Lecture_slides Lazar Rusu_Globalization and ICT

Transcription

INTODUCTION TO ICT4D COURSE
Globalization and
Information and
Communication Technology
Agenda
The Challenge of Globalization
The Global Business Environment
Regional Trading Blocs
The Globalization of Human Capital
The Global Company
The Global Manager’s Role
The Myth of Globalization
Blending Culture Business Styles
Developing Global Organizations
Information Systems Go Global
Is Global Software an Oxymoron?
Doing Business in the Digital Economy
Global E-Business
The Netcentric Organization
Running the Company on the Internet: The case of Cisco
Systems
The Role of ICT in Globalization
2
The Challenge of globalization
What is Globalization?
9 Origins of globalization began a long time ago with emergence of
international trading corporation.
9 Definitions of globalization:
“Transfer the business and workforce of the organizations to all over the world,
in terms of strategies, operations, managements, marketing, as well as human
and material resources and services.” (Harris 2002)
“Globalization is a term that refers to the establishment of worldwide
operations and the development of standardized products and
marketing.”(Deresky 2003)
9 The expectation is that the increased globalization will due to the
followings (Harris 2002):
-reduce the income gap between rich and poor nations an their people;
-encourage more knowledge job formation;
-build on local culture and needs in sharing power and control.
3
What is driving globalization?
Forces Driving Globalization according to Deresky (2003):
Increasing competitive clout resulting from regional trading blocs.
Declining tariffs, which encourage trading across borders and open up
new markets.
The information and communication technology explosion, which
makes the coordination of far-flung operations easier and also
increases the commonality of consumer tastes.
What else is driving globalization?
According to (Gupta and Govindarajan 2004) the managers find
globalization becoming increasingly feasible and desirable.
4
Why Globalization is here to stay?
In the emerging digital age it appears that globalization that is here
to stay and having an important role too due to the followings
trends of ICT development like for example convergence between
computing and communications technologies and the spread of
Internet, increase in the power of computing and communication
technologies with decline of costs of these technologies, ongoing
and explosive growth of mobile communications etc.
Therefore it is a certainty that digital technologies like those we
mention before will continue to increase connectivity of a global
company with his business units located around the world.
(Gupta and Govindarajan 2004)
5
The Global Marketplace is complex, interdependent,
and dynamic
Challenges include politics, culture, and technology
Managers must find a balance between social
responsibility, company image, and competitive
strategies
More focused on Global Management:
The process of developing strategies, designing and
operating systems and working with people around
the world to ensure sustained competitive advantage.
Helen Deresky, International Management: Managing Across Borders and Cultures, 5ed., Chapter 1, Prentice Hall 2006
6
Global competition is characterized by
networks that bind countries to one another,
institutions and people in an interdependent
global economy
Globalism trends
A borderless world
Increase in exports
Increase in direct foreign investment
Dominance of trading blocs
7
“The dominance of the
United States is already
over. What is emerging
is a world economy of
blocs represented by
NAFTA, The European
Union, and ASEAN.
There’s no one center in
this world economy.”
- Peter Drucker
Fortune, January 12,
2004
8
TRIAD Market
European Union
Asian Market
China, Japan, South Asia
NAFTA
CAFTA
9
The TRIAD
Three major regional free-trade blocs
Western Europe, Asia, and North America
Grouped around three dominant
currencies
Euro, Yen, and Dollar
In 2004, these trade blocs were
expanding their boarders to include
neighboring countries
10
European Union
Comprised of 25 nations
400 million people
Elimination of tariffs has not eliminated
national pride
Global Managers face two major tasks
Strategic – how to deal with the EU as an nonEuropean company
Cultural – How to deal with multiple sets of
national cultures, traditions and customs
11
Asia
Japan and the Four Tigers - Singapore,
Hong Kong - China, Taiwan, and South
Korea,
Each has an abundance of natural
resources and labor
China
A new east Asian economy is emerging,
focused on greatly increased trade within
the region and based on China rather than
Japan.
