The Effects of Information Technology on
Business
Douglas Chia & Chai Ming Poh
29th October 2004
Introduction
Information
technology is defined as the application of innovation process in making useful
data. Information itself is defined as data, which is orderly, organized,
stored and useful (Capron, 1998). Information technology would involve many
useful applications such as E-commerce, online-auctioning, information search,
credit transaction, networking, and teleconferencing. This research is
primarily aimed at examining the effects of information technology to business
in particular.
Background
There is accelerating growth over the population number of
Internet users. It is predicted that the total Internet users would reach 1
billion in 2005, which is one-sixth of the current total world population.
(Baloh and Trkman, 2004a). This large pool of mass market is indeed a potential
investment in the business world. In USA alone, the period 1996-99 recorded
that information technology contributed to its one-third economic growth.
(Baloh and Trkman, 2004b). The regular users of Internet usually come from
those who are more educated, having higher salary, working with computers and
occupying the important position in an organization. Thus, information is
mostly structured to target these influential groups of people. All these would
contribute to the changes of business environment.
Research
objective and research question
This research review is undertaken
to explore the effects of information technology on business environment. It
would seek to understand the effects of information technology as well as
identify its application which affecting business environment. It would also
investigate the business activities or working condition, which had changed
after information technology implementation.
Below
are the research questions that this research is trying to answer:
1.
What are the advantages of using information technology on business
environment?
2.
How do information technology change the working environment in
business?
3.
How does Internet affecting the retail industry?
Methodology
This research is done by
collecting data from books, Internet and journals. Then, it would be synthesized
to make it more meaningful in understanding the effect of information
technology on business. Then, a list of answers for the research question would
be discussed and elaborated further. Discussion would primarily base on the
information gathered through browsing the secondary data from Internet and
books.
Finding / Discussion
Advantages of using information technology
1.
Organizational effectiveness
Organizational effectiveness is defined as the potential
impact of IT in the area of decision making, communication, coordination and
planning. (Kraemar and Mooney 1994a) The use of Intranet or Internet within the
company has facilitated communication process. The use of teleconferencing has
saved travel times, thus reduce company expenses as well. Business executives
rated IT had much impact on areas of communication. (Kraemar and Mooney 1994b)
2.
Business innovation
This refers to the capability of IT enhancing quality,
value and delivery time to customers through the use of IT (Kraemar and Mooney 1994c).
IT plays more important role in service industry as compared to manufacturing
firms. (Kraemar and Mooney 1994d) Banking on-line is an example of service
industry, which benefits much from IT. Immediacy is an important concept in
today’s fast changing environment. Companies are trying hard to make the use of
electronic commerce easier for customer conveniences. (Wright, 1999)
3.
Economies of production
This involves the use of IT in enhancing potential impacts of
IT through improved production output, utilization of physical and human
resources. (Kraemar and Mooney 1994e) For example, the use of paperless
technology in healthcare industry had reduced its cost. Database of medical
information can be assessed rapidly, thus enable doctors to spend more quality
time with patients as well as make a more informed decision. (Ray, 2004)
Changes brought by information technology in business working
environments
1.
Staffing
The use of Internet in recruitment process
has reduced the cost of business. The cost reduction items include application
forms, postal expenses and newspaper advertisement. There is a cut for 12 days
during the period of recruitment process. (Baloh and Trkman, 2004c) There are
also many chances to draw more talented candidates in job application.
2.
Teleworking
Telework is defined as the use of
information technology to change the accepted geography of work. There many
benefits from the application use of teleworking. Employees have their own
flexible time working schedule and would not be fixed to the rigid 9 to 5 hours
plan. Thus, employees’ satisfaction, morale and productivity are
increased. (Baloh and Trkman,
2004d) Organization can reduce expenses in acquiring office spaces. The percentage
rise of the use of teleworking is 15% annually in developed countries. (Baloh
and Trkman, 2004e)
3.
Project-orientated work with subcontracting
This refers to the collection of skilled
people when they are needed in short or long term projects. They are not formal
part of the company. They are hired through contract basis. Thus, these
‘portfolio people’ would only offer their expertise to the best clients and
would not bound to a certain company permanently. Information technology
facilitates this to happen because Internet is a ‘borderless world’ for company
to seek experienced staff. The advantage is these experts would bring
innovative ideas to the company because of their extensive experiences. Lesser
degree of loyalty and rapid turnover of employee are the drawback behind it.
(Baloh and Trkman, 2004f)
4.
Employee-development
Information technology allows employee to seek data and
research findings of other companies. Internet permits them to gain access to latest
innovation and updates on new knowledge and skills. (Baloh and Trkman, 2004g).
There are also online-courses, which would enhance self-improvement skills.
The impact of Internet on retail industry
Retailing
industry had changed much since 100 years ago. Previously, retail industry was
known as an industry for keeping large amount of stocks, giving credits to
purchasers in addition to providing advices to customers. In the early 20th
century, department stores was set up. Variety of products was brought to a
single place for customer shopping conveniences. (Dong et. al., 2003a). 1960s saw the growth of ‘discount
departmental store’ in the market. These types of stores enable customers to
buy products and a very much cheaper price. Inventory turnover doubled or
tripled as profit margin per item has been cut into half. (Dong et.al, 2003b).
Inventory turn refers to the amount of cycle of new product that is replaced or
brought into the retail industry. Main players have reducing its profit margin
per item in order to capture market share.
