An application research of Porter’s value chain in information systems

【Abstract】This essay aims to explain how information systems and information processing add value to the different aspects of Herman Millers business by using Porters value chain. In addition， by using Porters five forces model to identify competitive forces that exist for Herman Miller ，the strategies that Herman Miller used to respond to the threats is briefly discussed.

【Key words】Porters value chain； information systems； five forces model

Porters value chain highlights specific activities in the business where competitive strategies can best be applied and where information systems are most likely to have a strategic impact. It includes primary and support activities. According to Porter （Porter，1985） ， the leading U.S. manufacturer of office furniture， Herman Miller， uses information system and process to add value to the different aspects.

In inbound logistics of primary activities， Herman Miller uses a new semi-independent division named SQA to follow Dell Computer's model of building its products to individualized orders. Completion information which includes the final cost and date could be automatically calculated immediately when the order was written. At the meantime， this software ensured that all parts of an order were either in stock or quickly available from Herman Miller's suppliers.

In terms of operation， Herman Miller adopts an innovative three-dimensional design software for displaying and Arranging clients' offices which is known as z-Axis. The system could automatically organize production to make sure all the parts are assembled quickly and completely at the same time， even if they were produced in different locations.

In the perspective of outbound logistics SQA focused on offering small， growing businesses a basic choice of quality furniture using a simplified sale and ordering process where orders would be shipped quickly and reliably. This system could automatically inform a manager to solving the problem arising in any part of delivery to guarantee the fulfillment of the order on time. Z-Axis even checked the accuracy and completeness of the order during the design process so that “when installation occurred， the SQA dealers would not suddenly find that critical parts had not been ordered”.

According to marketing and sales， Herman Miller has a exclusive rights to use the software Z-Axis which could significantly save the time of the whole business process. According to this， Herman Miller's average time to close a deal is shortened from 12 weeks to 12 days. The simple， quick， and affordable- simplicity of service， speed of delivery， and affordability of Z-Axis make the company achieve a powerful competitive advantage which could not be quickly and easily imitate.

In the customer services， the Z-Axis software has the ability to quickly design with the customers， giving a rotating three-dimensional view of the results on the spot， including price and a specific and rapid delivery date to customers. The two examples of the use and value of the Z-Axis are the success of offering Resolve to a fortune 1000 company and a business with TDI （a local engineering firm） which defeat competitor Steelcase and Haworth separately.

The secondary activities support organization to engage in the primary activities.

In the aspects of human resource aspect， Herman Miller sells its various kinds of products globally through a dedicated sales staff and dealer network that has the professional knowledge and experiences .The software which adopting by Herman Miller did not require much training and it was used by Herman Miller's more than 150 dealers across the country at no cost to the dealers. Considering the technology development， prior to Herman Miller's adoption of z-Axis， the entire business process was operated heavily manually， especially the office design and product sales processes. That cost a lot of time and money. The adoption of SQA had made the process simpler， quicker and more efficient for the customers

As Herman Miller uses technology and processes to add value in different aspects， it achieves lots of competitive advantages by lowering producing costs， simplifying the business process， improving accuracy of design and pricing， saving communication ，design and delivery time， maximizing flexibility of service， eliminating repetitive tasks， reducing order errors increasing customers satisfaction and improving relationship with customers.

Porters five forces analysis is a frame work for industry analysis and business strategy development. In the first force which is rivalry amongst existing competitors， Herman Millers major competitors include Steelcase and Haworth， which locate in the same place in western Michigan， and HON Industries， a low-price manufacturer in Iowa.

For the threat of new entrants， to my mind， it is not easy to entry into “system furniture” industries because it need offer a great variety of items and options and it requires lots of capitals to become bigger.

Considering the threats of substitute products of services， the competitors of Herman Miller use a commercial software packages with similar capabilities with Z-Axis which is at a much lower cost. This software can be sold to many companies because it supports the catalogs of many manufacturers， giving dealers flexibility. In addition it enables users to “embellish three-dimensional representations of a design with textures and colors and add potted plants to give the place a more lived-in feel” . This newer software is indeed a big threat of Z-Axis to a certain extent.

The fourth force is bargaining power of customers. In 2001-2002， the company was once hit hard when the sales have been dropping off badly and the products of Herman Miller's were considered as a symbol of excess spending by the customers.

In addition， the problems arising in online sales are also result from this force. The performance of customer created a serious problem with Herman Miller dealers.

In bargaining power of suppliers， being the lone supporter of z-Axis cost the company several million dollars per year . The high expenses for its Z- Axis resulted in cost problems and was considered should be cut back.

In order to respond the threats， Herman Miller took a lot of advantages of information systems to create new products and services that are customized and personalized to fit the precise specifications of individual customers， enable a specific market focus and tighten linkages with suppliers and develop intimacy with customers.

According to product differentiation， Herman Miller had exerted itself to achieve quality innovative designs. For instance， it was the first company to develop and produce “open office” panel systems. The product innovation made the company to be famous as a leader of manufacturer of office furniture.

Considering focusing on market niche， the company focuses on contracts to furnish whole office rather than the sale of individual pieces or small groups of furniture which could be used to design and furniture a whole new office spaces to their customers.

In terms of strengthening customer and supplier intimacy， Herman Miller has semi-exclusive relationships with its dealers. Miller dealers are forbidden from selling products of Steelcase or Haworth， although these dealers may represent smaller manufacturers. The company also uses an Web site for its bigger customers called eZConnect which go directly to the dealer network. Further more， Herman Miller gave its dealers the opportunity to adopt a common set of business applications， enabling them to “replace their large varieties of financial management， software management， and contact management with unified systems， thus helping the contract furniture businesses of Herman Miller dealers” .

References：

[1]Gonsalves A.“Simplifying Product Customization，” InformationWeek.com，December 24，2001.

[2]Herman Miller：Information Systems at the Crossroads viewed 22/08/2008.http：//wps.prenhall.com/bp_laudon_essbus_7/48/12301/3149210.cw/index.html

[3]David F.Carr，“Herman Miller Reassembles，” Baseline， January 17，2003.

[4]David F.Carr “Herman Miller's Conflicted Dealers，” Baseline， January 17，2003.

[5]David Carr，“Gotcha！ Creating Effective Visual Sales Tools，” Baseline，January 1，200.

[6]Laudon，K.C.and Laudon，J.P.（2007），“Achieving competitive advantage with information system”，Essentials of Business Information System 7th，Upper Saddle River，New Jersey：Prentice Hall，pp.74-105

[7]Mel Duvall，“Look What Three-Dimensional Design Software Is Cooking，” Baseline，January 1，2003.

[8]Regina K，“Processes：Herman Miller Case Dissection，” Baseline，January 28，2003.

[9]Porter，Michael E，（1985）.“Competitive Advantage”.The Free Press.New York.

作者簡介：黃珊（1984-），女，漢族，陜西勉縣人，澳大利亞悉尼大學會計學碩士畢業，講師，研究方向：商務英語教學、教育經濟。