IS Strategy: Virtual Organization and Transnational Corporation

1
IS Strategy Virtual Organization and
Transnational Corporation

• Bob Travica
• (More about Bob)
• Associate Professor at Asper School of Business,
  University of Manitoba, Canada
• Visiting Professor at Faculty of Economics,
  University of Ljubljana, Slovenia
• April 2011

2
Outline

• Virtual Organization (VO) concept examples
• Kinds of VO definition
• Role of IS in VO
• The ISSAAC Model of VO VO definition
• Summary
• Transnational Corporation (TNC) concept
  examples
• A model of TNC TNC definition
• Role of IS in TNC
• Future of VO
• Summary
• This lecture is based on two articles by Bob
  Travica VO, TNC. Full references are in
  Note below

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VO Concept

• VO is multiple organizations coming together for
  accomplishing a common purpose, ad acting as if
  they are a single organization.
• Differences from classical org.
• Members boundaries are flexible
• No physical presence as a whole
• Similar to virtual memory (mainpart of secondary
  storage)
• Just part of a physical organization can
  participate in VO
• Key condition "a sophisticated information
  network and compu- ter-integrated production
  processes" (Davidow Malone, 1992)

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Virtual Corporation

• Reason for creating VO is in combining
  competences to make an extraordinary product,
  thus seizing a market opportunity (AgileNet in
  Pennsylvania, Goldman et al., 1995)

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Virtual Corporation (cont.)

• Creators of V-Corporation McDonnell Douglas
  Aerospace, Dell, Nike
• Changing membership in VO switching principle
  (Mowshowitz, 1994). VO is not just an electronic
  supply chain.
• Sourcing, contracting-out, outsourcing methods

Figure 3. Virtual Corporation Including
Electronic Market A variant of Virtual
Corporation including an electronic marketplace
as the intermediary. This model has contributed
to maturation of B2B e-commerce.
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Virtual Alliance

• Goal developing a groundbreaking product, a
  long-term joint strategy.
• Alliance NCSA 50 organization developing
  American advanced computational infrastructure
• Joint strategy Rosenbluth International
  Alliance alliance of Sun Microsystems and of
  Microsoft
• Virtualness measured by the extent of e-linking
  among partners flexibility of their boundaries

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Virtual Interorganizational Team

• Members dispersed in space (not every dispersed
  team is virtual!)
• Members belong to different organizations
• Membership is switchable
• Special product a goal (again)
• Example Boeing-Rocektdyne project team (see last
  class)

IS Role in VO In all kinds of VO, IS that
connect and support operations of VO are a
necessary but not sufficient condition. Other
conditions need to be in place overall org.
strategy that directs IS strategy.
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ISSAAC Model of VO

• VO defined VO is a switchable
  interorganizational electronic network that
  delivers a special product.
• The model can be used for assessing the extent to
  which
• an organization is virtual.

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Summary

• VO consists of multiple organizations (or smaller
  units) that come together to join competences and
  harness a market opportunity.
• VO is a switchable interorganizational
  electronic network that delivers a special
  product.
• VO kinds are virtual corporation,
  interorganizational virtual team, and virtual
  alliance.
• IS present a necessary but not sufficient
  condition for VO. The ISSAAC model can explain
  any kind of VO, and it contains dimensions of
  Interoperability, Switching, Special Product,
  Aggregation, Anchoring, and Cybernization.

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Transnational Corporation (TNC)

• A key player in the process of globalization
• Globalization so far has contradictory effects
  helping global economic growth but in asymmetric
  manner (Travica, 2010)
• Focus of lecture is on the organization of TNC,
  its IT/IS, and capabilities
• Definitional characteristic TNC is involved in
  global markets of supplies, labour, and consumers
  global sourcing, production, sales
• Examples Nike J.P. Morgan, Deutche Bank, HSBC
  
• Toyota, Ford IBM, Oracle, Microsoft, SAP
• Chevron Pfizer

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TNC Capabilities

• TNC capabilities that enable global sourcing,
  production, sales (Bartlett Ghoshal, 1989 )
• Approaching world as a single market, working
  everywhere with same efficiency (like global
  firm)
• Being responsive to local markets (like MNC)
• Combining centralized and decentralized
  development of knowledge, sharing it across
  locations, and adapting it to local needs

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TNC Model

• TNC is an organization with the capabilities of
  global efficiency, local market responsiveness,
  distributed learning and cross-unit knowledge
  sharing, and increased bargaining power and
  mobility, which sources, produces, and sells in
  the global context.

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Role of IS in TNC

• Every TNC capability supported
• Global efficiency of operations - distributed
  enterprise systems
• Local Market Responsiveness - communication and
  decision making IS
• Learning - integrated IS for codifying and
  indexing knowledge
• Mobility Bargaining Power - computer networks
  linked ISes

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TNCs Global Impacts

• Enormous economic power (GE, Walmart, Microsoft)
• TNC recreates World system with Core vs.
  Periphery (Prebisch, 1950 Wallerstein,1974)
• TNC drives Informational Capitalism (Castellss,
  1996, 2000)
• TNC makes Techno-Economy. Most of rest is Grunge
  Economy (Joness, 1998)

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Future of TNC

• TNC is here to stay
• Choices for smaller players
• Get into TNCs supply chain (global informational
  capitalism) and
• OR
• Be doomed to periphery and grunge economy
• Benefits of doing biz with TNC employment,
  access to larger markets, technological
  incentives, know-how transfer (tech., profession,
  management), development
• Costs of doing biz with TNC adjusting to a given
  role, tech. costs, constrained development,
  ownership control

16
Summary

• TNC is an organization capable of achieving
  global efficiency, local market responsiveness,
  distributed learning, cross-unit knowledge
  sharing, and increased bargaining power and
  mobility, which sources, produces, and sells
  globally.
• In the TNC model presented, IS are necessary for
  each capability and resulting global operations
  (sourcing, producing and selling).
• TNC is a key player in globalized economy that
  imposes hard choices on smaller players
  (development at certain cost, or marginalizing)