The Effects of Globalization on Organizations - Assignment Example

? Given the dynamism of today’s market and the ever increasing degree of competition globally, produce a critical assessment of the role of IT in generating competitive advantage. Executive Summary The effects of globalization on organizations have been extensively studied by researchers and academics worldwide. The most common problem when exploring the above issue is the following one: globalization is not related to a specific activity or plan. In this way, it is possible that certain initiatives are considered as related to globalization while no such issue exists. In regard specifically to the business sector, the involvement of certain business tools and frameworks in the promotion of globalization seems to be extended. Reference can be made, for example, to the information systems, in all their forms. Information systems are highly related to globalization. Moreover, these systems are likely to be used by business worldwide as a tool for acquiring competitive advantage. The above role of information systems is presented in this paper. The Porter Five Forces model is used for explaining the involvement of information systems in the increase of business competitiveness, both locally and globally. Table of contents Executive Summary 2 1. Introduction 4 2. IT and competitive advantage 4 2.1 Effects of globalization on business – information systems and their relationship to globalization 4 2.2 Business processes and their relationship to information systems 7 2.3 Evaluation of the use of information systems as tools for increasing business competitiveness – Porter’s Five Forces model 10 3. Conclusion 12 References 14 Appendix 15 1. Introduction Aligning business processes with organizational objects is one of the most critical challenges that organizational leaders worldwide have to face. On the other hand, business processes are not standardized. Rather, they have to be changed continuously so that they can keep the organizational competitiveness high. Information systems can be considered as a tool that help business processes to achieve the above target. In practice, the use of information systems in organizations has been related to globalization. This view can be considered as justified if taking into consideration the following fact: information systems have been expanded across business activities of all sectors mostly because certain businesses have emphasized on the particular systems. Since the role of information systems in enhancing organizational profits and improving businesses processes has been made clear, the popularity of these systems worldwide has been increased. The relationship between information systems and globalization is examined in this paper. Particular emphasis is given on the potential use of information systems for achieving competitive advantage. It is proved that, indeed, information systems can play such role. However, it is necessary for the involvement of these systems in organizational activities to be carefully planned and monitored, otherwise the relevant plan will be led to a failure, either in the short or the long term. 2. IT and competitive advantage 2.1 Effects of globalization on business – information systems and their relationship to globalization. The high value of information systems for the development of business activities cannot be ignored. In order to understand the involvement of information systems in modern organizations it would be necessary to refer primarily to the effects of globalization on businesses; then, the role of information systems in supporting business activities could be understood. Modern market is characterized by a ‘global integration’ (Walker 2004, p.171). This means that a firm can survive in the global market only if it is able to strengthen its processes so that they can secure the firm’s competitiveness towards its rivals (Walker 2004, p.171). At the same time, Doole and Lowe (2005) that globalization has set a new challenge for all businesses: instead of trying to keep their existing market position, businesses tend to seek for continuous expansion, trying to develop a strong presence towards their competitors (Doole and Lowe 2005, p.139). Hitt, Ireland and Hoskisson (2010) note that expanding in the global market has become necessary for many organizations; still, it seems that the specific initiative can hide many risks, at the level that foreign enterprises are often treated differently than domestic firms (Hitt, Ireland and Hoskisson 2010, 230). The latter can enjoy a series of advantages, a fact that makes the internationalization of business less attractive (Hitt, Ireland and Hoskisson 2010, 230). Also, the potential response of consumers to the products/ services of a foreign firm need to be taken into consideration by a firm’s managers before deciding the entrance of their market in a foreign market (Hitt, Ireland and Hoskisson 2010, 230). Still, the value of internationalization for increasing a firm’s competitiveness cannot be doubted (Hitt, Ireland and Hoskisson 2010, 230). The use of information systems as tools for supporting such plans would be further explored. At this point, it would be necessary to discuss the relationship between information systems and globalization. Information systems help organizations to monitor the practices of competitors and the market trends, either locally or internationally (Stair and Reynolds 2011). Indeed, it