1. Chapter 2 Fueling Globalization Through Information Systems
“The global economic playing field is being leveled.”
Nandan Nilekani, Infosys Technologies Ltd.

2. Learning Objectives
2-2
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.

3. Learning Objectives
2-3
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.

4. Globalization Globalization created a new world characterized by:
Worldwide communication
Collaboration without barriers

5. Evolution of Globalization
Mainly European countries are globalizing
Power is the primary driver
Industries changed
Slow pace of change

6. Evolution of Globalization (cont’d)
Companies are globalizing
Reduction in transportation and telecom-munications costs
Mainly Europe and America involved

7. Evolution of Globalization (cont’d)
Individuals and small groups are globalizing
Faster pace of change
Emergence of new industries

8. Evolution of Globalization: Summary
The World Is Flat (Thomas L. Friedman)
“10 Enablers”
Key factors enabling Globalization 3.0

9. Enabler #1: The Fall of the Berlin Wall
November 9, 1989
Fall of communism
People from the former communist countries gained more freedom

10. Enabler #2: Netscape Browser
August 9, 1995
“Killer app”
First mainstream browser
Gave individuals access to the Internet & set standards

11. Enabler #3: Work Flow Software
Applications that allow people worldwide to communicate
XML: applications “talk” to each other
New possibilities for information sharing
Global currency to fuel commerce

12. Enabler #4: Uploading
Individuals and companies actively participate in content generation on the Web
Wikipedia a huge success

13. Enabler #5: Outsourcing
Outsourcing companies profited from the drop in telecommuni-cations costs
Companies can now use talented engineers from anywhere

14. Enabler #6: Offshoring
Companies set up entire factories in countries such as China
Mass production
Low costs

15. Enabler #7: Supply Chaining
Integration of retailers, suppliers, and customers
Wal-Mart became an early leader
Use of RFID tags

16. Enabler #8: In-Sourcing
Delegation of company’s key operations to a subcontractor
Example: UPS provides complete supply chain solutions to companies

17. Enabler #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

18. Enabler #10: The Steroids
Technologies that support different types of collaboration
Greater mobility
Triple convergence

19. Learning Objectives
2-19
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.

20. Opportunities for Operating in the Digital World
Opportunities for reaching new markets
Former Eastern Bloc countries provide new opportunities for international companies to reach new customers

21. Opportunities for Operating in the Digital World (cont’d)
Engineering Graduates in the
United States, Europe, and India
Opportunities of a global workforce:
Low communications costs
Highly-skilled labor pool
Based on: Mallaby, 2006

22. Learning Objectives
2-22
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.

23. Challenges of Operating in the Digital World
Globalization also created a set of unprecedented challenges:
Governmental
Geoeconomic
Demographic
Cultural

24. Governmental Challenges
Political System Challenges
Political stability
Regulatory Challenges
Tariffs
Embargoes
Export regulations
Quotas

25. Governmental Challenges (cont’d)
Data-Sharing Challenges
Transborder data flow regulations
Differences in standards
UPC vs. EAN
Measurement units
Postal codes, phone numbers, etc.

26. Governmental Challenges (cont’d)
2-26
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

27. Geoeconomic Challenges
Time Zone Challenges
Real time meetings across continents difficult
Working around the clock possible

28. Geoeconomic Challenges (cont’d)
Infrastructure-Related Challenges
Traditional infrastructure—roads, electricity
Connectivity—reliable Internet connections
Challenges Related to Economic Welfare
GDP growth not distributed evenly throughout the world
Migration
Some companies used to deal with low margins and tough competition

29. Geoeconomic Challenges (cont’d)
Demographic Challenges
Differing rates of population growth
World Population, (in billions)

30. Geoeconomic Challenges (cont’d)
Demographic Challenges (cont’d)
Expertise related challenges
Different concentration of skilled workers
Different costs of workers

