V

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• VS chapter 2

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Learning Objectives

• 1. Define globalization, describe how it evolved
  over time, and describe the key drivers of
  globalization.
• 2. Describe the emerging opportunities for
  companies operating in the digital world.
• 3. Explain the factors companies have to consider
  when operating in the digital world.
• 4. Describe international business and
  information systems strategies used by companies
  operating in the digital world.

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Globalization
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Globalization

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

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Globalization

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

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Evolution of Globalization
Globalization 1.0

• Mainly European countries are globalizing
• Power is the primary driver
• Industries changed
• Slow pace of change

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Evolution of Globalization (contd)
Globalization 2.0

• Companies are globalizing
• Reduction in transportation and
  telecom-munications costs
• Mainly Europe and America involved

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Evolution of Globalization (contd)
Globalization 3.0

• Individuals and small groups are globalizing
• Faster pace of change
• Emergence of new industries

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Evolution of Globalization Summary

• The World Is Flat (Thomas L. Friedman)

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Ten Enablers of Globalization 3.0

• 1. Fall of the Berlin Wall (11/9/1989)
• 2. Netscape went public (8/9/1995)
• 3. Work flow software
• 4. Uploading
• 5. Outsourcing

• 6. Offshoring
• 7. Supply chaining
• 8. In-sourcing
• 9. In-forming
• 10. The steroids

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Selected Details

• Work flow software
• XML enabled computer to talk to one another
  (regardless of OS) without human intervention
• Microsoft Word and Adobe Acrobat
• PayPal provided the equivalent of a global
  currency to fuel commerce
• Windows operating systems
• Uploading
• This refers to the ability of individuals and
  companies to create content for the Web
• The open source software movement (Linux,
  Firefox)
• Wikipedia (an online encyclopedia)
• Blogging and podcasting

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Selected Details (continued)

• Outsourcing (the movement of a business process
  to another company)
• Contracting with another company to take over a
  particular business process (e.g., development of
  new information systems applications)
• Telecommunications expands the geographic range
  of outsourcing so that companies can utilize
  cheap labor markets
• Offshoring (a company moves a business process to
  another country but the company retains control
  of the process (e.g., an American company moves
  manufacturing to a foreign country)

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Selected Details (continued)

• Supply chaining is the use of interorganizational
  systems to link retailers, suppliers, and
  customers
• Supporting technologies include extranets, EDI,
  and VPN
• Wal-Marts vendor replenishment
• In-sourcing
• Special case of outsourcing but refers to
  contracting with an outside business to handle
  logistics
• Nikes arrangement with UPS

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Selected Details (continued)

• In-forming is to individuals what outsourcing,
  offshoring, and in-sourcing is to companies
• Individuals have access to massive amounts of
  information through Google, Yahoo, MSN etc.
• Access to every book in print may be possible in
  the near future

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The Steroids

• The steroids permit individuals to author their
  own content in digital form
• The personal computer
• The browser brought the Internet to life and
  triggered the dotcom boom (1996-2000)
• The dotcom boom triggered an overinvestment in
  fiber-optic cable that wired the world
• Standardization of transmission protocols (TCP/IP
  and HTTP) made everyones computer and software
  interoperable
• These steroids created a platform that allows
  individuals to collaborate globally

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Outsourcing and You

• By 2006 nearly 90 percent of all large firms used
  some type of outsourcing (see tables 2.5 and 2.6
  in the textbook)
• You are competing with individuals all over the
  world
• Reasons for outsourcing

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Emerging Opportunities in the Digital World.

