The Digital Revolution - Research Paper Example

The Digital Revolution Digital Convergence The digital revolution has brought about global convergence of industries and markets. Yoffie (1997) defines convergence as the integration and unification of all the functions of the telephone, television and computer. Yoffie (1997) identifies several drivers for digital convergence in industries and marketplace including digital and communication technologies, government deregulation and development of managerial creativity. Digital convergence has several implications for industries and markets (Yoffie, 1997). Firstly, it eliminates the various barriers to entry through dilution of product differentiation. Secondly, in an attempt to benefit from digital convergence, firms engage in strategic partnerships and alliances, which ultimately reduce rivalry and competition in the industry. The Innovator’s Dilemma The innovators dilemma relates to the various challenges faced by firms following the emergency of revolutionary technology (Christensen, 2013). The large format disk industry, which used to produce 14-inch disk drives for use on mainframe computers, engaged in continuous innovation and improvement with the goal of compressing huge densities of data on smaller inches of disk space. However, the industry suffered significantly with the advent of personal computers which required less sophisticated hard disk drives and whose major focus was on cost optimization and not space optimization, as pursued by the large format disks. Unfortunately, the large format disks industries went out of business because they failed to innovate in order to develop appropriate disk size for personal computers. Blackberry is another firm, which had established itself as a technological disruptor in provision of wireless data by pushing paging couriers out of the industry, but later fell victim to the same technological revolutions, following the development of the Smartphone by Apple and the entry of Google into the industry. Corso and Luisa (2007) observe that in order for firms to overcome the innovator’s dilemma, they must develop excellence in meeting customers’ current needs while anticipating their future needs. Company Websites and E-commerce Company websites may employ domestic or global strategies in their e-commerce transactions (Bajaj, Debjani & Kamlesh, 2005). Websites with a domestic e-commerce strategy main seek to serve businesses and customers within the geographical boundaries of a country. In contrast, Bajaj, Debjani & Kamlesh observe that websites with a global focus aim towards promoting transactions between customers and businesses across global and international markets. Firms implementing global e-commerce need to address financial issues, legal issues and market access challenges such as cultural differences and language barriers. There are three main classifications for websites, namely transaction, promotion and content sites (Bajaj, Debjani & Kamlesh, 2005). Transaction sites are websites designed to enhance virtual or online transactions. This is mostly applicable for online business ventures that do not have the traditional brick and mortar model or any other physical presence. This site is more appropriate for businesses dealing with specialized product categories. Promotional sites are those designed specifically for information and communication purposes with the aim of supplementing marketing activities and strengthening relationships. It is appropriate for companies seeking to develop global presence and develop new channels of communication. Lastly, content websites are designed to provide customers and prospects with accurate and reliable content to aid in their buying process. These websites contain content such as company and product information, personnel and management contact information, product capabilities, technical information, among other significant information. Current Trends for Internet Businesses Trends in digital revolution have made it increasingly possible for small and medium enterprises (SME’s) to expand their market share. Treyger (2014) explores some of the current trends for internet businesses, which can be leveraged by SME’s. Firstly, the increasing development of online customer relationship management (CRM) tools and software such as Hubspot and SalesForce enables businesses effectively manage their customer base and facilitating business growth. These tools have the potential of improving ecommerce businesses and increasing customer online experience. Secondly, the emerging trends in content marketing enable businesses to share valuable information with customers and prospects. Content marketing has the potential of building trust, loyalty and driving organizations communication strategies. Thirdly, the development of online payment systems by firms such as PayPal and Google are increasingly reducing the need for people to use cash while transacting. The ability to engage in online and mobile money transfer has the potential of increasing the number and value of transactions, reducing the payment process and increasing customer online buying experience. References Bajaj, K.K., Debjani, N. & Kamlesh, K.B. (2005). E-Commerce.USA :Tata McGraw-Hill ` Education Christensen, C. (2013). The Innovator’s Dilemma: When New Technologies Cause Great Firms ` to Fail.USA: Harvard Business Review Press Corso, M. & Luisa, P. (2007). Continuous and discontinuous innovation: Overcoming the ` innovator’s dilemma. Creativity and innovation management, 16(4): 333-347 Treyger, V. (Jan. 19, 2014). 