Which of the following is true with regard to information systems in less-developed countries?

Dr�ger Safety�s efforts to create global supply chain processes are some of the changes in international information systems architecture�the basic systems needed to coordinate worldwide trade and other activities�that organizations need to consider if they want to operate across the globe.

           As a manager, you�ll want to know what special issues must be addressed when developing and managing international information systems. To be effective, you�ll need a global perspective on business and an understanding of the information systems needed to conduct business on an international scale. This chapter shows you how to organize, manage, and control the development of international information systems.

THE GROWTH OF INTERNATIONAL INFORMATION SYSTEMS

In earlier chapters we describe the emergence of a global economic system and global world order driven by advanced networks and information systems. The new world order is sweeping away many national corporations, national industries, and national economies controlled by domestic politicians. Many localized firms will be replaced by fast-moving networked corporations that transcend national boundaries. The growth of international trade has radically altered domestic economies around the globe. Over $1 trillion worth of goods, services, and financial instruments changes hands each day in global trade.

           Today, the production and design of many high-end electronic products is parceled out to a number of different countries. Consider the path to market for Hewlett-Packard�s ProLiant ML150 server, which is illustrated in Figure 16-1. The idea for the product was hatched in Singapore, which did the initial design work. HP headquarters in Houston approved the concept. Contractors in Taiwan did the machine�s engineering design and initial manufacture. Final assembly of the server takes place in Singapore, China, India, and Australia (Buckman, 2004). None of this would be possible without powerful international information and communication systems.

FIGURE 16-1 Global product development and production
Hewlett-Packard and other electronics companies assign distribution and production of high-end products to a number of different countries.

This chapter describes how to go about building an international information systems architecture suitable for your international strategy. An international information systems architecture consists of the basic information systems required by organizations to coordinate worldwide trade and other activities. Figure 16-2 illustrates the reasoning we follow throughout the chapter and depicts the major dimensions of an international information systems architecture.

FIGURE 16-2 International information systems architecture
The major dimensions for developing an international information systems architecture are the global environment, the corporate global strategies, the structure of the organization, the management and business processes, and the technology platform.

           After you have developed a strategy, it is time to consider how to structure your organization so it can pursue the strategy. How will you accomplish a division of labor across a global environment? Where will production, administration, accounting, marketing, and human resource functions be located? Who will handle the systems function?

           Next, you must consider the management issues in implementing your strategy and making the organization design come alive. Key here will be the design of business processes. How can you discover and manage user requirements? How can you induce change in local units to conform to international requirements? How can you reengineer on a global scale, and how can you coordinate systems development?

           The last issue to consider is the technology platform. Although changing technology is a key driving factor leading toward global markets, you need to have a corporate strategy and structure before you can rationally choose the right technology.

           After you have completed this process of reasoning, you will be well on your way toward an appropriate international information systems architecture capable of achieving your corporate goals. Let�s begin by looking at the overall global environment.

Table 16-1 lists the business drivers in the global environment that are leading all industries toward global markets and competition.

TABLE 16-1 Global Business Drivers

           The global business drivers can be divided into two groups: general cultural factors and specific business factors. Easily recognized general cultural factors have driven internationalization since World War II. Information, communication, and transportation technologies have created a global village in which communication (by telephone, television, radio, or computer network) around the globe is no more difficult and not much more expensive than communication down the block. The cost of moving goods and services to and from geographically dispersed locations has fallen dramatically.

           The development of global communications has created a global village in a second sense: A global culture created by television and other globally shared media such as movies now permits different cultures and peoples to develop common expectations about right and wrong, desirable and undesirable, heroic and cowardly. The collapse of the Eastern bloc has speeded the growth of a world culture enormously, increased support for capitalism and business, and reduced the level of cultural conflict considerably.

           A last factor to consider is the growth of a global knowledge base. At the end of World War II, knowledge, education, science, and industrial skills were highly concentrated in North America, western Europe, and Japan, with the rest of the world euphemistically called the Third World. This is no longer true. Latin America, China, southern Asia, and eastern Europe have developed powerful educational, industrial, and scientific centers, resulting in a much more democratically and widely dispersed knowledge base.

           These general cultural factors leading toward internationalization result in specific business globalization factors that affect most industries. The growth of powerful communications technologies and the emergence of world cultures create the condition for global markets�global consumers interested in consuming similar products that are culturally approved. Coca-Cola, American sneakers (made in Korea but designed in Los Angeles), and Cable News Network (CNN) programming can now be sold in Latin America, Africa, and Asia.

           Responding to this demand, global production and operations have emerged with precise online coordination between far-flung production facilities and central headquarters thousands of miles away. At Sealand Transportation, a major global shipping company based in Newark, New Jersey, shipping managers in Newark can watch the loading of ships in Rotterdam online, check trim and ballast, and trace packages to specific ship locations as the activity proceeds. This is all possible through an international satellite link.

           The new global markets and pressure toward global production and operation have called forth whole new capabilities for global coordination of all factors of production. Not only production but also accounting, marketing and sales, human resources, and systems development (all the major business functions) can be coordinated on a global scale.

