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The Impact Of Social Media Business Essay

Paper Type: Free Essay Subject: Business
Wordcount: 5419 words Published: 1st Jan 2015

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Part of: Social Media

This paper presents the significance of the new and innovative economy to organizational development, adopting to the business environmental changes and managing.

Design/methodology/approach -The paper analysis the factors that increase the role of social media (SM) and their influence to changes in the value added in the organization.

Findings – The paper contributes to the discussion about the importance of social media by enabling the access to the knowledge and the

Research limitations/implications – The concept is based on a theoretical view of the innovative new economy, knowledge management and the impact of social media on value creation.

Practical implications – out that the Originality/value – SM leads to the fact that we are not talking about knowledge management, but about enabling access to knowledge. SM influence on the formation of chain supply and consequently to the value added in the enterprises in innovative economy.

Keywords innovative economy, knowledge management, networking, organizational changes, social media, value added chain

Paper type Research paper


Sustainable development and increased uncertainty in the business environment are forcing companies to inflict as a strategic goal a constant reconstruction of a comprehensive infrastructure. This renewal based on a more flexible organizational structure (internal environment) including the introduction of modern technologies for the implementation of relationship marketing and renovation of the technological innovations.

Technology has with the phenomenon of the Internet and the development of mobile networks transformed the way in which our society communicates and socializes. Technology is no longer the domain of developers and users, but is becoming a central democratic element, which allows for the continuing presence of society. [1] 

Conservative organizations demonstrate the requirements of change management policy and organizational structures based on the Taylor paradigm of the hierarchy. At the same time, it has to be aware of the ability to develop and achieve at least basic levels of literacy in the field of modern information and communication technologies (ICT), which plays an important role in the success of both economic and social development. By achieving their strategic objectives, companies will be affected by the increase in productivity, efficiency, added value and consequently, the development of economy and society [11], [20].

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The business environment has been necessary to realize the negative consequences of ICT developments with the emergence of high-tech crime. Such abuses are increasing in frequency on both IT and radio-diffuse technologies. The crimes are divided into those where computers are used as a means of enforcement (computer related crime) or as an object of enforcement (computer crime) and criminal actions in the field of illegal use of the Internet [41].

In such an environment it is difficult to define and determine the appropriate boundaries of business. Competitors do not compete only with similar (or identical) business models. New ones are emerging with different approaches, techniques and thoughts that undermine the traditional rates set market share [8] (figure 1).

Influence of technology development to the organizational changes

Phenomenon of the Internet in the new economy has influenced in the early nineties of the twentieth century (including the Internet or the digital economy [2] ), the rise of the third wave of capitalism. During the last economic crisis and recession, which ended 2009 and the consequences of which the world felt in the form of low economic growth, the emergence of Internet technology, joined the digital technology [3] , which further affects the changes in global markets, which point out in the behaviors of the consumers and in developing new business models [37].










The new economy has in the early 21st century led to changes in strategies, structures and management styles. For managers it is expected to dominate the release, management and use of resources, in contrast to the strategies of the old economy, which stress that the management strategy to manage the acquisition and ownership need to defend their own resources [28].

An increasing role in the technological field of ICT in the past few years has been seen in mobility, cloud computing, business intelligence systems, and SM [16].All these factors assume a leading role in ICT in developed and underdeveloped economies. Technology and economic growth during the period of transition from the new innovative economy have become inseparable [27], [37].

Innovative economy in the process of organizational evolution introduces new approaches for the development of business models. Even in the early twentieth century in the so-called old economy there was a predominant position that for a successful (profitable) business to occur significant active ownership (hierarchy) must be implemented and that those organizations need to introduce a vertical organizational structure. In the eighties in the so-called the new economy, knowledge and the flexibility of organizational structures started to significantly affect the performance of companies. In the innovative economy innovation and intuition are becoming the key success factors [9], [21], [39].

Organizational changes include internal and external factors, technology, markets, the legislation (emphasis on the protection of intellectual property), which is in line with new processes, restructuring and mergers and takeovers. Seventy percent of organizational change efforts fail. The causes for failure can be found in the fact that managers skip critical elements in the processes of change [34].

