Introduction to Information Systems

ISOM 2010
Lecture 4: Digital Economy (III)
Globalization
Prof. Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

Group Info due 29/2, 11:59pm

Canvas, under People

Needed information
Team Name
Team Members

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Group Project
Two possibilities
Mobile App Idea, or
Data Science, or
Infographics

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Option 1. App
Come up with a unique and creative idea for an
Mobile App.
You dont need to develop it, but you need to
describe it well
Show some graphs to demonstrate the function
Explain how it is useful for the user

In the final report, describe the App.

ISOM2010 - Copyright (c) Michael Zhang

Option 2. Data Science

Search for data sources on the Internet and do
some analysis of the data.
Emphasize the skills you will obtain from
searching and analyzing data.
Try to obtain data from multiple sources if
possible, and in analysis examine the
relationship of multiple variables.

ISOM2010 - Copyright (c) Michael Zhang

Option 3. Infographic
Search for information n the Internet and
organize facts together.
Emphasize the skills you will obtain from
searching and organizing information.
Create an infographic that is
Informative
Entertaining
And pleasing to the eyes
ISOM2010 - Copyright (c) Michael Zhang

ISOM2010 - Copyright (c) Michael Zhang

Milestones
March 21 (Monday): Submit a brief Proposal (1
page at most).
March 30 (Wednesday): Presentations
scheduled
April 11, 14, 18, 21, 25: Presentations (12 minutes
per team)
Apr 25 (Monday): Final report due.

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Deliverables and Grading

Deliverables

Credits

Proposal

Presentation

FinalReport

Total

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Final report
At least 10 pages but no more than 25 pages,
1.5-spaced,
12 point font,
1 margins,
Uploaded to Canvas, then printed, and stapled.

Questions about videos

How to better understand the videos?
How will the materials in the videos be tested in
exams?

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Nature of the digital economy

Globalization
Digitization
Speed

New markets

Merger of
products
Role of ideas

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1. Globalization
The system of interconnected economies
Based on capital markets
Characterized by the use of technology

Globalization companies doing business in a

global market
Leaders in industry

Dell divisions in 43 countries

Fedex serving 215 countries
JPMorgan offices in 50 countries
Toyota manufacturing plants in 20+ countries
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Source: Seven-Eleven Japan Co.

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Globalization
Why?

Fedex
7-11
Toyota
JP Morgan

Nature of industry
More customers
Lower costs
More
customers/Reducing
risk

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Enablers of Globalization

Silk road

East India Company

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Today, IT

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Avoid Confusion 4 OSs

To be discussed later
Operating System
Windows, DOS, Linux, CPM-86, OS X

Open Source

Related to Globalization
Out-Sourcing
Off-Shoring

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Avoid Confusion
Outsourcing vs. Offshoring
Outsourcing

Country A/B

Company A

Company B

BP

Offshoring
Country A
Company A

Country B
Company A

BP

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Difficulties in Globalization
Laws and Regulations
Labor laws HK vs. US
Tax laws Steven Cheung

Culture and language

Coka-Cola: vs.
Tasty and Enjoyable vs. Thirsty & Spicy

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Video: The World is Flat

Alternative version available at:
http://video.mit.edu/watch/the-world-is-flat30-9321/
Remember to take notes and prepare to discuss

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 Why did Friedman mention JetBlue and

McDonald in the speech?
A: To demonstrate that the services we receive
now may come from anywhere, and technology
is the enabler.

