LECTURE NOTES 2CHAPTER 2

Information Systems Today: Managing in the Digital World 2-2

Globalization

• Globalization created a new world characterized by:o Worldwide

communication

o Collaboration without barriers

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Evolution of Globalization

• Mainly European countries are globalizing

• Power is the primary driver

• Industries changed

• Slow pace of change

Globalization 1.0

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Evolution of GlobalizationGlobalization 2.0

• Companies are globalizing

• Reduction in transportation and telecom-munications costs

• Mainly Europe and America involved

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Evolution of Globalization

• Individuals and small groups are globalizing

• Fast changes

• Emergence of new industries

Globalization 3.0

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Evolution of Globalization: Summary

• “10 Flatteners”o Key factors enabling globalization 3.0

• The World is Flat (Thomas Friedman)

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Flattener #1: The Fall of the Berlin Wall

• November 9, 1989

• Fall of communism

• People from the former communist countries gained more freedom

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Flattener #2: Netscape Browser

• August 9, 1995

• First mainstream browser

• Gave individuals access to the Internet

THEN

NOW

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Flattener #3: Work Flow Software

• Applications that allow people worldwide to communicate

• XML allows applications to “talk” to each other

• New possibilities for information sharing

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Flattener #4: Supply Chaining

• Integration of retailers, suppliers, and customers

• RFID tags used

• Wal-Mart became an early leader

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Flattener #5: Open Sourcing

• Software and source code freely available to everyone

• Wikipedia a huge success

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Flattener #6: Outsourcing

• Outsourcing companies profited from the drop in telecommuni-cations costs

• Companies can now use talented engineers from anywhere

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Flattener #7: Offshoring

• Companies set up entire factories in countries such as Chinao Mass production

o Low Costs

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Flattener #8: In-Sourcing

• Delegation of company’s key operations to a subcontractoro E.g.: UPS

provides complete supply chain solutions to companies

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Flattener #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

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Flattener #10: The Steroids

• Technologies that support different types of collaborationo Greater mobility

o Convergence

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Opportunities of Operating in the Digital World

• Opportunities of Reaching New Marketso Former Eastern

Bloc countries provide new opportunities for international companies to reach new customers

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Opportunities of Operating in the Digital World

• Opportunities of a Global Workforceo Low

communications costs

o Highly-skilled labor pool

Engineering Graduates in the US, Europe and India

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Challenges of Operating in the Digital World

• Globalization also created a set of unprecedented challenges:o Governmental challenges

o Geoeconomical challenges

o Demographic challenges

o Cultural challenges

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Governmental Challenges

• Political System Challengeso Political stability

• Regulatory Challengeso Tariffso Embargoeso Export regulationso Quotas

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Governmental Challenges II.

• Data-Sharing Challengeso Transborder data flow regulations

• Internet Access and Individual Freedomo Content blocking by governments/censorship

• China – Use of VoIP restricted

• Germany – Sites with fascist symbols prohibited

o Internet access blocking

• Cuba, North Korea

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Geoeconomic Challenges• Time Zone Challenges

o Real time meetings across continents difficult

o Working around the clock possible

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Geoeconomic Challenges II.

• Infrastructure-Related Challengeso Traditional infrastructure – roads, electricity

o Connectivity – reliable Internet connections

• Challenges Related to Economic Welfareo GDP growth not distributed evenly

throughout the world

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Demographic Challenges

• Differing rates of population growth

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Demographic Challenges II.

• Expertise related challengeso Different

concentration of skilled workers

o Different costs of workers

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Cultural Challenges

•National Cultureso Power Distance – differences in how societies

handle the issues of human inequalityo Uncertainty Avoidance – risk taking natureo Individualism/Collectivism – value placed on

an individual vs. a groupo Masculinity/Femininity – degree to which a

society is characterized as masculine/feminineo Concept of Time – long term vs. short termo Life Focus – quantity vs. quality of life

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Cultural Challenges II.

• Cultural Barrierso Language – communication language and norms

o Work Culture – work skills, habits and attitudes

o Aesthetics – art, music and culture

o Education – attitudes towards education and literacy

o Religion, Beliefs and Attitudes – spiritual institutions and values

o Social Organizations – family and social cohesiveness

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Cultural Challenges III.

• Other Challengeso Differences in what is regarded as

appropriate

o Standards of dealing with intellectual property

o Different standards

•E.g., writing paper, pillowcases

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Going Global: International Business Strategy in the Digital World

Multidomestic Business Strategy

Global Business Strategy

Transnational Business Strategy

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Multidomestic Business Strategy• Low degree of

integration between subunits

• Flexible and responsive to the needs and demands of local markets

• E.g.: General Motorso Opel in Germanyo Vauxhall in Great

Britain

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Global Business Strategy

• Centralized

• Used to achieve economies of scale

• E.g.: Coca-Colao Same core product

o Some different tastes made for local markets

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Transnational Business Strategy

• Some operations centralized while others decentralizedo Flexibility

o Economies of scale

• Difficult to manage

• E.g.: Unilever

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Business Strategies: Summary

• Different types of information systems can support these organizational forms

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Information Systems Strategies• Multinational Information Systems

Strategyo Often used by multidomestic companieso Decentralized systemso Communication between home office and

subsidiarieso No focus on communication between

different subsidiarieso Decentralized local data processing centers

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Information Systems Strategies II.

• Global Information Systems Strategyo Used by companies with global business

strategyo Centralized infrastructureo Home office coordinates most of the

strategic decisionso Communication and data sharing networks

between home office and subsidiarieso Data does not stay with local subsidiaries

but flows back to the home office

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Information Systems Strategies III.• Transnational Information Systems

Strategyo Pursued by transnational businesses

o Extensive communication between home office and subsidiaries as well as among subsidiaries

o Key data shared throughout the company

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IS Strategies: Summary