12
North America
The goal of NAFTA was to bring the US,
Canada, and Mexico together to create
more jobs, better working conditions
and a cleaner environment
421 Million Consumers
Has been very beneficial to Mexico
13
Central America
CAFTA – Central America Free Trade
Agreement – it was established in 2005
CAFTA is formed by the following
countries: US, El Salvador, Guatemala,
Honduras, Nicaragua and Dominican
Republic
14
Globalization means we
share jobs as well as goods.
- FINANCIAL TIMES,
August 27, 2003
15
Forrester Research predicts that 3.3
Million US jobs will move offshore by
2015
45% of the 500 US companies surveyed
state that they use a global sourcing
model
16
The Global Company
9 What does it mean to be a global company? How does one know if a
business is truly a global company? Here’s one definition: “A global company
is a business that is driven by a global strategy, which enables is to plan and
treat all of its activities in the context of a work-world system, and therefore
serve its local and global customers with excellence” (O’Brien 2002).
9 One of the quickest and cheapest way to develop a global strategy is to form
strategic alliances therefore many companies are trying to go global faster by
forming alliances with rivals, suppliers and customers. (Deresky 2003)
9 Becoming a global company is a major undertaking, a process requiring
fundamental business transformation. Professor Richard Nolan from Harvard
University noticed that “to become a global company is a multiyear process,
driven by the vision of achieving a fundamentally different state than the
current one, and involving simultaneous changes in just about every aspect
of the business.”
9 According to Professor Mohanbir Sawhney from Northwestern University’s
Kellogg School of Management “Getting to global requires companies to think
globally, source globally, make globally, sell globally, and learn globally.”
(Sawhney 2005)
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The Global Manager’s Role
18
Only a few large retail firms have a genuinely global
presence (Gwynne 2003).
A research study done by Alan Rugman, professor at
the Kelley School of Business, Indiana University
concluded that most companies are doing business in
three dominant regions:
¾ The EU
¾ Japan
¾ North America
19
Only one of the world’s 49 retail multinational
enterprises (MNEs) is only truly global.
For
example: the luxury goods retailer Christian
Dior/LVMH (see the next figure).
Five other MNEs have more than one-fifth of
their sales in a region beyond their home
location.
Wal-Mart: 9.6% of its stores outside its home
region; 16.3% of the revenue is international.
20
Sales of Luxury Goods Retailer
Christian Dior/LVMH
7,70%
EU
35%
26%
Asia
North
America
Other
31,30%
21
The likelihood that a retail firm will act
globally is determined to a great extent by
the size of its primary market.
While the retail industry is becoming more
‘international’ and there is overall a need for
firms to expand abroad to generate new
growth, this is not a ‘global’ activity.
22
Therefore the professor Alan Rugman and his
colleague Stephane Girod have concluded the
followings (Gwynne 2003):
“Do not be so quick to buy into ‘the myth of
globalization’, but rather concentrate on
building strategies that create advantage in
their major regional markets”.
23
Blending Cultural Business Styles
When companies conduct business in China
they often experience a clash in business
cultures. As result the company leaders will
have to choose between different styles of
doing business (Larry Yu 2002a).
Strategies are categorized for overcoming the
uncertainties of operating globally as either:
Offensive - they help to localize the
company to the foreign environment.
Defensive - they protect corporate interests
and reduce uncertainty and complexity.
24
Blending Cultural Business Styles
Offensive versus Defensive
A prototypical offensive strategy is networking or guanxi, a style
of doing business that resonates well in Asian cultures. Others
method is to invest in local community and increase the use of of
host resources.
A classical defensive strategy is the Western emphasis on
contracts.
The most successful companies among a study of 92 companies
were those who used both contacts and guanxi.
The networking helps to enhance revenues but does little to
control costs.
The contracts lower production and marketing costs but do not
boost the top line.
Therefore professor Yandong Luo at University of Miami points
(Larry Yu 2002a) that: “If you have only contracts, there is no
way to ensure your ongoing success.”