• New markets
• Eastern Europe
• China
• Opportunities to access skilled labor pools all
  over world

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Challenges of Operating in the Digital World

• Three broad categories
• Governmental
• Geoeconomic
• Cultural

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Governmental Challenges

• Political Systems
• Free market versus planned economy
• Regulatory challenges
• Tariffs
• Embargoes
• Export regulations
• Quotas (see Boeing and automobile manufacturers)
• Data sharing
• Restrictions in transborder data flow
• EU restrictions

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Governmental Challenges (continued)

• Standards
• Measurement standards metric and English,
  telephone numbers, zip codes
• Internet access and individual freedom
• Nazi paraphanalia, racist propaganda are banned
  in European Web sites
• China restricts the usage of VoIP in order to
  monitor phone conversations
• Access in North Korea and Cuba is severely
  limited
• MSN and Yahoo were requested to reveal identity
  of Chinese citizens posting dissident messages on
  blogs

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Geoeconomic Challenges (combination of economic
and political challenges)

• Time zone differences
• Infrastructure-related reliability
• Differences in welfare
• Demographic
• Expertise

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Geoeconomic Challenges (continued)

• Reduction in need for business travel as a result
  of high quality teleconferencing systems
• Time zone challenges (good and bad)
• Video conferences usually inconvenience one party
• Round the clock work teams (follow the sun)
• Infrastructure
• Traditional problems with roads, ports, rail
• Telecommunication infrastructure
• Economic Welfare
• Uneven benefits of globalization 3.0
• Gap between rich and poor countries has widened
• New competition from former poor countries

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Geoeconomic Challenges (continued)

• Demographic challenges
• Aging populations in US, Europe, and Japan
• New workers lack necessary work experiences
• Lack of skilled labor can pose problems for
  global operations
• Cost advantages of out sourcing can shrink over
  time (some predict that Indias advantage will
  soon erode with the rising value of the rupee)
• Next outsourcing destination may be Africa

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Cultural Challenges

• Cultural values on many basic issues are
  different
• Power distance
• Individualism/collectivism
• Masculinity/femininity
• Uncertainty avoidance (risk taking)
• Concept of time
• Life focus
• Challenges relating to offering products/services
  in different countries

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Cultural Challenges (continued)

• Challenges relating to offering products/services
  in different countries
• Environmental challenges
• Differences in treatment of intellectual property
  (e.g., software)
• Advertising

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Going Global International Business Strategies
in the Digital World

• Home-Replication Strategy
• Global Business Strategy
• Multidomestic Business Strategy
• Transnational Business Strategy

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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

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Global Business Strategy

• Centralized
• Used to achieve economies of scale
• Example Coca-Cola
• Same core product
• Some different tastes made for local markets

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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

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Transnational Business Strategy

• Some operations centralized while others
  decentralized
• Flexibility
• Economies of scale
• Difficult to manage
• Example Unilever

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Business Strategies Summary

• Different types of information systems can
  support these organizational forms

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The Third Wave by Toffler (text below is taken
from Wikipedia)

• In his book The Third Wave Toffler describes
  three types of societies, based on the concept of
  'waves' - each wave pushes the older societies
  and cultures aside.
• First Wave is the society after agrarian
  revolution and replaced the first hunter-gatherer
  cultures.
• Second Wave is the society during the Industrial
  Revolution (ca. late 1600s through the
  mid-1900s). The main components of the Second
  Wave society are nuclear family, factory-type
  education system and the corporation. Toffler
  writes "The Second Wave Society is industrial
  and based on mass production, mass distribution,
  mass consumption, mass education, mass media,
  mass recreation, mass entertainment, and weapons
  of mass destruction. You combine those things
  with standardization, centralization,
  concentration, and synchronization, and you wind
  up with a style of organization we call
  bureaucracy."
• Third Wave is the post-industrial society.
  Toffler would also add that since late 1950s most
  countries are moving away from a Second Wave
  Society into what he would call a Third Wave
  Society. He coined lots of words to describe it
  and mentions names invented by him
  (super-industrial society) and other people (like
  the Information Age, Space Age, Electronic Era,
  Global Village, technetronic age,
  scientific-technological revolution), which to
  various degrees predicted demassification,
  diversity, knowledge-based production, and the
  acceleration of change (one of Tofflers key
  maxims is "change is non-linear and can go
  backwards, forwards and sideways").