al 2007). For instance, Würth trades within a spectrum of over 100,000 products and em- ploys over 3,000 salespeople (Adolf Würth GmbH & Co. KG 2013a, Adolf Würth GmbH & Co. KG 2013b). To conduct and to organise the huge amount of products and to handle the quantity of sellers, the company inserted a product as well as a personal management system in which every product and seller gets a numerical code that can be allocated with the divisions, the warehouse location and the accounting systems. The theme language and communication encompasses a broad range of communication including electronic and human communication and language (Gammack et al 2007). Würth has implemented versatile resources of electronic communication. In addition to phone and email, Würth has an intranet with common company-information and the Würthnet which provides business-information and timetables. Würth also uses social media to communicate with its employees and the community. To define and control processes within the company to achieve its objectives, Würth uses a specific modelling language, called ARIS, which requires specific knowledge to understand signs, and symbols being used (Gammack et al 2007). Beside a simple suggestion system the company uses these communication systems to generate ideas and collect knowledge in the company (discovery and representation). The classical theme recording and remembering deals with knowledge and data and how it will be saved and stored, if it has for instance an ongoing value, if it is relevant to continuing business processes and purposes or if it is regulated by law (Gammack et al 2007). To store data and to make the data accessible for future, Würth keeps data such as incoming and outgoing invoices, acceptance of orders and further accountancy data, falling under the German safekeeping period of 10 years, in electronic archiving sys- tems. All business-relevant documents which do not fall under the safekeeping period, regulated by law, but are relevant to continuing business processes are stored in docu- ment management systems. In addition, a backup of all information systems, especially of the enterprise resource planning (ERP) and business intelligence (BI) System is made daily. As the preceding information elucidates, the data and documents are recorded in differ- ent information-systems within the company. According to the classical theme systema- tisation and construction (Gammack et al 2007) documents are detected to date of ac- quisition and business division and put under indices to allow a cue-search. Operational business data, detected in the ERP System, are saved and available due to Online Trans- actional Processing. Aggregated business data in contrast are saved due to Online Ana- lytical Processing and can be requested via Data Mining. Assessment of Würth’s information and communication technologies To evaluate and to assess the efficiency and effectiveness of Würth’s use of information and communication technology (ICT), different business models and frameworks are used. Primarily, the Work Centred Analysis (Alter 1999) is used to define existent and missing ICT systems. In addition to the evaluated strength and weaknesses, Porter’s Five Forces analysis (2008), and the Balanced Scorecard (1996) are used to define op- portunities and threats, which arise from environmental changes and not using infor- mation and communication systems. Work Centred Analysis According to the system theory (Dillerup and Stoi 2011), a company can be defined as a social work system. A social work system is a system in which human resources (em- ployees) perform business processes using input materials, capabilities, technology and information to produce or create products and services for internal and external custom- ers (Dillerup and Stoi 2011, Alter 1999). In this value added processes information and technology systems can both directly and indirectly create value. The work centred analysis is a model used to analyse all elements required to serve customers, especially focusing on information systems and technology (Alter 1999). The framework is helpful to summarise business processes and to determine potential gaps between business pro- cesses and their link to business technology and information systems. The work centred analysis covers three basic elements; customer, products and business processes. The element business processes contains the sub elements major activities, participants as well as information and technology needed to accomplish tasks in a business process (Alter 1999). Würth’s business rationale is, not to wait until the customer contacts the company; in- stead salespeople actively approach customers by frequently visiting them and selling products and services via personal contacts and relationships with the customers. Ac- cording to the business rationale, all business processes and activities are aimed at the customer. To efficiently apply resources in operational sequences and to control business process- es, Würth uses an ERP system, which covers functional areas such as purchasing, ware- housing, controlling, accounting and finance as well as human resource management, sales and product data management (SAP 2013). Additionally, the