In conclusion the MNCs that use both contact protections and
localization strategies are most successful overseas.
25
Impact of globalization
The shift is away from the old way of operating in Industrial Age
to the new approaches of Information Age.
Organizational leaders are in the process of creating a new work
culture.
Phenomenon of globalization has been described as movement
of business, industrial, and professional activities into a global
marketplace and the primary means for this development are
the advances in information technology (IT) and mass
transportation.
Globalization is seen by Harris (2002) to be an engine that is
pushing many industries and organizations to go global to
achieve competitive advantage.
According to Centre of Transnational Corporations from United
Nations the global corporations have a positive influence on
international integration and are a stimulant for economic
development.
26
Challenges and Issues in Globalization
In the paper “European challenge: developing
global organizations” published in European
Business Review Harris (2002) has identified
four factors has that are pushing globalization:
The
market imperative
The resource imperative
The IT imperative
The ecological imperative
On the other hand Harris (2002) has mentioned
in his paper that globalization also facilitates
world competition whether in business, science,
entertainment, athletics, arts, or academia.
27
The changes in the global marketplace
demand organizational responsiveness,
leading to strategies of acquisitions, mergers,
partnerships, and alliances.
Therefore according to Harris (2002) in order
to become a global organization the
managers are forced to:
re-engineer, re-design, re-evaluate the
processes, procedures, and products, as
well as their workforce, services, and
public relations.
28
Global institutions are becoming more
sensitive to the impact of free trade and
technological integration.
Real leaders in globalization are involved in
cultural renewal worldwide.
Source: (Harris 2002)
29
The European organization transformed
To create a global organization where it does
not already exist, requires a transformation
process into a new work culture mode of
thinking and functioning (Harris 1998).
For example the case study of Cemex
corporation that has transformed itself into a
global organization.
30
The impact of global communication
The globalization is also aided by the information and
communication technologies.
ICT also enhance knowledge and understanding
between both individuals and their institutions.
By creating a global village the lives of young or old
people and business people is transformed offering a
new level of freedom.
Increase of productivity and performance as
knowledge workers.
The central role of ICT in transforming the business
of a company in a global one. As example the case
study of Siemens.
31
Synopsis
Globalization is both a phenomenon and a process for integrating
worldwide cultures, markets, organizations and people.
Globalization has created a need for a global organizations with
leaders able to facilitate planned change toward a new work
culture.
Globalization enhance the utilize of the practice of innovation,
entrepreneurship and synergy with among personnel, customers,
suppliers and sometime even with competitors.
IT is the most powerful tool for spreading (a catalyst)
globalization and its applications globally are changing the lifestyle,
management practices, consumer patterns and workforce
composition.
32
Rapid globalization of business creates significant challenges for
managing information technology.
The most successful companies select the IT strategy that fits most
closely with their corporate strategy (Gwynne, 2001).
According to professors Vikram Sethi and William R. King (Gwynne
2001) there are three main global IT strategies each related to a
specific type of multinational organizations:
9 Low dispersal with high centralization- is an approach used
mostly by small companies that conduct business in relatively few
countries.
9 High dispersion with low centralization- is best suited for large,
diverse conglomerates that let their wholly owned subsidiaries and
joint ventures to mantain their own strategic IT plans.
9 High dispersal with high centralization- is the structure of choice
for truly global companies that have strong strategic alliances with
organizations in host countries.The approach includes both domestic
and international plans and encourages communication among IT
executives in the corporation and its subsidiaries.
33
9 According to Harris (2002) ICT not only influence the globalization
strategies currently, but also decide the future trend of the
globalization:
“The information become more centralized while the business and
workforce become more and more global”.
9 In a research done at KTH, School of ICT regarding “The impact
of ICT on business practices in companies from Kista Science City
(the 5th ICT cluster in the world) in 2005 (Zhang and Mostayin
2005), the authors concluded that the global enterprises prefer
the ICT strategy “High dispersal with high centralization” due to
the reasons that they have reduced their global offices and stored
all the information in fewer servers dispersedly. In this way their
ICT centralized strategy will help the companies executives to
manage easier their global subsidiaries.
