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The Importance of Knowledge Management to Organizations

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Martime is a Mexican headquartered trading firm that sources goods (from its own factories as well as third party suppliers) primarily in Greater China and Southeast Asia and sells finished goods to mid-level retailers in North America, Australasia and Europe. As a value-adding intermediary, it has established a highly profitable niche for itself. Recently, it has successfully negotiated a Vendor Managed Inventory (VMI) contract with Szekeli Associates (SA), a Hungarian conglomerate with interests in department stores in Central Europe. The VMI contract, which took three years to negotiate, with substantial involvement from lawyers and auditors, applies to sixty lines of goods. As it negotiated the VMI contract with SA, so Merlin developed considerable knowledge about VMI and negotiations with European retailers. The CKO of Merlin has recognised that this knowledge is a valuable asset that should be leveraged appropriately so as to generate additional future revenue for Merlin. Indeed, Martime is currently approaching three more potential VMI clients - in Argentina, Brazil and Venezuela, as it seeks to open up the South American market. The teams for these three VMI projects have been established, but the CKO hopes to be able to shorten the time needed to set up the contracts. Therefore, he plans to encourage those employees who were involved in the original VMI contract with SA to share their knowledge with the members of the three new project teams.

A) Why is Knowledge Management so important for firms like Martime?

B) Do you think that the Martime employees who worked on the first VMI contract for three years will be willing to share their knowledge with the members of the three new teams? If yes, why; if no, why not?

C) Assume that you are the CKO (Chief Knowledge Officer) for Merlin. You need to position this new knowledge sharing initiative very carefully in the organization. What approach(es) would you take in order to maximize the likelihood of success?

D) Assume that in order to systematize the knowledge sharing process, you have implemented a simple Knowledge Management System which includes an online Discussion Forum where team members can post new knowledge items, ask and answer questions, search for company documents, etc.
i) What would be the most effective way of measuring the success of this Discussion Forum? Please identify at least three measurements that you believe would be critical to an understanding of the impact (if any) of the system.
ii) How could use of the Discussion Forum be incorporated into annual appraisals of employees?

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A) Why is Knowledge Management so important for firms like Martime?

Knowledge management (KM) is the way an organization creates and shares knowledge and how it uses that knowledge for the further advancement of the organization both technologically and organizationally. In order to remain competitive, it is very important that organizations build upon existing knowledge and create new knowledge that will allow them to advance exponentially. Consequently, KM entails the following components (http://www2.sims.berkeley.edu/courses/is213/s99/Projects/P9/web_site/about_km.html):

? Generating new knowledge
? Accessing valuable knowledge from outside sources
? Using accessible knowledge in decision making
? Embedding knowledge in processes, products, and/or services
? Representing knowledge in documents, databases, and software
? Facilitating knowledge growth through culture and incentives
? Transferring existing knowledge into other parts of the organization
? Measuring the value of knowledge assets and/or impact of knowledge management

B) Do you think that the Martime employees who worked on the first VMI contract for three ...

Solution Summary

How knowledge management affects the development of organizations.

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Business Strategy Formulation and Implementation

In your own words and analysis of business, please reply to following non-graded questions. Thank you.

What are lessons learned in the case study (below) relative to the importance and effectiveness of environmental scanning?

As a result of this case study, what concepts and analytic tools will one be able to use in the development of a strategic plan (i.e., how does one expect to apply what was learned)?

What do the results of the case study reveal about the challenges facing strategic planners?

Case Study
Thinking Strategically

Identifying the factors that characterize a company's strategic situation is the basis for the strategy process. These factors can be classified as SWOT (strengths, weaknesses, opportunities, and threats). Analyzing these factors using various tools enables a manager to formulate strategies more effectively.

Strategy, in business is the combination of foresight, planning, and decision-making that prepares an enterprise to achieve long-term goals and manage the consequences of contemporary decisions.

In this case study, one determines a long-term objective for a bicycle manufacturing company on the basis of internal and external information. Using the long-term objective as a framework, one can isolate the strengths, weaknesses, opportunities and threats of the company. Then perform strategic analysis using a tool known as the Matched Pair Analysis to identify strategies that enable the company achieve its long-term objective.

Matched pair analysis extends the scope of the conventional SWOT analysis that matches the internal strengths and weaknesses of a company with its external opportunities and threats. Matched pair analysis enables more alternatives, and hence, more strategic alternatives.

Barnum's Pro Sports needs to decide on a long-term objective that defines its growth parameters and target for the next five years. Despite repeated discussions, management has been unable to make a single, unanimous choice from the choices under consideration.

