Business Environment And Strategic Management - Essay Example

BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT: QUESTION Table of Contents Table of Contents 2 Introduction 3 Role of Technology in Organizations and Industries 3 Factors Influencing Diffusion of Technology 5 Process Innovation in Lotus 8 Process Requirements 10 Corporate Objectives and Technology Needs for Lotus 12 Technological Advancement and Support 13 New Technology Selection for Process Innovation 14 Factors Influencing Implementation of Selected Technology 16 Critical Analysis of Technological Support for Organizational Development 18 Conclusion 19 Reference List 21 Introduction In the words of Jayawickrama and Yapa (2013), technological development has transformed the world into a compact place where networks and channels influence the activities of societies and organizations. This statement shows the influence of technology in the modern day scenario. Hosman (2011) noted that beginning from operational to planning tasks, every function of organizations is being performed with the help of technological means. The dominance of technology in the organizational process has been termed by Fazlollahtabar (2012) as the biggest phenomena since the Industrial Revolution. All these observations indicate the need of the corporate firms to incorporate technological tools for ensuring sustainable business growth and development. This report focuses on the need for implementing and adapting to technological resources in the contemporary scenario for organizations. The paper specifically focuses on the process innovation aspect in British automobile firm Lotus with the help of new technology adoption. Role of Technology in Organizations and Industries Technological development as per the observation of Fazlollahtabar (2012) has taken place in every sphere of human life. Beginning from the daily household activities to major economic and corporate activities is being performed with the help of technological resources. According to Hosman (2011), the growth of Information and Communications Technology (ICT) has contributed majorly in organizational development. New tools and techniques of information sharing and communication and nullified the influence of geographical borders and the cost of operations of the firms in a significant manner. Internet based platforms such as cloud computing or remote devices such as Smartphone’s or tablets have enabled business personnel to engage in their corporate responsibilities from any corner of the world (Kanet and Stößlein, 2010). However, Nafeeseh and Al-Mudimigh (2011) argued that although technology has increased the utility and performance of the corporations, there also exists noteworthy threats regarding the security and privacy of information shared over internet platforms. Kanet and Stößlein (2010) observed that because of extensive competition in the international market place firms are trying to reduce their operational expenditure and generate a cost competitive advantage. In this context, application of technology has improved the performance of the firms by reducing the manual work capital and time required for completing the operational activities of business houses. For instance, with the help of production equipments firms can accelerate their production process and also reduce the amount of man hours required. Similarly, ICT has helped in connecting the functions of the organizations with each other with aspects such as Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), etc (Qutaishat et al. 2012). The changes in the business environment have been largely accredited to the technological changes taking place in the world. Hosman (2011) considered that technological inclusion in business firms is taking place at a rapid pace which has increased the frequency of changes being incorporated in the work structure of firms and can also hamper the performance and productivity of the business houses. There are arguments and counter arguments regarding the role of technology in the corporate world, nevertheless the present scenario reflects that there is a need for technological support in order to enhance the performance of the firms and ensure sustainability. Furthermore, customer groups are also getting accustomed to the concept of a technology supported world which urges the firm to improve their productivity and customer offerings. Product development, market analysis, process innovation, operational processes, logistics management or strategic functions of business, all these activities have been directly related to technological elements. Although the impact of technology is being debated in terms of security of information, privacy or quality but their existence in business operations cannot be ignored. Factors Influencing Diffusion of Technology Diffusion or transmission of technology highlights the method of increasing the utility of a technological tool or concept. Diffusion of technology is often related to diffusion of innovation concept that highlights the rate at which new ideas and technology spread accords cultures and business processes in the firms (Fazlollahtabar, 2012). Observing the existing state of technological use in business and social spheres, Kanet and Stößlein (2010) considered social media networks to be the most vibrant form of ICT that has been diffused. Carrying forward this condition, internet platforms can be regarded as the most effective means for diffusing technology. Nafeeseh and Al-Mudimigh (2011) further explained that diffusion of innovation and technology takes place as a result of communication channels accords cultures, workplaces and societies. Figure 1: Diffusion of Innovation (Source: Fazlollahtabar, 2012, p - 239) The above given model highlights the different stages of diffusion of innovation. The blue curve shows the adoption of the new technology or concept by the target customers whereas the yellow curve shows the market share for each of the mentioned groups. The market share of early majority and the late majority is the highest followed by the laggards, early adopters and finally the innovators. According to Kanet and Stößlein (2010), diffusion of technology largely depends upon the human capital of a firm. The ability