CESA IB 2011 03


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Freidman, World is Flat, BRIC countries, Offshoring advantages and disadvantages

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CESA IB 2011 03

  1. 1. International Business<br />Stephan Langdon, MBA, M.ED<br />
  2. 2. Flatteners<br />
  3. 3. Flatteners: first three are platforms contributing to collaboration<br />11/9: the fall of the Berlin Wall opening Windows<br />Fall of the “Wall” between East and West Berlin<br />Political systems that were once closed opened up<br />Windows<br />8/9: Netscape goes public<br />Emergence of an internet browser<br />Work flow software: <br />Development of software which when installed in different computers and in different places allows them to work with each other<br />
  4. 4. 11/9 as a platform for collaboration<br />11/9: the fall of the Berlin Wall which separated East and West Berlin and Germany<br />The fall of the “wall” resulted in the eventual collapse of countries that were part of the Council for Mutual Economic Assistance or COMECON, <br />sometimes referred to as the “Eastern bloc”, or the Soviet empire<br />Included in this “bloc” were countries like the Czech Republic, Bulgaria, Romania, East Germany, Poland, etc.<br />
  5. 5. Friedman’s claim<br />this event tipped balance of power across the world towards more democratic, free-market oriented governments<br />
  6. 6. 11/9 as a platform for collaboration (Continued)<br />Centrally planned countries “opened up”<br />In 1991, India abolished trade controls<br />China accelerated reforms (although some of china’s economic reforms started in the 70s)<br />Global exchange of digital information now possible as political restrictions eased up<br />Huge personal empowerment<br />
  7. 7. 8/9 as a platform for collaboration<br />8/9: Netscape goes public<br />The initial browser was Mosaic which was designed to allow researchers/scientists in remote locations to access each other’s work<br />Mosaic was transformed into the first browser to be made available to the public (for free)<br />Coupled with introduction of Windows 95, including GUI capability, these made accessing the internet much easier<br />Early access to the internet were text based<br />
  8. 8. 8/9 as a platform for collaboration (Continued)<br />Browsers as gateway to Internet <br />From internal systems to systems of systems<br />Dot com bubble allowed massive investments in the internet highway; by the time the bubble burst, an initial physical infrastructure – fiber optic cables, switches, etc. – was in place<br />From resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.<br />
  9. 9. Work-flow software as a platform for collaboration<br />Work flow software: software that allows computers and in different places to communicate and work with each other using different modes, e.g. audio, video, etc.<br />Example: Wild Brain produces cartoons in SF<br />Recording sessions<br />Design and direction<br />Writers<br />Animation<br />All in different locations using Virtual Private Network (VPN)<br />
  10. 10. Work-flow software as a platform for collaboration (Continued)<br />Example 2: Pay Pal<br />Emergence of protocols and standards to facilitate communication among systems<br />
  11. 11. Flat World and NIN<br />Flat World<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br />NIN<br />
  12. 12. Flat World and NIN<br />Flat World<br />Berlin Wall<br />Windows<br />Netscape Browser<br />Workflow<br />NIN<br /><ul><li>Global Market
  13. 13. Websites
  14. 14. Facebook.com
  15. 15. Access
  16. 16. Musician Work
  17. 17. Danial Lanois
  18. 18. Pay Pal</li></li></ul><li>Flatteners: the next seven are new forms of collaboration<br />
  19. 19. Flatteners: the next seven are new forms of collaboration<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />
  20. 20. Flattener 4: Uploading<br />Power or capability of individuals to send up, out, and around their own products and ideas<br />Apache – a web server that allow web browsers (in different computers) to interact with different web servers. Web servers allow a user to use his or her home or office to host a web site.<br />
  21. 21. Flattener 4: Uploading (Continued)<br />Open source communities<br />“community rules”<br />Examples:<br />Linux operating system - offers a family of operating systems; can be adapted to run on the smallest desk top computer, laptop, palm pilot, etc.<br />Firefox (Mozilla)<br />Blogging, Wikis, etc.<br />
  22. 22. Flattener 5: Outsourcing <br />India as an example of how outsourcing began<br />Educational infrastructure in India<br />7 Indian Institute of Technology <br />6 Institute of Management<br />As a result, Indian nationals would go to the US or developed countries to find work<br />Dot-com boom created “physical highway” to allow for India to get “connected”<br />Reform of telecommunications system in India<br />
  23. 23. Flattener 5: Outsourcing (Continued)<br />US companies start looking for opportunities to utilize labor pool in India<br />Late in the 1990s, the Y2K issue emerged<br />Indian “expats” return to India after “dot.com bubble” burst<br />Friedman sees the massive amount of programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination<br />