ERP system, refer- ring to the classical theme of informatics naming and knowing, covers master data of customers, suppliers, employees and products (SAP 2013; see appendix A). To enable improved decisions and to monitor the achievement of objectives, Würth uses a busi- ness intelligence system (BI). In the BI system, reporting is automatized and optimised (Oehler 2004). It extracts, transforms and loads (ETL-process) operational data from the ERP system and the supplier relationship management system (SRM), which Würth uses to handle the huge amount of suppliers. To control its logistics, Würth uses a transport management information system (TMIS, Würth Logistics 2013) to track pack- ages after shipping and to handle effectively and efficiently third party logistics, deliv- ery of stocks and evacuation. According to its business rational, Würth deals with two major distribution channels; e-commerce and direct-marketing. E-commerce is handled via an electronic storefront system (Rainer and Cegielski 2011), which is a website that represents the company’s online store (called WÜKO). It is an electronic catalogue and purchasing system in which customers have access to the range of Würth products, product data sheets and their sales history and baskets. Würth’s online store does not provide possibilities to actively involve the customer by customer reviews, personal recommendations and social plugins (Adolf Würth GmbH & Co. KG 2013c). To sup- port its direct-marketing distribution channel Würth uses its ERP-system to commission customer orders and to monitor the effectiveness and efficiency of salespeople. Howev- er, there is no ICT-system which is used to document personal relationships between salespeople and customers and to record additional information about customers. To summarise the results of the work centred analysis, the company is well set in terms of information and technology systems. The existent ICT systems support the achieve- ment of its business objectives. In addition to the systems described, Würth has several document and knowledge management systems to store and conserve data. However, the weakness which may influence the effectiveness and efficiency of Würth’s company goal achievement is the lack of a system that conserves knowledge of customer prefer- ences and relationships. Currently, the knowledge of customers is only conserved in the mind of salespeople. If salespeople leave the company, for instance, the knowledge will also be lost. The second weakness is its electronic storefront system, which is no more suitable to people and customers being used to social media and customer reviews. The online store does not provide possibilities to actively involve the customer by customer reviews, personal recommendations and social plugins as, for instance Amazon, does. To assess the alignment between ICT systems and Würth’s goal achievement in terms of opportunities and risks, the business environment and environmental changes need to be considered. Porter’s Five Forces Porter’s five forces analysis is a framework to analyse industry structures and to evalu- ate the attractiveness and competitive situation of an industry (Porter 2008). The devel- opment of the competitive situation indicates whether the industry enables a company to develop profitably and successfully meet future challenges. To determine the attractive- ness of an industry, the factors supplier, buyer, new entrants, substitutes and rivalry are consulted (Porter 2008, see appendix C for detailed results of the analysis). Würth operates primarily in the German retail sector. In Germany, competition in the retail sector is highly concentrated; about 1% of the companies generate 70% of total revenues (Statista GmbH & Handelsblatt GmbH 2013). Because only low investments are required to enter the industry and no governmental or legal trade barriers are estab- lished, threat of new entrants is very high (Konrad Adenauer Stiftung 2013), especially from emerging markets such as China (Schwiegershausen 2011). The threat of substi- tutes is high, because buyers can adjust the production, for instance, to adhesion tech- nologies to connect product devices (Henkel 2013), which leads to a high bargaining power of buyers. Due to the high concentration of competition, as measured by total revenues generation (Statista GmbH & Handelsblatt GmbH 2013), and due to high con- tract volumes of buyers as well as high standardisation and mass production, leading to high switching costs of production (Dubé, Hitch and Rossi 2006), suppliers have a low bargaining power. The analysis shows that the retail sector is moderately attractive; consequently, the industry growth is also moderate. In 2012 the industry recorded a growth rate of 2.3 per cent and is predicted to grow moderately by 3.7 per cent until 2016 (Statista GmbH & Handelsblatt GmbH 2013). To develop profitably and success- fully meet future challenges, Würth needs to take the threats of new entrants and the high bargaining power of buyers into consideration. Referring to ICT systems, to moni- tor market dynamics and structural changes such as new entrants and their products as well as customer preferences enables the company to forecast trends