Information technology as a key to strategic management
There are a number of arguments concerning the role of information technology in the strategic management process for business organization. Nonetheless, this paper tries to provide the importance of information technology on strategy management process. Accordingly, the first part of the paper provides a brief discussions on key terminologies used in Information Technology(IT) in line with clarification about Information Technology. Words like Information Technology, Information system, and Management information system clarity for the purpose of contextual meaning in subsequent discussions. In this part emphasis is given for the benefits of information technology for strategy management process.
The Second part of the paper tries to explain about strategy and strategic management, organizational understanding and types of strategic leaders in the organization.
The final part of the paper provides a detail discussion on the role of information technology in the strategic management process focusing on basic understanding on Information technology and its integration with the strategic management. This part of the paper presents conclusions illustrated in the main text body.
Here in after, the term Information Technology is used to describe the usage of a wide variety of items and abilities used in the creation, storage and dispersal of information. Information technology focuses on processing of information which is the basic part of strategic management process, called Strategic analysis.
In this regard, Information technology is used to as an essential input to the process of strategic decisions. The following paragraphs are devoted to provide some benefits in using information systems.
The word Information System in this context describes a usage of a computer system to process data and produce business information. For processing of data Hardware, software, peoples, procedures are considered.i.e.they constitute information system.Here, Hardware is referred as part of a computer system that can be touched and seen by our sense organs. Keyboard, Mouse, Monitor, printer etc are grouped under Hardware. However, Software is part of a computer system that cannot be touched with our necked eyes. This include operating system software, and the applications software, hence, computer becomes nothing by itself without software.
Using information systems import a number of impacts on an organization success. These impacts can benefit the organization, users of the information system, and any individual or group who will interact with the information system.
Some of the specific benefits are ,adding value to products (goods and services),better safety ,better service ,competitive advantage ,fewer errors ,greater accuracy ,higher quality products ,improve communications ,increase efficiency ,increase productivity ,more efficient administration ,more opportunities ,reduce labor required ,reduce costs ,helps in decision making ,superior control over operations etc.
All the above benefits come from the capability of the computer system in relation to speed, consistency, precision and reliability. Here after, some of the benefits are illustrated.
In relation to time related benefits, classical idiom appears to be relevant, “time is money”. This is to mean that every minute of second has value for a person who utilizes the time effectively.
Accordingly, business organization has to treat their customers by providing appropriate services accurately and timely. However, Most of the time, we could not achieve or delay in delivering information, service, and products on time due to limited usage of information technology. But, with the help of information technology more work can be done timely by individuals, businesses, services and government organizations with high speed and accuracy. Hence, computer systems can process and helps to convert a bulk of data to meaningful information within a fraction of seconds; faster than people. These results in minimization of information gap among organizational units and enhance business efficiency.
The other use of Information technology is consistency. It is one of the qualities of computer system to retrieve repeated actions every time precisely.
In addition to the benefits stated under speed and consistency, Information technology also provide a benefit of precision.
Furthermore, due to speed, consistency and precision the computer system provides reliability. It is to mean that information technology gives the same result again and again unless and otherwise the input raw data is changed.
Therefore, emphasis has to be given for the Management information systems outputs as it is always based on the input we provide and the instructions. (That is, the internal programming codes initiated by our input).
Recognizing the above described benefits currently, most business organizations are using information technology by allocating huge investment so as to equip the management information system for the attainment of the business objectives. On the other hand, as capital investment on information and communication technology within business organization continues to increase, it is also necessary to optimize the benefits from such investment. That is to say, there is an expectation that business organizations not only maximize the benefits of adopting information and communication technology but also expected to minimize possible drawbacks and risks that are associated with rapid technological change and offer competitive advantage.
Generally, information technology system helps in effective utilization of resources. Like efficient utilization of manpower in the business not only to concentrate on routine manual works but to go beyond and spend time on “what-if analysis scenarios”.
Information Technology and Strategy
Some managers did not give more attention about the benefits of information systems on the business strategy process. Such luck of attention is related to a number of factors. First, there appears to be some gaps as how information technology could be used in their Strategic management process.
Second, there was a great misunderstanding on the usefulness of the information technology on business strategy. But nowadays, most of the business entities understood the benefits of the information technology systems as an enabler of their strategic management system process.
Besides, there is more awareness where and when to implement it and use information technology in the process of crafting different strategies that lead them to the road of stakeholders satisfaction.
Some of the application areas like transaction processing systems and decision support systems (DSS) have been used as the main information system so as to enhance business performances.
In addition to the above advantages large computer network that shares different information with reliable and easy internet systems has been used by the organization for the purpose of communication, distribution of information, to offer goods and services online to customer, to interact with other business organization either for business transaction or information exchanges etc.
