Which technology can contribute to the growth within an industry Essay

Which technology can contribute to the growth within an industry Essay

During the past decade, some unique terms emerged to define the need of technology for organizations. The terms of digital economy, information economy or internet technology are used to define the distinct contribution to the economy through the use of the internet, digital technology and information and communications technology (Combe, 2006). Together these types of technologies have created the so-called new economy, one that is based on entrepreneurship in knowledge creation and sharing, innovation and creativity and utilisation of information in selling new products and services (Strauss et al, 2003). The new economy defined the global market of the late twentieth century and will be the dominant driver of economies well into the future.

Survival in the new global business market calls for improved productivity and increased competition. Indeed, firms that have upgraded their products used technology skilfully and sought niche markets have not only survived, but prospered. Organizations that realised the speed of change in our present-day highly technological society, and the need for the overall economy and business to respond to this rapidly changing environment and market conditions have thrived in the business world. New technologies bring new ways of thinking, planning and challenging, thus they promote the need of creativity and innovation in an uncertain economy.

Some factors that have had a major impact on the development of management during this decade are: the knowledge explosion in technology, the arrival of the commercial computer, the emergence of a more educated, informed consumer with increasing purchasing power, the internalization and globalization of business and the emergence of multinational companies (Zineldin, 1998). All these factors created a need to prioritize technology. A company that does not learn and adapt to changing technology can face painful competition and may fall victim to competitors that switched their strategic thinking and planning to more technologically based relationships and advanced products and services.

According to (Lovelock, 2001) the diffusion of new technologies have played a key role in knowledge sharing, encouraging innovation and creativity, integrating global supply chains, facilitating global trade and creating wealth. Combe (2006) identified that there is also a local characteristic to the new economy as organizations utilize technologies to serve local or regional demand. The scope of the new economy encompasses the transition from localization to globalization by making it possible to co-ordinate economic activities in many different locations and beyond traditional organizational boundaries. Technology is an effort to maintain a firms ability to handle an increase in product/service volume while controlling costs. Gronroos (1994) argues that it also enables firms to be innovative and market oriented. The communications and computers (C&C;) networks between companies helped them to remain competitive and profitable.

The new economy is also characterized by changes in the competitive structure of industries (Harris, 2003). The traditional model, based on mass production, where competitive advantage was gained through decreasing production costs or increasing productivity, has given away to a need for organizations to adapt to changes in market conditions, seek new opportunities, embrace learning, embrace change and innovation and create and share knowledge. Managers in organizations have to control and co-ordinate the use of information technologies such as the internet, intranet, extranet and applications software to help meet those challenges and take advantage with the opportunities associated with operating within the new economy (Ford, 1997)

A metaphor has emerged the last decade to better explain and characterize the need for technology adaptation by organizations. The metaphors of wiring and growing are used to describe the infusion of technology into the international market (Fisk, 1999). The wiring metaphor for technology is a mechanistic metaphor for the need to build a technological infrastructure to support the international services organization, employees and customers. The growing metaphor for technology is an organic metaphor for the need to create international service systems that are responsive to the human needs of organizations, employees and customers.

The word wiring is used as a way of describing any form of connectivity. Experts classified connectivity based on eight information technologies: phone lines, televisions, internet, mobile phones, radios, personal computers, satellite dishes and cable. Managers need to wire their organizations, employees and customers for the effective use of technology. First, this includes networking the various departments and locations throughout the world where the organization does business. Second, individual employees need to be connected to their organization via technology. Third, customers should be included in the networking efforts. Organizations should create systems that enable customers to contact the organization for information, purchasing and customer support. All three levels of this technology require significant investments in hardware, software and support systems to make the technology productive.

In addition as the sophistication of technology increases, a more organic or humanistic approach to technology is needed (Norman, 1998). The growing word addresses the need to make the technology more usable to the organization, employees and customers. At the same time that organizations need to be wired via information technology, the technology must also serve the needs of its human users. The creators of technology tend to have vastly different perspectives on technology than the users of technology. To technology creators, technology is a goal in its own right. To technology users, technology is a means to solve problems. Norman (1998) argues that we need to create an environment where technology serves human needs invisibly and unobtrusively (Norman, 1998).

While all of industries are experiencing tremendous change because of technology, examples of the impact technology has on hospitality, travel and tourism services is developed in this section.

Nowadays, trade in international services has reached unprecedented levels and will almost certainly continue to grow. A major aspect of this trade growth has been information technology, especially the convergence of communication, computing and entertainment technologies. Technology has long been a key component of service industries (Quinn, 1999). For example, in the nineteenth century, linking the railroads from coast to coast was a major technological event in the USA. A variety of technology-based service systems were created in most countries in the twentieth century. These include jet transportation, telephone radio, and television service systems. In the late twentieth century, international service networks were created in such areas as television, telephone, satellite and the Internet.

