Management Chapter 15 Others Are Divided Among Regional And Local

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Management Information Systems, 13E, Global Edition

Laudon & Laudon

Lecture Notes by Barbara J. Ellestad

Chapter 15 Managing Global Systems

The world just keeps getting smaller and smaller. No company can afford to ignore

15.1 The Growth of International Information Systems

Globalization is possible even with very small businesses because of the technological

advances in computer networks and telecommunications. Is your organization developing

Developing an International Information Systems Architecture

You must have an information system in place that will support the communications,

coordination of people and products, and order processing for both domestic and foreign

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Walmart learned the hard way that it couldn’t just walk into a foreign country and build a

store mirroring those in the United States. Sales were very low and the products just

So don’t start creating all those juiced-up information systems as soon as you decide to

pursue the foreign marketplace. Before you tackle the technology, you must:

1. Understand the global environment, including which business driver is most

Notice that the last issue you’ll have to contend with is the technology. We said before

that every information system implementation plan must be in harmony with the basic

business plan. In fact, you must first develop the overall business strategy for entering the

global arena. Then and only then can you begin to think about how the information

system will be synchronized with the basic strategy.

The Global Environment: Business Drivers and Challenges

Table 15-1 gives you an idea of some of the global business drivers, factors influencing

the direction of businesses, that organizations must consider in today’s environment.

culture of that merged organization is an important influence on how well the company

does.

We’d like to destroy the myth of domestic being defined as a U.S.-based company and

the foreign company being from, well, from a foreign country. Toyota Motor Corporation

has its domestic headquarters in Toyota City, Japan with manufacturing operations in 27

foreign countries and regions, including the United States. Ask yourself this question:

Who says all corporate offices must be located in the continental Unites States?

Business Challenges

You know that doing business in foreign countries is not all that easy. There is

tremendous risk associated with global businesses. Russia is a prime example of how

difficult it can be for businesses to establish themselves in foreign markets amid political

turbulence and disorder. Just when your company thinks all is well with its foreign

establishment, a terrorist attack can put a crimp in the best laid plans.

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Corporations and companies must reconcile these differences in order to allow

transborder data flow between merged information systems.

Globalism presents challenges and opportunities in areas of accounting systems,

language, and currency usage. Some companies are deciding to adopt foreign systems

rather than continuing to use American accounting systems.

SEC Chairman Christopher Cox has called the move ‘a revolutionary

development’ that will streamline global reporting standards and create ‘a

true lingua franca’ for accounting. Business leaders such as the U.S.

Chamber of Commerce say it would help the USA compete in the world

economy, leading to more cross-border commerce.

Now, Culin says, Lenovo is weaning itself from IBM’s old ‘legacy’ U.S.

accounting system. So far, Lenovo has converted its operations in Asia

and Canada to IFRS, and it’s working now on Europe, then Latin

America. If the USA moves to global rules, Lenovo will adapt quickly.

State of the Art

If you thought building an information system for an organization doing business only in

the United States was tough, think about some of the factors we’ve just discussed and

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So why do companies even attempt to build themselves into global merchants? Because

the potential payoff is enormous!

Bottom Line: Global businesses must devote their time and attention to under-

standing the cultural factors of countries in which they want to do business. Not

only must they merge their business units, they must also merge their people into a

cohesive team. They must understand and deal with many different external factors

in both domestic and foreign environments.

15.2 Organizing International Information Systems

First you have to decide what you’re going to do—you have to choose a strategy. Then

Global Strategies and Business Organization

Table 15-3 shows four main global strategies that can form the basis for a global

organizational structure.

Domestic exporter: Most operations are located in the domestic country and the

company exports products to foreign companies. A company located in India that imports

rugs to the United States would fit this category. All corporate offices are in India, and

products are sent to distributors in the United States.

Multinational: Part of the company is located in the domestic country and other parts are

Franchiser: Some operations are located in the domestic homeland while extended

activities associated with the product are conducted in foreign countries. Starbucks

Transnational: One globe, one company. Going back to our earlier example of Toyota,

the company’s headquarters may be in Japan but its operations are spread throughout the

Global Systems to Fit the Strategy

Once you’ve decided which global business strategy to follow, it’s time to decide how

your information system will support it.

This figure gives you an idea of the type of information system that will best support the

different business strategies. To summarize the text definition of each type of system:

• Centralized: Everything is located at the domestic home base.

Reorganizing the Business

You have to decide what your overall business goals are and what makes sense for your

organization, fit the information system structure to your needs, and never lose sight of

new opportunities.

1. Organize value-adding activities along lines of comparative advantage. Starbucks has

to decide where to locate the marketing function to maximize its potential. Perhaps it

2. Develop and operate systems units at each level of corporate activity—national,

regional, and international. Walmart would probably maintain small information

3. Establish a world headquarters, a global chief information officer (CIO) position.

General Motors has one person who is responsible for an information system that

Bottom Line: There are four main global strategies that businesses can use to

organize their global efforts: domestic exporter, multinational, franchiser, and

transnational. Determining the global strategy will help a business determine its

information system structure: centralized, duplicated, decentralized, or networked.

