Various technologies affect all major socio-economic sectors including transport, manufacturing, health, farming, education, communication, entertainment, and commerce, or business. The purpose of this paper is to discuss how information technology has influenced the way businesses to operate in a global environment and how businesses can create competitive advantages using information technology. It seeks to establish how Information Communication Technology (ICT) can be deployed to support new players in a global market where volume, scale, and specialization are a major feature. It also aims at finding out lessons that Australia should learn from Singapore in order to progress further up the global trading partner rankings.
How has information technology influenced the way businesses to operate in a global environment? How can businesses create a competitive advantage by using information technology?
Advancements made by man during the last half of the twentieth century in ICT have in a great way influenced not only the way man communicates at the national and international levels but also the way he carries out virtually all of his activities in all industries Friedman (2007). To be specific, the business has profoundly been impacted upon by ICT both at the domestic and global levels Friedman (2007).ICT has accelerated the process of globalization in a manner that no one had anticipated a few decades ago prompting experts in international politics and relations to lament that ICT components such as the internet is a real threat to the sovereignty and territorial integrity of independent nations.
Glenn (1993) argues that the proliferation of new technologies, particularly information and communication technologies has made globalization of the economy possible. In other words, it has made international business more widespread worldwide than ever before. This trend started in financial markets but it is now a reality in the goods and services markets. Glenn further asserts that information technology has led to increased cooperation among organizations and interconnections among companies making servicing, production, and Research and Development (R&D) spread faster worldwide at an unprecedented rate.
She further explains that R&D partnerships that are made possible by IT have in turn enhanced the business organization’s competitiveness by enabling them to bring together resources and skills to attain technological merit. Likewise, production and marketing partnerships facilitated by IT have enabled organizations to make use of their partner’s distribution arrangements and knowledge of local markets. Information technologies such as internet services facilitate business applications to communicate directly with one another without human intervention resulting in swift interactions amongst businesses at a global level (Glenn, 1993; Friedman, 2007).
Generally, doing business successfully at the international markets requires wide and in-depth knowledge in regard to cultural differences, politico-legal differences, commercial differences, and financial issues of the target global market (s). Unlike during the olden days, modern information and communication technologies have made access to knowledge about global markets for companies wishing to expand internationally easier and cheaper.
Information technology has enabled both big and small companies to explore and learn more about various markets that are far away from their home headquarters inexpensively and extensively. This has reduced barriers to entry into new global markets, especially for small and medium-sized enterprises. It has also enabled them to enjoy the economy of scale and multiplicity of consumer and production factors (Glenn, 1993; Friedman, 2007).
At the global level, IT provides numerous commercial benefits to business organizations by enabling them to cut down operational costs and thus increase their turnovers. For instance, relational database technologies, computer-aided designs, word processing software, spreadsheets as well as automation of manufacturing processes aided by information technologies among others have made business at the global level not only efficient but also cheaper (benmeadowcroft.com 2011). Extracting and accessing information about what customers really want and how to provide the same has been made easier. This has enabled many business organizations to improve their customer services in global markets thereby maximizing their profits.
IT has also influenced the way diversified global business organizations coordinate their business resources across several business units at the global level. As a result, many firms have been able to leverage the economic advantages of diversification through the use of the capabilities of Information technology, which facilitates excellent coordination and communication (benmeadowcroft.com 2011). This explains the great investments in IT by modern global firms that are highly diversified especially in interrelated lines of businesses (Information Resources Management Association and Khosrowpour, 2001).
In addition, IT has enabled firms operating at a global level to keep an eye on the performance of their businesses more efficiently and effectively than before the surge of new information and communication technologies (benmeadowcroft.com 2011). It has also enabled firms to identify and put emphasis on areas where they are not making appropriate and better use of their resources. Information technologies have also influenced the way companies to establish themselves in diverse and unique global markets by enabling them to build and develop high profile presence through advertisement in the various available media such as the internet and transistor-based televisions which reduces costs while increasing reliability (benmeadowcroft.com 2011).
Even though the rise of global markets has been vilified by some scholars for the increase of problems of data management, a feasible solution is seen by many in IT. For example, Carlyle in Information Resources Management Association and Khosrowpour (2001) contends that globalization of business intensifies the problem of getting the right data in the right amount at the right time and the right place. However, Information Systems such as electronic data interchange (EDI) and structured query languages has made it easier for IS executives of firms with operations at the global level to solve data problems (Information Resources Management Association and Khosrowpour, 2001).
