Introduction of New Technology to Firms - Assignment Example

Diffusion and Strategic Roles: Introduction of New Technology to Firms Introduction General economic theory asserts that the main function of the firm is to make profit and that for the firm to increase its profits, it is important for the firm to employ certain strategies to reduce costs. This if projected, applies to all firms and industries, implying that these units that are continually looking for opportunities to optimize their profit potentials. Firms and industries are always in the lookout for processes and systems that assist in improving innovation and driving efficiencies so that they may lead in competitive advantage. This has necessitated these firms or the industries to invest in new technology or new systems that assist in reducing costs while at the same time enhances efficiency, which in turn results in higher profits. It is important to note that such initiatives are not the preserve of firms and industries in the higher echelons. This means that company CEO or industry leaders are increasingly on the lookout to for demands that are strategic and complement fully the operations of the firm or groups of firms in the industry. Various firms in a bid to be ahead of the pack are increasingly adopting new developments such as mobile technology and the rampant usage of social networking. There are strategic roles that new technology have with regard to a firm or an industry, this paper will initially look into them thereafter look into factors which may hamper the diffusion of such new technology. Additionally, the paper will consider a specific product or process innovation in an organization then analyse the corporate objectives for such an investment. Finally the paper will Identify and discuss factors which may have helped or hindered the adoption of this new technology within the organisation. Strategic roles that New Technology have with regard to a firms and industries The significance of strategies for not only firms but also the entire industries has been always stressed in the strategic management. Hitt, Ireland and Hoskisson (2010, p.334) observed that ‘…corporate strategies… Allow firms to search for new markets …and technologies to outdo their rivals’. A number of literatures on strategic management have pointed out that firms adoption of new technologies can be directly linked to strategic roles that a firm’s management hierarchy intends to pursue. Various firms adopt these strategies to show critical and important stages they must follow in order to achieve their target organizational objectives. The available strategic management theories often cite two important models of strategic decision-making: the incremental and the synoptic. Incremental decision making in strategic management entails corrective reaction to the existing challenges and problems or dissatisfaction at the existing state of affairs (Chen, 2001 p.237). In this process, those bestowed upon with the role of making decisions might take into account considered alternatives and observe strategy just as loosely coupled decisions. The process is because of an accumulation of wealth of experience meaning that it proceeds in rather minute incremental and cautious stages as a pattern of order emerges. Many writers suggest that the logic for incrementalism is because not a single analytical system can handle the strategic variable and the interactions amongst them concurrently on planned basis. The synoptic model on the other hand strategic roles are being perceived as genuine and rational comprehensive outcomes initiated by the managers and those who head the various firms. This may be due to existing problems and challenges afflicting the firms and industries but more importantly opportunities that the roles might achieve given such a new technology. Firms employ different strategies to advance their goals and objectives, for instance a firm may adopt a certain system in order to achieve a given level of market share in the industry. Wit and Meyer (2010, p.244) aptly puts it in a simple way, ‘in the battle for consumer preference, firms can gain an advantage by having more appealing image than those of the competitors” Therefore the firm must employ different technological inputs so as to achieve this feat. It has been pointed out that firms gain competitive advantage by giving value to their clients and customers. It is critical to understand that firms may only gain sufficient competitive advantage when they employ a series of strategically significant actions, which might include but not limited to production, marketing and sales. Other actions may include human resource management, research and development, procurement and this actions must be employed must result in lower cost and more efficient than those of its close competitors. Thus, this can be summarized into the three strategic roles of new technology to firms and industries; lowering of cost, product differentiation and the complete focus of the firm on its products (Hill and Jones 2011, p.124). In the low cost strategy, firms’ aims in reducing costs and increasing their profits coupled with a large turnover employs economies of scale in addition to scope and the new technology. For a firm to separate its products from those of its close competitors, a firm employs new technology that will assist in showing that their products are unique and different. The focus strategy, firms must focus on the critical product development and other related ethos such as marketing in a bid in creating a difference in market segment that the firm has cost or differentiation advantage. Currently, firms and industries are intricately dependent on the trappings of information technologies and the inability to transform to new forms of technology is as good as the business signing death certificate. Dramatic fall in firms costs, efficiency and effectiveness in the processes and the ease of communication have completely transformed general business operations