The Impact of Digital Business on Corporate Financial Performance

This report discusses the impact of digital technology on corporate financial performance and how companies are using this technology. It also sheds light on the relationship between digital technology with the old and new business management theory.

THE IMPACT OF DIGITAL
BUSINESS ON THE CORPORATE
FINANCIAL PERFORMANCE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Digital business impact on the corporate financial performance.................................................1
Relationship between digital technology and emerging theories of management.......................3
CONCLUSION................................................................................................................................5
REFERENCE...................................................................................................................................6

INTRODUCTION
The number of digital businesses are increasing because the impact they are giving on financial
performance of the company. It is noted that digital businesses are able to generate higher profits
and revenue as compare to offline businesses. As the era is changing so consumers are more
attracted towards online shopping. Amazon is the multinational e-commerce company which
sells large number of products through its website or mobile application. This report will discuss
about the impact of digital technology on corporate financial performance and also how
companies are using this technology. Further it will shed light on relationship between digital
technology with the old and new business management theory.
MAIN BODY
Digital business impact on the corporate financial performance
Digitalisation is one of the crucial topic nowadays. In order to attain success and competitive
advantages and also to improve the business performance, companies are using digitalisation. It
is found that those companies which are not considering digitalisation is lacking behind and they
are not able to attain competitive advantages (Park and Mithas, 2020). It is important to discuss
this topic so that other businesses which are not using digital technology can start using it
because of the numerous benefits which is provided by it.
The selected topic is important because business world is evolving due to advanced technology
especially digitalisation. Digital businesses are contributing in improving the financial
performance. In fact businesses which are not present on digital platforms are planning to bring
their businesses on digital platform. Digital technology which is used by the businesses are
digital marketing, e-commerce, artificial intelligence etc. this topic has developed because
financial performance of the company plays vital role in the success of the organisation. Digital
business is the merging trend which is used to enhance financial performance of corporates
(Lăzăroiu and et.al., 2020).
artificial intelligence-
artificial intelligence, demonstrated by machines and work not done by humans. Under artificial
intelligence, machines are build and programs are input inside machines so that machine can be
able to perform human like tasks. Like robots is the best example of artificial intelligence.
Robots are made by humans only but they are designed in such a manner that they are able to
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perform just like humans. It is all because of the programming which is already installed inside
robots. Companies are using AI for processing large numbers of data. artificial intelligence, can
be used in various business departments. Management of the company uses AI for process
automation, security purpose, sales forecasting etc. e commerce businesses are widely using AI
for the purpose of fraud detection, dynamic price optimization, smart searches etc. marketing
department of the company are using AI for customer segmentation, language recognition, social
semantics, image recognition etc. there are various technological platforms and software which
is used by companies nowadays which includes digital marketing etc. digital transformation is
helping company's in many ways. It is helpful for the company to increase their revenue by
making the customer experience better (Chen, 2021). If customer is satisfied with the products
and services which is provided by the company than company will definitely incur higher profits
or revenue and digital technology is helping businesses to get connected with their potential
customers easily. There are various mobile application which are launched by the company in
order to provide personalised services to their customers. Those mobile application have various
features which is helping customer while doing shopping.
In today's world almost every business are using digital technology because they have realised
that if they will use digital technology than they can able to improve their financial performance
and also their business position in the market. Digital technology is not limited for large
businesses only but there are many small firms also which are using digital technology. With the
help of digital technology, small businesses are able to reach to large audience (Fernando and
et.al., 2018). So they are getting recognition in the wide market and this is also because of
unique feature of digital technology which connects large audience in one go. Digital pivots is
helping companies to improve product performance. Digital transformation can also helps in
getting higher customer satisfaction. As digital technology plays vital role in enhancing
customer experience. It is found that with the help of digital technology, company is able to
build strong relationship with their potential customers. Digital technology is used by the
business as the promotional tool (Gil and Montoya, 2021). Like company using digital
marketing for promoting their products and services in the market. When company promote their
products then it will helps in increasing their sales and also improvises their financial
performance. So digital business are able to earn online sales.
