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MANAGEMENT INFORMATION SYSTEM LESSON 9: CHALLENGES OF GLOBAL INFORMATION SYSTEMS MULTINATIONAL ORGANIZATIONS

An increasing number of the worlds corporations have branched into countries all over the globe, becoming true multinationals. While they might have headquarters in a single country, they operate divisions and subsidiaries in different countries to take advantage of local benefits. For instance, a company might establish engineering facilities in countries that offer large pools of qualified engineers, build protection lines in countries that can supply inexpensive labor and open sales offices in countries that are strategically situated for effective marketing. Because of these dispersed operations, a companys nationality is not always obvious. Multinational corporations must use global information systems, which are systems that serve organizations and individuals in multiple countries. These companies might have unified policies throughout their organizations, but they still have to abide by the laws of the countries in which each unit operates, and be sensitive to other local aspects of their interaction with businesses as well as consumers. Therefore, unlike organizations that operate in a single country, multinational companies have the burden of ensuring that their information systems and the information flowing through the systems conforms to laws, cultures, standards, and other elements that are specific to countries or regions.

THE WEB AND INTERNATIONAL COMMERCE


The emergence of the WEB as a global medium for information exchange has made it an important vehicle for both business-to-business (B2B) and business to consumer (B2C) commerce. In 2007, more than 888 million people regularly logged on the Internet across the globe. Over 70% of them come from non-English speaking countries. Asians are the highest number of Internet users by global region (around 399 million as of 2007). The spread of Internet use opens enormous opportunities for businesses the world over. The WEB offers opportunities not only to increase revenue but also to save on costs. Organizations that wish to do business globally through their WEB sites must be sensitive to local audiences. Glocalization is the process wherein organizations must plan and carefully design their global sites to cater to local needs and preferences. Glocalization is a combination of universal business models and management philosophy with some adaptations for local audiences. Marketing experts often advise companies that operate internationally to think globally, act locally. Acting locally means being sensitive to regional customs and language nuances. Imperatives to heed when designing WEB sites for an international audience Plan Learn the Preferences Plan the site before you develop it. A site for an international audience requires more planning than a national one. Learn the cultural preferences, convention differences, and legal issues, or use experts who know these preferences. Tailor each local site (or the local section of your site) to the way in which the local people prefer to shop, buy and pay.

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Use local interpreters to translate content for local audiences. Do not use software or other automated methods, unless humans review the translated material. Experienced translators are attentive to contemporary nuances and connotations. Do not let any audience feel as if it is less important than other audiences. Keep all local sections of your site updated and with the same level of information and services. If the local language or culture has a word or picture for communicating an idea, use it; do not use those of your own country. Give the local audience a homey experience.

Be Egalitarian

Avoid Cultural Imperialism

CHALLENGES OF GLOBAL INFORMATION


While the WEB offers tremendous opportunities for establishing international ISs, global ISs are not without their challenges, both for B2B and B2C commerce. Some of the challenges that businesses must address are technological barriers, regulations and tariffs, electronic payment mechanisms, different languages and cultures, economic and political considerations, different measurement and notation standards, legal barriers, and different time zones. A. Technological Challenges

Not all countries have adequate technology infrastructure to allow resident companies to build an international information system. International ISs, especially those using the Web, often incorporate graphics to convey technical or business information, and those applications, as well as interactive software, require increasingly fast (broadband) communication lines. The bandwidth available in some countries is too narrow for highvolume transmission of graphically and animation-rich Web pages. Thus companies might have to offer two versions of their sites, one for wide bandwidth and another for narrow bandwidth. Language issues present another technological challenge. B. Regulations and Tariffs

Countries have different regulations on what may or may not be imported and which tariff applies to which imported product. C. Differences in Payment Mechanisms

One of the greatest expectations of e-commerce is easy payment for what we buy online. Credit cards are very common in North America and are the way businesses prefer to be paid online. However, this practice is not widespread in other regions of the world. In Europe, they prefer to use to use debit cards rather than credit cards. Most Japanese are reluctant to use credit cards for online purchases. In Japan, many people who order merchandise online prefer to pick it up at convenience stores called kombini, and pay for what they purchase. D. Language Differences

To communicate internationally, parties must agree on a common language, and that can create problems. For instance, data might not be transmittable internationally in real time because the information must first be translated (usually by human beings). Although some computer applications can translate on the fly, they are far from perfect. Another hurdle is that national laws usually forbid businesses to run accounting and other systems in a

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foreign language, leading to an awkward and expensive solution: running these systems in two languages, the local one and English, which is the de facto international language. E. Cultural Differences

Cultural differences refer in general to the many ways in which people from different countries vary in their tastes, gestures, preferred colors, treatment of people of certain gender or age, attitudes about work, opinions about different ethical issues, and the like. ISs might challenge cultural traditions by imposing the culture of one nation upon another (cultural imperialism). Conservative groups in some countries have complained about the Americanization of their young generations. Governments might be inclined to forbid the reception of some information for reasons of undesirable cultural influence. F. Conflicting Economic, Scientific and Security Interests

The goal of corporate management is to seize a large market share and maximize its organizations profits. The goal of a national government is to protect the economic, scientific and security interests of its people. Scientific information is an important national resource and a great source of income for foreign corporations, so occasionally those interests conflict. Another problem that arises with international information interchange is that countries treat trade secrets, patents and copyrights differently. Sometimes business partners are reluctant to transfer documents when one partner is in a country that restricts intellectual property rights, while another is in a country that has laws to protect intellectual property. On the other hand, the employees of a division of a multinational corporation might be able to divulge information locally with impunity. Intellectual property is tightly protected in the United States and Western Europe, and American trade negotiators and diplomats have pressured some countries to pass and enforce similar laws. G. Political Challenges