  24. 24. Flattener 6: Offshoring<br />Offshoring: move a strategic process or portion of a company’s value chain to a foreign location<br />Distinction <br />Outsourcing: have another company do a specific, but limited function, e.g. accounting<br />Offshoring: move production or an important process offshore<br />
  25. 25. Flattener 6: Offshoring (Continued)<br />China as an example of the emergence of offshoring<br />1977: Deng Xiaoping starts economic reforms in China<br />Mid 1980s: applies for membership in WTO<br />Finally accepted into WTO mid 1990s<br />Watershed moment in the sense that as a member of WTO, China has to play by international rules<br />
  26. 26. Flattener 6: Offshoring (Continued)<br />Example: ASIMCO<br />From efforts to find “new china” managers to manage their business to investing in the US <br />US operation takes care of finishing, also allows company to keep abreast with technology<br />Film: China Brands<br />Friedman does mention possible limits to growth in China, including need for further reforms<br />
  27. 27. Work-types companies avoid offshoring<br />Relationship-oriented work <br />Process where repeatable process map cannot be created<br />Roles with complex industry structure and/or long product learning curves<br />Success criteria are not well defined or measurable<br />Strategic aspect to the business<br />High levels of sensitive intellectual property are shared across wide groups of people<br />
  28. 28. Work-types companies push offshoring<br />High transaction volume<br />High repeatability<br />Low domain knowledge needed<br />Low mission criticality<br />Few touch points<br />Low complexity<br />Low training efforts<br />Non-strategic<br />Well defined process and metrics<br />Easily transmitted over electronic wires<br />Outcomes can be easily managed<br />
  29. 29.
  30. 30. India Advantages<br />Low cost<br />Native English<br />Early market entrance<br />Governmental software export strategy since 1972 <br />Early adoption to quality standards<br />Strong educational programs<br />Government incentives <br />Technology park development<br />Tax advantages and tax breaks<br />Low import duties<br />
  31. 31. India Disadvantages<br />Geo-political risk with Pakistan<br />Electrical Power issues <br />24 hour travel<br />Time zone<br />Costly Turnover <br />Salaries rising 20% annually for skilled workers<br />Mid-manager staffing difficulties<br />Cultural differences<br />
  32. 32. Brazil Advantages<br />Low cost<br />Time Zone and Proximity<br />Early adoption to quality standards<br />Strong educational programs<br />Multilingual Support (Spanish and Portuguese support)<br />Government incentives <br />Technology park development (but need more)<br />Tax advantages and tax breaks<br />
  33. 33. Brazil Disadvantages<br />Corruption<br />Lack of Qualified People<br />Delays<br />Infrastructure<br />IP Problems<br />English<br />Brain Drain<br />Higher cost than India and China<br />Poor infrastructure especially off coast<br />High sunk cost<br />Costly turnover <br />
  34. 34. China Advantages<br />Scale<br />Labor<br />Speed<br />Low cost<br />Strong educational programs and joint university programs<br />Government incentives <br />Technology park development<br />Tax advantages and tax breaks<br />
  35. 35. China Disadvantages<br />Focus on Asia<br />English <br />Cultural differences and inward thinking <br />Uncertain governmental actions<br />Communist effect on property laws <br />Communist bureaucracy <br />Intellectual property theft is rampant<br />Data Privacy<br />Poor infrastructure especially off coast<br />Manufacturing focus <br />Poor customer service <br />Need for local representation/local partner <br />Indian offshore companies are having problems with offloading their own work to China<br />
  36. 36. Flattener 7: Supply Chaining<br />Wal-Mart as an example of a company that pursues supply chain management aggressively<br />Coefficient of Globalization<br />Learning to sell new products: sushi<br />
  37. 37. Flattener 8: Insourcing<br />World Synchronized: Supply Manager<br />Trust through systemes<br />Toshiba Repairs<br />Shoes.com<br />UPS<br />
  38. 38. Flattener 9: In-forming<br />In-forming: capability to build your own supply chain . . . of information, knowledge, entertainment<br />
  39. 39. Flattener 10: Steroids<br />Computing capability has increased in terms of computational, storage, and input/output capacity<br />Instant messaging and file sharing<br />VOIP<br />Video conferencing<br />Computer graphics<br />Wireless communication<br />
  40. 40. Flat World and NIN<br />Flat World<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />NIN<br />
  41. 41. Flat World and NIN<br />Flat World<br />Uploading<br />Outsourcing<br />Offshoring<br />Supply-chaining<br />In-sourcing<br />In-forming<br />Steroids<br />NIN<br />
  42. 42. The world is flat . . . (Friedman)<br /><ul><li>Three converging developments
  43. 43. A global, Web-enabled playing field that allows multiple forms of collaboration
  44. 44. Gradual adaptation of organizations through horizontal collaboration in the value creation process extends this platform to different countries
  45. 45. 3 billion people join the party - opening of economies like China, India, Russia, and in Eastern Europe, Latin America, and Central Asia to the world economy</li>