Such internet usage leads to live in a global village in which computers and peoples are linked within companies, countries, and continents resulting easy communications in reducing the time and geographical barriers.
In this regard Mr. Kodama, (2002) asserts the importance of Information Technology in this competitive business world as crucial for business sector to consider and emphasis on the significance and role of information and communication technology for setting up competitive businesses, managing global corporations, adding business value, and providing valued products and/or services to their potential markets.
The main points on the above statement intended to address the capability of information technology to transform corporate data into meaningful and actionable information that helps the strategic management process of a business.
Gerald V.(1999) , also confirm that, information technology systems enable workers to process more items, and allowing the firm to expand without increasing labor costs beyond the ability of reducing errors in the data which leads to improved decision making. The stated findings also indicate the importance of information technology in business strategy.
Consistent with the above justification, in the developed country, almost all transaction has been undergoing electronically through internet infrastructure called electronic commerce (e-commerce). Such transaction decreases the intermediaries between the business and the end users. It reduces costs like labor, document preparation, telephoning, and mail preparation etc. and IT become part of the daily life activity.
On the other hand, in developing country there are some gaps in using Information technology in their business strategy as well as day to day activity as compared to the developed country. Therefore more efforts are expected in the future to get competitive advantages from application of information technology.
Management Information System
Management information system (MIS) is a computer system designed to help managers in planning and directing business and organizational operations. There are two main purposes of management information system. First: it helps to generate reports like financial statements mainly Balance sheet, Income statement, and cash flow statement, and other reports that help managers for planning and decision making purposes.Similarly,inventory status reports and performance reports needed for routine or non-routine purposes, can be generated using MIS and more others.
The second purpose of management information system is to generate other tailored reports as per the managers and customers requirements. Here, it is very important to emphasize on the role of experienced computer programmers and system analysts in developing Management information systems to meet the business objectives. The Managers role on designing phase of management information system is very important to provide his business objectives i.e. to cite problems that needs to be solved by the new system and to provide information about the existing non automated system strength and weakness and to let know the analyst the main points that the new system should encompasses and the required alignment with the company strategy. Hence, the General functional requirements expected from the final delivery of the software are expected from the business owner. Then after the system analyst will prepare a detailed document that can be changed into a programming language by the programmer.
During the final delivery of the system, care has to be taken whether the required functionality has properly incorporated or not, because this is the base that helps managers get information for decision making purpose.
Similarly, on using management information system in the business organization again care has to be taken on the amount of information generated from the system for the management purpose. Only the relevant report at the right time, in the right place, in the right format must be generated. Otherwise the managers may face the problem of information overload. The main purpose of the above descriptions is just to mention some of the most important precaution in implementing MIS.
To sum up, information technology system is a vital tool for proper management of the business if and only if it is properly used.
Strategy and Strategic Management
Johnson and Scholes (2006), defined strategy as the direction and scope of an organization for the long-term to achieve advantages for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations.
Gregory G. and etal (2007) define Strategic management is a process of the analysis, decision, and actions an organization undertakes in order to create and sustain competitive advantages.
Strategic management focuses on building a solid underlying structure of a business and through combining all efforts in the business.
Thus, Strategic management answers as to how the identified business objectives are achieved with what resource a company needs to adapt so as to quickly response to the new challenges.
Hence, an organization must have clear strategy that is developed carefully in order to meet the organizational goal. This responsibility lies on management’s shoulder. Besides, management decision in every strategic issue should be based on tangible evidences and information and such decisions must be taken on time.
In order to make proper decisions on time all necessary information must be available too. Therefore, the strategic management processes need to be supported by information technology systems in order not to miss the open advantage of information technology, mainly efficiency and accuracy.
Understanding the organization
The key to gaining strategic advantages from information technology systems lies in understanding the process of functional requirement gathering, and as to how the functional requirement changes to management information system, installing, implementing, adapting and managing a strategic information system.
A thoroughly understanding of the business requirements are firstly needed before any activities of implementation. Furthermore, being participation is another element of strategic management hence participation is required from all groups of the organization starting from the bottom level employee to top level executives. This helps in understanding business requirement and core issues to include in the development of the management information system. Moreover the commitment of the top level of management is outweigh more as in any other management systems, like Total Quality management.
Therefore, it is very important to have good strategic leader that by no means assures the use of information technology in the strategic process for the company.
Consequently, the leader will set the overall directions and the key criteria for the acquisitions of information systems and information technology. Then after, the next top senior experts should decide on the specific objectives of the intended systems preferably with the consultation of the management information systems professionals either inside or outside the company. In addition, the management of the implementation of information systems should be managed by the information system professionals with key other personnel’s in the business.
