Role of IT in Contemporary Firms - Coursework Example

Name Institution Date Professor’s Name An information system (IT) is a systematized method for the collecting, organizing, storing and communication of data. It involves the study of a logical network that individuals and businesses use to gather, filter, and process, generate and dispense data. The information collected supports in decision making, coordination and control of operations in the business. It involves capturing raw data from the business or external environment, converting data gathered into meaningful form and disseminating the information to individuals or activities that use it. Firms use IT to improve their products and offer better services to their clients. Businesses due to competition have implemented the IT in the monitoring the materials for production, the flow of information and skills of the employee (Drnevich, & Croson, 2013). For instance, in the functional areas business process, IT is used in assembling the products, identifying clients, developing a financial system and in the hiring of the workers. Information technology thus facilitates business by increasing the efficiency of the existing operations through automation of processes. Secondly, it helps in enabling entirely new process by enhancing a change to information flow, replacing systematic steps with parallel steps, eliminating delays in decision making, and supporting new business structures (Ye & Wang, 2013). Types of information system They include intranet; which is an internal business website that is only accessible to the company’s employees. Extranet, this is a company site that is open for the particular external users like suppliers and vendors. The information technology is essential in different business sections such as marketing products, e-business, and information about institutions, competitors and among others. Thirdly, transactions processing system (TMS) helps in the performance and recording of the daily routines of the operational managers. The daily tasks may include revenues, order entry, payroll, and delivery. Secondly, TMS enable management to screen the status of processes and relationships with the external environment and to make timely decisions concerning the firm’s directions and goals (Drnevich, & Croson, 2013). The fourth type of IT is business intelligence system. It enables the managers to make improved decisions it includes management information system (MIS), decision support system (DSS) and executive support system (ESS). The middle management uses MIS in providing reports on the current business performance as well as offer an answer to routine problems with predefined procedures for solving them. DSS is used for no regular decision and may rely on external information from TPS and MIS. Finally, the administrative support system is utilized by the senior management in making none routine decisions that require judgment, evaluation, and insight. The enterprise systems, on the other hand, helps in the coordination of day to day activities, managing production, and inventory and in making decisions about daily operations and long term planning. The next type of IT is supply chain management systems. It contains data related to the orders, production, inventory levels, delivery of products and services. It aims at reducing the cost and delivery time for goods and services to the market (Ye & Wang, 2013). The customer relationship management system is a type of IT that avails information such as sales, marketing, and customer service. It assists the firm to identify, attract and keep profitable clients. Finally, knowledge management system, support processes for capturing and applying knowledge and expertise. Besides, it helps in collecting internal knowledge and skills in the firm and make it accessible to workers. KMS thus improves the performance of the company by ensuring the production of the superior products and services as well as their delivery to the customers. The competition and the dynamics of the current business environment necessitate the adoption of relevant IT for the firm to gain a competitive niche over its clients (Drnevich, & Croson, 2013). The management of the organization relies on team work of the employees and IT to achieve higher productivity of quality products through innovation. Thus, the customers’ satisfaction leading to sales growth. Consequently, improved financial performance as a result of sales growth and profitability. Collaboration technology helps in strategic planning, implementation, and operations of the businesses. Proper strategic planning and execution ensure improved business performance (Ye & Wang, 2013). The role of managers is to monitor and evaluate the performance of the business and make recommendations in areas that require change. They thus set the strategies to respond to the challenges that face the firm both from within and the external environment. The strategies may include the creation of new product and services or restructuring the organization. Businesses hence depend on information technology to create value for their operations. It creates value by raising the level of production, increasing the revenues and setting superior long-term strategic positioning (Ye & Wang, 2013). Notably, investing on information technology alone is not an assurance of good returns. A firm should spend on the people and on complementary assets too. The additional assets consist of organizational assets such as business model and processes. Secondly, managerial assets motivations for organization innovation and partnership and cooperative work environment. Lastly, communal assets that comprise the internet and telecommunication framework and technological standards (Ye & Wang, 2013). Role of IT in contemporary firms In modern businesses, significant business relationships are digitally enabled and mediated. Secondly, digital networks help in achieving critical business processes. Moreover, the data administrator digitally manages core corporate assets. IT provides greater flexibility in activities and management through time shifting and place shifting. Finally, firms adopting IT in their processes has led to growth in