Business Strategy Introduction • Founded in 1977 by Larry Ellison, Oracle is a relational database management company whose products are used in many Fortune Global 100 companies • It underwent a few name changes before finally settling on Oracle Corporation so as to mirror its successful flagship product, Oracle database • Oracle is publicly traded on the Nasdaq and has grown globally having offices in more than 145 countries with over 80,000 employees worldwide • It provides a number of software solutions for database management systems, database development, application servers, customer relationship management software and more
Vision and Mission • To become the industry leader in computer integrated software systems, specifically in middleware and application systems similar to its leadership in database systems • To provide customers with complete and open solutions to meet their business needs • To continue to innovate and focus on solving the problems of the customers that rely on their technology Industry and Competitive Analysis Oracle’s NAICS 51121, Information Communication Technology (ICT) • Operates in all aspects of ICT (services, manufacturing, and wholesaling) – TOTAL ICT Sector $155. Billion dollar industry in 2008 – Oracle is shown to compete in 212 Strategically Relevant Industries (SRI’s) STRENGTH OF COMPETITION: All key competitors are multi-billion dollar level • • • DRIVING FACTORS: Consumer desire for “Cloud Computing” is driving new innovations in industry RATING: Oracle is rated #1 within industry with the recent acquisition of Sun Microsystems, its one of the top 10 companies listed on NASDAQ. Oracles revenue was $23. B USD in 2009 STRATEGIC POSITION: Oracle has also gradually increased its budget for its research and development department which is important if it wants to continue being an industry leader in the future because of increasing competition from companies such as Google, IBM, and Microsoft FUTURE TRENDS: Oracle is continuing to grow by leaps and bounds, positioning itself to compete head-tohead against IBM as the pre-eminent one-stop IT vendor.
Oracle will be able to reach all the way into the data center when supplying enterprise solutions. On the application infrastructure side of things, ownership of Java and an improved in-house high performance story to tell customers represent tangible gains. The deal also opens the door for Oracle to pursue an aggressive SaaS-enablement strategy. • • Industry and Competitive Analysis 5 Forces Model • Most important is Competitive Pressures Created by the Rivalry among Competing Sellers.
Oracle faces stiff competition from existing competitors in all areas of its businesses. Primary competitors are IBM, Microsoft, SAP, and Google. These are all large companies with strong financial resources and expertise that are very capable of direct competition with Oracle. Oracle benefits from aggressive acquisitions, brand recognition and loyalty as well as a reputation for providing outstanding service and support to its customers. Another key factor is the Threat of New Entrants.
Currently, not all of the competitors Oracle deals with have products in the various areas that Oracle has business in. However, companies like IBM, Microsoft, SAP, and Google are looking to expand their product lines and introduce new ones to further increase rivalry and try and gain market share away from Oracle. Although there are high initial investment costs to enter new markets, and brand loyal towards Oracle is strong, these companies have the resources required to pose a significant hreat. Oracle also benefits from high-switching costs and well established distribution channels • Industry and Competitive Analysis 5 Forces Model Continued • Threats from Competitive Substitute Products: Although Oracle has developed an integrated application suite to merge all aspects of business for its customers. Oracle has created a multitude level of products to compete for SME, and large enterprise customers.
Oracle as an industry leader is price sensitive; it used a cost differential strategy to maintain its brand image. Many smaller businesses may not be willing to pay for Oracle’s technology. There are a number of smaller products which are more specialized and less costly that businesses without the resources to implement such a massive change may be more willing to purchase. The real future threat will be the “Cloud Computing” services market, which is a new innovative service in an ever emerging I. T. market segment.
Bargaining power of customers Oracle has recently standardized pricing for its products and makes its entire line of applications available via its online store. Discounts are given for volume purchases, and government or educational purposes, but other then that there is very little discounting on products that Oracle offers. Oracle is under little influence from bargaining power of customers. Bargaining power of suppliers Due to Oracle aggressive acquisitions Oracle is forming into a self sufficient industrial giant.
By being able to develop, manufactures, market, and distribute its own hardware and software products, it will continue to limit its already low number of suppliers. Oracle has complete control of their product pricing and so are under very little influence from any suppliers they might have. • • Corporate Key Success Factors • • • • • Innovation is the engine of Oracle’s success. Oracle provides a highly scalable, cost efficient sever infrastructure to support growth.
Oracle has been acknowledged as the gold standard for database technology and applications in enterprises throughout the world. The acquisition of Sun gives Oracle a leadership role in the hardware arena. Oracle is the first software company to develop and deploy 100 percent internet-enabled enterprise software across its entire product line: database, business applications, application development, and decision support tools.