of the workforce to adapt to new technology and the resultant changes and outcomes are often considered as a measurement index for understanding the sustainability of technology. However, Hosman (2011) cited human capital to be the most critical barrier for diffusion of technology. As noted above, technology is inducing frequent changes in the business scenario and as a result the employees have to adjust with the changing work environment. This often hampers the performance and productivity of the employees and generates resistance among the employees to change. Considering the supportive factors for diffusion of technology, factors such as internet platforms, mass media communication channels such as social networking sites are considered to be among the major functions in relation to the business development process. However in the operational field of a firm, managerial strategies and workforce compatibility are considered as key factors in ensuring technology diffusion. Figure 2: Technology Diffusion Framework in Organizations (Source: Kartus and Kukrus, 2013, p - 11) As per the given model, support of management leads to change implementation in a work field and financial resource help in designing the implementation effectiveness. However, Qutaishat et al. (2012) argued that information sharing helps in building the implementation climate and hence motivates the employees to secure themselves within the change or transformation process. Apart from this, the managerial support also includes the function of helping in communication of the change in relation to the growth and development of the firm. From the perspective of human capital management and planning process of a firm, Fazlollahtabar (2012) stated that alignment of the intentions of employees with the change objectives is necessary in order to ensure effective technological implementation in workplace. Nafeeseh and Al-Mudimigh (2011) noted that sometimes technology diffusion can fail because the target customers are not ready to accept new technology. For instance, Apple Inc faced failure with their product Newton which was the first PDA based device launched in the year 1998 (Kanet and Stößlein, 2010). Process Innovation in Lotus Lotus Plc is one of the leading automobile manufactures of UK and is a wholly owned subsidiary of DRB-HICOM. Lotus is renowned for their light weight vehicles in sports segment as well as luxury car segment. With an historical significance related to the headquarters of Lotus, the firm has successfully established themselves in the international market place. The activities of Lotus Plc have been developed into three different segments namely, Lotus Cars, Lotus Engineering and Lotus Motorsports (Lotus Cars, 2014a). The operational process of Lotus Cars is mainly performed with a customized manual manufacturing process where employees attend to every detail of the vehicles and ensure quality product for their customers (Lotus Cars, 2014b). However, this has also increased the time taken for production of each vehicle. So far, the company has upheld their customized operational process which has served them well. Nevertheless, the competition in the market place has increased and so has the demand for the vehicles among the domestic customer groups. As a result, the firm needs to upgrade their systems and operational functions in relation to the existing trends of technological support for the firm. The existing manufacturing process of the company is performed in five critical stages namely, product proposal, product definition and development, product and process engineering, product facilities and trail and mass production. Figure 3: Manufacturing Stages of Lotus (Source: Lotus Cars, 2014a) The product proposal stage is the first stage of manufacturing where the product is designed or the orders are sorted as per the requirements of the customers. The initiation stage of the production process of the firm includes thorough analysis of the resources of the company and estimates the time and budget to be allotted for each lot of production (Lotus Cars, 2014b). Product and process engineering focuses on the specific requirements of the cars and identifies any new modifications to be included. After this the production of the vehicles is initiated in a small scale manner and every car is individually tested in accordance to the quality standards of the company. These activities are performed in the product facilities and trials phase. After the produced vehicles pass the test, the mass production begins. The primary gap in the above given production process of Lotus is lack of communication among the different functional departments of the firm. The existing communication systems are mainly dependent on e-mails and verbal communication which are performed in meeting after completion of each stage of manufacturing. This increases the time for initiation of each stage and also increases the scope of errors in the calculations of the budget. Lotus outsources their engines from Japanese automobile manufacturer Toyota while the chassis and rest of the body parts are designed and manufactured in-house (Awad and Nassar, 2010). It can be gathered from the existing process of Lotus that assembling of the body parts of vehicles can often get delayed if there is an issue with any other functional stage and hence the mass production system will get hampered. Based on these findings, the process innovation of Lotus will be designed. Process Requirements Process requirements highlights the factors will help in completion of process redesign (Kartus and Kukrus, 2013). The analysis of the existing manufacturing process of Lotus shows gaps in communication and inadequate knowledge transfer among the functional departments of the company. In the contemporary scenario, both communication and knowledge transfer processes are being managed with the help technological means such as ICT. New technologies such as ERPs and Accounting Management Systems (AMS) have reduced the time taken for communication and also ensure accurate flow of information among the operational network of a firm. According to Nafeeseh and Al-Mudimigh (2011), implementation of ERPs helps in connecting the departments of organizations and also optimizes