Even though IT has the potential of influencing business operations positively at the global level in a manner that benefits the firms as well as their clients, its application is usually accompanied by a number of challenges which may be detrimental in various ways in regard to the smooth running of the business at the global level.
For instance, when firms are setting up their Information Systems abroad, they meet a host of challenges such as different and rigid government bureaucracies, lack of enough and well-qualified systems and support engineers, poor quality communication equipment, and difficulties in obtaining emergency services (Information Resources Management Association and Khosrowpour,2001). This may block the smooth running of the business at the global level for sometime thereby leading to not only financial losses but also loss of customers’ loyalty and trust.
Business organizations can create competitive advantages for themselves at the national and international levels through information technologies in various ways. “Information Technology has the potential to improve a company’s performance (Khosrowpour, 2001). Businesses can secure competitive advantage for themselves by using Information technologies to alter the nature of competition in their industries through changing industry structure or even shifting its boundaries.
They can use IT to attain competitive advantage by lowering costs and enhancing differentiation of shifting competitive scale (Information Resources Management Association and Khosrowpour, 2001).For instance, they can use information technologies to reduce costs of promoting and advertising their goods and services and ultimately lower the consumer costs carried down to the end users who will purchase the same high quality products and services at pocket friendly prices.
They can also use Information technologies of various kinds to establish superior customer services which guarantee them repeat buyers thereby expanding their client base which is critical to overall performance of an organization (Reponen, 2003). Business organizations can also use IT to build and develop long term beneficial relationships with their stakeholders including employees, customers, financiers, partners, suppliers, shareholders as well as authorities. Through E-mails and SMS, they can at all times inform their clients about their new products and services and the way they are positioned to satisfy their needs. Besides informing them about their new products and goods, they ca also inform them about their competitive prices.
Businesses can also attain a competitive advantage, for themselves through IT by using it to access information about various suppliers of materials needed for their business. This enables them to make better procurement decisions and access valuable raw materials cheaply thus lowering their cost of production. In turn, businesses are able to lower final prices of their end products or services thereby relieving the end users, who are always interested in high quality goods and services, from high prices.
Information technologies can also be used to create favorable working conditions for the employees, a feature which attracts highly talented and qualified personnel who bring their innovativeness and creativity to an organization enabling a business to differentiate its products and offer excellent customer services for maximum satisfaction. According to Porter and Miller cited in Information Resources Management Association and Khosrowpour, 2001), IT can be used to create new businesses by making new businesses or products technologically viable or by using existing information-processing capacity to start a new business.
Besides creating value and improving the competitiveness stance of a company directly, use of information technologies also influences all other organizational activities and relationships between and among them positively (Information Resources Management Association and Khosrowpour, 2001). Khosrowpour concludes that IS function is strategically important if it is useful to a firm‘s special areas of strategic focus and core competences. It is important to note that a company’s IS function is a core competence if it lowers operational costs and improves value-added appreciably, in a manner that outdo the company’s competitors at national and international markets.
However, it is similarly important to note that information technology and IS function is not vital to all companies operating in various industries. Therefore, in some firms and business processes information systems play only a minor role and do not offer a business organization a unique advantage over its competitors. This explains why firm managers are advised to investigate whether their IS function is a core competence or fundamental to one or more other core competencies.
Information Resources Management Association and Khosrowpour (2001), suggests that outsourcing should only be a choice if IS function of a firm is not a core competence or crucial to other core competences.
Information Communications Technology (ICT) has facilitated industries in gaining specialized knowledge and/or creating economies of scale – often supporting those already established as leaders of an industry. How can ICT be deployed to support new players in a global market where volume, scale and specialization are a feature?
Virtually all well established modern business organizations as well as new players in various industries have increasingly been seeking to expand their operations into global markets. Consequently, international trade has been stirred up and accelerated thanks to advancements made by man particularly in the area of Information and Communication Technologies (ICT) and other areas during 19th and 20th Centuries Friedman (2007).
Business organizations particularly from world’s major economies and the emerging and the newly industrialized Asian economies offering goods and services in different commercial sectors or industries are determined to establish high profile presence in major global markets in an attempt to enhance their profitability and remain competitive in an era of accelerated globalization. Some of them fall under the category of business organizations known as multinational corporations (MNCs) or multinational enterprises (MNEs) which have operational branches in virtually all stable nations worldwide.
