2

Chapte
r
Fueling Globalization through
Information Systems

“The idea of charging for calls belongs to the last

century.”
Niklas Zennström, Skype

Information Systems Today: Managing in the Digital World 2-1

Learning Objectives

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

Learning Objectives

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

Globalization

• Globalization created a
new world characterized
by:
o Worldwide communication
o Collaboration without
barriers

Information Systems Today: Managing in the Digital World 2-4

Evolution of Globalization
Globalization 1.0
• Mainly
European
countries are
globalizing
• Power is the
primary driver
• Industries
changed
• Slow pace of
change
Information Systems Today: Managing in the Digital World 2-5
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 2-6

Evolution of Globalization
Globalization 3.0

• Individuals
and small
groups are
globalizing
• Fast
changes
• Emergence
of new
industries

Information Systems Today: Managing in the Digital World 2-7

Evolution of Globalization:
Summary
•The World is Flat (Thomas Friedman)

• “10 Flatteners”
o Key factors enabling globalization 3.0

Information Systems Today: Managing in the Digital World 2-8

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 2-9

Flattener #2: Netscape Browser

THEN
• August 9,
1995
• First
mainstream
browser
• Gave
individuals
NOW access to
the Internet
Information Systems Today: Managing in the Digital World 2-10
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 2-11
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 2-12
Flattener #5: Open Sourcing

• Software and
source code
freely available
to everyone

• Wikipedia a
huge success

Information Systems Today: Managing in the Digital World 2-13

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 2-14

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 2-15

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 2-16
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 2-17

Flattener #10: The Steroids

• Technologies that
support different
types of
collaboration
o Greater mobility
o Convergence

Information Systems Today: Managing in the Digital World 2-18

Learning Objectives

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

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 2-20
Opportunities of Operating in the
Digital World

• Opportunities of a Engineering Graduates in the US,

Europe and India
Global Workforce
o Low
communications
costs
o Highly-skilled labor
pool

Information Systems Today: Managing in the Digital World 2-21

Learning Objectives

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

Challenges of Operating in the
Digital World
• Globalization also created a set of
unprecedented challenges:
o Governmental challenges
o Geoeconomical challenges
o Demographic challenges
o Cultural challenges

Information Systems Today: Managing in the Digital World 2-23

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 2-24
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 2-25

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 2-26

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 2-27

Demographic Challenges
• Differing rates of population growth

Information Systems Today: Managing in the Digital World 2-28

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 2-29

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 2-30
Cultural Challenges II.
• Cultural Barriers
oLanguage – 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 2-31

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 2-32

Learning Objectives

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

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 2-34

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 2-35
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 2-36

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 2-37
Business Strategies: Summary

• Different types of information systems

can support these organizational forms
Information Systems Today: Managing in the Digital World 2-38
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 2-39

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 2-40

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 2-41

IS Strategies: Summary

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

End of Chapter Content
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 2-44

 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 2-45

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

Information Systems Today: Managing in the Digital World 2-46

 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 2-47
 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 2-48

 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 2-49
 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 2-50
 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
Information Systems Today: Managing in the Digital World 2-51