Information is power. Some countries fear that a policy of free access to information could threaten their sovereignty. For instance, a nations government might believe that access to certain data, such as the location and quantity of natural resources, might give other nations an opportunity to control an indigenous resource, thereby gaining a business advantage that would adversely affect the resource-rich countrys political interests. Companies must also be aware of limits that some governments impose on Internet use. China, Singapore and many Arab countries impose restrictions on what their citizens can download, view and read. Some corporations have found themselves in uneasy positions in countries that have limited civil rights. H. Different Standards

Differences in standards must be considered when integrating ISs internationally, even within the same company. Because nations use different standards and rules in their daily business operations, sometimes records within one company are incompatible. For example, US still uses the English system of length and weight measures, while the rest of the world officially uses the metric system. There are also different standards for communicating dates, times, temperature and addresses.

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Companies that want to operate globally must adapt their ISs to changing formal or de facto standards. Corporations in non-EU countries have grown accustomed to adapting their systems to those of the EU. For example in 1976, Europeans adopted 13-digit European Article Number (EAN), while American companies used the 12-digit Universal Product Code (UPC). The additional bar in the EAN bar code identifies the products country of origin. For 7 years, the American Uniform Code Council (UCC) promoted the use of the European standard. In 2004, the organization officially adopted it. The UCC is trying to expand product codes to 14-digit Global Trade Item Numbers (GTINs). This code is large enough to identify more than 100 times the number of products and manufacturers that the 12-digit UPCs could. GTINs are designed to support global supply chains. I. Legal Barriers

The fact that the countries have different laws has a significant impact on global business in general, and on e-commerce in particular. The differing laws can pose serious challenges to international transfer of data, free speech and the location of legal proceedings when disputes arise between buyer and seller. Privacy Laws

Although many of the challenges involved in cross border data transfer have been resolved through international agreements, one remains unresolved: respect for individual privacy in the conduct of international business. Countries differ in their approaches to the issue of privacy, as reflected in their laws. Some are willing to forgo some privacy for the sake of a more free flow of information and better marketing. Others restrict any collection of personal data without the consent of the individual. The European Union enforces a privacy law called the Directive on Data Privacy. Member countries have crafted their laws according to the Directive. Usually the law is titled Data Protection Law. The EU defines personal data as any information relating to an identified or identifiable natural person; an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity. Some of the principles of the directive are in stark contrast to the practices of U.S. businesses and therefore limit the free flow of personal data between the US and the EU. Following are the provisions of EU that are in conflict with U.S. practices: Personal data can be collected only for specified, explicit and legitimate purposes and not further processed in a way incompatible with those purposes. However, in the U.S., businesses often collect data from people without having to tell them how the data will be used. Personal data can be processed only if the subject has given unambiguous consent or under other specific circumstances that the directive provides. Such circumstances are not required by American laws. Individuals or organizations that receive personal data (the directive calls them controllers) not directly from the subject must identify themselves to the subject. In the U.S., many organizations purchase personal data from third parties and never notify the subject. People have the right to obtain from controllers without constraint at reasonable intervals and without excessive delay or expense confirmation that data about them is processed, to whom the data is disclosed, and the source that provided the data. They are also entitled to receive information on the logic involved in any automated

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processing of data concerning them, at least in the case of automated decision making. None of these rights is mandated by any U.S. laws. People have the right to object, on request and free of charge, to the processing of personal data for the purpose of direct marketing, or to be informed before personal data is disclosed for the first time to third parties or used for direct marketing. Furthermore, controllers must expressly offer the right to object free of charge to disclosure of personal data to others. American companies use personal data especially for direct marketing. The EU agreed that the U.S. Department of Commerce could establish a Safe Harbor, an arrangement for U.S. companies that have agreed to comply with the EU directive regarding EU citizens so that European companies can trade with these U.S. companies without fear of violating the directive. J. Different Time Zones

Companies that operate in many global regions, especially multinational corporations, must craft policies for the work of both their employees and information systems. Teleconferencing systems must be available much of the day, and in many cases, 24 hours per day, so that employees many time zones apart can communicate to discuss problems that need immediate resolution. Teams in support centers might have to work in shifts to accommodate clients worldwide.

SUMMARY
As more companies use the WEB for both B2C and B2B business, they realize that they must accommodate non-English speaking audiences and tailor their sites to local preferences. They also must be carefully attuned to the cultural differences and payment preferences of different world regions as well as be aware of legal and tariff issues. Organizations that engage in international trade, especially through the Web, must also be aware of the linguistic, cultural, economic, and political challenges involved in such trade. One important unresolved issue is the discrepancy between the laws governing the collection and manipulation of personal data in two economic powers, the United States and the European Union, which have incompatible data privacy laws. This difference restricts the flow of personal data between the United States and the EU. The Safe Harbor arrangement enables EU companies to do business with U.S. businesses that comply with EU policies on handling personal data of its citizens. Several cases have demonstrated that the old legal approach of territorial jurisdiction is inadequate when so much information is communicated and so much business is conducted on the Internet. Issues such as free speech and consumer litigation of etailers have brought to light the need for an international legal reform for cyberspace.

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