Globalization: Navigating Challenges & Opportunities in the Digital Age

1. Chapter 2 Fueling Globalization Through Information Systems “The global economic playing field is being leveled.” NandanNilekani, Infosys Technologies Ltd.

2. Learning Objectives 2-2

3. Learning Objectives 2-3

4. Globalization • Globalization created a new world characterized by: • Worldwide communication • Collaboration without barriers

5. Globalization 1.0 Evolution of Globalization • Mainly European countries are globalizing • Power is the primary driver • Industries changed • Slow pace of change

6. Globalization 2.0 Evolution of Globalization (cont’d) • Companies are globalizing • Reduction in transportation and telecom-munications costs • Mainly Europe and America involved

7. Globalization 3.0 Evolution of Globalization (cont’d) • Individuals and small groups are globalizing • Faster pace of change • Emergence of new industries

8. Evolution of Globalization: Summary • The World Is Flat (Thomas L. Friedman) • “10 Enablers” • Key factors enabling Globalization 3.0

9. Enabler #1: The Fall of the Berlin Wall • November 9, 1989 • Fall of communism • People from the former communist countries gained more freedom

10. Enabler #2: Netscape Browser • August 9, 1995 • “Killer app” • First mainstream browser • Gave individuals access to the Internet & set standards

11. Enabler #3: Work Flow Software • Applications that allow people worldwide to communicate • XML: applications “talk” to each other • New possibilities for information sharing • Global currency to fuel commerce

12. Enabler #4: Uploading • Individuals and companies actively participate in content generation on the Web • Wikipedia a huge success

13. Enabler #5: Outsourcing • Outsourcing companies profited from the drop in telecommuni-cations costs • Companies can now use talented engineers from anywhere

14. Enabler #6: Offshoring • Companies set up entire factories in countries such as China • Mass production • Low costs

15. Enabler #7: Supply Chaining • Integration of retailers, suppliers, and customers • Wal-Mart became an early leader • Use of RFID tags

16. Enabler #8: In-Sourcing • Delegation of company’s key operations to a subcontractor • Example: UPS provides complete supply chain solutions to companies

17. Enabler #9: In-Forming • In-forming is to individuals what outsourcing, offshoring, and in-sourcing is to companies • Individuals have access to massive amounts of information

18. Enabler #10: The Steroids • Technologies that support different types of collaboration • Greater mobility • Triple convergence

19. Learning Objectives 2-19

20. Opportunities for Operating in the Digital World • Opportunities for reaching new markets • Former Eastern Bloc countries provide new opportunities for international companies to reach new customers

21. Opportunities for Operating in the Digital World (cont’d) • Opportunities of a global workforce: • Low communications costs • Highly-skilled labor pool Engineering Graduates in the United States, Europe, and India Based on: Mallaby, 2006

22. Learning Objectives 2-22

23. Challenges of Operating in the Digital World • Globalization also created a set of unprecedented challenges: • Governmental • Geoeconomic • Demographic • Cultural

24. Governmental Challenges • Political System Challenges • Political stability • Regulatory Challenges • Tariffs • Embargoes • Export regulations • Quotas

25. Governmental Challenges (cont’d) • Data-Sharing Challenges • Transborder data flow regulations • Differences in standards • UPC vs. EAN • Measurement units • Postal codes, phone numbers, etc.

26. Governmental Challenges (cont’d) 2-26 • Internet Access and Individual Freedom • Content blocking by governments/censorship • China—Use of VoIP restricted • Germany—Sites with fascist symbols prohibited • Internet access blocking • Cuba, North Korea

27. Geoeconomic Challenges • Time Zone Challenges • Real time meetings across continents difficult • Working around the clock possible

28. Geoeconomic Challenges (cont’d) • Infrastructure-Related Challenges • Traditional infrastructure—roads, electricity • Connectivity—reliable Internet connections • Challenges Related to Economic Welfare • GDP growth not distributed evenly throughout the world • Migration • Some companies used to deal with low margins and tough competition

29. Geoeconomic Challenges (cont’d) • Demographic Challenges • Differing rates of population growth World Population, 1950-2050 (in billions)