and structural changes. Balanced Scorecard The balanced scorecard is a performance measurement model to improve the strategic direction of a company. It allows assessing the achievement of objectives on the basis of multidimensional business ratios for different perspectives (Kaplan and Norton 1996). The used business ratios provide information about the past, the present and the future of a company. The perspectives are derived from the company’s strategy and vision (Kaplan and Norton 1996). To evaluate and to assess the efficiency and effectiveness of Würth’s use of information and communication technology, the balanced scorecard is executed in a modified form. Risks and weaknesses in terms of problems are deduced from the balanced scorecards perspectives. Then opportunities are deduced from the use of information and communication technologies to adequately encounter these prob- lems. The analysis (see appendix B for further details and information) shows that the suc- cessful goal achievement of Würth is addicted to environmental conditions. Würth’s cost efficiency is dependent of labour costs and commodity prices, for instance steel and petrol prices (Moyo 2013, Weinberg 2013). To handle these problems, additional cost- efficient distribution channels are required. One possibility is, to restructure direct sales to online sales processes to decrease labour cost and to meet changing customer pur- chase preferences towards e-commerce (Buchenau 2013). Referring to Porter’s five forces analysis, a critical success factor is the adequate cus- tomer advisory service due to the high bargaining power of buyers. It is necessary to monitor customer needs and preferences and to record and conserve customer infor- mation to improve customer relationships and to increase customer loyalty. Consequent- ly, due to customer loyalty and brand awareness the power of new entrants is weakened. However, the analysis of competition and new entrants is recommended to recognise trends, customer preferences and plagiarism, which is in this industry indeed an issue (Schwiegershausen 2011). SWOT analysis summary In the light of environmental conditions and influences, the results of internal analysis are confirmed. The company is missing an adequate knowledge management system to store and conserve (a) customer information and preferences and (b) knowledge of em- ployees, especially of salespeople who are directly working with customers. Referring to the environmental threat, the over aging of the German population (Steven 2011), it is essential to conserve existing knowledge, which can be described as the capabilities, information and data being used to solve problems and tasks within a company (Maier 2007). The strength and competitive sustainable advantage of Würth is its quality of having close relationships to customers, but the personnel-intensive distribution channel canvassing incurs high costs for the company (Adolf Würth GmbH & Co. KG 2013a, Buchenau 2013). Additionally, consumer preferences, even in the business to business market, change towards e-commerce and social media (n-tv 2013). However, as already discussed, the existent online store is out-dated. Furthermore, the analysis shows that Würth does not adequately observe competitors, although possible trends could be discovered and risks could be evaluated. The current Euro crisis (Handelsblatt 2013) and the change in German societal and governmental behaviour towards sustainability (Buehler et al 2011) are risks and challenges concern- ing sustainable growth. Consequently, the lack of a risk management to monitor gov- ernmental and societal risks is announced. Recommendation According to the strong orientation towards customer and marketing it is recommended to implement a customer relationship management (CRM) system to systematically form customer relationship processes and to consistently align the company with its customers (Schnauffer and Jung 2004). The objective is to keep records of information which is explicitly attributed to the customers. CRM allows the analysis of the custom- ers purchase behaviour, to improve customer satisfaction and to increase purchase fre- quency and customer loyalty (Schnauffer and Jung 2004). Furthermore, CRM provides early warnings of opportunities and risk in changes of customer behaviour. The ad- vantage for implementing a CRM system is that all customer relevant data and infor- mation are stored in one system, thus every employee, for instance customer service representatives or salespeople as sickness cover, have the same information of customer history, preferences and individual details. Consequently, the data and information is conserved and can be further processed. Without any difficulties, it is possible to inte- grate the CRM system into the ERP system to prevent redundancy of data and to share master and variable data (Schnauffer and Jung 2004). Additionally, a CRM system pro- vides web analytics, which is an analytical tool, comparable with Google analytics (Google Analytics 2013), to investigate from where web-visitors are coming, how long they stay and how often and how long they browse on the web pages or in online stores (Haberich 2012). However, it needs to be considered, that