Information Technology as a Key to Strategic Management - Case Study Example

 Information Technology as a Key to Strategic Management 1.0 Introduction Over the last few decades, the business organizations seen to be recognizing the fact that the competitive pulls and pressures challenging the firms around the world call for a reorientation of the management practices around innovation and ingenuity. The adoption of relevant management practices need to expand across all aspects of a business, right from the suppliers to the end consumers. A dire need for competitiveness is motivating the companies to imbibe such management models that are simple, horizontal, and flexible and information driven (Betz 2001). Such models not only promise to reduce the manufacturing and marketing costs, but also appear to be more sensitive to consumer requirements and aspirations. Going by the global scale of contemporary business operations, there exist a very few companies, which have the wherewithal and the ability to singlehandedly create and manage the requisite value chains. Hence, the global organizations are making varied changes in their management practices. One such change is the introduction of information oriented management models and practices that not only are capable of responding promptly and aptly to change, but also allow the companies to optimally and efficiently use their resources and workforce to gain a competitive edge in the international markets (Betz 2001). Such practices enable the global companies to forge symbiotic links with multiple other organizations and concerns, thus allowing for increasing levels of efficiency and competitiveness. The current business scenario is utterly competitive and shifty, thereby making it problematic for the companies to secure adaptability and attempt realistic business forecasts. On the one side, the market pressures are nudging the businesses to be innovative and accurately respond to customer requirements by coming out with better products and services, yet on the other side, the existing hierarchical and predominantly manual models of strategic management simply fail to enable the businesses to predict the end results of the business decisions taken in a hurry (Allen 1994). Under such circumstances, information technology stands to be an enabling tool, which to a large extent allows and empowers the strategic managers to extend their vision and creativity beyond the existing shortcomings, barriers and constraints (Allen 1994). The present business environment is about innovation, adaptability, interdependence and collaboration. Therefore, information technology makes way for an efficient and accurate management of this adaptability and interdependence. Information technology is a handy tool that can not only lower the coordination costs within varied sub-sections of a business organization, but also has the capacity to allow for a well informed and seamless decision making and implementation along all the levels of a competition driven value chain (Betz 2001). The objective of this topic review is to elaborate on and analyze the reasons owing to which the information technology has emerged as a key to strategic management. This review also intends to grasp the dynamics of the current global business environment. It also culls out the reasons as to why businesses are increasingly resorting to using information driven tools in the sphere of strategic management and how these tools can favourably impact their performance and effectiveness. For this purpose, this review has resorted to the study and analysis of the relevant textual and online sources. 2.0 Main Section 2.1 The Reasons as to Why Information Technology has emerged as a Key to Strategic Management? A variety of reasons are responsible for the enhanced importance of information technology as a pivotal factor in strategic management. Some of the salient reasons are: 2.1.1 Emergence of Information as a Strategic Asset In the 21st century, information has emerged as an important strategic asset in international trade and business (Chatterji 2000). The competition in the contemporary markets is no more confined to big firms, but is always open to small companies, willing to exploit, analyze, package and market the relevant information (Chatterji 2000). Businesses have realized that their survival and sustenance to a great extent depends on their ability to access the right information at the right time. Moreover, they also need to be deft at processing and using the gathered and available information in a fast and effective manner. Such fast paced global markets simply cannot do without affiliating to information technology. Information technology is the tool that empowers the strategic managers to fast shift from a passive mode to a proactive and aggressive approach towards business (Chatterji 2000). In a strategic perspective, information technology performs a variety of functions. It facilitates the managers with pragmatic insights into the dynamics of targeted markets, before they leap for a full scale production (Hulser 1998). It helps the strategic managers identify the most suitable customers at the local and international level. Information technology helps the managers make important decisions regarding manufacturing, packaging, sales and marketing of products and services. Insightful processing of data aided by information technology makes the managers select the most competitive suppliers and inputs, leading to an enhanced efficiency and achievement of the economies of scale. In the last two decades, the demand for information and data generated by varied sources, institutions and organizations, is it the print and digital media, consultancy firms, financial institutions, statutory bodies and business companies has multiplied manifold. In such a deluge of information pertaining to global and local business trends, it becomes amply difficult for managers to arrive at broader and understandable conclusions (Hulser 1998). The supply and availability of the required business information at such a large scale could actually hamper businesses, unless not quantified and processed by the aid of information technology. Information technology helps the strategic managers to arrive at most apt and suitable business strategies and plans, by reducing the available data into easy to understand models, premises and conclusions (Hulser 1998). Information technology aided statistical analysis of unwieldy and bulky data helps the strategic managers readily come to terms with otherwise complex and diverse business realities (Hulser 1998). Information technology allows for a more suitable and organized approach towards information processing, thereby curtailing the wastage of scarce time, resources and manpower. It is courtesy the information technology that is responsible for transforming the otherwise cumbersome business data into a key strategic asset for modern businesses. 