across a wide range of businesses. So far, this paper has delved into the non-strategic roles that occur when new technologies are introduced to firms and industries. This is frequently known as the business strategy, there are other strategic roles arising from new technology being introduced into firms and industries and these are classified as corporate strategies. Firms have some form of strategy which are either imply or clear and the core of business strategy lies in making upcoming competitive advantages that must appear quicker than participants. The global economic instability in the last few years has helped in creating an environment, which is challenging for the introduction of new technologies. In present circumstances, firms have come to belong to networks reflective on suppliers and customers and these networks assist in maximization of efficiency and enhance the innovative capacity and the decision support system. These are usually always in place for the competitive advantage to be built, without this view, several of such systems would not be achievable. A firm’s profitability potential is depended on the capability to utilize the sources of its competitive advantage to the near perfect degree and to develop an appropriate resource base. Numerous works create the needed feature for a particular resource to taken as strategic and becomes a source of sustainable competitive advantage. Therefore, it is important for the firm to develop capabilities so as t obtain the benefit that arises out of the introduction of new technologies to its systems and processes. The authorities in strategic management often cite transaction cost economics as they provide a complementary theoretical approach to understand the importance of new technology to understanding behaviour and competiveness of firms and the industries because of the introduction of new technologies to its processes. New technologies asymmetries and the supposition of prospective characters are indeed the major causes of contract costs, leading to the creation of large, vertically integrated firms. New technologies to the industry can be understood to arise from three perspectives; the organization trying to improve the efficiency and effectiveness of the current state, different players the industry trying to outmanoeuvre other participants in a competitive rivalry and finally outsider pondering whether to enter into the industry. Subsequently, this paper has identified three categories of chances that can generate competitive benefit into; improving each value adding function, the connection with clienteles and dealers to upsurge substituting costs and finally create new ventures through services and products. Factors that may hinder the diffusion of such new technology Technology has often been described, as versatile or dynamic meaning firms must always employ new technology in their processes and systems. In business, technology adoption implies the acquisition and the usage of new concepts, ideas, invention and innovation in production whereas diffusion is the process through which the new concepts, ideas, invention and innovation spread throughout the organisation. According to Aledda (2010, p.40) diffusion is the cumulative series of individual calculations that affect the incremental benefits that arise out of utilizing new technology versus the impediments of such transformations often in uncertain environment. Economists refer to such as the cost versus benefit analysis, different schools of thoughts regarding modelling of diffusion of technology in organizations have risen. The Cost Adopting new technology for firms and industries is a costly affair for a number of reasons for instance new machines need to be procured and more often, the new technology is just a specific asset. However, according to Sadler (2003, p.187) the diffusion of novice technology to an organisation can result in a significant source of cost advantage. Additionally, employees must be trained on how to use and operate the newer forms of technology that firms have purchased. The opportunity cost lost during its installation and when it is being updated or when the old form of technology is being replaced. The uncertainty the surround the acquisition of the new technology from a purely economic point of view might be even considered a cost. This means that firms are not sure whether the amount invested in such acquisitions would be recovered, this due to turbulent and competitiveness of different industries. Cultural and Individual Factors According to Seleshi and Birnberg (2012, p.16) new technology diffusion into the organisation is hindered by not only cultural factors but also what the authors refer to as individual factors. New technologies have primarily been focused on the innovativeness of the concept and the idea, ignoring customer and end user perception of its adoption. Keillor and Wilkinson (2008, p.228) noted that diffusion of technology is in fact higher in the high context cultures. That the adoption of new technologies such information technologies if not completely embraced; partially due to the lack of fit between technology and culture. It often noted that the value system of a person is important to innovation and the adoption of new technologies. This means that it is imperative for an urgent realization to the effect of culture on the diffusion process. Personal or what some authors refer to as individualistic hindrance has emerged as important factor affecting new technology diffusion into firms and industries. This perhaps founded on the assumption that an individualistic society is characterized by the reliance on personal beliefs in the decision making process. Argued against the ethos of collectivism, individualistic society, the former has the tenet of group consensus as the most important decision making system. The process of diffusion and implementation of new technologies to firms and industries is as important as the process involved in its operation ability. Critical