International marketing management lesson 13

UNIT V LESSON 13 INFORMATION TECHNOLOGY AND INTERNATIONAL BUSINESS CONTENTS 13.0 Aims and Objectives 13.1 Introduction 13.2 History of Information Technology 13.3 Information and Communication Technologies 13.4 New Information Technologies 13.4.1 Data Warehousing 13.4.2 Data Mining 13.4.3 Payment Gateway 13.4.4 Enterprise Portals 13.4.5 Electronic Data Interchange (EDI) 13.5 Customer Relationship Management (CRM) 13.5.1 Supply Chain Management (SCM) 13.5.2 Enterprise Resource Planning (ERP) 13.6 E-Business 13.6.1 Features of E-Business 13.6.2 Value Creation through E-Business 13.7 Business Process Reengineering (BPR) 13.7.1 Need for BPR 13.8 Let us Sum up 13.9 Lesson End Activity 13.10 Keywords 13.11 Questions for Discussion 13.12 Suggested Readings 212 International Marketing Management 13.0 AIMS AND OBJECTIVES After studying this lesson, you will be able to: Appreciate the role of informations technology in international business Know what is Information and Communication Technology (ICT) Describe new information technologies like: data warehousing, datamining, payment gateways, ERP etc Describe features and importance of e-business Understand the basics of business process reengineering 13.1 INTRODUCTION Information Technology (IT), as defined by the Information Technology Association of America (ITAA), is "the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware." IT deals with the use of electronic computers and computer software to convert, store, protect, process, transmit, and securely retrieve information Today, the term information technology has ballooned to encompass many aspects of computing and technology, and the term is more recognizable than ever before The information technology umbrella can be quite large, covering many fields IT professionals perform a variety of duties that range from installing applications to designing complex computer networks and information databases A few of the duties that IT professionals perform may include data management, networking, engineering computer hardware, database and software design, as well as the management and administration of entire systems When computer and communications technologies are combined, the result is information technology, or "infotech" Information Technology (IT) is a general term that describes any technology that helps to produce, manipulate, store, communicate, and/or disseminate information Presumably, when speaking of Information Technology (IT) as a whole, it is noted that the use of computers and information are associated 13.2 HISTORY OF INFORMATION TECHNOLOGY The history of information technology predates the invention of the modern digital computer by many centuries Machines for calculating fixed numerical tasks, such as the abacus, have existed since antiquity Wilhelm Schickard built the first mechanical calculator in 1623 Charles Babbage designed a difference engine in Victorian times, and around 1900 the IBM corporation sold punch-card machines However all of these machines were constrained to perform a single task, or at best, some subset of all possible tasks During the 1940s, as newer and more powerful computing machines were developed, the term computer came to refer to the machines rather than their human predecessors As it became clear that computers could be used for more than just mathematical calculations, the field of computer science broadened to study computation in general Computer science began to be established as a distinct academic discipline in the 1960s, with the creation of the first computer science departments and degree programs Since practical computers became available, many applications of computing have become distinct areas of study in their own right 13.3 INFORMATION AND COMMUNICATION TECHNOLOGIES Information Communication Technology is basically an electronic based system of information transmission, reception, processing and retrieval, which has drastically changed the way we think, the way we live and the environment in which we live It must be realized that globalization is not limited to the financial markets, but encompasses the whole range of social, political, economic and cultural phenomena Information and communication technology revolution is the central and driving force for globalization and the dynamic change in all aspects of human existence is the key by-product of the present globalization period of ICT revolution The world telecommunication system, the convergence of computer technology and telecommunications technology into the Information Technology, with all its components and activities, is distinctive in its extension and complexity- and is also undergoing a rapid and fundamental change The results of this are that National boundaries between countries and continents become indistinct and the capacity to transfer and process information increases at an exceptional rate The global information communication has been called "the world's largest machine," and it is very complex and difficult to visualize and understand in its different hardware and software subsystems As Kofi Annan (1999) has put it, "the Internet holds the greatest promise humanity has known for long- distance learning and universal access to quality education It offers the best chance yet for developing countries to take their rightful place in the global economy And so our mission must be to ensure access as widely as possible If we not, the gulf between the haves