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3 globalizations
1.0: Countries
2.0: Companies
3.0: Individuals

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The 10 Flatteners
11/9/89
8/9/95
Workflow
Software

Uploading
Outsourcing
Offshoring
SupplyChaining
Insourcing
In-forming

The Steroids

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The First 3
11/9/89
8/9/95
Workflow
Software

Uploading
Outsourcing
Offshoring
Supply-Chaining
Insourcing
In-forming

The Steroids

Platform for
Collaboration

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Flattener #1: 11/9/89

Berlin Wall
; Windows
(Windows-enabled) PC became widely
available
Allowed people to create their own contents in
___________(e.g.
words, data, pictures, videos)
digital
forms
These contents could be sent anywhere in the world

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Flattener #2: 8/9/95

Netscape went public
Internet became widely available
Browser enabled anyone in the world to access
contents stored in any server that was connected to
the Internet

What are the consequences?

1. Dot.com boom and bubble
2. Overspending (at that time) on fiber optic cable
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Flattener #3: Workflow Software

Interoperable software became widely available
People from anywhere can work on the same content
More people can collaborate on more contents more cheaply than ever
before

Led to substantial efficiency (productivity) gain

The industrial revolution in 90s

E.g. UPS
Before 1995, it cost UPS $2.10 to handle each call from their call center
(multiplied by 600,000 calls during peak days before Christmas)
They then improved their own tracking systems with wireless
technologies, and took advantage of Netscape customers could then
track packages themselves over the Internet, at a cost of 5-10 per
query
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The Next 6
11/9/89
8/9/95
Workflow
Software

Platform for
Collaboration

Outsourcing
Offshoring
Uploading
Supply-Chaining
Insourcing
In-forming

The Steroids

New Forms of
Collaboration

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Flattener #4: Outsourcing

The emergence of virtual organization
Networked Organization
Uses networks to link people, assets, and ideas to create and
distribute products and services without being limited by
traditional organizational boundaries or physical location
Ally with suppliers and customers, and sometimes even
competitors

E.g. Call centers, soft/hardware production and assembly,

airline reservations, etc.

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Flattener #5: Offshoring (1)

Outsourcing: allow an outside company to perform certain
specific (but limited) function that your company was doing
in-house, then reintegrate their work back to your operation
Offshoring: moves the entire production from one location to
an outside country
Performing the same production at much lower costs (cheaper labor,
lower taxes, subsidized energy, lower health-care costs)

Implications?
More jobs for China/India/Africa/South America
Much higher economic growth in Asia due to consumer spending

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Flattener #5: Offshoring (2)

It is NOT a zero-sum game after all!!
Cheap imports from China have saved U.S. consumers $600 BILLION (and
U.S. manufacturers in untold billions)
This savings has helped the Fed to hold down interest rates longer
More home buying and refinancing
More capital for businesses to invest in new innovations, which in turn create
more jobs and lead to more growth

Both parties benefit, some more, some less

The invisible wall between developed and developing
countries starts to collapse

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Flattener #6: Uploading

As oppose to downloading:
No longer a one-way, top-down distribution from
centralized entity (authority, database, etc.)
Individuals from anywhere can upload their own
contents anytime

3 examples?
E.g. Linux, Wikipedia, blogging

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Flattener #7: Supply-Chaining (1)

What is a supply-chain?
Five stages: planning, sourcing, production, product delivery,
returns
IT (SCM systems) can assist in each of these stages
Supply-chaining: a method to collaborate horizontally (among
suppliers, retailers, and customers) to create value
Both enabled by the flattening of the world and a big factor
that flattens the world
Growth and proliferation of supply chains -> need to adopt common
standards among companies (so every SC can interface with each other)
-> eliminating points of friction at borders -> increased efficiencies gain
(plus others who follow the same practices) -> encouraging global
collaboration
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Flattener #7: Supply-Chaining (2)

Why SC has become so important?
When the world is flat, your company can (and must)
take advantage of the best producers at the lowest price
anywhere in the world
If you dont, your competitors will

Global SC become essential, both for manufacturers and

retailers
Challenge: it becomes much harder to make these SC work
(need for constant innovation and adjustment)
Two particular challenges

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Flattener #7: Supply-Chaining (3)

Global optimization:
it doesnt matter if you can get one part cheaper in one place; what matters is the
total delivery cost of all your parts on time is low (and lower than those of your
competitors)

