In recent decades globalization transformed the way of interecation between nations, countries, corporations and individuals. It has a great impact on all areas of human life. The progress in informational technology drives globalization and changes the way of doing business all over the World. New business models, new communication patterns and channels, increasing speed of data transmission, active exchange of ideas, information, expertise, goods and services – that’s what happens in the modern World, and that’s how globalization erases the borders between countries. Informational technology in our post-industrial society is a key driver of globalization and a major component of global business strategies of the companies who want to survive and to succeed in the market. At the same time, there’re several issues that have to be taken into account, for example, related to data security and privacy.
The IT revolution made the metacapitalism model of business come true. Development and production is outsourced, data are stored in the cloud, communication and information flow is made via electronic media, interaction with customers from all over the World is easier than ever with the help of social networks and geolocation tools. A customer located in Germany can book a flight online from the U.S. company and, if in need for help, she can contact the call center, and her call will be served by the manager located in India. This paper is aimed at describing the role of information tehnology in driving globalization and the way the social and business areas are transformed due to globalization.
Globalization in general terms means active movement of goods, services, capital and information beyond domestic borders to other markets around the World (Smith, 2007.) Globalization allows dissemination of ideas, best practices, technologies and allows developing nations to get access to employment opportunities and technological advances in order to catch up with highly developed economies. At the same time, developed counties get access to a cheaper labor force and resources. Time and space compression speeds up international exchange and increases accessibility.
Globalization means that the World has become more interdependent. There’re no isolated processes any more – what’s going on on local level influences the various processes and aspects on a global level (Lawlor, 2007.) Processes and trends initiating on a domestic level form the global landscape. “Deterritorialization” decrease the significance of local borders and distances.
The informational technology is one of the key driver of globalization, and, at the same time, tehnology advancement is lead by globalization. First of all, unless the technology is not culturally neutral, it technology can be easily localized to serve its users in different countries and local contexts (Molina.) The trend is evidenced by the growth of technological startup industry. Only in the U.S. in 2013 there were over 2,600 investment deals with startups, and many of these emerging businesses are expanding to reach the customers Worldwide. The same trend is observed in Europe, Asia and other regions of the World.
Growth in IT startups is accompanied with expansion of e-commerce. According to eMarketer estimate (2014), the global market size of B2C e-commerce will reach $1.5 trillion in 2014. And the 20% annual growth of this market is mostly contributed by Asia0Pasific region customers, who spend online more than in North America. The global e-commerce giants (EBay, Amazon, Ali-Baba) together with the largest payment service providers (Paypal, AppplePay, Stripe, MasterPass, etc) transform the way of shopping for goods and services and provide the customers with access to international markets from their homes or offices.
The technological progress changes the way the data is stored. According to IMDEA Networks Institute (2014), cloud computing can be considered “a key enhancer of innovation and economic development.” Cloud technologies eliminate geographical and technological boundaries, concentrating information in cloud data centers and enabling access to the data at any time from anywhere in the World from almost every internet-connected device. With cloud technologies, the technological resources are dissimilated globally, promoting mobility, scalability, automation, flexibility accessibility and security on unprecedented level. Cloud storage solutions (as, for example, Dropbox or Google drive) and project management systems (for example, Trello) bring data and decisions flow between international offices or international project teams easier than ever before.
With the modern technologies, everyday life of people had changed. People now download various applications, check news from all over the Globe, make cheap internet calls via Skype, use web cameras and videoconferencing. Many people can not imaging their life without social media connecting them to their other people across the World.
The penetration of global social networks (Facebook, Twitter, Instagram, YouTube, etc.) gives the multinational organizations great opportunities related to the user data that an be received and analyzed. For example, the Global Pulse Initiative started in 2009 aimed at exploring opportunities for using real time data (including data mined from the social media) to get deeper understanding of people well-being, predict disease epidemics as well as economic crises (Cerra et.al, 2012.)
Big data management, CRM technologies (customer relationship management) enable personalized customer relations, facilitating localization of products and brands and building marketing communication with customers in any country of presence. IT trends have also an impact on interaction between people, public administrations and multinational non-profit organizations (Sunarno, 2001.)
Broadband internet, mobility, data analytics, cloud data storage and collaboration driving “seismic shifts” in the role of employees in any organization. Limited access of some groups of people to these advantages (for example, for broadband internet) creates a digital divide in a society (Cerra et.al, 2012.) This digital divide limits growth opportunity for the local and global economies.
The other negative trend of technological advancement and globalization is downsizing. The company should keep its costs at an optimal level to remain competititive under pressure from the other market players, including outsourcing companies in different countries.
The other challenges affecting multinational companies are strategy, talent management and knowledge transition in multicultural environment, and also supply chain management (Ahmed at al., 2011.) IT play the increasing role in the corporate strategy, so, to be competitive in the market, the management should envision the technological trends and incorporate them into the company strategy. In the context of talent management, the leaders should take into account cultural diversity, workforce mobility, new models of employment (mobile offices, working from home, etc.), new infrastructures for teamwork and collaboration. In the supply chain management, the international companies often rely on an array of alternative production and procurement methods giving the necessary flexibility and freedom in managing costs.
In this respect, globalization if forcing corporates to outsource development or production. Allocating production facilities in countries or regions with qualified workforce and cheaper resources allows to reduce costs and reinforce competitive capability. The corporates get a quality products and reach resource efficiency while labor force in the developing countries explore attractive employment opportunities. Many companies implement low labor cost and flexible (or shifts) model with 24x7 operation. According to the Cutting Edge data, about 90% of the U.S companies outsource at least one activity (Kathawala, 2005.)
The most common example of outsourcing is offshore software development. The companies from various countries allocate their software production in developing countries with educated and talented developers, for example, in India, Russia, Ukraine. India is one of the biggest offshore location for IT development while China is known as the largest location for manufacturing.
For example, let’s take the Microsoft two-tier model with the stable center (permanent full-time employees with social benefits and stock options) and temporary, part-time cross-cultural workforce giving the company the necessary flexibility and enabling it to manage uncertainty (Kazi, 2011.)
There’re several challenges related to global otsourcing: loss of future talent, loss of intellectual assets (as the intellectual property regulations in developing countries are weak) and loss of organizational performance. Moreover, there are several other issues that shouldn’t be underestimated, for example, very sensitive inter-cultural interface within the subsidiaries located in different countries, that can cause some ethical and communicational problems.
The other concern the companies are often faced is possibility of losing control over outsourced processes and the quality, even of the usage of the company’s brand and identity. It’s very difficult to build proper relationship with foreign partners taking into account all possible uncertainties, differences and risks and to set proper control points.
Another risk of outsourcing is information security comprising integrity, confidentiality and availability. This risk is attributable not only to outsourcing, with multichannel data flow and internet technologies advancement the problem with data protection becomes vital at all the levels.
Probable decline in organizational efficiency can be compensated by proper project management and control, contractual relations, facilitating open communication, top executives involvement (Kathawala, 2005.)
And, finally, unpredictable political and economic factors may influence the company’s business or even lead to failure. It’s difficult to predict in advance the probability of a war, of a public riot or change in government composition leading to change in policy and regulations.
Globalization has its pros and cons, but it’s obviously that this trend has come to stay; and it requires reassessment of strategies and approach at all the levels – society, company, unit, individual – to keep up with the fast pace of technological progress.
References:
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