is through information systems that firms can have access to the annual reports of their competitors, the reports that have been developed in regard to the industry they operate and the statistics that present customer responses to specific products and services (Oz 2008). In this way, through information systems businesses become familiar to global business practices and to the methods used by their rivals for managing various business challenges (Khosrowpour 1999). On the other hand, information systems are highly depended on the World Wide Web. In fact, it is quite difficult to consider of business networks that do not have access to the Internet; such networks would not have any value as they would not allow the use of a high range of communication channels that are available only through the Internet, meaning especially the social media (Schermerhorn 2009). According to the above, information systems promote globalization since they offer access to trends and practices developed worldwide (Schwalbe 2010). At the next level, each firm that needs to secure its competitiveness has to take into consideration these trends and practices (Schwalbe 2010). Through this activity, globalization is highly promoted while the dependency of businesses on information systems is continuously increased. The introduction of strategies such as the development of a central database for storing the data related to all organizational departments is a reflection of the influence of firms by practices held in the global market. In other words, the promotion of globalization by information systems may not be direct but it can be also denoted through the use of IT management plans that are quite popular globally, as explained below. 2.2 Business processes and their relationship to information systems – Information systems as sources of competitive advantage Firms that need to secure their competitiveness have to use information systems in most of their processes, especially those related to communication and customer service (Walker 2004, p.171). It has been proved that information systems can help businesses to decrease the time required for managing customer requests and for checking their resources (Walker 2004 p.171). In addition, information systems help organizations to improve their brand image, attracting more customers both locally and globally (Walker 2004, p.171). It has been also revealed that information systems can help managers to identify potential gaps in regard to internal processes (Walker 2004, p.171). For example, through a data warehousing database, managers can check whether the time required for the replacement of stock is long or not (Walker 2004, p.171). Also, through information systems, HR managers can check the performance of employees in regard to tasks assigned to them (Walker 2004, p.171). Under these terms, a high range of information systems is available to organizations operating in different sectors. Another aspect of the role of information systems as sources of competitive advantage for modern businesses is the following one: information systems are used for managing data referring to the various businesses activities. Towards this direction central databases are developed which are used for data storage; data can be retrieved through these databases and processed according to the need of each organization (Clarke 2012). Also, information systems are used in organizations for communication and marketing purposes. In order to respond to the communication needs of a particular organization IT managers use appropriately customized IT networks that usually have two forms: intranet and extranet, so that communication is appropriately promoted both internally and externally, i.e. with customers, suppliers and the public in general (Clarke 2012). As tools of marketing, information systems are also important. In fact, it is through the website of each organization that customers and the public can be informed on existing and future products/ services (Clarke 2012). Also, through social media, a feature available through information systems, the firm can improve its brand image and increase its customer base at a significant level (Clarke 2012). In Graph 1 (Appendix) the various aspects of information systems, as sources of competitive advantages are presented. According to the above graph, not all aspects of information systems have the same power in supporting a firm’s competitiveness. The IT/ Management Consultant of a firm seems to be more capable, at a percentage of 23%, in helping his firm to acquire competitive advantage. The corporate IT specialist is at the second place as of his power to increase a firm’s competitiveness; the relevant percentage is 15% (Graph 1, Appendix). It should be noted though that most of the aspects of information systems that contribute in the acquisition of competitive advantage by organizations are not known, representing a percentage of 27% (Graph 1, Appendix). The above percentage proves that there are, still, many aspects of information systems, as parts of organizational environment, that they are still not fully explored. Graph 1 (Appendix) verifies that close relationship between information systems and business processes. In fact, through the above Graph it is made clear that information systems are related, more or less, to all business processes; still, the level of involvement of information systems in business processes is not standardized, meaning that