copyright 2004 john wiley sons, inc.5 - 1 information technology: strategic decision making for...

Copyright 2004 John Wiley & Sons, Inc.

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Information Technology: Strategic Decision Making For Managers

Henry C. Lucas Jr.

John Wiley & Sons, Inc

Dinesh MirchandaniUniversity of Missouri – St. Louis


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Chapter 5

Globalization and IT in International Business


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IT’s Impact On Globalization

• IT can help a firm become global by– Enhancing global competitiveness– Reducing administrative and coordination

costs for global firms– Improving efficiencies– Making performance in local markets more

effective


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Metrics of the contribution of IT to Global Business

• Local versus global market share of firms• Market share in local countries• Sales per employee per country• Sales growth per country• Administrative and communication costs• Number of employees by country over

time


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The Impact of Globalization on Business

• Rationalized manufacturing• Worldwide purchasing• Integrated customer service• Global economies of scale• Global products• Worldwide rollout of products and services• Subsidizing markets• Managing risk across currencies• Growing irrelevance of national borders


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International Business Strategies

• Multinational– Focuses on local responsiveness– Subsidiaries operate autonomously or in a loose

federation– Firm can quickly respond to different local needs and

opportunities– Reduces the need for communications– Heavy reporting requirements are necessary for

monitoring purposes


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• Global– Stresses efficiency based on strong central control from

headquarters– Economies from standard product designs and global

manufacturing– Requires an extensive communications system for

management• International

– Much like the multinational with autonomous subsidiaries– Subsidiaries depend on headquarters for new processes

and products


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• Transnational– Seeks global efficiency while retaining local

responsiveness– Integrates global activities through cooperation among

headquarters and foreign subsidiaries– A difficult strategy to implement


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The Globally Outsourced Firm

• A growing trend is the movement of service jobs to countries which have a well-educated, English-speaking workforce– Jobs affected include customer service, programming, and

back-office functions (payroll and HR) among others• Offshore outsourcing reduces labor costs and is

efficient • Outsourcing however comes with the risks of poor

vendor performance and political instability in foreign countries

• Outsourcing creates a new kind of organizational structure along with challenges for management


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Outsourcing cuts across all types of Global Business


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Firms can outsource both Manufacturing and Business Services


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Key Issues in an International Environment

• Information Needs– For coordination and control of diverse

businesses– IT improves coordination and control

with tools such as E-mail, Groupware and Videoconferencing

– IT provides reporting and early warning systems to improve control


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• Implementing International IT– Locally driven development may lead to

duplicate efforts or poorly conceived and designed systems

– Common systems take advantage of economies of scale but may be impossible to implement across countries with different laws and regulations

– In designing applications, real and perceived unique features are important in each country


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• Government regulations that can impede the development of global information systems– A requirement to purchase specific equipment in the foreign

country that may not be compatible with the equipment in other places the global firm operates

– A requirement to do certain kinds of processing in the host country before data can be sent electronically to another country

– Restrictions on the use of satellites and special requirements for building private networks

– Limited access to flat-rate leased lines or a requirement that all transmission be made on variable cost lines

– Restrictions on Internet access and efforts to censor Web sites


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• Barriers to transborder data flows– Restrictive regulations on the processing of

data– Exorbitant pricing of communication services– Security issues

• Language, culture, and time differences


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Strategies for Managing Global IT

• Concentrate on interorganizational linkages• Establish global systems development skills• Build an infrastructure• Take advantage of liberalized

telecommunications• Strive for uniform data• Develop guidelines for shared versus local

systems


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Two Examples of Businesses

• Standard Pharmaceuticals International– Dilemma of local system versus shared

systems development– Did not want to provide more resources to IS

but sought greater sales revenues• Verifone– Decentralized network of “equal” locations– Virtual teams using many communication tools– Harnessed global resources to solve local

problems


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Business Models and IT Management

Business Model IT Management Approach

Multinational Independent operations

Global Headquarters driven

International Intellectual synergy

Transnational Integrated global IT


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IT Management Approaches• Independent operations

– Little interaction with headquarters IT staff on applications or hardware and software acquisitions

• Headquarters driven– Implementation of worldwide applications to reduce development and

operating costs• Intellectual synergy

– Subsidiaries control IT while headquarters tries to guide the choices of the subsidiaries

– Reduces duplicate development efforts and encourages resource sharing

• Integrated global IT– Headquarters specify certain applications as common systems and

allow limited customization– Systems design requires input from around the world


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The Internet, Imperialism and Developing Countries

• Some governments may wish to control or limit publicly available information and are unable to do so with the advent of the Internet

• The Internet culture emphasizes the free flow and availability of information


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Summary

• Four main international business strategies include the multinational, global, international, and transnational organizations

• Corresponding IT management approaches include independent operations, headquarters driven, intellectual synergy, and integrated global IT

• Implementing international applications of technology can be difficult

• IT challenges in an international environment include standards, uniform data, government regulations, and quality of telecommunications, among others

copyright 2004 john wiley sons, inc.5 - 1 information technology: strategic decision making for...

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