Innovative economic theory (in contrast to neoclassical) follows from the thesis that capital accumulation is the main vehicle for economic growth in today’s knowledge-based economy. To change so there is also the global financial theory that during the innovation, economy favors Asset Management prior to ownership. This new business logic derives from the thesis that economic growth in the innovative economy arises due to the final product or services that are incurred as a result of knowledge [3]. The innovative entrepreneurship that has been developed based on R & D and the down-regulation of activities, highlights the risk upon capital and intellectual property (patents and licenses) and fosters a networking organization that enables collaboration between companies (e.g., clustering). In the innovative economy, partnerships among organizations are based almost exclusively on human capital. Economic capital has lost the importance it still has in the new economy [7].

Network economics considers integration as a strategic instrument that affects the growth of knowledge, and increases the role of information and human knowledge in a knowledge society. The concept of network management is important as a management style that builds or appropriates synergies, particularly between information management, knowledge and human resources. Knowledge and behavior have become a power not only to the new economy but also to the innovative economy [10], [33]. Networking promotes the importance of Supply-Chain Management for the success of which it is necessary to provide unknown knowledge and prepare for the changes brought about by the development of social media [4] and their introduction into business operations [13], [22].

The advantage of the network structure is two-way communication. Processes’ operating is not run in isolation because, with two-way communication typically every person can communicate with any other person, and information can move freely within an organization f [8], [42].

Knowledge and information are part of the supporting information system which enables their transfer and processing (from the data to the end of wisdom), it is determined by knowledge management. In the given concept network knowledge management can be defined as a shift from a transaction perspective in the distribution of inter-organizational knowledge management process. Specifically, this means that the members of each exchange acquire specific skills needed to support decision-making [40].

Individual companies use outsourcing management activities in order to minimize the operating costs. Companies are therefore compensated for: the purchase of thier own information system (introduction of cloud computing), own implementation of marketing activities (setting up their own social platforms on the existing activity), finance, shared services and the production specific parts of a product, of which the production is not a core activity. The company has to be aware that decisions on the implementation of external operations are risk and that such decisions significantly affect company performance [20].

Management of supply chains is an important part of the value chain by Porter [30], who developed a model to determine the development of rival advantages. Porter stresses the need to identify competitive advantages seen in the company as a whole. Cost-effectiveness and successful differentiation are important factors in the chain of activities for the success of companies that bring value to customers. In the Internet age, the value chain has become a basic tool for understanding the impact of information technology on business. The company starts to integrate the value chain and entire value system, which includes suppliers, distribution channels and consumers. Importance of Supply-Chain Management – SCM and customer relationship management – CRM is to bring together applications, which include consumers, distribution channels, supply links for ordering example, production orders and deliveries. Development of new technologies to further product development or integration services and exchange of complex models among partners and consumers, which build on the exchange of information through social media. The show began after the onset of the need for identifying the impact of social software solutions upon knowledge management and determining the value of knowledge in enterprises [6], [31], [38].

Von Krogh [38], points out that the SM leads to the fact that we are not talking about knowledge management, but about enabling access to knowledge. Social tools are in fact opening channels of communication with businesses, universities, research institutes, suppliers, customers, users, competitors, etc….

This theoretical overview ended with description of the quite new concept of the creative economy. It connects creativity, knowledge and innovation economy. The concept is to encourage investment in innovative technologies and to encourage a period of recession, a new economic cycle and stimulate economic growth [14].

The importance of new technologies for the business development

Software applications based on the Internet are entering into all aspects of industrial and service sectors. Web technology provides better opportunities for companies to create strategic priority positions, than they could before any other information technology [31]. An issue that Porter [31], exposed is how to use the Internet in a way that will influence an increase in economic value? The author exposed two factors that determine profitability: industry structure and sustainable competitive advantage; a universal factor which exceeds any form of technology or business. Their effectiveness varies from company to company and from industry to industry. The Internet has an important impact on business development and in connecting relations in business to consumer (B2C) and business to business (B2B). Thus it has gained an important role in company performance and thus results in profit, which depends on the specifics of individual companies or industries. The expansion of online portals and blogs is increasing the communication among Internet users (potential customers). This leads to an exchange of opinions on the quality of products or services. The Internet has influenced the development of relations between consumers (C2C), which has a significant relationship to the creation of consumer perception of the quality of brand or company reputation.

