By
Lauren Camper
Benjamin Crump
Ryan Goodman
Transnational
organizations are businesses that operate in multiple countries. Their business
strategies, from an IT perspective, are unique in that they combine global
configuration with local responsiveness (Linton, 2014). Centralized information
systems are vital components of the transnational strategy (Linton, 2014). “Transnational
IT operations enable an organization to
deliver consistent information services to all locations and support high
levels of collaboration, while allowing individual locations the flexibility to
adapt to their local market conditions (Linton, 2014).” With any IT business
strategy, there are pros and cons associated with its implementation. This blog
post will detail the pluses and minuses of IT business strategies with
transnational organizations as well as examine a real world case in which IKEA
successfully implemented their transnational IT business strategies.
Transnational IT business
strategies can come in several forms including global e-commerce, global supply
chain and business continuity (to name a few) (Linton, 2014). Some of the informational
technologies that enable businesses to succeed globally are web based
applications, internet and extranet connectivity, and the ability to
communicate in the local market place (Basu, 2014). Management of the
implementation of the IT business strategies is important to ensure that the
business goals are in line with the strategic IT goals.
There are many advantages
to transnational IT business strategies such as:
-
They
provide flexible operations in terms of business hours, service language and
market reach. By operating in multiple time zones, business are able to provide
customer service around the clock. Additionally, they are able to tailor their
websites or business information to the local language or enable customers to
select the language they would prefer. Lastly transnational companies are able
to reach various markets by having a global presence (Marulanda, 2010).
-
There is potential for lower cost structures, being that the business operates in
another nation that may have access to resources more affordably (Marulanda,
2010).
-
Business
continuity is heightened. If a disaster were to occur in one location, the
local company can recover its data from back-ups at other centers via the
global network (Marulanda, 2010).
-
Collaboration
is simplified which enables companies to “draw on expertise around the world
(Marulanda, 2010).”
-
Supply
chain management via transnational IT strategies enables businesses to connect
with vendors and suppliers across secure networks. It enables businesses to tap
into global networked resources; particularly in the time of a supply chain
crisis (Marulanda, 2010).
Adversely,
if poorly managed, transnational IT strategies can negatively impact a business
in the following ways:
-
Not every
country has access to technological infrastructures which can severely impact a
company (Marulanda, 2010).
-
Slow
communication connections can be damaging to a business in terms of response
times (Marulanda, 2010).
-
Unstable
political environments can impact an organizations ability to conduct business
or implement the technological strategies they wish to implement (Marulanda,
2010).
-
The
technical capabilities of local employees may not be to the standard that the
organization is accustomed, which can impact the ability to implement the
appropriate technological needs (Marulanda, 2010).
IKEA is one of several successful transnational
organizations that has implemented a successful IT business strategy. This
Swedish based company is the largest furniture retailer in the world (Lu,
2014). Founded in 1943, the company is known for its easy to assemble
furniture; sold at affordable prices (Lu, 2014). IKEA has over 9,500 products
per store and operates in 37 countries (Lu, 2014). One of the many reasons this
business is so successful is because of its supply chain strategy. IKEA stores
mirror a warehouse layout. Each store has a logistics manager who is
responsible for inventory replenishment. The replenishment system is based off
of systemic calculations of consumer demand (Lu, 2014). They use a
“minimum/maximum settings” system, developed by IKEA, to appropriately address
inventory levels on a daily basis (Lu 2014). The company also uses automatic
retrieval and storage systems which drive down their cost-per-touch (the number
of times a customer touches a product- more touches equals more costs
associated with the product) (Lu, 2014). In addition, IKEA has a robust online
ordering system that is multifunctional for both customers and suppliers. The
internet based site is segregated by country and displays various products,
descriptions, and product availability. They also have a separate supplier’s
link that enables suppliers to connect with the organization. Lastly, IKEA is
widely known for its massive catalog that is produced annually. Ikea believes
the shopping experience starts and ends at home, therefore they have created an
interactive function for consumers to begin their shopping experience at home; not
only from their computers but from their mobile devices. In 2013 IKEA created
an interactive catalog which allows customers to use their mobile devices to
scan catalog products and virtually place them in their homes to see how
products will look in their personal spaces. This application enables customers
to visualize furniture before purchasing it. Check out the video below for a
first look at the interactive catalog.
Transnational IT business strategies are an important
component for businesses. If managed and implemented correctly, they have the
potential to heighten communication for customers, increase infrastructure,
increase supply chain management and enhance flexibility. Mismanagement of these strategies can
have the adverse effect on the organization. IKEA is one of several
transnational organizations that has been able to sustain its global position
because of it’s successfully supply chain management across the world,
e-commerce efforts, and mobile application enhancements. Businesses should
strongly consider doing their research before implementing a new IT business
strategy for their transnational organization to optimize its potential for
success.
Linton, Ian (2014). Transnational IT Operations as a Strategy. Retrieved from
http://yourbusiness.azcentral.com/transnational-operations-strategy-4238.html
Basu, Chirantan (2014). What is a Transnational Business Strategy? Retrieved from http://smallbusiness.chron.com/transnational-business-strategy-20950.html
Marulanda, Jaime (2010). Transnational Operations. Retrieved from http://www.thecompanyofthefuture.com/post/Transnational-Operations.aspx
Lu, Clara (2014). Ikea’s Inventory Management Strategy:
How does Ikea do it? Retrieved from
http://blog.tradegecko.com/ikeas-inventory-management-strategy-ikea/
Group 3 Response (Regina Ricconi and Jason Hatter)
ReplyDeleteGroup 1:
Well written blog about IKEA and how they use technology as an international company. We would like to further examine how technological infrastructure can limit a company’s ability to be successful. This was the first of your potential problems listed. However, coming from a fully developed economy, we believe U.S. companies often underestimate how severe these limitations can be. Examples of this can be seen from companies that have tried to expand operations into Africa.
