Analysis Of Pirelli's Drive Toward A Global Strategy

Table of Contents

Analysis of Pirelli's Drive Toward a Global Strategy 2

Systems Development 4

Range of Methods Available 4

The Systems Development Life Cycle 5

Issues raised by the case study 8

Evaluation of the effectiveness of the Information System for its Users 9

Control 9

Security 9

Health and safety 10

Conclusion 11

Appendices

Appendix A 12

Appendix B 16

Bibliography 20

Analysis of Pirelli's Drive Toward a Global Strategy

Arrigo Andreoni, Pirelli's corporate director of information, believes that in order to keep up with the erratic nature of the global economy Pirelli's worldwide Information Technology (IT) infrastructure needs to be redesigned and standardized. The Pirelli group initially had not incorporated a global IT infrastructure hence they had not established international standards. The information systems within individual units were developed locally and operated independent of each other. Consequently this decentralization and lack of integration made data sharing across national borders difficult, tainting effective management and strategic decision-making.

This inefficient IT infrastructure may be the reason Pirelli has suffered a dynamic reduction in revenue, other influences may be the consistent rise of competition and the introduction of new technologies (See Appendix A.1). As a result, managements goals are returning the company to its accustomed level of profitability, their objectives; focus on core products, cut costs, improve competitiveness by developing new technologies and improving response to customer demands (See Appendix A.2).

The IT reform is to support the Information Systems at all levels of the company and to allow sufficient information flows among all units regardless of location so corporate management will have immediate access to the information they need to carry out their executive planning and management functions (See Appendix A.3) i.e. Pirelli seeks to promote a multinational strategy, whereby the headquarters in Milan, Italy would act as the central home base that concentrates on financial management and overall control while there would be decentralization of Production, Sales and Marketing operations to the units in the other countries.

To develop this fully-fledged networked a UNIX server would be used to link each unit in each country to the headquarters in Milan. The use of this server should allow the rapid flow of information from one location to the next with a clear connectivity. Pirelli has to take into account the high costs and low quality of European inter-country communication, which leads to poor communication between sites. Pirelli also has to take into account that European standard for networking and EDI (Electronic Data Interchange) are very industrial and country specific i.e. banks in Europe use the SWIFT protocol for international fund transfers, whereas the United States use the ANSI standard for EDI. The systems in both locations will be incompatible and hence weak exchange of information. This therefore will not conform to Pirelli's corporate strategy.

To facilitate a standardized infrastructure in which all units would be integrated, SAP's R/3, a client-server-based Enterprise Resource Planning system that includes integrated modules for most business functions would be the projects centerpiece. Andreoni decided that this software would be best effective in responding to the company's corporate strategy. By introducing SAP R/3 in the various countries, the company moves closer to achieving corporate objectives due to the eventual availability of information from all its locations worldwide.

Systems Development

Range of Methods Available

To satisfactorily develop Pirelli's global network Andreoni is responsible for using his expertise to decide on the most appropriate method of development. In doing so, the systems development should undergo a more structured and precise formation.

In each of Pirelli's local units, the country relied on outsourcing to handle both the new and old systems. Outsourcing is whereby Pirelli hired an outside organization that specializes in IT to undertake the project whilst Andreoni, who comprehends the necessities of the new system, would portray his IS plans and ideas and negotiate with the performing vendors who would then apply them to the project.

Another methodology used is External Acquisition of Software i.e. Off-the-shelf software with a high quality and high probability of fulfilling Pirelli's business needs would be selected as the basis of the system. The external acquisition system selected was SAP R/3, a client-server based Enterprise Resource Planning system with integrated modules for Production, Factory Automation, Finance, Sales, etc, is recognised for providing collaborative business solutions. It would allow employees, customers, and business partners to work together anywhere and anytime, hence fulfilling an important aspect of the strategy i.e. globalization. It is also open and flexible to upgrades by supporting databases, applications and operating systems and almost all hardware.

Finally, the effectiveness of prototyping was applied (See Appendix B.1). Effectiveness? Prototyping allows for a feel of the system even before it is completed. Employees would be given the opportunity to clarify their information needs as they review iterations of the new systems, as a result they would become familiar with the system while being trained by the outsourcing consultants. Consequently since user interaction is particularly important managers will quickly witness the impact of the system on their prime resource (employees) and would also be able to determine whether a full implementation could improve business operations.

The Systems Development Life Cycle

Systems Investigation

This includes the feasibility study and the technical, economical and behavioral feasibility of the system. Would this system improve Pirelli's growth? Would the implementation