Chapter 9: Challenges of Global Information Systems Oz (5 th edition)

Multinational Organizations and IS ► A multinational firm (MNF) is a firm that operates in many countries. The firm may or may not have a headquarters in a single country, but operates divisions and subsidiaries in different countries to take advantage of local benefits (i.e., cheap labor) ► MNFs must use global information systems which are systems that serve individuals and firm units in multiple countries. ► Global information systems are different than other IS because these systems must conform to laws, cultures, and standards etc. in many countries

The Web and International Commerce ► Web has become important vehicle for B2B and B2C commerce ► Ratio of non-English speakers to English speakers growing ► Internet opens enormous global opportunities ► Chinese market expected to be largest in future ► Web offers opportunities to save on costs (see subsequent slides)

The Web and International Commerce (continued) Figure 9.1: Two-thirds of Internet users come from non-English-speaking countries

The Web and International Commerce (continued) ► An example of cost savings: printing product and service manuals  Put on Web as opposed to shipping with product  Downloaded at customer ’ s convenience  Inclusion of animation, sound, hypertext, graphics, and video clips  Reduce customer service costs by 50 %  Multiple language versions are easier on the Web ► Global businesses must be sensitive to audiences ► Glocalization: design global sites to cater to local needs  McDonalds menu changes to appeal to local palates

The Web and International Commerce (continued) Figure 9.2: Imperatives to heed when designing Web sites for an international audience

Think Globally, Act Locally ► International companies “ think globally, act locally ”  Be sensitive to regional customs  Control must be decentralized  Strategic planning should be global  Can be followed with local flavor

Challenges of Global Information Systems ► Global information systems face challenges  Technological barriers  Regulations and tariffs  Electronic payment mechanisms  Different language and culture  Economic and political considerations  Different measurement standards  Legal barriers  Different time zones ► Challenges involve both the firm’s Web site and other information systems

Technological Challenges ► Challenges  Not all countries have adequate information technology infrastructures  Unable to build international IS  Broadband communication lines needed ► Solutions  Offer two versions of Websites to compensate for slower bandwidth  Use low earth orbit satellite systems to build network for voice and data

Technological Challenges (continued) ► Challenges  Language is technological challenge because eight-bit bytes not sufficient for languages with large character sets (e.g., Chinese  Fields such as telephone numbers present problems for databases in MNFs ► Solutions  Use double-byte characters (e.g., unicode allows for 65,536 characters)  Fields for telephone numbers must be variable length to allow flexibility

Regulations and Tariffs ► Challenges  Countries have different importing regulations  Executives reluctant because of hassles  Even with research there are fears that employees will not know how to comply with laws of destination countries ► Solutions  There are programs such as NextLinx to help importers and exporters for Web commerce ► NextLinx is integrated within the firm ’ s systems ► When an international order is placed the software determines tariffs, cost of delivery, provides forms, and logistics

Differences in Payment Mechanisms ► Challenges  E-commerce allows easy payment for online purchases  Credit cards preferred payment method in North America  Not all countries adopt this preference ► Japanese avoid using credit cards ► Solutions  Web sites for international firms must have multiple payment mechanisms  Konbini example in Japan

Language Differences ► Challenges  International parties must agree on common language  Data not transmittable internationally because information must be translated; computers still cannot accurately translate “ on the fly ”  English considered de facto international language  Many countries require accounting systems to be in the local language ► Solutions  Largest companies translate Web sites into local languages  Web site design and translation should be done in overseas offices although the server may be located in another country; lack of uniformity in languages  Multiple accounting systems in different languages

Cultural Differences ► Challenges  Different countries vary ► Tastes ► Gestures ► Treatment of people ► Ethical issues  Conservative groups against “ Americanization ” ► Solutions  MNFs should employ local personnel to design their Web sites or version of a Web site that will appeal to a particular country

Conflicting Economic, Scientific, and Security Interests ► Challenges  Goal of corporate management ► Seize large market share and maximize organization profits  Goal of governments is to protect economic, scientific, and security interests of its people  Occasionally interests conflict ► Drawings related to the design and manufacture of weapons ► Software packages ► Encryption software  Differences in treatment of trade secrets, patents, and copyright law ► Solutions  No easy ones  Pressure from America for stronger copyright laws  International trade groups

