Chapter 4 The Information Technology and Management Infrastructure Strategy

1. Chapter 4The Information Technology and Management Infrastructure Strategy Presented by Alen Davoudian

2. Goals • Radical changes in Global Business Environment and IT Environment • Effects of globalization on organizational strategies/structures and coordination control/strategies • Development of Global Information Systems (GIS) Management Strategy • Need for alignment of business and technological evolution

3. www.globalpolicy.org

4. MGMT 308 by Dr. Rosenthalinstructional1.calstatela.edu/prosent/MGMT%20308/Chap012.ppt

5. Chapter 12McDonald’s Corporation Opening Case • More than half of McDonald’s restaurants are outside of the U.S., accounting for 62% of company revenues. • As a prominent global brand McDonald’s symbolizes perceived evils of globalization. • In developing nations, the arrival of a McDonald’s is regarded as a sign of modernization. • McDonald’s does transfer cultural values and practices. However, most of McDonald’s international restaurants are franchises, run as local businesses. The entrepreneurs who run these businesses adapt them to local custom. The story of McDonald’s illustrates the complexity of globalization.

6. Globalization and Pros • Globalization occurs when networks of economic, political, social, military, scientific, or environmental interdependence grow to span worldwide differences. • Has lifted millions of people out of poverty. • Consumer benefits of more variety. • Lower costs and higher quality of products. • Improved working conditions for millions of workers. TED talk, by Alex Tabarrok : One Idea, One World, One Market http://www.ted.com/talks/lang/eng/alex_tabarrok_foresees_economic_growth.html

7. Introduction • Global firms have an explicit global business strategy few have corresponding strategy for global information technology • A global information management strategy is needed as: • Industry globalization: To compete effectively at home or globally, firms often must coordinate their activities on a worldwide basis associated with reliance on information technologies. • National competitive posture: the aggregation of separate domestic strategies in individual countries that may contend with coordination.

8. Causative factors for globalization • Increased similarity in available infrastructure, distribution channels and marketing approaches among countries • Fluid global capital market that allows large flows of funds between countries • Falling political and tariff barriers • Growing number of regional economic pacts that facilitate trade relations • Increasing impact of the technological revolution in restructuring and integrating industries

9. Changes in the business environment • During 1980s, significant changes have taken place in organizational strategies/structure because of ever-increasing global competition and growth in the communications and information-processing industry • In 1990s,political changes in the Soviet Union and the Eastern European countries, the evolution of the European Common Market towards single European market without national barriers also have led to growing international market

10. Evolution of Global firm’s strategy/structure • Global Strategy is defined as strategy from which ‘a firm seeks to gain competitive advantage from its international presence through either a concentrated configuration of activities, or coordinating among dispersed activities, or both’ • Global firm has a number of options in both configuration and coordination for each activity in the value chain implying that there is no one pattern of international competition, neither is there one global strategy • A global firm value chain activities vary depending on their global strategies and environmental forces: national differentiation – diversity in individual country markets global integration – coordination among activities in various countries These forces can vary depending on their global strategies

11. Global Strategies • Multinational/decentralized strategy • Global/centralized strategy • International/coordinated federal strategy • Transnational strategy/integrated-network strategy

12. Multinational/decentralized strategy • Firm might differentiate its products to meet local needs to respond to diverse interests • Firm might delegate considerable operating independence and strategic freedom to its foreign subsidiaries • Coordination and control are achieved primarily through personal relationships between top corporate managers rather than by a formal organizational structure • Strategic decisions are decentralized and top management is involved mainly in monitoring the results of foreign operations • This strategy was seen in European-based companies before Second World War. • Example: Unilever in packaged goods, Phillips in consumer electronics

13. Global/centralized strategy • Firm may seek competitive advantage by capitalizing on the economies associated with standardized product design, global-scale manufacturing and a centralized control of worldwide operation • In this centralized organizational structure, there are primarily one-way flows of goods, information and resources from headquarters to subsidiaries • Key strategic decisions for worldwide operations are made centrally by senior management • This strategy was seen in Japanese based companies in post-war years • Example: KAO in branded packaged products, Matsushita in consumer electronics

14. International/coordinated federal strategy • Firm transfers knowledge and expertise to overseas environments that are less advanced in technology and market development • Local subsidiaries are often free to adapt new strategies, products, processes and/or ideas • Under this organizational structure the subsidiaries’ dependence on the parent company for new processes and ideas requires a great deal more coordination and control by headquarters • This strategy defines the managerial culture of many US based companies • Example: Procter and Gamble in branded packaged products, GE in consumer electronics

15. Transnational strategy/integrated-network strategy • Firm coordinates number of national operations while retaining the ability to respond to national interests and preferences • Each subsidiary is viewed as a source of ideas, capabilities and knowledge that can be beneficial to the company as a whole • In this structure top managers are responsible for : - coordinating the development of strategic objectives an operating policies - coordinating logistics among operating divisions - coordinating the flow of information among divisions • Forces of global competition required global firms to be more responsive nationally. As a result, this strategy is being adopted by increasing number of global firms.

