Chapter 4 The Information Technology and Management Infrastructure Strategy

Chapter 4Chapter 4The Information Technology and The Information Technology and

Management Infrastructure StrategyManagement Infrastructure Strategy

Presented by Alen DavoudianPresented by Alen Davoudian

GoalsGoals

Radical changes in Global Business Environment and IT Radical changes in Global Business Environment and IT EnvironmentEnvironment

Effects of globalization on organizational strategies/structures and Effects of globalization on organizational strategies/structures and coordination control/strategiescoordination control/strategies

Development of Global Information Systems (GIS) Management Development of Global Information Systems (GIS) Management StrategyStrategy

Need for alignment of business and technological evolutionNeed for alignment of business and technological evolution

www.globalpolicy.orgwww.globalpolicy.org

MGMT 308 by Dr. RosenthalMGMT 308 by Dr. Rosenthalinstructional1.calstatela.edu/prosent/MGMT%20308/Chap012.pptinstructional1.calstatela.edu/prosent/MGMT%20308/Chap012.ppt

Chapter 12McDonald’s Corporation Opening Case

More than half of McDonald’s restaurants are outside of the U.S., accounting for 62% of company revenues.

As a prominent global brand McDonald’s symbolizes perceived evils of globalization.

In developing nations, the arrival of a McDonald’s is regarded as a sign of modernization.

McDonald’s does transfer cultural values and practices. However, most of McDonald’s international restaurants are franchises, run as local businesses. The entrepreneurs who run these businesses adapt them to local custom.

The story of McDonald’s illustrates the complexity of globalization.

Globalization and Pros

Globalization occurs when networks of economic, political, Globalization occurs when networks of economic, political, social, military, scientific, or environmental interdependence social, military, scientific, or environmental interdependence grow to span worldwide differences.grow to span worldwide differences.

1.1. Has lifted millions of people out of poverty.Has lifted millions of people out of poverty.2.2. Consumer benefits of more variety.Consumer benefits of more variety.3.3. Lower costs and higher quality of products.Lower costs and higher quality of products.4.4. Improved working conditions for millions of workers.Improved working conditions for millions of workers.

TED talk, by Alex Tabarrok : One Idea, One World, One Markethttp://www.ted.com/talks/lang/eng/alex_tabarrok_foresees_economic_growth.html

IntroductionIntroduction Global firms have an explicit global business strategy few Global firms have an explicit global business strategy few

have corresponding strategy for global information have corresponding strategy for global information technologytechnology

A global information management strategy is needed as:A global information management strategy is needed as:

Industry globalizationIndustry globalization:: To compete effectively at home or To compete effectively at home or globally, firms often must coordinate their activities on a globally, firms often must coordinate their activities on a worldwide basis associated with reliance on information worldwide basis associated with reliance on information technologies. technologies.

National competitive postureNational competitive posture:: the aggregation of separate the aggregation of separate domestic strategies in individual countries that may contend domestic strategies in individual countries that may contend with coordination.with coordination.

Causative factors for globalizationCausative factors for globalization

Increased similarity in available infrastructure, distribution Increased similarity in available infrastructure, distribution channels and marketing approaches among countrieschannels and marketing approaches among countries

Fluid global capital market that allows large flows of Fluid global capital market that allows large flows of funds between countries funds between countries

Falling political and tariff barriersFalling political and tariff barriers Growing number of regional economic pacts that Growing number of regional economic pacts that

facilitate trade relationsfacilitate trade relations Increasing impact of the technological revolution in Increasing impact of the technological revolution in

restructuring and integrating industriesrestructuring and integrating industries

Changes in the business Changes in the business environmentenvironment

During 1980s, significant changes have taken place During 1980s, significant changes have taken place in organizational strategies/structure because of in organizational strategies/structure because of ever-increasing global competition and growth in ever-increasing global competition and growth in the communications and information-processing the communications and information-processing industryindustry

In 1990s,political changes in the Soviet Union and In 1990s,political changes in the Soviet Union and the Eastern European countries, the evolution of the Eastern European countries, the evolution of the European Common Market towards single the European Common Market towards single European market without national barriers also European market without national barriers also have led to growing international market have led to growing international market

Evolution of Global firm’s Evolution of Global firm’s strategy/structurestrategy/structure

Global StrategyGlobal Strategy is defined as strategy from which ‘a firm seeks to gain is defined as strategy from which ‘a firm seeks to gain competitive advantage from its international presence through either a competitive advantage from its international presence through either a concentrated configuration of activities, or coordinating among dispersed concentrated configuration of activities, or coordinating among dispersed activities, or both’activities, or both’

