Global Information Systems: A Strategic Audit - Essay Example

Global Information Systems: A Strategic Audit Introduction GIS was established, in the year 2002, to distribute a wide range of solutions and products for data protection, backup, and storage and management of digital assets extrusion security. The company began as a storage media distributor and has now grown to become a leading distributor of storage products and solutions. Its focus is assisting corporate customers and resellers in reducing the cost of storage, effectiveness and efficiency and enhancing digital asset security. The company’s list of clients is impressive with industries like banks, pharmaceuticals, transport and logistics, government ministries, education and electronics. The company’s presence in Singapore and Brunei, they are able to service their resellers in Malaysia, Singapore, Brunei, Indonesia and Thailand. Via its strategic and exclusive partnerships, GIS is in a position of delivering the most advanced technology straight from the world’s best companies while offering internet security, data storage products and digital assets security management. This paper aims to discuss GIS’s expansion strategy into global business and the workability of the strategy. In addition, the discussion includes whether the company should be doing things in a different manner to increase its international presence. The Information Technology Business Information technology is large on a global scale. IT has aided to lay the foundation for the propagation of global capitalism. It is the electronic skeleton via which globalization operates, connecting all the performing parts of the global economy (Yilmaz, 2012). The reach and power of all transnational companies depends on IT products from IT companies, with IT corporate leaders being a vital sector within the global capitalists. Information capitalism has created the new economic structure via two methods in the production of knowledge and information. The convergence of computers and telecommunications has enabled a global control and command center for transnational companies, which has built a manufacturing global assembly line. The same IT has established twenty-four hour global financial markets functioning in real time, thus leading to integration of world capitalism. IT, in addition, is thoroughly imbedded in the productive processes and tools of the traditional industrial sector, coupled with entertainment, media, services and consumer products (Yilmaz, 2012). The most vital part about the Information Technology sector is the corporations that manufacture the services and products, which are involved in the creation of the information processing’s global structure, as well as enable industrial and financial organizational changes. Fortune’s 500 listing in the United States lists IT companies as only coming second to the finance sector in profits, although it beats the banks on revenues. The corporations that produce these goods, or have thoroughly integrated them into their process of production tend to act as the core of the new power base of transnational companies. The information technology revolution has made a huge impact on stock markets and capital investments. GIS should expand into Malaysia because of the countries continued economic success, which grew by 7.2% in 2011, compared to a contraction of 1.7% a year earlier (Dorothy & Kayworth, 2012). The countries high level of global integration should also act as an incentive, coupled with its positions as Asia’s fourth most competitive country after Singapore, Hong Kong, and Taiwan. However, the most important factor that should convince GIS to expand into Malaysia is its position as one of the best-networked economies in Asia, ranked only below Singapore, Hong Kong, Taiwan and South Korea. Porters Five Forces Model (PFM) The five forces model created by Michael Porter can be used, in addition to the SWOT analysis, to provide a tool for analysis in the identification of risks and opportunities when they are entering an untapped market in any market or industry (Tsai, 2012). PFM provides for a clear course of action and is not reliant on subjective judgment, as is the case with the SWOT analysis. If the derived actions from the PFM are synchronized with business goals and requirements, it could become a significant driver of business in a competitive environment. The five forces method of analysis is defined in the language of business intelligence as an analysis that aids in the evaluation and management of the long-term attractiveness of a business (Baker, 2010). Its design is aimed at describing the relationship between the five dynamic forces affecting the performance of an industry. These include: the intensity of competitors and rivals, new entrants threatening market share, threat from substitute products, the bargaining powers f the clients, and the supplier’s bargaining power. The PFM model aims at identifying the factors that shape competitive character within an industry. PFM targets an assessment of the structural suitability of the industry under analysis. Finally, the analysis pinpoints the weaknesses and strengths that a corporation might experience and discovers threats or opportunities within the industry (Khosrowpour, 2007). The strength of each of the five forces that affect the chosen industry’s competition needs to be assessed. During the analysis, one should devise a plan of action, which may include using proactive and strategic moves to influence the balance of forces, the positioning of the company to give a good defense against competitive forces, and anticipation of a shift in forces, as well as the [positioning, goals, and actions. The determinants of threat of entry include economy of scale, marketability and brand identity, capital requirements like raw materials, legislation and government policies, absolute cost advantages and access to distribution. Determinants of rivalry include fixed cost of expectations, projected industry growth, brand identity, lack of differentiation and numerous competitors with similar resources and power (Baker, 2010). Determinants of the power of the supplier include forward integration threats, presence of projected and substitute inputs, supplier density, switching effort and costs, and the importance of volume to the suppliers (Palvia et al, 2012). The determinants of substitution threat are switching barriers and costs, relative cost of substitute products, and the buyer’s propensity to substitute. Finally, the determinants of buyer power involve buyer volume, the concentration of buyers, ability of the company to integrate backwards, presence of substitute products in the market, the sensitivity of price including the perceived price value, and decreased profits. Business Level Strategy The core competencies of an organization must be focused on satisfaction of the customer’s preferences or needs to achieve returns that are above average. Business-level strategy is the best way to do this (Schniederjans, 2008). It details the actions taken for the provision of value to clients, in addition, how to gain a competitive advantage via exploiting core competencies in individual, specific service or product markets. Business level strategy concerns itself with the position of a firm in an industry in relation to the five forces of competition and competitors. Customers are the essence or foundation of the business level strategies in an organization. Having knowledge of one’s customers is vital