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Benchmarking should not include sensitive data or negative advertising using sensitive data to put down the other company. Confidential information must not be shared without the proper confidentiality contract in place, and confidential information should not be illegally obtained from competitors.
After internal cost disadvantages are found, steps should be made to correct them by revamping the value chain system, moving high cost activities to lower cost areas, implementing cost-saving technology, or simplifying some aspects of the product design. Competitive advantage can be worked into the value chain by utilizing employee knowledge more effectively, coordinating related activities, and building dominating expertise that is essential to customer satisfaction or market success. Competitive strength against competitors must be assessed to determine the overall competitive position of the company, and a new strategy must be based on the company's current position. This strategy should include every issue listed in the industry and competitive analysis.
The first step in conducting a SWOT analysis for CQUAY is to identify the resource strengths and competitive capabilities. One of the strengths was that the Common Ground technology was a new product that many different kinds of companies needed, regardless of the nature of their business. The uses of the technology were not limited to a specific industry. For example, the telecom industry used the technology to determine available network capabilities for a particular service address. Wireless telecom carriers used the technology to determine tax zones and tariffs for telephone calls and services; utility companies used it to ensure valid addresses and postal service formats on bills. Additionally, oil and gas companies used location technology to retrieve public and private data regarding geographic interest, and the marketing industry used it to link demographic, census and lifestyle data to customer service records. Finally, the financial services industry used addresses as a key to create a single view of a customer and even the real estate industry used location technology to buy, sell and rent homes based on location (Ivey Management Services, 2004). In other words, CQUAY's product was marketable across the board to the it departments of all companies in all sectors of business.
The competitive capability of the Common Ground system was good too, because although there were other products on the market, CQUAY had competitive advantage, because the technology included aspects that other products did not. For example, traditional GIS and mapping software focused on engineering users, and was unsuccessful at moving into Web mapping and emerging location-enabled spatially enabled business support systems. CQUAY established competitive advantage by focusing on the spatial information management market and its extension into mobilized applications. In addition, the Common Ground product was compatible with many data quality tools used by companies, such as First Logic and QAS. Thus, these companies did not have to replace an entire system, because of the compatibility were able to save costs. The number of companies using data quality tools was very high - 5,000 to 7,000, that were able to benefit from location technology. The license to these companies to use the Common Ground product was also very high, at an average price of $250,000 per customer (Ivey Management Services, 2004). Therefore, CQUAY was in a very nice position from a competitive advantage standpoint.
Next, the company's resource weaknesses and competitive deficiencies must be identified. These results are then used to determine where the attractiveness of the company's situation ranks, as well as the attractive and unattractive aspects of the company's situation. One of the resource weaknesses of the Common Ground technology was that the operational costs of the technology were very high. For example, in 2004, the total operating expenses of CQUAY was $330,309. This figure included $203,697 for general fees and administration, $17,625 for sales and marketing, and $108,987 for research and development. In 2005 alone the amount for sales and marketing jumped from $17,625 to $165,000, about 9 times the cost of the year before. Research and development expenses also rose from $108,987 in 2004 to $175,000 in 2005. In the predictions of the years to come, the operating expenses continue to jump at extremely high rates. Additionally, revenue appears to drop as well, likely caused by the inflated operating expenses. Increasing operating costs is a very strong resource weakness of CQUAY.
The next step is to identify the company's market opportunities, and to identify external threats to the company's future well-being. All of these steps are then used to improve the company's existing strategy. In 2003, the company attempted to correct weaknesses and deficiencies through a strategy that would prepare the company for its eventual sale. At that time it was agreed that the current market and economic conditions constrained the possible valuation and the likelihood of a near-term acquisition outcome, so instead the company should implement a new strategy. The new strategy consisted of an examination of its value chain, which consisted of looking at all of the costs associated with CQUAY's location technology, such as management, operations, distribution, sales and marketing, customers and services, and research and development. Their financial projections were examined from start to finish of the manufacture and end sale of the location services license. Operating expenses were examined, as well as the cost of revenue such as the cost of services and the data royalties. The new strategy of the company included keeping operational costs to a minimum, minimizing future research and development, securing lead customers, creating a reoccurring revenue stream, and maintaining the company structure so as to compliment a future merger or acquisition.
Competitor Analysis value chain analysis also compares a company's costs to those of a competitor, using such factors as the internal operations, strategy, approaches used for strategy execution, and the underlying economics involved. CQUAY had several competitors, as the location services field was booming at the time the company was founded. One such competitor is NAVTEQ, which also manufactures similar products to CQUAY. One of its products, the PTV Naviguide, provides a range of Internet design, web-site development and systems support services. This product provides a safe, scalable system environment for Toyota's travel portal, including useful services for motorists. NAVTEQ's products also greatly assist the end-customers business. For example, NAVTEQ helped WF Electrical centralize its 21-branch London operation, which involved distributing 25,000 product lines to electricians and builders on site and in store. Within three months the system, with its street-level routing capability, were in live use within the M25, planning daily deliveries from the central distribution centre at Dagenham (NAVTEQ, 2007). In the WF Electrical case, not only are vehicles and driver time being managed more efficiently, but Street Level Routing ensures that the right deliveries are being made to the right place at the right time which has improved customer service. Finally, the benefits reported by WF Electrical consist of mainly more efficient use of driver time and improved customer service.
Another highly competitive product manufactured by NAVTEQ is through a partnership with GeoConcept SA, a company that designs, develops and markets PC-based map programming software and systems. This high performance, user-friendly products target the rapidly growing geographical information systems market, and include companies in the utilities, financial, industry manufacturing, government, telecom, retail, and emergency services industry sectors. In this regard, NAVTEQ is an equal competitor that offers a location services product in many of the same industry sectors as CQUAY does. A main important competitive advantage that NAVTEQ has over CQUAY is that the company sells in many different countries, whereas CQUAY only sells in the United States and Canada. NAVTEQ's market reach stretches to Belgium, India, Italy, Japan, Saudi Arabia, Spain, Switzerland and the United Kingdom. A competitive benefit of CQUAY is that they operate and manufacture in one of the largest countries, the U.S., whereas NAVTEQ does not do any business in the U.S.
The research in this area indicates that NAVTEQ'S success over the last 10 years comes from its partnership with other companies, and its commitment to the three main aims of the company: a policy of continued technological innovation, the desire to make geographical information systems accessible to all (excellent price-performance, user-friendly interface and Internet-enabled), and the will to increase map legibility so as to maximize their value (NAVTEQ, 2007). Their products have attracted prestigious clients and are now available in several languages, unlike CQUAY's Common Ground, which is only available in English. Furrthermore, NAVTEQ has already sold more than 50.000 licenses, and 69% of the equity is held by the founders and well-known investors including Innovacom 2 and La Financiere de Brienne and Galileo (NAVTEQ, 2007). In coming up with their new strategy in 2003, CQUAY did not conduct a full blown analysis of their competitors, other than to take a look at some of the other similar models and the license price that was paid. A good idea would be for the partners to examine how these companies were making money off of their products, which…[continue]
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