Global firm has a number of options in both configuration and Global firm has a number of options in both configuration and coordination for each activity in the value chain implying that there is no coordination for each activity in the value chain implying that there is no one pattern of international competition, neither is there one global one pattern of international competition, neither is there one global strategystrategy

A global firm value chain activities vary depending on their global A global firm value chain activities vary depending on their global strategies and environmental forces:strategies and environmental forces:national differentiation –national differentiation – diversity in individual country markets diversity in individual country markets

global integration –global integration – coordination among activities in various countries coordination among activities in various countries

These forces can vary depending on their global strategiesThese forces can vary depending on their global strategies

Global StrategiesGlobal Strategies

1)1) Multinational/decentralized strategyMultinational/decentralized strategy2)2) Global/centralized strategyGlobal/centralized strategy3)3) International/coordinated federal strategyInternational/coordinated federal strategy4)4) Transnational strategy/integrated-network Transnational strategy/integrated-network

strategystrategy

Multinational/decentralized strategyMultinational/decentralized strategy

Firm might differentiate its products to meet local needs to respond to Firm might differentiate its products to meet local needs to respond to diverse interestsdiverse interests

Firm might delegate considerable operating independence and Firm might delegate considerable operating independence and strategic freedom to its foreign subsidiaries strategic freedom to its foreign subsidiaries

Coordination and control are achieved primarily through personal Coordination and control are achieved primarily through personal relationships between top corporate managers rather than by a formal relationships between top corporate managers rather than by a formal organizational structureorganizational structure

Strategic decisions are decentralized and top management is involved Strategic decisions are decentralized and top management is involved mainly in monitoring the results of foreign operationsmainly in monitoring the results of foreign operations

This strategy was seen in European-based companies before Second World This strategy was seen in European-based companies before Second World War.War.

Example: Unilever in packaged goods, Phillips in consumer electronicsExample: Unilever in packaged goods, Phillips in consumer electronics

Global/centralized strategyGlobal/centralized strategy

Firm may seek competitive advantage by capitalizing on the economies associated Firm may seek competitive advantage by capitalizing on the economies associated with with standardized productstandardized product design, global-scale manufacturing and a design, global-scale manufacturing and a centralized centralized controlcontrol of worldwide operation of worldwide operation

In this centralized organizational structure, there are primarily one-way flows of In this centralized organizational structure, there are primarily one-way flows of goods, information and resources from headquarters to subsidiariesgoods, information and resources from headquarters to subsidiaries

Key strategic decisions for worldwide operations are made centrally by senior Key strategic decisions for worldwide operations are made centrally by senior managementmanagement

This strategy was seen in Japanese based companies in post-war yearsThis strategy was seen in Japanese based companies in post-war years

Example: KAO in branded packaged products, Matsushita in consumer electronicsExample: KAO in branded packaged products, Matsushita in consumer electronics

International/coordinated federal International/coordinated federal strategystrategy

Firm transfers knowledge and expertise to overseas environments that Firm transfers knowledge and expertise to overseas environments that are less advanced in technology and market developmentare less advanced in technology and market development

Local subsidiaries are often free to adapt new strategies, products, Local subsidiaries are often free to adapt new strategies, products, processes and/or ideasprocesses and/or ideas

Under this organizational structure the subsidiaries’ dependence on the Under this organizational structure the subsidiaries’ dependence on the parent company for new processes and ideas requires a great deal more parent company for new processes and ideas requires a great deal more coordination and control by headquarterscoordination and control by headquarters

This strategy defines the managerial culture of many US based companiesThis strategy defines the managerial culture of many US based companies

Example: Procter and Gamble in branded packaged products, GE in consumer Example: Procter and Gamble in branded packaged products, GE in consumer electronicselectronics

Transnational strategy/integrated-Transnational strategy/integrated-network strategynetwork strategy

Firm coordinates number of national operations while retaining the Firm coordinates number of national operations while retaining the ability to respond to national interests and preferencesability to respond to national interests and preferences

Each subsidiary is viewed as a source of ideas, capabilities and Each subsidiary is viewed as a source of ideas, capabilities and knowledge that can be beneficial to the company as a wholeknowledge that can be beneficial to the company as a whole

In this structure top managers are responsible for :In this structure top managers are responsible for : - coordinating the development of strategic - coordinating the development of strategic

objectives an operating policiesobjectives an operating policies - coordinating logistics among operating divisions- coordinating logistics among operating divisions - coordinating the flow of information among divisions- coordinating the flow of information among divisions• Forces of global competition required global firms to be more Forces of global competition required global firms to be more

responsive nationally. As a result, this strategy is being adopted by responsive nationally. As a result, this strategy is being adopted by increasing number of global firms.increasing number of global firms.