31. National Cultures Cultural Challenges
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

32. Cultural Challenges (cont’d)
Cultural Barriers
Language—communication language and norms
Work Culture—work skills, habits, and attitudes
Aesthetics—art, music, and culture
Education—attitudes toward education and literacy
Religion, Beliefs, and Attitudes—spiritual institutions and values
Social Organizations—family and social cohesiveness

33. Cultural Challenges (cont’d)
Environmental challenges
Energy consumption, pollution, workers health
Shipping
Other Challenges
Differences in what is regarded as appropriate
Standards of dealing with intellectual property
Network readiness
Not every country has access to the global networked economy

34. Learning Objectives
2-34
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.

35. Going Global: International Business Strategies in the Digital World
Home-Replication Strategy
Global Business Strategy
Multidomestic Business Strategy
Transnational Business Strategy

36. 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
Information systems play minor role in facilitating this strategy

37. Global Business Strategy
Centralized
Used to achieve economies of scale
Example: Coca-Cola
Same core product
Some different tastes made for local markets

38. Global Business Strategy
2-38
The role and characteristics of IS
Centralized information systems
Data flows from subsidiaries to home location
Multiple networks between home office and subsidiaries
Data does not stay at subsidiaries

39. 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

40. Multidomestic Business Strategy
2-40
The role and characteristics of IS
Each subsidiary has own, decentralized information systems
No centralized infrastructure
Data sharing primarily between subsidiaries and home office
Limited data sharing among subsidiaries
Loose integration of information systems

41. Transnational Business Strategy
Some operations centralized while others decentralized
Flexibility
Economies of scale
Difficult to manage
Example: Unilever

42. Transnational Business Strategy
2-42
The role and characteristics of IS
Integrated networks between home office and local subsidiaries
Much communication among subunits AND between home office and subunits
Key data is shared throughout company
Enabled by intranet, extranet, and Web based applications

43. Business Strategies: Summary

44. End of Chapter Content
2-44

45. Opening Case—Managing in the Digital World: Infosys Technologies Ltd.
Companies like Infosys are “flattening” the world.
Does business in new ways
Outsourcing
Supply Chains
Consulting
Employment

46. Netscape’s James H. Clark and Marc Andreessen
Founded Mosaic Communications Corporation
75 percent of Web surfers used Netscape in 1996
AOL acquired Netscape in 1999 for $10 billion in stock
Both founded several start-ups
James H. Clark
Marc Andreessen

47. Online Searching
To “Google” has become a household verb meaning search

48. IT Globalization: Accenture in India
Provides consulting, technology, and outsourcing
Global before other companies were just “waking up” to globalization
Accenture’s growth
Announced plans for doubling its thirteen thousand business consultants between 2008 and 2011

49. Underground Gaming Economy
Massive Multiplayer Online Role-Playing Game—MMORPG
Virtual world—players live through avatars
Players started selling virtual tools for real money—farmers
Banned from various gaming sites due to behavior being unethical and fear of turning users away
What’s your take on farmers and people “buying” tools and advancement without mastering the skills?

50. Learning Languages in Context
Livemocha
Online language instruction using social networking
Structured lessons
Help with grammar
Canned pronunciation guides
Most valuable asset
Conversation with native speaker
Using social community to increase understanding

51. e-Waste
Disposal of electronics containing hazardous materials is a rising issue
U.S. exports much of its e-waste to third world countries
China banned the import in 2002
Other countries to follow
In mid 2006, EU banned toxic ingredients
Production of “green” hardware
U.S. government working on making changes—currently state-level legislation most effective
Pace of technological changes increases problem

52. The Automobile Industry
The automobile industry is feeling the pressure of globalization
Failed attempts at making a “world car”
Consumers have different tastes
Differences in infrastructures derive needs
The price of gasoline
Variations in emission standards
Globalization is already there
Foreign manufacturers producing in US
US companies producing worldwide
Global network of suppliers
Ripple effects resulting from any crisis