The key to enterprise success for Oracle is that it understands and use business applications such as Corporate Performance Management System (CPM). Oracles goal is to become #1 in middleware and #1 in applications, like its database systems. Oracle’s continued planning and evaluation to measure performance increases the value of integration between strategy, planning, and budgeting within it’s core business transaction applications. This integration is a core element for Oracle to continue to be a successful corporation in the future.
Oracle’s Balanced Scoreboard is used to gain corporate acceptance to help leaders define and rapidly implement strategy. The use of the scoreboard provides a predictive outlook on strategic success. Oracle provides reporting and analysis capabilities through analytic data models using applications such as general ledger, customer profitability analysis, public sector budgeting, and several other applications as a means to combine analysis methods. • • • • • Corporate SWOT Analysis
Strengths: • Strong, charismatic, and motivated leader in Larry Ellison • World leader in supplier of software for information management, Offers a Suite Software which integrates all major areas of e-business into one package – one stop shopping; expertise extends from extensive experience and knowledge in the areas of data storage, business applications and e-marketing. • Strong support as it Offers consulting, education and ongoing support services for its customers. • Robust market position; strong sales distribution channels both domestically and internationally, many new acquisitions strengthen industry standing. Inorganic growth strategy; strong balance sheet and financial position with both cash and assets • Non-union employees, little chance of work stoppage, and good overall employee relations Weaknesses: • Ellison has a no holds barred attitude which alienates people and can be too controlling. Raymond Lane, President and COO resigned recently, some speculate because he and Ellison did not get along due to Ellison’s desire to control the company and did not allow Lane to operate freely. • Less control over some international operations than domestic because of reliance on partnerships and alliances instead of direct involvement. Considerable long term debt. Corporate SWOT Analysis Opportunities: • Creating a model to exploit the shift toward “Cloud computing” which where the infrastructure for business is done remotely. Cloud computing also offers more efficient processing, storage, and bandwidth usage by centralizing the equipment and optimizing the software. There are a few potential downsides to the cloud computing model, including concerns over the security of centralized computing as well as concerns over the current limitations of bandwidth. • Long term growth prospects for enterprise software market.
Oracle plans to release the most comprehensive package of business applications available, and has a good chance of gaining significant market share. For everything from accounting , customer management, to web sales. • Emergence of new media access points technology. Ellison had predicted a few years ago that PC’s would be completely obsolete and be replaced by small appliances. Many analysts had their doubts initially but the trend of smart phones, hand held devices have become a strong force within the market. • Oracle is an early leader in the ERP market, and has agreements with Ford, Sears and Chevron.
Enterprise software for communication, integrated systems, and cloud computing. Threats: • Key Competitors are major industrial giants such as IBM, Microsoft and SAP who all have massive resources and large cash positions. • Ellison known for using ‘dirty’ tactics, such as hiring an investigative firm to sort through trash at competitors (such as Microsoft) to find information about them. This can hurt them in the PR war, and cost them in legal fees. Desired Corporate Positioning • • Oracle’s tagline is “Software. Hardware. Complete. ” This accurately represents Oracle’s desired position in the market.
Providing a complete, comprehensive mix of software and hardware solutions Oracle is focusing mainly on the businesses users segment The innovation, cost efficiency, and strong brand reputation of Oracle’s database software make it the market leader in database technology worldwide With Oracle’s acquisition of Sun, Oracle can now lead in the hardware market as well Oracle is employing a Focused Differentiation Strategy It is focusing mainly on the large business segment while differentiating itself in terms of the capabilities and capacity its database systems offer One of its main competitors, Microsoft SQL, aims for a broader market while differentiating itself in terms of ease of use with its other products as well as having the least flaws vis-a-vis its rivals • • • • • • Desired Corporate Positioning
Database Comparison Database system Oracle Strategy Focused Differentiation Differentiation Capacity, flexibility, compatibility, and strong reputation as leader Pioneer in the use of the SQL language Easy integration with other Microsoft applications and least flaws Open source Market Position 1 IBM DB2 Broad Differentiation 2 Microsoft SQL Focused Differentiation 3 MY SQL Focused Low-cost 4 (on this list) Choice of Generic Strategies 1. To align strategic and operational planning and budgeting for strategy execution using a balanced scoreboard tool. Oracle aligns divisional and departmental priorities with overall corporate goals. Oracle adapts quickly to change based on continuous planning and forecasting. Oracle assigns and reallocates resources dynamically through strategic initiative management.
