The role of ICT in globalization and doing business in digital economy Dr. Lazar Rusu Senior Researcher at School of IC

1. The role of ICT in globalization and doing business in digital economy Dr. Lazar Rusu Senior Researcher at School of ICT Royal Institute of Technology Stockholm, Sweden

2. Agenda • Globalization • The Global Company • Challenges for Globalization • ICT and Globalization • ICT is a Key Trigger for Globalization • ICT Strategies in Global Companies • Digital Economy • Doing Business In Digital Economy • The Digital Technologies Impact on Global Companies

3. Globalization • Origins of globalization began a long time ago with emergence of international trading corporation, e.g.. British East India company and Dutch Easy India Company. • 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) • A research study (Gwynne 2003) done by Alan Rugman, professor at the Kelley School of Business, Indiana University concluded that: “Most companies do business in only one of three dominant region markets which are the European Union, Japan and North America.”

4. Globalization (cont.) 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.

5. The Global Company • 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). • 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) • 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.” • 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)

6. Challenges for Globalization • “To create a global organization where it does not already exist, requires a transformational process into new work culture mode of thinking and functioning” (Harris and Moran 2000) • A great challenge is that the people cannot accept the new work concept. The anti-globalization groups argued the followings issues: • The greed and anti-consumerism of multinational corporations. • Concerns about human rights, labor rights, environmental impacts. • Fear that globalization is homogenizing the world and destroying the rich cultural diversity. • Information and communication technology can be an agent for this challenges!

7. Challenges for Globalization(cont.) Much of global business could not be accomplished without ICT. ICT also can reduce the risk of the challenges due to followings arguments: • ICT revolution enhanced the knowledge and understanding between both individuals and their organization; • ICT help organizations to monitor the behavior of government officials across borders to protect employees’ human rights; • New ICT applications reduce the employees’ repeated work and enhance the productivity and working efficiency; • ICT had changed the work environment into one more flexible and mobile; • The ICT hardware and software provide tools and means for peoples everywhere to meet electronically and control their affairs in homeland.

8. ICT and Globalization • Many companies are now in the process of globalization that is becoming internet-worked global enterprises • Managing and accomplishing these strategic changes would be impossible without the Internet, intranets, and other global computing and telecommunications networks that are the central nervous system of today’s global companies. • Today’s internet-worked global enterprise can collectively exploit many national market niches that would be too small for any one national company to service. • The internet-worked global enterprise can also pool skills from many countries to work on projects that need workers with a variety of skills that cannot be found in any one country. • Using information and communication technologies for globalization and business process reengineering frequently results in the development of information systems that help to give a company a competitive advantagein the marketplace. (O’ Brien 2002).

9. ICT is a key trigger for globalization • Basically: The computerized and automated reports ensure the value of information for running the enterprise. • Gradually: The computing networks make the data transferred quickly through the enterprise. • Furthermore: Managers could have a better supervision over people and business processes. • Nowadays: All the global organizations have their own IT department. With the help of IT department, the headquarters can not only streamline the operations and finances, but also the procurement, sales, distribution, as well as improved the customer and supplier relations. (Harris 2002)

10. ICT Strategies in Global Companies According to professors Vikram Sethi and William R. King (Gwynne 2001) there are three main global ICT strategies each related to a specific type of multinational organization: • Low dispersal with high centralization- is an approach used mostly by small companies that conduct business in relatively few countries. • 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. • 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.

11. ICT Strategies in Global Companies (cont.) • ICT not only influence the globalization strategies currently, but also decide the future trend of the globalization (Harris 2002) : “The information become more centralized while the business and workforce become more and more global” • In a research done at KTH, School of ICT regarding “The impact of ICT on business practices in companies from Kista Science City” 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.

12. Digital Economy • “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) • “The digital economy is sometimes called the Internet economy, the new economy, or the web economy” (Brynolfsson et al. 2003 and Liebowitz 2002)

13. Doing business in the digital economy • 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.all 2004). • In e-commerce the business transactions like buying, selling and customer service are done electronically over the Internet and other computing networks. • In e-business a company performs most of his business functions electronically in order to enhance its operations and competitiveness. E-business already changed the way that business is done in the past decade years. • 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.

14. The Digital Technologies Impact on Global Companies • The digital technologies have enhanced the possibilities to make the society and world highly interconnected. • In 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 netcentriccompanies. • There are also companies that were born netcentric like e.g. Amazon, Yahoo, e-Bay, Cisco. • The globalization process has pushed also the existing companies like e.g. Ford, Toshiba, ABB to transform itself and become netcentric too. (Gupta and Govindarajan 2004)

15. The Digital Technologies Impact on Global Companies (cont.) • More companies will integrate all the activities and run their operations using the Internet. • The companies will move beyond e-commerce and use e-business more in the future.  • 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 net-based transactions are not very visible. These include transactions between employees within businesses, transactions across supply chains, and online procurement.” • 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) • 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)

16. 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. (2003). International Management, 4ed., Prentice Hall • Gupta, A. K. and Govindarajan V.(2004). Global Strategy and Organization, John Wiley & Sons • 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 • Liebowitz, S. (2002). Rethinking the network economy: the true forces that drive the digital marketplace. New York: AMACOM • Harris P.R. and Moran R.T. (2000). “Managing culture differences: leadership strategies for a new world of business”, 5th ed., Butterworth-Heinemann • 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/GettingtoGlobal.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 • Zhang L. and Mostayin T.(2005), “The impact of ICT on business practices in companies from Kista Science City”, Master Thesis, KTH, School of ICT

17. Thank you for your attention! Questions?