Case study sap establishing a research center over china Essay

Recommendations Content Competitors SAP overview Benchmarks Products and Services chinawares package industry Porters diamond model explains how warms can put on competitive advantage on international grocery store places and thus become exporters of their goods and services collect Conditions Government policies 1972 1978 SAP Founded from IBM employees in Germany SAP turns 10 providing service to 250 companies in Germany, Austria, and Switzerland 1982 Opens international subsidiaries in Denmark, Sweden, Italy, and the US Customer milest wiz Dow Chemicals becomes SAPs 1,000th node SAP International Expansion into Switzerland 1984 1988 1989 SAP (International) AG in Switzerland controls 12 international subsidiaries in Canada, Singapore, Australia, and other countries.33% of its tax revenue is spent for R&D SAP is named Company of the Year Marketing in the Chinese market with presentations in Beijing, snatch, and Tianjin. The IBM corporation, a longstanding SAP partner, is n ow using SAP R/3 to have sex its global business processes. New York Stock Exchange (NYSE) in Q3 Worlds leading supplier of e-business package solutions Third-largest independent software vendor on the planet Company supports its customers with special programs designed to help them emerge from the 2009 economic crisis.Cutbacks, SAP is able to improve its operating margin in spite of the challenging circumstances. Double-digit growth shows that more and more customers areturning to SAPs software innovations.FUTURE INVESTMENTSSAP announces its plans for growth in emerging market economies such as Brazil, India, Russia, and especially chinaware= EUR 2 Billion World leader in enterprise applications in terms of software and software-related service revenue Worlds third largest independent software manufacturer A 40-year history of innovation and growth. More than 183,000 customers in one hundred thirty+ countries. More than 55,765 employees in 130+ countries.Annual revenue (IFRS ) of 14,23 billion = $18,66 billion US dollars (2011) 1994 1998 2000 2003 Early History 1979 Goes public SAP AG Fast Track SAP in Shanghai ninth opening of a development location 2005 2007 2010 2011The SAP HANA platform, enabling them to analyze data in secondsSAP announces its EUR 2.5 billion acquisition of SuccessFactors, the leading provider of cloud applications. SAPs Financial The SAP R/3 system is released for WindowsWorkforce = 24,000 employeesin over 50 countriesRevenues 6.3 billion 23% cast up SAP decision to construct SAP Labs Shanghai Pudong Software Park. 2006 Along with SAP Germany, SAP Austria, SAP Chile,SAP Andina y delCaribe, SAP Mexico, andSAP region Sur winSAP Labs India receives the distinction Recruiting and Staffing Best in Class Software revenue of EUR 1.5 billion best quarter in SAPs history. SAP branches out to clients in Austria and France Wave of the Future Opens subsidiaries China South Africa, Malaysia, Japan, the Czech Republic, Russia, and Mexico 199 2 1996 Strategy, Structure, and Rivalry Related & Supporting Industries Factor Endowments SAP offered competitive salary, interest in local high-potential programs, foreign visits, the opportunity to fetch with global counterparts, and for long-term senior staff, a subsidized car policy.SAP set up programs to build relationships with Chinas top 10 universities in computer science. Staff traveled to local universities to develop and maintain contact with their professors.SAP gentlemans gentleman Resources set up a number of programs to help promote PhD internships at SAP Research.Stanford University three-month summer internship positions an incentive for top Chinese interns Finding talent difficult = 1% of master and PHD graduates with same qualifications as in US or EuropeDifficult recruiting managers from abroad to ChinaCompensation Wars for local talentExpatriates recruited in addition very expensiveDifficult to retain staff cod to high opportunities=problem for project tha t require 3-7 yearsAnnual raises were common up to 15% or more squeeze graduates expected a high level of in the flesh(predicate) engagement Recruiting Challenges Solutions Key decision making for SAP Labs in China Recommendations Support of long-term investment in technology and R&D Tax incentivesReduced 15% corporate income tax150% deduction for R&D expenditures if R&D spending has increased by 10% from the prior year Access to cheap landEstablishing facilities in China eases market accesspremise to sell productsGovernment allows easier access to clientsRelationship building is very authorizedPolitical stability supports long-term investments Some Facts 1.5 million employeesCAGR 29% over past three years20,719 firms in software industry High market potentialonly 45% of companies had adapted ERP systemsDemanding customers due to specifications of Chinese marketRapidly changing and developing marketMarket of the future trends can be identified hereStrong development of general Chi nese economy Limited competition, mostly smaller companies with focus on SMEsSAP is market leader in large enterprise segmentFocus of strategy is to deliver high quality software as a standardized solution with constant improvements and innovation SAPs structure Geocentric firm sets the basis for successful operations in China Homogenous company cultureCollective decision makingall pulling on one string interdependent subsidiaries Partners are available, yet underutilized Huawei became SAPs starting Chinese partner in July 2012 Supporting industry is not as important as in other industries business outcomes are companionship basedonly little up- and downstream activities Infrastructure pileus Resources Knowledge Resources Factor Endowments strong-arm Resources Human Resources Availability of skilled, hard-working, striving, aspiring workers appr. 2.4 million graduates Workforce is comparatively cheap5000 9000 RMB per programmer20,000 30,000 RMB per SAP consultantCompetition fo r skilled university graduates is rough Access to development available, however on a limited basis due to restrictions imposed by the government (such as controlling the internet), Internal knowledge can be built up through switch over with other SAP invests High availability, large in string up of FDI, especially in high technology sector Capital is relatively cheapDifferent