Oracle tries to reduce the level of detail to increase planning efficiency and increase value delivered from the process to provide service continuum and delivery. Oracle’s “Strategy Focused Business Plan” is designed to increase value and accuracy of management information by allowing management to make faster and better decisions on strategic and operational management initiatives. 2. 3. 4. Choice of Generic Strategies The Balanced Score Board • • The balanced scoreboard is used to develop strategy maps for each organizational unit within the business. The scoreboard articulates the company strategy in a series of linked objectives representing the most important priorities for the business.
It also holds the specific measures and targets that represent the expected level of success, the strategic initiatives, as well as action programs necessary to achieve targets outside current capabilities. The board also provides the critical information necessary for divisions and departments to create top down budgets and forecasts to represent actions necessary to execute strategy. • • • • Oracle Adopting to Change The company focuses on strategic priorities to help remove resistance to the allocation of resources. Oracles quarterly rolling forecast is an effective way to reallocate resources faster and improve the accuracy of business predictions.
Oracles demand-driven planning solutions warrant changes in conditions of scoreboard targets and continuous planning due to surveillance of the strategic environment and assessment of the strategic plan. Choice of Generic Strategies • • • Aligning Resources Strategically Oracle collaborates with companies to align IT with business strategy. Oracle’s Management Excellence Framework focuses on better business planning and execution of strategies by monitoring the companies strategic plan and scorecards. Oracle focuses on having the right level of planning detail by selecting people with the right roles and responsibilities to complete company task to increase efficiency. Oracle uses Enterprise Planning and Budgeting applications to collect all financial and non financial forecasts values to feed the companies strategic plan.
Proper selection and management of both the operational and strategic budget initiatives impacts longterm strategic success. Increased Efficiency and Value Oracle’s Premier Support Service Strategies focuses on continuous product enhancements; global support for rapid resolution; advanced support technologies; technology leadership and lifetime support policies. Oracle’s Advanced Customer Services Strategies focuses on advanced support assistance; business critical assistance; maintaining a solution support center; and updating assisted services. Oracle on Demand includes strategies focused on infrastructure management, software management; security management; service level management; IT governance. • • • • • Choice of Business Portfolios Oracle has chosen a broad business portfolio that keeps to its core skill set as a technology company, but now includes entries into many segments of IT. Oracle began life in 1977 with the vision of Larry Ellison to create a Relational Database model. Along with Middleware, this is the core platform and accounts for the largest segment of Oracles Revenue at 72% Oracles applications segment accounts for 9% of revenue. With total revenue of 23. 252 Billion in FY 09 Oracle is one of the largest software companies in the world. Of this 81% comes from software licenses, the remaining 19% from services. Software services include consulting, education and support revenue. • • • • •
Consulting revenue accounted for 3. 247 billion in revenue in FY 09, Education was 349 million. Choice of Business Portfolios • Oracles business portfolio in the IT market is broad. In addition to it’s flagship database product the Middleware industry included Application Serves, BI, Data Integration, Portal Servers, and Identity management. The applications segment includes enterprise applications, content management and collaboration, development tools, enterprise management software, Software as a Service, hosted and on demand services, operation systems (by distribution of Enterprise Linux) and virtualization software. Much of Oracles growth has been through acquisition.
Oracle has acquired to date 55 companies, many being market leaders in their segment such as Hyperion, Siebel, Sun, BEA Weblogic, Peoplesoft and many others. This has allowed Oracle quick entry with proven organizations in growth markets. Oracle has paid both a premium for Hyperion, and a low cost for a struggling Sun to enter the Business Intelligence and Hardware markets. • • • • Financial and Risk Analysis Strategies • Evaluating Industry Attractiveness – Oracles recent acquisitions position it for sustained growth in the coming years. Market leaders who are already embedded in current customer sites or those of competitors enables Oracle to diversify the business units they are present in and help drive enterprise level deals for complete systems rather then simply application licenses.
Evaluating business unity competitive strength – Oracle has acquired both industry leaders, and complementary vendors to their current business offerings. The complementary vendors enable a competitive advantage and an integrated solution when calls to vendors are issued. Checking the competitive advantage potential of cross-business strategic fits – Oracles acquisition strategy enables them to both acquire new technology and skills, as well as leverage known and trusted brands. For example users of Hyperion know they offer a world class Forecasting/Planning tool. Oracle has now entered this market with a strong product, and a 23,000 user strong customer base. • • Financial and Risk Analysis Strategies Check for resource fit – Of the 55 Oracle acquisitions each adds both strategic and financial benefit to the organization and it’s share holders. The applications are complementary to Oracles current offerings, or allow entry into a market Oracle has been trying unsuccessfully to organically enter. Most IT organization are similar in structure enabling efficiencies for both Oracle and the acquired companies using their broad sales force, and economies of scale. Ranking the Performance prospects of BUs and assigning a priority for resource allocation – As Oracles DB platform and Middleware division constitute 72% of revenue, and the Middleware division is typically acquisitions the performance of the BU’s are strong, and growing.