to this process and part of the implementation stage is the process of rolling out of new technology to the firm. This stage is crucial as it assist in integration of new technology within stipulated period and within the budgetary constraints that had been present. However, in most situations there arises a range of factors that usually hamper implementation of new technologies into firms systems and processes. In a more general circumstance, the time frame provided for implementing new technology might be shaped by crucial factors such as; the complexity of the new technology. Additionally, the process of replacing the firm’s existing technology might also influence the process of implementing new technologies to firms and industries. The level of importance of such new technology might also play a role in successful implementation or its diffusion into the company’s processes and systems. Governmental and Regulative Factors The regulative influence have an effect on the technology adoption and diffusion through firms and industries, this can be through what strategic management experts refer to as the governmental sponsorship of technology with network effects. The economic regulation is based on the market size of organizations as well as the structure of the market or industries involved. Regulation is often is to foreclose entry and open a substantially large market segments to the incumbents which in turn reduces the incentives for possible cost reduction strategies. The exact consequence noted will depend fractionally on the specified price-setting systems that have been selected by the relevant regulator. Adoption of technology I most industries have always been affected by regulations touching on the environments. These regulations directly influence the diffusion because often ban or direct the preferred means of technology to be used in such scenarios. Introduction of information technology organization: its influence on corporate objectives Every firm in the contemporary setting is aware of the benefits and positive impacts information technology in business performance and its ability to create sustainable competitive advantage (Tsai 2003, p.123). In business ventures it is applied through value chains of activities and this has the effect of helping organisations to maximize and control functions of operations, it also enhance easy decision making. The use of information technology as a tool for competitive weapon has in this decade become crucial in influencing smooth processes and coordination of not only technology but also corporate and business strategies. Presently it is not in doubt that most organisations in nearly every sector be it the public or private are fundamentally reliant on information technologies. The information technology revolution resulted due to man’s desire to speed up processes and systems; additionally business minds are continually on the lookout for processes that out do competitors. Undoubtedly, the introduction of information technologies to most organisations has resulted in the reduction in the cost of doing business. For example in the past to make an order business used the postal services which took at least 5 days to deliver the order, in the contemporary world it takes less than a second to make an order and receive feedback with the email application. Therefore, the paper shall extensively explore and critically analyse the impact of information technology on the internal and corporate objectives. The information technological revolution is the single most important concept in human civilization after the industrial revolution in the 14th and 15th century. This revolution has necessitated businesses all over the globe to adopt it so as to remain not only competitive but also be innovative. Therefore, IT has emerged as an important factor affecting the competitiveness of firms and industries, and the organization under scrutiny is no exception. In our case analysis, the effect of information technology application is explores as an important factor that maximizes the value chain and efficiency of the organization. Organization A have different strategic objectives, with some being overt and others being covert and the main stay of the business strategy is that of enabling future competitive advantages more than competitors. The organization has waded through turbulent economic environment in the last couple of years to build a challenging business with the help of information technology investment. During those periods, the organization had applied non-cooperative relationship with the competitors as well as the suppliers and customers. Presently with the introduction of the new systems, the organization currently belongs to a networked system of customers and suppliers, this not only optimizes efficiency but also improves innovation capacity, and decision-making processes within the firm. Without these developments in the firm, these systems that are currently in place would not be possible. Therefore, it is important to analyse the impact of information technology on both the competitive and corporate strategy of organization A. Additionally, it is important to mention the alignment of information technology and business strategies of the organization as a crucial issue for the management hierarchy to design and develop both the corporate as well business strategies. Strategic management often state that internal strategy to be related to the advancement of efficient and effective organizational systems and processes that aid in accomplishment of specified goals and objectives. The corporate and business objectives are even closely related to issues such information technology (Sutherland and Morieux 1991, p.3). Organization A can maximize its supply chain strategy into online order entry system and install terminals in suppliers and customers purchasing sections respectively. Such a system helps in improving efficiency of the organization’s operational efficiency, which is embodied in the