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Chapter 15
Managing Global Systems
Student Learning Objectives
1. What major factors are driving the internationalization of business?
2. What are the alternative strategies for developing global businesses?
3. What are the challenges posed by global information systems and management
solutions for these challenges?
4. What are the issues and technical alternatives to be considered when developing
international information systems?
Learning Catalytics is a “bring your own device” student engagement, assessment, and
classroom intelligence system. It allows instructors to engage students in class with real-
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
Business driver, 578
Legitimacy, 590
Cooptation, 590
Multinational, 584
Core systems, 587
Particularism, 581
Domestic exporter, 583
Software localization, 595
Franchisers, 584
Transborder data flow, 582
Global culture, 579
Transnational, 584
architecture, 578
Teaching Suggestions
The opening case, “New Systems Help Fiat Become a Global Powerhouse,” demonstrates
that a global company has the same information system requirements as a domestic
company, just on a larger, more complex, scale.
Fiat Group has numerous operating units in many different countries but management’s
main problem was the inability to see how the company was performing enterprise-wide.
Management needed more capabilities to easily cross-analyze data among countries,
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channels, and products and the ability to drill down into variables such as model, power
train, and vehicle equipment. Managers couldn’t conduct planning and analysis within
The company implemented a new group reporting platform that uses software to draw
data from a third-party ERP system and spreadsheets to provide users with pre-
aggregated data across countries, legal entities and business functions. The new
Section 15.1, “What major factors are driving the internationalization of business?”
Figure 15.1 is an excellent example of the globalization of businesses and industries. This
figure shows how one product, the Apple iPhone, involves operations in seven different
countries around the world. That’s possible only through advanced networks and
information systems such as the one Apple uses. Students might find it interesting to
trace common products through the design, production, and distribution phases to see the
Section 15.2, “What are the alternative strategies for developing global businesses?”
It’s important for students to understand that a company’s corporate headquarters isn’t
always located in the United States as many people assume. There are many instances of
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Section 15.3, “What are the challenges posed by global information systems and
management solutions for these challenges?” Take all the problems and challenges that
a domestic company faces in designing, building, and managing its information
technology infrastructure and magnify them on a global scale. The subsection “A Typical
Scenario: Disorganization on a Global Scale” describes the more common situation
Section 15.4, “What are the issues and technical alternatives to be considered when
developing international information systems?” Many students may assume that all
countries have the same technology and telecommunications infrastructure as the United
States. Many students are also under the impression that the United States leads the world
Interactive Session: Organizations: E-Commerce Russian-Style
Case Study Questions
1. Describe the technical and organizational obstacles to e-commerce growth in
Russia.
Russia lacks both logistics infrastructures and online payment systems for e-commerce to
flourish. Combined with the prohibitively expensive investment required to deploy fiber
connections across the vast expanses of Russian terrain, the impediments to e-commerce
expansion are substantial.
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2. How do these technical and organizational factors hamper companies from doing
business in Russia or setting up Russian e-commerce sites?
Card and online payment systems are gaining acceptance for digital goods (software,
e-books, and digital music) and travel purchases such as airline tickets and hotel
reservations.
Several retailers and merchant companies are making in-roads in e-commerce in Russia.
• Ozon: adopted a multi-pronged strategy—it accepted customer preference for
COD in order to build trust, expand its customer base, and establish market
position. Its delivery service (O’Courier) and 2100 pick-up centers serve 350
cities throughout Russia and Kazakhstan. This logistics network dwarfs those of
its competitors.
• KupiVIP: built its own logistics network including multiple warehouses and a
fleet of delivery trucks.
• Ulmart: a hybrid online–offline retailer which recently became the first Russian
3. Will non-Russian companies such as Amazon.com and eBay flourish in Russia?
Explain.
Russian e-commerce is dominated by a handful of large companies with most medium
and small domestic retailers yet to establish an Internet presence. EBay has launched a
Russian language site and Amazon is in the process of building one, but their presence is
overshadowed by Russian firms, which control 90 percent of the market.
