IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/ Chapter 2 Fueling Globalization Through Information Systems “The global economic playing field is being leveled.” Nandan Nilekani, Infosys Technologies Ltd. “The global economic playing field is being leveled.” Nandan Nilekani, Infosys Technologies Ltd.

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Globalization 2-2 Globalization created a new world characterized by:  Worldwide communication  Collaboration without barriers Globalization 1.0  Mainly European countries are globalizing  Power is the primary driver  Industries changed  Slow pace of change

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Evolution of Globalization (cont’d) 2-3 Globalization 2.0  Companies are globalizing  Reduction in transportation and telecommunications costs  Mainly Europe and America involved Globalization 3.0  Individuals and small groups are globalizing  Faster pace of change  Emergence of new industries  Ten key enablers to Globalization 3.0 (Table 2.2 on page 42)

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Ten Key Enablers to Globalization 3.0 Table 2.2 on page Microsoft released first version of the Windows Operating System  De facto world standard in PC operating systems Common computing platform 2. Netscape, the “killer app”–easy Internet access & interconnection  Phased out in early 2008  Lives on in open source Mozilla Firefox and successor, Flock  Venture capital and dot.com bubble burst 3. Workflow- software & standards  XML – eXtensible Markup Language  MS Word ; Adobe Acrobat ; Pay-pal 2-4

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Ten Key Enablers to Globalization 3.0 (cont.) 4. Content Uploading by end users  Wikis, blogs, podcasts, open-source  Linux Kernel (include programmers from Google, Nokia, Sony)  Computers offered with open-source software (Dell, HP, Lenovo, Asus) 5. Outsourcing (Table 2.3 on page 48) 6. Offshoring – Company locations set up in different countries 7. Supply chaining – IT to tightly integrate suppliers, customers, mfg  RFID – radio frequency identification tags – track goods in supply chain 8. In-sourcing – Subcontract duties  UPS – complete supply chain solution 2-5

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Ten Key Enablers to Globalization 3.0 (cont.) 9. In-forming – individual access to Internet data 10. The Steroids – Amplifies previous enablers  Fast data transmission  Transmission standards  Collaboration tools  Mobile computing  Convergence of enablers makes Globalization 3.0 possible  Horizontal and vertical collaboration  Rise of Outsourcing  Maquiladoras – Assembly plants on Mexican side of border  Outsourced services – Coding, customer support, telemarketing call centers  Factors considered - Salaries, English proficiency, & geopolitical risk  Reasons – Page 53 – bulleted list 2-6

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/ Opportunities for reaching new markets Opportunities of a global workforce:  Low communications costs  Highly-skilled labor pool Engineering Graduates in the United States, Europe, and India Opportunities for Operating in the Digital World (cont’d) Based on: Mallaby, 2006

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Governmental Challenges 2-8 Political System Challenges  Political stability  Risk losing assets (confiscation, military coups, upheavals, civil wars) Regulatory Challenges  Tariffs (regarding imports/ exports)  Embargoes – Trade limits with a country  Export regulations – Limits exports of certain goods to specific countries (ex. PGP- Pretty Good Privacy)  Quotas – Allowed a specific number of products

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Governmental Challenges (cont’d) 2-9 Data-Sharing Challenges  Transborder data flow regulations  Strictness of rules (Europe’s regulations greater than U.S.)  Standards – U.S. (UPC) ; Europe & Japan (EAN-13)  European Article Number  Measurement standards (English vs. metric)  Address information 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

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Geoeconomic Challenges 2-10 Time Zone Challenges  Real time meetings across continents difficult  Working around the clock possible (Follow the sun)  Ex. Symantec antivirus labs

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Geoeconomic Challenges (cont’d) 2-11 Infrastructure-Related Challenges  Traditional infrastructure—roads, electricity, sewage systems  Connectivity—reliable Internet connections Challenges Related to Economic Welfare  GDP growth not distributed evenly throughout the world  New competition from companies from poorer countries  Used to tight competition and low profit margins

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Geoeconomic Challenges 2-12 Demographic Challenges Differing rates of population growth Aging populations Expertise related challenges Different concentration of skilled workers Different costs of workers

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Cultural Challenges 2-13  Culture – Collective programming of the mind that distinguishes members of one group from another  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  See page 65 – Other Cultural Barriers bullets

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Going Global: International Business Strategies in the Digital World 2-14  Home-Replication Strategy  Global Business Strategy  Multidomestic Business Strategy  Transnational Business Strategy See Tables (pgs 70-71)

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Home-Replication Strategy 2-15 Most basic form of going global  AKA: Export strategy or international strategy  Companies view international operations as secondary to, or extension of home operations.  Export products to: Generate additional sales Extend product life near end of domestic life cycle  Focus on core competencies in home market  International operations – secondary emphasis  Inability to react to local market conditions  Use for homogeneous markets  IS plays a minor role

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Global Business Strategy 2-16 Centralized Used to achieve economies of scale Example: Coca-Cola  Same core product  Some different tastes made for local markets Data flows  Subsidiaries => Home  Extensive Info Systems  Transborder data flow issues

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Multidomestic Business Strategy 2-17 Low degree of integration between subunits  Decentralized Flexible and responsive to the needs and demands of local markets Limited data flow  Limited knowledge transfer  Repeated mistakes/inefficiencies Example: General Motors  Opel in Germany  Vauxhall in Great Britain

IS Today (Valacich & Schneider) Copyright © 2010 Pearson Education, Inc. Published as Prentice Hall 9/9/2015 Transnational Business Strategy 2-18 Some operations centralized while others decentralized  Flexibility  Economies of scale Difficult to manage Example: Unilever  Centralization determined by product and market Key data sharing for seamless integration