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THE IMPACT OF SOCIAL MEDIA ON BUSINESS PERFORMANCE

Social Media 6

THEIMPACT OF SOCIAL MEDIA ON BUSINESS PERFORMANCE

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Abstract

Socialmedia is becoming more popular and is increasingly used in dailyoperations of many companies like small, medium and large andstart-upscompanies.the main role of this research is to demonstratethe impacts of the social media and to analyze how the social mediaimpacts on the capability of an organization hence affecting itsperformance. This paper has gone beyond the outlining of drawbacksor benefits of social media and has analyzed the impacts at whichapplication have on the business performance. These impacts may be asa result of the influence of social media on the company’smanagement, governance, knowledge management, and strategiccompetitiveness.

Aresearch model has been developed consisting of two prepositions. Theanalysis of the impacts of six social media application applicationsis done on the business capabilities and also the businessperformance of Sponsor Pay as a case study. Sponsor pay is a start uporganization from 2009 in the industry of online game industry. Themethods used in this research include both qualitative analysis likeinterviews and quantitative analysis like surveys.

Theresults showed that the use of social media actually have an effecton the business capability and hence its performance. The impactderived is not as a result of the social media tools but thecombination of the social media tools to an effective social mediaenvironment enabling the internal and external process coordination.

LiteratureReview

Asnoted by Andriole (2010), social media is becoming more popular andis always used in the operations of the many companies ranging fromsmall to large corporations. Although, the use of social media toolsis widely used, no one has been able to point out the specificimpacts that these tools have on the business performance orprocesses.

Thenew technologies have become popular tools for enabling cooperationin a business in the technology networks whereas the applicationmarket flourishes (Bell &amp Loane, 2010). The companies which arenetworked and take the advantage of new social media technologiestend to perform their competitors and achieve benefits such as lowcosts and improved efficiency. In this case, it is crucial tounderstand the social media impact on the business processperformance. The realization of the connections between the twosupports the movement towards a new business environment whereby anorganization maximizes benefits obtained through integration ofsocial media into regular operations (Kietzmann et al, 2011).

Inthis research the question is ‘What is the impact of social mediaon business performance?’ The study aims to bring an understandingon social media environment and their impacts on the businessperformance. In order to answer such question, an analysis of case isdone and the assessment on the IT mangers and mangers is carried outin a company which uses the social media platforms in its regularoperations to evaluate this impacts.

Accordingto Denyer et al (2011), social media is an internet base applicationwhich builds on the ideology and technology foundation of the socialmedia tools usually used by organizations includes: Google Apps(Gmail, Sites Calendar, Docs,), Asana, Pivotal Tracker, Github(github.com/SponsorPay), Zendesk (Helpdesk -helpdesk.sponsorpay.com), Salesforce (CRM). Concerning the resources,a company obtains given resources for instance, IT infrastructure andsocial media which are specific, rare and not easily imitated bycompetitors. Certain combinations of resources give way for thecompany’s performance e and competiveness.

Itake a resource based view perspective on organizations to explainthe impact of social media on firm performance. The resource-basedview states that organizations obtain a set of certain resources(like human resources, IT infrastructure, and social media) that arespecific to the firm, rare and not capable of easy imitation byrivals (Liu &amp Liu, 2009). The particular combination of resourcesforms the basis for firm competitiveness and performance (Harrington,1991). A distinction can be derived between capabilities and theresources. Klein &amp Myers (1999) argues that, as the resourcesforms basic units of analysis, the capabilities are repeated in theuse of resources in order of produce, offer or create value tomarket. The resources such as social media can easily be obtained butit’s difficult to initiate business-wide capabilities to utilizeresources and enhance the performance of the business (Kaplan &ampHeinlein, 2010). As resources are easily imitated, the embeddedcapabilities in business practice are not (Barney, 1991).

Thesocial media is a resource used alongside other resources enablingthe development of strategies, processes and capabilities. Accordingto such perspective, the social media is categorized into businessprocess performance self assessment, latent factors and honeycombframework.

