Corporate Strategies in Small and Medium Enterprises Essay Example for Free

Corporate Strategies in Small and Medium Enterprises Essay The article picked is â€Å"Information technology and corporate strategies in Small and Medium Enterprises† by Poolad Daneshvar, Research Scholar, Department of Business Administration, University of Mysore, India and Dr.H.N.Ramesh, Director Kuvempu University, PG Center, Kadur, Karnataka, India. It is, to be more precise, a synthesis of different researches about the subject: â€Å"How does Information Systems create competitive advantages for the enterprise?† The article, however, focuses on the competitive advantages for the Small and Medium Enterprises (SMEs). The difference between Information Systems (IS) and the Information Technology (IT), from the authors’ point of view is the orientation. If IT is most likely technical and supply oriented, IS is the way business makes use of IT depend on the enterprise’s needs. So IS is more demand oriented and business grounded. In the article, the authors rarely separate these two notions, considering that IS is based on IT and the authors’ point is to present how the application and utilization of information can be used to create competitive advantage. The authors also discussed about why SMEs should seize the opportunities to create competitive advantages brought by the IT/IS development. In fact, the main reason for the creation of many large companies that regroup vertical value chain (from raw material, production to sales and customers services) is the transaction costs between the steps in a value chain, due to information asymmetric and assumption of opportunistic behaviors. When big companies are able to set up a whole value chain, they will gain considerable advantages from cost decrease and from the fact that they avoided, at some stages, the pressure from the suppliers and customers. In order to maximize efficiency, the SMEs can only concentrate in certain activities and thus can only be part of a value chain. These companies were struggling in this competition. However, IT/IS gives SMEs chance to increase their ability to compete by three possible ways (Rockart and Scott Morton): Increase efficiency in operations, creat e links with customers and suppliers to increase their switching cost, create new products or new services. The authors explain how IT/IS has influence on competitive advantages of the SMEs in three categories: Internal Strategy, Competitive Strategy and Creation of the Competitive Advantages. The authors precise two applications possible of IT/IS on internal strategy. Firstly, applications on the existing activities to increase efficiency and customers’ satisfaction reduce cost, but the authors stated this application is just basic and cannot be considered strategic. From the authors’ point of view, IT/IS should be applied in Management processes. Some model has been set up throughout the last three decades: Business Systems Planning (BSP, Hammer, M.M et al, 1980), Office automation methodology (OAM, Sirbu, M et al, 1984) or also Business Process Re-engineering (BPR) †¦ These models can demonstrate to the managers how their business is working and what kind of result can be expected, BPR can even shows the options. The decision making can be much easier and quick with helps from IT/IS. The most two most usual competition strategy are Cost reducing and Differentiation. However, Porter and Al. have concluded others ways to turn the competition around in the IT/IS era: Use the IT/IS to change the rules of the competition in the industry, create competitive advantages by finding the company’s ability to outperform its rivals, create new business. The authors analyze the competition strategy in two aspects, according to Porter’s study: Value Chain Analysis and Competitive Forces. Value chain is a framework for identify all the activities and analyze how they affect the company’s cost and its value delivered to the customers. Value in this notion can be divided into 2 types: Value explicit and direct from Primary activities and Value implicit, indirect from support activities. The authors’ idea is to use IT/IS to move some physical activities in the value chain on line (cu stomers’ orders gathering, information collecting†¦) or make some physical activities less costly (communication†¦). This way, the SMEs can resolve one of their biggest problems is the high transaction costs. They also have the chance to alter the services provided to make their operations more appealing to the customers, compared to part of other large groups’ value chain. According to Porter, there are five competitive forces: Intra-industry rivalry, new entrance, customers’ bargaining power, suppliers’ bargaining power and substitute products/ services. IT/IS can change the relationship between an industry and its suppliers, decrease the suppliers’ bargaining power. Furthermore, by accelerating the innovation, SMEs can create a technology barrier for new entrances while developing new competitive weapon for intra-industry competitors. Concerning the creation of competitive advantages, the authors stated five different strategies for SMEs in the new IT/IS era: Differentiation in price and product innovation: using IT/IS to gather more customers’ preference on ex isting products/ services and change the enterprise’s products/ services accordingly or to have more promotion channels at low cost and establish the brand’s image; Existing cost reduction: like in promotion and distribution cost or Provide new inexpensive services; Innovation: increase the business’s efficiency, reduce product’s cycle life; Growth: extend the enterprise’s scope and its score business based on the reach of the new telecommunication and transportation technology; and finally, Alliance: by using IT/IS in communication and information sharing. In the end of the article, the authors conclude that an alignment between IS strategy and Organizational strategy is necessary for the competitiveness development of SMEs; that include the alignment between four elements: Business Strategy, Organizational Infrastructure processes, IT strategy and IT infrastructure and processes. Basically, the authors insist on the managerial role in this application: the strategies and decision making concerning the enterprise’s IS should be considered as part of the organizational strategies depend on the enterprise’s goal s. II. Why it is important to the management of the IT systems? The article insisted on the important role of the IT systems in the management of SMEs, in order to create competitive advantages in the economy dominated by large groups. IS can now be considered as a weapon, a way that turns the â€Å"powerless† SMEs from before to dangerous competitors. Aside from companies in the Information field that developed strongly just in the last decade like Facebook or Google, a lot of others companies in others industries are making use of IT to find a â€Å"blue ocean† and grow. IS can change a company’s value change by reducing cost and making it different from others companies, creating the competitive advantage. IS also can change the competition rules, limit the domination of large groups, create chances for SMEs to find its own way to develop and stand its ground. However, the development of the Information can also create entrance barriers for these companies. In my opinion, the development of the IT/IS in the past decades has made the global economy much more animated and â€Å"thrilling†. Considering these points, all managers should value the position of IT/IS strategy in their overall strategies, especially managers of SMEs, who will have to think of IT/IS as their surviving paths. The managers should consider the enterprises’ goals and objectives invest in RD to find an IT/IS tools/ facilities that can respond to the enterprises’ demands, build a strategy of IT/IS development in short term and in long term and invest in IT/IS infrastructure and processes. Since the innovation speed of the IT/IS world is very fast, every IT/IS strategy have to consider and leave room for regular update and development. In conclusion, Information systems have an indispensable role in the creation of competitive advantages nowadays. Company that can make good use of IT will be receiving limitless opportunities. III. Personal thoughts and opinions I worked as a sales assistant and later manager’s assistant in an international company, also I studied in the international economy for about five years now. From my experience, the globalization that was only for transnational and multinational companies before is now also opening its doors to SMEs, and that was the result of the Information Technology development. The world is now â€Å"flat† (Thomas Friedman, 2005) and It create opportunities for SMEs in even developing countries to find their ground in the global value chain, just take for example the information, financial services outsourcing in India. My ex-employer worked in the high fashion field so the only application of the IT/IS in its activities is in promotion: Aside from specialized magazines, Facebook, website and newletter emails were all important channels that help the company to establish Its brand worldwide, since It only have one siege in Hanoi. When I worked as Manager’s assistant, I also participated in the establishment of the KPI systems of the company, a systems that allow employees’ performances to be digitized and evaluated by the computer, it was a system applicable in the Human Resources Management. Unfortunately, I did not get to see its result.