WCM/U1 Topic 2 Competition and Business Challenge
Organizations are at present in the midst of a revolutionary transformation: that of competition shifting from the industrial age to the information age. During the industrial age, the success of a company was measured by how well it could capture the benefits from economies of scale and scope. Technology was important, but ultimately success accrued to companies that could embed the new technology into physical assets that ensured efficient mass production of standard products. The emergence of the information era in the last decades of the twentieth century made many of the fundamental assumptions of industrial age competition obsolete. Consequently, companies could no longer gain sustainable competitive advantage by merely deploying new technology into physical assets rapidly. The information age environment requires new capabilities in organizations for competitive success. The ability of a company to mobilize and exploit its intangible assets has become far more decisive than investing and managing physical and tangible assets. Intangible assets enable an organization to develop customer relationships and loyalty, introduce innovative products and services, produce customized high-quality products and services at low-cost and with short lead times, mobilize employee skills and motivation for continuous process improvements, and deploy information technology effectively
Information age competition has initiated some unique challenges that businesses have to cope up with (Luftman 1996). These are described below.
Managing Uncertainty: Uncertainty in the business environment has become a way of life.
Consequently, companies are finding it even more difficult to predict changes. Customers are becoming competitors, competitors are becoming partners and unconventional competition is emerging. Businesses, however, must go on despite dramatically new environments that are at present not well understood.
Understanding Customers: It is increasingly becoming important to understand customers’ needs and wants, and to translate these into a unique value-added business mission. Companies capturing and applying information at each point of customer contact will, therefore, be better off than those that do not. Thus, companies have to be able to apply and integrate information technology into the entire product process (including research, design, manufacturing, distribution, marketing, and after sales service).
Understanding Globalization of Business: Globalization is defined as a process that cuts across national boundaries, integrating and connecting communities in new space-time combinations
(Hall et al. 1992). As information technology (IT) breaks down the barriers of time and location, distinctions are also breaking down between large and small companies. Small, agile Finns are now effectively competing with industry giants because IT can make a consortium of small firms look, feel and get big, reaching out for customers once beyond their grasp. This has given rise to intense competition, blurring the boundaries between domestic and global markets.