5 internet trends you need to take advantage of as a small business ` owner. Retrieved on June 6, 2014 from http://www.business2community.com/small-` business/5-internet-trends-need-take-advantage-small-business-owner-0744492#!Vj6fp Yoffie, D. B. (1997). Introduction: CHESS and Competing in the Age of Digital Convergence. ` In D.B., Yoffie (Ed.), Competing in the Age of Digital Convergence (pp. 1-35). Boston: ` Harvard Business School Press. Competitive Advantage In his study, Porter (1985) identified five key competitive forces, which determined the structure and organization of the market and industry. These forces include competitive rivalry existing within the specific industry, the threat of new entrants to the industry, the bargaining power of sellers or suppers, the bargaining power of buyers and threats of new substitutes. Porter (1985) developed a generic model for competitive strategies, which he classified as cost leadership strategy, differentiation strategy and focus strategy. A firm that seeks to gain competitive advantage using the cost leadership strategy aims towards optimizing the cost of production so that it delivers the product or service at a relatively lower price than that offered by competitors. Firms could also gain competitive advantage by implementing the differentiation strategy. Firms implement this strategy by developing unique offering in the industry that addresses the specific needs of the consumers. Further, firms could achieve competitiveness by implementing the focus strategy. Firms implementing the focus strategy seek to develop competencies in one or more market segments. Porters competitive model has however been criticized due to its inherent limitations. Firstly, the model assumes a perfect market with many buyers and sellers, homogeneous products, freedom of entry and exit and perfect information. The model is therefore not applicable in imperfect markets. Secondly, the model can only be applied in industries with simple market structures. Thirdly, the model assumes that the market structure is static over time. Hamel and Prahalad (1994) proposed an alternative competitive advantage model, which they referred to as the core competence model. Unlike Porter’s competitive model, Hamel and Prahalad model assumed an inside-out approach to development of corporate strategies. While Porter emphasized on the need for situational analysis of the market, competition and customers as the starting point for strategy formulation, Hamel and Prahalad argued that competitive strategies depended on the core competence and strength of the firm to deliver products at a lower cost and faster than the rival firms. The advantage of this framework is that it enables firms to focus on their strategic intent and innovative competencies. Firms may develop strategies that undermine competitors, change engagement rules or collaborate with them thus taking advantage of key strategic resources. The main weakness of this model is that it does not provide a clear framework by which firms can determine their core competencies. The model also assumes that firms will achieve success by merely having a winning obsession, which may not be possible it collaborates with the losing firms. Porter (1990) identified four competitive variables, which determined national advantage. Factor conditions include capital, weather, labor, location, and natural resources. Demand conditions comprise size, composition and growth potential of domestic demand. Related and supporting industries relates to the presence of global and multinational firms, which increases domestic competition. Finally, the firms strategy, structure and industry relates to the specific strategies adopted by firms in the industry. Porter argued that the role of the government was to proactively catalyze the relationship among the four factors and encourage firms to attain competitiveness. The US education system attracts a broad and diverse set of scholars in all fields across the world. These talented scholars tend to develop a liking for US companies and have a high probability of working in the US (George, 2012). Increased demand for iPhones in the US domestic market has prompted Apple Corporation to improve their designs thus increasing competitiveness both in the local and international markets. Similarly, the domestic rivalry in the Smartphone industry between iPhones and Android further promotes radical and continuous innovation within these firms thus improving the national competitive advantage of the US. Coca-cola has been able to thrive because of its global sourcing strategy, which enables it to recruits global leaders and executives outside the US segment. George further observes that Nestle and Unilever transferred their research and development function into the United States to take advantage of the wide pool of talented employees. References George, B. (March 2, 2012). Developing global leaders in America’s competitive advantage. ` Retrieved on June 6, 2014 from http://blogs.hbr.org/2012/03/developing-global-leaders-` is-a/ Hamel, G. & Prahalad, C. K. (1994). Competing for the Future. Boston: Harvard Business ` School Press. Porter, M. E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. ` New York: Free Press Porter, M.E. (1990). The Competitive Advantage of Nations. New York: The Free Press. Leadership, Organization and Social Responsibility Hitt, Barbara and Emre (2003) observe that in order to perform effectively now and in future, leaders in global enterprises must develop understanding, trust and rich social capital. Building strong internal relationships is therefore fundamental in developing social capital and attaining global competitiveness (Prewitt, Richard & Anthony, 2011). Pepsi has a diverse and highly experienced management team working in a flexible organization structure, which is aligned with the firm’s vision for growth. Similarly, Prewitt, Richard & Anthony observe that global leaders must be able to develop strong relationship with external stakeholders, which are achieved through strategic alliances. These alliances are important because they promote knowledge and skill transfer, encourage sharing of strategic resources, promote creativity and ultimately improve the firm’s innovativeness. Coca-cola has developed a dynamic vision, which seeks to align the company with its strategic bottling partners with the goal of improving global business performance. Rentfrow (2007) argues that effective leaders in the global business context assume three strategic leadership styles, which include creating vision and mobilizing people towards attaining it, serving others through creation of strong emotional bonds and effectively leading others towards a common goal. Unilever’s leadership strategy is threefold in nature, entailing development of a strong growth vision, defining and implementing the various drivers for growth, and enhancing employee commitment to the growth strategy through team leadership and strategic influence. Alternative Global Organization Structures Global Functional Organization Structure This organization structure involves organizing the business based on the various functional areas such as marketing, production, finance, research and development among other important functions (Griffin & Gregory, 2009). The main advantage is that it allows for tight control on all