34
Is Global Software an Oxymoron?
Many software companies focus on functionality that they feel
will be globally applicable and then add language-specific userinterface features for different countries .
Customer satisfaction among software users is dependent on a
number of factors, not just capability, reports a growing body of
research.
In a comparative study (Larry Yu 2002b) between North
American and Japanese users of an e-commerce development
tool across five variables- capability, usability, performance,
reliability and documentation – that reveals differences between
markets suggests that internationalization does not work.
In conclusions the authors of the study mentioned that for any
company who is approaching a different market should do a
similar study because the attributes of customer satisfaction
could be different by country and software. the North American
customers prize usability as the most important quality attribute
while Japanese customers emphasis on capability.
35
Doing business in the digital economy
9 Digital economy is an economy that is based on digital technologies,
including digital communication networks (the Internet, intranet, and private
value-add networks or VANs), computers, software, and other related
information technologies” (Turban et al. 2005)
9 “The digital economy is sometimes called the Internet economy, the new
economy, or the web economy” (Brynolfsson et al. 2003 and Liebowitz 2002)
9 E-commerce and e-business are two ways of doing business in the digital
economy by using the web-based systems on the Internet and other
computing networks (Turban et.al. 2005).
9 E-commerce - refers directly to the marketing and sales process via the
Internet. In e-commerce the business transactions like buying, selling and
customer service are done electronically over the Internet and other
computing networks.
9 E-business - refers to the integration of systems, processes, organizations,
value chains and entire markets using Internet-based and related
technologies and concepts. In e-business a company performs most of his
business functions electronically in order to enhance its operations and
competitiveness. E-business has already changed the way that business is
done in the past decade years.
9 The third form is m-business that it is built and based on e-business and
brings more flexibility and mobility. The aim of m-business is in fact to
ensure the company employees to work anytime and anywhere in the world.
Adopting m-business will be more helpful for an enterprise to change it from
local to global business.
36
Global E-Business
Convenience in conducting business worldwide;
facilitating communication across borders contributes
to the shift toward globalization and a global market.
An electronic meeting and trading place, which adds
efficiency in conducting business sales.
A corporate Intranet service, merging internal and
external information for enterprises worldwide.
Power to consumers as they gain access to limitless
options and price differentials.
A link and efficiency in distribution.
37
The Digital Technologies Impact on Global
Companies - Netcentric Organizations
The digital technologies have enhanced the possibilities to make the
society and world highly interconnected (Gupta and Govindarajan
2004) therefore Gupta and Govindarajan conclude the followings:
9In this context the companies will have no choice and they will move
all their activities and run the operations using Internet and other
computing technologies and become netcentric.
9There are also companies that were born netcentric like e.g.
Amazon, Yahoo, e-Bay, Cisco.
9The globalization process has pushed also the existing companies
like e.g. Ford, Toshiba, ABB to transform itself and become netcentric
too.
38
¾ More companies will integrate all the activities and run their operations
using the Internet.
¾ The companies will move beyond e-commerce and use e-business more in
the future.
¾ The former CEO of IBM’s Lou Gerstner noticed, “The end-game is not
about company ABB becoming ABB.com. Some of the most important netbased transactions are not very visible. These include transactions between
employees within businesses, transactions across supply chains, and
online procurement.”
¾ Regarding the use of e-business for global expansion IBM corporation has
noticed: “The real story is the profound impact this medium will have on
corporate strategy, organization and business models. Our research
reveals that the Internet is driving global marketplace transformation and
paradigm shift in how companies get things done, how they compete and
how they serve their customers.” (www.IBM.com April 10, 2001)
¾ Leading companies (like for example Cisco) that are netcentrinc today are
creating role models for how the global corporation of tomorrow might be
organized and managed. (Gupta and Govindarajan 2004)
39
The Netcentric Organization
Source: Lucas, H. C.Jr. (2005). pp. 13
40
Running the Company on the Internet - Cisco Systems
Cisco Systems is a worldwide market leader in providing
hardware, software and related services to enable
networking.
