The while maintaining corporate social responsibility, the profit maximization

The 20th century
economist Joseph Schumpeter, known as the prophet of innovation, argued that
established firms were best positioned to innovate because of the resources
available to them. However, Schumpeter believed that the key agent of
innovation was the entrepreneur.

In order to compete in the era
of dynamic and disrupted digital markets, organisations need to be able to operate
at a higher speed. They require to be able to respond quickly to changing
market conditions, customer preferences or competitor activity. Therefore, the
entrepreneur is unable to process all the information manually, and is required
to use the information technologies. As a result, there is an growing necessity
of automatic systems of collecting, processing and storing the data. An
effective information control, eases the business controlling process, and speeds up
the decision-making process. This essay, will analyse the effects of innovative
information systems on businesses, pointing out the main IS required for
business prosperity. 

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Every business has
to pursue a goal. Although, the primary
purpose of a business is to maximize profits for its owners or stakeholders
while maintaining corporate social responsibility, the profit maximization can
be achieved in different ways. One way of maximizing the profits, is by
optimization of the business process. This can be done with the use of
innovation in the IT sector. Business can be viewed to exist for the purpose of
creative expansion. Successful firms like Google manage to align their
activities towards the purpose of creative expansion from the perspective of
all stakeholders, especially employees. This validates the growing importance
of innovation as a core principle for corporation survival and success. Also,
innovation can be the factor that would distinguish a business from other firms
in the market. Therefore, gaining competitive advantage is critical for organisations. Baltzan and
Phillips define competitive advantage as ‘a product or service that an organisation’s
customers value more highly than similar offerings from its competitors’. Michael
Porter’s Five Forces Model is used to measure competition intensity,
attractiveness and profitability of an industry or market. Porter mentions that
in order to complete an industry analysis a firm must examine five competitive
forces, which are competition in the industry, threat of new entrants, power of
suppliers, power of customers and threat of substitute products. In order to
survive and succeed, a business must develop and implement strategies to
effectively counter the above five competitive forces. O’Brien and Marakas suggest
that organisations may follow one of five basic competitive strategies, which
are based on Porter’s three generic strategies of cost leadership,
differentiation, and focused strategy. The five competitive strategies are:
cost leadership, differentiation, innovation, growth, and alliance. Information
systems could be a critical enabler of these five competitive strategies. Businesses
can use information systems to identify and create new products and services and
to develop new markets or to radically change business processes via
automation. They also can work on new initiatives of establishing online only
businesses or operations. At the same time, the Internet and telecommunications
networks provide better capabilities and opportunities for innovation.

 

However,
despite the obvious benefits, some businesses or entrepreneurs are reluctant to
invest in information systems innovation. The reason lies within the company
itself. Most companies don’t suffer from lack
of initiatives in the IT sector. It is more often that there are too many
initiatives, and the firm managers can’t decide which ones to focus on. As a
result, the managers decide to follow the competitors and use the same
technologies as them. This leaves the firm in a position where it is catching
up, instead of being the one leading the market. Moreover, the systems used by
the competitor do not always satisfy entirely the needs of the business, which
creates an obstacle for the efficient use of it. On the other hand, a study by
Accenture, a global management consulting company, revealed that nearly half of
entrepreneurs are risk averse when it comes to considering new ideas. Instead
of inventing new products and services, 64 percent of companies focus more on
product-line extensions. Due to a lack of disciplined approach for innovation
risk management, many companies hesitate to take risks, which in return
jeopardizes the results.  

 

Despite the numerous
benefits of information systems and innovations in this sector, there are some
drawbacks of such systems as well.  One of
the problems with information systems is that quality of the systems depends on
the quality of data. If the data is insufficient, incorrect or misplaced, it
can mislead the managers, resulting in faulty decisions being taken. It can
also become ineffective, if it will result in managers requiring additional
input due to a lot of unimportant information that has been gathered, thus
delaying business decisions.  Secondly,
there are security concerns. There have been many cases of hackers, identity
thieves or corporate saboteurs targeting and leaking sensitive company data. Such data can
include vendor information, bank records, intellectual property and personal
data on company management. The hackers distribute the information over the
Internet, sell it to rival companies or use it to damage the company’s image.

An example of such an attack was the WannaCry hack in 2017. Hackers targeted
devices running Windows operating systems, encrypting the data and demanding
300$ to restore it. It has affected 200.000 devices over 150 countries,
including many state organisations such as NHS or Ministries in several
countries.  Thirdly, information system
integration requires a good amount of cost in a case of software, hardware and
people. Software, hardware and some other services should be
rented, bought and supported. Employees need to be trained with unfamiliar
information technology and software. Therefore, it can involve high costs which
not many companies are ready to support.

