International Business Strategies
Click the boxes to read about the four major types of international business strategy.
The multinational strategy focuses on local responsiveness. Subsidiaries operate autonomously or in a loose federation. The advantage of this type of approach is that the firm can quickly respond to different local needs and opportunities. This strategy reduces the need for communications because local subsidiaries can make many decisions. There are heavy reporting requirements though because the results from the subsidiaries have to be monitored at a headquarters location.
A global strategy stresses efficiency because there is strong central control from headquarters. Economies come from standard product designs and global manufacturing. An extensive communications and control system is necessary to centrally manage the global firm.
The international strategy is much like the multinational as there are autonomous local subsidiaries. However, these subsidiaries are very dependent on headquarters for new processes and products. A good example is a pharmaceuticals company. The research labs in the headquarters company develop products for introduction around the world. Local subsidiaries stress product approval by local governments and local marketing.
The transnational firm attempts to do everything! It seeks global efficiency while retaining local responsiveness. The firm integrates global activities through cooperation among headquarters and foreign subsidiaries. This difficult strategy tries to achieve local flexibility at the same time that it obtains the advantage of global integration, efficiency, and innovation. We predict that the various types of firms will tend to strive toward the transnational model over time.
Key International Environment Issue #1 - Information Needs
An international corporation needs information to coordinate and control its diverse businesses. Reporting and early-warning systems are very important in this environment. Systems that summarize sales data and process accounting information are necessary, but they only reflect what has happened in the past. These systems represent traditional uses of IT for reporting and control. Technology offers the international firm many more active tools to help manage the business.
An international corporation needs plenty of up-to-date information to operate effectively!
Key International Environment Issue #2 - Coordination
Coordination is a major problem for the global firm. IT provides a number of approaches to improving communications and coordination, for example, e-mail. The emergence of groupware products is very important to international business. These systems let workers in different locations create a shared, electronic environment. Intranets encourage the sharing of information and provide for coordination. Technology plays a crucial part in the design and operation of international firms.
A larger firm is much more difficult to coordinate!
Implementing International IT
The ultimate objective for the global firm is to process data anyplace in the world and share information without having to worry about the type of platform used for processing.
What kinds of problems do you encounter trying to achieve this objective in an international environment?
Click the buttons to read some of the typical problems faced by a manager of a global organization.
1. Managing Local Development
The first problem is managing local development when the foreign unit does not coordinate with headquarters. The foreign subsidiary may be duplicating development efforts under way in other parts of the world. It also may not have a talented staff and may end up with poorly conceived and designed systems. The question of headquarters-subsidiary coordination and management is a central one in pursuing an international corporate strategy. The counter argument from the local company is that it knows the needs in its location. A distant headquarters unit cannot set specifications for foreign countries.
2. Developing Common Systems
How does the firm develop a set of common systems shared across different countries to take advantage of economies of scale? Headquarters does not want each country to develop its own accounting and sales reporting systems. Different countries have different laws and regulations, so it may be impossible to share programs among foreign locations without making special modifications for unique requirements in each country.
3. Local Unique Features
The third development problem is that when designing applications, there are real and perceived unique features in each country. Designers, especially those representing headquarters, must recognize what features are required for a system to work in a country and what features are there as an exercise in local independence.
Implementing International IT
Managers must also be aware that more and more firms want to build a worldwide communications network to take advantage of communications and coordination tools to move data freely around the world.
This effort can be a major challenge because of different technical standards and regulations.
Certain countries regulate the kind of telecommunications equipment that can be used on their network.
In a number of countries, the Internet is highly censored and many websites and social networks that are pervasive in the west are banned in the Middle East and Asia.
Government Requirements as Barriers
A number of government requirements may impede the development of global information systems
A requirement to purchase specific equipment in the foreign country that may not be compatible with the equipment used by other parts of the global firm.
A requirement to do certain kinds of processing in the host country before data can be sent electronically to another country.
Restrictions on the use of satellites and special requirements for building private networks.
Limited access to flat-rate leased lines or a requirement that all transmission be made on variable cost lines.
Restrictions on Internet access and efforts to censor Web sites.
Click the numbers to read about the requirements.
Trans-border Data Flows
A sixth major issue arising from international IS efforts is trans-border data flows.
Trans-border data flow is the flow of electronic data across political boundaries, such as between states or countries, a process which can cause legal conflicts, such as who owns a particular piece of information, and who may use it.
Moving data across a boundary may be curtailed by government regulation, ostensibly to protect its citizens and their privacy.
Another impact of regulation is to reduce the economic power of foreign companies or limit the imposition of foreign culture on the host country.
Trans-border Data Flows
Many of the trans-border regulations seem to be motivated by a desire to protect local industry.
Countries may have a legitimate concern about the privacy rights of their citizens.
This reason is probably cited most often for instituting data controls. To implement control, a country can establish regulations through its telecommunications ministry, levy tariffs, and/or require formal approval of plans to process data in the country.
Restrictive regulations that require processing of data originating in a country in that country only, making it difficult to transmit and share data.
Exorbitant pricing of communications services by government-owned post, telephone, and telegraph ministries. However, a wave of "privatization" is sweeping countries and many PTTs are becoming private or quasi-private companies.
Attacks on computers by various hackers throughout the world have pointed out how difficult it is to secure networked computers.
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