data privacy is regulated by German and European law, which may limit the freedom of web analytics. At the same time, it is recommended to adapt the online store, which should provide possibilities to actively involve the customer by customer reviews, personal recommendations and so- cial plugins. Secondly, it is recommended to implement a competitor analysis system. It is not neces- sarily software, but it is a systematic, continuing collection and examination of competi- tor information regarding products, market and industry development, patents, innova- tive technologies and customer expectations (Michaeli 2006). A competitor analysis system, also known as competitive intelligence (CI), enables the company to align cor- porate and competition strategies to changing competition structures or environmental changes. The objective is to gain competitive sustainable advantages within an aggres- sive industry. Research data and analysis results can be integrated in the BI system to generate reports and to integrate the competitor analysis into the corporate management system (Michaeli 2006). In addition to the competitive intelligence system, it is recommended to implement a risk management (RM) system. As well as the CI system, the RM system is not neces- sarily software, but rather a continuous improvement process. According to the plan-do- check-act cycle (Deming 1982) planning, implementation, controlling and improvement occur consecutively (Königs 2009). The process of RM involves the identification of existing and potential risks by problem and source analyses, assessment of specific risks including the likelihood, priorities and consequences as well as the identification of measures to reduce risks (Königs 2009). Risk management enables the company to ear- ly recognise, for instance, environmental, governmental, financial or societal risks and therefore the analysis allows to better aligning the corporate strategy to changing struc- tures and processes (Dillerup and Stoi 2011, Königs 2009). Research data and analysis results can also be integrated in the BI system to generate reports and to integrate the risk analysis into the corporate management system (Königs 2009, Michaeli 2006). Conclusion If the recommended systems are implemented, they will excellently fit into the system landscape of the company. Both the BI system and the ERP system possess interfaces, which enable an integration of the recommended systems. Consequently, it is possible to align processes and structures to the customer and monitor the effectiveness and effi- ciency of customer orientation within the BI system. Additionally, monitoring environ- mental changes through the lenses of competitor and risk analysis enables to react at an early stage and to align current strategies to these changes. Implementation plan The implementation of the recommended systems must be conscientiously executed. To implement a CRM system a five step plan (Schnauffer and Jung 2004) is recommended; first, a blueprint phase to get a general idea about success factors and tripping hazards. It is recommended to evaluate these factors on the basis of best practise examples. The analysis phase is directly attached to the blueprint phase to determine the status quo of customer orientation and investments required for implementation. It is recommended to execute an economic consideration of total costs of ownerships and return on invest- ments and to analyse business processes. Subjected to these analyses, a decision should be made for a software provider. Third, the system must be customised. Data must be filled in as well as settings and user interfaces must be adapted to the company’s exist- ing systems. Before the system goes on line, the CRM must be tested for errors and problems (test phase). In the last phase, the roll-out phase, the system will be launched. Employees need to be introduced and trained to correctly use the system, which is deci- sive for the success of the implementation of the system. Additionally to the five step plan, it is recommended to prepare a detailed cost budget and a project team who is re- sponsible for the implementation. The implementation of the competitive intelligence and risk management system can be executed at the same time and parallel to the implementation of the CRM system. Both the CI and RM system implementation is subdivided into four steps; analysis, testing customizing and rolling out. In the analysis phase, key indicators, management ratios and the way data will be collected and stored must be defined. In the second phase, the ratios and key indicators must be validated, verified and adapted to the performance measurement system of the company. In the following phase, the ratios and key indica- tors must be integrated into the BI system, thus in the roll out phase reporting and moni- toring becomes possible. The last action to be scheduled is the adaption of the online store, which should provide possibilities to actively involve the customer by customer reviews, personal recommen- dations and social plugins. The implementation starts with a blueprint phase to get a general idea about the possibilities of improvement and financial investments required. If the