Digital Business

in The Digital Age

Jens Christensen

• Publisher: Books on Demand
• Year: 2015
• Print ISBN:
  9788771700633
• Edition: 1
• eBook ISBN:
  9788771454901
• Topic: Business
• Subtopic: Business General
• Index: Business

This book provides a holistic picture of the digital age as it emerges in the 2010s. On the background of business analysis concepts from firm to megatrends and all business sectors of the World, the digital age of information systems and digital drivers are thoroughly laid out.

Chapter 1

Introduction

In the 1990s and 2000s, computers and the Internet became part of people’s work and daily life in developed and increasingly developing countries. This became even more so as were entered the 2010s. Digital technologies took hold of all devices and information processes. In our vocabulary, digital replaced information and communications technology and signaled a new transformation of societies. Digital economy became titles of books and research to capture a more profound change of the economy. Some even talked about the arrival of the digital age.

In this context, we shall use the concepts of ‘digital business’ and ‘digital age’ to denote recent transformations. The prevailing economy of the world is a market economy or capitalism, which is based on the activities and competitiveness of businesses and their applied technologies. Although national governments are important and necessary for the economy as well as its organizations and people (such as, infrastructure, rights, and order), the wealth and values of society are created by companies. That is why we start by laying out the principles and drivers of business in the first part. In addition, we outline the subsectors of the global economy and their leading and consolidating companies. In the wake as well as the front of new technologies and economic drivers, we see thousands of innovative firms arise throughout the world. They are important characteristics of contemporary developments, but they cannot replace the dominant position of consolidated businesses. In order to remain leaders of their industries, they also tend to merge with the most advanced and successful start-ups. That is why big business form and continue to form the core of modern capitalism.

The concept of ‘digital age’ is used to signal that we are entering a new age. Not only are digital technologies becoming ubiquitous, they are also making their way into the heart of business and social activities. In this context, we focus on how digital technologies are developing and transforming business in the contemporary world of the 2010s. In the second part of the book, we seek to present the nature and developments of new digital technologies which are increasingly affecting business. This includes the core enterprise systems as well as the rapidly new and influential mobile, cloud and social technologies and businesses. In addition, recent new trends of embedded systems in things are likely to rise in importance during the second half of the 2010s. That is the case with new interfaces and the use of games in business activities.

Multiple sources are used in order to create a meaningful and holistic picture of contemporary developments. First of all, I draw on a general understanding of drivers and trends in global business and technology, as they have taken place in recent decades. Next, a palette of research in books and articles has been applied to lay out the details of business and new technologies. Finally, many kinds of market research, white papers, reports, and company websites are indispensable for an updated and practice near coverage of realities.

Chapter 2

Business Analysis

Business

Market economy is the primary driving force and contextual framework of all societies of the world. It is based on the relationship between firms that supply goods and services and firms and consumers that demand these goods and services. While firms and consumers choose products or services from the companies that meet their needs in the best way, firms compete to gain a profitable position by being the preferred supplier of these goods or services. Firms and markets are segmented in matters of product and geographic scope, and the business world is divided into numerous industries and markets. Understanding the dynamics and structure of business is based on fundamental concepts of competitiveness on the one hand and overall market trends that drive consumers and businesses on the other.

Government and governmental agencies and institutions, the state, are not directly part of the market economy. Indirectly the state is based on the market economy through taxes. As current taxes and the use of tax funds represent a large proportion of national GDPs, they affect businesses and societies in many ways. It influences the way companies make investments and the level of salaries. By social payment transfers, it increases the purchasing power of unemployed and disabled people. The state invests in and supports functions such as military, security, police, justice, education and research as well as health and social care. Governments are heavily involved in infrastructure building, including roads, ports, airports, energy, sewers, and telecommunication. So, they are important customers for many sectors of the economy. Generally, the state affects business and firms by way of laws and regulations, securing property rights, standards, etc. Accordingly, there is a strong interrelationship between business and state, but business always comes first.

In this context, we shall mainly focus on the private sector, because that is where the fundamental wealth and values are created and the drivers of society are working. Governmental organizations just exist in the wake of business and on the basis of taxes drawn from the value creating market economy. The firm is the core unit of business, and the crucial challenge to any business is to become and stay competitive in a dynamic business environment. In the following, we outline the rationale of the firm, the industry, and the broader context of clusters, nations, globalization and other megatrends. The purpose is to understand how a company develops and sustains a competitive advantage, focusing on its sources and drivers as well as the nature of these drivers. In addition, a whole section presents the various business sectors of the global economy.