Internet
has changed much the way of business in the retail industry. Initially,
Internet allowed the creation of ‘vanity pages’, a non-interactive web page
regarding product information which permits only browsing activities but not
able to do any transaction online. The enabling technology of E-commerce has
helped in contributing to the sales of retail industries.
There
were problems of E-commerce at first. Customer’s complaints include expensive
shipping, handling charges and slow-loading pages. However, the conveniences of
time-saving in comparing prices over the Internet and effective delivery
mechanism such as Dell Company override the disadvantages of E-commerce.
E-tailing bot is electronic ‘robots’
that is used to provide lists of items and their corresponding prices. It
allows customers to access a larger base of sellers. (Dong et.al, 2003c). The
creation of Amazon.com has allowed small and big retailers to participate in
the E-commerce activities. Amazon.com. allows for customer to seek profile of
prospective sellers by reading on comments from previous buyers. Thus, the
credibility of the sellers is enhanced.
Retail
sales from E-commerce in US recorded $8.7 billion in the fourth quarter of
2000, or equivalent to the increase of 67.1% from the previous year. (Dong
et.al, 2003d). Its total revenue in 2000 was $28 billion. Although, it only
contributed to 0.8% of total retail sales, E-commerce would play a major role
in the coming future (Dong et.al, 2003e). The ways that would help E-commerce
to grow in retail industry include
1.
Value bundling
Bundling is an activity
of selling different products in a single package. Example is selection of software
programme bundled with computer hardware to make a purchase more valuable. Its
concept works perfectly because it combines 2 or more decisions into one. Such
concept would work effectively in E-commerce industry as customer unable to
touch the product in ‘reality’. Bundling toothbrush with toothpaste in
E-commerce would entice customers to purchase more of the particular
products.
2.
Incentive
Consumers must be encouraged to buy
online. This would include the establishment and setting up of attractive
website. Giving discount on online-buying could help in promoting growth of
E-commerce. Buyers at storefront can be motivated into online purchasing.
3.
Customer conveniences
Sufficient information should be made
easily available to customers. These include delivery cost and availability of
stock. Efficient delivery and easy ordering system are 2 important factors to
increase satisfaction. ‘Stickiness’ is a new concept use in maintaining
customers. It deals with
i.
personalization, such as receiving ‘Welcome Back’ mail,
ii.
emotional appeal (joy) such as Hallmark.com creating list of
important birthdays
iii.
reminder such as Drugstore.com reminding the last usage of
contact lens
iv.
interactivity such as Garden.com that promote discussion with
experts leading to sense of ownership and belonging
Other considerations include non-intrusive
question during registration, loading speed and effective search engine for a
particular product. The use of choiceboards allows customers to customize
product selection easily thus making the search for a product faster. Thus data, which was collected from choiceboard regarding customers’
preferences, can be used by target marketing by the retailer.
4.
Bricks and clicks
This is a term used especially for
Internet retailers such as Wal-Mart. It establishes in-store kiosk related to
its Walmart.com site. Thus, it can satisfy both customers, which prefer
in-store buying or on-line purchasing. Customers who prefer to touch the sample
merchandise before buying it online or picking themselves directly after
browsing rather than waiting to be delivered can do so in the nearby Walmart
kiosk. (Dong et.al, 2003f). Thus,
every segment of customers buying behaviour can be fulfilled through this
approach.
In
conclusion, retail industry has been revolutionized by the application of
Internet. It deals not only with price reduction; it also has to consider
different approach in order to attract customers. As information technology is
getting more advanced as well as more people are affording it, the retail
industry must be innovative in the field of Internet application.
Conclusion
In this research review, the reviewers
have explored the effects of Information Technology on the business
environment. Information technology
has change the ways people doing business. The business environment nowadays is absolutely different
with the business environment several decades ago.
Several decades ago, people use their
hands as the tools to earn their living.
After Industrial Revolution, people started to use machines instead of
hands to increase their production.
In 1960s, there was another significant increase in every sectors of
production when the information technology has been introduced.
Information Technology has shortened
the distance between people around the world. Businessperson can communicate with their business
partners easily in very short time by using e-mail or fax machines. On the other hand, the high-tech
computer reduced paperwork; shorten the time to access data and decision-making
process. Therefore, businessperson
will have more time to focus on other important things on their business and
hence increase their production.
The only drawback of the development of
information technology is it increases the unemployment rates around the
world. For example, the invention
of Automatic Teller Machines (ATM) and Deposit Machines took over the human
being tellers’ job. There are
information technologies embedded in these machines. Since these products of information technology lowered down
the cost of operation and provided higher production, almost all users ignored
the disadvantage of using it.
Recommendation
After doing this research review, the
reviewers have found out that the prospective of using Information Technology
on business will grow from time to time.
The growth over the population number of Internet users is making a
potential market in the business world.
The business environment in the future
will focus more on the e-commerce.
This borderless business environment is a new trend of marketing
system. By using this marketing
system, people do not need to go to supermarkets to buy their commodity, even
food are also available to be ordered online nowadays. Therefore, information technology is
improving the standard of living of everyone by changing the marketing systems
in the business environment.
Therefore, information technology
should not be misused, especially youngster, they like to play online games.
Everyone should learn to use Information Technology effectively and
efficiently.
Bibliography
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