ORGANIZING INTERNATIONAL INFORMATION SYSTEMS
Three organizational issues face corporations seeking a global position: choosing a strategy,organizing the business, and organizing the systems management area. The first twoare closely connected, so we discuss them together.
Global Strategies and Business Organization
Four main global strategies form the basis for global firms organizational structure.These are domestic exporter, multinational, franchiser, and transnational. Each of thesestrategies is pursued with a specific business organizational structure (see Table 16-3). Forsimplicitys sake, we describe three kinds of organizational structure or governance: centralized(in the home country), decentralized (to local foreign units), and coordinated (all units participate as equals). Other types of governance patterns can be observed in specificcompanies (e.g., authoritarian dominance by one unit, a confederacy of equals, a federalstructure balancing power among strategic units, and so forth; see Keen, 1991).
TABLE 16-3 Global Business Strategy and Structure
The domesticexporter strategy is characterized by heavy centralization of corporateactivities in the home country of origin. Nearly all international companiesbegin this way, and some move on to other forms. Production, finance/accounting,sales/marketing, human resources, and strategic management are set up tooptimize resources in the home country. International sales are sometimesdispersed using agency agreements or subsidiaries, but even here foreignmarketing is totally reliant on the domestic home base for marketing themesand strategies. Caterpillar Corporation and other heavy capital-equipmentmanufacturers fall into this category of firm.
The multinational strategy concentrates financial management and control out of acentral home base while decentralizing production, sales, and marketing operations tounits in other countries. The products and services on sale in different countries areadapted to suit local market conditions. The organization becomes a far-flung confederationof production and marketing facilities in different countries. Many financial servicefirms, along with a host of manufacturers, such as General Motors, Chrysler, and Intel, fitthis pattern.
Franchisersare an interesting mix of old and new. On the one hand, the product is created,designed, financed, and initially produced in the home country, but forproduct-specific reasons must rely heavily on foreign personnel for furtherproduction, marketing, and human resources. Food franchisers such as McDonalds,Mrs. Fields Cookies, and KFC fit this pattern. McDonalds created a newform of fast-food chain in the United States and continues to rely largelyon the United States for inspiration of new products, strategic management,and financing. Nevertheless, because the product must be produced locallyitis perishableextensive coordination and dispersal of production, localmarketing, and local recruitment of personnel are required.
Generally, foreign franchisees are clones of the mother country units, but fully coordinatedworldwide production that could optimize factors of production is not possible.For instance, potatoes and beef can generally not be bought where they are cheapest onworld markets but must be produced reasonably close to the area of consumption.
Transnational firms are the stateless, truly globally managed firms that may represent alarger part of international business in the future. Transnational firms have no singlenational headquarters but instead have many regional headquarters and perhaps a worldheadquarters. In a transnational strategy, nearly all the value-adding activities are managedfrom a global perspective without reference to national borders, optimizing sourcesof supply and demand wherever they appear, and taking advantage of any local competitiveadvantages. Transnational firms take the globe, not the home country, as their managementframe of reference. The governance of these firms has been likened to a federalstructure in which there is a strong central management core of decision making, butconsiderable dispersal of power and financial muscle throughout the global divisions.Few companies have actually attained transnational status, but Citicorp, Sony, Ford, andothers are attempting this transition.
Information technology and improvements in global telecommunications are givinginternational firms more flexibility to shape their global strategies. Protectionism and aneed to serve local markets better encourage companies to disperse production facilitiesand at least become multinational. At the same time, the drive to achieve economies ofscale across national boundaries moves transnationals toward a global management perspectiveand a concentration of power and authority. Hence, there are forces of decentralizationand dispersal, as well as forces of centralization and global coordination.
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Global Systems to Fit the Strategy
Information technology and improvements in global telecommunications are givinginternational firms more flexibility to shape their global strategies. The configuration,management, and development of systems tend to follow the global strategy chosen(Roche, 1992; Ives and Jarvenpaa, 1991). Figure 16-3 depicts the typical arrangements.
FIGURE 16-3 Global strategy and systems configurations
The large Xs show the dominantpatterns, and the small Xs showthe emerging patterns. Forinstance, domestic exporters relypredominantly on centralized systems,but there is continual pressureand some development ofdecentralized systems in localmarketing regions.
By systems we mean the full range of activities involved in building information systems:conception and alignment with the strategic business plan, systems development,and ongoing operation. For the sake of simplicity, we consider four types of systemsconfiguration. Centralized systems are those in which systems development and operationoccur totally at the domestic home base. Duplicated systems are those in whichdevelopment occurs at the home base but operations are handed over to autonomousunits in foreign locations. Decentralized systems are those in which each foreign unitdesigns its own unique solutions and systems. Networked systems are those in which systemsdevelopment and operations occur in an integrated and coordinated fashionacross all units.
As can be seen in Figure 16-3, domestic exporters tend to have highly centralized systemsin which a single domestic systems development staff develops worldwide applications.Multinationals offer a direct and striking contrast: Here, foreign units devise theirown systems solutions based on local needs with few if any applications in common withheadquarters (the exceptions being financial reporting and some telecommunicationsapplications). Franchisers have the simplest systems structure: Like the products they sell,franchisers develop a single system usually at the home base and then replicate it aroundthe world. Each unit, no matter where it is located, has identical applications. Last, themost ambitious form of systems development is found in the transnational: Networkedsystems are those in which there is a solid, singular global environment for developingand operating systems. This usually presupposes a powerful telecommunications backbone,a culture of shared applications development, and a shared management culturethat crosses cultural barriers. The networked systems structure is the most visible infinancial services where the hom*ogeneity of the productmoney and money instrumentsseems to overcome cultural barriers.
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Reorganizing the Business
How should a firm organize itself for doing business on an international scale? To developa global company and information systems support structure, a firm needs to follow theseprinciples:
Organize value-adding activities along lines of comparative advantage. For instance,marketing/sales functions should be located where they can best be performed, forleast cost and maximum impact; likewise with production, finance, human resources,and information systems.
Develop and operate systems units at each level of corporate activityregional,national, and international. To serve local needs, there should be host country systemsunits of some magnitude. Regional systems units should handle telecommunicationsand systems development across national boundaries that take place within major geographicregions (European, Asian, American). Transnational systems units should be established to create the linkages across major regional areas and coordinate the developmentand operation of international telecommunications and systems development(Roche, 1992).
Establish at world headquarters a single office responsible for development of internationalsystems, a global chief information officer (CIO) position.
Many successful companies have devised organizational systems structures along theseprinciples. The success of these companies relies not only on the proper organization ofactivities, but also on a key ingredienta management team that can understand therisks and benefits of international systems and that can devise strategies for overcomingthe risks. We turn to these management topics next.
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