the important functional areas across the world. In addition, this type of organization allows the global firm to employ a few skilled employees to bring out competitive advantages in the major functional areas. However, this organization structure may not be suitable for firms dealing in multiple product lines and which have established presence in different geographical regions. Secondly, this structure experiences coordination challenges because of the separation of the various functional areas such as finance, distribution, manufacturing and marketing. The Global Geographic Structure This structure organizes the company based on the geographical regions in which it operates, with every division having the product and functional area responsibility while the overall global strategy is centralized (Griffin & Gregory, 2009). The structure is mainly suitable for mature businesses dealing with narrow product lines with diversified geographical operations. It is also advantageous for firms dealing in standardized products across the world. It allows the firm to differentiate business strategies based on the local, regional and global market characteristics and enables effective development of the marketing mix programs. This structure is however not suitable because it promotes duplication product and functional roles, which may ultimately increase the operational costs. Furthermore, the regional manager’s focus on operations and performance may hinder the effective flow of relevant information to the headquarters. Lastly but not the least, this structure may not be effective for firms dealing with diverse and wider product lines. Global Product Structure Global companies with a wider product line implement this organization structure, where each product division has a global responsibility for design, research and development, production and marketing of a specific product line (Griffin & Gregory, 2009). This structure works best when the company deals with highly diversified products, when the products require differing marketing mix approaches and when the product is highly technical. This structure allows each transfer of knowledge and technology across various divisions. It also promotes functional integration for research and development, production and marketing across the globe thus increasing efficiency in cost management. However, this organization structure may create duplication roles and responsibilities across the various product divisions. It may also create challenges in integration and coordination of the various activities of subsidiaries in the same region. Global Matrix Structure This structure employs a three-dimensional approach by integrating the functional, geographical and product structures to achieve a greater effect (Griffin & Gregory, 2009). Under this organization, structural power and responsibility are shared among the product, geographic and functional areas. The main advantage of this structure is that it allows for global coordination and responsiveness for the various environmental factors. However, duplication in roles and reporting frameworks may cause confusions and disputes. In addition, decision making under this structure is time consuming and costly. Corporate Social Responsibility According to Moon (2004), CSR is a complex concept that incorporates other concepts of corporate governance, corporate citizenship, social, corporate and environmental accountability and business ethics. Fernando (2011) observes that CSR is a contemporary approach to business management with a triple-bottom line perspective, which seeks to satisfy three key objectives, namely meeting the expectations of the people (employees and shareholders), the business profit making motives and the sustainability of the society and environment. Fernando observes that implementation of CSR initiatives is beneficial to firms in a number of different ways. Firstly, it enables the firm to increase market share and sales turnover. Secondly, CSR enables firms too attract, retain and motivate highly skilled and specialized employees. Thirdly, focus on environment enables the community and the natural environments to benefit from the business initiatives. Finally, CSR has a strong motivation and appeal to other important business stakeholders. Rosam and Rob (2004), identifies seven steps for implementing organizational commitments to CSR. Firstly, the firm should adjust and integrate CSR initiatives and decisions within the organization structure to ensure that they are in line with its overall mission and strategies. Secondly, the firms should develop and implement an overall CSR business plan, which highlights the CSR commitments and strategy. Thirdly, the firms need to specify the CSR goals and targets and define their key performance indicators. Fourthly, the firm should be able to engage employees and other stakeholders in the formulation and implementation of the CSR initiatives and commitments. Fifthly, firms should engage in continuous training and education of its staff and employees regarding CSR issues and commitments. Sixthly, the firms need to develop appropriate mechanisms for auditing, monitoring, evaluating and reporting on any behavior that is contrary to CSR initiatives. Seventhly, firms should develop effective internal and external communication strategies for its CSR commitments and initiatives. References Fernando, A.C. (2011). Business Environment. New Delhi: Pearson Education India Griffin, R. & Gregory, M. (2009). Organization Behavior: Managing People and Organizations. ` USA: Cengage Learning Hitt, M.A., Barbara, W.K. & Emre, Y. (2003). Strategic leadership in global business ` organizations: Building trust and social capital. Advances in Global Leadership, 3(2003): ` 9-35 Maarten, V.B. & Grachev, M. (2010). Building Strategic Leadership Competencies: The Case ` of Unilever. International Journal of Leadership Studies, 5(3): 317-332 Moon, J. (2004). Government as a driver of corporate social responsibility. University of ` Nottingham, International Centre for Corporate Social Responsibility, Research paper ` Series. No. 20. Prewitt, J., Richard, W. & Anthony, M. (2011). Developing leadership in global and multi-` cultural organizations. International Journal of Business and Social Science, 2(13): 13-20 Rosam, I. & Rob, P. (2004). Implementing Effective Corporate Social Responsibility and ` Corporate Governance: A Guide. London: BSI British Standards Institution Read More