Friday, February 13, 2009


New information technology modes include electronic mail, corporate and public databases, application systems, fax, video and computer conferencing. These modes are considered to be some of the driving forces of internationalisation. These new IT modes have a major impact on the coordination of headquarters-subsidiary relations. In fact, most of the MNCs have developed these new modes of IT.
IT enables the management to solve the problems which are intensified by international scope of business process in terms of geographical distances, scattered members in a decentralised organisation who need to create and process information in many places and different time zones between senders and recipients of information that pose additional problems.

The globalisation of companies increases the dynamics and complexity of their relations with the environment. MNCs cannot fully rely on adaptive structural changes due to rapid external changes. They have to organise their business processes in order to allow greater flexibility.
Therefore, MNCs should deliberately design or redesign existing international business processes.

Neural Networks: The next information technology breakthrough is the neural networks which change the way people do their jobs. Neural networks combine computer software and chips that are capable of mimicking brain functions. These brain networks are currently regarded as one of the most important forms of emerging information technology and they are going to have an impact on the way work is done in the years to come. For example, Mellon Bank's Visa and Master Card operation in Washington is put in neural computer network. This is more sophisticated and better able to compare purchases with customer behaviours. These systems are being used for many other jobs as well. IBM France uses this system to provide early warning failure in industrial machinery such as motors, cleaning tools and pneumatic robots. The future will see the emergence of new network chips that will dramatically increase both the speed of operations and their work applications. These chips will be used to mimic operations and carry them out the way humans do.
Neural networks will also allow computers to run factories. For example, when a purchase order
is issued to a vendor, he simultaneously enters the order in the online database. The entire activities in the operation are entered into the online database. Finally, when the goods are received, a person at the receiving-end will check a computer terminal to ensure that the shipment corresponds to the purchase order in the database. If it does, the employee will enter this information into the database and computer will automatically issue a cheque to the supplier. If it does not, the employer is empowered to refuse the shipment and goods will be returned to the supplier.

The information technology brought significant and dramatic changes through various
techniques like
•• Business Process Reengineering,
•• Enterprise Resource Planning and
•• Supply Chain Management.

Business Process Reengineering

Business process reengineering has developed at a fast rate towards a new management
philosophy. The business process reengineering (BPR) changes the perspective of international
management from a structural to a process view of headquarters-subsidiary relations. The engineering of international business process needs special attention due to multifaceted deeper structure of multinational corporations. This, in turn increases the complexity of business processes influencing the options for redesign.


Business Process Reengineering has been contemplating to overcome some of the problems
raised by the structural specialisation. It stresses the radical changes of processes concerning
different departments. Redesign of process is one of the aspects of management of business processes.
The other aspects include: management of ongoing business processes, improvement of business processes, and reengineering of business processes .

•• Management of Ongoing Business Processes: Managers coordinate the relationship between the headquarters and subsidiaries. Previously, the relationship between the headquarters and subsidiaries was based on structural relationship. Now, it is changed to interaction process due to the business process reengineering. The broad range of business interaction between headquarters and subsidiaries include: strategic planning, budgeting, developing and launching new products and logistics .

•• Improvements of Business Processes: Management of business process also includes
continuous improvement. Normally, managers of global business manage their departments
or country concerned only but not the process crossing departments or countries. This often
results in suboptimal solutions of a business process concerning a particular department only.
Marginal improvements can be achieved by using the techniques like Overhead Value Analysis
(OY A), Total Quality Management (TQA), Just-in- Time Production (JIT) or Computer
Integrated Manufacturing (CIM). Business Process Re-engineering can bring radical change
in the activities of MNCs .

•• Reengineering of Business Processes: OVA and TQM could bring 10% to 20% cost reduction only. But BPR takes a holistic view of the total process attempting to integrate all the
stakeholders of international business like suppliers, customers, market intermediaries etc.
Integration should not end at :1ational boundaries. In view of increasing globalisation of many
industries, BPR should be enlarged beyond national boundaries and it should be the total process rather than a few aspects of MNCs.