and the have-nots will be the gulf between the technology-rich and the technology-poor" ICTs are increasingly playing an important role in organizations and in society's ability to produce, access, adapt and apply information They are being heralded as the tools for the post-industrial age, and the foundations for a knowledge economy, due to their ability to facilitate the transfer and acquisition of knowledge (Morale-Gomez and Melesse, 1998) These views seem to be shared globally, irrespective of geographical location and difference in income level and wealth of the nation ICT may not be the only cause of changes we are witnessing in today's business environment, but the rapid developments in ICT have given impetus to the current wave of globalization Governments worldwide have recognized the role that Information and Communication Technologies could play in socio-economic development A number of countries especially those in the developed world and some in developing countries are putting in place policies and plans designed to transform their economies into an information and knowledge economy Countries like USA, Canada, and a number of European countries, as well as Asian countries like India, Singapore, Malaysia, South Korea, Japan, and South American countries like Brazil, Chile, and Mexico among others, and Australia and Mauritius either already have in place comprehensive ICTs policies and plans or are at an advanced stage of implementing these programmes across their economies and societies Some of these countries see ICTs and their deployment for socio-economic development as one area where they can quickly establish global dominance and reap tremendous payoff in terms of wealth creation and generation of high quality employment On the other hand, some other countries regard the development and utilization of ICTs within their economy and society as a key component of their national vision to improve the quality of life, knowledge and international competitiveness ICTs are offering even less developed countries a window of opportunities to leapfrog the industrialization stage and transform their economics in to high value-added information economies that can compete with the advanced economics on the global market Technological innovation has contributed to 213 Information Technology and International Business 214 International Marketing Management globalization by supplying infrastructure for trans-world connections According to Ajayi (2000), the revolution taking place in information and communication technologies have been the central and driving force for the globalization process Both developed and less-developed countries can not afford to miss out on the opportunities these technologies are creating Globalization benefits those with technology, resources, contacts, information and access to markets It has a negative impact on the poor The prediction is that the gap between the new winners and losers within the world economy order dominated by an Information and Knowledge Economies will be much larger than the development gap that now exists between the advanced nations and the less developed nations African countries are at risk of being further marginalized if they fail to embrace these technologies to transform their economies As pointed out by the Secretary-General of the United Nations, globalization can benefit humankind as a whole 13.4 NEW INFORMATION TECHNOLOGIES Globalization has increased for centuries with constant improvements of transportation and communications technologies It has taken a giant leap in recent years, however Previously, physical and human resources moved around the world by means of land, sea, and air transportation Now, with data serving as a basic resource and digital communications the means of transport, financial capital is moving throughout the world at nearly the speed of light and work is moving to the worker at the same velocity, reshaping the landscape of the world economy Information and digital technologies that initially cost a great deal, with little direct return, are now showing tremendous dividends in terms of productivity in developing countries and large industrial firms The digital economy is finally coming to fruition 13.4.1 Data Warehousing A data warehouse is a repository of an organization's electronically stored data Data warehouses are designed to facilitate reporting and analysis This classic definition of the data warehouse focuses on data storage However, the means to retrieve and analyze data, to extract, transform and load data, and to manage the dictionary data are also considered essential components of a data warehousing system Many references to data warehousing use this broader context Thus, an expanded definition for data warehousing includes business intelligence tools, tools to extract, transform, and load data into the repository, and tools to manage and retrieve metadata Benefits of data warehousing Some of the benefits that a data warehouse provides are as follows: A data warehouse provides a common data model for all data of interest regardless of the data's source This makes it easier to report and analyze information than it would be if multiple data models were used to retrieve information such as sales invoices, order receipts, general ledger charges, etc Prior to loading data into the data warehouse, inconsistencies are identified and resolved This greatly simplifies reporting and analysis Information in the data warehouse