23
USING INFORMATION
TECHNOLOGY TO SUPPORT
INTERNATIONAL MANAGEMENT

Fer-Hoc Walter Fang, Andrew Gonzalez and Mike Shiwan Su

 

 

Introduction

Information technology (IT) is a tool that deals with the use of computers and telecommunications equipment to store, retrieve, transmit and manipulate data. The Information Technology Association of America has defined IT as “the study, design, development, application, implementation, support or management of computer-based information systems” (www.itaa.org/). The term is commonly referred to as Information and Communications Technology (ICT), which consists of computer hardware, computer software, networking, telecommunication and other application software. Since IT has the function in dealing with data and information, it can assist an organization to manage its operation using Information System (IS) or Management Information System (MIS) (Ahmed et al., 2011).

Information technology has continued to gain popularity since its emergence and currently plays a significant role in contemporary business operations. IT facilitates business expansion in an incredible way; for instance, employees of Multinational Enterprises (MNEs) can work remotely from anywhere in the world to implement or complete a task without disruption to business operations. Managers use computer software to integrate resources, manage their business, and improve their effectiveness and efficiency (Schatz et al., 2011). IT also enables MNEs to manage their overseas subsidiaries, for example, headquarters can launch web conferences to conduct board meetings with their subsidiaries that allow for ad hoc decisions to be made and thus allows for immediate decision taking. Thus MNEs use IT to support international management. Furthermore, IT also produces new industries and supports new ones, for example: the software industry, telecoms, e-business such as business to business (B2B) (i.e., alibaba.com), business to consumer (B2C) (i.e., Tesco online shopping), consumer to consumer (C2C) (i.e., ebay). This chapter will serve to outline how IT is used to support international management; in particular, it will focus on the IT challenges existing for global business in the context of international management, the important role of IT in supporting international management, how IT is developed and managed in global business, and will describe how MNEs use IT to support their international management through two case studies.

Business and management challenges in international management

Communication is essential for business operations as firms need to negotiate business transactions with suppliers or buyers and other stakeholders. However, due to geographical challenges and varying time zones this is not always easy. For example, managers in China are unlikely to negotiate business over the phone with firms in Canada because the time difference is 12 hours. However, they can utilize emails to exchange information and documents such as RFPs and contract service agreements. Alternatively they can utilize online chat platforms (i.e., MSN) to negotiate and collaborate over computer or handheld devices (i.e., Apple iPad) instead of requiring both to have to face-to-face discussion. Conversely, location and time zone difference also pose a significant challenge for international businesses. To help alleviate some of these issues MNEs can offer 24/7 support service by establishing offices in different locations, and offshoring parts of their operations to overseas locations. For example, many UK bank customers use telephone banking to communicate with their home branches while actually talking to a call center in India. Indeed, many successful Indian software firms have benefited from the time zone differences between the USA and India by offering 16 working hours a day on software programming or testing for clients that outsource these tasks (Carmel, 1999).

Without IT support it is hard for MNEs to manage their subsidiaries located in different regions where the culture is different from their headquarters; this difference may affect the process of decision making at headquarters as culture has been identified as another significant factor in management (Tan, 2002). Software such as ERP (Enterprise Resource Planning) is a tool used by MNEs to assist in the co-construction of a uniform culture across geographical boundaries. Thus managers in headquarters can manage their global human resources and also control their financial resources, as well as to integrate their idle resources (Tse and Gong, 2009). In today's turbulent business environment markets change rapidly. Firms need to adjust their strategies accordingly to respond to these changes. Traditionally, firms usually take a long period to conduct market research in collecting, processing, and analyzing the survey data, even if it proves hard for firms to get up-to-date business intelligence (BI). However, with the support from IT firms can utilize econometric software (i.e., Limdep, SPSS) to process a large scale of dataset (i.e., survey data of market research) on customer preferences, buying behaviors, market demand, market trends, etc.; thus managers can make more informed decisions when responding to market changes. BI enables an organization to produce large amounts of information which can lead to the development of new opportunities. When these opportunities have been identified and a strategy has been effectively implemented, they can provide an organization with a competitive advantage in the market, and stability in the long run (within its industry).

In terms of the above difficulties firms normally encounter when there is no IT support, firms are facing the challenges in finding the right global and regional business strategies for different geographies, and IT is the solution to make their business success as it provides 24/7 boundless service and connectivity. Thanks to the development of information technology, particularly to the application of the internet which facilitates firms to go global as never before, firms can purchase their production elements or sell their products/services via the internet from/to anywhere in the world. Thus many researchers (Ahmed et al., 2011;Tan, 2002) argue that most firms are born global as they can serve both domestic and international markets through the internet (i.e., e-business). In the perspective of the resource-based view, firms usually possess different resources (i.e., tangible or intangible), and must utilize them wisely in order to build their own competitive advantages and this is likely to depend on how they adopt information technology. 24/7 connectivity allows customers to interact with businesses and suppliers in an unprecedented way and receive assistance through live chats and customer service centers based abroad.