corporate strategy. It is worth noting that the corporate strategy is a subset of the organisations internal strategy, therefore the efficiency mentioned above is an element of internal strategy. The terminal, which is at both ends of both the suppliers and the customers, can retain relevant information, thus increasing the speed at which orders can help both the firm and customers reduce unnecessary expenses and costs. However, the shortfall of such a new system is that it leads to a rise in what is known in strategic management as switching costs making it difficult for the firm and the customer to change brands. Improving the effectiveness and efficiency of the every organization has always been the mantra of new technologies, and e-commerce has changed substantially the landscape of organizational performance. Information technology has as influence on the competitive presentation via their impact on management systems, employees, and the embodiment of the organizational structure. The electronic-commerce automates business transactions and reduces incidences of paperwork, bottlenecks and bureaucracies, but more often, it is not considered strategic as it merely enhances the effectiveness of handling transactions. However, the overall impact of information technology on the corporate can lead to a business advantage and pip competitors. Just like in any firm, information technology on the organization A has central effect on its competitive advantages in cost, differentiation and in niche. Furthermore, IT influences value activity singly and allocates to the organisation the resulting gain in comparative benefits by advancing transformations in competitive range. In strategic management theory, information technology influences competition in three basic ways; by changing the structure of the industry and as such transforms the rules of competition, creating competitive advantage by allowing firms fresh ways to outdo rivals, creates dynamic and new business concepts albeit with the present organizational operations. Thompson and Martin (2010, p.161) concurs by concluding that IT in particular is one of the prominent forces in business that have a certain unique character in altering the rules of competition. In general, two approaches stems can be analysed with regard to the application of IT in the organisation; value-added chain analysis of its operations and a framework for competitive analysis. The concept of Value Chain analysis was first introduced by Porter, however, according to Sekhar (2009, p.115), ‘It is the price a customer is prepared to pay for any product that maximizes his expectation.’ A firm is the whole of actions that are executed to develop, design, produce, market and deliver products and services, these businesses activities can be shown by using the value chains, which may only be analysed only in the background of a business unit. Value chain activities according to Behl (2009, p.444) are divided into nine generic activities that are further divided into primary and secondary and support activities. Primary activities imply those that enable the organisation to fulfil its duty in the industry value chain, thus satisfying its customers, the customers; thereafter, see the direct effects the proper flow of activities are carried out. These activities are performed well and thereafter adjoin together efficiently enabling the overall optimization of business performance. Support activities on the other hand are those that are important in controlling and developing the business overtime and thereby increase value indirectly- the value being realized through the success of the primary activities. The value chain being the process in which products move from production to deliveries, is the basic tool upon which understanding the influence of IT on the firm. The value chain framework for recognizing all the activities and examining the manner in which they influence not only the organization’s costs but also the value delivered to the customers. This means that IT is allowing the value chain at every point, altering the manner in which value activities are conducted and the process of enjoinment among them. These activities might at times entail shifting physical activities on-line, and others entail the physical activities in a more cost effective manner. Information technology, therefore, improves the commercial transaction processing enabling the entire chain to react effectively to the real-time demand and supply changes, enabling transaction information sharing. The organisation usage of IT has a powerful effect on the competitive advantage in cost and differentiation. Barnes (2001, p.62) uses a simple analogy of two products a car and food to assist in the understanding of new technology in competitive advantage in cost and product differentiation. Technology affects value activities and allows the organisation to gain competition by exploiting every transformation in the industry inclined to the competitive scope. Academically, perspectives on competitive strategies and the competitive advantage are divided into at least five tactical views that compound an organization’s competitive advantage. In strategic management, these are divided into alliance, growth, innovation, cost reduction and differentiation. Factors helped or hindered the adoption information Technology within the organisation. Adoption of information technology within the organisation was aided and hindered by a number of certain factors. Whereas Ghuman (2010, p.585) generally specifies the economics of integration of new technologies into an organisation, the case above presented unique and practical scenarios which hindered and helped the adoption process. Underlying these factors these is the importance of information technology within the organisation, by generating interdependent value activities comprising of elements such as suppliers, customers, production, finance and etc. information technology creates a system of linkages between these activities