2.1.2 Globalization Globalization is the other important factor that has augmented the stakes of information technology in strategic management. Globalization has done away with the constraints imposed by borders and territories. Wireless telephony, fax and the internet have radically transformed the way businesses plan, operate and manage. For the companies to operate in an international business environment, requires the inculcation and development of global platforms pertaining to product development, manufacturing, marketing and supply chain management (Stephens 1999). In the current times, almost all the competition oriented companies simply cannot do without introducing a transnational element in some or all aspects of their business operations. Global business arrangements like mergers, acquisitions, joint ventures and strategic partnerships have further consolidated the validity of information technology in the strategic management of businesses (Stephens 1999). Operating at a global scale calls for the dilution of time and space related discrepancies at levels in a business, be it at the suppliers’ level, in manufacturing or at the consumer end. Sans information technology, it is next to impossible for the strategic managers in a company, to make its transnational operations operate in tandem and close coordination. In fact, information technology is the single most important tool that helps the strategy oriented companies to evolve from being local entities to real multinational corporations (Corbitt 2003). Information technology not only helps the managers to package and transfer information and data to their operations scattered around the world, but also drastically minimizes the cost of coordinating these operations (Corbitt 2003). It helps the strategic managers to integrate and outsources their procurement, manufacturing, marketing and logistics operations in a cost effective and competitive manner. It goes without saying that before the dawn of information era, businesses were certainly not devoid of effective strategies and processes. Yet, information technology has turned out to be a great enabler in the sense that it has multiplied the options open to strategic managers by allowing for multiple permutations and combination of the already existing options (Brady 2003). Modern manufacturing practices and trends like just-in-time and lean manufacturing simply cannot do in the absence of information technology. According to Brady, information technology has helped business accelerate the pace of their international operations (2003). Stephens holds that information technology has made way for the division of labour in the true sense of the term (1999). The crux of all strategic management is to maximize returns on investment in a legal and ethical manner. In that context, information technology has enabled the investors and businesses to seamlessly expand their business operations in such territories as offer maximum returns on their capital. Going by this perspective, information technology could also be considered to be a potent strategic multiplier, besides being a cost effective coordination, analysis, communication and planning tool. This tool has not only increased the influx and outflow of profitable ideas in the global organizations, but has also facilitated an informed statistical analysis of the prospective ideas and strategies. 2.1.3 Information Technology Revolution The relevance of a technology simply cannot be estimated, until that technology is put to practical use (Friedman 2005). Strangely, information technology revolution is one major and essential factor that has enhanced the relevance of IT in strategic management. Information technology has placed an alternative option before the companies, pertaining to the way they can manage and run their operations (Friedman 2005). A way that is much faster, all pervasive, cost effective and ultra-efficient. At the very onset of information revolution, businesses got access to very innovative and enabling technologies. However, their importance to strategic management was still constrained owing to their high cost and complexity. With the passage of time, information driven tools and solutions started to get more affordable, user friendly and efficient. Today, businesses, both big and small, have ready access to high performance, low cost, and easily customizable information tools and solutions. Besides, the overall IT infrastructure around the world is getting universally accessible, efficient and economic (Friedman 2005). Strategic management being a cross functional discipline, information technology is an option that is readily compatible with its multifaceted requirements. One other aspect of information technology revolution is that it has drastically shifted from bulky and centralized platforms to widely distributed locations (Friedman 2005). Businesses today are no more required to save, access, analyze and process data and information at a centralized or localized focal point. Companies today are very capable of extending and implementing their information driven solutions and strategies at almost all levels in their value chain. At