The business drivers for IT to support international management

The above section has introduced the notion of 24/7 connectivity, the importance of obtaining complete, up-to-date information, and the application of business intelligence. In general, there are two categories of business drivers for IT to support IM. The first business driver is global 24/7 effective connectivity that makes communication available 24 hours a day, seven days a week. Managers can remotely access a company's inventory system and get stock update information, financial data and other metrics regardless of location. Through a connective workforce an MNE can enhance the understanding of the organizational culture and thus develop a global culture (Firoz et al., 2002).

When a firm grows rapidly it becomes increasingly harder to control its human and physical resources. This is where software steps in. Software is divided into general software (i.e., Microsoft Win 7, Office 2010) and customized software; the cost for the former can range from several hundred to several thousands of pounds. The cost for the latter can reach as high as millions (depending on the size of the organization and the scale of the resources). In general, bigger firms have more resources and more complicated operations to be managed. As such the requirement for software is higher accordingly and thus results in a higher cost. Therefore, in the software industry economies of scale provide a strong incentive for mass consumption. The second business driver stems from update data/information which is significant for firms when making informed decisions. Firms may utilize a business intelligence system, which uses technologies (i.e., online analytical processing: OLAP), processes (i.e., data mining), and applications (i.e., spreadsheet) to analyze internal and external information, and structured data to generate an analysis for managers to make decisions.

The development of IT generates a new business model — e-business. Users can buy production sources and sell goods/services in different regions of the world. By using the internet firms can cross-check and compare prices from different suppliers and purchase the best deal. Naturally in order to use the internet, the appropriate hardware needs to be in place. Network cables, switches, and high-speed telecommunication lines all form part of this infrastructure. Researchers like Kenaroolu (2003) claim that the degree of development of telecommunication infrastructure determines the economy of a nation. Nowadays many developed countries use fiber-optic cables for telephone, internet connection, and TV/video transmission to enrich lifestyles and make international management more effective and efficient. It is the quality of the infrastructure managers have available to them in headquarters that facilitates this communication via web conferences with overseas subsidiaries. Each respective subsidiary may have different resources available to them as geographical differences pose potential issues. Thus MNEs that are based in regions of the world where telecommunications infrastructure is sound are able to integrate their global resources more effectively and this in turn can lead to competitive advantages. If utilizing software such as ERP, CRM software then these MNEs can manage their operations more intelligently as those software process the market data and information and provide managers with a solution to integrate all resources.

Therefore IT supports international management in overcoming many business and management challenges. It can be easily remembered with the synonym “Triple A, triple I” — the As stand for Availability (24/7 connectivity), Access (to financial data, applications, customer/supplier information, inventory), and Affordability (through economies of scale and scope). The Is stand for Infrastructure (which paves the way for managers to utilize IT to support their international management affairs), Integration (of resources, facilitated by IT for effective management), and Intelligence (the data provided globally to firms through IT that allow managers to make the most intelligent business decisions).

Application of IT to support international management

In the twenty-first century, almost all industries are using IT to support their businesses, particularly for businesses that operate internationally. Geographical challenges make it unlikely for managers of MNEs to be present in subsidiaries all of the time; thus they have to rely on group-ware to improve communications and foster collaborative teamwork. Groupware consists of communication tools, conferencing tools, and collaborative management tools (Ahmed et al., 2011). The basic and prevalent tools of communication are e-mail systems (i.e., Gmail, hotmail, Microsoft exchange mail, etc.), and P2P instant messaging systems (i.e., MSN, Skype, ICQ, etc.). The adoption of push mail also allows users to check, write, and reply to emails via their handheld devices such as iPhones, iPads, and Blackberry mobile phones. Instant messaging systems provide users with interactive communication which allows managers to talk to colleagues and business partners online. Conferencing tools include video/audio conferencing, chat, and forums. WebEx was developed in 1996 to cater for the niche market of web conference and now occupies over 60 percent of market share. WebEx utilizes the existing network bandwidth to speed up communication and enables multiple users to interact at the same time; therefore, board meetings can be conducted over the internet without restriction of location. Collaborative management tools consist of project management system, workflow, and information management systems, etc. These systems strengthen the workflow of a project and manage various information flows in a more effective manner that enables teamwork (Laudon and Laudon, 2010). Other IT solutions, including web search engines such as Google, Yahoo, Baidu, Bing, Ask, Aol, etc. and knowledge-based solutions, can improve knowledge sharing for organizations. Web search engines are information platforms where managers and consumers can search for the information they want.

Knowledge-based solutions enable employees and departments to work more efficiently by reducing redundant work, lessening training time for new employees who can learn the work procedure and routine over the knowledge base platform. This is particularly useful for overseas staff. For example, Microsoft employees in London can receive training direct from its headquarter in the USA through knowledge-based solutions. Additionally, these solutions prevent knowledge from leaving when an employee leaves and improves decision-making processes. In a word, knowledge base software provides immediate, 24/7 support, and becomes a key to business success.

