Chapter 2 Fueling Globalization Through Information Systems

Home , Marc Andreessen, Netscape

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“The global economic playing field is being leveled.”

Nandan Nilekani, Nilekani, Infosys Technologies Ltd.

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1. Define globalization, describe how it evolved over time, and describe the key drivers of globalization.

2. DibDescribe the emergi ing opportun iiities for companies operating in the digital world.

3. Explain the factors companies have to consider whiihdiilldhen 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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y Pair uppp with one other person y The instructor will give each team copies of one or more slides from the slide presentation y Each team writes a script for the verbal message that will be delivered with each slide { Each slide’s script can consume no more than 1 minute of delivery time y Each team delivers its content verbally y There is an assignment dropbox named IC 03wk in Blackboard – extra ppgoints will be earned for entering your “script” digitally using the dropbox

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1. Define globalization, describe how it evolved over time, and describe the key drivers of globalization.

2. DibDescribe the emergi ing opportun iiities for companies operating in the digital world.

3. Explain the factors companies have to consider whiihdiilldhen 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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y Globalization created a new world characterized by: { Worldwide communication { Collaboration without barriers

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Globalization 1.0 y Mainly European countitries are globalizing y Power is the primary driver y Industries changed y Slow pace of change

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Globalization 2.0 y Companies are globalizing y Reduction in transportation and telecom- munications costs y Mainly Europe and America involved

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Globalization 3.0 y Individuals and small groups are globalizing y Faster pace of change y Emergence of new industries

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y The World Is Flat (Thomas L. Fri ed man)

y “10 Ebl”Enablers” { Key factors enabling Globalization 3.0

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y November 9, 1989 y Fa ll of communism y People from the former communist countries gained more freedom

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y August 9, 1995 y “Killer app” y First mainstream browser y Gave individuals access to the Internet & set standards

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y Applications that allow people worldwide to communicate y XML: applications “talk” to each other y New possibilities for information sharing y Global currency to fuel commerce

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y Individuals and companies actively participate in content generation on the Web

y Wikipedia a huge success

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y Outsourcing companies profited from the drop in telilecommuni- cations costs y Companies can now use talented engineers from anywhere

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y Companies set up entire factories in countitries such as China { Mass production { Low costs

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y Integration of retailers, suppliers, and customers y Wal-Mart became an early lea der { Use of RFID tags

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y Delegation of comppyany’s ke y operations to a subcontractor { Example: UPS provides complete supply chain solutions to companies

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y In-forming is to individuals what outsourcing, offshoring, and in-sourcing is to companies y Individuals have access to mass ive amounts of infooormation

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y Technologies that support different types of colla bora tion { Greater mobility { Triple convergence

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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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y Opportunities for reaching new markets { Former Eastern Bloc countries provide new opportunities for international companies to reach new customers

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Engineering Graduates in the y Opportunities of United States, Europe, and India a global workforce: { Low communications costs { Highly-skilled labor pool

Based on: Mallaby, 2006

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1. Define globalization, describe how it evolved over time, and describe the key drivers of globalization.

2. DibDescribe the emergi ing opportun iiities for companies operating in the digital world.

3. Explain the factors companies have to consider whiihdiilldhen 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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y Globalization also created a set of unprecedented challenges: { Governmental { Geoeconomic { Demographic { Cultural

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y Political System Challenges { Political stability

y Regulatory Challenges { Tariffs { Embargoes { Export regulations { Quotas

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y Data-Sharing Challenges { Transborder data flow regulations

y Differences in standards { UPC vs. EAN { Measurement units { Postal codes, phone numbers, etc.

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y Internet Access and Individual Freedom { Content blocking by governments/censorship Ù China—Use ofidf VoIP restricted Ù Germany—Sites with fascist symbols prohibited { Intern et access bl ockin g Ù Cuba, North Korea

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y Tihllime Zone Challenges { Real time meetings across continents difficult { Working around the clock possible

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y Infrastructure-Related Challenges { Traditional infrastructure—roads, electricity { Connectivity—reliable Internet connections

y Cha llenges Re late d to Econom ic We lfare { GDP growth not distributed evenly throughout the world { Migration { Some companies used to deal with low margins and tough competition

2-30 y Demographic Challenges { Differing rates of population growth

World Population, 1950-2050 (in billions)

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y Demographic Challenges (cont’ d) { Expertise related challenges Ù Different concentration of skilled workers Ù Differ en t costs of workers

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y National Cultures { Power Distance—differences in how societies hdlhandle the issues o f human inequa lity { Uncertainty Avoidance—risk taking nature { Individualism/Collectivism—value placed on an individual vs. a group { Masculinityyy/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

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y 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

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y Environmental challenges { Energy consumption, pollution, workers health { Shipping y Other Challenges { Differences in what is regarded as appropriate { Standards of dealing with intellectual property y Network readiness { Not every country has access to the global networked economy

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1. Define globalization, describe how it evolved over time, and describe the key drivers of globalization.

2. DibDescribe the emergi ing opportun iiities for companies operating in the digital world.

3. Explain the factors companies have to consider whiihdiilldhen 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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nHome-Replication Strategy oGlobal Business Strategy pMultidomestic Business Strategy qTransnational Business Strategy

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y Most basic form of ggggoing 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 y Information systems play minor role in facilitating this strategy

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

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y 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

2-40 y Low degree of iibintegration between subunits y Flexible and responsive to the needs and demands of local markets y Example: General Motor s { Opel in Germany { Vauxhall in Great Britain

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y The role and characteristics of IS { Each subsidiaryy, 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

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y Some operations centralized while others decentralized { Flexibility { Economies of scale y Difficult to manage y Example: Unilever

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y 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

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y Companies like Infosys are “flattening” the world. y Does business in new ways { Outsourcing { Supply Chains { Consulting { Employment

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y FddFounded MiMosaic JHClkJames H. Clark Communications Corporation y 75 percent of Web surfers used Netscape in 1996 y AOL acquired Netscape in 1999 for $10 billion in stock y Both founded several Marc Andreessen start-ups

y To “Google” has become a household verb meaning search

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y Accenture { Provides consulting, technology, and outsourcing { Glob al bef ore oth er compani es were jus t “wa king up ” to globalization y Accenture’ s growth { Announced plans for doubling its thirteen thousand business consultants between 2008 and 2011

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y Massive Multiplayer Online Role-Playing Game— MMORPG { Virtual world—players live through avatars y 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 y What’s your take on farmers and people “buying” tools and advancement without mastering the skills ?

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y Livemocha { Online language instruction using social networking Ù Structured lessons Ù Help with grammar Ù Canned pronunciation guides y Most valuable asset { Conversation with native speaker { Using social community to increase understanding

2-52 y Disposal of electronics containing hazardous materials is a rising issue y U.S. exports much of its e-waste to third world countries { China banned the import in 2002 { Other countries to follow y In mid 2006, EU banned toxic ingredients { Production of “green” hardware y U.S. government working on making changes— currently state-level legislation most effective y Pace of techlilhnological changes increases pro blem

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y The automobile idindustry is flifeeling the pressure of globalization y Failed attempts at making a “ world car” { Consumers have different tastes { Differences in infrastructures derive needs { The price of gasoline { Variations in emission standards y Globalization is already there { FiForeign manuftfacturers prodiducing in US { US companies producing worldwide { Global network of suppliers { Ripple effects resulting from any crisis