Management of International Business Process

Traditionally managers of MNCs manage the international business operations mostly through
coordinating the operation of subsidiaries based on the policies and strategies formulated by the
headquarters. Coordination activity is based on the size, age, technology, environmental dynamics and the degree of internationality of the global company. The headquarters-subsidiary coordination was mostly done through correspondence.
Subsidiaries work under specific situations. Therefore, the efficiency of coordination depends
upon employing the coordination techniques apt for the subsidiary specifics. Coordination also
depends on the character of strategic business unit or functional departments.
In addition to correspondence, coordination has been taking place by using the instruments
•• Face-to-face meetings
•• Personnel instructions
•• Visits for strategic planning.
In addition, managers of international business use technocratic instruments of coordination
•• Rules
•• Programs
•• Written document in operational and well-structured decisions.

Characteristics of BPR

The characteristics of business process reengineering include:
•• From Structure to Process Orientation: In a global context, process orientation changes the perspective from structural relationship between headquarters and subsidiaries to the interaction process between them.

The Contents and Boundaries of Business Processes: Generally, the number of business processes vary from 10 to 20. For example, IBM uses 18 business processes. Some of these processes are: production, customer fulfilment, customer feedback and hardware development.
Business Process Owners and Responsibility: Top management of the company assumes the ownership and responsibility of business process.
International Business Processes: All the processes of MNCs need not be international. The internationality of the company determines how many business processes have international scope. The international operations include: global sourcing, manufacturing at different global locations etc.
Customer-Orientation: BPR is completely customer-oriented and aims at maximisation of
customer satisfaction. Hence, customers should be integrated into the redesign.
Reengineering as a radical change of business process.
Holistic View of Processes Instead of Piecemeal Engineering: BPR takes a holistic view of network of parallel and sequential processes. The subprocesses should not be too many. IBM reduced their 140 subprocesses to 18 processes.
Top-down Approach of Business Process Reengineering: International BPR follows topdown approach due to broad, cross-functional, cross-departmental and cross-boarder scope.
Benchmarking of Business Process Reengineering: BPR aims at continuous improvement and radical' innovations in order to reduce cost and time and enhance organisational flexibility and customer satisfaction. TQM and JIT concepts help in enhancing efficiency of separate processes. But BPR through its holistc approach enhances the efficiency of the total system.

Role of IT in International Business:
It is viewed that the new IT is an enabler of process reengineering. IT opens new dimensions of process reoganisation. The proportion of information, operations and management varies tremendously between and within business processes. The hardware and software of IT have a spectrum of abilities to support informational or operational or even managerial activities with respect to the individual business process.

The use of computers increased the pace of business, globalisation, increased competition.
Electronic Data Interchange (EDI) facilitated the speedy, secured and accurate transfer of documents across the globe. Computers make possible a paperless working system. If the computer of a businessman is linked up with those of his customers and suppliers all the transactions can be done electronically. All these and a few other developments have brought a phenomenal change in global trade and commerce.

"E-Business is about using the convenience, availability and world-wide reach to enhance
existing businesses or creating new virtual business."
IBM defines e-business as "a secure, flexible and integrated approach to deliver differentiated business value by combining the systems and processes that run core business operations with the simplicity and reach made possible by Internet technology. "

According to the concept developed by the IBM, E-business combines the traditional information systems with the vast reach ofthe Web and connect critical business systems directly to critical business constituencies - customers, employees and suppliers via Intranets, Extranets and via the Web.
E-business can be divided into three areas.
They are (a) within the organisation,
(b) businessto- business (B2B) dealings and
(c) business-to-customer (B2C) transactions.

(a) Within The Organisation
E-business within the organisation uses the Intranet. The Intranet uses Internet standards
for electronic communication. People on the Intranet are able to see organisation-specific web sites. Because of the firewalls and other security measures outsiders cannot have access
to these organisation-specific Intranet web sites. The Intranet web sites allow the employees to obtain information and place orders online. Depending on the security policies of the organisation or company, people may be allowed to connect over the Internet via virtual private networks (VPN) to the Intranet using encryption lines and strong authentication for identification purposes.

(b) Business-To-Business (B2B) Dealings

The second area is the business-to-business (B2B) dealings. Business-to-business (B2B) dealings take place over the Extranet. ''The Extranet consists of two lntranets connected via the Internet, whereby two organisations are allowed to see confidential data of the another." Normally only that much information which is necessary for the business to take place is made available to the partner over the extranet. Business-to-business networks have existed long before the Internet came into use. Many organisations have had used private networks to deal with their business partners. But maintaining the private networks proved too expensive'to the business concerns. Costs of usage of business-to-business solutions through the Internet have come down dramatically. Use of virtual private networks (VPNs)' keep the costs low at the same time keeping the business transactions private.