present, it is practically possible and feasible to install and operate equally versatile and capable IT platforms, right from the supplier side to manufacturing, logistics, marketing and eventually at the end user level (Friedman 2005). As a strategic manager by necessity is required to have an insight into all the aspects of a business, information technology revolution has provided the strategic managers with a tool that is almost all pervasive, very flexible and highly manoeuvrable. In this context, it would not be wrong to claim that information revolution was the thing that the strategic managers around the globe were ardently waiting to happen (Khosrowpour 2001). Globalization and information technology revolution both constituted a propitious cycle, in which one sustained the other, while at the same time being dependent on it (Khosrowpour 2001). Information technology revolution, hence, totally revolutionized the way organizations coordinated and communicated at both horizontal and vertical level. So much so, information technology revolution has paved the way for the ultimate in strategic management, which is the creation of virtual companies that solely focus on managing their fundamental strategic asset that is their intellectual property, while delegating the associated responsibilities to peripheral partners and contractors located around the world. One other development that leveraged the relevance of information technology as a strategic tool is the rising compatibility amongst the information oriented solutions, both at the hardware and software level (Friedman 2005). This brought in the concept of end to end information solutions that made it feasible to bind the varied aspects of business operations, scattered across organizations and locations, through a single digital loop (Friedman 2005). This paved the way for a scenario in which the strategic managers could chalk out plans, implement decisions and collect feedback by adhering to an integrated digital network (Gupta 1992). This eased the scope of strategic management by consolidating the systems and operations into an integrated whole, that earlier seemed scattered, divergent and complex (Mukhopadhyay, Kekre & Kalathur 1995). Information technology has today enabled the managers to shift from a helicopter vision mode to a tunnel vision mode in a matter of seconds. 2.1.4 Need for Competitiveness If the information technology has benefitted business, it has also give way to varied challenges and obstacles to be crossed. Information technology has empowered the customer like never before. Not only the customers have access to multiple providers of similar goods and services, an enhanced ability to choose has made them seek products with better features and reasonable prices (Wagner & Yezril 1999). This has exponentially increased the need for staying competitive. On the other side, the shareholders are increasingly pushing the companies to shed the unnecessary flab and stick to processes and operations that lead to value addition. In a scenario of growing competitiveness, innovation became a key for the strategic planners to assure sustenance and market success (Tansey 2002). Information technology with its innate flexibility and versatility, offered an opportunity to enhance their productivity by customizing it to their specific needs. Information technology offered the platform on which the strategic managers of the era could unleash their initiative and creativity (Tansey 2002). Information technology in fact drastically changed the nature of intense R&D needed to quench the customer need for better and diverse products (Tansey 2002). Information technology helped the strategic managers to shift the scope of manufacturing from being essentially labour based to primarily capital based. It also helped the interested companies to cope with the change associated with the technological innovations. The best thing about the information revolution is that it not only fostered a parallel development of technologies and skills in all aspects of business, but also made way for a practical and cost effective adaptation of these technologies to strategic needs and requirements of the evolving enterprises (Opstal 2001). It enabled the small and ambitious companies to offer a stiff competition to the existing giants, by being innovative and technology driven. It allowed the businesses to build on their strategic capabilities by assuring better productivity and sustainability through the creation of backward and forward linkages in the value chain. Information technology extended the scope of customer service by enabling the companies to go beyond product delivery, to the rendering of value added services in a pre and post sales scenario (Crane & Mayer 2003). It made the strategy oriented companies to carry on and forward their influence right from the warehouse to the minds and hearts of the end users. The one other hallmark of information technology in a competitive scenario was the free access to strategic intelligence (Wagner & Yezril 1999). It gave way to an open information environment, in which businesses not only had a ready access to the vital statistics and data related to their customers and competitors, but also had the tools, wherewithal and options to exploit that data to secure and edge over their rivals (Wagner & Yezril 1999). Business was no more confined to in house expertise and trade secrets, but was more dependent on the ability of the enterprises to deliver the best products at most affordable prices, backed by apt and prompt after sales service. 