cost budget is determined and the technical capabilities are explored (analysis phase), the online store must be re-engineered and adapted. The adaption should not last longer than one day to avoid lost in sales. Referring to the timeline, at least two years should be calculated to entirely and success- fully implement the CRM system (Schnauffer and Jung 2004) due to high investments and adjustments of business processes. The implementation of CI and RM systems are less time-consuming due to less financial investments. It should be calculated to three, at the utmost six months. Concluding, the following graph illustrates the recommended adjustments of ICT sys- tems in chronological order. Projects CRM Blueprint Analysis phase Customizing Testing Roll out phase Best practise Success factors tripping hazards Status quo of customer orientation economic consideration of investment Data fillling adaption to company's CI Testing of business processes and system components Launching the system Employee training business process analysis decision for a system provider Milestone Milestone CI Analysi Test Customise Roll out RM Online Analysi Test Milestone Milestone Customise Roll out leeway 6 12 18 24 months Graph 1: Gantt chart of ICT implementation (author’s representation). List of references Adolf Würth GmbH & Co. KG 2013a, Unternehmensportrait, viewed 14 February 2013a, . Adolf Würth GmbH & Co. KG 2013b, Kennzahlen zum vorläufigen Jahresabschluss der Adolf Würth Gmbh & Co. KG, viewed 14 February 2013a, < http://www.wuerth.de/web/de/awkg/unternehmen/kennzahlen/kennzahlen.php>. Adolf Würth GmbH & Co. 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Appendix A: Work Centred Analysis Work Centred Analysis Customer Products and Services Internal: Products: employees subsidiaries shareholder (family) External: customer Customers: Customer areas: local tax office - potential customers - mechanical art other stakeholder - industry customers - production key account customers - industry local customers (AW KG 2013a) (Würth Group 2011) (AW KG 2013a) screws, anchor bolts, furniture and building fixtures, tooling equipm. chemistry-technical products, employment protection products (AW KG 2013a) Services: customer services (online and locally) catalog information (online and printed version) return services and technical support web page and social media pages product information service for employment, fire protection & legal building codes Major activities and processes major steps salespeople visit customers salespeople show pattern cards and product catalogues customer identifies desired products salespeople provide product information customer decides what to order salespeople make a note of the order warehouse worker collect the order order gets packed in a box for shipping third party logistics deliver order to the customer Business rationale: Instead of waiting until the customer contacts the company, salespeople frequently visit the customers and sell the products via personal contacts and personal relationships with the customers. Participants information technologies customers suppliers salespeople administration employees management tax authorities community content provider other service provider third party logistics product numbers and information payment inventory file financial accounting salespeople personnel numbers administration personnel numbers Hardware personal computers used by online purchaser personal computers used by employees telephones and mobile phones copying machines and printer packaging systems server Software - supplier numbers and information - customer numbers and information - transport numbers and information - packaging codes - web application created for customer order - competitor product information - system of tracking after shipments - price calculation - documents management system online and offline product catalogue online sales history online access to order status online order tracking system - office system enterprise resource planning system return management system product management system warehouse planning system - online feedback and complaint system - logistic management system - business intelligence system - supplier relationship management system - storefront system (E-Commerce) customer realtionship management system competitor analysis management system risk management system ICT-Gap SAP-System BI-System TMIS-system Storefront System SRM-System Appendix B: Balanced Scorecard Balanced Scorecard Perspectives Problems Role for ICT ( √) yes - (x) no Opportunities Reference Financial perspective - Increase in sales Current euro crisis, especially in Spain and Italy slows increase in sales. Construction business is very seasonable (in Germany) (√) Risk management to monitor sales development referring to governmental and societal risk development Handelsblatt 2013 - Improving cost structure rising commodity prices, especially petrol, steel and copper; additional cost-efficient distribution channels required (√) Restructuring of direct sales processes to online sales processes due to changing customer purchase preferences Buchenau 2013, Moyo 2013, Weinberg 2013 Customer perspective Activly shape customer - service Incresing