Information Society and Information Economy - Essay Example

INFORMATION SOCIETY & INFORMATION ECONOMY Online banking and information economy Introduction The internet has revolutionized the use and abuse of information and communication technology (ICT) in almost every sphere of commercial and non commercial activity. Thus ICT has acquired a significant dimension in the coordination efforts of companies in their global operations and it is increasingly becoming the world's most important determinant of commercial and trade related issues and actions. For instance online banking has become the daily norm of many customers. Its significance in the internal and external communication strategy of the bank in its global and local operations can be seen with regard to the level of its applications in coordinating inter-country and intra-country operations. The changing internet related environment at overseas branches and operations of banks has such a big impact on the online banking related decision making process. While multinational companies (MNCs) such as banks have been making use of internet banking as the main investment related strategic policy alternative, smaller banks too have been making use of it in order to achieve positive synergies over the internet (Durkin, and Howcroft, 2003). However while the former have being able to increase their net investment expenditure on internet banking on a larger scale, the latter have only been able to increase such investment on a smaller scale. As a result a clear dichotomy between the two entities can be noticed. Big business organizations including some international banks have adopted growth oriented communication policy measures primarily with the intention of enhancing growth drivers such as merger and acquisition (M&A) related synergies while smaller banks have basically relied on capturing niche markets. Online banking related benefits have come to be identified with positive organizational outcomes as well. Therefore internal and external growth drivers of banks operating internationally are mostly determined by either the success or the failure of the average banks online banking policy. In fact according to recent World Bank reports nine out of ten companies engaged in international business operations have invested a greater percentage of asset related investment funds in ICT. This is because that such investment brings about a qualitative shift in their operational environment and capabilities (Bell, 1976). Such capabilities include incremental growth rates in financial management cash flow, quality, sales revenue and profits. While big banks have successfully made use of online banking activities to achieve these organizational goals, smaller banks have been less successful because they lack adequate resource portfolios to engage in competition at every level of operations. Analysis Despite a series of online banking related investment successes by big banks, there have been some policy related lags too. For instance the operational environment of a bank is constantly influenced by the changing circumstances in the global environment. The current economic downturn has played a very important role in changing the fortunes of many banks. Falling demand and supply constraints have forced many banks to adopt variety of online banking policies in their international operations (Mackay, 2003). According to available statistics already there are signs of falling internet related investments in overseas operations of banks, though so far no fully-fledged study has been undertaken into a comprehensive assessment of the impact of the economic downturn. Online banking strategy requires well defined organizational goals and such organizational goals might vary from one banks to the other. For example some international banks are faced with a different set of policy alternatives while small banks have a completely different set of priorities and opportunities (Mattelart, 2003). Therefore it is very important to consider multinational banks and smaller banks separately. After all smaller banks are operating in international markets have much less flexibility in carrying out transactional and non-transactional activities. On the other hand big banks are able to carry out such operations by using online banking as the integral denominator in coordinating activities seamlessly (Shapiro, and Varian, 2000). Determining the nature and the extent of the online banking activities influence in coordinating activity in the international operations of banks is related to the organizational outcomes and/or goals while international market-based operations essentially influence the organization's communication strategy to such an extent beyond the domestic level (Alistair, Muddiman, and Plant, 2007). On the other hand banks adopt far reaching changes to the existing online banking policy and communication strategy with such huge expenditure programs when they expand into overseas markets. Given the opportunities that exist for such expansion and the way in which those opportunities acquire such a significant dimension in the international competitive environments would impact on the organizational goals. Thus environmental factors other than the nature and extent of market oriented competition and penetration would have an impact on the bank's strategic intents. It's not a secret that banks respond to the changing environment of competition abroad by adopting new ICT infrastructures on internet banking activities (Beck, 1992). Therefore such strategic intents enable the bank to achieve corporate goals to such an extent that other variables remaining constant the online banking policy and coordination activities within the bank enable the management to design and