2.2 The Ways in which Information Technology can be used for Strategic Management If one is to summarize the contemporary business environment in one word, it would be ‘change’. So information technology is that strategic tool that can be exploited by the strategic managers to guide, manage and cope with organizational change and reorganization (Galup & Dattero 2000). While doing so, one simply cannot afford to fail to consider the fact that information technology in itself is today the primary precursor of organizational change and flux (Galup & Dattero 2000). In the times to come, businesses and organizations will be strategically required to go flat, by opting in favour of information technology supported automation and consolidation of business operations. This will certainly make way for the achievement of cost effectiveness and a further betterment of the primary and peripheral support functions within organizations. There is no denying the fact such strategic objectives are readily feasible through information technology as the modern IT solutions and networks are themselves consolidated and integrated in their scope and essence (Galup & Dattero 2000). In the current times, strategic managers have come to terms with the fact that a larger allocation of capital for information dependent solutions and networks, leads to enhanced efficiency and a reduction in the operating costs in the long run. Considering the existing complex, yet dynamic business environment, corporations need to adapt and innovate at a fast pace. In such dynamics, businesses ought to be very flexible and open regarding the structure of their organizational framework (Marchewka & Towell 2000). Individual enterprises, no matter how innovative or big, simply lack the resources and means to operate in a global environment that is complicated and dynamic at one and the same time. Revolutionary technologies and fickle market trends are forcing the organizations to rethink and reinvent the relationships, both within and with external organizations (Marchewka & Towell 2000). Businesses have finally arrived at the conclusion that it is strategically saner to accept disintegration and the accompanying interdependence on the external organizations. As the businesses today are connected in terms of environmental parameters and influences, thus, interconnectedness is the way to sustainability and growth. As a result, information technology has favoured the rising trend towards network structures, which allow the constituent organizations to simply focus on what they are really good at and what enforces their market competitiveness (M2 Presswire 2000). In such loose and flexible corporate frameworks, information networks constitute the primary backbone, which help the varied constituents and organizations to benefit from their joint pool of resources and expertise (M2 Presswire 2000). This trend to a great extent validates the view of Quinn, Doorley and Paquette (1990) that the organizations which focus on developing and delivering services, that could better be managed and delivered by external organizations and strategic partners, are in fact working towards shrinking their competitive edge in the markets. Thus, an information technology aided business environment is essentially interdependent, symbiotic and competitive. Crises management is other area of strategic planning, where information technology could be of immense use (Moore & Seymour 2005). Information technology allows for a systematic and organized management of material and human resources. It is the primary input that ushers in an element of safety and predictability at manufacturing and logistics facilities (Moore & Seymour 2005). Information technology helps in a methodical monitoring of resources, a mismanagement of which could give way to safety lapses. Information driven monitoring tools and devices also help in generating advance warnings, which if heeded to could help limit a crises like situation much before the actual build-up takes place (Moore & Seymour 2005). The very reliability and predictability of information networks make them an ideal resource to tackle crises like scenarios. The other area of strategic management, where information technology has worked wonders is the quality control and benchmarking. Information systems and networks allow for the setting of goals and quantification of organizational productivity, in consonance with the top level global parameters and industry practices (Stapenhurst 2009). Information technology facilitates meaningful insights into prevalent decision making processes and an informed comparison of those processes with those being pursued by the competitors (Stapenhurst 2009). The data generated by the information networks aids the evaluation and analysis of the performance standards within organizations. 3.0 Conclusion Almost, none of the textual sources studied and analyzed for this review, pointed towards any contradictions between the aims and objectives of strategic management and the essentials of information technology. Information technology is a cost effective and efficient tool that could be used by strategy driven organizations to achieve their objectives. There is nothing in information technology that is at least directly enforceable on business organizations, and it is open to the voluntary choice of corporations to use or avoid it. Globalization and information revolution are co-dependent phenomenon, each influencing the other. Businesses simply cannot remain unaffected by them. Information technology has something to contribute to almost all the aspects of business operations. In today’s interconnected world, information technology has facilitated the businesses with varied strategic permutations and combinations, which enable and allow them to be competitive, while assuring sustenance and survival. Word Count: 3500 References Allen, Thomas J 1994, Information Technology and the Corporation of the 1990s, Oxford University Press, New York. Betz, Frederick 2001, Executive Strategy: Strategic Management and Information Technology, John Wiley & Sons, New York. Brady, Mairead 2003, ‘Managing Information Technology Assimilation: A Marketing Perspective’, Irish Journal of Management, Vol. 24, no. 1, pp. 125-128. Chatterji, Deb 2000, ‘Strategic Impact of Information Age’, Research Technology Management, Vol. 43, no. 1, pp. 35-37. Corbitt, Terry 2003, ‘Information Management’, Management Services, Vol. 47, no. 3, pp. 20-25. 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