the database of the company. However, Jayawickrama and Yapa (2013) stated that manual lookout is needed for securing the database of a firm and also to reduce the errors in database. Some of the most common errors that take place in ERP software are duplicity and misinterpretation of queries. In case of Lotus, the production process of the company needs a communication as well as information transfer method that can help in accelerating their operational activities of the company. The information system need to be having strong security and should also be amalgamated with the main database of the company. Furthermore, there should be layers of access of information based on the designation and responsibilities of the users. For instance, an employee operating in the assembling process should not be able to access the manufacturing information. Finally, the entire ERP should also have communication systems such as e-mails or chat facilities wherein the users can raise any concerns and queries in regards to the information accessed. In order to implement any selected ERP system, Lotus also needs to measure its costs and utility in financial terms. Furthermore, there will be additional costs associated with the diffusion process of the technology and hence can reduce the suitability of the ERP software. Diffusion process will require Lotus to be able to present the new technology in an applicable and easy manner wherein the compatibility of the technology will be measured against workforce capacbil.ity. Qutaishat et al, (2012) noted that cost of technological implementation increases with the improvements that take place in them. Implementing this statement for ERP applications, the updates published for software to increase their security and utility. This can convert into a recurring expense that can hamper the cost effectiveness of the ERP software for Lotus. These are the primary requirements for implementation of new technology, in context of process innovation. Corporate Objectives and Technology Needs for Lotus The mission statement of Lotus highlights their aim to provide quality light weight vehicles to their customers. In Lotus, technology is the key driver for modification in their products. Every step that can reduce their weight of their vehicles and provide it better aerodynamics are being analyzed and researched in Lotus in order to improve their performance (Mengistie, Heaton and Rainforth, 2013). However, the problem being analyzed in this report is related to their information sharing and communication process. The relationship between the issues and the objectives of Lotus is based on the influence of the internal factors on the production system of the company. As noted majority of the activities included in the production system of the company is performed in hand-made manner in order to sustain the quality and tradition of Lotus. However, they need to accelerate their production process for meeting the increasing demands of products in the market. The changes in the business development process of the company are also another factor effectively related with the production as well as the corporate objectives of the firm. The implementation of ERP will help Lotus in connecting the various functional departments of the firm and reduce the time taken for information sharing. It was observed that under the existing system, Lotus needs to hold a series of meetings for knowing and relating the information regarding the activities performed in each stage of production process. In order to connect the technological requirements of Lotus along with the corporate objective of the firm, the elements forming both these spheres needs to be assessed. The objective of producing light weighted vehicles is directed towards the product base of the firm. On the other hand, the suggested technological inclusion for process innovation highlights the operational requirements for Lotus. Jayawickrama and Yapa (2013) mentioned that technological improvements with the help of ICT are considered as long-term benefits for the firm. Although the initial set-up cost and the regular upgrades of the technology can increase cost of operations, ICT reduces the space and man hours required for performing the organizational activities. For instance, the planning stage or product proposal stage of Lotus can directly upload and share the minutes of planning process in the ERP which can be accessed by the design and engineering segment of Lotus. Similarly, there will be a steady network among all other stages of the production process of Lotus. The improvement of information and communication system will reduce the man hours required for production of vehicles. Apart from this, knowledge sharing will also help in enhancing planning effectiveness of the company and create a transparent work atmosphere (Nafeeseh and Al-Mudimigh, 2011). Thus, the implementation of ERP software for improving communication will help the company in achieving excellence in their business process. Technological Advancement and Support Innovation has been defined by Mengistie, Heaton and Rainforth (2013) as the process of technological advancement and support. The role of technology in the business development is extensive in the present scenario. Every function of corporate world is being managed with technological interventions. In this report, the influence of ICT is being considered for process innovation in Lotus. ERP software has been selected for helping Lotus in improving the communication and knowledge sharing functions of the company which will reduce the cost and the time taken for the production process. Razi and Hossain (2012) noted that ERP’s need to be connected with every function of a firm and so that the functions of the company can be streamlined. As the majority of the production functions of Lotus are handmade, the time taken for production is extended. However, ineffective communication processes and limited knowledge sharing among different stages of production is further extending the production cycle of the company. The technological advancement and support for Lotus will be performed in two phases where the 1st phase is to redirect the production process with the help of EPR software and the 2nd phase is