Although Africa boasts significant natural resources and a plentiful labor force, economic development lags behind the rest of the world. One reason for this is their inadequate energy infrastructure. Companies wanting to do business in Africa may find that providing power to operations in Africa will be challenging and they may experience disruptions in supply due to power outages. The ICA states that “The installed generation capacity of the whole of sub-Saharan Africa is 68GW -- less than Spain's -- and as much as one quarter of that 68GW capacity is unavailable because of aging power plants and poor maintenance” (Energy, 2014). A 2013 article in US News and World Report states that many hospitals, schools, and businesses are forced to close, or work in the dark, during peak hours of operation and that, “Roughly 50 percent of companies in sub-Saharan Africa identified electricity as a "major constraint to business” (Christy & Morland, 2013). The Reuters TV video here (https://www.youtube.com/watch?v=Gclraj59W_I) discusses some challenges of doing business in Africa and it specifically mentions the power grid.
Some companies have tried to compensate for these power issues using cloud computing and other “green IT” concepts. For example, a 2010 case study in South Africa showed that these technologies could generate energy savings (Iyengar, n.d.). It showed that in a banking environment, the use of green IT and private cloud computing could reduce the number of virtual servers by half which in turn reduced power and cooling requirements by half (Iyengar, n.d.). However, despite how effective these may be in reducing requirements, complete energy failures still cripple IT operations. Even brown outs or power instability can leave IT operations are completely handicapped.
Given the criticality of energy to IT success, companies should focus resources on ensuring a stable power grid in areas of operation. This may require an additional investment in operations and may require creative IT sourcing strategies by IT departments when evaluating international installations.
References
Christy, P. & Morland, S. (2013, September 24). Powering U.S. Business in Africa. US News and World Report. Retrieved on February 24, 2014 from http://www.usnews.com/opinion/blogs/world-report/2013/09/24/increasing-african-access-to-electricity-will-power-us-business
Energy. (n.d.). In Infrastructure Consortium for Africa. Retrieved February 23, 2014 from http://www.icafrica.org/
Iyengar, S. (n.d.). Green could computing: A data center approach. Retrieved on July 13, 2014 from www.ibm.com/ibm/files/T926959G85653T32/GREEN_CLOUD_COMPUTING.ppt
Reuters TV. (2012, September 28). Investing in Africa: opportunities and challenges. Retrieved on July 14, 2014 from https://www.youtube.com/watch?v=Gclraj59W_I
This was a great blog post. I agree that a main problem with transnational organizations is that not every country will be at the same level in terms of technical capability or the required resources. Google is a company that is known as transnational and their usage of technology shows this. When I was in Colombia, Google was able to pick up on it and tried to show me Spanish options. Also, since Google was linked with Youtube I was getting Spanish videos. At the same time Google ensures that the level of quality is high across all levels, so the consumer does not feel a difference in service from place to place.
ReplyDeleteI think another potential disadvantage of transnational firms is that sometimes the culture of the country may over power the seamless quality that exists throughout the entire organization. There will be some countries that just do not easily join the fold in terms of transnational information technology
I agree with you. Culture is definitely a factor that organizations need to consider. When hiring employees who are not native to the home base of where the business is located, you run the risk of disrupting your brand because of cultural norms that may not mirror the standards that are bodied in the homeland. Companies definitely need to be cognoscente of cultural differences in host territories to avoid negative impact on their It business strategies.
ReplyDeleteReally interesting. You raise a good point that power is most certainly needed to maintain technologies and an outage or shortage would negatively impact an organization. I think organizations have to do their research on this and other forces that may impact their IT business strategies to avoid any pitfalls that may arise.
ReplyDeleteAs discussed in the blog post, Transnational IT consist of global supply chain and global e-commerce amongst others. The advantages of Transnational IT outweighs any cons it may present. Cons would of course include security breaches where customer information is jeopardized, just to mention a few. Another advantage my group wants to discuss is lower costs. According to the blog post, by allocating business operations over seas lower costs will be incurred due to more affordable resources.
ReplyDeleteMany companies are operating this way; for instance, Bayview Asset Management practices this advantage. In this case, business operations are allocated to India. Operational cost is drastically decreased and efficiency is heightened by keeping the oversees workforce in line with the goals of the company. This is a real life example of the benefits of Transnational IT.
The group also mentioned another great point, business continuity. The group stated that if, say, a natural disaster struck one location other locations would still be able to function. We see this at the Bayview workforce as well. There have a few locations; Coral Gables, Pompano Beach, Washington and NY. Each month data is stored into one data warehouse share by the different locations. In this case, if a hurricane strikes Miami the data won’t be lost. On the contrary, the data will be available through the other locations.
The Wall Street Journal (April 19th, 2011). Big U.S. Shift Hiring Abriad. Retrieved July 18, 2014 from http://online.wsj.com/news/articles/SB10001424052748704821704576270783611823972
-GROUP 8