is under the control of data warehouse users so that, even if the source system data is purged over time, the information in the warehouse can be stored safely for extended periods of time Because they are separate from operational systems, data warehouses provide retrieval of data without slowing down operational systems Data warehouses facilitate decision support system applications such as trend reports (e.g., the items with the most sales in a particular area within the last two years), exception reports, and reports that show actual performance versus goals Data warehouses can work in conjunction with and, hence, enhance the value of operational business applications, notably Customer Relationship Management (CRM) systems 13.4.2 Data Mining Generally, data mining (sometimes called data or knowledge discovery) is the process of analyzing data from different perspectives and summarizing it into useful information information that can be used to increase revenue, cuts costs, or both Data mining software is one of a number of analytical tools for analyzing data It allows users to analyze data from many different dimensions or angles, categorize it, and summarize the relationships identified Technically, data mining is the process of finding correlations or patterns among dozens of fields in large relational databases Although data mining is a relatively new term, the technology is not Companies have used powerful computers to sift through volumes of supermarket scanner data and analyze market research reports for years However, continuous innovations in computer processing power, disk storage, and statistical software are dramatically increasing the accuracy of analysis while driving down the cost 13.4.3 Payment Gateway A payment gateway is an e-commerce application service provider service that authorizes payments for e-businesses, online retailers, bricks and clicks, or traditional brick and mortar It is the equivalent of a physical point of sale terminal located in most retail outlets Payment gateways encrypt sensitive information, such as credit card numbers, to ensure that information passes securely between the customer and the merchant A payment gateway facilitates the transfer of information between a payment portal (such as a website or IVR service) and the Front End Processor or acquiring bank When a customer orders a product from a payment gateway enabled merchant, the payment gateway performs a variety of tasks to process the transaction: A customer places order on website by pressing the 'Submit Order' or equivalent button, or perhaps enters their card details using an automatic phone answering service If the order is via a website, the customer's web browser encrypts the information to be sent between the browser and the merchant's webserver This is done via SSL (Secure Socket Layer) encryption The merchant then forwards the transaction details to their payment gateway This is another SSL encrypted connection to the payment server hosted by the payment gateway The payment gateway forwards the transaction information to the processor used by the merchant's acquiring bank The processor forwards the transaction information to the card association (i.e., Visa/MasterCard) If an American Express or Discover Card was used, then the processor acts as the acquiring bank and directly provides a response of approved or declined to the payment gateway 215 Information Technology and International Business 216 International Marketing Management The card association routes the transaction to the correct card issuing bank The credit card issuing bank receives the authorization request and sends a response back to the processor (via the same process as the request for authorization) with a response code In addition to determining the fate of the payment, (i.e approved or declined) the response code is used to define the reason why the transaction failed (such as insufficient funds, or bank link not available) The processor forwards the response to the payment gateway The payment gateway receives the response, and forwards it on to the website (or whatever interface was used to process the payment) where it is interpreted and a relevant response then relayed back to the cardholder and the merchant The entire process typically takes 2-3 seconds The merchant must then ship the product prior to being allowed to request to settle the transaction The merchant submits all their approved authorizations, in a "batch", to their acquiring bank for settlement The acquiring bank deposits the total of the approved funds in to the merchant's nominated account This could be an account with the acquiring bank if the merchant does their banking with the same bank, or an account with another bank The entire process from authorization to settlement to funding typically takes days Many payment gateways also provide tools to automatically screen orders for fraud and calculate tax in real time prior to the authorization request being sent to the processor Tools to detect fraud include geolocation, velocity pattern analysis, delivery address verification, computer finger printing technology, identity morphing detection, and basic AVS checks 13.4.4 Enterprise Portals The term "enterprise portal" refers to an intranet platform which provides access to enterprise data as well as resources of the information system within a single interface The enterprise portal is therefore the point of entry to the data of the information system of the enterprise