At the beginning of the 21st century, IT management and technology, acting, directly and indirectly, are the most powerful shapers of global strategies and organizations today. Technology has a direct effect on business strategies but also an indirect effect on other factors such as the role of governments. The increased investments are also shortening product life cycles. With fewer years over which to write off the product development costs, companies need more volume per year to reach break-even points. The result is a search for markets in more countries to replace fewer years of volume. The level of competition increases even more (Danziger and Andersen 2002).
Thus, the immediate effect of investing in new technologies is to escalate global competition by forcing companies to seek world-scale outside their domestic markets. The most recent change, however, is to the active actual participation of government in the competitive process. Technology is again a driver of this change. The new role is clearest in newly emerging industries and technologies. Governments shelter new industries like biotechnology.
They also relax antitrust laws permitting cooperation among local competitors in developing new technologies at pre-competitive development stages; that is, increasingly governments are forming and funding consortia and nonprofit corporations to create and disseminate new technologies before they are developed into commercial products. For example, the European Community has funded ESPIRIT to develop semiconductor and electronic products.
Today, IT management initiates changes in organizational structure and business practices. “Executives need to stop looking at IT projects as technology installations and start looking at them as periods of organizational change that they have a responsibility to manage” (McAfee 2006, p. 142). The increased level of competition requires strategies from management to deal with the new environment. The stock markets undervalue the stocks of companies that do not respond. In the less regulated financial markets investors, both friendly and unfriendly, bid to take over these undervalued stocks.
If management needs an additional stimulus to respond to the new competitive environment, the takeovers are providing it. The response of Western companies to the new competitive environment has been a sequence of three strategic steps. First, they act to recover the cost and quality competitiveness of their core businesses. Next, they extend these businesses globally. Finally, the priority shifts to the development of new sources of revenue (Philip, 2007).
In the information age, IT management comes into play in several ways. In automation, technology is used to reduce labor costs. It is used in robotics and automation for quality and flexibility. Management and professional functions are now being automated by computer-aided design, engineering, manufacturing, software engineering, and so on. Currently, the establishment of computer-to-computer linkages is reducing intermediate information processing steps in sequential processes, with a reduction of clerical costs and an increase in quality. The computer’s greatest impact on management processes is its facilitation of a more responsive and integrated organization (Philip, 2007).
In sum, the responsive-integration efforts of firms are a direct response to the new competition. Many companies are discovering that there are hidden costs in the interfaces between functions like engineering and manufacturing or sales and manufacturing. Engineers were previously unconcerned or unaware that trivial design changes could produce major savings in manufacturing costs. Firms are designing quality and cost-effectiveness into their products and services from the beginning. As product life cycles decline, the product development cycles are declining. The customer is also demanding more customized products, faster delivery, and newer technologies.
The companies still work on cost competitiveness and global extensions, but growth and development assume a higher priority in resource allocation when the business generates an excess cash flow. Technology plays a different but key role in each of the three strategies.
Danziger, J. N., Andersen, K. V. (2002). The Impacts of Information Technology on Public Administration: An Analysis of Empirical Research from the “Golden Age” of Transformation. International Journal of Public Administration, 25 (5), 591.
McAfee, A. (2006). Mastering theThreeWorlds of InformationTechnology. Harvard Business review. pp.141-147.
Philip, G. (2007). Information Systems Management.