Global Information SystemsGlobal Information Systems A Global Information System A Global Information System is a distributed data-processing system that crosses is a distributed data-processing system that crosses

national boundariesnational boundaries

As they cross national boundaries unlike domestic distributed systems, they are exposed to As they cross national boundaries unlike domestic distributed systems, they are exposed to wide variations in wide variations in Business environmentsBusiness environments:: Differences in language, culture, professional management Differences in language, culture, professional management

disciplines among subsidiary organizations which leads to difficulty in disciplines among subsidiary organizations which leads to difficulty in business/technology planning, monitoring and control functionsbusiness/technology planning, monitoring and control functions

IInfrastructurenfrastructure:: The predictability and stability of available infrastructure in a given The predictability and stability of available infrastructure in a given country are major issues when making the country a hub for a global firm country are major issues when making the country a hub for a global firm

Availability of resourcesAvailability of resources:: It can vary due to import restrictions or lack local vendor It can vary due to import restrictions or lack local vendor supportsupport

Regulatory EnvironmentsRegulatory Environments:: Changes in government, economy and social policy can lead Changes in government, economy and social policy can lead to critical changes in the telecommunications regulations that pose serious constraints to critical changes in the telecommunications regulations that pose serious constraints on the operation of GISson the operation of GISs

Transborder Data FlowTransborder Data Flow:: TBDF regulations in part govern the content of international TBDF regulations in part govern the content of international data flow. These regulations can adversely affect the economies of GISs by forcing global data flow. These regulations can adversely affect the economies of GISs by forcing global firms to decentralize their operations, increase operating costs and prohibit certain firms to decentralize their operations, increase operating costs and prohibit certain applicationsapplications

StandardsStandards:: International, national and industry standards play a key role in permitting International, national and industry standards play a key role in permitting global firms to ‘leverage’ their systems development investment as much as possibleglobal firms to ‘leverage’ their systems development investment as much as possible

Global information management Global information management strategystrategy

Globalization has caused a change in the coordination /control needs of global Globalization has caused a change in the coordination /control needs of global firmsfirms

As a result new organizational designs are created to meet new organizational As a result new organizational designs are created to meet new organizational needs and to deal with increased organizational complexity and sizeneeds and to deal with increased organizational complexity and size

This strategy should contain the senior management policy on corporate This strategy should contain the senior management policy on corporate information systems architecture (ISA)information systems architecture (ISA)

Corporate ISA providesCorporate ISA provideso A guide for systems developmentA guide for systems developmento Facilitates the integration and data sharing among applicationsFacilitates the integration and data sharing among applicationso Supports development of integrated corporate systems that are based on a Supports development of integrated corporate systems that are based on a

data resource with corporate wide accessibilitydata resource with corporate wide accessibility Corporate ISA for a global firm is a high level map of the information and Corporate ISA for a global firm is a high level map of the information and

technology requirements of a firm as a whole; composed of technology requirements of a firm as a whole; composed of network, data, network, data, application and technology architecturesapplication and technology architectures

Global Information Management Global Information Management StrategyStrategy

A new GIS management strategy needs to address A new GIS management strategy needs to address organizational structural issues related to coordination organizational structural issues related to coordination and configuration of value chain activities by proper ISA and configuration of value chain activities by proper ISA design.design.

The key components of GIS management strategy areThe key components of GIS management strategy are• Centralized and/or coordinated business/technology strategy Centralized and/or coordinated business/technology strategy

on establishing data communications on establishing data communications architecturearchitecture and and standardsstandards

• Centralized or coordinated data management strategy for Centralized or coordinated data management strategy for creation of corporate creation of corporate databasesdatabases

• Alignment Alignment of global business and GIS management strategyof global business and GIS management strategy

Network Management Strategy and Network Management Strategy and ArchitectureArchitecture

Network architecture describes where Network architecture describes where applicationsapplications are are executed where executed where databasesdatabases are located and what are located and what communications linkscommunications links are needed among locations are needed among locations

It also sets It also sets standardsstandards ensuring that all other ISA ensuring that all other ISA components are interrelated and working togethercomponents are interrelated and working together

Deciding on appropriate Deciding on appropriate network architecturenetwork architecture is a is a leading management and technology issue.leading management and technology issue.

Research suggests that appropriate structure for GISs Research suggests that appropriate structure for GISs may vary for different product and service portfoliosmay vary for different product and service portfolios

Data Management Strategy and Data Management Strategy and ArchitectureArchitecture

Data architecture concerns the arrangement of Data architecture concerns the arrangement of databasesdatabases within an organization. within an organization.