To facilitate the implementation process constant support to the system users should be provided. In addition, awareness creation method has to be established in order to provide information to all employees regarding on the usage and benefits of information technology and information system. If not, one can be challenging occurrences and change resistances will soon come early on implementing the system.
Consistently to the above fact Eliezer G. (1994) advices on the need to strategically manage Information technology by senior mangers particularly on understanding of the diffusion of the technology and its role in information gathering, processing, and transferring at all levels through the services of IS/MIS. Furthermore he emphasized on the need that information technology is to be left to the sole discretion of information professionals.
From the above, it may be inferred that, strategy management process success depends on information, the process of managing information system which is a crucial task that needs continuous consideration and follow-up. Therefore, leaders in the business area have to understand the value of information technology. However most of the time the cause of difficulties in using information technology in strategy management process may not solely the failure of the Managers, but the way how to manage the information technology systems also contribute greatly.
Moreover, information technology systems are a tool for executives that must be aligned with the organizational setup in order to eliminate the barriers to use the system effectively. (Ibid)
Strategic leaders and IT implementation
In a business organization, three types of strategic leaders might be cited; the first one is the leader that advocates the use of information technology in using in their strategy management process. Such type of Strategic leader has enough knowledge of usage of information technology. Besides such leaders may have some form of formal or informal awareness on the benefit and on the use of information technology. Hence such managers are committed to invest considerable investment on Management information system projects to supplement strategic process using information technology.
The second type of leaders are leaders who also have a good understanding of the benefits of information technology systems but thinks that the investment cost in implementing management information systems will negatively impact on the profitability of the business. They luck full confidence in using of Information technology systems.
The third types of leaders are those who do not have awareness on the benefits of the use of information technology systems and misunderstand information technology and its strategic significance. Such leaders do not want to use information technology systems mainly due to a fear of new technologies and the outputs in using it. Such types of leaders appear to be more deficient in modernization concepts or just think using the technology as fashion.
In my opinion, the basic differences of the three strategic leaders lie on the understanding of the benefits of information technology, on understanding of the organization long term plan (strategic vision) and, the current competitive world situations.
Consistently with the above idea, Linda L. & Susan B. (2007) describe two basic impacts in using electronics support. The First one is, if one is confident with the technology he will explore every e-avenue and fully utilize all of the facilities available. Conversely, if one is a more novice user he may look blankly at the computer screen and panic.
Therefore, to continually compete in this competitive market, business should continually support by the information technology systems and also continual update and usage of the latest systems makes to win in the market.
Role of Information Technology in Strategy Management
As previously discussed, Management information system relates on processing of raw data and outputs in such a way that managers and customers’ need. Hence Management information system helps business in analyzing data accurately and quickly. This information flow helps managers to use the outputs of the management information system for different quality decision by adding value to the product and service that the organization provide.
As a result, information technology has becoming an integral part of business strategy.
Therefore, investing in information systems can pay off the company mainly by supporting the core business. For example, firms that interact with its customer frequently may develop online systems using internet. Hence, using internet minimizes the time needed.
On the other hand, some large companies may have more than two core departments. Then as far as they are the heart of the business, information technology can such support that core departments. For example, in Beverage industry, the core department is the production section. Therefore, the strategic leader has to equip the section with a modern technological device that uses information technology and every data in relation to production to captured, analyse and report in the predefined format to the manager. Hence such system helps in getting necessary information for managing large production data. Besides Automated systems are the most cost efficient way to organize large scale production. These can produce economies of scale in promotion, purchasing, and production; economies of scope in distribution and promotion; reduced overhead allocation per unit; and shorter break-even times more easily. This absolute cost advantage can mean greater profits and revenue.
The same is true for the service giving organization; it has to equip with proper information system to satisfy their customer by providing the services required accurately on time.
Therefore, it is possible to suggest that information technology can support any part of the core system of any business organizations and can be used as strategic tool .But this does not mean that information technology alone makes the business strategy of the company to be succeed; but while factors like human resource can also contribute to the long term goal of the business.
Nowadays, the role of business information systems had expanded to include strategic support.
We have discussed that strategy formulating; strategy implementing and action taken based on it are always based on information. Information also has to be processed quickly, accurately and consistently through the application of management information system implemented. Information Technology application provides benefits of speed, accuracy and consistency. Therefore, it is necessary for managers to understand information technology and how to use it effectively by integrating management information system with their strategic process and which in turn makes great support to business objectives. Therefore, from the above facts there is no doubt to say information technology systems plays a critical role in supporting the accomplishment of business goals and objectives which is formulated through the strategic management process and the business organization should align Information Technology strategy with the business strategy process.Order Now