for all personnel and, possibly, partners The purpose of a portal is to provide a starting point for the user within the information system Generally speaking, we distinguish three large groups of portals: An, Enterprise Information Portal (EIP) sometimes called a corporate information portal, provides access to multiple sources of information (documents, reports, messages, press articles, etc) in a single location; An, Enterprise Application Portal (EAP), also called an application portal, provides access to different applciations of the enterprise and to the corresponding data depending on a user profile; An, Enterprise Expertise Portal (EEP), sometimes called a supervisory portal, makes it possible to capitalize on and analyze the information used by the users to improve access to the knowledge of the enterprise 13.4.5 Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) can be defined as the exchange, between computers, of data regarding transactions by using networks and standardized forms The information from the computer system of the issuer travels via networks to the computer system of the partner, where it is integrated automatically This involves: Exchanging what? Requires understanding as to what is to be exchanged and how to model it; Exchanging how? Requires transporting information via which media, which communication protocols? Today, whenever you go shopping at the supermarket, more than 90% of the products you buy were ordered by using EDI, then billed after the shipping notice was sent in the same manner All of this occurs without retyping the data, saving time and money by reducing data entry errors In many cases, the use of EDI is indispensable; as a matter of fact, the little chicken you buy are weighed, labeled with the correct weight, the batch number and an up-to-date price per kilo, etc Every day for each store, since two stores of the same chain may not necessarily sell at the same price Considering the volume of information to be processed and the deadline for the preparation and delivery of chicken each and every day, only using EDI makes it possible to have fresh chicken on your plate with a maximum of food safety, since of course, traceability information also travel via EDI Check Your Progress 1 Define the concept of Electronic Data Interchange Elaborate Enterprise portals 13.5 CUSTOMER RELATIONSHIP MANAGEMENT (CRM) CRM (Customer Relationship Management) intends to provide technological solutions which make it possible to strengthen the communication between the company and its clients in order to improve the relationship with the clientele through automization of the different components of the client relationship 13.5.1 Supply Chain Management (SCM) The term SCM (Supply Chain Management) refers to to the tools and methods whose purpose is to improve and automate the supply through the reduction of stock and delivery times The term "just-in-time" production characterizes the concept of minimizing stock throughout the entire production chain SCM tools are based on production capacity information that is present in the information system of the enterprise to automatically place orders SCM tools are therefore strongly correlated with Enterprise Resource Planning (ERP) of the enterprise Ideally, a SCM tool makes it possible to track the passage of pieces (traceability) between les different parties of the supply chain 217 Information Technology and International Business 218 International Marketing Management 13.5.2 Enterprise Resource Planning (ERP) ERP are applications whose purpose consists in coordinating all activities of a company (so-called vertical activities such as production, procurement, or rather horizontal activities such as marketing, sales forces, management of human resources, etc.) around the same information system Integrated Management Software generally provide Groupware and Workflow tools to ensure transversality and flow of information between the different services of the company The term "ERP" comes from the name of the MRP (Manufacturing Resource Planning) method used during the 70s for managing the planning of industrial production 13.6 E-BUSINESS The term "e-Business" therefore refers to the integration, within the company, of tools based on information and communication technologies (generally referred to as business software) to improve their functioning in order to create value for the enterprise, its clients, and its partners E-Business no longer only applies to virtual companies (called click and mortar) all of whose activities are based on the Net, but also to traditional companies (called brick and mortar) The term e-Commerce (also called Electronic commerce), which is frequently mixed up with the term e-Business, as a matter of fact, only covers one aspect of e-Business, i.e the use of an electronic support for the commercial relationship between a company and individuals The concept of e-Business is nonetheless very flexible and covers all possible uses of information and communication technologies (ICT) for any and all of the following activities: Making the relationships between the enterprise and its clients and different partners (suppliers, authorities, etc.) more efficient Developing new business opportunities Facilitating the internal flow of information Controlling the different processes of the enterprise (production, warehousing, purchasing, sales, human resources, etc.) 13.6.1 Features of E-Business A company can be viewed as an entity