Hospitality, travel and tourism services are very ancient forms of service. Providing food and lodging to passing travelers has a long and honored history. Today it is considered the largest industry in the world, with an estimated total economic of US$3.6 trillion dollars (Roberts, 1998). Historically, hospitality, travel and tourism services have been rather low-technology services. However, information technology has become a major competitive tool for todays hospitality, travel and tourism services. Hospitality, travel and tourism services are rapidly wiring their operations. Computerized reservation systems allowed hotels and airlines to book reservations and bill customers while creating sophisticated computer databases for direct marketing (Roberts, 1998).

Electronic Commerce (e-commerce), is changing the way organizations operate, interact with consumers, and in general doing business. E- Commerce is not only the buying and selling of products via electronic means, it evolves all other activities to support the sale process (Applegate et al, 1996). Undoubtedly, e-commerce is changing the business process and it also changing the organizational structure to support the new process. Among the myriad of computer and telecommunications based applications, e-commerce is having the biggest impact on organizations and their customers (Lovelock, 2001).

Hospitality, travel and tourism services are learning how to grow their service technology, too. Recent online innovations have made it possible for customers to search, shop and purchase airline, hotel, and other travel arrangements directly (Roberts, 1998). One such service is Travelocity (http://www.travelocity.com ). Travelocity has made the process of shopping for and booking travel arrangements very simple. It also makes it possible for customers to receive regular e-mail updates on new prices for selected travel destinations.

Innovations by a service industry can also affect related service organizations. For example, online ticket purchasing arrangements have caused airlines to reconsider their policies on travel agency commissions. In addition, technology can provide more options for customers. One notable example is the rethinking of ticketing processes by Easy Jet airliner which used internet as the only supplier of tickets. As a result, many airlines now offer electronic tickets as an alternative to printed tickets. This option eliminates the hassles of forgotten or lost tickets for the customer and of course cost reductions in personnel.

The internet has dramatically affected the conduct of business. Markets, industries and businesses are being transformed. Information technology now drives businesses and markets. In the new economy, internet has become a powerful and ubiquitous communication mechanism to facilitate the business transactions. To take advantage of e-commerce, many companies expanded their business activities to reach new customers and to offer new opportunities to their existing ones. The Web is the tool for change, providing the opportunity for unprecedented flexibility, collaboration, and speed. It is a perfect platform for the travel and tourism industry to bring information about their products to the customers all over the world, in a direct, cost minimizing, and time effective way. As many authors have claimed: Tourism must be treated as an information intensive industry (Schertler, 1995). An excellent example of the use of internet is of Ryanair Airlines. The generic strategy of the company is cost leadership. In order to create a competitive advantage in their highly competitive environment required to be the least cost producer in the industry. There were numerous ways the company used to achieve that, including: flying to secondary destinations, minimal advertising costs, minimal training of staff etc. In addition, the most successful way was that of encouraging customers book their seat online. This saved the company on administration costs and quickened the process of filling seats. Internet booking allowed the firm to generate 400 million in profit in 2005. (www.Ryanair.com ). Using latest technology and the internet as service distributor, the airline gained competitive advantage is areas where airlines incur most costs.

In addition internet technologies also offer other applications for use in internal and external electronic communications. Intranets are probably the best applications of the internet technology in business. Intranets capitalize on the fact that most organizations distribute far more information internally than they do on the outside world (Broadbent, 1997) A notable example is that of Hilton Hotels where the company introduced a system that could be used by all staff. The company linked all corporate locations at the UK with its headquarters in the USA. The value of the system lied in its speed and capacity. The intranet not only increased efficiency and reduced administration costs but also the operating costs were massively reduced. Another application of internet technology is extranet systems. These systems are similar to intranet but their use is found primarily on the external activities of the firm. Extranet were firstly used by large hotel companies such as Hilton and Marriot to ease communication between their suppliers. These systems are primarily useful in providing simple exchange of information between some parties on: prices, availability of products, specifications, delivery times, etc. The most common use of extranet is to enhance efficiency in supply chain management (McCollum 1997).

Probably one of the most significant applications on information technology systems has been the development of EDI (electronic data interchange), (Strauss, 1997). Nowadays almost every company in all industries that supply products/services by using e-commerce, adopted this system. EDI is based on the simple idea of exchanging information between consumers, and product/services providers. Expedia, the traveler booking company owns its tremendous success on innovative technology such as EDI. The firm offered its customers with unique services at the time, increasing consumer satisfaction and providing easy service consumption. The company was based on a differentiation strategy by infusing this technology. The firm offered the consumers with more information and greater choices. They reduced bureaucracy and paperwork effectively and provided the customer with more free time.