in the obtaining and maintenance of a competitive advantage. The ability to satisfy fully, as well as predict, the customer’s future needs is vital. Therefore, organizations must determine how to utilize capabilities and resources in order to form core competencies, followed by how to use these core competencies to satisfy the needs of the customer via implementing strategies to create value (Schniederjans, 2008). There are four strategies used to aid organizations in the establishment of competitive advantage over its rivals. Organizations could also choose to go head to head across a focused market. The first BLS is cost leadership. Organizations compete for a large client bases based on price (Srinivasan, 2008). The price has its basis on internal efficiency to possess a margin, which aims to sustain an above average return and cost to the client such that the client purchases the product or service. It works best the service or product is standardized the organization can offer the lowest price, and can have acceptable generic goods in the market. Continuous efforts aimed at lowering the cost in relation to the competitor are vital to be a successful leader of cost (Srinivasan, 2008). These could include minimizing sales cost, service and R.D, maintenance of tight control on overhead costs and over-production, and building efficient facilities that are state of the art. A cost leadership strategy helps organizations remain profitable. Competitors are most likely to avoid a price war because the firm with the lowest cost continues to ear profit after the competitors blow away their profits on competition. Powerful clients that make the firm produce services or goods at decreased profits could make an exit from the market instead of earning profits that are below average, which leaves organizations that operate at a low cost in a position of monopoly (Srinivasan, 2008). Clients then lose purchasing power. To obtain a cost advantage, determining and controlling the cost of service or products, and reconfiguration of the value chain as need be, is vital. Risks include tunnel vision, imitation and technology. Another business level strategy is differentiation (Khosrowpour, 2011). The organization could provide value to customers via a unique characteristics and features of a firm’s products instead of lowering the price. This happens via high customer service, high quality features, advanced technological features, management of image and others. The organization can create value by lowering the client’s purchasing power, raising the performance of the client by improving performance, and sustainability via the creation of barriers using perceptions regarding reputation and uniqueness. The differentiation strategy has several risks including loss of value, uniqueness and imitation. Effective differentiators are able to maintain profitability even when the PFM appear to be unattractive. For PFM, rivalry is affected in this strategy since brand loyalty means clients are not as sensitive to increases in price as long as the organization is capable of satisfying the client’s needs. Another force, the suppliers are also affected since differentiators charge premium costs that they can afford in order to absorb increased costs. Finally, for the entrants, loyalty provides a difficult barrier to be overcome, with brand loyalty helping to combat the product’s substitute. Another strategy is focused low cost that organizations not only compete regarding costs but also select a small market segment to provide services or products (Downs & Adrian, 2009). An example is a company, which does business with the United States government. Focused differentiation is another BLS where organizations compete, not only on differentiation but also carve a small market segment, to provide services and goods. This strategy seeks to serve the requirements of a particular segment of clients. The risks involved with using this strategy include the segment becoming of interest to broad market organizations and out-focusing by the competitors. The final BLS is the use of an integrated differentiation or low cost strategy. This strategy could become very popular as competition increases globally. Organizations that utilize this strategy could see an improvement in learning new technologies and skills. Moreover, they will experience adaptability to changes in the environment, and the capability of leveraging effectively the core competencies across product lines and business units, which should enable the organization to produce products with increasingly differentiated features at a much lower cost (Downs & Adrian, 2009). The client thus gets value based on a low price and product features. Organizations electing to use this strategy need to be careful in order not to be stuck in the middle. They must also have the capability to reduce costs while putting in additional differentiated features. GIS should utilize differentiation as a business level strategy, as an IT firm, it can provide high customer service, high quality features, advanced technological features and management of image. Market Entry GIS should expand into Malaysia because Malaysia has a ready market for their type of product and services. While the IT industry’s contribution currently accounts for only a small fraction of the country’s GDP, it is poised to grow tremendously in future. Exceptional example of this is the fact that even with the economic slow-down, the sector continued to see steady growth. It is expected to be the catalyst for a synergistic expansion of all related IT industries and the establishment of an enabling environment for its orderly development. GIS would be advised to buy out a local company in Malaysia because this would improve its competitive edge. The company that they buy could be an invaluable asset in getting its products launched in a new market. The local company is aware of preferences and purchasing habits of the local suppliers and buyers. Additionally, local governments in Malaysia insist on foreign companies allow some sort of local ownership; therefore, buying a company and giving them some power should see this fulfilled. Finally, this could allow GIS to share technology with the foreign firm; in this case, they would get technological help from the company they are buying out to aid them in settling into the market better. References Baker, Michael. (2010). The Strategic Marketing Plan Audit. Axminster: Campridge Strategy Publ. Dorothy, Leidner. & Kayworth, Tim. (2012). Global Information Systems. London: Routledge Downs, Cal. & Adrian, Allison. (2009). Assessing organizational communication : strategic communication audits. New York : Guilford Press. Khosrowpour, Mehdi. (2007). Dictionary of information science and technology. Hershey: Idea Group Reference. Khosrowpour, Mehdi. ( 2011). Managing information and communications in a changing global environment. Harrisburg: Idea Group,. Palvia, Shailendra. Palvia, Prashat. & Zigli, Ronald. (2012). The Global issues of information technology management. Harrisburg: Idea Group Pub. . Schniederjans, Mark. (2008). Operations management in a global context. Westport : Quorum Books . Srinivasan, Rao.(2009). Strategic management : The Indian context. New Delhi: PHI Learning Tsai, Hu-Liang. (2012). Information technology and business process reengineering. Westport: Praeger. Yilmaz, Kadir. (2009). Basics of major strategic (and analytic) tools Goal setting and strategy process. München : GRIN Verlag GmbH . Read More