When a manager is making a decision he/she usually relies on data warehousing, data mining, online analytical processing (OLAP) and business intelligence solutions, thus IT solutions improve decision support. Amazon, which is the world's largest bookstore, has created well-performing database and OLAP; both work effectively to update its inventory and intelligently recommend the other buyers' shopping habits (buyers who buy this book also buy the others) to the user placing the order. Its data warehouse also has relationships with publishers to place new orders once a book has sold out. Amazon's website also indicates the date of availability should stock run out, and through OLAP, Amazon can store customer information and preferences to target specific marketing campaigns, personalized to customer buying patterns.

With its business intelligence solution Amazon can integrate its resources better; for example, the Harry Potter book was a bestseller and sold out in its UK stores but was unsalable in China and stock levels were high at this location. Its BI system reflected this fact and thus sales managers were able to make arrangements to ship stock from China to the UK. This is a prime example of how IT supports decision making for managers.

Software vendors have developed management software such as Enterprise Resource Planning (ERP) systems, Supply Chain Management (SCM) systems, Customer Relations Management (CRM) systems, Content and Document Management (CDM) systems, etc. to manage corporate operations and governance. ERP systems integrate internal and external resources and management information (such as finance, sales, service, etc.) throughout a firm. The main purpose of adopting ERP systems is to facilitate the flow of information between all business functions inside the boundaries of the firm and to manage the connections with external stakeholders. The most widely known ERP software system is SAP. ERP systems deliver role-based access to crucial data, applications, and analytical tools and are suitable for all organizations, particularly for multinationals as they have relatively more resources and information that require management (Lawlor,2007).

SCM is a system involving all activities including design, planning, execution, control, and monitoring within supply chains for the purpose of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally. It is used to manage a network of interconnected businesses in the provision of product/service required by the end customers in a supply chain from the point of origin (i.e., raw materials) to work-in-process (i.e., inventory) and to the point of consumption (i.e., finished goods) (Wailgum, 2007). Multinationals benefit from SCM systems by reducing the transition time and the cost of product/service and build their competitive advantages.

CRM is a system which focuses on the management of the interactions with customers; it is described as a company-wide business strategy to measure and value the customer relationship. Through CRM systems multinationals can market their new products/services to their existing customers with very low costs (e.g., via phone calls or newsletter email alerts), and this can enhance customer satisfaction through dedicated customer care, and result in higher consumer satisfaction levels (Lawlor, 2007). Some strategists claim that successful development, implementation, use, and support of CRM systems can offer users significant advantages. CDM systems are used to track and store electronic documents and images of paper documents as they are a significant asset for an organization. Subsidiaries of multinationals can share the recorded information. For example, an advertisement of Wal-Mart in the US can be transmitted electronically to ASDA (Wal-Mart family member) in the UK for advertising without recomposing the contents or design of the advertisement.

There are many other IT solutions used to manage corporate operations and governances, as the above systems have limitations to reach potential/new customers. Social media and social networking tools can bridge this gap to communicate and exchange information with not only existing customers but also potential customers. Social media solutions include blogs, RSS, photosharing, podcasts, social news and bookmarking, video sharing, wikis, etc.

A blog is a discussion or information site consisting of text, images, links to other blogs, web pages, and other media published on the World Wide Web consisting of posts displayed in reverse chronological order. Firms may use blogs to interact with customers by allowing customers (visitors) to leave comments and even message each other. In this context blogging can be seen as a form of social networking: bloggers produce contents to post on their blogs and build social relations with customers and other bloggers. Firms use blogs for business purposes to enhance the communication and culture internally, and externally for marketing, branding or public relations. By February 2011 there were over 156 million public blogs in the world and they have become a new channel for marketing.

RSS refers to Rich Site Summary (also named Really Simple Syndication) which allows users to subscribe to feeds and get updates instantly with information the subscriber is interested in. RSS was regarded as one of the fastest methods for marketing, as it can reach customers via a user's handheld device. Photo sharing is an online feature that firms are starting to exploit for business uses. Real estate firms, for example, can upload property pictures online for prospective buyers in order to enhance experiences. Overseas employees can share high-quality photos with colleagues online rather than sending by email or by fax because of size limitations in email.

Podcasts are another type of digital medium consisting of audio, video, PDF, etc., to dispatch to subscribers' handhelds (i.e., iPhone). The other social media solutions such as social news and bookmarking, video sharing, and wikis provide users with an opportunity to share the information; as a result, a firm is able to understand customer demand and preference in a better way.