Although the internet provides companies with a truly global market, convenience and comparison of services was far more than easy for consumers. Due to the need to satisfy consumers by offering them the best services at the best prices and at the minimum time used, a new system of reservations has emerged. The so called Computer Distribution Systems (GDS) satisfied the needs of consumers for convenient access to transparent and easy to compare information (Buhalis, 1998). They cover the entire variety of choices of travel, lodging and leisure services, destinations, holiday packages, as well as displaying the actual prices and availability of those services. These systems also provide immediate confirmation and speedy documentation of reservations, allowing flexibility for the customer. Airlines, such as Easy Jet pioneered this technology, although large hotel operators (Hilton, Sheraton) and tour operators (Thomas Cook, My Travel), followed by participating in GDS channels. This technology enabled these organization to be considered first movers strategically and allowed them to promote their products globally while facilitating their yield management.These systems have become electronic supermarkets linking buyers to sellers and allowing reservations to be made quickly and easily. Nowadays, more travel is sold over the Internet than any other consumer product. The Internet is a perfect medium for selling travel as it brings a vast network of suppliers and a widely dispersed customer pool together into a centralized market place. (www.hotelonline.com)

Another example of successful implementation of GDS systems is the Marriot Corporations room reservations system which manages the booking of than 355.000 hotel rooms globally. This provides Marriot with a valuable opportunity to collect information about the characteristics, habits and preferences of people who travel. Today competition in the hospitality industry is fierce and this diverse and uncertain environment has forced organizations to restructure for survival and growth. This restructuring effort, according to researchers, has led to the adoption of a new paradigm, which is referred to as relationship marketing. Relationship marketing cannot be established without any IT technology using advanced technological tools (EDI, intranet, extranet, electronic appliances, etc) (Zineldin, 2000). As the core concept of RM is the customer, companies developed ways to continuously gain information on their existing customers. Retention is a primary function of companies in the hospitality industry and loyalty the most desirable result. It is commonly known that retaining existing customers is far cheaper than attaining new ones. Another notable example that involves Marriot Hotels is the introduction of a loyalty scheme which is directly integrated and connected with the hotels reservation system. This simply enables the firm to store the customer profiles in their frequent lodger programme which constitutes the largest database of travellers in the globe. This results to an effective targeting strategy by the company, and makes Marriot able to target incentives and promotions with unprecedented precision (Parasuraman, 2000)

Beyond internet, every organisation should use every kind of technology that will strengthen the service infrastructure to meet the needs of the organisation, employees and customers (Norman, 1998). Norman (1998) proposes that information appliances are needed. According to Norman, an information appliance is a technological device that is simple, versatile, and pleasurable. Technology is seeping into almost every service offering. Very few service organizations could survive today without the heavy use of telephones, fax machines, computers, bar-code readers and hand-held computer devices. Field service workers are able to monitor parts inventories with bar-code readers, carry a vast array of service manuals compactly stored on CD-ROM discs, upload service data to corporate computers via telephone lines and a laptop computer, and stay in close contact with the main office via cellular phones. As these various service technologies move closer to true information appliances, international services organizations will find it even easier to wire and grow their service operations (Fisk, 1999)

IT also links all parts of an organization. The sales and marketing, human resource, the suppliers, operations, logistics etc. integration is vital among these departments and IT can provide a valuable link to those interdependence areas.

In the past the hospitality industry was primarily focused on selling accommodation, food and beverages. It has now evolved into a truly global industry, not only because hospitality enterprises serve international markets but also because their products and service are complex and globally competitive. The transformation of the hospitality industry from being a low tech, local industry, now selling services and goods into a high-tech global environment, is the perfect example of the benefits of the creative use of technology in services.

Information technology is revolutionizing the global service economy and changing the rules of competition in international service industries. The information revolution offers unprecedented opportunity to improve productivity, increase service quality, strengthen customer relationships, offer new services and adapt to employee and customer needs (Fisk, 1999) Technology is likely to continue to play a critical role in establishing service organizations competitive position in the third millennium. If international services managers fully wire their organizations, employees and customers, they will enable tremendous improvements.

Infusion of technology into modern hospitality organizations is the key to the creation and sharing of knowledge to gaining a competitive advantage. The development of the internet has provided the mean to enhance the process of sharing information. More specifically internet facilitates greater communication and collaboration in e-business. It is the job of managers to integrate all of the organizations applications to fully support its activities.

However, the unprecedented pace of the technological change facing organizations as they move into the future, demands that managers must be aware that making inappropriate decisions about the technological dimensions may affect their competitive powers. It may also affect their profits by requiring expensive actions. Technology advancement and Internet has undoubtedly altered the way companies conduct business and establish business or customer relationships. Although internet remains one of the driving success factors, it cannot survive without effective management. Success is the result of the symbiosis between technology and management (McCollum, 1997).


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