16. Global Information Systems • A Global Information System is a distributed data-processing system that crosses national boundaries • As they cross national boundaries unlike domestic distributed systems, they are exposed to wide variations in • Business environments: Differences in language, culture, professional management disciplines among subsidiary organizations which leads to difficulty in business/technology planning, monitoring and control functions • Infrastructure: The predictability and stability of available infrastructure in a given country are major issues when making the country a hub for a global firm • Availability of resources: It can vary due to import restrictions or lack local vendor support • Regulatory Environments: Changes in government, economy and social policy can lead to critical changes in the telecommunications regulations that pose serious constraints on the operation of GISs • Transborder Data Flow: TBDF regulations in part govern the content of international data flow. These regulations can adversely affect the economies of GISs by forcing global firms to decentralize their operations, increase operating costs and prohibit certain applications • Standards: International, national and industry standards play a key role in permitting global firms to ‘leverage’ their systems development investment as much as possible

17. Global information management strategy • Globalization has caused a change in the coordination /control needs of global firms • As a result new organizational designs are created to meet new organizational needs and to deal with increased organizational complexity and size • This strategy should contain the senior management policy on corporate information systems architecture (ISA) • Corporate ISA provides • A guide for systems development • Facilitates the integration and data sharing among applications • Supports development of integrated corporate systems that are based on a data resource with corporate wide accessibility • Corporate ISA for a global firm is a high level map of the information and technology requirements of a firm as a whole; composed of network, data, application and technology architectures

18. Global Information Management Strategy • A new GIS management strategy needs to address organizational structural issues related to coordination and configuration of value chain activities by proper ISA design. • The key components of GIS management strategy are • Centralized and/or coordinated business/technology strategy on establishing data communications architecture and standards • Centralized or coordinated data management strategy for creation of corporate databases • Alignment of global business and GIS management strategy

19. Network Management Strategy and Architecture • Network architecture describes where applicationsare executed where databases are located and what communications links are needed among locations • It also sets standards ensuring that all other ISA components are interrelated and working together • Deciding on appropriate network architecture is a leading management and technology issue. • Research suggests that appropriate structure for GISs may vary for different product and service portfolios

20. Data Management Strategy and Architecture • Data architecture concerns the arrangement of databases within an organization. • To increase coordination among a global firms value-chain activities, its data architecture should be designed based on an integrated data management strategy • Corporate databases should be based on business entities involved in value chain activities rather than around individual applications • Critical establishment of linkage between strategic business planning and strategic information systems planning is possible when this strategy is used as the activities that create value for the firm customers also create data the firm needs to operate

21. Alignment of global business and GIS management strategy • A proper design of critical linkages among a firm’s value-chain activities results in an effective business design involving information technology and an improved coordination with coalition partners and firm’s own subsidiaries • Establishing the necessary alignment requires the involvement of and cooperation with both senior business planner and the senior IS technology manager. • This results in a new set of responsibilities and skills for both

22. New Responsibilities for the senior management • For the senior business planner • Formal integration of the strategic business plan with the strategic IS plan • Examination of the business needs associated with a centralized and/or coordinated network, technology, and data management strategy • Review of the network architecture as a key enabling technology for the firm’s competitive strategy • Awareness of key technologies/standards at industry, national and international levels • Championing the rapidly expanding use of industry, national, international standards

23. New Responsibilities for the senior management • For the senior information technology manager • Awareness of the firm’s business challenges in the changing global environment and involvement in shaping the firm’s leverage of IT in its global business strategy • Preparing a systems development environment that recognizes the long-term company-wide perspective in a multi-regional and multi-cultural environment • Planning the development of the application portfolio on the basis of the firm’s current business and its global strategic posture in the future • Making the “business purpose” of the strategic systems development projects clear in a global business context • Selecting and recommending key technologies for linking systems across geographic and cultural boundaries • Setting automation linkages among internal/external activities within the firm’s value-chains goals and selling them to others • Designing corporate databases derived from firm’s value chain activities • Facilitating corporate restructuring through the provision of flexibility in business services

24. Conclusions • With the information intensity in the market and information intensity associated with coordination across geographic, cultural and organizational barriers global general managers will rely increasingly on IT to support their management processes • Proper alignment of the evolving global information management strategy and the global organizational strategy will be important to the positioning of the global firm in the global economic community

25. TED talk, by Alex Tabarrok One Idea, One World, One Market Globalization is increasing the demand for ideas, the incentives create new ideas and investments in education are increasing the supply of new ideas. http://www.ted.com/talks/lang/eng/alex_tabarrok_foresees_economic_growth.html

26. Questions & Comments Thank you for your time