in organizations the involvement of each one of the aspects of information systems, as presented in Graph 1, can be different depending on the market trends, the organizational culture and the resources available. In Graph 2 (Appendix), an information system for the development of online auctions is presented. The system’s structure, as presented in the particular graph, has been appropriately designed so that it is able to support the needs of the particular business activity. It is clear that the structure of each information system is not standardized; rather it needs to be aligned with the organizational objectives and resources, so that it is able to support effectively all organizational processes. The above assumption is further verified through Graph 3 (Appendix). In this graph another type of information system is presented: Computer Reservation Systems (Pemberton, Stonehouse and Barber, C., 2001). The particular information system promotes specific aspects of the organization, leading to the achievement of a series of benefits, as described in Graph 3. The strategies used by organizations in order to face global competition can highly vary. Czinkota and Ronkainen (2007) note that firms that wish to secure their position in the global market can choose among three strategies: ‘cost leadership, differentiation, focus’ (Czinkota and Ronkainen 2007, p.196). Towards the same direction, Lamb, Hair and McDaniel (2011) argue that the strategies used by firms in order to strengthen their competitiveness tend to change through the decades, so that they can respond to changing market trends. It is explained that in the past, keeping price low has been a popular strategy for achieving competitive advantage (Lamb, Hair and McDaniel 2011, p.133). Today, product quality has become the key criterion of strategic planning for organizations operating globally (Lamb, Hair and McDaniel 2011, p.133). Information systems can significantly help in achieving high product quality. The ways in which information systems can help in regard to this target are the following ones: a) research on new material used in products related to various sectors is based on information systems; for example, in the textile industry, information systems are used for checking the resistance of fabrics to weather conditions; b) information systems are used for receiving and categorizing the feedback of customers in regard to products sold and c) information systems are used for developing surveys that aim to identify the customers’ views on existing products and their proposals on changes required for the improvement of products (Rainer and Cegielski 2010). It is mostly in regard to the above issue that the involvement of information systems in businesses has become quite popular. According to the view of Rainer and Cegielski (2010) information systems can help organizations to achieve a competitive advantage through the introduction of products/ services that are innovative; in this way, the response of the consumers to these products is expected to be high. 2.3 Evaluation of the use of information systems as tools for increasing business competitiveness – Porter’s Five Forces model Porter’s Five Forces Model is commonly used in order to evaluate the forces that are likely to influence competition within each industry (Hill and Jones 2009, p.42). In the context of the above Model, each organization has to face Five Forces that impact the organization’s competitiveness in its industry (Graph 4, Appendix). In regard to the information systems and their use for the increase of organizational competitiveness, the Five Forces model of Porter could be analyzed as follows: a) risk related to new entrants; information systems are continuously developed; in fact, the rate of development of these systems is extremely high, at such level that it is quite difficult, in terms of the costs involved, for a business to update its information systems on a regular basis (Stair and Reynolds 2011). Through this point of view, the ability of information systems to secure an organization’s competitiveness is limited at the level that not all organizations are able to continuously compete their rivals as of the information systems involved in their operations (Stair and Reynolds 2011); b) risk related to suppliers; the information systems used in all businesses need regular maintenance since damages on the software or the hardware are common phenomena (Rainer and Cegielski 2010). In most cases, the parts of information systems can be retrieved in many suppliers. This means that the business that needs to replace one or more components/ parts of its information systems can choose a supplier that can offer the lower cost (Rainer and Cegielski 2010), c) risk related to customers; in the case of information systems, the term customers could be replace with the term users (Khosrowpour 1992). Information systems are highly exposed to many threats, such as damages from fraud, damages from malfunction of the systems’ software, damages from other events, such as the removal of information systems by a business through an action that is punished by the law (Khosrowpour 1992). In addition, information systems can suffer damages due to the inability of their users to understand the operational rules of these systems (Stair and Reynolds 2011). In all the above cases, the damages caused on the businesses involved can be extremely high, a fact that it is considered as a major