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Interactive Session: Management: South Korea’s Restricted Internet
Case Study Questions
1. Why is the Internet restricted in South Korea?
South Korea is one of the most “wired” nations in the world. However, it is also among
the most Internet-regulated countries in the world. South Korea’s 1995 Electronic
Communication Business Law allows the government to block material deemed morally
offensive or harmful to South Korean youth. Political speech, particularly relating to
longtime foe North Korea, was, and still is, rigorously controlled. North Korean URLs
have been off-limits and online support for North Korea could be grounds for
investigation, detention, and revocation of Internet access.
2. What are the implications South Korea’s Internet restrictions for international
companies doing business in South Korea?
Searching the Internet is often unproductive because Web sites prohibit search engines
from indexing their pages. Google is also finding South Korea a challenging environment
for Google Maps. The National Security Law (NSL), the basis for censoring Web sites
with North Korean content, also prohibits the export of map data to safeguard
infrastructure details. For travelers, and the companies that want to profit from helping
them navigate, this has presented a challenge. Directions from airports to area hotels can
be divined only for mass transit, thanks to publically available routes and schedules.
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3. What management, organization, and technology factors should be taken into
account when developing an e-commerce presence for the South Korean market?
Management: Elimination of online restrictions must be balanced with rational national
security objectives. For both foreign and domestic companies trying to do business in
South Korea, government control of information can create a challenging and even
hostile environment.
Review Questions
15-1 What major factors are driving the internationalization of business?
List and describe the five major dimensions for developing an international
information systems architecture.
According to Figure 15.2, the five major factors are the need to:
• Understand the global business environment in which your firm is operating.
• Consider a corporate strategy for competing in that environment.
Describe the five general cultural factors leading toward growth in global
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business and the four specific business factors. Describe the interconnection
among these factors.
According to Table 15.1, the five general cultural factors are:
• Global communication and transportation technologies: A global village
has been created in which global communications of all kinds are no more
difficult and not much more expensive than domestic communications.
The specific business factors are:
• Global markets: Patterns of consumption of goods are becoming similar
around the world.
• Global production and operations: Far-flung production facilities are
coordinated at central headquarters thousands of miles away.
• Global coordination: Coordination of business factors has expanded beyond
production to include all major business functions, such as accounting,
These factors are interrelated. The spread of global communications has led to the
emergence of a global culture and global social norms. This, in turn, has led to the
development of global markets. Emerging global technologies make possible the
transportation of raw materials and finished products throughout the world, and have
List and describe the major challenges to the development of global systems.
According to Table 15.2, the general challenges are:
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• Cultural particularism—regionalism, nationalism, language differences,
different standards for electronic data interchange, e-mail, and
telecommunications.
Explain why some firms have not planned for the development of international
systems.
For some companies, the competition has not been powerful enough yet to drive them
toward developing international systems. Other companies lack the global strategy
needed for such development, or they have inherited a patchwork of international
15-2 What are the alternative strategies for developing global businesses?
Describe the four main strategies for global business and organizational
structure.
Referencing Table 15.3, there are four main strategies.
• Domestic exporter: Heavy centralization of corporate activities in the home
country of origin. Production, sales, marketing, finance, and other such
functions are set up to optimize resources in the home country. Foreign
marketing is totally reliant on the domestic home base.
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Describe the four different system configurations that can be used to support
different global strategies.
According to Figure 15.3 there are four different system configurations:
• Centralized: Systems development and operations that occur totally at the
domestic home base.
15-3 What are the challenges posed by global information systems and management
solutions for these challenges?
List and describe the major management issues in developing international
systems.
The major management issues in developing international systems are listed in Table
15.4. These issues include agreeing on common user requirements, introducing
Identify and describe three principles to follow when organizing the firm for
global business.
According to Figure 15.4, a sensible strategy is to reduce agency costs by developing
only a few core global systems that are vital for global operations, leaving other
systems in the hands of regional and local units. Not all systems should be
Identify and describe three steps of a management strategy for developing and
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implementing global systems.