providing products or services to clients with the support of products or services of partners in a constantly changing environment The functioning of an enterprise can be roughly modeled in accordance with a set of interacting functions, which are commonly classified in three categories: Performance functions, which represent the core of its activity (core business), i.e the production of goods or services They pertain to activities of production, stock management, and purchasing (purchasing function); The management functions, which cover all strategic functions of management of the company; they cover general management of the company, the human resources (HR) management functions as well as the financial and accounting management functions; The support functions, which support the performance functions to ensure proper functioning of the enterprise Support functions conver all activities related with sales (in certain cases, they are part of the core business) as well as all activities that are transversal to the organization, such as management of technological infrastructures (IT, Information Technology function) 13.6.2 Value Creation through E-Business The goal of any e-Business project is to create value Value can be created in different manners: As a result of an increase in margins, i.e a reduction in production costs or an increase in profits E-Business makes it possible to achieve this in a number of different ways: Positioning on new markets Increasing the quality of products or services Prospecting new clients Increasing customer loyalty Increasing the efficiency of internal functioning As a result of increased staff motivation The transition from a traditional activity to an e-Business activity ideally makes it possible to motivate associates to the extent that: The overall strategy is more visible for the employees and favors a common culture The mode of functioning implies that the players assume responsibilities Teamwork favors improvement of competences As a result of customer satisfaction As a matter of fact, e-Business favors: a drop in prices in connection with an increase in productivity improved listening to clients products and services that are suitable for the clients' needs a mode of functioning that is transparent for the user As a result of privileged relationships with the partners The creation of communication channels with the suppliers permits: Increased familiarity with each other Increased responsiveness Improved anticipation capacities Sharing of resources that is beneficial for both parties An e-Business project can therefore only work as soon as it adds value to the company, but also to its staff, its clients, and partners 219 Information Technology and International Business 220 International Marketing Management Check Your Progress What you understand by the term Information Technology? What are the new information technologies? Define business process reengineering 13.7 BUSINESS PROCESS REENGINEERING (BPR) Business Process Reengineering (BPR) is a management approach aiming at improvements by means of elevating efficiency and effectiveness of the processes that exist within and across organizations The key to BPR is for organizations to look at their business processes from a "clean slate" perspective and determine how they can best construct these processes to improve how they conduct business The Business Process Reengineering is a complete life cycle approach This provides the scope for problem identification and also solutions to implement the successful business operations There are many new elements in BPR such as extensive use of IT and new perspectives on organisational structure There is also more about process redesign, quality improvement and so on It is a comprehensive method of assessing the current business process planning and redesigning the methods and implementing them for business solutions Hence, the BPR is defined as " The fundamental rethinking and radical redesign of the business systems to achieve the dramatic improvements in critical and contemporary areas such as cost, quality, service and restaurants to increase peak capacity for a top unit from $400 per hour to $1500 per hour At the same time they lowered prices; their average pricing today is about 25% less than nine years ago In short the Reengineered processes are designed to be simpler to those they replace, several jobs might be combined into one and the number of checks and controls reduced In the right sense, more frequently, it is the result that work is performed where it makes most sense, and workers can make more decisions themselves New information technology (such as knowledge based, expert system and sophisticated tele-communications equipment) is frequently employed in the design of these processes BPR derives its existence from different disciplines, and four major areas can be identified as being subjected to change in BPR - organization, technology, strategy, and people where a process view is used as common framework for considering these dimensions Business strategy is the primary driver of BPR initiatives and the other dimensions are governed by strategy's encompassing role The organization dimension reflects the structural elements of the company, such as hierarchical levels, the composition of organizational units, and the distribution of work between them Technology is concerned with the use of computer systems and other forms of communication technology in the business In