plan online banking programs in recognition of the existence of such opportunities and their relevance to more advanced coordination efforts. MNCs, such as banks would definitely have an advantage here while smaller banks are not altogether far behind because the latter could still strategically orient themselves to capture niche markets from big banks (May, 2002). Therefore it must be noted that the online banking policy play a very important role here. Online banking facilitates both cross border and internal activities of banks and are determined by the extent to which they use online banking activities to coordinate their international operations (Lyon, 2007). The cost constraint apart, there are other bottlenecks in adopting an online banking policy or strategy. The strategic operational environment of such business organizations is increasingly being characterized by the changing behavior of consumers. Therefore the real impact of online banking related strategies can be seen in the bank's ability or inability to achieve online banking related positive synergies in its international operations. The ever increasing intensity of global banking strategies and online banking related policy shifts have invariably produced a process of global integration, niche market centric differentiation and innovative communication strategy (Bradley, 2000). The centre of this galaxy of activity in the international business environment is the firm. Strategic aims of banks as expounded in this study To establish a set of correlations and regressions between and among the most significant endogenous and exogenous variables that underlie global operations of banks that seek to coordinate their international efforts through online banking related strategies (Tapscott, 1996). To identify and address the causal factors of global online banking integration strategy of big and smaller banks. To determine learning outcomes related to online banking policy initiatives of banks operating in international markets (Van Dijk, 1999). These learning outcomes include the incidence or prevalence of strategic policy framework-based approaches in internet related developments at the individual bank's level. To investigate the a priori and a posteriori elements in globalization related issues which have a direct impact on the banks' international strategic operational environment, more specifically the competitive strategy of the bank in capturing overseas markets and retaining them by using a difficult to copy communication policy (Schofield, 2009). Finally to examine the impact of coordination efforts and online banking strategy of the bank on the organizational goals. As the available literature on the subject suggests there is a substantial amount of empirical evidence to support the internet related banking operations and their positive impact on growth drivers such as revenues, profits, market share, share price and integration across a number of market segments without truncation (Bauer, Hammerschmidt, and Falk, 2005). Independent analysts have identified three forces that determine the ultimate growth prospects of big banks in particular and small banks in general. They are, (a). Differences in the local business environment. (b). Level of global integration. (c). Global innovation in online banking in particular and operations in general. The application of processes and procedures in identifying differences in the local business environment is connected with the overall global business strategy of the bank (Webster, 2004). Online banking is a single aspect of this global banking strategy. If the bank were unable to identify and isolate the important elements in the global operational environment, there would be much less of an opportunity for the bank to successfully integrate in to the global market environment (Castells, 1998). In other words the strategic global environment of competition and regulations would impact on the local product differentiation efforts of the bank to a greater extent. Global integration of online banking related activity would have a definite impact on the global operation of the bank. But nonetheless online banking policy of the bank in coordinating international operations is basically dependent on the international business environment and the subsequent operational strategy (Hassan, 1999). Assuming that the bank transfers funds between different customers' accounts, such operations will be facilitated by a proper online banking policy. However the policy environment is not completely free from developments elsewhere. For instance banks require a well developed system of infrastructures such as road and rail networks, a good fleet of vehicles, well trained personnel and above all the latest communication equipment (Webster, 1994). Thus global integration requires even M&A related expansion. When M&A synergies become available to the bank, it is possible to increase market penetration through intensified communication and coordination. On the other hand big banks would have much less trouble in increasing its strategic presence in the market because much of its operations depend on the ability to market the product by using better communication and coordination (Molina, 1990). For example good customer relations would enable the bank to reach the customer in right time at the right place. Finally writers have pointed out that worldwide innovation is essential for the bank's online banking strategy to succeed. According to a recent research studying the individual bank level innovation have a qualitative impact on the organizational goals and as a result the bank's online banking and coordination efforts in international markets might suffer a setback if the management ignores the positive