WHAT IS A FLAT WORLD

BA 447Day 2 & 3

Moving forward

• Friedman’s view of a “flat world”

• “Flatteners” or developments that helped create this flat world

• Summarize these flatteners into his notion of a “triple convergence”

Flat World

• The notion of a flat world suggests a challenge to how we think of things. Recall– Globalization 1.0 (1492-1800): discovery that the

earth was round, exploration, European powers expand their power, including trading reach

– Globalization 2.0 (1800 – 2000): multinationals followed their countries

– Globalization 3.0 (2000- ): individuals of diverse backgrounds able to collaborate and compete globally

Flat World

• Playing field has been flattened – traditional advantages accruing to one country or a large multinational are being challenged

• Individuals from other countries can compete for global knowledge work as never before

• Because intellectual work, intellectual capital, can be delivered, distributed, produced, and put back together again . . . with relative freedom in the way we do work

Significance of Flat World

• Level playing field

• Traditional, comparative advantages held by those with access to information and/or technology can now be challenged

• Individuals from non-traditional backgrounds can now engage in economic activity, at times in ways not seen before

Flatteners: first three are platforms contributing to collaboration

• 11/9: the fall of the Berlin Wall – Fall of the “Wall” between East and West Berlin– Political systems that were once closed opened up

• 8/9: Netscape goes public– Emergence of an internet browser

• Work flow software: – Development of software which when installed in

different computers and in different places allows them to work with each other

11/9 as a platform for collaboration

• 11/9: the fall of the Berlin Wall which separated East and West Berlin and Germany

• The fall of the “wall” resulted in the eventual collapse of countries that were part of the Council for Mutual Economic Assistance or COMECON, – sometimes referred to as the “Eastern bloc”, or the

Soviet empire– Included in this “bloc” were countries like the Czech

Republic, Bulgaria, Romania, East Germany, Poland, etc.

11/9 as a platform for collaboration (Continued)

• Friedman’s claim: this event tipped balance of power across the world towards more democratic, free-market oriented governments

• Centrally planned countries “opened up”– In 1991, India abolished trade controls– China accelerated reforms (although some of china’s

economic reforms started in the 70s)

• Global exchange of digital information now possible as political restrictions eased up– Huge personal empowerment

8/9 as a platform for collaboration

• 8/9: Netscape goes public• The initial browser was Mosaic which was

designed to allow researchers/scientists in remote locations to access each other’s work

• Mosaic was transformed into the first browser to be made available to the public (for free)

• Coupled with introduction of Windows 95, including GUI capability, these made accessing the internet much easier– Early access to the internet were text based

8/9 as a platform for collaboration (Continued)

• Browsers as gateway to Internet • From internal systems to systems of systems• Dot com bubble allowed massive investments in

the internet highway; by the time the bubble burst, an initial physical infrastructure – fiber optic cables, switches, etc. – was in place

• From resistance to email and cell phones (early 90s) to emergence of terms like B2B and B2C.

Work-flow software as a platform for collaboration

• Work flow software: software that allows computers and in different places to communicate and work with each other using different modes, e.g. audio, video, etc.

• Example: Wild Brain produces cartoons in SF– Recording sessions– Design and direction– Writers– Animation– All in different locations using Virtual Private Network

(VPN)

Work-flow software as a platform for collaboration (Continued)

• Example 2: Pay Pal

• Emergence of protocols and standards to facilitate communication among systems

Flatteners: the next seven are new forms of collaboration

• Uploading

• Outsourcing

• Offshoring

• Supply-chaining

• In-sourcing

• In-forming

• Steroids

Flattener 4: Uploading

• Power or capability of individuals to send up, out, and around their own products and ideas– Apache – a web server that allow web

browsers (in different computers) to interact with different web servers. Web servers allow a user to use his or her home or office to host a web site.

Flattener 4: Uploading (Continued)

• Open source communities– “community rules”– Examples:

• Linux operating system - offers a family of operating systems; can be adapted to run on the smallest desk top computer, laptop, palm pilot, etc.

• Firefox (Mozilla)

• Blogging, Wikis, etc.

Flattener 5: Outsourcing

• India as an example of how outsourcing began• Educational infrastructure in India

– 7 Indian Institute of Technology – 6 Institute of Management– As a result, Indian nationals would go to the US or

developed countries to find work

• Dot-com boom created “physical highway” to allow for India to get “connected”

• Reform of telecommunications system in India

Flattener 5: Outsourcing (Continued)

• US companies start looking for opportunities to utilize labor pool in India

• Late in the 1990s, the Y2K issue emerged• Indian “expats” return to India after

“dot.com bubble” burst• Friedman sees the massive amount of

programming to prevent a “Y2K” disaster and return of expats catalysts India’s emergence as an outsourcing destination

Flattener 6: Offshoring

• Offshoring: move a strategic process or portion of a company’s value chain to a foreign location

• Distinction – Outsourcing: have another company do a

specific, but limited function, e.g. accounting– Offshoring: move production or an important

process offshore

Flattener 6: Offshoring (Continued)

• China as an example of the emergence of offshoring

• 1977: Deng Xiaoping starts economic reforms in China

• Mid 1980s: applies for membership in WTO• Finally accepted into WTO mid 1990s

– Watershed moment in the sense that as a member of WTO, China has to play by international rules

Flattener 6: Offshoring (Continued)