There are various reasons that inspire business organizations to seek expansion into the global or foreign markets. Ireland, Hoskisson and Hitt (2008) have identified four main reasons that usually motivates companies or business organizations to seek an expansion into international markets namely; the desire to use their existing resources and gain access to new resources, seeking to expand or develop new markets, competitive rivalry and controlling core competences and learning.These authors points out that companies search for economies of scale in the use of their existing resources by expanding into new foreign markets.
At times, they enter international markets in order to reach certain valuable resources like inexpensive raw materials and specialized knowledge or cheap labor. As companies become well established in the domestic markets, they embark on searching for worldwide markets in order to increase their revenue and gain more profits, enhance their competition with major rivals and influence further development of their core competencies (Ireland, Hoskisson and Hitt, 2008; Ajami and Goddard, 2006; Friedman ,2007).Owing to the important role played by ICT in globalization of businesses, it is important that we explore how ICT can be deployed to support new players in a global market where volume, scale and specialization are a feature.
Success of a company in global markets depends largely upon an extensive and in-depth understanding of global markets where a firm seeks to operate. This responsibility lies squarely upon the shoulders of a firm’s management. Expanding into global markets bring about four main areas of business which raise concerns that international managers must understand for their companies to be successful (Newlands and Hooper, 2009; Friedman, 2007). They include cultural differences, commercial environments, politico-legal environments and financial issues.ICT can prove crucial aspects for new players in these complex and unique global markets.
Despite the numerous benefits that a business organization stands to enjoy by expanding into global markets, there is a range of challenges which new players face and which they can overcome through the use of the ICT. Getting a significant market niche in global markets can be costly and an uphill task for new players but they can use ICT to lower the costs of learning about the cultures, economies, politico-legal and financial issues of their target market.
For instance, they can use internet to access a considerably amount of information about the diversity of consumer and production factors of their target global markets. They can use the internet to learn about the needs of the customers in the new global markets in relation to their products and services. Actual knowledge about customer needs enables them to redesign their goods and services where need be so that they can be in harmony with customers’ tastes and preferences.
Introducing products and services that are able to satisfy the needs of new customers in new global markets will in turn enable new players to win loyalty and trust of customers who are not used to their goods or services and thus establish and expand their client base.
ICT can help new players to outsource services which do not fall under the core business operations during the initial stages of entry into new global markets and even later. For instance, Li ( 2006) asserts that progress of ICT infrastructure together with accelerated pace of globalization can enable new organizations in global markets to deploy the expertise of individuals situated in different places in different parts of the world. This enables executives of new players to commit their time and organizational resources in other areas so as to facilitate effective expansion into global markets. This translates into reduction of costs of production for new players in global markets giving them a competitive advantage which can allow them to position themselves as low cost leaders.
New players can also use ICT to establish what Li (2006) terms to as virtual teams with people located in different continents, from different cultural backgrounds and different organizations and in different time regions with whom they can partner to facilitate marketing and production of their goods and services. A virtual team refers to inter-organizational deals where a group of independent organizations usually work together for a shared goal but not entirely, through telecommunications channels and information systems to bring together their activities.
These ICT-enabled arrangements can facilitate new players in global markets to compete collectively with well established larger incorporated organizations (Li, 2006). In other words, new players can use information and communication technologies to pool their skills and resources together in order to create synergies which can make it possible for them to compete effectively with already well established industry leaders in global markets.
There are many more barriers to entry into global markets for new players than there is in home markets whereby managers are already familiar with business practices and dynamics. For example, the substance of business both at national and international level is how much the seller is asking and how much the buyer is willing to offer. Unfortunately, deficient information in the global markets can create difficulties in regard to matching buyers and sellers.
However, according to Goldstein, O’Connor, OECD and Development Centre (2002), information technologies can permit new players reduce such market imperfections for their own advantage. For instance, information-sharing networks among globally scattered agents can improve allocation of meager resources for new players in global markets (Goldstein, O’Connor, OECD and Development Centre, 2002).
However, it is worth noting that effectiveness of information-sharing networks relies upon whether they include all prospective important market participants. However, if a new player who are low-cost producers of a particular good do not have net work access; prospective benefits may not reach their consumers (Goldstein, O’Connor, OECD and Development Centre, 2002).