Social networking is also an important feature in international management as it is very useful for marketing. The representative solutions are Facebook and MySpace, both of which are the most well-known websites allowing online users to connect and share information with other online users. MNEs use Facebook to reach new customers and to market to wide audiences within specific networks. Currently over 1 billion people use Facebook. By using Facebook multinationals can connect people anywhere in the world as long as those people have internet access, and send messages (such as new product) to all within the network. This approach is much cheaper than paid TV or newspaper advertisements. MySpace is a powerful springboard in lead generation for business owners, especially those that appear to be true friends rather than in-your-face marketers. MySpace can be used to gain ties with other business owners and to promote products or services to prospective customers in a more personalized and easily accessible environment. Through social networking tools multinationals can not only market their products/service but also provide customer care and even recruit new employees; reducing transaction costs and globalizing their business in the process.

Considerations in developing and managing global IT systems

Major current developments in IT

The internet has played a significant role in people's daily lives since its emergence and has generated a number of new businesses. The fast growth of the internet accelerates the expansion of e-business and promotes other industries such as hardware (i.e., computer, mobile phone, firewall hardware) and software to grow. To some extent, the application of the internet enhances the performance of traditional sectors; for instance, British Airways' website allows customer to book a flight, a hotel, rent a car, or even reserve a seat on a flight online; this relieves BA's reservation teams' job pressure and time and gives customers more freedom. The ubiquitous mobile “smart” devices (e.g. smart phone (iPhone), tablet (i.e., iPad)) have internet access, in which users can do almost all tasks usually done by a computer. Continuing on from the BA example, mobile phone users can check in their flights anywhere simply by using smart phones to connect to the internet. This feature is a result of programming of codes using XML programming language compliable with smart phones at the times of its website construction. The growth of the internet and the popularity of smart phones has led to an increasing demand for hardware and software. However, some small businesses or individuals may not be able to afford a new mainframe hardware or comprehensive software; they may use them occasionally, and thus it is not necessary to buy and keep them forever. As such cloud computing was generated in 2007 to meet the market demand.

Cloud computing delivers computing resources to users over the internet (Kenaroolu, 2003). It is typically divided into “public” and “private” cloud computing. Most businesses and individuals use the former; for example, a company has just collected a large number of survey data which requires professional software to process and hardware to store it. Here the company is using external cloud computing to get its survey analysis job done in a more efficient way (because of professional and well-equipment from cloud computing provider) and cost reduction (i.e., not buying the expensive machine and software). In a word, cloud computing relies on sharing of resources to achieve coherence and economies of scale similar to a utility over a network.

Nowadays more and more complicated tasks need to be executed and the performance speed is an obstacle to influence the development of IT. According to Moore's law (this is named from Intel co-founder Gordon E. Moore) the number of transistors on integrated circuits doubles approximately every 18 months; in other words, the chip performance accelerates twice every 18 months. Therefore the speed of computing power is developing accordingly to cater to the demand of IT solutions for business (Liang et al., 2004). Because more and more IT solutions for business are conducted over the internet, the speed on the internet is important. One important indicator for measuring the speed of the internet is bandwidth; according to Gilbert's law, communication bandwidth is grown to double every 10 months, and this development allows enterprises to process and analyze real-time data, and extract relevant information in seconds (Kenaroolu, 2003). Regardless of the expansion and growth of the internet, ubiquitous mobile devices, cloud computing, continuation of growth in speed of computing power and communication bandwidth are all major contributors to the development of IT and its supporting role in international management.

Technology challenges of global systems

To conduct business globally, MNEs have to develop global, distributed, and integrated systems to support their business processes that span across national boundaries. Yet subsidiaries in different countries may use different hardware, operating systems, and applications which may not necessarily be compatible with each other; therefore, they must be integrated and all corporate data and technical standards need to be established as well (Lawlor, 2007).

The well-known computing operation platforms are Microsoft Windows, Linux, Unix, and Apple Mac. Linux is free open source platform software; thus in many developing countries (e.g., China) software developers use Linux as the platform software to develop other software tools (i.e., middleware, application software). However, Windows is the main platform for US software developers. It is common for application software to run properly in Windows platforms but not on the Linux operating platform. Therefore, one major technology challenge of global systems is to find a solution to truly standardize a global computing platform. When different software developers design and construct application software they may do so on different computing platforms and have different standards. Thus the other challenge in global system computing is to find specific software applications that are user friendly and truly enhance the productivity of international work teams and lead to an increase in the effectiveness of international management. Internet connectivity in some developing countries (e.g., Thailand) may not work as well as in developed countries (e.g., the UK); it really depends on each country's telecommunication infrastructure. Global systems include hardware, software, and networking, each of which has special technical challenges in an international setting. For example, the technical accounting term in the UK is from April 1 to the following March 31 but in Canada the fiscal year runs from January 1 to December 31 of the same year. Hence, an appropriate interface must be developed to standardize between systems, communication speeds and architectures, and network software to overcome disparate national standards, data exchange restrictions, and service levels.