To increase coordination among a global firms value-To increase coordination among a global firms value-chain activities, its data architecture should be designed chain activities, its data architecture should be designed based on an based on an integratedintegrated data management strategy data management strategy

Corporate databases should be based on Corporate databases should be based on business business entitiesentities involved in value chain activities rather than involved in value chain activities rather than around individual applicationsaround individual applications

Critical establishment of linkage between strategic Critical establishment of linkage between strategic business planning and strategic information systems business planning and strategic information systems planning is possible when this strategy is used as the planning is possible when this strategy is used as the activities that create value for the firm customers also activities that create value for the firm customers also create data the firm needs to operatecreate data the firm needs to operate

Alignment of global business and GIS Alignment of global business and GIS management strategymanagement strategy

A proper design of critical linkages among a firm’s value-A proper design of critical linkages among a firm’s value-chain activities results in an effective business design chain activities results in an effective business design involving information technology and an improved involving information technology and an improved coordination with coalition partners and firm’s own coordination with coalition partners and firm’s own subsidiariessubsidiaries

Establishing the necessary alignment requires the Establishing the necessary alignment requires the involvement of and cooperation with both senior involvement of and cooperation with both senior business planner and the senior IS technology manager.business planner and the senior IS technology manager.

This results in a new set of responsibilities and skills for This results in a new set of responsibilities and skills for bothboth

New Responsibilities for the senior New Responsibilities for the senior managementmanagement

For the senior business plannerFor the senior business planner Formal integration of the strategic business plan with the Formal integration of the strategic business plan with the

strategic IS planstrategic IS plan Examination of the business needs associated with a centralized Examination of the business needs associated with a centralized

and/or coordinated network, technology, and data and/or coordinated network, technology, and data management strategymanagement strategy

Review of the network architecture as a key enabling Review of the network architecture as a key enabling technology for the firm’s competitive strategy technology for the firm’s competitive strategy

Awareness of key technologies/standards at industry, national Awareness of key technologies/standards at industry, national and international levelsand international levels

Championing the rapidly expanding use of industry, national, Championing the rapidly expanding use of industry, national, international standardsinternational standards

New Responsibilities for the senior New Responsibilities for the senior managementmanagement

For the senior information technology managerFor the senior information technology manager

• Awareness of the firm’s Awareness of the firm’s business challengesbusiness challenges in the changing global environment in the changing global environment and involvement in shaping the firm’s leverage of IT in its global business and involvement in shaping the firm’s leverage of IT in its global business strategystrategy

• Preparing a Preparing a systems developmentsystems development environment that recognizes the long-term environment that recognizes the long-term company-wide perspective in a multi-regional and multi-cultural environmentcompany-wide perspective in a multi-regional and multi-cultural environment

• Planning the development of the Planning the development of the applicationapplication portfolio on the basis of the firm’s portfolio on the basis of the firm’s current business and its global strategic posture in the futurecurrent business and its global strategic posture in the future

• Making the “Making the “business purposebusiness purpose” of the strategic systems development projects ” of the strategic systems development projects clear in a global business contextclear in a global business context

• Selecting and recommending key technologies for Selecting and recommending key technologies for linking systemslinking systems across across geographic and cultural boundariesgeographic and cultural boundaries

• Setting automation linkages among Setting automation linkages among internal/external activitiesinternal/external activities within the firm’s within the firm’s value-chains goals and selling them to othersvalue-chains goals and selling them to others

• Designing corporate Designing corporate databasesdatabases derived from firm’s value chain activities derived from firm’s value chain activities• Facilitating corporate Facilitating corporate restructuringrestructuring through the provision of flexibility in business through the provision of flexibility in business

servicesservices

ConclusionsConclusions With the information intensity in the market and information intensity With the information intensity in the market and information intensity

associated with coordination across geographic, cultural and associated with coordination across geographic, cultural and organizational barriers global general managers will rely increasingly on IT organizational barriers global general managers will rely increasingly on IT to support their management processesto support their management processes

Proper alignment of the evolving global information management strategy Proper alignment of the evolving global information management strategy and the global organizational strategy will be important to the positioning and the global organizational strategy will be important to the positioning of the global firm in the global economic communityof the global firm in the global economic community

TED talk, by Alex Tabarrok

One Idea, One World, One Market

Globalization is increasing the demand for Globalization is increasing the demand for ideas, the incentives create new ideas and ideas, the incentives create new ideas and investments in education are increasing the investments in education are increasing the supply of new ideas.supply of new ideas.

http://www.ted.com/talks/lang/eng/alex_tabarrok_foresees_economic_growth.html

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