Information Systems Today: Managing in the Digital World “The idea of charging for calls belongs to the last century.” Niklas Zennström, Skype Fueling Globalization through Information Systems Chapter

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

Information Systems Today: Managing in the Digital World 2-3 Learning Objectives

Information Systems Today: Managing in the Digital World 2-4 Globalization Globalization created a new world characterized by: oWorldwide communication oCollaboration without barriers

Information Systems Today: Managing in the Digital World 2-5 Evolution of Globalization Mainly European countries are globalizing Power is the primary driver Industries changed Slow pace of change Globalization 1.0

Information Systems Today: Managing in the Digital World 2-6 Evolution of Globalization Globalization 2.0 Companies are globalizing Reduction in transportation and telecom- munications costs Mainly Europe and America involved

Information Systems Today: Managing in the Digital World 2-7 Evolution of Globalization Individuals and small groups are globalizing Fast changes Emergence of new industries Globalization 3.0

Information Systems Today: Managing in the Digital World 2-8 Evolution of Globalization: Summary “10 Flatteners” o Key factors enabling globalization 3.0 The World is Flat (Thomas Friedman)

Information Systems Today: Managing in the Digital World 2-9 Flattener #1: The Fall of the Berlin Wall November 9, 1989 Fall of communism People from the former communist countries gained more freedom

Information Systems Today: Managing in the Digital World 2-10 Flattener #2: Netscape Browser August 9, 1995 First mainstream browser Gave individuals access to the Internet THEN NOW

Information Systems Today: Managing in the Digital World 2-11 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

Information Systems Today: Managing in the Digital World 2-12 Flattener #4: Supply Chaining Integration of retailers, suppliers, and customers RFID tags used Wal-Mart became an early leader

Information Systems Today: Managing in the Digital World 2-13 Flattener #5: Open Sourcing Software and source code freely available to everyone Wikipedia a huge success

Information Systems Today: Managing in the Digital World 2-14 Flattener #6: Outsourcing Outsourcing companies profited from the drop in telecommuni- cations costs Companies can now use talented engineers from anywhere

Information Systems Today: Managing in the Digital World 2-15 Flattener #7: Offshoring Companies set up entire factories in countries such as China o Mass production o Low Costs

Information Systems Today: Managing in the Digital World 2-16 Flattener #8: In-Sourcing Delegation of company’s key operations to a subcontractor o E.g.: UPS provides complete supply chain solutions to companies

Information Systems Today: Managing in the Digital World 2-17 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

Information Systems Today: Managing in the Digital World 2-18 Flattener #10: The Steroids Technologies that support different types of collaboration o Greater mobility o Convergence

Information Systems Today: Managing in the Digital World 2-19 Learning Objectives

Information Systems Today: Managing in the Digital World 2-20 Opportunities of Operating in the Digital World Opportunities of Reaching New Markets o Former Eastern Bloc countries provide new opportunities for international companies to reach new customers

Information Systems Today: Managing in the Digital World 2-21 Opportunities of Operating in the Digital World Opportunities of a Global Workforce o Low communications costs o Highly-skilled labor pool Engineering Graduates in the US, Europe and India

Information Systems Today: Managing in the Digital World 2-22 Learning Objectives

Information Systems Today: Managing in the Digital World 2-23 Challenges of Operating in the Digital World Globalization also created a set of unprecedented challenges: oGovernmental challenges oGeoeconomical challenges oDemographic challenges oCultural challenges

Information Systems Today: Managing in the Digital World 2-24 Governmental Challenges Political System Challenges o Political stability Regulatory Challenges o Tariffs o Embargoes o Export regulations o Quotas

Information Systems Today: Managing in the Digital World 2-25 Governmental Challenges II. Data-Sharing Challenges o Transborder data flow regulations Internet Access and Individual Freedom o Content blocking by governments/censorship China – Use of VoIP restricted Germany – Sites with fascist symbols prohibited o Internet access blocking Cuba, North Korea

Information Systems Today: Managing in the Digital World 2-26 Geoeconomic Challenges Time Zone Challenges o Real time meetings across continents difficult o Working around the clock possible

Information Systems Today: Managing in the Digital World 2-27 Geoeconomic Challenges II. Infrastructure-Related Challenges o Traditional infrastructure – roads, electricity o Connectivity – reliable Internet connections Challenges Related to Economic Welfare o GDP growth not distributed evenly throughout the world

Information Systems Today: Managing in the Digital World 2-28 Demographic Challenges Differing rates of population growth

Information Systems Today: Managing in the Digital World 2-29 Demographic Challenges II. Expertise related challenges o Different concentration of skilled workers o Different costs of workers