labour cost of salespeople; rising petrol prices influence effectiveness of customer development; overaging of German society; Information of customers are in the mind of salespeople (not written down) (√) Customer relationship management to monitor customer needs and preferences and to record and conserve customer information to improve customer relationships Moyo 2013, Weinberg 2013, Stevens 2011 - Reduce amount of complaints Complaints lead to dissatisfied customers and negatively influence future sales (√) Complaint management and help desks for customer to improve customer satisfaction while complaints are processed. Andreassen and Lindestad 1998 Internal business perspective - competitive intelligence High threat of new entrants, low market entry barriers, high threat of plagiarism (√) Analysis of competition to recognise trends, customer preferences and plagiarism Schwiegershausen 2006, Chen 1996, Ghoshal and Westney 1991 - decrease returns Returns cause high transportation and re-packaging or disposal costs (√) Knowledge and information of customer business and preferences enables efficient consulting services of salespeople; mispurchases can be avoided Ermisch 2013, n-tv 2013 Innovation and learning perspective - use new media No knowledge and information of user characteristics and behaviour in online stores and on the webpages (√) Knowledge and information about characteristics and behaviour leads to an improvement and modification of web sites and online stores Google analystics 2013 increase the amount of - employee training Unskilled and unmotivated employees negatively affect company success and goal achievement (x) Training and development encourages and motivates employees Stringer 2013 Appendix C: Porter’s Five Forces Porter's Five Forces Drivers Results Comments Reference Rivalry/Competition MODERATE - Industry growth moderate 2012: 2.9% Forecast until 2015: 3.7% Statista GmbH & Handelsblatt GmbH 2013 - Concentration of competition high About 1% of the companies generate 70% of total revenues Statista GmbH & Handelsblatt GmbH 2013 - Exit barriers low Due to less investments needed to entry the industry, low exit barriers; no governmental or legal trade barriers Schwiegershausen 2006 Konrad Adenauer Stiftung 2013 - Product differentiation low less differentiation possibilities but for package design, image and reputation; However, Würth is a leader in quality and image Würth Group 2013 Bargaining power of suppliers LOW - Contract volume low Due to high contract volume of buyers low bargaining power of suppliers Assumption - Degree of standardisation low bulk commodity Assumption - Switching costs high high standardisation and mass production leads to high switching costs of production Dubé, Hitch and Rossi 2006 Bargaining power of buyers HIGH - Switching costs low Low value parts have normally no priority in purchasing; they accept the lowest and best offer Peters 2011 - Degree of information high Due to E-Commerce and online price comparisons buyers are well informed Assumption - Brand identity high Buyers attach importance to the brand and reputation of the company Würth Group 2013 Threat of substitutes HIGH - Switching costs low low, e.g. adhesion technologies serve the same purpose Henkel 2013 - Price/performance ratio high Low value parts require a favourable price/performance ratio, substitutes are innovative and expensive Henkel 2013 - Brand identity high Buyers attach importance to the brand and reputation of the company Würth Group 2013 Threat of new entrants HIGH - Entry barriers low no governmental or legal trade barriers Schwiegershausen 2006 Konrad Adenauer Stiftung 2013 - Capital demand low Commerce requires less investments than, for instance, the production industry Schwiegershausen 2006 - Economies of scale high high Schwiegershausen 2006 Appendix D: SWOT analysis Strengths Opportunities customer contacts, close realtionships to customers marketing orientation market leader (Adolf Würth GmbH & Co. KG 2013a, Müller 2013) quality leader (Adolf Würth GmbH & Co. KG 2013a) high financial resources ( Würth Group 2013a) arranged company future (foundation; Focus Money 2013, Würth Group 2013a) high brand identity and awareness (Siebenbrock 1999) delivery service within 24 hours (Würth Group 2013a) cost efficiency through e-commerce trend recognition through competitor analysis risk management to monitor governmental and societal risks industry growth (Statista GmbH & Handelsblatt GmbH 2013) exploitation of new customer groups customer loyalty and optimised customer relationships through effective relationship management Weaknesses Threats out-dated online store personnel-intensive direct-marketing (Adolf Würth GmbH & Co. KG 2013a, Buchenau 2013) high pressure to perform (Buchenau 2013) dependency on commodity prices car fleet (cause for sustainable criticism) current euro crisis (Handelsblatt 2013) changing consumer preferences towards e-commerce (n-tv 2013) raising commodity prices and labour costs (Weinberg 2013) threat of new entrants (Schwiegershausen 2013) plagiarism of brand products (Schwiegershausen 2013) change in societal and governmental behaviour towards sustainability (Buehler et al 2011) overaging of German society (Stevens 2011)