Oracles approach to acquiring market leaders, as well as companies that accent the Oracle tools creates a strong brand which can seamlessly integrate into the Enterprise. Crafting New Strategic Moves to Improve Overall Corporate Performance – Oracle must begin the transfer of trade with the recent Sun acquisition which will take time and focus to ensure a smooth transition. Oracles current approach of aggressive acquisition is adequate as they are increasing revenue (17% in FY 10 Q3) and there are still many steals due to the economic down turn. Oracle is positioning itself strongly for the future. • • Marketing Strategy • • • • Product/Market and Price Oracle’s product offering consists mainly of Enterprise Software Products; particularly Database Management Systems
Oracle’s flagship product is the Oracle Database More than 15,000 products are currently available They also specialize in building tools for database development and systems of middle-tier software, enterprise resource planning software (ERP), customer relationship management software (CRM), and supply chain management (SCM) software. Oracle also offers other branded products such as apparel, toys, and office supplies through its oraclestore. com Products are available in 93 countries worldwide Because Oracle offers many different products its segmentation practices vary by product Oracle’s product prices range from $0. 20 for its Enterprise Management software to $92,000 for its RealTime Decision (RTD) server. Oracle offers rare promotions in its Web store and seemingly only on its support products Oracle also offers a financing option where customers can purchase products now and pay for them over a specific period of time • • • • • • Marketing Strategy • • • Distribution Channels and Communications Oracle employs a large sales force with dedicated toll-free numbers in 36 countries Oracle’s products are available primarily through its Web store and through qualified Value Added Resellers (VARs) worldwide Because Oracle’s products are highly specialized and detailed, they do not focus solely on conventional marketing communications Among the modes of communication used are: – Oracle Magazine and Profit Magazine – Oracle’s YouTube channel – Television commercials – Sports related sponsorships (such as BMW Racing) – Oracle Podcasts – Oracle Books – Oracle Blogs – Social-networking sites such as Face book and Twitter Because of its strong market position, strong brand reputation, and large potential markets, Oracle counts on pull strategy due to the already existing demand for its products • Operations Strategy • Oracle develops, manufactures, markets, distributes and services database, middleware and application software to help organizations to grow their usinesses It also provides software license updates, product support, consulting services, On Demand services and education services Although there is intense competition in the software market, Oracle intends to maintain 1st or 2nd position in each of its product categories and grow revenues faster than its competitors by: – decreasing total cost of ownership of software product by improving integration, reducing installation time, decreasing administrative costs and improving ease of use. (These steps are anticipated to increase the customers’ return on investment which in turn creates more demand for the product and services thus increasing competitive advantage. ) continually improving on quality and software product service levels. In so doing, it is anticipated that customer satisfaction and loyalty will improve which will help the company in achieving its of being number one. • • – Organizational Design Strategy • • Evidenced in Oracle’s Code of Ethics document, it is clear that the corporate culture is one which demands excellence and the highest ethical conduct of its employees The code addresses four areas: Compliance (expectation to obey all applicable laws and regulations); Business Conduct (expectation to operate fairly and ethically); Oracle’s Relationships (expectation to interact fairly and respectfully with everyone); and Enforcement (disciplinary actions for violation of code).
Summary of Core Values = Integrity; Mutual Respect; Teamwork; Communication; Innovation; Customer Satisfaction; Quality; Fairness; Compliance; Ethics The Code sets a standard of conduct expected of all its employees worldwide and has greater expectations for those in senior management Some of the corporate polices/issues discussed in the Code include conflict of interest (obtaining kickbacks, perception of bias, actual or potential conflicts), antitrust or competition laws, ethical practices, boycott policies, export laws, immigration laws, confidentiality provision, human rights issues The Code is strongly worded which sets a serious and important tone for its employees. It is also sufficiently detailed to provide employees ample guidance for their decision making.
The Code emphasizes protection for individuals who report breaches of unethical behaviour even if the breach is requested by management. Such reporting is emphasized throughout the Code. It directs employees to consulting directly with the company’s Legal department on conduct issues for which they are uncertain Oracle also exercises social responsibility indicated by its environmental initiatives as well as its charitable endeavours • • • • • • Conclusion Oracle is an industry giant with a bright future; statistics show that they are doing well even during the current recession. Primarily due to their aggressive and well executed business strategy. QUESTIONS? / COMMENTS