15.3 Managing Global Systems

Take all the problems and challenges you can think of when developing a single

information system for a domestic operation (see the table) and then multiply it by tens or

hundreds. Now you understand the problem of developing a system to support a global

business operation.

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A Typical Scenario: Disorganization on a Global Scale

The text gives a wonderful scenario of challenges facing corporations wanting to develop

information systems to support global operations. Bring it a bit closer to home: You’re

part of a team of 12 students with an assignment due by the end of the month. You have

to develop a Web page to support three different presentations given in three different

Global Systems Strategy

The figure below shows the connection between the core business processes and the core

systems. Only a few business processes use global core systems. Others are divided

among regional and local systems.

Identify the Core Systems to Coordinate Centrally

Once you’ve identified and analyzed each business process, you decide which systems

will be centralized and which to keep decentralized. Obviously, the systems should match

Choose an Approach: Incremental, Grand Design, Evolutionary

Don’t bite off more than you can chew. If you try to fulfill your development and

implementation plan all at once, combining every task into one huge project, you’re

setting yourself up for failure. It may indeed by cheaper to do it that way, but you have

lots of considerations other than cost. There are political, cultural, and historical biases to

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Make the Benefits Clear

You have to convince the organization’s managers that the impending changes will

benefit them in the long run. Get them behind your effort and use them to help you

develop and establish system changes. They need to understand how they can enhance

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The Management Solution: Implementation

Management’s biggest task is to manage the changes that must take place in a global

company. As we mentioned earlier, the changes are more difficult and complex because

of the added characteristics of politics, culture, and language. Here are some guidelines:

• Agree on common user requirements: Keep the list of core business processes short

and simple. It’s easier to implement the changes that way. Don’t lose sight of the

• Coordinate applications development: Communicate, communicate, communicate.

Tell people what’s going on; don’t surprise them about anything. Change is difficult

enough without people feeling like they’re getting blindsided. This is one area in

which an intranet may prove to be an invaluable tool to help you get the word out.

Interactive Session: Organizations: Hasbro Develops a Global Systems Strategy (see

page 607 of the text) discusses how one of the world’s leading toy and game makers

implemented an enterprise resource planning software throughout the company’s

global manufacturing plants and offices and created a standardized approach to

business processes.

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15.4 Technology Issues and Opportunities for Global Value

Chains

Advances in technology and the desire to seize new business opportunities presented by

the advances are what induce organizations to undertake the changes we’ve been

Computing Platforms and Systems Integration

Most global companies are a result of merging several units into one cohesive success

story. When the merger takes place, you can’t just buy all new hardware and software.

It’s too expensive for one thing, and it probably won’t make sense. You have to figure

out how you’re going to get all the different types of hardware to work together in one

Each region of the business is used to working according to its standards. For instance,

the German unit has been storing data according to its standards and definitions. The

Asian units have been using different standards and definitions to accomplish the same

task. The idea is to conform the data to one standard across all units so that they can be

shared efficiently and effectively.

Connectivity

Most Americans don’t think twice about the reliability of our telecommunications

systems. When you pick up the phone in Peoria you expect it to work and work well.

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Table 15-5 shows some of the problems you’ll have to contend with when working in

other countries.

When you’re trying to establish global communication networks, you must work through

the maze of various laws, high-to-low levels of service reliability, different rate charges

and currency exchanges, and different companies and governments controlling the

telecommunication systems.

Software Localization

We mentioned before that different foreign units probably have divergent standards for

their information systems. Trying to merge different databases from several domestic

units is tough enough. Trying to merge databases from different countries can be quite

troublesome because of the added layer of politics, traditions, and languages.

Even though the English language is widely accepted in foreign business circles, and it

seems reasonable to build software programs based on that language, that decision will

Traditionally, companies have merged their transaction processing systems into one or a

few worldwide applications. Now they are looking to do the same with collaborative

workgroup software, and well they should. We mentioned at the beginning of this course

Interactive Session: Management: CombineNet ASAP Helps Primark Manage Its

Global Supply Chain (see page 613 of the text) discusses how the second largest

clothing retailer in the United Kingdom implemented a new Web-based supply

chain execution system that optimized all of its supply chain processes. Shipping

costs were greatly reduced while supplies were improved to all of its retail stores.

Bottom Line: Differences in hardware, software, and telecommunications

whole.

Discussion Questions

1. Discuss the cultural factors organizations must understand in order to do business on

a global scale.

2. Discuss the differences in the four global strategies organizations can use to organize

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Answers to Discussion Questions

1. Answers should reference religious laws and civil legal systems, collection of

2. Answers should reference the four global strategies: domestic exporters, multinational

3. Cooptation is the art of working with the opposition to convince them to be part of the

solution in designing and implementing the new system. Raw power should be

avoided as much as possible. Local units should help develop a short list of

4. Table 15-5 lists the connectivity problems global companies face: quality of service,

security, costs and tariffs, poor quality of international services, and regulatory

constraints, among others. The Internet and Internet technologies offer a standard