Step 1: A company must define its core business processes before it can build an
information system that supports them.
1. Define a short list of critical core business processes by conducting a
business process analysis. The list should include about ten business
processes that are absolutely critical for the firm.
2. Identify centers of excellence for these processes. Some areas of a
Step 2: Identify the core systems to coordinate centrally. Keep the list to an absolute
minimum. By dividing off a small group of systems as absolutely critical, the
opposition to a transnational strategy is divided. You can appease those who
oppose the central worldwide coordination implied by transnational systems
by permitting peripheral systems development to progress unabated.
Step 3: Choose an incremental, grand design, or evolutionary approach. Both the
incremental and grand design approaches are dangerous. The best approach is
Define cooptation and explain how it can be used in building global systems.
Cooptation is defined as bringing the opposition into the process of designing and
implementing the solution without giving up control over the direction and nature of
the change. The idea is to find a way whereby local units in transnational companies
are brought into the process of building transnational core systems by becoming part
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15-4 What are the issues and technical alternatives to be considered when
developing international information systems?
Describe the main technical issues facing global systems.
Hardware, global software, and telecommunications are the main technical issues.
Hardware issues arise because the firm needs to standardize the computer hardware
Identify some technologies that will help firms develop global systems.
The main hardware and telecommunications issues are systems integration and
connectivity. The choices for integration are to go either with a proprietary
architecture or with an open systems technology. Global networks are extremely
Discussion Questions
15-5 If you were a manager in a company that operates in many countries, what
criteria would you use to determine whether an application should be developed
as a global application or as a local application?
Student answers to this question will vary.
15-6 Describe ways the Internet can be used in international information systems.
Student answers to this question will vary.
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Hands-On MIS Projects
Management Decision Problems
15-7 United Parcel Service: UPS has been expanding its package delivery and logistics
services in China, serving both multinational companies and local businesses. UPS
drivers in China need to use UPS systems and tools such as it handheld Driver
Information Acquisition Device for capturing package delivery data. UPS wants to
make its WorldShip, CampusShip, and other shipping management services
accessible to Chinese and multinational customers via the Web. What are some of the
international systems issues UPS must consider in order to operate successfully in
China?
UPS is likely to face these international systems issues:
• User interfaces: Which language will be used, Chinese or English? The
Chinese language has far more interpretations than the English language. The
Chinese language is character based so it may not be easy to translate the user
interface instructions between the two languages.
15-8 Selling tennis rackets outside the United States: Your company manufactures and
sells tennis rackets and would like to start selling outside the United States. You are
in charge of developing a global Web strategy, and the first countries you are thinking
of targeting are Brazil, China, Germany, Italy, and Japan. Using the statistics in the
CIA World Factbook, which of these countries would you target first? What criteria
would you use? What other considerations should you address in your Web strategy?
What features would you put on your Web site to attract buyers from countries you
target?
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is helpful but shouldn’t be the most important criteria in the decision.
Country
Age
Structure
0–14years
/15–64 years
Literacy
Rates Over
15 yrs can
read & write
Education
Levels
# of years in
school
GDP per
capita
Household
incomes by
% share
highest 10%
Internet
users
Brazil
27/66
88%
14
$9,500
44%
50 mil
China
20/71
90%
11
$5,400
34%
13/66
99%
16
22%
42 mil
13/66
98%
16
26%
32 mil
Japan
13/64
99%
15
21%
Other considereations to address in the Web strategy may include language translations
for the user interface and database, cultural factors, and the availability and costs of
Internet connections.
Achieving Operational Excellence: Building a Job Database and Web Page for an
International Consulting Firm
Software skills: Database and Web page design
Business skills: Human resources internal job postings
15-9 KTP Consulting operates in various locations around the world. KTP specializes in
designing, developing, and implementing enterprise systems for medium- to large-size
1. What type of data should be included in the KTP job vacancies database?
2. What information should not be included in this database?
3. Based on your answers to these questions, build a job vacancies database for
KTP. Populate the database with at least 20 records. You should also build a
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simple Web page that incorporates job vacancy data from your newly created
database. Submit a copy of the KTP database and Web page to your professor.