sources of financing available Cheap availability of land and office spaces, especially in software parks Other animal(prenominal) resources do not play a big role Software parks support the exchange of knowledge, lead to innovation, low colloquy costs advanced(a) internet connections allow for highspeed communication with sets throughout the world Threats Wage levels rise in China companies already start moving to ASEAN countriesLoss of IP due to violations and copyright infringementsIntercultural problems might become an issueHofstede cultural distance between China and Western countries is very high Language barriersTime zone barriers ecumenical Threats Unfamiliarity HazardIncorrect market assessment Do Chinese firms really want to have standardized software Inadequate knowledge of artlesss norms, values, culture, business conduct Lack of embeddedness in local networks (suppliers, customers, governments) Relational HazardsCosts within the organization caused by geographic distance and limited flow of information Discrimination HazardsDifferential treatment of SAP by government, customers, employees Liability of Foreignness Transnationality Index Why Shanghai? Why SAP Labs in China? Why locate in a Software Park? Recruiting Decisions SAP Labs China SAP chose the Integrated R&D Network Approach to manage its worldwide R&D sites successfully R&D networks should follow two principlesSubsidiarity whatever can be managed by a alter unit should not be taken care of in the centerMoving centers of gravity decentralized units take over projects if they are better in doing them than ot hers Create a good working atmosphere Care for employees familiesAssign interesting & challenging projectsGive responsibilities to inquiryersConduct intercultural trainingsOffer attractive compensation packages part with researchers to focus on research administrative work should be minimized Offer trainings and exchange with other R&D institutions Attract top quick-witted and highly skilled graduates and experienced researchers Maintain tight contacts to local universitiesProvide support for workers who move to R&D site Choose renowned local researcher with international experiences as a lab leader technological gatekeeper Include local managers with multicultural experiences to act as cultural mediators assuage integration through mentors One of the key success factors is managing humans hiring and retaining talents accounts largely for the successExperienced managers and experts have to be transferred to new R&D site to share process knowledge, routines and culture which wi ll improve the quality of the work and will make the R&D site an attractive place to work at. Attracting talented employees sets the cornerstone for successful R&D outcomes contacts to universities are extremely valuable Recruitment Retention By holding turnover rates low, knowledge will be kept in the company and has the potential to multiply Each R&D site is on the same level R&D sites are closely interconnected by means of flexible and varied coordination mechanisms Each R&D site specializes in a occurrence field of research development of competence centers Multi-dimensional coordination & information is necessary+ Coupling of specialization and synergy effects+ Global before local efficiency+ organizational learning across many locations+ Exploitation and refining of local strengths High coordination costs Complex institutional rules & decision processes Key Characteristics 1 Long-term strategical vision for R&D site should be set Clear assignment of tasks and responsibili ties for siteOutlook for development growth planQuick first successes to strengthen respect and reputation for research work Determine appropriate size of R&D site for each development stage thrift to business units Cooperation with universities and local research institutes to get fast access to new knowledge and developments Attracting new employees by close ties with universitiesGetting access to informal networks to gain insight information and knowledge Searching contact to companies to be close to the market/customers Regular visits by top managers should underline importance of new R&D site Promote research outcomesNew site should be considered to be equal among other R&D locations Positioning as high-end research organization, which increases motivation and attractiveness for new employees Top management support is crucial to success of R&D site Appropriate resource allocation in terms of money, time, and people needs to be guaranteed Senior management has to be an advocat e of new R&D siteIncentives for managers should include components based on success of R&D site Besides managing employees, several other key areas including attention for R&D site and sponsorship have to be tackled Top management team commitment, support and involvement Steering committee representation of relevant partiesLed by managers with technical expertise and in-depth organizational knowledge direction and monitoring of R&D sites Virtual teams are the key success factor for successful team work Establish processes & infrastructure for efficient communication Allow for visits by granting travel budgets Create a strong corporate cultureEncourage taking responsibility, initiative and self-leadership 360-degree feedback Transfer of experts & managers who spread routines, culture and processes Cooperation & exchange between competence centersKnow-how and technologies need to be transferred and easily accessible throughout the organization Cross-functional and cross-dimensional co mmunication has to be ensured over different channels, such as Visits, personal meetings, conferences, employee exchanges & trainings set budget for traveling & exchangeIntranet To prevent the not-invented-here syndromeCentral staff department should support decentralized units Alignment of corporate strategy and R&D strategy Clear allocation of research focus to prevent duplication competence centers should have a clear focus, should set research agendas Processes & Organization leadership & Collaboration Strategy To successfully manage the integrated R&D network, SAP has to set the right course Attention for R&D site Strategy Cooperation Sponsorship The measures serve to increase identification, internal transfer and absorptive potentials Location matters Firms need to seek resources (esp. advanced)