The Digital Transformation of Traditional Businesses - Assignment Example

The Digital Transformation of Traditional Businesses Student’s Name Institutional Affiliation Course Name Date of Submission The Digital Transformation of Traditional Businesses 1. Describe the kinds of businesses that can use new information technology.  3 Marks The world has experienced rapid advancements in technologies in the recent past. The advancements has resulted in the emergence of a number of new information technologies (NIT) that has transformed businesses and industries in a big way. Among the NIT used by businesses today include the Internet, mobile communication and broadband networks among other technologies. However, the NIT does not suit all the businesses. Instead, there are certain kinds of businesses that Andal-Ancion, Cartwright and Yip (2003) say can use NIT appropriately to enhance business processes. The first kind of business that can use NIT, according to the authors is the Books Stores. The authors argue that businesses that deal in the sale of books can effectively use the Internet to sell the books in digital form to its customers. In fact, unlike in the past, where people depended on physical bookstores to get books of their choice, the emergence of the Internet has made it possible for publishers to sell their books in the digital format via the internet. The other type of business that the authors say can use NIT is the airline firms. According to Andal-Ancion, Cartwright and Yip (2003), airline industries can use the internet to offer online ticketing services. Accordingly, this enables travelers to book their flights via the internet without necessarily having to present physically at the airline booking office. Other kinds of businesses that can use NIT include software businesses, because software can easily be distributed online to the customers without having to depend on the middlemen. 2. Illustrate the reasons for the drivers of NIT that the authors have identified in their study. 6 marks Andal-Ancion, Cartwright and Yip (2003) identified 10 drivers of NIT that determines the competitive advantage that a company can derive through NIT deployment. Each of these drivers plays a critical role in ensuring efficient deployment of NIT in a business or industry. First is electronic deliverability. Electronic deliverability is one of the most important drivers of NIT because it facilitates the delivery of a product to a customer efficiently and cost effectively. Andal-Ancion, Cartwright and Yip (2003) noted that, for a product to use NIT, its components must be able to be delivered electronically. For instance, the authors noted that most airline companies have benefited from online booking services because the tickets can easily be delivered electronically via e-mail services. This helps in eliminating middlemen in the transaction process. The authors provide easyJet an example of the airline firms that have benefited a great deal from online ticketing services noting that the airline sells more than 90% of its tickets online (Andal-Ancion, Cartwright and Yip, 2003). Nevertheless, the authors noted NIT is not effective for use for some products, such as the car because, as much as the customer can compare the prices and features of a car on the Website, the customer would still need to verify the car physically and test-drive it before accepting delivery. As such, electronic deliverability of a product is a critical driver of NIT that must be taken into consideration to ensure successful transaction. Second driver is information intensity. The authors argue that the intensity of information is a critical driver of NIT that should be considered before investing in NIT. In this respect, the authors noted that businesses that have high information intensity and products with high information intensity stands a chance to benefit a greatly from the investment in NIT than those businesses and products with low information intensity (Mitropoulos and Tatum, 2000). For instance, firms that have products with high information intensity can benefit from investment in NIT, such as the Internet since the Website would enable the firm to leverage the features inherent in the product, thereby enabling customers to understand the content of the products easily without the need of an intermediary. Customization is another driver of NIT. The authors noted that, the majority of customers demand products and services that are customized according to their needs and preference. Unfortunately, customization was not possible in the past as products and services were designed to fit all. However, today, with the development of new technologies, it has become possible for firms to customize the products or services to suit the need of each consumer or targeted segment (Apulu and Latham, 2011). Customization of products or services to suit the needs of customers through NIT has helped businesses that adopts NIT gain competitive advantage over rivals since NIT enables them to design products or services that suits the individual needs of customers, thereby resulting in improved sales and profitability. Aggregation effect is another key driver of NIT. The authors note that, in the past, consumers of financial services had to rely on different financial institutions for different services. For instance, customers had to use banks for savings, building societies for mortgages, independent financial advices to help them make sound investment decisions and insurance firms for insurance policies. This happened because firms depended on manual systems and had no means of offering different services at the same time (Mitropoulos and Tatum, 2000). Fortunately, the development of NIT has made it possible for firms to offer bundled services to customers, which includes offering different financial services in one account. Offering aggregated services through NIT has