to diffuse the technological change within the workforce of the company. The support for technology accommodation will thus need to remodel the database system of Lotus wherein the ERP will be amalgamated with the existing database management system. One of the primary needs for ensuring a well connected database management system is to identify the relationships between each query and develop a relationship entity models (Razi and Hossain, 2012). It should be noted that the employee base of Lotus mainly operates with e-mails for communications and hence the aspect of operating a new database can be troublesome for them. This brings in the aspect of technology diffusion where the employees will be made accustomed with the process of operations in the ERP software. Furthermore, Lotus will need to recruit a separate team for managing and supporting the ERP system. These are the primary support systems for ERP implementation in Lotus production process. Apart from the technological support and advancement, the implementation of ERP in Lotus will need top management support of the firm. The top management will be primary responsible for the diffusion of the technological process among the associated employee groups. The functions, role and development of the technology need to be appropriately communicated and trained for ensuring the desired outcome. New Technology Selection for Process Innovation As noted in the above segment, ERP has been considered for application in the production process of Lotus. The ERP will thus be selected based on its compatibility with the production process of the firms. The changes in the production process will also be measured in terms of cost and effectiveness of the product in achieving the goals. Lotus being an automobile firm will need an ERP that can help them in connecting their entire supply chain system and also associate it with the marketing and sales activities of the firm. The operational effectiveness of the selected ERP process will depend on the streamlining of the activities and the ease of communication and knowledge transfer of the business firms. The primary considerations for the ERPs are SAP and ORACLE systems. Both ORACLE and SAP are considered to be among the most used ERPs in the business world (Hossain, Bala and Bhagwatwar, 2011). SAP is one of the world’s renowned ERP software. According to Razi and Hossain (2012), SAP helps in integrating all the functional departments of a firm within a common ground. The database connections among for information sharing and transfer are developed mainly because of the similar framework being used in SAP. SAP is cost effective but it requires a firm to change their entire database management system and integrate it with SAP which can be cost exhaustive for a firm. However, once installed, SAP can increase the rate of transfer and also boost the performance of the firm. The implementation of SAP however costs somewhere between $50-$100 million for big enterprises with a large range of data and networks within their work structure. But the updating processes of the ERP system can cost up to $100 million at one go (Qutaishat et al. 2012). This can be an area of concern for Lotus. The cost of implementation and system support may overtake the benefits derived from the software. Other demerits of SAP implementation can be the inflexibility of the software. As noted above SAP is applicable only within platforms of similar modules and hence can be inflexible for Lotus if they need to engage any other ERP or database management process within SAP. ORACLE is being implemented mostly in the traditional process by changing the database interface of a firm. However, this is a costly and time taking process and hence the company has designed ORACLE Business Accelerators (OBA) in order to reduce the time and cost of implementation (Hossain, Bala and Bhagwatwar, 2011). The OBA can help a company in directly integrating ORACLE with the database management process of the company. OBA also helps in accommodating the customizations required by a firm for integrating their ERP system with the work structure or any other functional department of the company. The cost of implementation of ORACLE lies within $10-$30 million for a big firm such as Lotus (Qutaishat et al. 2012). On the other hand, the application of ORACLE and its handling is complex in nature and is difficult to learn in comparison to SAP or other ERP systems such as SQL. In terms of performance, ORACLE allows a firm to be versatile in its database management system by allowing extensive customization of the ERP as per the needs and changes in the operational system. Considering the present state of Lotus and their needs, ORACLE seems to be more functional and beneficial in comparison to SAP. The main criterion for selection of ORACLE is cost and versatility of the software. Also, Lotus will not require changing their existing database management process and can integrate ORACLE with it. Factors Influencing Implementation of Selected Technology Implementation of a new technology always initiates a change in the business processes (Hossain, Bala and Bhagwatwar, 2011). The factors that influence the implementation of technology are mainly associated with the compatibility of the work process with the characteristics of the technology. In case of Lotus, the technology selected for implementation is ORACLE ERP that will help in creating a communication platform and information sharing space in the manufacturing process of the company. The expected outcome of ORACLE ERP implementation is to reduce the time taken for production of vehicles by enhancing flow of information and also reduce the cost of operations by reducing the manual database management systems. The performance of ORACLE not only helps a firm in relating their daily operations with their organizational objectives but also indicates the gaps in their existing work structure. As mentioned previously, the primary factor that will influence the implementation of the selected technology is the human capital adaptability with the change instigated. Implementation of a new ERP will change the data input system and the information sharing process of Lotus, the management of the database system will also