impact of bank level innovations (Haythornthwaite, and Kendall, 2009). Some of the latest research efforts have focused attention on the following three strategies on online banking policy initiatives at banks operating in national and international markets. (a). Cross border strategy. (b). International strategy. (c). Transnational strategy. Though all three strategies look the same there are some essential differences between them when online banking policy of the bank in its international business environment is taken in to consideration (Fuchs, 2008). In the application of cross border strategy the average bank identifies the existing constraints such as differences in regulatory regimes and the ability or inability to practice transfer pricing strategies. For example countries like Canada and US have been arguing over the type of common policies that can be put in place to increase the level of cross border trade. Despite the existence of the Basel Accord, banks have found it increasingly difficult to freely operate because individual banks seek to benefit not so much from free operate but strategic initiatives such as transfer pricing and online related investments (Hornby, and Clarke, 2003). Some writers have identified an international strategy involving global operations that enable individual banks to identify and capture strategically important market segments anywhere in the world. However if the bank has a deficient online banking policy and its international coordination efforts are lacking in creating synergies across markets with little or no efforts then it is more likely that international efforts would suffer a setback (Castells, 2001). In recent years there have been some other research efforts which have identified three organizational communication structure related areas for expansion in overseas markets. (a) ICT infrastructure related developments. (b) Communication policy related developments. (c) Cost related developments. Banks which carry out coordination activity in their overseas markets are essentially influenced by these three spheres of development (Robins, 1999). The availability of sophisticated ICT infrastructure - networks, equipment, services and license agreements - has enabled banks seeking to expand overseas an opportunity to identify structure related benefits such as increasing sales volumes through viral marketing efforts (Castells, 1997). Such structure related opportunities are mostly determined by the communication requirements of the bank. For instance smaller banks that seek to capture niche markets for their products there is very little opportunity to expand on the available scale of operations because niche markets do not allow the management to initiate expensive online banking infrastructure programs. On the other hand according to recent research on the bank's online banking policy related developments, the strategic operational environment has enabled even smaller firms to initiate online banking policies that would continuously bring about positive changes in their overseas operations (Acharya, Kagan, and Lingam, 2008). For instance the current wave of international market expansion programs has been attributed to the ever rising expectations of banks that the global economy would sooner or later recover from its ongoing downturn. In fact online banking policy of banks has not been much adversely affected by the current economic recession. As for cost related developments many banks seeking to coordinate international efforts in overseas markets have been constrained by rising costs of online banking related infrastructure (Fuchs, 2007). For example not only the prices of equipment have gone up in the recent past, but also service vendors like Microsoft have put in place more stringent service and license agreements. As a result the cost constraint has played a negative role in bank's overseas expansion plans. In the recent past ICT equipment sales have experienced a decline. However, according to research the decline has occurred mainly due to a fall in demand for final products (Loader, 1998). In other words while bigger banks have been affected largely due to substantial declines in sales in mass markets, smaller banks have less been affected though when it comes to meeting cost related constraints successfully, the latter are finding it more difficult. This research study would be focused on establishing correlations and regressions between and among some chosen variables such as online banking related developments in overseas markets where banks operate with a view to expanding in to both mass markets and niche markets. In other words this study would find how internet related developments at the bank's level have been essentially influenced by the changing online banking policy environment (Graham, 2001). Coordination activity at the bank's level has two distinct elements - the level of operations and corporate goals related to its overall strategy. Therefore this study would seek to establish a probable link between banks' organizational goals and the online banking related synergies (Castells, 1996). The assumption that banks operating in overseas markets have been basically influenced by opportunities such as big profits and sales is not necessarily the main line of argument here. This study would prove that the above link is much weaker against the backdrop of overriding concerns for survival against competition. Communication strategy and online banking policy of the firm operating in overseas markets are simultaneously dependent on the available opportunities for expansion and the extent of competition (Hughes, 2003). This researcher has found out an obvious link between strategy and policy in the bank's strategic operational