GLOBALIZATION THE WORLD IS FLAT

7-2

Globalization
Globalization created a new world characterized by:
Worldwide communication Collaboration without barriers

7-3

Evolution of Globalization
Globalization 1.0
Mainly European countries are globalizing Power is the primary driver Industries changed Slow pace of change

7-4

Evolution of Globalization
Globalization 2.0
Companies are globalizing Reduction in transportation and telecommunications costs Mainly Europe and America involved

7-5

Evolution of Globalization
Globalization 3.0
Individuals and small groups are globalizing Faster pace of change Emergence of new industries

7-6

Evolution of Globalization: Summary

The World Is Flat (Thomas L. Friedman)

10 Enablers
Key factors enabling Globalization 3.0

7-7

Enabler #1: The Fall of the Berlin Wall

November 9, 1989 Fall of communism People from the former communist countries gained more freedom

7-8

Enabler #2: Netscape Browser

August 9, 1995 Killer app First mainstream browser Gave individuals access to the Internet & set standards

7-9

Enabler #3: Work Flow Software

Applications that allow people worldwide to communicate XML: applications talk to each other New possibilities for information sharing Global currency to fuel commerce

7-10

Enabler #4: Uploading

Individuals and companies actively participate in content generation on the Web Wikipedia a huge success

7-11

Enabler #5: Outsourcing

Outsourcing companies profited from the drop in telecommunications costs Companies can now use talented engineers from anywhere

7-12

Enabler #6: Offshoring

Companies set up entire factories in countries such as China
Mass production Low costs

7-13

Enabler #7: Supply Chaining

Integration of retailers, suppliers, and customers Wal-Mart became an early leader
Use of RFID tags

7-14

Enabler #8: In-Sourcing

Delegation of companys key operations to a subcontractor
Example: UPS provides complete supply chain solutions to companies

7-15

Enabler #9: In-Forming

In-forming is to individuals what outsourcing, offshoring, and in-sourcing is to companies Individuals have access to massive amounts of information

7-16

Enabler #10: The Steroids

Technologies that support different types of collaboration
Greater mobility Triple convergence

7-17

Opportunities for Operating in the Digital World

Opportunities for reaching new markets Former Eastern Bloc countries provide new opportunities for international companies to reach new customers

7-18

Opportunities for Operating in the Digital World

Opportunities of a global workforce:
Low communications costs Highly-skilled labor pool
Engineering Graduates in the United States, Europe, and India

Based on: Mallaby, 2006

7-19

Challenges of Operating in the Digital World

Globalization also created a set of unprecedented challenges:
Governmental Geoeconomic Demographic Cultural

7-20

Governmental Challenges
Political System Challenges
Political stability

Regulatory Challenges
Tariffs Embargoes Export regulations Quotas

7-21

Governmental Challenges
Data-Sharing Challenges
Transborder data flow regulations

Differences in standards
UPC vs. EAN Measurement units Postal codes, phone numbers, etc.

7-22

Governmental Challenges
2-22

Internet Access and Individual Freedom

Content blocking by governments/censorship ChinaUse of VoIP restricted GermanySites with fascist symbols prohibited Internet access blocking Cuba, North Korea

7-23

Geoeconomic Challenges
Time Zone Challenges

Real time meetings across continents difficult Working around the clock possible

7-24

Geoeconomic Challenges
Infrastructure-Related Challenges
Traditional infrastructureroads, electricity Connectivityreliable Internet connections

Challenges Related to Economic Welfare

GDP growth not distributed evenly throughout the world Migration Some companies used to deal with low margins and tough competition

7-25

Geoeconomic Challenges
Demographic Challenges
Differing rates of population growth

World Population, 1950-2050 (in billions)

7-26

Geoeconomic Challenges
Demographic Challenges (contd)
Expertise related challenges

Different concentration of skilled workers Different costs of workers

7-27

Cultural Challenges National Cultures

Power Distancedifferences in how societies handle the issues of human inequality Uncertainty Avoidancerisk taking nature Individualism/Collectivismvalue placed on an individual vs. a group Masculinity/Femininitydegree to which a society is characterized as masculine/feminine Concept of Timelong term vs. short term Life Focusquantity vs. quality of life

7-28

Cultural Challenges
Cultural Barriers
Languagecommunication language and norms Work Culturework skills, habits, and attitudes Aestheticsart, music, and culture Educationattitudes toward education and literacy Religion, Beliefs, and Attitudesspiritual institutions and values Social Organizationsfamily and social cohesiveness

7-29

Cultural Challenges
Environmental challenges
Energy consumption, pollution, workers health Shipping

Other Challenges
Differences in what is regarded as appropriate Standards of dealing with intellectual property

Network readiness
Not every country has access to the global networked economy