BPR, information technology is generally considered as playing a role as enabler of new forms of organizing and collaborating, rather than supporting existing business functions The people / human resources dimension deals with aspects such as education, training, motivation and reward systems The concept of business processes - interrelated activities aiming at creating a value added output to a customer - is the basic underlying idea of BPR These processes are characterized by a number of attributes: Process ownership, customer focus, value adding, and cross-functionality 13.7.1 Need for BPR Each organisation must determine itself when it is appropriate for them to reengineer Reengineering should be done only if it can help in achieving an enhanced strategic position Some strategic indicators that require reengineering include Realisation that competitors will have advantage in cost, speed, flexibility, quality or service New vision or strategy: a need to build operational capabilities Need to reevaluate strategic options, enter new market or redefine products/ services Core operating processes are based on outdated assumptions/technologies Strategic business objectives seem unreasonable Change in market place 13.8 LET US SUM UP Information technology (IT), is "the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware." IT deals with the use of electronic computers and computer software to convert, store, protect, process, transmit, and securely retrieve information ICTs are increasingly playing an important role in organizations and in society's ability to produce, access, adapt and apply information In recent years a lot of new information technologies have been invented, like data warehousing, data mining, payment gateways, enterprise portals, EDI, ERP, etc The term "e-Business" refers to the integration, within the company, of tools based on information and communication technologies (generally referred to as business software) to improve their functioning in order to create value for the enterprise, its clients, and its partners The Business Process Reengineering is a complete life cycle approach This provides the scope for problem identification and also solutions to implement the successful business operations There are many new elements in BPR such as extensive use of IT and new perspectives on organisational structure There is also more about process redesign, quality improvement and so on It is a comprehensive method of assessing the current business process planning and redesigning the methods and implementing them for business solutions 13.9 LESSON END ACTIVITY Discuss the new information technologies in detail Also discuss the implications of new information technologies in international business 221 Information Technology and International Business 222 International Marketing Management 13.10 KEYWORDS Information technology (IT): The study, design, development, implementation, support or management of computer-based information systems Information Communication Technology: An electronic based system of information transmission, reception, processing and retrieval Data Warehouse: A repository of an organization's electronically stored data Data Mining: The process of analyzing data from different perspectives and summarizing it into useful information e-Business: The integration, within the company, of tools based on information and communication technologies 13.11 QUESTIONS FOR DISCUSSION Define information and communication technology Discuss its history Discuss the features of new information technologies What is e-business? Discuss its features Discuss the role of business process reengineering in international business Check Your Progress: Model Answers CYP 1 Electronic Data Interchange (EDI) can be defined as the exchange, between computers, of data regarding transactions by using networks and standardized forms The term "Enterprise Portals" refers to an intranet platform, which provides access to enterprise data as well as resources of information system within a single interface CYP Information Technology: Information technology (IT), is "the study, design, development, implementation, support or management of computer-based information systems, particularly software applications and computer hardware." New Information Technologies: In recent years a lot of new information technologies have been invented, like data warehousing, data mining, payment gateways, enterprise portals, EDI, ERP, etc Business Process Reengineering: This is a complete life cycle approach This provides the scope for problem identification and also solutions to implement the successful business operations 13.12 SUGGESTED READINGS PKVasudeva, International Marketing, Excel Books, New Delhi, 2006 Shyam Shukla, International Business, Excel Books, New Delhi, 2008 Philip R Catero, International Marketing Keegan, Global Marketing Management ... Reengineering (BPR) 13. 7.1 Need for BPR 13. 8 Let us Sum up 13. 9 Lesson End Activity 13. 10 Keywords 13. 11 Questions for Discussion 13. 12 Suggested Readings 212 International Marketing Management 13. 0 AIMS... Relationship Management (CRM) 13. 5.1 Supply Chain Management (SCM) 13. 5.2 Enterprise Resource Planning (ERP) 13. 6 E-Business 13. 6.1 Features of E-Business 13. 6.2 Value Creation through E-Business 13. 7.. .LESSON 13 INFORMATION TECHNOLOGY AND INTERNATIONAL BUSINESS CONTENTS 13. 0 Aims and Objectives 13. 1 Introduction 13. 2 History of Information Technology 13. 3 Information and