The Firm

The Value Chain

Competitive advantage results from the way firms organize and perform discrete activities.¹ Firms create value for their buyers through a unique organization of these activities. This value is measured by what buyers are willing to pay for a company’s products or services and how many buyers who are willing to do so. A firm is profitable if this value or income exceeds the total cost of performing all the required activities. A firm gains competitive advantage over its rivals, either by providing value more efficiently than its competitors (lower cost), or perform its activities in a way that creates greater buyer value at a premium price than its competitors (higher value).

The Value Chain

Source: www.wikpedia.org.

The activities of any firm can be divided into a series of operations that might be called the value chain. Activities can be divided into two groups. One group might be named ‘primary activities’, which include supply, production, marketing and sales, and after-sale service, i.e., the actual production of products and services. Another group might be called ‘support activities’, which include the management and support of the primary activities and thereby the whole company, such as procurement, IT, HR, finance, R & D, communications and marketing, and overall strategy.

Strategy determines the way a firm performs its activities and organizes its value chain. The activities’ importance to competitive advantage varies in different industries. In most production industries, for instance cars, technology is crucial as well as supplies. Service industries such as marketing and architecture depend in a higher degree on professional skills. Generally speaking, recent developments have clearly upgraded the importance of IT and strategy.

The Value System

Source: www.wikipedia.org.

A firm is more than the sum of its activities. A firm’s value chain is a system or network of connected activities. The connection or linkage means that the way one activity is performed affects the cost or effectiveness of other activities. In order to achieve competitive advantage from such connections, they must be integrated according to its strategy. For instance just-in-time delivery without costly inventory requires careful coordination of supplies and sales. Competitive advantage arises from managing the value chain as a system. Improvement of a company’s competitive position is often the result of reconfiguring the value chain, for instance outsourcing of varies parts of the value chain in order to be able to focus more on the core competence. The task of strategy is to create a unique organization of the value system enabling the firm to provide unique values to its customers.

A firm’s value chain is part of a larger stream of activities that may be termed the value system or more often called the supply chain. The supply chain includes suppliers of products and services, who provide inputs to the firm’s value chain, and distribution channels to reach end users. As a result of globalization and digitization, competitive advantage is increasingly depending on how a company can manage this entire and growing system and network of interrelated companies (see below, the section on globalization).

Firms create competitive advantage by devising and marketing new and better ways of competing in an industry. This is what is meant by innovation. Innovation includes both improvements in technology and products as well as better ways of doing things. It might include product changes, process changes, new approaches to marketing, new forms of distribution, new markets. Much innovation is incremental, rather than radical. Incremental innovation depends more on organizational learning than from technological breakthroughs or R & D efforts. Incremental innovation is based on investments in skills and knowledge and other assets.

Innovations often create competitive advantage that brings about changes in the strength of rivals in an industry, particularly if some firms fail to respond to new initiatives. For example Swiss watch producers overcame the challenge of electronic watches by upgrading design and specialized functions. New technology can even reconfigure an industry, as was the case with the advent of the smart phone. The most typical causes of innovations that shift competitive advantage are the so-called megatrends (see below, the section on R & D).

Sustained Competitive Advantage

It is vital for companies to make competitive advantage lasting. The sustainability of competitive advantage depends on three conditions. The first is the order of advantages. Lower-order advantages, such as cheap labor or materials, are relatively easy to imitate. In this case, companies primarily compete on costs, including low-cost countries or economies of scale using easily available technology. Cost advantages disappear, however, when undermined by even lower-cost labor countries and new technology.

In contrast, higher-order advantages are more durable. They include for example unique products and services, brand reputation, and high barriers of entry for newcomers, based on advanced skills and capabilities. They make up the second condition. These higher-order advantages depend on history. I.e., they are the result of often many years of sustained investment and continuous development of core competences, located in specialized facilities and unique innovative knowledge capabilities. Unlike low-cost, such special and dynamic competencies are very difficult for competitors to copy.

The third condition of sustained competitive advantage is constant improvement and upgrading. The source of this advantage is the mentioned higher-order core competencies, but such superiority might vanish if management rest on its laurels and continue to upgrade capabilities according to market developments. To do so, any company must be able to change...

Table of contents

• Table of Contents
• Abbreviations
• Chapter 1 Introduction
• Chapter 2 Business Analysis
• Chapter 3 Business Sectors
• Chapter 4 Digital Systems
• Chapter 5 Digital Drivers
• Chapter 6 Conclusions
• Index
• Copyright