           Frito Lay, for instance, can develop a marketing sales force automation system in the United States and, once provided, may try the same techniques and technologies in Spain. Micromarketing�marketing to very small geographic and social units�no longer means marketing to neighborhoods in the United States, but to neighborhoods throughout the world! These new levels of global coordination permit for the first time in history the location of business activity according to comparative advantage. Design should be located where it is best accomplished, as should marketing, production, and finance.

           Finally, global markets, production, and administration create the conditions for powerful, sustained global economies of scale. Production driven by worldwide global demand can be concentrated where it can best be accomplished, fixed resources can be allocated over larger production runs, and production runs in larger plants can be scheduled more efficiently and precisely estimated. Lower cost factors of production can be exploited wherever they emerge. The result is a powerful strategic advantage to firms that can organize globally. These general and specific business drivers have greatly enlarged world trade and commerce.

           Not all industries are similarly affected by these trends. Clearly, manufacturing has been much more affected than services that still tend to be domestic and highly inefficient. However, the localism of services is breaking down in telecommunications, entertainment, transportation, financial services, and general business services including law. Clearly, those firms within an industry that can understand the internationalization of the industry and respond appropriately will reap enormous gains in productivity and stability.

BUSINESS CHALLENGES

Although the possibilities of globalization for business success are significant, fundamental forces are operating to inhibit a global economy and to disrupt international business. Table 16-2 lists the most common and powerful challenges to the development of global systems.

TABLE 16-2 Challenges and Obstacles to Global Business Systems

           At a cultural level, particularism, making judgments and taking action on the basis of narrow or personal characteristics, in all its forms (religious, nationalistic, ethnic, regionalism, geopolitical position) rejects the very concept of a shared global culture and rejects the penetration of domestic markets by foreign goods and services. Differences among cultures produce differences in social expectations, politics, and ultimately legal rules. In certain countries, such as the United States, consumers expect domestic name-brand products to be built domestically and are disappointed to learn that much of what they thought of as domestically produced is in fact foreign made.

           Different cultures produce different political regimes. Among the many different countries of the world are different laws governing the movement of information, information privacy of their citizens, origins of software and hardware in systems, and radio and satellite telecommunications. Even the hours of business and the terms of business trade vary greatly across political cultures. These different legal regimes complicate global business and must be considered when building global systems.

           For instance, European countries have very strict laws concerning transborder data flow and privacy. Transborder data flow is defined as the movement of information across international boundaries in any form. Some European countries prohibit the processing of financial information outside their boundaries or the movement of personal information to foreign countries. The European Union Data Protection Directive, which went into effect in October 1998, restricts the flow of any information to countries (such as the United States) that do not meet strict European laws on personal information. Financial services, travel, and health care companies could be directly affected. In response, most multinational firms develop information systems within each European country to avoid the cost and uncertainty of moving information across national boundaries.

           Cultural and political differences profoundly affect organizations� business processes and applications of information technology. A host of specific barriers arise from the general cultural differences, everything from different reliability of phone networks to the shortage of skilled consultants (see Steinbart and Nath, 1992).

           National laws and traditions have created disparate accounting practices in various countries, which impact the ways profits and losses are analyzed. German companies generally do not recognize the profit from a venture until the project is completely finished and they have been paid. Conversely, British firms begin posting profits before a project is completed, when they are reasonably certain they will get the money.

           These accounting practices are tightly intertwined with each country�s legal system, business philosophy, and tax code. British, U.S., and Dutch firms share a predominantly Anglo-Saxon outlook that separates tax calculations from reports to shareholders to focus on showing shareholders how fast profits are growing. Continental European accounting practices are less oriented toward impressing investors, focusing rather on demonstrating compliance with strict rules and minimizing tax liabilities. These diverging accounting practices make it difficult for large international companies with units in different countries to evaluate their performance.

           Language remains a significant barrier. Although English has become a kind of standard business language, this is truer at higher levels of companies and not throughout the middle and lower ranks. Software may have to be built with local language interfaces before a new information system can be successfully implemented.

           Currency fluctuations can play havoc with planning models and projections. A product that appears profitable in Mexico or Japan may actually produce a loss because of changes in foreign exchange rates. Some of these problems will diminish in parts of the world where the euro becomes more widely used.

           These inhibiting factors must be taken into account when you are designing and building international systems for your business. For example, companies trying to implement �lean production� systems spanning national boundaries typically underestimate the time, expense, and logistical difficulties of making goods and information flow freely across different countries.

One might think, given the opportunities for achieving competitive advantages as outlined previously and the interest in future applications, that most international companies have rationally developed marvelous international systems architectures. Nothing could be further from the truth. Most companies have inherited patchwork international systems from the distant past, often based on concepts of information processing developed in the 1960s�batch-oriented reporting from independent foreign divisions to corporate headquarters, with little online control and communication. Corporations in this situation increasingly face powerful competitive challenges in the marketplace from firms that have rationally designed truly international systems. Still other companies have recently built technology platforms for international systems but have nowhere to go because they lack global strategy.

           As it turns out, there are significant difficulties in building appropriate international architectures. The difficulties involve planning a system appropriate to the firm�s global strategy, structuring the organization of systems and business units, solving implementation issues, and choosing the right technical platform. Let us examine these problems in greater detail.

Which of the following is true about the matrix structure of organizational design?

Which of the following is the most common form of organizing foreign operations?

Which of the following organizational structures is the best for global firms?

Which of the following terms refers to focusing on and specializing in specific markets?