Effective marketing is a requisite to success for a product, a service, a cause, a person and even an organization especially for a new player encroaching a marketplace where volume, specialization and size matters a lot like in global markets. This argument is anchored on the fact that it is one thing to build and develop a great product or service. However, if customers do not get information about it, your superior product or service will definitely die (Kurtz, Mackenzie and Snow, 2009).
ICT can help new players in global markets to do effective marketing that reaches the right buyers at the right time and influences them to try their product and develop strong, long term and beneficial relationships with them (Kurtz, MacKenzie and Snow, 2009). For example, internet-enabled marketing and other telecommunication channels like SMSs and E-mails and other social networks can do a miracle for new players in global markets.
In our modern globalised and interconnected world, thanks to ICT, most people turn to the internet in search of information about virtually everything they are in need of including news. Buyers bargaining power has been increased drastically more than ever before by information and communication technologies especially the internet because through the web, they can access adequate information about products, services, prices and where they can get high quality products at the lowest possible price (Kurtz, MacKenzie and Snow, 2009).
Therefore, new players in global markets who are customer-oriented should establish a high profile internet presence so that target customers can get enough information about their organization and products or services. Equally important, they are able to offer competitive prices and high quality products or services coupled with superior customer service. Doing so will position their products or services as a viable alternative to buyers who are always determined to part with as little money as possible for the best offer in the market.
It is however important to note that ICT-enabled marketing should not overshadow other marketing methods which are equally important for new players who are seeking to establish themselves in complicated global markets. Besides, not all target customers for new players in global markets are internet savvy or can afford electronics particularly in developing countries where information and communication infrastructure is poorly developed.
To sum up, the power of ICT can not be overstated but available evidence show that if utilized properly it can help new players in global markets to establish themselves and compete effectively with well established global market players. If ICT is used to lower operational and production costs and add value to an organization’s products or services, then it can give new players a competitive advantage.
Singapore is considered a strong global trading partner. What should Australia learn from Singapore to enable it to progress further up the global trading partner rankings? Why is it important for Australia to consider such actions?
Singapore, known formally as the Republic of Singapore, is a Southeast Asian city-state located off the southern tip of the Malay Peninsula Moon and Sharman (2003). Geographically, it is an Island country comprising of 63 islands. She is highly urbanized with vey little tropical rain forests remaining, even though the government is creating more land for development through land reclamation ((Moon and Sharman, 2003).
According to Moon and Sharman (2003), Singapore has a political system that consists of a parliamentary democracy with a unicameral parliamentary government through which constituencies are represented. Much of the executive power is vested in the cabinet while presidency remains largely ceremonial with a few veto powers for a few key decisions like the use of national reserves and appointment of judges (Moon and Sharman, 2003).
The parliament is the law-making organ of the government (Moon and Sharman, 2003). She is more of a two-party system with People’s Action Party and Worker’s Party currently dominating politics. The Economist ranks Singapore as a ‘hybrid government’ in its Democracy Index. Transparency International constantly rates Singapore as one of the least corrupt countries in the world (Peterson and Lewis, 1999).
Economically, Singapore has a highly developed market-based economy (Peterson and Lewis, 1999). Together with South Korea, Hong Kong and Taiwan Singapore is one of the Four Asian Tigers. During a short period of less than half a century, Singapore has emerged as one of the highly celebrated ‘Little Dragons’ of East Asia. In global economy she is considered as one of the strongest trading partner. Singapore’s economy depends profoundly on exports and refinement of imported goods especially in manufacturing industry (Peterson and Lewis, 1999). She is definitely one of the fastest- growing economies in the world. What lessons should Australia learn from Singapore to enable her to progress further up the global trading partner rankings?
Australia is formally known as the Commonwealth of Australia. Politically, Australia is a constitutional monarchy with a federal division of powers (Gilligan and Ravenhill, 1997).She uses parliamentary government with Queen Elizabeth II at its head as the Queen of Australia. The Queen lives in the United Kingdom and is represented by her viceroys in Australia (Moon and Sharman,2003). Australia has the ninth highest per capita GDP which is higher than that of world’s major economies like United States, Germany, United Kingdom, Japan, France and Canada.
Generally, there are many socio-economic and political factors which are essential for not only economic growth and development of a nation but its general prosperity. Good governance and overall political stability are necessary for creation of a conducive environment in which individual citizens and groups can exploit their potential for the benefit of a nation’s economy and their personal development.