Political Challenges ► Challenge  Information is power and some countries oppose policy of free access to information and limit use of Internet  Governments recognize that software is an economic resource and require firms to purchase local software to build local industry; problems for firms trying to standardize ► Solutions  MNFs may have to cut some content from their sites to limit risks of offending local government  Limit use of employee blogs  International human rights pressure may help in the long run  Use open source software (e.g., Linux, MySQL) can help

Different Standards ► Challenge  No international accounting standards  United States uses English system of weights and measures; rest of world uses metric system  Different standards for dates, temperatures, time, telephone numbers, and addresses  Different standards for product codes ► Solution  Multiple accounting systems  Multiple versions of data where user can request version needed (i.e., software must be flexible and give users choice)  Promotion of universal product codes

Legal Barriers ► Challenges  Countries have different laws that affect global business in general and in particular areas such as ► Privacy with respect to data collection ► International transfer of data ► Free speech ► Location of legal proceedings  Other differences in law ► Auctions ► Gambling ► Sale of liquor and prescription drugs

Legal Barriers: Privacy and Data Collection ► Privacy laws in general  Respect for privacy in international business is unresolved challenge  Majority of democratic nations protect individual privacy ► How privacy laws differ with respect to data collection  Does the law apply to data collected by a company or the government?  Does the law apply to manual data, digital data, or both?  Does the law protect data concerning human beings or does the law also protect legal entities such as corporations?

Legal Barriers: US versus EU Approach to Privacy with Respect to Data Collection ► US privacy laws  Slanted toward the public sector (government)  Over 50 % encompass manual and computerized systems  Limited provisions for individuals versus legal entities (corporations) ► EU privacy laws  Covers both public and private sector  Stronger protection regarding computerized decision making  Variance in EU with respect to coverage of entities; strong coverage with respect to individuals

Legal Barriers: EU Practices with Respect to Data Collected on Individuals ► European Union practices (Directive on Data Privacy) for data collected by corporations on consumers follows the Fair Information Practices mentioned in chapter 11  Personal data collected only for specified purposes  Personal data must be given consent to be processed  Collecting organizations must identify themselves  People have right to object to processing of personal data

Legal Barriers Between US and EU ► Challenge  American companies collect data for marketing purposes on all their customers, but differences between European and American approaches prevent unrestricted flow of information with respect to data collection on EU customers  For example, EU agents monitor US companies that collect data on EU citizens ► Solution  The EU has worked with the US Dept of Commerce to enable US companies who comply with EU’s Directive on Data Privacy to carry on trade without fear of violating the directive (Safe Harbor arrangement)

Legal Barriers: Legal Proceedings ► Challenge  Suppose you purchased an item from a site located in another country, and the item has a defect or arrived after the time promised. Because your request for compensation or other remedies has not been answered, you decide to sue. Where do you file the lawsuit? ► Solution  Country- of-origin principle whereby all legal matters are confined to the country where the site operates  Country-of-destination principle whereby the laws of the country to which the site caters apply regarding dealings with the site, regardless of the site’s country (EU’s approach)

Different Time Zones ► Challenge  MNFs must craft policies that work for employees, customers, and IS for all time zones  Time stamping ► Solutions  Teleconferencing systems can help; but huge time differences require accommodations for employees in other time zones  Chat rooms and bulletin boards for asynchronous communication  Opportunity to work on projects 24 hours a day  Enable customer support personnel to be available 24/7 without requiring night shift work  Standard policy for time stamping documents

Summary ► Companies using Web for business must accommodate non-English speaking audiences ► Companies must tailor to local preferences ► Must be aware of cultural differences and payment preferences ► Tariff and legal issues ► Linguistic, cultural, economic, and political challenges must be addressed

Summary (continued) ► Laws governing collection of data in United States and European Union are different ► Incompatible data privacy laws ► Restricted flow of personal data between United States and EU ► Safe Harbor arrangement enables EU to do business with US ► Old legal approach of territorial jurisdiction inadequate ► Free speech and consumer litigation of e-tailers brought need for legal reform for cyberspace