30. Geoeconomic Challenges (cont’d) • Demographic Challenges (cont’d) • Expertise related challenges • Different concentration of skilled workers • Different costs of workers

31. Cultural Challenges • National Cultures • Power Distance—differences in how societies handle the issues of human inequality • Uncertainty Avoidance—risk taking nature • Individualism/Collectivism—value placed on an individual vs. a group • Masculinity/Femininity—degree to which a society is characterized as masculine/feminine • Concept of Time—long term vs. short term • Life Focus—quantity vs. quality of life

32. Cultural Challenges (cont’d) • Cultural Barriers • Language—communication language and norms • Work Culture—work skills, habits, and attitudes • Aesthetics—art, music, and culture • Education—attitudes toward education and literacy • Religion, Beliefs, and Attitudes—spiritual institutions and values • Social Organizations—family and social cohesiveness

33. Cultural Challenges (cont’d) • Environmental challenges • Energy consumption, pollution, workers health • Shipping • Other Challenges • Differences in what is regarded as appropriate • Standards of dealing with intellectual property • Network readiness • Not every country has access to the global networked economy

34. Learning Objectives 2-34

35. Going Global: International Business Strategies in the Digital World • Home-Replication Strategy • Global Business Strategy • Multidomestic Business Strategy • Transnational Business Strategy

36. Home-Replication Strategy • Most basic form of going global • Companies view international operations as secondary to, or extension of home operations. • Focus on core competencies in home market • Inability to react to local market conditions • Homogeneous markets • Information systems play minor role in facilitating this strategy

37. Global Business Strategy • Centralized • Used to achieve economies of scale • Example: Coca-Cola • Same core product • Some different tastes made for local markets

38. Global Business Strategy 2-38 • The role and characteristics of IS • Centralized information systems • Data flows from subsidiaries to home location • Multiple networks between home office and subsidiaries • Data does not stay at subsidiaries

39. Multidomestic Business Strategy • Low degree of integration between subunits • Flexible and responsive to the needs and demands of local markets • Example: General Motors • Opel in Germany • Vauxhall in Great Britain

40. Multidomestic Business Strategy 2-40 • The role and characteristics of IS • Each subsidiary has own, decentralized information systems • No centralized infrastructure • Data sharing primarily between subsidiaries and home office • Limited data sharing among subsidiaries • Loose integration of information systems

41. Transnational Business Strategy • Some operations centralized while others decentralized • Flexibility • Economies of scale • Difficult to manage • Example: Unilever

42. Transnational Business Strategy 2-42 • The role and characteristics of IS • Integrated networks between home office and local subsidiaries • Much communication among subunits AND between home office and subunits • Key data is shared throughout company • Enabled by intranet, extranet, and Web based applications

43. Business Strategies: Summary

44. End of Chapter Content 2-44

45. Opening Case—Managing in the Digital World: Infosys Technologies Ltd. • Companies like Infosys are “flattening” the world. • Does business in new ways • Outsourcing • Supply Chains • Consulting • Employment

46. Netscape’s James H. Clark and Marc Andreessen • Founded Mosaic Communications Corporation • 75 percent of Web surfers used Netscape in 1996 • AOL acquired Netscape in 1999 for $10 billion in stock • Both founded several start-ups James H. Clark Marc Andreessen

47. Online Searching • To “Google” has become a household verb meaning search

48. IT Globalization: Accenture in India • Accenture • Provides consulting, technology, and outsourcing • Global before other companies were just “waking up” to globalization • Accenture’s growth • Announced plans for doubling its thirteen thousand business consultants between 2008 and 2011

49. Underground Gaming Economy • Massive Multiplayer Online Role-Playing Game—MMORPG • Virtual world—players live through avatars • Players started selling virtual tools for real money—farmers • Banned from various gaming sites due to behavior being unethical and fear of turning users away • What’s your take on farmers and people “buying” tools and advancement without mastering the skills?

50. Learning Languages in Context • Livemocha • Online language instruction using social networking • Structured lessons • Help with grammar • Canned pronunciation guides • Most valuable asset • Conversation with native speaker • Using social community to increase understanding