disadvantage of information systems (Gupta and Malik 2005), d) risk from substitute products; information systems can highly vary as of their structure and components; as a result, it is quite easy for substitute products to appear in the particular industry (Gupta and Malik 2005). Reference can be made for example, to the telecommunication networks; a series of these networks has appeared in the global market, so that it is quite difficult for businesses to understand whether a substitute information system is of lower quality and performance from the original or not (Khosrowpour 2002); e) rivalry within the industry; the IT industry is a highly competitive industry (Stair and Reynolds 2011). It is often difficult to managers to decide whether they should invest on the update of their firm’s information systems or not since the expected benefits cannot be guaranteed (Gupta and Malik 2005). On the other hand, highly competitive firms have necessarily to update their information systems regularly otherwise their competitiveness will be severely threatened, either in the short or the long term (Gupta and Malik 2005). . 3. Conclusion The use of information systems in modern organizations can result to a series of benefits. At a first level, the value of these systems for all business processes cannot be ignored even if their performance has been often negatively criticized. Indeed, as already explained, information systems are related to a series of failures, either related to the system’s structure/ performance or to human intervention, such as in the cases of violation of these system’s security passwords. However, the importance of information systems for organizational competitiveness cannot be doubted. The literature published in this area, as analyzed above, has verified the unique role of information systems as source of competitive advantage. Moreover, the ways in which information systems can enhance organizational competitiveness vary, according to the business environment and the organizational objectives. At this point, the following question can appear: can information systems guarantee the increase of organizational competitiveness? The answer should be positive. Even if the failures related to information systems can be many, their expected benefits in regard to organizational competitiveness are significantly more even in industries that are highly competitive. References Atkins, M., 1998. The role of appropriability in sustaining competitive advantage—an electronic auction system case study. The Journal of Strategic Information Systems, 7(2): 131–152 Clarke, S., 2012. Information Systems Strategic Management: An Integrated Approach. 2nd ed. London: Routledge. Czinkota, M. and Ronkainen, I., 2007. International Marketing. 8th ed. Belmont: Cengage Learning. Doole, I. and Lowe, R., 2005. Strategic Marketing: Decisions in Global Markets. Belmont: Cengage Learning EMEA. Gupta, A. and Malik, A., 2005. Management Information Systems. New Delhi: Firewall Media. Hill, C. and Jones, G., 2009. Strategic Management Theory: An Integrated Approach Strategic Management Series. 9th ed. Belmont: Cengage Learning. Hitt, M., Ireland, D. and Hoskisson, R., 2010. Strategic Management: Competitiveness & Globalization: Concepts. 9th ed. Belmont: Cengage Learning. Khosrowpour, M., 2002. Issues and Trends of Information Technology Management in Contemporary Organizations: 2002 Information Resources Management Association International Conference, Seattle, Washington, USA, May 19-22, 2002. Hershey: Idea Group Inc (IGI). Khosrowpour, M., 1999. Managing Information Technology Resources in Organizations in the Next Millennium: 1999 Information Resources Management Association International Conference, Hershey, Pa, Usa, May 16-19, 1999. Hershey: Idea Group Inc (IGI). Khosrowpour, M., 1992. Emerging information technologies for competitive advantage and economic development: proceedings of 1992 Information Resources Management Association International Conference, Charleston, South Carolina, May 24-27, 1992. Hershey: Idea Group Inc (IGI). Lamb, C., Hair, J. and McDaniel, C., 2011. Essentials of Marketing. 7th ed. Belmont: Cengage Learning. Oz, E., 2008. Management Information Systems. 6th ed. Belmont: Cengage Learning. Pemberton, J., Stonehouse, G. and Barber, C., 2001. Competing with CRS-generated information in the airline industry. The Journal of Strategic Information Systems, 10(1): 59–76 Rainer, K., Cegielski, C., 2010. Introduction to Information Systems: Enabling and Transforming Business. 3rd ed. Hoboken: John Wiley & Sons. Schermerhorn, J., 2009. Exploring Management. 2nd ed. Hoboken: John Wiley & Sons. Schwalbe, K., 2010. Information Technology: Project Management. 6th ed. Belmont: Cengage Learning. Stair, R. and Reynolds, G., 2011. Fundamentals of Information Systems. 6th ed. Belmont: Cengage Learning. Walker, G., 2004. Modern Competitive Strategy. New York: McGraw-Hill International. Appendix Graph 1 – Competitive advantage for organizations through information systems (Source: http://www.cb.cityu.edu.hk/is/msbis/Career%20Prospects/) Graph 2 – An IT for electronic auctions (Source: Atkins 1998) Graph 3 - Computer Reservation Systems (CRSs) as sources of competitive advantage (Source: Pemberton, Stonehouse and Barber, C., 2001) Graph 4 – Porter’s Five Forces model (Source: http://maven.wordpress.com/2008/01/11/a-new-version-of-porters-five-forces-model/ from Porter M., Harvard Business Review, January 2008) Read More