When using the internet to transmit data on a global platform, security is another important consideration for international management. Encryption is the most commonly used remedy thus far. However, few multinationals trust the security of the internet and generally create private networks such as global intranets, extranets, virtual private networks (VPNs), and other remedies to communicate sensitive data. Those networks also support ever-increasing mobile smart devices. Furthermore, not all countries support the same level of internet service which is required to obtain reliable circuits, to coordinate among different internet service providers (ISPs) and the regional telecommunication authority, to obtain payments in a common currency standard, and to obtain standard agreements for the level of telecommunications service provided. Such a global system that can integrate different hardware, can be compatible with all operating systems, can establish corporate data, and can standardize the technical terms is a major consideration in the development and management of a global IT system that supports international managers (Tan, 2002).

General guidelines for developing global information systems

Developing global information systems is no easy feat. They involve strategic thinking and cultural sensitivity to differing business practices and ways of working. The general guidelines for developing global information systems are summarized in the following five subsections (Laudon and Laudon, 2010).

Agreeing on common user requirements

Large multinationals consist of many subsidiaries across the world; each subsidiary includes several divisions (departments), and employees may have different backgrounds in culture, education, experience, etc. Hence they may have different requirements when using IT to develop global information systems; those differences may affect the application of their global information systems and the performance of their business. Therefore practitioners must agree on common user requirements by developing a common language/platform that allows for effective business interchange.

Introducing changes in business processes

Business environments (i.e., regional economy, market demand, technology) are dynamic in nature; thus firms adapt their strategies to cater to these changes. A strategy usually stems from a key decision maker's vision, authority, competence, and business acumen. Typically in order for a change in business to occur the decision maker (typically the IT director of a multinational) needs to convince other directors and managers that the change is feasible, desirable, and in the best interests of the company and their local units. Changes in business processes are difficult to achieve as many firms are crippled by bureaucratic measures that stifle change.

Coordinating applications development

Once a business process has been adjusted, applications developments should be coordinated among different units (i.e., departments, divisions, subsidiaries) to ensure that the strategy is feasible and desirable for business operations at the subsidiary level. Heads of multinationals, for example, consult local managers step by step and guide them towards achieving such changes. In doing so, Headquarters can also customize applications to local and regional needs of the business.

Coordinating hardware installations and software releases

A global information system combines hardware, software, and networking. All components are interrelated. For example, the hardware determines software configuration requirements and networking speed; this is a sensitive task as many issues may arise if not carefully planned. For example, the Windows 7 platform cannot run on an old Intel 386 tower because it requires a faster CPU (central processing unit), larger amounts of memory, and higher screen definition.

In addition, many software update releases encounter problems when converting older versions (of the software) to the new version. For instance, Microsoft Office 2000 cannot properly execute files saved in Office 2010. As such, MNEs must ensure standardization and compatibility of hardware and software across all subsidiaries to assure minimum disruption to the business.

Encouraging local users to support global IT systems

All of the above indicate the importance of developing global information systems. MNEs should encourage their local users to support global systems and take into account the following considerations.

First, local units must agree on a short-list of transnational systems, and select the one suitable across all business units.

Second, headquarters may consider establishing one or a few transnational centers of excellence to focus on specific business processes. These centers are based on local conditions but act globally and are run by multinational teams that report to worldwide managers. The objectives of these establishments are to identify specific business processes, define information requirements, perform business and systems analyses, and roll out design and testing.

Third, choices of technology platforms, hardware, networks, and software should be easily procured to facilitate the construction of global information system architectures.

Recommendations for developing global IT systems

In summary, there are five crucial areas to consider when developing global information systems. First, standardization of all systems elements (hardware, software, networking, etc.) should be compatible and work from one country to another. Various telecommunication methods exist around the globe with different technical specifications; without standardization they are unable to communicate with each other. Electronic data interchange (EDI) refers to the structured transmission of data among organizations, the transmission of which is electronic and involves no human intervention. Second, reliability, availability, and serviceability should be taken into account when developing global IT systems. A network includes the internet, intranet, and extranet.Virtual Private Networks should be available 24/7 to facilitate the transmission of data in a secure and reliable manner. The global information system should also be able to back up and recover data.Third, security and control are significant for data transmission. For information security reasons all data should be encrypted when being transmitted in order to ensure confidentiality and privacy of sensitive information. Fourth, capacity and performance are a concern when large volumes of data are being processed. There are three aspects, including maximum (peak) volume transaction, data transfer speeds, and response time.They are subject to computing power (Moore's law) and communication bandwidth (Gilbert's law). Fifth, internationalization and localization are fundamental when developing global information systems. Local language, culture, business styles, user preferences, etc. cannot be ignored because they are important elements for the successful implementation of MNEs' internationalization strategy. For instance, “The world's local bank” — HSBC's global strategy — means that HSBC acts local and strategizes global. HSBC's internet banking website is tailored in different countries through its web content and website presentation, as well as different preference setting options for users. Its global information system allows HSBC to be a successful leader in the financial services sector.