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E commerce business are the digital business only. Digital transformation brings growth and
innovation to the business (Bao and Lewellyn, 2017). It is observed that financial performance is
connected with the growth and innovation and it can be received through digital investments. It
is noticed from company's financial reports that digital transformation is helping them in
receiving growth oriented benefits like more sales, customer satisfaction etc. digital business are
flourishing more because it is easy to start and also require very low investment (Oduro, Nyarku
and Gbadeyan, 2020). Digital businesses have their stores online so there is not need to get
physical stores which means that company can save over rent and also on many other things.
With the help of digital technology company have found that they are able to do old things faster
and better.
Relationship between digital technology and emerging theories of management
Old theories of business and management:
classical management theory-
as per this theory it can be said that in order to motivate employees amazon has to fulfil their
economic and financial needs (Putri and et.al., 2019). Under this theory workforces of the
company is divided into three segments which are owners, middle management and managers.
According to this theory every worker is doing the work which is assigned to them and they are
not the multitasker. Managers which uses this theory believes that financial rewards are the only
thing through which workers can get motivated. When amazon actually uses this theory in
practical way then they observe that this theory is actually helping them in increasing the
productivity of the workforces. Just like digital technology which also helps workers in
increasing the level of productivity. As digital technology helps workers in saving over time and
energy.
It also motivates workers for hard work. Through this theory and applying digital technology in
this company can motivate their employees to focus on the bottom line. This theory also have
certain drawbacks because it neglects human relations, job satisfaction etc. as employees are
treated as machines which demotivate various employees for whom financial rewards are not
more than their dignity.
Theory X and theory Y-
according to this theory it believes that there are only two management styles and managers can
choose within two styles in order to motivate their workforce (Moşteanu, Faccia and Cavaliere,
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2020). Theory X can be used by the managers or leaders of the company on those employees
which are non motivated and does not like their work or dislike it. Managers which is using
theory X has to bring authority working style, so that they can able to make work done by their
employees (Oh and Park, 2018). As employees which are lethargic and do not complete work on
time then there managers has to be strict with them. Theory Y can be used by the managers
when they observe that their employees are self motivated, confidence and is enjoying their job.
So managers has to change their management style according the employees. By using digital
technology, managers of amazon can motivate their employees because when employees uses
digital technology then it helps in making work faster. So managers can provide technology to
their workforces in order to motivate their workforces and also it will be helpful in increasing
productivity.
New theories of business and management:
Systems theory-
according to this theory it treats company as the living being and every department is necessary
for the company for survival (What is Modern Management Theory., 2021). Starting from the
CEO to the bottom line workers every person in the organisation are required to work with
cooperation and collaboration. If amazon want to survive for the longer time than it is important
that every worker works with harmony. Organisation which are using this theory believes that
employees of the company should work in a group and not in isolated manner. When employee
joins the organisation then he or she should have mindset of team building because when work is
done in a team then it completes much faster and effective.
As per this theory every department of the company should have work together and in this thing
digital technology will be helpful for the company in connecting all departments of the company
with each other (Lanzolla and et.al., 2020). As digital technology saves time and also connects
each other in no time. The communication which is done with the help of digital technology is
so transparent that it reduces confusion which arises due to misunderstanding.
Contingency theory-
this theory says that every situation needed different style of leadership. As leaders and
managers cannot apply same leadership style in each and every situation (Khin and Ho, 2019).
So here leaders plays important role as they have to evaluate the situation so that they can find
out that which leadership style has to be utilized here. In order to decide which leadership style
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has to be selected is based on the size of the organisation, technology and previous leadership
style which has been used in the company. This theory is giving lot of responsibilities to the
leaders because they have to decide the leadership style and if wrong leadership style will get
selected than it can lead to the failure. Modern workplaces lie amazon are using this theory more
because with the help of this theory, leaders can easily select leadership style because the theory
knows that technology is changing and so leadership style should also change.