been of huge benefit to businesses and customer in the sense that the system is more convenient and offer helps boost customer’s confidence level. This benefits businesses because it helps build customer loyalty that result in repeated purchases, thus high profitability. Search cost is the other driver of NIT identified by the authors. In this respect, the author’s notes that the emergence of NITs has helps lower the search cost in the sense that people can now find information of whatever kind easily on the internet. This helps minimize time and cost that an individual has to spend searching for information. Additionally, the use of NITs also helps in enhancing transparency as customers and suppliers now have the opportunity to compared products in terms of features and prices on the Website in order to arrive at an informed decision. Real-time inference is another critical driver of NIT. Real-time inference is particularly important because it enables a customer to transact business at anytime, night or day without any restrictions (Mitropoulos and Tatum, 2000). However, real-time inferences are of less value to companies that deal with tangible products, such as clothes, since customers must be told the exact date to pick their items. Additionally, the authors noted that a contracting risk is a key driver to NIT. They note that, with the use of NITs help lower the risk for customers. For instance, they note that, when an individual intends to buy a book online, he/she will be able to benefit from low prices and be able to understand the content of book before purchasing it, which effectively reduces the risk of contracting to customers. NIF also enables companies to standardize their business processes, which results in greater efficiency in transactions, as well as increasing convenience for customers (Apulu and Latham, 2011). Moreover, the authors noted that NIF is important to businesses today because it facilitates alliance building among firms, which helps bridge the missing skills and competencies. 3. Discuss the usefulness of mediation strategies that the authors are researching.  6 marks The authors identified three critical mediation strategies, including classic disintermediation, remediation and network-based mediation. All these mediation strategies play a critical role in business that uses NITs. Classic-disintermediation is one of the commonly used mediation strategies in NT businesses. This strategy is important because it ensures the elimination of middlemen in the transaction process. The elimination of middlemen in the transaction process is beneficial to the company and the customer since it helps enhance efficiency and the speed with which products or services are delivered to customers. Additionally, the fact that classic disintermediation eliminates middlemen also help in reducing the transaction cost that would have otherwise paid to the middlemen to facilitate the delivery of services or products to customers. For instance, Andal-Ancion, Cartwright and Yip (2003) noted that easyJet Airline has benefited a great deal since it began adopting classic disintermediation strategy. Andal-Ancion and colleagues note that, since the airline introduced the online ticket booking services, it has been able to bypass many travel agents. This has in effect enabled easyJet offer lower fares for its customers, something that has attracted many travelers to the airline, thereby resulting in increased profitability due to high volume of travelers using the airline. The second mediation strategy that a company can employ to enhance its business processes is called remediation. Remediation strategy is particularly important for companies using NIT because it helps in building a strong relation between the firm and its suppliers, customers and distributors or products or services. For instance, the company Toys “R” Us has benefited from the use of remediation, which has enabled it build a string and lasting relationship with its value chain partners (Andal-Ancion, Cartwright and Yip 2003). Accordingly, this has also ensured that the firm established strong loyalty with its value chain partners, resulting in success. The other mediation strategy is called the network-based mediation. This mediation strategy involves the use of NIT in building partnerships and alliances where relationships have proved complex in nature (Carr, 2000). In other words, network-based mediation helps in addressing issues that confront customers, suppliers and distributors, such as customers being restricted to just a single provider or a supplier being restricted to just a single customer. This is because the strategy allows customers and suppliers to network, thereby giving them the opportunity to exploit other avenues. Eastman Chemical Co., for instance, has benefited from the adoption of network-based mediation by enabling it to diversify its product portfolio to include the manufacture and sale of chemicals, plastics and fibers (Andal-Ancion, Cartwright and Yip 2003). Diversification has ensured that the company does not have to rely on just a single customer or supplier to succeed. References Andal-Ancion, A., Cartwright, P. A., & Yip, G. S. (2003). The digital transformation of traditional businesses. MITSloan Management Review, 44(4), 34-41. Apulu, I., & Latham, A. (2011). Drivers for information and communication technology adoption: A case study of Nigerian small and medium sized enterprises. International Journal of Business and Management, 6(5), 51-60. Carr, N. (2000). Hypermediation: Commerce as clickstream, Harvard Business Review 78, 46-47. Cartwright, P. (2002). Only converge: Networks and connectivity in the information economy. Business Strategy Review 13, 59-64. Mitropoulos, P., & Tatum, C. B. (2000). Forces driving adoption of new information technologies. Journal of Construction Engineering and Management, 126(5). DOI: 10.1061/ Read More