Case studies of how some MNEs use IT to support international management for business success

The advantages of using information technology to support international management have been discussed in the above sections. This section attempts to use two examples to illustrate how MNEs leverage IT to support their businesses.

FedEx

FedEx was founded by Frederick W. Smith in January 1998 and since its conception has acquired many firms and achieved great business growth. In only 15 years since initial start-up, FedEx has become one of the four largest couriers in the world competing against UPS, DHL, and TNT. In 2011 FedEx earned a staggering US$40 billion in revenue and handled 2.5 million packages on average on a daily basis and employs 290,000 around the world. One of the major sources of competitive advantage originates from the fact that FedEx has achieved relatively higher customer satisfaction over its major competitors (UPS, DHL, and TNT) and this was thanks to their adoption of a global information system which allowed their customers to virtually witness the entire delivery process and track the whereabouts of their goods while in transit. FedEx's global strategy and their early embraces of information technology, innovation and information system management bolstered and improved its operations. This strategy originally came from the founder's vision; Frederick W. Smith was aYale University graduate and in the 1960s designed a system specifically for airfreight in order to accelerate the time spent on transportation. In 1971 Smith designed another information system to resolve the inefficient distribution system in logistics. Below is an example of how FedEx uses IT to make its business successful.

A FedEx employee (usually a van driver) goes into the house/office of the customer to pick up the parcel the customer wants to ship. The employee immediately placed it into a FedEx cover (an envelope or other package with a bar code which is also the tracking number) and scans the package by using the handheld and inputs the delivery address. From that point the FedEx terminal receives the information transmitted from the handheld and stores it in the database where it is connected to its extranet. With the software (i.e., PowerShip Mc, Powership Server, MultiShip, DADS, and COSMOS) support FedEx can know exactly where each package is, when the pick-up tour ends and the truck goes to the local sorting center (warehouse) to transfer the packages. FedEx uses its extranet linked to the internet where customer can track the parcel.

All packages in the warehouse will be classified to which destinations (i.e., North American, Asia, Africa, etc.). Each package is put on a belt which tells the length, height, weight, and volume so that FedEx can notify customers of the cost of delivery by email, text message, or internet customer account. Then the parcel goes under a scanner which reads the destination and is put into a box with the right belt, and from there the machine can scan the box; if not, the package will be sorted out manually.

The next step is to put all the boxes into the right container until filled up to maximum. The containers are designed to fit in perfectly with the shape of the plane for economies of scale to keep the transportation cost lower. After loading containers into the aircraft employees check the weather, the location and destination information to make sure the flight will be on schedule. Upon arrival at the destination airport the packages need to be sorted out again in more precise geographic location.

When the parcel is delivered to the recipient the employee asks for a signature for confirmation of receiving the parcel to sign on the handheld, which sends the information to the local FedEx terminal, and again through the internet the delivery information including the signature of the recipient can be checked by the customer (www.fedex.com).

The above example indicates that FedEx transacts its business mainly using a web-based interface, which allows customers to place an order (a delivery service) over the internet; an e-business model. So far, FedEx has developed two e-business models: B2B (Business to Business) and B2C (Business to Consumer). Its B2B site is electronic and designed to facilitate the conduct of shipments for business partners (i.e., Dell Computers). FedEx releases a unique code for each business user to access its B2B interface. Once here, business customers can place multiple delivery orders and are also able to schedule returns ofunsatisfactory products. The communication on B2B is interactive; this means that business partners can monitor, cancel, or even change the shipment at any point in the process. The bill for each service will be calculated individually and summed at the end of each month for payment.

B2C technology makes it possible for FedEx to communicate directly with consumers over extranet. Through its global information system FedEx uses the most advanced scanning system available in the world to enhance the efficiency of its package sorting operations. In addition, they also boast exceptional customer service levels which are made possible due to the strategic integration of their systems, allowing detailed descriptions on their packages and more up-to-date information than any of their rivals. This bolsters customer loyalty and makes imitation difficult if not impossible.

Using its expertise in IT FedEx has extended its business into county- and town-level geography. Thanks to its advanced global information systems and Supply Chain Management (SCM) systems, FedEx has achieved better performance than its rivals in six business aspects: speed of delivery, lower price promise, geographic coverage, IT capabilities, on-time delivery performance, and customer service. FedEx possesses the world's largest all-cargo air fleet, including Boeing 777s and Airbus A-300, which allows FedEx's planes to fly on schedule and ensure on-time deliveries. FedEx uses advanced materials in its packaging so that scanners can read codes without the need for manually inputting information and, in doing so, reduce labor costs. In addition, the large amount of shipments made daily leads to economies of scale, and these efficiencies are passed on to customers in the form of lower prices. FedEx's network extension grants it broader geographical coverage. IT innovation and developments are one of the key strategies in FedEx and the management team realize the benefits derived from proper information technology. They have created critical software in logistics service including inventory systems, scheduling and routing, warehousing, and e-commerce to meet inventory needs, provide customers with complete order fulfillment and transportation management solutions, and this again results in higher performance and customer satisfaction levels. FedEx has become “The airline of the internet.”