Progress and development of Web technology have an enormous impact on the evolutionary changes in social, economic and cultural fields [32]. A capacity to adapt is conditional with changes in organizational behavior such as with the initiation and adaptation of technological innovations [36].


interactivity applications Growth of do commerce on demand

connect communicate collaborate

real time

on demand

(from) distance

*Critical infrastructure: IT developments and breakthroughs

Organizations have to adapt to changes in environment if they wish to survive. In the 21 century we are witnesses to global warming and climate change. Society and organizations are looking for solutions within the concept of sustainable development, which will affect all levels of contemporary culture organizations, whose task will be a close relationship with global challenges. Private organizations will need to consider how environmental responsibility starts in their basic concept of development and this will also affect the organizational culture [35]. In cultural fields organizations’ are exposed to cases of managing the culture and limiting behavior of group members through sharing the same norms. In today’s increasingly networked and virtual world one must be aware that each group consists of members coming from different social background, ethnic group, country, etc… All this affects in to the culture of the organizations [35].

Launch of new ICTs in the knowledge-based industry

The knowledge-based industry achieves its performance with the ability to develop new knowledge and the use thereof in the development of new products and services. Within organizations, the emphasis on knowledge management, and the processes within an organization geared to the development and dissemination of knowledge throughout the organization. An essential role in these processes is played by the workforce at all levels of he organization; whose ideas and insights serve to create knowledge, and the organizations competitive advantage (A Dictionary of Human Resource Management 2008). Between knowledge based industry classified automotive industry, information industry, pharmaceutical and healthcare industries and media and entertainment industry

Phenomenon online platforms that represent social media (SM) (Table 1) have acquired a large force in 2004, when Facebook announced: “We give people the power to share and make the world more open and connected [23]. During this period a new form of social media has formed, Twitter, which currently has a billion registered users who generate 175 million messages (tweets) daily. Use of online media is growing people and organizations use them for self-promotion, dissemination and the exchange of information users express their opinions, criticisms and compliments and straight communication [2].

TABLE I: examples of social media for business

1. Social-Media/Social-Bookmarking Sites: for share favorite sites on the Web with potential customers and business partners by commenting on, uploading and ranking different news, articles and company blogs.

Reddit, Digg, Del.icio.us, Technorati, Ning, Furl, WikiHow, Youtube, Ma.gnolia.

2. Professional-Networking Sites: online networking communities for companies or individuals for promotion, recruiting, business opportunities.

Linkdeln, Xing, Focus, Facebook. Ecademy, Research gate, Plaxo

3. Niche Social-Media Sites: sites convenient for linking up for attainability business target audience.

Pixel Groovy, Mixx, Tweako, Small Business Brief, Sphinn

4. General Social-Media Sites: opportunities for advertise, promotion etc.

Wikipedia, Newsvine, Wetpaint, Twitter

5. Job sites: suitable for searching for high qualified candidates.

CareerBuilder.com, The Wall Street Journal’s CareerJournal, Sologig

Today’s knowledge society, in addition to knowledge-intensive processes, is including the benefits of creating and finding new information with communication technologies. Following the implementation of new web-based solutions (Web 2.0) the term “Enterprise 2.0” has been established for companies using new technological solutions that include digital media and social software solutions for business purposes [23], [24].

Social media tools enable the creation of new forms of connections and contribute to the maintenance of social connections (networks). It has never been possible to share mutual information and knowledge so quickly on a global scale. Social media allow instant transfers of video and picture material, as well as maintaining blogs. This gives rise to the joint efforts of the public resulting in a new, often freely accessible database of information and knowledge. The design and structure of social media links the development of digital media technologies (e.g. digital signage) and the decline in prices increasingly influence in facilitating the transfer of information events in ways not previously possible (e.g., corporate television, video portals, etc….). Social networks are growing in different environments and strongly influence the changes in society, technology and business practice [15], [12].

e commerce

New IT capabilities competitive strategies& efficiency of operations

social networks

rule of management

Companies should be aware that the customers (internet tools users) are becoming the new marketers (viral marketing: mouth to mouth communication + SM), with extensive opinion-leading talks about the brand (table 3) [12]. All these factors come together through social media to create an external image of the company, which will depend on its reputation and consequently, the value of the firm (e.g., informing the interested public through the website if a corporation, showing the relationship to both owners and the media and consequently, affect the value shares) [18]. Organizations have no influence upon customer publications through social media. They can only publish a retaliatory explanation later and try through to decrease potential damage to their image. Viral marketing has had an influence on reducing the role of PR and marketing agencies. Technology today allows companies to create personal communication blogs, or use other similar social platforms. Companies can even invest in their own social programs and store and transfer them via digital media.

