It is almost impossible to envisage a business that conducts its operations without the use of the information technologies. Businesses and major companies rely on IT in their day-to-day operations, and the Internet has altered business strategies by imparting a virtual shape to them. This essay will focus on three articles with insight into how the information technologies have presented businesses with both advantages and challenges.
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Andrew McAfee and Erik Brynjolfsson wrote the article “Investing in the IT That Makes a Competitive Difference” that appeared in a Harvard Business Review magazine in 2008. The article studies how companies tackle increased competition in the United States. McAfee & Brynjolfsson argue that the companies in the US may be better equipped to handle competition if they choose to invest in IT. The authors also note that the companies favoring modern IT solutions perform better in today’s market.
With the spread of information technologies, the money that the company invests in an employee in terms of IT rose from $3500 in 1994 to $8000 in 2005 (McAfee & Brynjolfsson, 2008). As more and more companies become dependent on the IT, the investments in IT equipment increased threefold between the years of 1995 and 2006. The figures speak for themselves. The authors are right in their statements that the spread of the IT over the years is beating all the records. The growing demand for information technologies may be supported by the report released by the UK Government Office for Science (2014) which states that there are over 14 billion objects connected by the IT as of now, it is estimated that the number will reach 100 billion by 2020 (p.14).
The article “Investing in the IT That Makes a Competitive Difference” although written in 2008 is in line with the UK government report published recently. IT is booming and even the most conservative companies, which are used to the old habits of doing business, are looking for ways to incorporate IT into their daily work practices. The controversial idea voiced in the article related to the distribution of profit margins. The authors made a point that the number of firms decreased, and the market remained the same, implying that fewer companies were in charge of a larger market share. The redistribution of the market when small firms were consumed by large corporate giants is unlikely to be linked to the spread of IT.
Another controversial statement in the article suggests that the companies using the IT will perform better than those performing the work according to old, conservative ways. Having made the statement, the authors sort of generalize all of the companies on the market irrespective of what their main areas of business are. Although the authors are right stating that the companies dealing in marketing, sales, IT, design, and software development saw added benefit with the use of the information technologies, some companies have been influenced by the Internet to a much lesser degree. For instance, major construction companies that are involved in large-scale government projects, road construction companies, manufactures of furniture or non-tech goods did not experience a sweeping revolution in their business practices.
Most of the processes are almost the same as they were years ago. This view is partially supported by Porter, who wrote that the Internet should not be considered as the key element in the business, it is rather a complement helping companies take advantage of the modern technologies to streamline their processes (Porter, 2001). While it is true that companies linked with IT saw their profits increasing, for a wide range of enterprises, the IT is merely a tool helping them to enhance and digitalize their reporting procedures, adding no added financial value.
The second article ‘Strategy and the Internet’ written by Michael Porter in 2001 departs from the ideas and notions shared by McAfee and Brynjolfsson. Porter presents the reader with the opposing ideas relating to using the Internet in daily business operations. With the emergence of the Internet, a majority of respected authors, including McAfee and Brynjolfsson, put forward the idea that the Internet helps companies to perform better on the market. Porter’s views are not aligned with this belief, although he agrees that the Internet may be instrumental in helping the companies streamline their business activities.
He makes a point that businesses might be deluded by the misleading signals of the Internet. Porter (2001) argues that “companies that have deployed Internet technology have been confused by distorted market signals, often of their own creation” (p.64). The ideas expressed in the article written in 2001 are far from the realities of 2016. To start with, Porter argues that online sales figures cannot be relied on as the goods sold online come with unbelievable discounts, thus creating artificially high demand. It is true that when the online sale was only capturing the market, the Internet purchases were viewed as a novelty by buyers. However, nowadays goods sold online have almost the same price as the ones sold over the counter.
If the price gap, suggested by Porter was true today, most of the biggest stores would simply go out of business. Finally, Porter argues that many of the dot.com businesses were able to make a profit based on the premise that the Internet market is easier to capture (Porter, 2001). There is ample reason to believe that it was indeed much simpler to enter the I-market in the early 2000s as there was considerably less competition, clearly, nowadays it would be naïve to assume the same. The Internet market of 2016 presents tough competition, and thousands of sites are closed daily due to a lack of the audience.
The third article “Closing the Gap Between Strategy and Execution” by Donald N. Sull explores the market performance in the context of multiple variables such as geopolitics, competition, consumer choices, innovating technologies, etc. The central idea of Sull’s article is that the traditional view of the strategy does not apply to present-day realities. In today’s volatile market, an elaborate and well-thought strategy may become inapplicable due to the multitude of new factors that additional changes to the situation daily (Sull, 2007).
With this in mind, the companies need to leave room for revision, and sometimes play it by ear, if the market calls for changes to the strategy. The author presents companies such as Diageo Ireland, All America Latina Logistica, and others as examples of the market giants falling back on his ideas. Sull’s views are in line with O’Clock s and Devine’s ideas in an article ‘The Role of Strategy and Culture in the Performance Evaluation of International Strategic Business Units’, the authors argue that an adequate market strategy needs to be multi-fold, and incorporate different factors, including cultural (O’Clock & Devine, 2003).
The views and ideas expressed by the authors are similar in the context of the shifting market, the challenges it presents to businesses, and the ways of tackling them. In fact, the market is so volatile that the ideas voiced a couple of years ago may not apply to current market trends, let alone the views presented in the early 2000s. Interestingly, information technologies were considered a tabula rasa by many authors, including those reviewed in this paper. To this day, IT still remains fertile ground. Cisco (2014), a major American Technology Company voiced its forecasts in the report released in 2014 “The possibilities for service providers are just beginning. Cisco predicts that, by 2018, “there will over $600 billion worth of incremental revenue and value for service providers to earn across cloud, mobile, and video technologies” (p.4).
It should also be noted that the definition of the information technologies 10 years ago is a world apart from the IT as we know today. The new services emerge regularly such as cloud, new types of social media platforms, sharing opportunities, and others. The companies, whether they want it or not, have to adapt to the new digital environment and the Internet of Things concept. According to Cisco, half of the companies in the market today, will cease to exist in 10 years from now as they will be unable to adapt to the emerging digital market (Cisco, 2014). Based on this forecast, and following the authors’ recommendations, the companies need to embrace the IT and innovation to stay competitive in today’s market.
Brynjolfsson, E., & McAfee, A. (2008). Investing in the IT That Makes a Competitive Difference. Harvard Business Review, 86(7), 98-106.
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Cisco. (2014). Transformation through Innovation: A Strategy for Service Provider Success. Web.
O’Clock, P., & Devine, K. (2003). The Role of Strategy and Culture in the Performance Evaluation of International Strategic Business Units. Management Accounting Quarterly, 4(2), 18-26. Web.
Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review, 79(3), 62-78.
Sull, D.N. (2007). Closing the Gap Between Strategy and Execution. MIT Sloan Management Review, 48(4), 30-38.
UK Government Office for Science. (2014). The Internet of Things: making the most of the Second Digital Revolution. Web.