Availability, accessibility and fair distribution of resources ensures a balanced socio-economic progress and acts to minimize chances of people-led revolutions as well as surge of crime which are inevitable in societies whose wealth and national resources are not fairly distributed if lessons learnt from history of many countries worldwide is anything to go by. A visionary leadership that believes in a nation’s vision, interests and aspirations is probably more important than great material wealth because a country where justice and order does not prevail, development of any kind is elusive and a foreign thing.
Equally important, developmental socio-economic and political policies and availability of skilled and talented personnel that can implement them fully is crucial for overall socio-economic and political developments of a nation. Singapore and Australia are similarly good if not excellent in all of the above briefly mentioned aspects. However, Australia is not as good as Singapore in global trading partnership ranking and there are a number of lessons that she can learn from Singapore which is presently hailed as one of East Asian ‘Little Dragons’ economic wise.
Owing to the natural interdependence between and among independent nations, international trade has always been central to the development of all countries Friedman (2007) Friedman (2007). Consequently, virtually all nations strives to establish and maintain cordial relations with not only their neighbors but also all members of the international community for purposes of facilitating exchange of goods and services and maintaining international peace and security which are necessary for creation of favorable conditions in which long term and beneficial international trade can take place.
The most important lesson that Australia can learn from Singapore is the need to pursue a systematic and deliberate export-oriented development plan. After attaining independence in 1965, Singapore opted to pursue an exported-oriented development plan after a short venture during the early 1960s with import-substitution, a plan intended to encourage domestic production of end user goods by erecting shielding tariffs and quotas (Rajan, 2003).
Singapore’s foreign reserves are the tenth largest in the world. In addition, the value of her external trade is greater than its GDP, making trade one of the most critical components of Singaporean economy (Rajan, 2003). Like Singapore, Australia should seek to add value to commodities and export them to other global markets. Embracing such a policy will earn her more foreign exchange and tilt balance of payments to her advantage like Singapore. Secondly, even though government intervention in trade plays a significant role in the development of all states, Australia should strive to make her economy as open as possible.
For instance, in 2009, Singapore’s economy was ranked as the most open worldwide. Opening up her economy further will attract competitiveness and innovation which is necessary in taking Australia to the next level in global trading partnership ranking. In addition, Australia should strive to make her economy business-friendly as Singaporean (Peterson and Lewis, 1999). This action will attract domestic and foreign direct investors who are central in taking an economy up the ladder in international trade.
Singapore’s main economic competitive advantage is founded in her commitment to uphold a core guiding principle of use of technology (Toh and Tan, 1998).Singapore has been committed to achievement of high value-added content. According to (Toh and Tan, 1998), this principle has been the foundation of policy thinking in national technology management since 1980s.Use of technology to add value to whatever Singaporean trade participants take into international market gives her a competitive advantage that is hard to beat Friedman (2007).
This coupled with a strong culture of respect for the rule of law which ensures that counterfeit goods are almost non-existent in Singapore acts to win her the loyalty and trust of her trade partners in the global markets. This market reputation makes her markets one the most preferred source of a range of goods by major players in international trade. Australia should therefore move an extra mile by adopting policies that will enhance use of technology to lower costs and add value to goods and services originating from her industries and global traders. Taking this action will earn her a competitive advantage in global markets where differentiation and specialization plays a key role in determining how business organizations perform.
Australia should also amend its global trade strategies in order to adjust to changes in the global and regional economies. Like Singapore, it should reaffirm herself as a regional centre of production, finance and marketing (Peterson and Lewis, 1999; Rajan, 2003). Given its expansive geographical position, Australia should take a step further by positioning herself as a regional and global trade centre in that part of world. Doing so will enable Australia to access valuable raw materials inexpensively and enjoy cheap labor. This will lower operational costs for her global players enabling them to offer competitive prices in international markets.
To conclude, success in global trade requires strategic plans that can position a country competitively as a global player. However, it is important to note that competitiveness of an economy in global markets is to a large extent determined by its trade policies as well as other strategies that influences trade directly and indirectly right from its home markets all the way to global markets. Australia should therefore follow the foot paths of Singapore by adopting policies that can set up her favorably in the global trading partnership rankings.
It should particularly take advantage of ICT in adding value to its products and services and embrace an export-oriented strategy accompanied with attractive international business values and practices Friedman (2007). Taking such actions will give her competitive advantages that are hard to beat by other competitors however hard they try.
References for Question
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