Students must first be reminded that before coding ever begins, it is the responsibility of
the developer to fully understand the task at hand, the company’s needs, and the external
business environment. The second step is to plan for the development of the Web
Data that should be included in the database are: area name; geographic location,
contact person and phone number, hours per week, position title, necessary qualifications,
and required experience.
Data that probably should not be included in the database: position salary, race,
religion (although it may be a significant consideration in some geographic locations).
(Learning Objective 15.3: What are the challenges posed by global information systems
Improving Decision Making: Conducting International Marketing and Pricing
Research
Software skills: Internet-based software
Business skills: International pricing and marketing
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15-10 You are in charge of marketing for a U.S. manufacturer of office furniture that has
decided to enter the international market. You have been given the name of Sorin SRL, a
The students will use various approaches in completing this exercise. As of this writing,
the home page for Sorin SRL is www.sorin-italia.it/. The students should find
Collaboration and Teamwork Project
4-12. In MyMISLab, you will find a Collaboration and Teamwork Project dealing
with the concepts in this chapter. You will be able to use Google Drive, Google Docs,
Google Sites, Google +, or other open source collaboration tools to complete the
assignment.
Case Study: Unilever’s Push Toward Unified Global Systems
15-12 What management problems typical of global systems was Unilever
experiencing? What management, organization, and technology factors were
responsible for those problems?
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Management: Unilever is organized as two separate holding companies: Unilever PLC
(public limited company), headquartered in London, United Kingdom, and Unilever
Organization: Unilever’s Compass strategy focuses on using cost leveraging and cost
efficiencies, innovation in marketing and marketing investment, and profitable volume
Technology: In order to grow its business in developing and emerging markets, Unilever
needed to unify its core business processes, including supply chain management. Prior to
2007, almost every business in each of the more than 190 countries in which Unilever
operated functioned as an independent division. Approximately 30,000 transactions per
15-13 How did Unilever’s new systems and use of SAP HANA support its business
strategy? How effective was the solution chosen by the company?
To remain a leader in modern demand-driven supply chain management, Unilever began
adding SAP HANA (High-Performance Analytic Appliance) software to some of its key
SAP ERP applications at the end of 2012. HANA is an in-memory data platform (see
Chapter 6) that is deployable as an on-premise appliance, or in the cloud. It is very well
suited for performing real-time analytics and processing extremely large numbers of
transactions very rapidly.
Effectiveness of solution are highlighted by these facts:
• Month-end financial analysis produced in just one day as opposed to three
previously.
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15-14 How did Unilever’s new systems improve operations and management
decision making?
Unilever estimates that time spent tracking raw materials has declined by 80 percent.
Improved understanding of the supply chain, in turn, supports managerial decision
making to both improve efficiency and reduce environmental impact.
SAP Cash Forecasting was added to SAP ERP Financials to minimize liquidity risk and
maximize the use of working capital and cash. Product Cost Planning (CO-PC-PCP) was
incorporated to help Unilever plan the costs for materials independently from orders; set
15-15 What influence does the global business environment have on firms like
Unilever and how does that affect its choice of systems?
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,
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The configuration, management, and development of systems tend to follow the global
strategy chosen.
• Centralized systems are those in which systems development and operation occur
totally at the domestic home base.
• Duplicated systems are those in which development occurs at the home base but
operations are handed over to autonomous units in foreign locations.
15-16 Identify and describe solutions to the five management challenges of
developing global systems.
Visit MyMISLab for suggested answers.
15-17 Identify and describe five problems of international networks that prevent
companies from developing effective global systems.
Visit MyMISLab for suggested answers.
For an example illustrating the concepts found in this chapter, view the
videos in mymislab.com.