The Chairman is keen that Barnum's becomes the number 1 bicycle specialty retailer in the United States in terms of revenue, by achieving annual revenues of $130 million. Alternatively, the chairman would like the company become the number 1 specialty bicycle retailer in the United States in terms of the number of stores, by increasing the number of stores to 50.

The CEO wants profitability, rather than competitive position, to be the yardstick. He wants Barnum's to improve profitability from the current 28 percent to an industry-leading 38 percent. Alternatively, he wants Barnum's to become the lowest-cost producer of mountain bikes in the United States by reducing manufacturing costs per bikes to under $100.

The first task is to recommend a long-term objective. However, in order to do that, one needs to start by assembling critical internal and external information. The internal information is readily available, however, external information comes with a price tag.

Considering the advice of Ken Shrathum, Strategy Consultant: he is a stickler for the best information that money can purchase. His selections are ideally to be the U.S. Specialty Bicycle Consumers Study for its statistical significance and the U.S. Bicycle Retailing-Industry Analysis for its level of detail.

Since working with a budget of $15,000 and five options to consider, the U.S. Specialty Bicycle Consumers Study and the National Specialty Bicycles Retailing Industry Report are selected for trends analysis, statistical data, and information specific to specialty bicycle retailers. This information should hold one in good stead while deciding the long-term objective.

The U.S. Specialty Bicycle Consumers Study and National Specialty Bicycles Retailing Industry Report were selected based on the strategy consultant's advice with a total cost of $14, 590 based on advice from Ken Shrathum, the Strategy Consultant. The information package seems to be the most optimum utilization of the budget as well.

Having assembled the information required to decide the long-term objective, there are four long-term objectives under consideration. Based on advice from Ken Shrathum, the Strategy Consultant, the long-term objective selected was "To become the No. 1 specialty bicycle retailer in the United States in terms of revenues (target $130 million). The objective selected seems to be the most suited to the internal situation and the external environment of Barnum's. The information package compiled seems to have aided in decision-making. Nevertheless, the more optimum information package is likely to added greater focus to one's decision-making.

S W O and T are the internal strengths and weaknesses of a company and the environmental opportunities and threats facing the company. Identifying these factors is key to performing the SWOT analysis.

Further on, one will expand the scope of SWOT analysis by performing the Matched Pair Analysis for Barnum's, as this may generate more strategic alternatives than a conventional SWOT analysis. The next task is to identify the three key SWO and T factors, which can be derived from the purchased reports and the internal information.

The strengths identified are cash position, store mountain bike brand 'Anti-Gravity' sold exclusively through Barnum's and in-store advisory and service network.
Weaknesses are low retail presence in areas where demand is growing, brand image as a male-oriented' retailer and low brand recall among 12-24 years age group (extreme sports market; juvenile bicycles).

Opportunities identified include market for women consumers, extreme sports market (juvenile bikes segment) and government spending on physical education programs at $60 billion, and policy on 'bicycle-friendly' public spaces.
The threats are low-cost imports from Asia turning bicycles into a commodity, maturing of the mountain bikes segment and low interest among Generation Y for bicycling, and saturation among 'Baby Boomers' - the core consumer segment.

Matched Pair Analysis expands the scope of conventional SWOT analysis by enabling 7 more matches between SWO and T than the latter. Matching pairs from the SWOT analysis enables the identification of optimum strategies.

Although there is no prescribed order while performing the matches, Ken Shrathum, Strategy Consultant, has the following suggestion:

Perform the conventional SWOT matches such as S/O, S/T, W/O and W/T
Then, do the O/T and S/W matches
Finally, the S/O/T, O/S/W, T/S/W, and S/W/O/T matches

Of the strategic choices arising from the various matches, strategies need to be identified that will enable Barnum's to achieve its long-term vision of becoming the No. 1 specialty bicycle retailer in the United States in terms of revenue in the next five years.

Based on conducting matched Pair Analysis, the Strategic Alternatives discovered consist of shifting focus from Baby Boomers to women consumers, improve brand recall among women consumers, create a range of bikes appealing to women consumers, increase women sales staff in advisory roles and sell Anti-Gravity brand bikes through other specialty bicycle retailers as well.

Strategy is re-emerging as the new wave in corporate planning to secure growth, profitability, and competitive advantage. Organizations committed to thinking strategically sharpen their ability to leverage change to their advantage.

The outcome of strategic planning is no longer a hard-bound, occasionally referenced, strategic plan. Strategic Thinking is, instead, a readiness for action-based on market realities, organizational competencies, and brand equities. It is supported by long-range objectives, strategic flexibility, and a need to stay ahead of change.

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