The Importance Of Value And Information In Assessing Market Competitiveness Using IT Portfolio Theory: A Study Of American Express, An Essay.

IT Portfolio Theory and Its Relevance in Business Value

The current study is concerned with the importance of value and information in the context of identifying the degree of competitiveness. Along with that, this is conducted by using the conceptuality of the IT Portfolio Theory. The study concerns the working process of American Express in a similar context. In addition, the incorporation of the RBV model is present in the mentioned study. The study also sheds light on the detailed Value Rare, Inimitable, and Organized (VRIO) analysis of American Express’s policies. The mentioned organization is a well-known giant in the Payment card industry. Therefore, the market competition is high in terms of similar businesses as well as digital payment services. The fundamental motive of incorporating these functions is to highlight various types of IT investment for providing different kinds of business value.

While considering the growth of an organization then assessment of market competitiveness becomes essential. In order to do so, the mentioned organization tracks the previous data and analyzes those data in terms of profitability measures preceding the forecast. The mentioned organization is a multinational giant with approximately 63,000 employees and a revenue of almost $43.66 billion. The action plan of the organization has approximately a potential growth of 10%, therefore, an assessment of the degree of the market competitiveness is noteworthy. The main operations of the organization are to provide credit cards, charge cards, and traveler's cheques. A huge number of user information is stored in the organizational archive daily. This data can be used for the assessment of consumer choices which is influential for strategizing new policies. The organization measures the growth of the rival and compares it with the current situation for the betterment of the purpose.

The core fundamental of the IT portfolio theory is using the information in order to strategize better decisions. As opined by Platanakis, and Urquhart (2020), maintaining and supervising the total pool of IT resources across a company. In addition, the considered organization focuses on the investment as well as financial viability for the betterment of the process. IT portfolio theory considers every existing and current resource and delivers a framework for planning, analyzing, as well as existing IT portfolio's all along with the organization. In the last financial year, the organizational operational income has dropped together with the total share in equity. Therefore, the organization is diligently acting regarding improving the losses. While considering the mentioned theory an explanation of the technologies behind them is essential.

According to the deliberation of Sunchalin et al. (2019), multiple portfolios that are compared consist of various resources belonging to the essential part of the primary domain. Building up all fundamental infrastructural resource’s servers, storage, networking model, and topology ensue in a business model of an organization for ensuring the availability of resources. Data handling methods, data mining, and data visualization are essential for improving the organizational portfolio. According to the conceptualizations of Kalayci et al. (2019), a better portfolio has the potential to attract new investors. Apart from that, a noteworthy organizational portfolio helps in coping with the current situations.

The Role of IT Investment and Financial Viability in Market Competitiveness

Table: IT Portfolio investments

In order to focus on the RBV theory, first of all, rethinking IT investment by providing a portfolio or balance sheet is essential. It helps in determining the comprehensive approach to various kinds of business value retrieved by IT investments is essential (Kalayci et al. 2019).

This is a managerial framework which is used for determining the strategic resources that a company can use for exploitation of achieved sustainable competitive upper hand. As opined by Gupta et al. (2018), sustainable competitive advantage is essential not only for having a detailed conception of the degree of competitiveness but also prioritizing for available resource. RBV theory suggests that the nature of the firm requires it to be heterogeneous as the heterogeneous organization has multiple resource mixes. Therefore, a vast number of strategizing criteria are present while contemplating this segment. However, competitors such as Visa and Mastercard are not having direct involvement in the card transaction methods, instead these organizations have joint ventures with some banking sectors (Yuen et al. 2019). However, the mentioned organization is independent while comparing the business policies of the rivals. 

While considering the RBV theory the resources are categorized into two significant parts. Under the tangible Information and communication technology (ICT) investment the machine, the server setup, the networking hubs, physical archive are included. While considering the intangible resources, the big day traded in virtual cloud, the information about process metadata are considered. Depending on the availability of the resources the radiation compares the current marketing situations with the other rivals. The organization is capable of handling 110 million credit cards with the available infrastructure. Then the heterogeneity of the resources are checked in the process. Coming immobility, the credit card and tourism cheque are the strong out of the mentioned organization. It is hard for other rivals to provide such an offer to the consumers independently (Dionysus and Arifin 2020). As the organization is also a part of the banking industry therefore, providing independent unique advantages is possible (as no third party is installed). It provides a huge competitive advantage to American express.

This is an internal analysis that helps an organization in terms of identifying the availability of resources as well as the advantage of having those, by providing a competitive edge to the organization. According to the consideration of Chatzoglou et al. (2018), the framework is developed on the basis of four major segments such a Value, rarity, imitability and organization. The VRIO analysis of American Express delivers a wide range of organizational opportunities for obtaining valuable and crucial competitive edge over the oligopoly market of credit and payment card industry.

Valuable: the set of resources utilized by American Express by the mend organization are comprehensively analyzed based on the nature and importance. Resources such as financial, human resources, operational IT set up and management for optimizing the competitive advantage (Miethlich and Oldenburg 2019). The organization has assets of 43.66 million USD, Hove, the operational income is running in loss.

Rare: these resources are usual and can be costly sometimes. The industry's advantage over relocating to any place of the world is considered as a rare classification. The organization surely has a bright scope while considering the expanse of the business.

Imitation: Replicating the business model or the service of the mentioned brand is costly for the rival brands. However, this can be performed by duplicating the processes after launching and by launching a substitute element along with the changing expenses.

Organization: this segment of the VRIO analysis handles the compatibility of the mantid organization. Market making services or products are having an advantage over the regular approaches provided by the organization (Murcia et al. 2022).  Being a self-reliable organization this can be considered as an advantage of American express.

Table : VRIO Analysis

Conclusion

The current study concludes the importance of IT investments while considering the business case scenario of AmericanEXpress. Being an active giant of the credit and finance industry the mentioned organization has a significant amount of rivalry. Therefore, the need of market assesmentof the marketing competitiveness is essential. In addition to that, the mentioned organization uses RBV theory and VRIO framework for fulfilling this purpose. In order to achieve that the investment ratios are also discussed along with the associated risk factors. 

References

Americanexpress.com, 2022, Home, Available at: <https://www.americanexpress.com/en-au/> [Accessed on: 16/04/2022] 

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Dionysus, R. and Arifin, A.Z., 2020. Strategic Orientation on Performance: The Resource Based View Theory Approach. Jurnal Akuntansi, 24(1), pp.136-153.

Gupta, G., Tan, K.T.L., Ee, Y.S. and Phang, C.S.C., 2018. Resource-based view of information systems: Sustainable and transient competitive advantage perspectives. Australasian Journal of Information Systems, 22.

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Platanakis, E. and Urquhart, A., 2020. Should investors include bitcoin in their portfolios? A portfolio theory approach. The British accounting review, 52(4), p.100837.

Sunchalin, A.M., Kochkarov, R.A., Levchenko, K.G., KOCHKAROV, A.A. and Ivanyuk, V.A., 2019. Methods of risk management in portfolio theory. Revista Espacios, 40(16).

Yuen, K.F., Wang, X., Ma, F., Lee, G. and Li, X., 2019. Critical success factors of supply chain integration in container shipping: an application of resource-based view theory. Maritime Policy & Management, 46(6), pp.653-668.