Information Systems Today: Managing in the Digital World 2-30 Cultural Challenges National Cultures o Power Distance – differences in how societies handle the issues of human inequality o Uncertainty Avoidance – risk taking nature o Individualism/Collectivism – value placed on an individual vs. a group o Masculinity/Femininity – degree to which a society is characterized as masculine/feminine o Concept of Time – long term vs. short term o Life Focus – quantity vs. quality of life

Information Systems Today: Managing in the Digital World 2-31 Cultural Challenges II. Cultural Barriers o 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

Information Systems Today: Managing in the Digital World 2-32 Cultural Challenges III. Other Challenges o Differences in what is regarded as appropriate o Standards of dealing with intellectual property o Different standards E.g., writing paper, pillowcases

Information Systems Today: Managing in the Digital World 2-33 Learning Objectives

Information Systems Today: Managing in the Digital World 2-34 Going Global: International Business Strategy in the Digital World  Multidomestic Business Strategy  Global Business Strategy  Transnational Business Strategy

Information Systems Today: Managing in the Digital World 2-35 Multidomestic Business Strategy Low degree of integration between subunits Flexible and responsive to the needs and demands of local markets E.g.: General Motors o Opel in Germany o Vauxhall in Great Britain

Information Systems Today: Managing in the Digital World 2-36 Global Business Strategy Centralized Used to achieve economies of scale E.g.: Coca-Cola o Same core product o Some different tastes made for local markets

Information Systems Today: Managing in the Digital World 2-37 Transnational Business Strategy Some operations centralized while others decentralized o Flexibility o Economies of scale Difficult to manage E.g.: Unilever

Information Systems Today: Managing in the Digital World 2-38 Business Strategies: Summary Different types of information systems can support these organizational forms

Information Systems Today: Managing in the Digital World 2-39 Information Systems Strategies Multinational Information Systems Strategy o Often used by multidomestic companies o Decentralized systems o Communication between home office and subsidiaries o No focus on communication between different subsidiaries o Decentralized local data processing centers

Information Systems Today: Managing in the Digital World 2-40 Information Systems Strategies II. Global Information Systems Strategy o Used by companies with global business strategy o Centralized infrastructure o Home office coordinates most of the strategic decisions o Communication and data sharing networks between home office and subsidiaries o Data does not stay with local subsidiaries but flows back to the home office

Information Systems Today: Managing in the Digital World 2-41 Information Systems Strategies III. Transnational Information Systems Strategy o Pursued by transnational businesses o Extensive communication between home office and subsidiaries as well as among subsidiaries o Key data shared throughout the company

Information Systems Today: Managing in the Digital World 2-42 IS Strategies: Summary

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Information Systems Today: Managing in the Digital World 2-44 Opening Case: Managing in the Digital World: Casino Gaming RFID tags will revolutionize the gambling industry by providing real time information such as the amount held in chips Mobile gambling using PDAs Online gambling on the rise

Information Systems Today: Managing in the Digital World 2-45 Detecting Intermittent Electrical Faults Hard to find intermittent electrical faults caused by small damage to wires Pulse arrested sparks discharge (PASD) – developed to help find these faults o Nanosecond bursts of high voltage sent through wires o Problem areas light up and are identified Boeing uses the technique U.S. military is interested in the technology

Information Systems Today: Managing in the Digital World 2-46 Online Searching To “Google” has become a household verb meaning search

Information Systems Today: Managing in the Digital World 2-47 Niklas Zennström: Cofounder and Chief Executive Officer, Skype “The idea of charging for calls belongs to the last century.” Skype has 28 million subscribers Among the 100 most influential people transforming the world

Information Systems Today: Managing in the Digital World 2-48 Underground Gaming Economy Massive Multiplayer Online Role-Playing Game – MMORPG o Virtual world – players live through avatars Players started selling virtual tools for real money – farmers o Banned from various gaming sites due to behavior being unethical and fear of turning users away

Information Systems Today: Managing in the Digital World 2-49 E-Waste Disposal of electronics containing hazardous materials is a rising issue U.S. exports much of its e-waste to third world countries o China banned the import in 2002 o Other countries to follow In mid 2006, EU banned toxic ingredients o Production of “green” hardware US government working on making changes – currently state-level legislation most effective

Information Systems Today: Managing in the Digital World 2-50 Transnational Development Wrigley Company o World’s largest manufacturer of chewing gum o Sold in 150 countries Good information systems key to conducting marketing research o Russian marketing research branch initiated the development of a marketing research work flow automation system o After successful testing, system was implemented in other marketing research branches

Information Systems Today: Managing in the Digital World 2-51 The Automobile Industry The automobile industry is feeling the pressure of globalization Failed attempts at making a “world car” o Consumers have different tastes o Differences in infrastructures derive needs o The price of gasoline o Variations in emission standards Cultural and economic conditions need to undergo more globalization to make a world car successful