Coordination of (global) supply with (local and/or global) demand:

Inventory control (at a much more difficult level) innovation is happening much
faster today (esp. fashion and electronics); products go in and out of fashion much
faster -> much harder to forecast demand

Wal-Mart: 8th largest trading partner of China, and the biggest retail chain in
the world
Yet it does not make a single thing
The moment a customer pick up something from the shelf onto the check-out
counter, the same product is being produced somewhere in the world
Recently introduced RFID to cope with the new SCM challenges

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Flattener #8: Insourcing (1)

Insourcing: a new form of collaboration and creating value
horizontally
Again, enabled by the flat world and flattening it even more

Very few companies can afford to develop, maintain, and support

a complex global supply chain at the scale and scope that WalMart has developed
Once the world went flat, small companies could suddenly see
around the world
Lots of places to sell their goods, manufacture their products, and buy raw
materials more efficiently
Many dont know how to pull all this off or cant afford to manage a
complex GSC; some simply dont want to manage this kind of complexity
if this is not part of their core competency (e.g. Nike)
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Flattener #8: Insourcing (2)

Why UPS (United Parcel Service)?
UPS creates an enabling platform for those who want to take
their business global or to vastly improve the efficiency of their
GSCs
If you go online and order a pair of sneakers from Nike.com
The order is routed UPS, and a UPS employees picks, inspects, packs
from a Kentucky warehouse and delivers it to your door

If your HP printer breaks in Europe

The field service repairperson who comes to your door to fix it works
for UPS (they manages the replacement parts and repairs divisions
for HP in those markets)

UPS now works with U.S. Customs too

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Flattener #9: In-forming

In-forming: the individuals equivalent to uploading,
outsourcing, insourcing, supply-chaining, and
offshoring
Ability to build and deploy your own personal supply chain (of
info, knowledge, entertainment, etc.)
Self-collaboration become your own selfdirected/empowered researcher, editor, etc. without spending
the time and the troubles of going to the library or news stands
Seeking like-minded people and communities (e.g.?)

Key enabler: Search Engines (e.g. Google, Yahoo!, MSN

Web Search; to be discussed in length later) Google
processes >1 BILLION searches per day
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The Last, but not the least

11/9/89
8/9/95
Workflow
Software

Platform for
Collaboration

Uploading
Outsourcing
Offshoring
Supply-Chaining
Insourcing
In-forming

The Steroids

New Forms of
Collaboration

Improving
Infrastructure

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Flattener #10: The Steroids

New and constantly improved communication
technologies (e.g. VoIP, P2P, Wi-Max, etc.)
They turbo-charge the other nine Flatteners, as well as
businesses
E.g. Airplane struck by lightening real-time, automatic analysis
from remote computers and engineers can make decision before the
flight is landed

Anyone can work from anywhere at anytime using any

device
Machines can now talk to computers, people can talk to
people, computers can talk to computers, and people talk to
computers further, faster, cheaper, and much easier than
before
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So What EXACTLY is a
Flat World After All?
Simply put, its a world in which specialization is taken to a
much higher level
Specialization: redistribution of work so that each person does what
he/she does best (at the lowest relative opportunity cost)
Outsourcing, offshoring, virtual organizations
Everyone can contribute, anytime, from anywhere in the world
More specialized labors from all over the world
The role of IT: enabling us to do this much better, much faster, much
more manageable, and much cheaper

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Key Takeaways
Economies grow bigger and more global
and get more complex
Spinning off more inventions faster
Enabled (and sustained) by IT

The most important, greatest sustaining skill is?

the ability to learn how to learn
Because what you can learn from textbook this year may
become out-dated the next
Ideas become the most-valued asset any person can possess
(while ideas can be copied, they cannot be taught so
youll have to develop skills to come up with your own)
And thats why the group project, you see?
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The End