This theory have relationship with digital technology because it gives great important to
technology. As technology helps businesses in attaining success and growth. With the help of
digital technology, leaders can easily connects with their subordinates and this helps leaders to
choose their leadership style. When leaders understands their employees then they can decide
that by using which leadership style they can be able to manage their workforces (Sukumar and
et.al., 2020). Like when they have highly skilled and knowledgable workers then they can use
laissez faire style because in this style leaders does not give direction to their employees because
employees have sufficient knowledge and skills to make the decisions. But if they think that the
employees are not efficient and they require to give instructions and direction than they can use
autocratic leadership style. As in this style decisions remain in the hands of leaders only.
Quantitative theory-
this is the number based theory which calculates everything which can be risks, drawbacks or
advantages of the actions which managers has to be taken. This theory says that calculative risks
are always better because it causes minimum losses to the company. In order to calculate risks or
benefits there are many qualitative tools which are used by the company like information
models, statistics etc. often leaders combine this theory with another theory at the time of
implementation. By using digital technology leaders can take calculative risks. As there are
various application which can be used by the leaders or managers of the company for the
purpose of calculating risks or benefits (Cho, Chung and Young, 2019).
CONCLUSION
Through this report it can be concluded that digital businesses are growing because of the
various advantages which is provided by the technology to the businesses. Digital technology is
helping in improving the corporate financial performance because when company do promotion
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by using digital marketing then it increases sales and also enhances companies financial
performance. Report has discussed in detail about the new and old management theories and
also have explained their relationship with the digital technology.
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REFERENCE
Books and Journals
Park, Y. and Mithas, S., 2020. Organized Complexity of Digital Business Strategy: A
Configurational Perspective. MIS Quarterly. 44(1).
Lăzăroiu, G. and et.al., 2020. Sustainability Management and Performance in the Urban
Corporate Economy: A Systematic Literature Review. Sustainability. 12(18). p.7705.
Chen, H.L., 2021. Impact of Industry 4.0 on Corporate Financial Performance: A Moderated
Mediation Model. Sustainability. 13(11). p.6069.
Gil, M.A. and Montoya, M.A., 2021. Digital Transformation and Corporate Sustainability
Accounting. In The Palgrave Handbook of Corporate Sustainability in the Digital
Era (pp. 651-669). Palgrave Macmillan, Cham.
Putri, W.H. and et.al., 2019. The emerging fintech and financial slack on corporate financial
performance. Investment Management & Financial Innovations. 16(2), p.348.
Moşteanu, N.R., Faccia, A. and Cavaliere, L.P.L., 2020, August. Digitalization and green
economy-changes of business perspectives. In Proceedings of the 2020 4th
International Conference on Cloud and Big Data Computing (pp. 108-112).
Cho, S.J., Chung, C.Y. and Young, J., 2019. Study on the Relationship between CSR and
Financial Performance. Sustainability. 11(2). p.343.
Sukumar, A. and et.al., 2020. The potential link between corporate innovations and corporate
competitiveness: evidence from IT firms in the UK. Journal of Knowledge
Management.
Khin, S. and Ho, T.C., 2019. Digital technology, digital capability and organizational
performance: A mediating role of digital innovation. International Journal of
Innovation Science.
Oh, S.H. and Park, H.S., 2018. The Effect of Management Innovation on the Relationship
between Corporate Social Responsibility and Financial Performance. Journal of Digital
Convergence. 16(6). pp.175-185.
Lanzolla, G. and et.al., 2020. Digital transformation: What is new if anything? Emerging
patterns and management research.
Bao, S.R. and Lewellyn, K.B., 2017. Ownership structure and earnings management in emerging
markets—An institutionalized agency perspective. International Business
Review. 26(5). pp.828-838.
Fernando, Y. and et.al., 2018. Understanding the effects of energy management practices on
renewable energy supply chains: Implications for energy policy in emerging
economies. Energy Policy. 118. pp.418-428.
Oduro, S., Nyarku, K.M. and Gbadeyan, R.A., 2020. Supplier relationship management and
organizational performance of hospitals in an emerging economy context: A
comparative study. Journal of Modelling in Management.
Online
What is Modern Management Theory., 2021. [Online]. Available through:
<https://www.glassdoor.com/blog/guide/modern-management-theory/>
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