The above case illustrates how information technology (e.g., extranet, integrated tracking systems, etc.) helped FedEx to reduce lead times and inventory levels drastically by scientifically calculating ways to improve efficiencies at every step along their supply chain. IT also enhances customer traffic by placing company-related information on the company's official website, from which FedEx creates interfaces to power B2C and B2B e-commerce worldwide. IT has also caused a paradigm shift in control with customers and employees more easily connected to firms. It is critical to the change of management and, as illustrated, has helped FedEx to provide value-added services, and successfully manage and support its rapid growth.

Wal-Mart

The predecessor of Wal-Mart was a discount retail store founded by Sam Walton in 1962 in Arkansas, USA. It was officially incorporated as “Wal-Mart Stores Inc.” in 1969 and listed on the New York Stock Exchange in 1972. Nowadays it serves customers more than 200 million times per week at retail outlets, online, and on mobile devices. It operates in 28 countries and is estimated to achieve US$444 billion revenue in 2012. Currently it employs 2.2 million worldwide (Wal-Mart, 2012). Wal-Mart has been operationally successful even through periods of rapid growth. This is party due to its technological innovations. Indeed its annual report (2010) indicates that over the last five-year period, Wal-Mart had invested over US$600 million in its inventory and distribution system. It is well recognized in the industry for adopting the latest technologies and information systems that help it maximize its profitability. It has utilized several information systems throughout the course of its history such as point-of-sale systems, centralized communications systems, store satellite communication systems, data warehouses, retail link systems, electronic data interchange (EDI), web-based platforms, Radio Frequency Identification Devices, SAP, ERP, etc.

From operation effectiveness to business strategy

Initially, Wal-Mart attempted to improve its operations to become more efficient and effective. It introduced point-of-sale (POS) systems in the 1980s and found this to be a worthwhile investment. The POS systems were able to handle data more efficiently, helped in the avoidance of overstocking, and improved inventory management. POS is a computerized system that identifies each item sold, finds its price in a computerized database, creates an accurate sales receipt for the customer, and stores this information item-by-item in a database for further analysis such as identifying customer preference and reordering inventory. The technical basis of the POS system is the bar code utilization. Each product is assigned a bar code which is unique to a specified product; once the bar code is scanned by a scanner the information of each product will be stored in the database. Historical records allow the organization to keep track of sales trends at any given point by identifying each item as an individual entity with unique characteristics such as product type, price, etc.

The use of IT systems strengthened Wal-Mart's competitive advantage in the retail industry. In 1987 it developed a private satellite communication system which was the prototype for the retail link system (RLS) which served to strengthen supplier relationships. RLS gave suppliers access to current sales and inventory data on their products on Wal-Mart's shelves. After five years in practice this satellite communication system was developed into what became a centralized communication system in 1992. Today, Wal-Mart uses telecommunications to directly link its stores to its central computer system and from that system to its supplier's databases. This system gives Wal-Mart the benefits in direct reordering and coordination, reduced inventory costs (in Wal-Mart stores only 10 percent of the floor space is reserved for inventory area compared to the 25 percent average for the retail industry), and lower manufacturing costs. This is also beneficial to their suppliers who have more consistent orders and are thus able to lower their production costs, benefit from economies of scale, and pass some of these savings back to Wal-Mart and eventually to consumers. According to Porter's generic strategy theory this is a cost-leadership strategy; in other words, Wal-Mart turns its operation effectiveness into business strategy. Consistent with the adoption of the POS or centralized communication system, development and acceptance of bar codes required agreements on standards, which led to the development of a universal product code (UPC) system to be established. This system is a standard method for identifying goods with numbers and coding.

IT systems at Wal-Mart are applied in major areas such as inventory management, supplier management, administrative management, and customer management. In order to enhance its inventory management, Wal-Mart chose internet protocol for electronic data exchange and electronic data interchange (EDI) systems; it connects thousands of suppliers worldwide. EDI systems in conjunction with advanced telecommunications allow information to be transferred at high speed between branch computers and the central system in order to maintain a real-time database with complete data on inventory levels. As a result IT systems improve information coordination and processing with its suppliers and reduce lead time with distributors.

Each day Wal-Mart stores have huge amounts of incoming shipments, and in order to manage them effectively and efficiently Wal-Mart deployed an innovative technology, radio frequency identification devices (RFID) as electronic product codes, and required its suppliers to tag all shipments with RFID so that Wal-Mart can benefit from one-stop information, control on physical movement, and lesser times to locate products. Inside the RFID there is a substrate that transmits information, an IC chip that stores information, and an antenna that sends out information wirelessly. This function allows the data to be sent or received in real time by communicating with the networks. In contrast to a bar code, RFID has an IC chip which allows more up-to-date, accurate information to flow through the networks; thus RFID enables Wal-Mart to reduce costs in inventory and increase profitability by keeping inventory levels under control (www.walmart.com).