 

Although most of the businesses are imitative
rather than innovative, there has been a combination of both observed.

Businesses produce imitative products or services, but at the core of the
organisations there are innovative technologies used. There are 3 main
information systems used in most organisations.

The first one is the social media, since the business success lies in its marketing which helps
to identify its target audience first and then observe their needs, trends and potential
desires. The development of social media, has changed the way
people interact. Moreover, it has become a powerful tool for businesses. Social
media marketing (SMM) allows companies to find consumers, rather than waiting
for a consumer to find the company, like SEO and Google Adwords marketing. The
main advantage of SMM is the targeting possibility. Unlike the traditional
marketing, social media allows businesses to target the preferred audience of a
promotion, and choose age, gender, location or even interests of the target consumer.

The results and reactions to any of the activity of a company on social media
can be tracked, analysed and used as a reference for further campaigns. Organisations
need to provide quality content for the potential consumer, because this will
ultimately lead to brand recognition. Not to mention that social media
advertising is more cost efficient than other ways of advertising.  However, businesses are not the only
beneficiaries of social media development. Consumers can easier find products
and services that they might be interested in. Some social media users don’t
even realize that it is the company that found them and not vice versa. In
addition to that, they can always check on a company’s score and opinions of
other former clients, which can be an important decision-making factor.   

 

The second one is customer
relationship systems, since higher level of customer satisfaction is the key to
success which cannot be achieved without a quick and reliable customer support
process. Business success depends on knowing customer needs, trends, behaviours
and satisfaction level. Therefore, effective communication is the key to understanding
the customer demands, problems and their solutions. A customer relationship management (CRM) system uses
information about customers to gain insight into their needs, wants and
behavioral patterns, in order to provide better service.

CRM helps businesses build a relationship with customers that, in turn, creates
loyalty and customer retention. At its core, customer relation management is
simple. However, there are many ways in which a customer can interact such as
website, email, telephone calls, social media, mail. A CRM system does gather
all the interactions and creates a profile for each individual customer. It
helps the business learn about its customers, including who they are and why
they purchase, which leads to a better anticipation and fulfillment of their
needs. In other words, CRM helps businesses build a relationship with customers
that, in turn, creates loyalty and customer retention. Since customer loyalty and revenue are both qualities directly
affecting company’s revenue, CRM is a management strategy that results in
increased profits for a business.

 

The
third one is resource management, which plays a
crucial role in business success. In large organisations, it is impossible for
managers to administrate all the resources manually. It may include human,
tangible or financial resources. The user-friendly solutions introduced by
information technology have played a crucial role in automating such complex
problems. Most of the large and mid- sized companies have complex organisational
structure. They are required to deal with both internal and external stakeholders,
therefore, they need to make sure that, right data and information is available
all the time. In order to meet this challenge, Enterprise Resource Planning
(ERP) software has been developed. An ERP software
solution seeks to track business resources, namely cash, raw materials,
production capacity, and the status of business commitments such as orders,
purchase orders and payroll. In other words, ERP systems integrate all data and
processes of an organisation into a unified system.  ERP facilitates the information
flow across various departments. It reduces the operational costs involved in
manually tracking and duplicating the data using the individual & disparate
system. Additionally, it facilitates error-free transactions and production,
thereby enhancing businesses efficiency. The unified databases, allows
employees to track the actual progress and key metrics straight away, without
waiting for other departments to update the data.

These 3 resources have proven over time to
improve the performance of a company, given a correct use and administration.

Since it combines both, suppliers and customers interactions optimization, it
creates a better image of the business. If these information systems are used
correspondingly, they are more than likely to stimulate the growth of any
business. On the other hand, should it not be used accurately, it might turn
the benefit into a drawback, as it has been mentioned above. Therefore, a
company should be ready to commit to using these systems, not just invest and
expect the software to work on its own.

 

In conclusion, it can be
said that modern technologies reshape the business sector. Innovative services
are created, new ways of customer service are invented. Therefore, only a
well-constructed IT infrastructure inside the business will be able to cope
with all the changes. It is impossible to achieve a long-term business success
without leveraging the benefits of information technology in this digital age. When
a company has an innovative culture, it’ll grow easier, despite the fact that
the creative process isn’t always simple. Tried-and-tested methods may be
reliable, but trying out new things is a worthwhile experiment. The success of
a business in the digital age, completely relies on the effectiveness of the IT
sector. Therefore, each entrepreneur should not be afraid to face the change,
and start the optimization and innovation process within the business, and
since most companies are imitative, it will stimulate others to follow.