Chapter 4The Information Technology and

Management Infrastructure Strategy

Presented by Sfurti Kamble

Goals

Radical changes in Global Business Environment and IT Environment

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

Development of Global Information Systems (GIS) Management Strategy

Need for alignment of business and technological evolution

Introduction Global firms have an explicit global business strategy few

have corresponding strategy for global information technology

A global information management strategy is needed as:

• Industry globalization: the growing globalization trend in many industries and the associated reliance on information technologies for coordination and operation

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

Globalization Causative factors for globalization are

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

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

• Falling political and tariff barriers• Growing number of regional economic pacts that • facilitate trade relations• Increasing impact of the technological revolution in restructuring

and integrating industries

Changes in the business environment

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

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

Evolution of Global firm’s strategy/structure

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

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

A global firm value chain activities are pulled together by two environmental forces:

national differentiation – diversity in individual country markets global integration – coordination among activities in various countries

These forces can vary depending on their global strategies

Multinational/decentralized strategy

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

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

Highly autonomous national companies are managed as a portfolio of offshore investments rather than as a single international business

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

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

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

Example: Unilever in packaged goods,Phillips in consumer electronics

Global/centralized strategy

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

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

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

This strategy was seen in Japanese based companies in post-war years Example: KAO in branded packaged products, Matsushita in consumer

electronics

International/coordinated federal strategy

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

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

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

This strategy defines the managerial culture of many US based companies

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

Transnational strategy/integrated-network strategy

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

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

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

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

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

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

crosses national boundaries As they cross national boundaries unlike domestic distributed systems, they

are exposed to wide variations in Business environments: Differences in language, culture, professional management

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

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

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

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

Transborder Data Flow: TBDF regulations in part govern the content of international 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 applications

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

Global information management strategy Globalization has caused a change in the coordination /control needs of

global firms As a result new organizational designs are created to meet new

organizational needs and to deal with increased organizational complexity and size

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

Corporate ISA provides A guide for systems development Facilitates the integration and data sharing among applications Supports development of integrated corporate systems that are based on

a data resource with corporate wide accesibility 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 network,data,application and technology architectures

Global Information Management Strategy

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

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

establishing data communications architecture and standards Centralized or coordinated data management strategy for

creation of corporate databases Alignment of global business and GIS management strategy

Network Management Strategy and Architecture

N/W architecture describes where applications are executed where databases are located and what communications links are needed among locations

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

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

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

Data Management Strategy and Architecture Data architecture concerns the arrangement of databases within an

organization. To increase coordination among a global firms value-chain

activities, its data architecture should be designed based on an integrated data management strategy

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

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

Alignment of global business and GIS management strategy A proper design of critical linkages aming a firm’s value-

chain activities results in an effective business design involving information technology and an improved coordination with coalition partners and firm’s own subsidiaries

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

This results in a new set of responsibilties and skills for both

New Responsibilities for the senior management

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

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

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

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

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

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

New Responsibilities for the senior management For the senior information technology manager

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

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

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

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

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

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

Designing corporate databases derived form firm’s value chain activities Facilitating corporate restructuring through the provision of flexibility in business

services

Conclusions

With the information intensity in the market and information intensity associated with coordination across geographic, cultural and organizational barriers global general managers will rely increasingly on IT to support their management processes

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

Questions