Honeycombframework was coined and used the honeycomb framework in analysis ofthe impact of social media tools by differentiating seven buildingtools such as identity, conversations, sharing, presence,relationships, reputation, and groups and their impact businesscapabilities which influences the business performance (Bughin,2009).

Seven Functional building blocks

Impact on company Capabilities

Identity

This is the revelation of users themselves

ability to control information privacy and give tools for self-promotion and personal branding

Conversations

This is the extent at which customers uses the social media

to communicate with each other

ability to monitor conversations and

identify adequate periods for starting conversations

Sharing

This is the extent at which customers exchanges,

distributes, and receives the information

ability to manage information and identify

the objects consisting viral potentials

Presence

This is the extent to which customers are aware of

Their presence

ability to create and manage the

information by analyzing customer availability and geographical location

Relationship

The extent to which users relate to one

another

The company’s ability to manage network relations by

identifying strength of relations and interaction patterns

Reputation

The extent to which customers are aware of

the social standing of other customers

ability to identify parameters that monitor

the strength of perspectives of others and the reach

Groups

The extent to which customers form

communities

The problem is to identify membership protocols and rules and being part of the community group.

AccordingtoBell&amp Loane (2010) it is assumed that social media tools togetherform capabilities supporting the network effects, business networkingand the enhanced performance. They assumed that these network effectsand the enhanced performance occurs when the network has developedNetworked Business Operating Logic which enable various businesses toconnect easily and develop linkages among network data and processes.The logic enables the network to be smart by creating the ability toquickly pick, plug and plays the process and configure quickly toachieve a certain objective, for instance, to react to an unexpectedsituation or in responding to customers (Bughin, 2011). Concerningthe similar tenet, I argue that effective uses of social mediaresources exist if the Networked Business Operating Logic exists.Such logic includes the ability to link a lot of organizations,business processes and the flow of information hence creates networkeffects and enhances the effectiveness of the business (Juran &ampGryna, 1988). Thus, I propose that a given set of social media toolsincreases the business performance if enough business capabilitiesalso exist.

Thereare six business capabilities that are impacted by the use of socialmedia tools and in turn affect the business performance (Gordijn &ampAkkermans 2001). The capability on the collaboration andcommunication is impacted. The social media tools have the ability tofacilitate communication and the collaboration within the business orcompany, hence promoting the internationalization of the organizationand the globalization of their operations. As noted by Hakes (1995),there are four indicators relating to this communication andcollaboration, which are:

  1. Ability to coordinate discussion

  2. Ability to attend to more people faster

  3. Ability to synchronize tasks and projects

  4. Ability to audit streaming communication

Rapidapplication development capability is also impacted. Social mediafacilitate the application development through involving the thirdparties and the combining the readily available technologies into thenew business (De Herthog et al, 2011). Such social media toolsintegrate the company employees, suppliers, customers and experts inthe development efforts of a product hence speeding it up (Brocke, &ampRosemann, 2010). Also, the involvement of the customers in thedevelopment also minimizes the rate of failure significantly. Thereare three indicators are

  1. Ability to develop and modify applications faster

  2. Ability to support applications easily

  3. Ability to enhance requirement modeling

Customerrelationship management (CRM) capability is influenced. Social mediareshapes the traditional customer relationship management processesand transforms them to social media customer relationship managementthrough identification and solution of customer service issues, byuse of forums and wikis. There are four indicators namely

  1. Ability to effectively mind the customer data

  2. Ability to access more customers

  3. Ability to get feedack from customers

  4. Ability to effectively communicate with the customers.

Inaddition, the innovation capability is also impacted upon. This isthe direct outcome of the exchange of ideas or knowledge amongexperts, generated by the user generated contents and mass creation.The social media tools enable the faster innovation in the marketsthrough enabling boundary communication among experts having certainexpertise in a given field (Heck &amp Vervest, 2007). It is measuresas:

  1. Ability to manage innovation

  2. Ability to enhance the rate of success

  3. Ability to multiply the innovation activities

  4. Ability to efficiently produce.

Asnoted by Bradbury (2010), training capability is impacted. Socialmedia tools impacts on training process because the information whichhas become user driven and organizations have faced shifts towardsuser generated content, shared data and user experience.Consequently, capacity building activities are not limited to aspecific time frame or geographical location. Webinars takes placethroughout the world and podcasts, wikis, forums, RSS filters andblogs assist in training experience (Mingers, 2001). Applicationsencompassing internal focus enable a business educate and trainemploy cheaply and efficiently, whereas, applications encompassingexternal focus permits a business to consolidate into the onlineindustry and to reduce the costs through training suppliers andcustomers (Dutta, 2012). The impacts are measured as

  1. Ability to offer support to traditional trainings

  2. Ability to modify or edit training content

  3. Ability to support simultaneous training

  4. Ability to code and distribute the training contents or information.

Theimpacts on the knowledge management capability are also realized.Social media tools improve the management of knowledge process,creation of knowledge and the exchange of knowledge (Birkinshaw &ampCrainer, 2010). The social media internally enhances the knowledgetransfer between servants while externally focuses on the two-waycommunications between suppliers and the customers (Lee et al. 2008).The knowledge management is aimed at the abilities to

  1. Share,

  2. Retrieve,

  3. Organize and

  4. Leverage Knowledge.

Theabove six factors relates to the companies abilities or capabilities,impacted by social media uses. The model of the Andriole is used toreview the business capabilities by use of the indicators above.Based on the resources of the company, utilization of the socialmedia technology resources promotes the companies capabilities andhence the business performance (Eisenfeld &amp Fluss, 2009).

Inthis research, both qualitative and quantitative methods are used andinvolve the analysis of a case study. Also interviews are carriedwith lead actors of the company who are experiencing and reacting tothe impacts of social media uses on their organizations. Thus toanswer the research question which is the: what is the impact ofsocial media on business performance) the quantitative andqualitative analysis is carried out. In addition observation isanother method used to collect information.

Questionnaireswere used to collect information and are sent to all the servants oremployees to understand the ways in which social media technologiesare viewed and how it is regarded on how they improve businessprocesses and performance. The questionnaire looked this way:

1.

Which department do you work?

2.

How long have you been working as an employee in the company?

3.

Which social media tools do you use on a daily basis for instance Google Apps (Gmail, Calendar, Docs, Sites), Asana,

Pivotal Tracker, Github (github.com/SponsorPay), Zendesk (Helpdesk – helpdesk.sponsorpay.com),

Salesforce (CRM), Other (please specify)

4.

How do they improve your work? (scale 1-5)

5.

Which business abilities do you believe social mediatechnologies contribute mostly? (Knowledge management, Rapid application development, Customer relationship management, Collaboration and Communication, Innovation or Training)

6.

Which social media technologies have contributed the most to the business capabilities? (for each capability) arrange in order of contribution: (Google Apps/ Asana/ Pivotal Tracker/Github / Zendesk / Salesforce)

7.

Are you satisfied in using the social media tools in the company? (scale 1 -5 ))

8.

Rate how your work has improved or has become more difficult since the introduction of the social media tool

(worse – neutral – better 5 points scale)

Inorder to validate the findings, the senior managers are interviewed.

Conclusions

Themain objective of the research is to understand the social mediaenvironment and impacts of social media tools as used. To achieve,this objective, the resource base perspective of a firm is used asthe theoretical baseline and to differentiate social media use andabilities or capabilities of an organization and the business processperformance. This research has explained three prepositions mainlycapabilities, social media uses and the performance to answer statedresearch question.

It’sbeen explored that the combination of internally linked social mediaforms a social media environment which improves the businesscapabilities. It is also demonstrated that there are evidence whichsupports and concludes that use of social media enhances or improvesthe business capabilities. Also it’s concluded that improvedbusiness abilities or capabilities pave way for the improved businessperformance. However, this study has certain limitations. First, thisresearch has only analyzed one industry heavily depended on socialmedia and in future, the impacts of social media on other industriesshould be done and compared. The information above is only for astart-up company and in this case, I propose that in future thecompanies with different size and nature to be analyzed. Lastly, theinformation shown above on the business performance was assessed byuse of simple self-assessment tool and is few so in future moreindicators need to be included in researches.

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