Social media


Viral marketing


Viral marketing



Fig. 1. Social media communication

The development of the management skills based on the influence of technological change which lead to existence of the concept of “KM 2.0.”

Von Krogh [38], notes that in the context of the impact of social software solutions onto the generation of KM and upgrades to increase the added value of organizational knowledge, there is a need to focus on:

€­ Identification of indications of how people adapt their communication with the external environment in terms of quality, distinctiveness and ownership of data, information and knowledge,

€­ How people account for the risk of sharing their content with strangers. Are people receptive to the issues of ownership and transfer of data between strangers (the problem of transmission of information from researchers and developers on outside experts to help create the so-called open innovation?

€­ How it affects the takeover or merger of the development company that owns the new technologies developed by its members to communicate with experts in acquiring.

The impact of social media to value added in knowledge-based industries

Knowledge is already seen as the key factor of a sustainable competitive advantage in the new economy. An organizations need to develop an organizational culture to raise the level of awareness of employees to create and share knowledge is the basic concept of business, allowing further growth of the organization. An organizational culture based on sharing knowledge, providing opportunities for the development of KM processes, which are closely associated with the creation of added value is essential [19], [29].

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The organization has to take its objectives into account, their knowledge and know-how from the environment, to establish a policy to customer relationship management (CRM) and suppliers, develop a marketing strategy that provides market positioning and design of brand loyalty. These resources constitute social capital, which occurs in two forms: as an internal adhesive to create the organizational culture or as an external agent relationship. Keeping these two forms of social capital requires different approaches to individual forms [26].

Social media has become an important source of knowledge and enables the creation of the content value chain. This is achieved by linking complementary organizations and respective organizations with their distributors and customers [26], [38].

The purpose of networking between organizations is the tendency to develop and implement technology solutions and processes that will enhance the organizational added value and bring added value to the customer in the form of utility value. Linked organizations that constitute the value chain have to reach decisions on strategies to increase the added value (e.g., acquisition, accumulation and divestment) with a consensus with partners. In order for successful participation to occur in the value chain, organizations have to identify common goals, be complementary and trust each other [25].

Knowledge that is transmitted through social media will impact favorably on added value provided that the information delivered to the customer at any moment will be of sound quality, accuracy and up-to-date.. The increase in the effective implementation of the dissemination of information via the SM (Facebook, Twitter, Youtube, proprietary platforms, etc…), Increase the dissemination of information on the advertised product, service, etc…

Organizations must ensure that the flow of information through social media is properly secured, and that they will not lose their knowledge [38]. With such policy the use of SM in the field of marketing communication in knowledge based industry will increase the reliability of the information and the general perception of loyalty to the brand and the organizations good name. This will increase the ROI of social media compared to classic media [18]. Consequently this will lead to higher added value in knowledge based industry.

Management changes Processes of creation Results

the value added with SM


Technological development enabling the aces to knowledge financial


Enterprise infrastructure

Relations in supply change feedback

Marketing & trading non financial

B2B, B2C and C2C performance

Service unconscious marketing BSC, human capital

Unwanted marketing (spam)


The emergence of the Web in the new economy has highly influenced the development of new forms of communication and socializing. With the expansion of social media during the innovative economy there have been qualitative leaps in the communication and transmission of information.

Social media has changed the focus on KM from managing the knowledge to the providing of the access to knowledge.

Social media allows access to data and video information to a broad range of potential consumers. The proper marketing communication strategy using SM allows both a permanent presence in the IT ecosystem and quick response to any negative responses to the public.

The inexpensive media campaign over the SM reaches a relatively large volume of potential consumers, indeed in any time of day and affects the higher ROI than by the use of traditional media. Consequently, it affects the higher value added to the organizations.

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