• Example: ASIMCO– From efforts to find “new china” managers to manage

their business to investing in the US – US operation takes care of finishing, also allows

company to keep abreast with technology

• Film: China Brands• Friedman does mention possible limits to growth

in China, including need for further reforms

Flattener 7: Supply Chaining

• Wal-Mart as an example of a company that pursues supply chain management aggressively

Flattener 8: Insourcing

• My experience with DHL

• UPS

Flattener 9: In-forming

• In-forming: capability to build your own supply chain . . . of information, knowledge, entertainment

Flattener 10: Steroids

• Computing capability has increased in terms of computational, storage, and input/output capacity

• Instant messaging and file sharing

• VOIP

• Video conferencing

• Computer graphics

• Wireless communication

The world is flat . . . (Friedman)

• Three converging developments– A global, Web-enabled playing field that allows

multiple forms of collaboration– Gradual adaptation of organizations through

horizontal collaboration in the value creation process extends this platform to different countries

– 3 billion people join the party - opening of economies like China, India, Russia, and in Eastern Europe, Latin America, and Central Asia to the world economy

Example of how triple convergence works

• A global, Web-enabled playing field that allows multiple forms of collaboration is in place

• A company installs an effective supply chain that allows it to source products from a country, e.g. India, Bangladesh, China, Ireland, etc.

• A factory worker in China is able to benefit from global trade because his or her country has allowed information and products to flow “freely”

New “Arrivals”

• Population data– Population data

• We are only seeing the tip of the iceberg.– Not everyone has access yet– Microsoft: in China, 1 in a million can mean a

total of 1,300,000– Bangalore: “we are hungry for success”

• Its dominated by, but not all India– Map of IT businesses

Global Strategy Implications

• Supply chain– Value chain– Strategic Outsourcing

• Search for low cost locations heightened/assisted by technology

• Opportunity to assemble or produce locally• Global product morphing into local or regional

versions• Strategy will depend on nature of the company’s

business and how management adapts to opportunities and threats

What assumptions does Friedman make?

• All 3 billion have ready access to technology, knowledge, etc.?

• Products, services, or portions thereof can be shipped by or facilitated by the internet

• Tariffs and other entry barriers will continue to decline

• Political stability in countries like China

• What else?

Conclusions?

• What conclusions can we draw from the concept of a flat world and how it flattened?– Level playing field– Competition will increase

• What do you think?

Exercise 1

• Given the forces shaping this “flat world:”– Provide at least one example of each of these

forces from your readings or direct experience.

– State a concern you might have with this notion of a “flat world”: consequence on your immediate future? your community’s future?

– Strategies to respond to these challenges?

Term Project

• Find an issue or a possible developments that may impact a multinational company or industry.– Read a few articles from Readings– Consider what aspects of the “story” are

interesting; what matters to you?– Can these issues may affect a multinational.– Analyze one of these issues in depth

Approach to Analyzing Issue

• Describe the situation or issue as best as you can and as simply as possible.– Frame it in a question, for example, what is this all

about? – What does the article say about it?– What does the popular press say about it?

• What further questions are raised, for example possible resolution? outcome? Implications on the region? Multinationals?

• Get data to understand scale, cost, etc.

Approach . . .

• Who are key players? Stakeholders? Their interests? Are there conflicting interests involving players who can influence the outcome?

• Where will this conflict be fought? Courts, public opinion, legislature, regulatory body (whether trans-national or national), real battlefield, etc.?

• What does the group think?

Consider Different Perspectives

• Each issue, potentially, can be understood through several perspectives, e.g. historical, economic, social, political, technological, religious

• The popular press sometimes picks up on one and often forgets or minimizes others.

• Historical perspective: most issues of a social or political nature are best understood from the perspective of history. – For example, Iraq was carved out of the Ottoman

Empire only after World War I; Kurds, Shiites, and Sunnis were unilaterally placed into one political entity.

Different Perspectives

• Economic perspective: this can range from business aspect, e.g. what is gained from importing ewaste into a developing country, to national aspect, e.g. what is the contribution to national income of a developing country of outsourcing.

• Religious perspective: this can range from conflicts involving two religions, e.g. Hindus and Muslims, to conflicts within religions, e.g. Shiites and Sunnis.

Different Perspectives continued

• Social perspective: some issues contain or involve conflicts across different races, cultures, ethnicities, etc.

• Political perspective: who or what are the key political social groups involved in the conflict and how might they gain or lose from possible resolutions of the conflict.

• Technological perspective?

Issues other students have studied

• E-waste• WTO issues, e.g. Airbus vs Boeing• Unethical advertising in developing

countries - case of Nestle• Government involvement in business

transactions - CNOOC and UNOCAL, Dubai Ports World

• Activists/terrorists and their causes - free trade coffee, Al quaeda

Examples of Global “Issues”

• Some examples:– Terrorism– Unfair labor practices and multinationals– Global Warming– Waste, particularly e-waste, and developing

countries– Resource constraints, e.g. oil, water– Genetically modified products

When Studying or Seeking to Understand an Issue/Topic

• Define the “objective reality.” Tell the story without making a value judgment.

• Describe the scope and dimension of the issue.• Examine different perspectives of the issue.• Who are the key players or stakeholders? What

are their interests?• What are the conflicts inherent in the issue?• How might these conflicts be resolved?

Organize your groups

• Start tossing around possible topic

• Agree on expectations/criteria for evaluating contribution to group effort

• Collaboration software

• Common meeting time

• Exchange contact info