There are many ways that customer relationship management (CRM) can help gain competitive advantage for a firm. List three and explain or provide examples about how each one helps gain or maintains competitive advantage.
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Customer relationship management (CRM) and related applications help companies to establish positive relationships with clients and earn a higher volume of sales. Thus, there are many ways in which CRM provides a competitive advantage. First of all, CRM systems and applications can help to analyze customer behaviors, interests, and demographics. This provides the information necessary for creating target customer profiles, which are often used in marketing campaigns. Customer profiles help to create more focused and effective advertisements, which can attract new customers, thus achieving a competitive advantage.
Secondly, CRM can help to build and maintain positive relationships with existing customers. For example, it can involve systems of customer support or similar services establishing two-way communication between the customers and the business (Trainor, Andzulis, Rapp & Agnihotri, 2014). By improving relationships with current customers, companies enhance customer satisfaction and retention rates, which is also a major source of competitive advantage. High customer satisfaction and retention mean a continuous increase in sales volume and a higher market share for the company.
Lastly, CRM helps to obtain customer opinions on products and services, thus allowing for successful quality improvement initiatives. For example, if a product does not fulfill the target customer’s needs, the company will learn about this and improve functionality or quality of the product in the future. High product quality, in turn, would allow gaining and maintaining a competitive advantage over firms with lower quality of products or services.
In what types of applications can robots be particularly useful? In what other applications have they failed to meet expectations?
Over the last few years, robots have found a number of successful applications in the industry. For instance, robots are particularly useful with repetitive or manual tasks, such as collecting and transporting products, sticking labels, and grouping different types of products. Robots can also take part in applications designed for data analysis due to their computational capacity. Nevertheless, in social applications where interaction with people is essential, robots failed to meet expectations. This is probably due to the lack of artificial intelligence, as reliance on the written script makes robots inflexible in terms of their responses.
A manager of Madrid Manufacturing, a producer of computer hard drives, is planning to lease a new automated inspection system. The manager believes the new system will be more accurate than the current manual inspection process. The firm has had problems with hard drive defects in the past and the automated system should help catch these defects before the drives are shipped to the final assembly manufacturer. The relevant information follows.
- Current Manual Inspection System
- Annual fixed cost = $45,000
- Inspection variable cost per unit = $15 per unit
- New Automated Inspection System
- Annual fixed cost = $156,000
- Inspection variable cost per unit = $0.55 per unit
Suppose annual demand is 8,000 units. Should the firm lease the new inspection system?
To determine if the firm should lease the new inspection system, it is critical to count the differences in total costs for all 8,000 units. With the current manual inspection system, the total costs are 45,000 + 15*8,000 = 165,000 USD. However, if the company decides to switch to a new system, the costs will be lower: 156,000 + 0.55*8,000 = 160,400 USD. In addition to minor cost-cutting, the company will benefit from improved operations due to early detection of defects. Hence, despite the higher cost of the new system, the company should lease it.
Using the data from problem 3 above, which machine is more scalable? Explain why.
In the present context, scalability refers to the negative relationship between unit cost and sales volume, which allows the company to achieve economies of scale. In other words, if a machine is scalable, an increase in the number of units will lead to a decrease in expenses per unit. Given the information above, the new automated inspection system would be more scalable. The vast part of its price is fixed, and thus increasing the number of units required will result in minor additional costs of 0.55 USD per unit compared to 15 USD per unit in the first option. For instance, at 15,000 units, the old machine will cost the company 45,000+15*15,000=270,000 USD, and the new one will cost 156,000+0.55*15,000=164,250 USD. Thus, the second option will provide significant economies of scale in case the annual demand grows higher.
Trainor, K. J., Andzulis, J. M., Rapp, A., & Agnihotri, R. (2014). Social media technology usage and customer relationship performance: A capabilities-based examination of social CRM. Journal of Business Research, 67(6), 1201-1208.