interdependence in the ability to apply information technology and ability to implement organizational strategies and attain organizational goals. The primary motives firms capitalize on IT is to realize the following business strategic goals; optimize its operations, new product, and service and business structure, build customer and supplier relationship, competitive positioning and for continued existence. The optimization of operations aims to improve efficiency to attain higher profitability. The implementation of technology does not only increase the level of production but also increase the effectiveness in the manufacture of quality goods and services. Better customer services lead to customer loyalty, which increases revenues and profits while the intimacy with the suppliers enables the firm to get valuable inputs at lower costs thus reducing the cost of production. Improved decision making; the data collected when properly analyzed allows the business to make decisions on the expected level of production, allocation of resources and ensures timely production and delivery of products to the market. Competitive advantage; firms invest in IT to attain a competitive advantage over its challengers in the industry. They achieve this by delivering better performance, selling quality products at affordable prices and keeping in touch with both the suppliers and customers. Lastly, survival, firms may invest I IT to remain relevant in the industry, for example, the use of ATM in the banking sector (Grant, 2016). They may also use IT as a regulatory requirement, for example, Toxic Substance Control Act. Just like labor and capital, IT is a factor of production and affects the quality and cost of information. It makes firms to downsize since it reduces the cost of the transaction. Trade theory explains that companies strive to minimize the cost of operating in the market. As a result, they integrate vertically. IT lowers market transaction cost making it easier for firms to do business with other companies through outsourcing instead of hiring more employees. Also, the urgency theory purports that the cost of supervision and management increases as the companies grow. IT lowers the urgency cost, enabling the firm to grow without adding the cost of employing more employees to supervise (Grant, 2016). IT allows contemporary businesses to develop competitive strategies. Michael Porter’s forces model recognizes that the business environment is in constant war for the market base and the resources for production. He identified that competitive forces to the company originate from the traditional competitors, the new entrants, substitute products and services customers bargaining power and the bargaining power of suppliers (Grant, 2016). The traditional competitors are businesses that have been serving the same market with the firm. With their innovative capacity, they can continuously devise new products and services as well as reduce the production cost of goods and services by adopting effective and efficient methods of production. The firm has to keep records of their trends and strive to be ahead of them regarding the implementation of modern technologies, quality of output and profitability. New entrants are firms that are launching into the industry for the first time. They reduce the company’s market share by supplying in the same market. Thirdly, the substitute products are products that customers can use in place of the firm’s goods and services. Businesses should ensure affordability and higher quality of its products to retain its market share. Organized customers may have an influence over the firm’s goods and services by setting price and quality standards of the company’s products. Consequently affecting the profit margins for the enterprise. Finally, the suppliers may change the cost of production by charging higher prices for the raw materials. A firm thus needs to keep relevant information about the suppliers to read their trends and keep them from supplying to the competitors (Grant, 2016). IT makes it possible for the company to implement the following generic strategies to deal with the competitive forces; low-cost leadership; the company may use this approach to produce goods and services at costs lower than the competitors. Product differentiation; creation of new brands that meet the requirements of different customers, for example, Nike, Apple. Market segmentation; the firm may use the information system to focus on a particular market and specialize, for instance, Hilton Hotels’ OnQ system, strengthen customer and supplier loyalty and raise the switching cost (Drnevich, & Croson, 2013). Until today, there is a lot of transformations in the way people conduct their businesses starting with the installation of internet networks including big data, data marts among others in the officers too. Most organizations have launched into e-commerce to advertise, get an order for their products and deliver to their customers. The e-commerce strategy expands the market share of the products thus increasing revenues from sales. The e-commerce has led to the creation of social shopping sites, wisdom crowds, crowdsourcing and the ease of predicting the market behavior about goods and services (Boone, & Kurtz, 2013). IT infrastructure is very crucial in the contemporary business. It remains the best competitive way of firms improving the cost and efficiency their production. However, the data must be reliable, confidential and readily available to ensure effective decision making in the organization. Reference Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. V. (2013). Digital business strategy: toward a next generation of insights. Boone, L. E., & Kurtz, D. L. (2013). Contemporary marketing. Cengage learning. Drnevich, P. L., & Croson, D. C. (2013). Information technology and business-level strategy: Toward an integrated theoretical perspective. Mis Quarterly, 37(2). Grant, R. M. (2016). Contemporary Strategy Analysis Text Only. John Wiley & Sons. Ye, F., & Wang, Z. (2013). Effects of information technology alignment and information sharing on supply chain operational performance. Computers & Industrial Engineering, 65(3), 370-377. Read More