Cisco Systems had codified the algorithms that its
technical salespeople employed to configure network
system for their corporate customers and put these on the
Web.
Cisco Systems outsourced much of its manufacturing.
Cisco Systems run many aspects of its human resource
management function over the Web.
Cisco Systems has done research as his core
competencies and development and customer relationship
management too.
Cisco Systems people have on real-time access to
operational and financial data.
Source: Gupta, A. K. and Govindarajan V.(2004). pp. 185-187
41
The Role of ICT in Globalization
Much of global business could not be accomplished without ICT. On the
other hand ICT can reduce the risk of the challenges due to followings
arguments:
9 ICT revolution has enhanced the knowledge and understanding between
both individuals and their organizations;
9 ICT is helping organizations to monitor the behavior of government
officials across borders in order to protect employees human rights;
9 New ICT applications has reduced the employees repeated work and has
enhanced the productivity and working efficiency;
9 ICT has changed the work environment into one more flexible and mobile
one;
9 ICT has provided software and hardware tools for employees to cooperate
and exchange information electronically and for the managers a way to
control their affairs in the business units dispersed geographically in the
world.
42
Case Study
Debate on Globalization – video case study.
Based on viewing the accompanying video, please
answer the following questions:
1. In your opinion, is globalization inevitable? Are the
overall benefits of globalization positive? What are
the gains and losses from globalization?
2. What external influences does a company encounter
when determining how and where to conduct
business globally?
3. What is the evolution of stages that a company goes
through, as its operations become more global?
43
References
O’Brien, J.A. (2002). Management Information Systems: Managing
information technology in the e-business enterprise, 5ed., McGraw-Hill Co.
Brynolfsson, E., et al. (2003). “Consumer surplus in the digital economy:
estimation the value of increased product variety at online booksellers”,
Management Science, 49(11)
Deresky H. (2006). International Management, 5ed., Prentice Hall
Gupta, A. K. and Govindarajan V.(2004). Global Strategy and Organization,
John Wiley & Sons, pp. 1-9, pp. pp. 185-187
Gwynne P. (2001). “Information Systems Go Global”, MIT Sloan
Management Review, Summer, pp.14
Gwynne P. (2003). “The myth of Globalization?”, MIT Sloan Management
Review, Winter, pp.11
Larry Yu, (2002a). “Blending Cultural Business Styles”, MIT Sloan
Management Review, 44(1), pp.12-13
Larry Yu, (2002b). “Is Global Software an Oxymoron?”, MIT Sloan
Management Review, 43(3), pp.9
44
References
Liebowitz, S. (2002). Rethinking the network economy: The true forces that
drive the digital marketplace. New York: AMACOM
Lucas, H. C.Jr. (2005). Information Technology: Strategic Decision Making
for Managers, John Wiley & Sons (pp. 1-15; pp.91-112)
Harris P.R.(1998). The New Work Culture: HRD Transformational
Strategies, Human Resource Development Press, Amherst, MA
Harris P.R. and Moran R.T. (2000). Managing culture differences:
leadership strategies for a new world of business, 5th ed., ButterworthHeinemann, MA
Harris P.R.(2002). “European challenge: Developing global organizations”,
European Business Review, Vol.14, No.6, pp.416-425
Sawhney M. (2005)“Getting to Global”,
http://www.mohansawhney.com/Registered/Content/TradeArticle/Gettingto
Global.pdf June 3, 2005
Turban E., Leidner D., Mclean E., Wetherbe J. (2005). Information
Technology for Management : Transforming organizations in the Digital
economy, John Wiley & Sons, pp. 2-5
45

Lecture_slides Lazar Rusu_Globalization and ICT

Transcription

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