environment and this link is all the more significant in the context of stakeholders' concern for market share. Next, the changing demand patterns and supply constraints in domestic markets are set to be behind the bank's shift in communication strategy and online banking policy (Dutton, 1999). This causal relationship has injected a degree of fear in to banks' overseas expansion programs. Thus the organizational outcomes are determined by this particular policy shift. This researcher has found out a much stronger correlation between the need to shift the bank's growth trajectory and the need to put in place communication strategies with stronger emphasis on public relations. This study would focus on the current level of ICT integration in the average bank's global communication strategy as a primary source of coordination of efforts in national and international markets; online banking related global strategies of banks are central to the survival and success of them in an ever increasingly integrated market place (Chadwick, 2006); banks operating in national and international markets orient their operations to achieve online banking related positive synergies such as big profit margins in niche markets and positive cash flows; such banks exponentially increase their investments to achieve such synergies, exponential growth process is perhaps the most dependable metrics-based approach of banks in internet banking related coordination activity in international markets (Hassan, 2008); such banks locate in order to achieve such synergies while synergies have been defined to include all related benefits such as M&A synergies and market integration synergies. Thus the online banking policy and communication strategy are intertwined with the bank's overseas operations. In mass communication the word market segmentation refers to such activities as dividing and organizing the customers to a manageable small segments or groups. This is carried out with the sole intention of developing appropriate target customer groups for effective communication. In other words the communication strategy is focused on the final outcomes related to efficiency in transmission and reception (Feather, 2008). Such segmentation is essentially connected with reducing costs. Recent efforts at market segmentation even include such highly theoretical frameworks as the determination of characteristics of segmented sub-categories on the basis of their inherent behaviors, e.g. psychological perception. Communication strategy is often determined by the ability of the communicator to reach as a wide and varied customer base as possible by using a given amount of resources during a given amount of time. Convergence refers to the communicator's ability to combine different technologies in the process of communication (Loader, 2001). Thus the variations in the elements of a communication process necessarily affect the qualitative outcomes. The communicator's success in determining the different technologies depends on his ability to master the techniques of communication efficiently. Improvisations are not new in convergence decisions of individuals and organizations. For instance modern communication equipment enables convergence to take place at a variety of levels both within the organization and outside (Dearnley, and Feather, 2001). In addition, in completely different environments such as at banks and in the field such equipment and technologies play still a bigger role. Mass communication has persistently developed a spirit of technological capabilities and these capabilities are focused on achievement related design and planning. Finally convergence is a process in which compatibility between and among technologies matters to such an extent that casual design and planning might not help (Yu, 2006). Multiple platforms are those operating environments that include two or more modes such as CPUs and operating systems. In other words multiple platforms enable the user to integrate in to the operating environment at multiple levels such as internet surfing and communication (Fitzpatrick, 2002). These multi functional environments not only are seamlessly integrated but also independently determined. Multi platforms are intrinsically capable of enhancing the quality of the operating environment to such an extent that along with speed techniques can be incorporated without the user being put off by increasing difficulty levels. Further multi platforms permit the user to create environment specific synergies such as multi modal communication and independent operations. In other words only the functions would be integrated (Hutton, and Giddens, 2000). Multi platforms have become more complex due to the integration of multi level tasks in to the operating environment. For example while the operating system is just an empowering tool, digital communication web portals such as Google would simultaneously empower the user. This is a considerable research effort that invariably identifies the existence of some sound correlations between online banking and the communication function at the organizational level. The researcher extensively used the books written on the topic and also studied research journals, reports, graphs, articles, newspaper articles and so on. References were taken from most of the research material available in the field. This study depends mainly on the secondary material, because theoretical analysis is much well facilitated by it than primary material which is basically limited to responses in the questionnaire and the survey. The available literature has been analyzed with specific focus on the online shopper's changing spending patterns due to the influence of the internet. This researcher has tried to show the most important