change owing to the new methods and interface of ORACLE. The employee base will need thorough training for getting accustomed to the ERP platform. Another factor that will influence the performance and implementation of ORACLE will be the transaction management system of Lotus. The process of integrating the ERP database with the sales channel will help Lotus in understanding the market demand and calculate the need for production. The sales actvities of Lotus was previously managed with SQL database wherein the transactions were directly entered in the relevant query. However, in ORACLE, the transaction of a product will be integrated in the database from its manufacturing stage. Every vehicle will be tracked directly from its manufacturing to the time it is sold to the end customers. Thus the transaction updating process will change along with input of other data in the ORACLE ERP. The existing communication process of Lotus in their manufacturing process will also influence technology implementation. Hossain, Bala and Bhagwatwar (2011) noted that the most crucial factor that influences ERP implementation is that of project planning. This highlights the responsibilities of top management of the company for ensuring effective ERP performance. The top management needs to calculate the cost effectiveness of the technology in relation to their capability and the requirements of the firm. ORACLE in this regard has lower implementation cost in comparison to its counterparts but also is more complex to operate. Hence, the top management will need to ensure that the workforce is able to easily handle the technological change and also maintain their performance and productivity. Critical Analysis of Technological Support for Organizational Development Based on the above analyzed case of Lotus, it can be noted that technology is playing a key role in organizational development. The academic point of view regarding the same however considers technology to be supportive as well as disruptive for business development process. Andjelkovic (2010) noted that from a theoretical standpoint, the role of technology depends upon the needs of the organization and hence changing demands of corporate and social structures is fueling the growth of technology. Carrying forward this condition, it can be noted that technological development is directly related to business growth. Kanet and Stößlein (2010) argued that technological development has reduced the security of information in business processes and increased the expenses of information management process. Kartus and Kukrus (2013) added that technology has also disconnected the employees from the end products and also created distractions in the form of system failures. Qutaishat et al. (2012) opined that most of the changes taking place in the business houses are accredited to technological development. This can disrupt the focus and engagement of the workforce. Focusing on the positive aspects of technological development and its influence on corporate, the development of technology has led to reduction of space usage in the business world and accelerated the performance management and administration of firms. With the help of technologies such as CCTV monitoring, employers can continuously supervise their workforce and the work progress. Moreover, Andjelkovic (2010) noted that technology has increased the transparency in the business process of the firms. Most of the firms are now able to share their plans and its status with the employees via information and communication means such as e-mails, social networking platforms, video sharing platforms and other communication channels (Kartus and Kukrus, 2013). It was observed in the case of Lotus that with the help of ERP implementation, the company can bring down the time taken for their production process and also streamline their operational departments. These types of actvities have improved the business management process and contributed largely in measuring the business performance against their objectives. The ability to integrate the functional segments of a business and align them under a common objective is the foremost criteria for business development and technology is ensuring a sure path for performing the same. Conclusion The report aimed to highlight the need and importance of technology in business houses in the contemporary scenario. It was observed that although technology is proving to be a beneficial aspect for business houses, there exist some major challenges in context of diffusion of technology such as human capital alignment with technological development. The case of Lotus reflected the need for a better communication and information sharing process within the manufacturing process of the company. This problem was sorted with the help of ERP implementation in the organization. ORACLE ERP system was considered for implementation on the basis of organizational objectives and cost of technological innovation. The process innovation process also faces some challenges in terms of adaptability and integration of database. But with appropriate support from senior management and other stakeholders, Lotus can be able to solve their issues. The theoretical underpinnings and academic literature regarding the contribution of technology showed both advantages and disadvantages of technology in the business sphere but the necessity of technology for business development in prevailing conditions cannot be ignored. Reference List Andjelkovic, M., 2010. The Future is mobile: Why developing country entrepreneurs can drive Internet innovation. SAIS Review of International Affairs, 30(2), pp. 121-133. Awad, H. A. H. and Nassar, M. O., 2010. Supply Chain Integration: Definition and Challenges. Proceedings of the International MultiConference of Engineering and Computer Scientists, 1, pp.17-19. Fazlollahtabar, H., 2012. Applying information technology in developing business models of export. International Journal of Business and Systems Research, 6(1), pp. 89-107. Hosman, L., 2011. 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ERP implementation: examining interdependencies among pre-implementation, implementation, and post implementation phases. Proceedings of DYNAA, 3(1), pp. 8-12. Read More