MULTINATIONAL ORGANIZATIONSA softwa

MULTINATIONAL ORGANIZATIONS
A software development firm in India sends an electronic greeting card to employees of business
partners worldwide. The card includes a swastika, a symbol sacred in Indian culture. In protest,
14 international teams stop working for 11 days. An international company discovers that its
invoices are electronically stamped with a date that is one day before a shipment is made from
Singapore to the United States. An international team using Web tools to collaborate discovers
near the completion of the project that some of the measures in electronic drawings are metric
and some are English. AWeb-based business learns that the law in some countries forbids the sale
of an item it offers at the site. International corporations regularly encounter these types of
problems, and realize that they need to overcome cultural, legal, and other challenges.

The emergence of the Web as a global medium for information exchange has made it an
important vehicle for both business-to-business (B2B) and business-to-consumer (B2C)
commerce. In 2007, more than 888 million people regularly logged on to the Internet across the
globe. Over 70 percent of them come from non-English-speaking countries, as Figure 9.1 shows,
and more than half of all e-commerce revenues come from these countries. The ratio of
non-English speakers to English speakers has steadily grown over the years.

CHALLENGES OF GLOBAL INFORMATION SYSTEMS

Technological Challenges
Not all countries have adequate information technology infrastructure to allow resident companies
to build an international information system. International ISs, especially those using the
Web, often incorporate graphics to convey technical or business information, and those
applications, as well as interactive software, require increasingly fast (broadband) communication
lines. The bandwidth available in some countries is too narrow for high-volume transmission
of graphically and animation-rich Web pages. Thus, companies might have to offer two
versions of their sites, one for wide bandwidth and another for narrow bandwidth. Often,
companies use one site but provide the same content in both graphically rich and text-only
pages, or the same video for download at different speeds.

Regulations and Tariffs
Countries have different regulations on what may or may not be imported and which tariff
applies to which imported product. While many executives know they might be missing out on
lucrative deals with overseas businesses, they are afraid that exploring international opportunities
would entail too many hassles. They are also afraid that even with the proper research,
employees might not know how to comply with the laws of destination countries, let alone
calculate how much the organization would have to pay in taxes, tariffs, custom duties, and
other levies on exported or imported goods.

Differences in Payment Mechanisms
One of the greatest expectations of e-commerce is easy payment for what we buy online. Credit
cards are very common in North America and are the way businesses prefer to be paid online.
However, this practice is not widespread in other regions of the world. The high rate of stolen
credit cards, especially in Eastern Europe, attaches risk to such payments and deters potential
online customers. Also, most Europeans prefer to use debit cards rather than credit cards. (The
holder of a debit card must maintain a bank account from which the purchase is immediately
deducted; the holder of a credit card receives a grace period of up to a month and pays the
credit-card issuer in any way he or she prefers.) Americans are more willing to give credit-card
details via the Web than people from other nations. Until citizens of other countries become
willing to do so, payment through the Web, and therefore B2C trade, will not reach its full
potential.

Language Differences
To communicate internationally, parties must agree on a common language, and that can create
problems. For instance, data might not be transmittable internationally in real time because the
information must first be translated (usually by human beings). Although some computer
applications can translate “on the fly,” they are far from perfect. Another hurdle is that national
laws usually forbid businesses to run accounting and other systems in a foreign language, leading
to an awkward and expensive solution: running these systems in two languages, the local one
and English, which is the de facto international language.

Cultural Differences
XL Capital is a global insurance firm operating 77 offices in 28 countries and proclaiming to be
“one company without borders.” At one point, the company had seven different e-mail
addressing standards at local offices. When the company’s CIO decided to adopt a single
universal naming format, he faced resistance. In South America, for instance, a person might use
five names: his first and middle names, and his parent’s middle and last names. That caused some
people to have long e-mail addresses. The CIO’s suggestion to use employee ID numbers as their
e-mail addresses (with the company’s suffix) was received with resentment in South America and
Europe because it was impersonal. To mitigate these unexpected cultural differences, the CIO
established a system that greets each employee by name in a personal manner as soon as the
employee logs on to a computer.

Conflicting Economic, Scientific, and Security Interests
The goal of corporate management is to seize a large market share and maximize its organization’s
profits. The goal of a national government is to protect the economic, scientific, and
security interests of its people. Scientific information is both an important national resource and
a great source of income for foreign corporations, so occasionally those interests conflict.
For instance, companies that design and manufacture weapons have technical drawings and
specifications that are financially valuable to the company but also valuable to the security of
their country. Hence, many governments, including the U.S. federal government, do not allow
the exchange of weapon designs. Transfer of military information to another country, even if the
receiving party is part of an American business, is prohibited. Often, products whose purpose has nothing to do with the military are included in the list of prohibited trade items, because of the
fear that they could be converted for use against the country of origin. In recent years, the list
has included some software packages. The result is that, although American divisions of a
company can use such software, their sister divisions in other countries cannot.

Political Challenges
Information is power. Some countries fear that a policy of free access to information could
threaten their sovereignty. For instance, a nation’s government might believe that access to
certain data, such as the location and quantity of natural resources, might give other nations an
opportunity to control an indigenous resource, thereby gaining a business advantage that would
adversely affect the resource-rich country’s political interests.

Different Standards
Differences in standards must be considered when integrating ISs internationally, even within
the same company. Because nations use different standards and rules in their daily business
operations, sometimes records within one company are incompatible. For instance, the bookkeeping
records of one division of a multinational company might be incompatible with the
records of other divisions and headquarters. As another example, the United States still uses the
English system of length and weight measures (inches, feet, miles, quarts, pounds, and so on),
while the rest of the world (including England) officially uses the metric system (centimeters,
meters, liters, kilograms, and the like). There are also different standards for communicating
dates, times, temperatures, and addresses. The United States uses the format of month, day, year,
while the rest of the world records dates in the format of day, month, year—so a date recorded
as 10/12/08 might be misinterpreted. The United States uses a 12-hour time notation with the
addition of a.m. or p.m., while other parts of the world use a 24-hour notation (called “military
time” in the United States because the U.S. military uses this notation). The United States uses
Fahrenheit temperatures, while other countries use Celsius temperatures. Americans communicate
addresses in the format of street number, street name, and city name. Citizens of some other
countries communicate addresses in the format of street name, street number, and city name.

Legal Barriers
The fact that countries have different laws has a significant impact on global business in general,
and on e-commerce in particular. The differing laws can pose serious challenges to international
transfer of data, free speech, and the location of legal proceedings when disputes arise between
buyer and seller.