through a values chain. It alters the value chain activities and to the product’s physical components and systems either through the reduction of cost of value activities or by product differentiation. The organisation in approving information technology can enjoy innovation, growth; cost reduction, alliance and variation benefits produced by information technology. Conversely, information technology enhances information processing, communication and alliance patterns. These features improve the firm’s competitiveness in the market, in addition, to facilitation of relations with other organizations within similar value chain. Support Systems Initially, the organisation did not have internal technology support personnel, therefore the firm had to be reliant on external support system. The importance of the latter was instrumental for the successful operations of the firm, this is due to the fact, that they provided all round support to the system being a cost effective approach to the organisation. The supplier, who happens to be the developer of the new system into the organization, also provides the all-round support service. Additionally, monitoring and support services for the new technology can be is usually outsourced from a nearby technological centre that services the organization’s system. The servicing usually includes support provided to the system and technology infrastructure, hardware, software applications and communications. Organizational Changes For a successful implementation of the system, employees have to be thoroughly informed and trained to correctly adapt and use the introduced transformations and differences created by new technology. Initially, due to the complexity of the new technology, employees had a problem in grasping the tenets of the system, however, technology system was provided by the vendor/supplier. Customers and suppliers proved another bottleneck in the implementation of the new system. The organisation went ahead to inform both the customers and the suppliers of the intending changes in the system changes. The introduction of information technology to the organisation has the effect of affecting the adaptability of individuals mostly employees, customers and suppliers to the changes. Initially, the cost that was involved in procuring the new technology to the organisation was massive nearly crippling other primary operations of the firm; however, upon the first month of operations, the organisation soon began to appreciate the value of this investment. The management performed risk assessment of the same and developed contingency plans, which inadvertently aided in reacting to worst scenarios that were perceived. Conclusion New technologies for firms and industries could increase their strategic value and the businesses portfolio and operations. Information technology has the benefit of increasing business acumen and leadership of business futures, fundamental in creation of a success story. Meaning that most businesses are increasingly searching for means of improving their revenue streams, and this thus lays the emphasis for more strategic roles of new technologies for such businesses. New technologies have the potential to increase such, as demonstrated by the introduction of the introduction of information technology in the above case analysis. The management must assist in developing and implementing the innovation process in the organisation and such initiatives leads to better business performance. A number of factors hinder diffusion of new technologies in an organisation; these include cost, individual and cultural factors and finally regulative factors. The cost of purchase may be argued to be a result of the demand side the factors whereas the supply side include issues such installation and training of the users and the ease of applicability of such new systems by the organizations employees. Organisation A introduced an automated its processes by introducing the new developments in information technology enhancing efficiency of its operations. On the flipside, the cost of acquisition as well as the cost that were incurred in training the employees proved cumbersome. The only rejoinder was when the vendor /developer stepped in to assist in training, monitoring and improving the new system introduced. The strategy of the firm was to increase its domestic market share by five percent in the next five years, however, in the first month, due to the efficiency of the new system, the company grown the niche. The management executive must employ and bring to the board a CIO, he or she can help execute the end-to-end process of innovation that results in smooth operations of the core business of the organisation in the first place, and thereafter enable it as well. In economics, firm are constantly in the battle to pip each other in making profits and that for the firm to increase its profits, it is important for the firm to employ certain strategies to reduce costs. This if projected, applies to all firms and industries, implying these units are continually looking for opportunities to optimize their profit potentials. Firms and industries are always in the lookout for processes and systems that assist in improving innovation and driving efficiencies so that they may lead in competitive advantage. References Aledda, R. (2010). Key Success Factors of New Products / Product Innovations Case Study: "Kess & Fit". München, GRIN Verlag GmbH. [Online] Available at: http://nbnresolving.de/urn:nbn:de:101:1-201010292013 accessed [16/07/2013] Barnes, D. (2001). Understanding business: processes. London, Routledge in association with the Open University. Behl, R. (2009). Information technology for management. New Delhi, India, Tata McGraw-Hill. Chen, S. (2001). Strategic management of e-business. Chichester [England], Wiley. Ghuman, K. (2010). Management: Concepts. Tata McGraw-Hill. Hill, C. W. L., & Jones, G. R. (2011). Essentials of strategic management. 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