Tuesday, January 14, 2020
Impact of Information Technology on Customer and Supplier Relationships in the Financial Services Essay
Information technology plays an important role to support the relationships between customers and suppliers in financial industry. Different industry faces different competitive and different business practice. Besides, we can use information technology to determine the opportunities and threats to the relationships between customers and suppliers. In this research, it focus on the financial service industry that is motivated by three factors which are the paucity of research in customer and supplier relationships in service industries relative to manufacturing industries, the sheer size of the financial service sector relative to other service sector and the potential for information technology to positively impact firm performance through channel expansion, cost mitigation and service level enhancement. Financial service industry includes all Standard Industrial Classification (SIC) codes starting with the digit six. In this research, we only focus on those services typically classified as Ã¢â¬Å"financialÃ¢â¬ . Financial service companies are the earliest commercial users of information technology. Economic forces and technological advances, especially Internet has driven this consolidation across international boundaries and across type financial services. The financial service companies are relatively unique in regard to their value chains. Without possessing any intermediate product can add value to the finish product. The financial services industry has been doing business electronically for many years. Some customer and regulatory statutes demand the use of paper-based transaction audit trails and reporting those transactions. However, the industry leaders will pressure them to adopt electric distribution and information management methods. This report concerns on electronic connectivity, alliances and partnerships. There is a lack of understanding of and available insight into the emerging role of e-business as a delivery channel and customer connection mechanism make a great concern of many organizations. Research Methodology The first phase of methodology is to identify the current and potential role of information technology to support relationship among customers and suppliers in financial services. It included 5 steps which are definition of scope; determination of survey methodology and identification of sample; creation of a survey instrument; administration of the survey; and analysis of survey responses. In this phase, they limited the scope to the immediate suppliers and customers of the subject companies. So the respondents no need to identify suppliers of their suppliers or customers of their customers. In this research, it conducts two interviews in several sectors. Due to the availability of contacts, three of the subjects worked in mutual fund industry, one in retail banking, two in each insurance carriers, institutional investment companies, and brokerage. Eight of them were conducted by telephone and another two were chosen to supply written responses. The typical respondents are senior managers and vice president. Interviews were recorded manually by interviewer so that it is confidentiality and security. Analysis The collected data were analyzed using qualitative techniques. It seeks to conceptualize theory from data rather than proposing theory. The method involves organizing and understanding interview transcripts, collected documents and observe social or business practice. The methodology involves extracting theory from one case study and studies to augment, refine the theory by using subsequent case. Since the sample is limited, they only drew inferences upon a convergence of ideas across industry sectors. Findings / Results Based on the results of interview, there are consistent patterns in the thought, planning, and implementation processes of various participants. They have group the result into five categories. First is how information technology supports existing customer and supplier relationships. Second and third are the opportunities and threats they foresee when they expand their business. The fourth session is the drivers of change. Finally, they examine how manager predict the future respect to the relationship among their customers and suppliers. The analysis of current activities begins with an examination of the partnerships that support inter-organizational business activities within the respondentÃ¢â¬â¢s respective industries. There is high degree of interdependence among various financial service industries. A non-linear relationship among the parties is clearly shown. Besides, the relationships demonstrate a high level of complexity and variability. Existing audio response and Web-based account access functions reduced the cost of delivery for many customers account services. There are many opportunities to strengthen the relationships with customers and suppliers. One of the opportunities is to improve customer service levels by providing new form of service delivery, rapidly response to customers, and improve customer confidence. Besides, information technology creates opportunity to increase switching costs for their customers. By this, they can add more value to the transaction. It includes the assimilation of information that supports the investment decision and motivates the transaction execution. Furthermore, information technology also creates the opportunity to extend the world-wide relationships of both customers and suppliers. Similarly, the opportunity exists to create a new relationship with suppliers to create, purchase and provide new products and services. Some respondents believed that the ability to demonstrate technological leadership is one of the opportunities to improve market perception. Besides opportunities, there is a variety of threats to their existing relationships. It includes security risks, network and systems instability and the difficulty of integrating different systems. An opportunity to create a new channel and relationship can create a threat of disintermediation for others. A related threat is the commoditization of product, because it is common in all industries. Many financial service companies have historically relied on existing customers to build profit margins and create loyalty. Besides, the respondents feared the risk of adopting the wrong standard. Since the technology is moving rapidly. So the standards are changing so fast. Another threat is the challenge of keeping pace with escalating technological and business change. The greatest threat is they worried that they may unable to move fast because they cannot see the upside potential and downside risk of inactivity. Evolving customer expectations also impact the e-business strategies. Nowadays, customers demand access to real-time data and expect to access at any time and any place. Besides, improvement in security technology are also driven change. Many respondents believed that internal and public network reliability is improving and will facilitate more rapid expansion of services. There are two primary areas for future investment in inter-organizational integration by respondents. First path is expanding commitment to existing forms of technology to deliver new or expanded functionality. Second area is investing in new technology forms and enhances the inter-organizational relationships. All respondents emphasis on development of technology-enabled education and advice services. Linkage of inquiry and advice functionality to available tools is a vital component of service level expansion and customization. The need to integrate new technology and service with existing system are motivating those firms to pursue more alliances both software and hardware suppliers. Conclusion In the conclusion, there is less linear in the relationships among customers and suppliers in financial services compare to manufacturing industries. And there is a high degree of interdependence exists among the sectors of financial service industry. In this research, there is many findings have been predicted. The participants believe that opportunity for cost savings and service enhancement resides in expansion of customer account maintenance via the Web. Maintenance and education in new form of functionality place more control. So the responsibility is in hand of customers. One discerning manager pointed out, Ã¢â¬Å"weÃ¢â¬â¢re now doing business on the customerÃ¢â¬â¢s terms, not the terms dictated by our firm or our industry.Ã¢â¬ Managers interviewed shared many concerns about how to competitive threats and the risk of expanding e-business activity. They fear the capabilities of new, competitors rapidly enter new markets without the millstone of legacy system and traditional organizational cultures will block the progress of industry incumbents. It will cause imbalanced cost structures with new services and pricing. The managers predict further opportunities to improve quality of service, reduce costs, reach customers worldwide, and provide new services. Some managers believe that demonstrating technology leadership was a important component of establishing industry leadership and promoting customer acquisition and loyalty. It has many limitations in this research first it has short term applicability. This is because the longevity of the obstacles is unclear. Another limitation is that it is descriptive rather than prescriptive. Lastly, the conclusion is drawn in this study by small size of sample. This study is very important for both researchers and practitioners. Besides, this study also help managers in financial services industry to identify and analysis the opportunities, risk of building relationships with their customers and suppliers through electronic commerce. A better understanding of the treats and opportunities to existing relationships allow them to response customers more rapidly, accurately and cheaply.