(c) Business-to-Customer (B2C) Transactions
The third area of e-business is bus1l1ess-to-customer transactions. This is selling the goods and
services through the Internet to the innumerable customers spread all over the world. In this business concerns establish virtual shops and offer goods and services to whoever visits their web sites.
"Traditionally this is what most people know as e-commerce; selling products on the web."s
Global Business Context:
Multinational and transnational companies by using the operation of e-business can arrange for production of some components/parts in one country and other
components in other countries. These production activities in various countries and final assemble of the product in the third country can be co-ordinated more efficiently through e-business operations.
In fact, the finished goods or finally assembled products can be shipped directly to the market.

E-Business Categories:
Electronic business is a super-set of business cases. E-commerce is one of the aspects of e-business. Some other important aspects of e-business, which are successfully carried through the Internet are e-auctioning, e-banking, e-directories, e-engineering, e-franchising, e-gambling, e-Iearning, e-mailing, e-marketing, e-operational resource management, e-supply and e-trading.
Those aspects of business, which are digitized, work well on the Internet.

>(i) E-Commerce
e-commerce" is the process of two or more parties making business transactions via computer and some type of network, e.g., a direct connection or the Internet. This includes business-to-business transactions, online retail, and the digitalisation of the financial industry. Some experts and leading 'Netropreneurs' even argue that e-commerce includes all the steps that occur in any business cycle, such as placing ads, completing invoices, and providing customer support. The term e-.commerce, often used interchangeably with IBM's coined term e· business, covers a lot of ground and refers to all these areas."

E-commerce (electronic commerce or EC) is the buying and selling of goods and services via the communications capabilities of private and public computer networks, including the Internet. The term e-tailing is sometimes used for online retail selling.
E-commerce can be divided into:
•• Electronic Data Interchange (EDI), the business-to-business exchange of data .
•• Gathering and use of demographic data through Web contracts .
•• E-tailing or "virtual storefronts" on Web sites with online catalogues, sometimes gathered into
a "virtual mall."
•• E-mail and fax and their use as media for reaching prospective and established customers .
•• Business-to-business buying and selling .
•• The security of business transactions.
(ii) Electronic Data Interchange
The term electronic data interchange has many definitions. American National Standards Institute (ANSI) has defined it as:
"Electronic Data Interchange (EDI) is the transmission, in a standard syntax, of unambiguous information of business or strategic significance between computers of independent organisations.

Electronic Data Interchange is the transfer of business documents, such as purchase orders and invoices, between computers as per a set of standards.8 EDI facilitates the transfer of business documents stored in structured formats - through mutually agreed messaging protocols - from one computer application to another. The users of EDI do not have to change their internal databases.
In simple terms, EDI is computer-to-computer communication using a standard data
format to exchange business information electronically between independent organisations. The goal of EDI is the elimination of paper work and increased response-time. E-commerce, on the other hand, is a concept reflective of the infrastructure and technology available for conducting business using the electronic media.

Uses of EDl :
EDI addresses many problems arising out of paper based information systems.
In a paper based information system, a number of delays occur. Lot of time is required, sometimes, for physical movement of documents from one party to the other. Further, delays are caused by the manual processing which requires one to key and rekey the information along the time line. Delays in transporting and keying information result in ordering delays, billing delays, payment delays,
poor customer service, and poor management information. Some of the problems with paper-based information systems that EDI can address are:
(i) Labour Costs: In a paper based system, manual processing is required for data keying,
document storage and retrieval, document matching, envelope stuffing etc.
(ii) Errors: In the paper based system the same information is required to be keyed in a number of times. Hence, the paper based information system is not only labour intensive but also error-prone.
(iii) Inventory: In addition to the delays and uncertainties, in paper based system lot of paper is required to record a variety of information.
(iv) Uncertainty: Uncertainty exists in three areas. First, delay in transportation and keying mean that timing is uncertain. Secondly, the sender does not know whether the matter dispatched will reach the party intended to or not. Thirdly, uncertainty regarding payment.
It is difficult to tell when the bank will disburse the cheque. In EDI uncertainty with regard to timings is discarded in some cases and lessened in others. This enables a firm to forecast cash flows more accurately. Mail and processing delays are eliminated. A content acknowledgement provides the buyer fast feedback on whether the order will be honoured or whether the buyer must look elsewhere. This lessens the need for safety stock. One-time keying means that labour costs can be reduced and payment can be processed' through the settlement system the day after initiation.

