Role of Information Technology in Entrepreneurship - Essay Example

? Entrepreneurship Role of Information Technology Information technology has become an integral part of business management as it plays an inevitable role in organizations ranging from single computer owned small business houses to mainframe systems maintaining multinational corporations. The emergence of information technology significantly reduced human labor, and subsequently it intensified the productivity and profitability of the firms. As MacKechnie points out, nowadays most of the companies use e-mail as their principal means of communication between suppliers, retailers, employees, and customers. It is evident that e-mail, the notable contribution of information technology provides users with a simple and inexpensive way of communication. Over the last decade, more high-tech communication facilities have been developed including voice over internet protocol telephones and smartphones, which allow personnel to communicate through live chat systems. Likewise, data management is another important role of information technology in modern organizations. As MacKechnie points out, many of the companies nowadays deploy digital versions of documents on storage devices in order to get rid of the troubles associated with bookkeeping. This system promotes easier and immediate access of data in a multinational corporation regardless of its geographical locations. In addition, the IT plays a notable role in managing the inventory levels of an organization. Since purchase, production, and distribution processes of a firm are connected by a computer system, it is possible to maintain effective control over stock and to ensure inventory optimization. According to McAulay, the management Information Systems (MIS) greatly assist companies to accurately trace productivity levels, sales data, and operational expenses. Thus, the information gathered can be effectively employed to analyze profitability, to point out areas of improvement, and finally to increase returns on investment over time. Furthermore, Customer Relationship Management (CRM) system is an effective application of information technology that stores every interaction a company makes with its customers. Such a system aids the company to deliver improved services to its customers and thereby to maximize its sales volume. Impact of IT on entrepreneurs and their organizations According to John, since information technology plays a vital role in transferring technology from institute to industry, it greatly assists entrepreneurs by introducing technological changes in management and emphasizing on their relevance in the present environment. John adds that IT sector provides information to all business entrepreneurs without any discrimination (109). This easy accessibility to information has greatly aided entrepreneurs to focus more on their planned venture. In addition, IT also ensures that entrepreneurship is not concentrated in particular area or people. The affordability of information assisted entrepreneurs to bring greater and deeper improvements in their venture. The IT developments enhanced cross border information sharing and this situation greatly aided entrepreneurs across the globe to effectively plan their venture development process. The developments in information technology “will also bring about access to just-in-time information of business opportunities” (John, 109). The emergence of e-commerce was a milestone in business management that entirely restructured the way organizations provide value to external and internal customers. In short, the rampant developments in IT sector including the introduction of e-commerce were helpful to entrepreneurs to redesign their operations so as to ensure increased customer satisfaction. 2. Differences in Asset Structure Across the global market, today’s economy is considered to be the “knowledge-based economy”, where the responsibility of creating value lies heavily on the various kinds of assets related to all kinds of knowledge, which is called the intangible assets. “The knowledge – creating company, which means only those companies that can create knowledge can be successful in today’s world” (Nonaka and Takeuchi, as cited in Volkov and Garanina). Unlike the traditional company asset structure, where more significance was given to the tangible assets such as labor, capital and land, today in the modern knowledge-based company’s asset structure identifies these traditional elements as increasingly dependent on the effective utilization of knowledge and thereby knowledge-based asset management. The organizations have undergone evolution, and as a consequence the administration of intangible resources varies from tangible or financial resources. The following diagram shows the major differences between the traditional company’s asset structure and the modern knowledge-based company’s asset structure. Traditional Company’s Asset Structure Modern Knowledge-Based Company (Source: Lagu) There is a vast difference between the traditional company asset structure and the modern knowledge-based company’s asset structure. And the modern companies make use of these differences in order to enhance the efficiency in their operations. In the opinion of Andriessen (2004) (as cited in Volkov and Garanina), the most significant characteristic of knowledge-based economy that separates it from the traditional asset structure is that knowledge replaces labor and capital as fundamental resources in production and intangible assets forms an extensive portion of the value added of companies. The modern companies make use of the knowledge-based asset structure, as in today’s globalized economy, the knowledge element of the products and services grow rapidly and the concept of ownership of resource have been changing where knowledge exist in the head of employees. The concept of knowledge, in today’s globalized economy has a greater role to play in the evaluation of an organization’s operations as well as asset management. It acts as locomotive behind the success of every contemporary business firms, because as according to Mathi (2004), those successful organizations were backed by the continuous process of implementing innovations based on modern technologies on top of the knowledge, experience, and skill of their management and employees alike. Analysts hold the view that more than half of the American firms have moved forward with prop-active thinking and concentrated on the procurement and assessment of non-financial data. Thus, it is evident that, the value for an organization is created not just by the traditional assets which is in the tangible form, but heavily by the assets in the knowledge or intangible form. Moreover, about half of the effective investment strategies made by the current business organizations were rooted in existing knowledge-based assets. Such knowledge-based decisions allow the firms to make precise prediction about income and profitability of the firm in the future and the extent of value for shareholders thereof. Works Cited John, S Maria. Information Technology: Its Application On The Small Scale Industries Sector. Discovery Publishing House, 2003. Print. Lagu, Rajendra K. ‘Business Strategy and Operations Management’. Web 22 Dec 2011 http://www.genesis.iitm.ac.in/downloads/resources/strategy/Strategy_&_Management.pdf MacKechnie, Chris. ‘Information Technology & Its Role in the Modern Organization’. Chron.com. web 22 Dec 2011 McAulay, Kaye. “The Changing Role of Management in Information Systems Development”. Interfaces, (May - Jun., 1987). 17, (3): 47-53. Mathi, Kavindra. “Key Success Factors for Knowledge Management”. International Business Management & Consulting, (2004): 1-69. http://www.knowledgeboard.com/download/2087/KSFsforKnowledgeManagement.pdf Volkov, Dmitry and Garnina, Tatiana. Intangible Assets: Importance in the Knowledge-based economy and the role in value creation of a company. School of Management, Saint-Petersburg State University, Russia. Web 22 Dec 2011 www.ejkm.com/issue/download.html?idArticle=137 Read More