Using RFID and networks technology Wal-Mart developed another system — a supply chain management (SCM) system, which connects suppliers, purchasing firms, distributors, and logistic companies to share information about orders, production, delivery, inventory levels, sales, etc. so that all participants can source, produce, and deliver goods efficiently. Those systems make it possible for Wal-Mart to remain competitive in the retail industry.

In 2008, Wal-Mart planned to implement the SAP system to manage not only the inventory levels but also the financial management, and other aspects in management. It started the pilot installation at ASDA (a family member of Wal-Mart in the UK). This attempt increased ASDA's sales revenue by 2.8 percent on the previous year and achieved satisfaction from employees and business partners, and customers. The adoption of SAP replaces Wal-Mart's own in-house developed systems (POS system, centralized communication, retail link system, SCM, RFID, etc.), and those have been grown and used for over 30 years. This big shift indicates the major challenge and strategy Wal-Mart will be facing, for example, whether the new SAP systems are compatible with the existing hardware, software, and networking. It also raises questions as to whether or not the existing inventory data system and customer database can be transferred to the new system. ASDA changed its computer hardware to IBM AIX Unix servers to ensure SAP systems work at minimum risk. All the data had finally been transferred to the next platform, said David Dixon, SAP program manager at ASDA. After one year's implementation he stressed that the SAP financial management system is more scalable and flexible than ASDA's previous system. Other benefits derived by ASDA were improved reporting in financial statements and lower consumption time on generating monthly reports.

In fact, SAP systems include ERP, CRM, SCM, business intelligence etc.; all of them are comprehensive and fully functional in dealing with business operations (Schatz et al., 2011). The shift to an external software package represents a significant shift for Wal-Mart, whose IT department takes the responsibility to continue developing its own IT solutions including RFID wireless tagging solutions, and intends to create a global e-commerce platform that will unify the systems used by existing online operations and imitate them in the new markets. As the technology develops there a proliferation of new systems emerging in the world such as the 2D bar code (QR code);Wal-Mart is paying attention.

What are the lessons we have learnt from Wal-Mart? The implementation of IT systems in Wal-Mart indicates that IT solutions reduced inventory costs associated with frequent and efficient replenishment from distribution centers to local stores, and enabled Wal-Mart to attain competitive advantage on cost leadership in comparison to its major competitors. Wal-Mart's POS, SCM, and inventory systems identify which goods are selling well and which are not; furthermore, the information flows within Wal-Mart's efficient managerial hierarchies to ensure communications and data are up to date. This combined effort results in fewer returns from customers and higher savings in inventory costs. Wal-Mart's data warehouse contains its daily, weekly, monthly, and yearly sales and stock list. Data-mining systems enable Wal-Mart to process the data further to better understand and forecast its customers' demands and increase probability of buying the right merchandise at the right amount and at the right time. Wal-Mart followed three rules to a keep a tight rein on IT and system development.

First, maintain a centralized information system infrastructure. Keep its IT systems up to date and make information flow internally within the company and externally with suppliers, distributors, etc. This results in reduced costs in inventory and enhanced firm performance. Second, standardize systems and platforms. To ensure all application software, IT systems are compatible with all hardware, software, and networking. Third, be merchants first and technologists second. Wal-Mart is a genuine discounted retailer and has invested a large amount of funds into IT systems to achieve this. They stay true to their mission to “save money and live better” and know that IT can help in achieving this goal.

Concluding remarks

Following the development of telecommunication infrastructure and transportation, firms have more opportunities to globalize their businesses than ever before. In today's globalized world MNEs can benefit from a bigger market (domestic and foreign market), more competitive choices for production elements (sources), and higher income. Yet many MNEs encounter difficulties in managing their operations in multiple geographies around the globe. Language and culture, market demand, as well as local government policy are affecting the business of multinationals.

IT systems support international managers of multinational enterprises in overcoming many challenges that arise from international and global management. The current major IT systems for IM include those that improve communications, knowledge sharing, decision support, as well as those that manage enterprise resources, supply chain, and customer relations. Many global systems have been developed by different IT professionals and deployed by various businesses; furthermore, these cross-functional systems are not always compatible with different languages, culture, and business processes in other countries (Liang et al., 2004). Therefore, standardization is required to overcome this problem.

Developing and managing global IT systems requires proper planning and considerations on the standards, reliability, availability, serviceability, security and control, capacity and performance, internationalization and localization. IT will continue to be the backbone support for international management, with new advances in smart devices, cloud computing, etc. Companies like FedEx and Wal-Mart have demonstrated how they have successfully leveraged IT to develop systems that integrate various silos and streamline processes that allow them to succeed in IM with tremendous business growth. Following the development of computer hardware, software, and networking infrastructure, innovation is essential for firms using IT systems to remain in a competitive position.

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