(3) E-mail
E-mail is "the exchange of text message and computer files over a communications network such as a local area network or the Internet, usually between computers or terminals." It is also defined as "an electronic text message".
Communication is the basis of all businesses. "The Internet breaks into the traditional communication markets. Postal services and telecommunications companies
are losing market share to the electronic communication, especially e-mail. E-mail combines the strengths of phone calls and letters. The advantage of a phone call is its immediacy and the letter has the advantage that everything is in written form. The Internet enables instant communication in written form, either bye-mail or online chat."

"More and more businesses are talking digitally to each other. Other than a phone call, e-mails can contain more than just the text.· It is possible to attach files, which may, for example, contaip formatted documents, presentations, images or sounds. Information can be shared much more easily."!

(iv) Internet

Internet is "the world wide collection of networks and gateways that use the TCP/IP suite of protocols to communicate with one another. At the heart of the Internet is a backbone of high-speed data communication lines between major modes or host computers, consisting of thousands of commercial, government, educational and other computer systems, that route data and messages.

One or more Internet nodes can go off line without endangering the Internet as a whole or causing communications on the Internet to stop."



Auctioning on the Internet has become popular nowadays. In traditional methods of auctioning all those who would like to participate in the auction either assemble at one place or bid· over the phone. Some, who are busy may find it difficult to spare time to participate in the auction. But nowadays all those who have Internet connection can participate in the auction by sitting in the home itself.
The Internet enables everyone, irrespective of the country to which he belongs and
where he is located, can visit the auction web site with a click and participate in the auction. In eauctioning the people who want to participate in the auction visit the web site with a click, go through the details of the goods offered on the concerned web pages and place the price or prices they would like to offer on the web page. The auctioneer waits until a certain value has been reached or a time
limit has been passed and then hands out the goods to the highest bidder. Http://,
http:/ are some of the popular auction web sites which provide
an opportunity for everyone to become either a bidder or an auctioneer, or both at the same time for two different products. In this category of business the web site becomes an infrastructure for exchanging goods based on the auction model, which works basically by setting the prices by demand.

Electronic banking is one of the most successful online businesses. E-banking allows customers to access their accounts and execute orders through a simple-to-use web site. Electronic banking saves individuals and companies' time and money. Online banking allows the customers to selfservice themselves. Customers can get money from an automated teller machine (ATM) instead of walking up to the cash desk in the bank, can view their accounts, transfer funds and can pay bills.

In traditional marketing the marketing team could not get immediate results on the customer reaction. They conducted market surveys, processed the data and prepared the reports. On the basis of those reports the management took decisions, formulated the policies, prepared the plans and implemented them. For all this they took lot of time. Those who took less time and acted quick outwitted their competitors. In the pre-information age this worked well. But in the information age the information flowing back from the customer in real-time, needs to be passed on to the appropriate
department within the company to react in real-time to the ever faster changing demands or the customers. The Internet allows companies to react to individual customer demands immediately without any loss of time. It does not matter where the customer is located. This is called e-marketing.

E-trading, where the basic requirements are a PC, a modem and the Internet connection, the investor can log on to an online trading portal, go through a comprehensive database of information, use the online analytical tools, and pass on instructions to a friendly and reliable online broker. online trading is the perfect combination of the medium of net catering to a real life concept. Online trading is the perfect solution to investor needs. It brings together under one site all the relevant factors to enable an informed investment, rather cheaply to the user. Before the Internet was introduced buying and selling stocks at the right time was dependent on the availability of a well-informed broker, who used to be ever busy and never available to a small individual investor. The other sources of information relating to the prices were newspapers, magazines, telecommunication systems, radio
and television. They were relatively slow, costly and less exhaustive. Retrieving the relevant information and processing that information was difficult. The Internet has changed the way stocks are traded. E-trading is also called E-broking. E-broking offers the real-time stock prices to every desk throughout the world. People are able to react in real-time to changes in the stock market.

Everyone with an Internet bank account is able to buy and sell stock.

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