aspectual overview of the research in the delineation of banking functions as determined by the internet. Also there is considerable reflection on the state and relevance of current research. Future research possibilities in the field are discussed in depth to show how theoretical underpinnings evolve in time and space with specific reference to viral marketing efforts of banks (Negroponte, 1995). There is little or no critical literature to support the methodology of metrically determining the feasibility, attraction and obstacles to creating a theoretical and conceptual contingency model on the changing online banking related environmental impact on the decision making process of the bank. This particular handicap has affected the researcher to a greater extent. However the research segment of this paper places emphasis on the qualitative aspect of it rather than the quantitative aspect. The appropriateness of the strategic competitive approach depends on the bank's own capacity for the functional integration of all its strategically important functions from marketing to delivery so that competitive advantage will be achieved. Lateral integration of functions across an organization to achieve competitive advantage against other similar banks in the industry is a well known business tactic. Integration means controlling new bundles of resources in addition to controlling costs. Tactical strategies adopted by organizations to avoid risk are common in every industry. Such strategies have been criticized by many writers due to their escapist element. However such strategies are part and parcel of the decision making process. The average bank isn't an exception to this rule. Banking operations depend on the qualitative outcomes related to the bank's communication strategy. Online banking is part of this policy. However many EU banks, especially the bigger banks have immensely benefited from a policy of convergence in operations achieved through a seamless integration process in which operational aspects are integrated into the communication function without structural division so that connected operational parameters are well defined and focused on organizational goals. However it is the internet related technological environmental influences that have impacted heavily on the organizational goals and outcomes of the modern banks. Particularly the operations need to be updated in keeping with competitors' moves. Modern equipment costs dearly when innovative approaches are put in place. The big organization has the resources to meet these new challenges. Maintaining a separate department would cost dearly and thus the organization's capabilities would be decided primarily by the technological innovations that the management is able to put in place. Diversification or product differentiation is practiced by banks using service quality. Product diversification has been at the very heart of the banking and insurance industry. While most of the small banks have been targeting a pre-chosen customer base big banks have been adopting some innovative strategies in their internal operations including quality management with a view to maintaining the positive relations with existing customers. Critical success factors at both industry level and the individual bank level include such things as the role of the top management, quality improvement standards and techniques, employee relations, motivation, leadership style, internal value chain management, external supply chain management and so on. It must be noted that the average EU bank has been placed at a strategically advantageous position in the consumer banking sector through its combined resource capabilities and enhanced operational capacity. Thus the future performance of the banking industry in Europe in particular depends on the bank's ability to harness these capabilities to the maximum by innovating in the sphere of internet banking. The average consumer is not only mature but also well informed about the type of service and its quality delivered at banks. Thus the general worry is all about the user friendly technology that enables customers to interact with the bank. The banking services market in Europe has been more and more oriented towards meeting these technology-based demands of a new generation of customers. For example the bank that introduces internet banking facility 24 hours of the day is in a better position vis--vis its rivals in the market and thus able to achieve both horizontal and vertical aggregation of synergies such as sales volumes and market penetration. Mobile banking technology hasn't yet reached many customers even in Europe. In fact it is not a secret that technology advantage in the banking sphere is growing exponentially each day. Conclusion The banking industry has been highly influenced by modern technology. Online banking facility has reached millions of customers throughout the world. Right now internet related technologies are widely purchased by banks with a view to enhancing their customer integration activity. In other words customers are just added to the network through the internet. The facility enables the average customer with access to a computer and the internet to carry out transactions with his bank. However while payments can be made by using a credit card or a debit card, cash cannot be received in person unless there is a prior arrangement with a bank to deliver the money at the door step. Internet related technology has gone one step further in enabling the customer to do business at his own will and his own time. However these conveniences are not without risk. For instance phishing, identity theft and identity fraud are common on the internet. 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