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To which extent a firm can standardize its offerings/ processes in international business. Firms might be tempted to standardize their products/services for cost-containment, but highly standardized products are unlikely to become financially beneficial. Performance of a highly standardized firm might be higher, for a huge firm offering homogeneous product, have a strong global market presence, Douglas & Wind (2001) e.g. CSD firms [Coke, Pepsi], aircraft manufacturer and IT firms. Standardization is influenced by factors like cultural diversity, convergence of market, and economies of scale of R&D and Production (Solberg, 2000). Globalization propelled export to a higher volume for most of the firms, which in turn gives raise the debate between standardized vs adapted export strategy (Shoham, 1999). Product/distribution strategy, price, and environmental conditions influence the extent of standardization of a firm, Shoham(ibid).
Impact of international business on different stakeholders of the firm
Environmental factors oft eh target market, like geography, market condition; political/legal environment, organisational factors, customer-choice and nature of the product/service have influence on the firm’s international business, Shoham (ibid). IT firms are geographically distributed and enabled by virtual structure (Brooks, 2009). They operate in an almost edgeless manner, with permeable and continuously changing interfaces between company, supplier and customers. IT firms have some basic structural specialties – a) decentralization, b) leaner structure with less hierarchical layers, c) boundaries are fuzzy and obsolete, d) increased routinisation of same jobs [standardization], Brooks(ibid). Now, lets analyze impact of globalization on different stakeholders of an IT firm.
Globalization of IT-market became significant during the Y-2K bug, late nineties. Before that investors need to consider the risk assessment of their local markets while taking the investment decisions. Nowadays it became global so investors need to consider and take into account the political and socio-economic conditions of the target market. Economies of scale Douglas & Wind (ibid) has played a key role in expanding the IT market towards developing economies like China, India when Western [mostly US and EU firms] started to venture into this geography to get benefit from cheaper labor cost. The cultural difference was huge and combined with different political situation [lack of democracy in some regions], terrorism effects [e.g. India], political turmoil etc all need to be considered. Environmental factors, (Mintzberg and Waters, 1985) in such areas play a crucial role – lack of stringent labor rule, quality control criteria, lack of proper infrastructure and political disturbance all these influence in shaping the investment strategy. Stakeholder theory (Donaldson and Preston, 1995) emphasizes on considering all stakeholders [in the environment in which firm operates – not only the shareholders’ interest] strategy-making.
Staff – global and local
We have both local staff [mostly US, EU regions] and global staff [mostly Indian, Chinese, East-European]. Local staff experiences more close collaboration with their global counterparts- cultural difference is a big challenge. Apart from the time-difference which poses a big challenge to IT staff at the same time is provides it edge in the terms of seamless service throughout the clock. The geographical distance [between local and global operations] and unknown region where operation is being transferred initially pose a challenge to local-staff. Due to cost-containment efforts MNCs used to outsource their BPOs to Developing countries so the local staff encountered the challenge of job-cut hence the globalization at some point was perceived by the local staff a threat to their job. The global-staff on the other hand has been influenced by the different time-zone and had to change their working pattern [shift timings/night shift, they need to adjust their holiday calendar to be in-line with their offshore counter-parts. Globalization of IT develops a huge job market in the developing countries and introduced an enhanced lifestyle/working environment. Work-environment has been shifted towards networked, virtual, Brooks (ibid).
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Customers to IT firms also impacted by the globalization – most important are data security and protection of customer-sensitive data. EU directive restricts customer data of being taken out of the EU-zone [e.g. to an offshore location in India] and imposes stringent measures to ensure customer data is well-protected against cyber-crimes. The benefits that customers [of IT firms] are getting are the reduced cost of operation due to economies of scale Douglas & Wind (ibid) and continuous (24*7) support by both offshore [global support-centres] and onsite [local to customer’s location] IT staff. This helps customers twofold – they can channelize their saved money towards newer product development and offer more seamless service to their customers.
Globalization of IT firms require newer infrastructure to develop in the new operation-countries, which directly adds to its real-estate and construction markets. Apart from that Telephone industry of the developing country gets benefits by increased use of their facilities. The overwhelming need of human resources for IT firms has an positive effect on the job-market of developing countries and the inflow of foreign currencies in tern boosts the internal economy too -e.g. the consumer product market, the car and real-estate market and tourism. Government as one of the key facilitator, helps IT firms in setting up their operation, introducing SEZs and itself gets benefitted by increased employment rate, forex-inflow.
Business doesn’t occur in vacuum (Parry et al, 2007), the environment in which it operates and the time has a crucial role. Global business environment is becoming highly complex and unpredictable. Leadership need to assess firms’ capabilities, changes in business conditions, the competitive and regulatory environment, and consumer behavior, Shoham (ibid). Complying to ever changing regulatory requirements [both onsite and offshore] is a true challenge to IT firms, for example a IT firm need to meet the SOX requirements though it has its operation spread across global-market. Global IT firm need to be responsive to external factors [e.g. political, regulatory, technical or customer-demand] and devise their approach accordingly- a deliberate emergent approach where decision is being made considering the feedback from external-factors is needed, Mintzberg and Waters (ibid).
Rivalry is having negative impact of industry profitability as price-competition transfers profit directly from industry to its customers (Porter, 2008/1979). Price discounting is one form of rivalry that IT firms face during the increasing challenge of globalization.
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