Introduction
Information technology (IT) is probably the force the rampant globalisation and economic internationalisation. Whereas the world was already destined to becoming a global village even before the eruption of the World Wide Web (WWW) and other digital networks, the Internet has largely facilitated this sojourn and it continues to do so with the new inventions that rock the world each day such as eBay, social networks, and other technological gizmos.
How has IT influenced how businesses operate in a global environment?
The general answer to this question is that Information technology has revolutionised the operation of businesses in the global environment. Considering that ‘global’ comprises of compounded ‘locals’, perhaps it is prudent to begin this analysis from the miniscule level of local businesses and the effect that information technology has on them.
Local businesses are now creating company websites to advertise the services and products that they have to offer and in so doing, they are increasing the scope of their areas of influence (Bassellier, Reich & Benbasat 2001). As they go online, they introduce the option of purchasing these products and services online and increase their internal capacities by expanding just enough to incorporate delivery services to these new areas of influence and in so doing; they are beating the competition by reaching out for new clientele. Technology is revolutionising local businesses. Additionally, now that foreign firms are fast infiltrating the emerging markets of the world such as China and other developing countries, the local firms in such areas are benefitting since they can easily learn and adapt the technologies being reeled in by these advanced firms. Since they are locally established and so they are familiar with the local market, such technology transfers are sustainable and profitable to these firms as they make the most of their capacities (Hurst 2003).
The next segment of this analysis is on foreign firms doing business both locally and in foreign environments. Such firms are usually large and they have more funds available for investment in Research and Development (R&D) activities. Consequently, they wield a lot of technological power and insight into the latest developments in technology (Wahab, Rose & Osman 2012). Additionally, they are in the loop of new technological advances because back home they are part of the big players, who are in other words the birthing pools of technological innovation. Another advantage of being a foreign firm is that such firms have been in business for a long while during which they have managed to accumulate technological knowledge and skills and they have customised this into their unique organisational structures. Consequently, this aspect is already giving them competitive advantage as it is impossible or in the very least, very difficult for rivals to duplicate their technological expertise. This element gives them an edge over local firms that are seeking to compete for the local market, as whereas technological resources are easily mimicked, technological capabilities are mostly inimitable.
Additionally, it is becoming clear that the value of information technology is not uniform for local and foreign firms because for instance, local firms report a higher growth rate of technological capabilities than foreign firms do and the cause of this scenario is that they can easily borrow and absorb advanced technologies from the foreign rivals in the host countries. This new technology coupled with their market awareness boosts their competitive advantage especially because foreign firms on the other hand are not as quick or open-minded in the obtaining of information about the local market trends and so all they have is advanced technology, which they cannot fully utilise.
Part of the cause of this hesitance by foreign firms is the reluctance to develop their technologies for the benefit of local markets and this aspect in turn prevents them from participating fully and reaping the benefits of being a multinational firm (Pinsonneault & Kraemer 1997). To counter this retarded growth, it would be prudent for local firms to drop their inhibitions, buy into the local market as though it is their new home, and thus invest in it completely by developing their IT just as they would if they were home, but in the manner that is relevant for the particular local firm. It is interesting to note that the foreign firms show potential for long-term benefits and growth in IT if they invest in R & D.
How can businesses create competitive advantage using IT?
As noted in the previous paragraph, the competitive advantage of foreign firms with regards to how long they have been in business as well as in light of Information technology specifically is somewhat guaranteed by the inimitable technological capabilities wielded and controlled by this firm. As compared to budding firms, which are just starting out and so whatever mechanism they are using to achieve competitive advantage is superficial and thus easily mimicked. With older firms, the rival would need to acquire the firm as whole for it to take advantage of the deeply integrated knowledge and skills that by then form part of the organisation’s structure.
Nevertheless, it is important to note that even in the foreign environments where the more seasoned multinational firms go to set base, there are usually the trendsetters that have been in businesses for several decades already and these could form formidable competition. Consequently, it is important to come up with a sure way of maintaining a competitive advantage to keep abreast of one’s rivals and this paper limits this discussion to the use of Information Technology in doing this (Tanriverdi 2005). Therefore, the next discussion shall gravitate on how businesses can use their Information Technology to maintain competitive advantage.
Competitive advantage refers to a specific advantage that a firm has over its competitors or rivals that allows and enables it to generate greater margins or record more profits at the end of the fiscal year. An inseparable companion to competitive advantage is differentiation, which refers to the unique qualities of a particular product or service that makes it more attractive when held in comparison with those of competitors. In a bid to have a competitive advantage, one needs to offer and display differentiation, which in turn attracts consumers’ preference and fosters their loyalty in the long term.
Concerning information technology, the Business Value of Information Technology, (BVIT) hinges on two indispensable variables, namely Resource Structuring and capability Building. Resources in IT denote human, intellectual, and physical resources among others so that all the faucets of an organisation that have any linkage with IT are counted in (Pollard & Hayne 1998). Resource structuring thus denotes the procedures or mechanisms that firms apply to create business value of information technology by being more effective than their rivals are in structuring their IT resources. On the other hand, capacity building refers to how firms create business value of IT by being more effective than their rivals are at deploying IT resources. A novel term in the understanding of the role of IT in business is resource orchestration, which refers to the synchronisation of resource structuring and capacity building, which is the general answer to how firms can use information technology to increase their competitive advantage.
Resource orchestration pushes resource structuring to new heights beyond the simple picking and allocation of resources and into acquisition, accumulation, and deployment of these resources with sufficient regard to factor markets and internal controls (Wahab, Rose & Osman 2012). It also touches on environmental factors such as intellectual property protection considerations during expansion, planning, and integration of IT competencies into strategic planning for competitive advantage.
For some time now, firms have been using either capacity building or resource structuring as the IT-related strategy for ensuring that they keep abreast on their competition. However, this move has proven ineffective especially in the light of the global business environment because these firms are now facing various foreign business environments ranging from stable to dynamic ones and majority landing somewhere along that continuum (Spender 1994). The question thus becomes how to maintain competitive advantage in such environments. Research posits that in case of stable environments, the way to go is resource structuring. This choice is more affordable and time savvy of the two while in dynamic or uncertain environments, the solution lies in capacity building as the nature of the environment justifies the investments in R & D that shall be required, as well as the time that shall be consumed pursuing product and service innovation (Segars, Grover & Teng 1998).
Conclusion
This essay has looked into how information technology has influenced businesses that operate in a global environment and how businesses can create competitive advantage using information technology. The manner of influence is manifested in the expansion into new areas of influence as well as capacity growth to include online commerce ventures. It is also interesting that foreign firms are holding back from fully participating in the local markets of their host countries because they do not want them to benefit from such involvement. However, this move is to their detriment as local firms still copy their advanced technologies and by partial participation, they miss valuable insights concerning business implementation in the local market. The solution to competitive advantage lies in an equitable application of resource structuring and capacity building, which becomes resource orchestration.
Reference List
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