Transnational IT Operations

Every country differs in culture which has been there for centuries. The international market is growing rapidly, with more and more multinational organisations entering new markets each day. In this assignment I will evaluate how the difference in cultures affects the performance of international businesses.

The business environment that influences companies' activity determines them to search for new development strategies intended to help them increase their business. In most cases, companies expand their business on international level. This is because the numerous growth opportunities provided by markets they have not addressed before can help them reduce their costs by outsourcing some of their processes and activities to cheaper destinations, or to increase their incomes by addressing new markets and new customer segments. The number of companies that outsource their production process to countries in Asia, Africa, Eastern Europe that are able to provide skilled workforce at lower costs is increasing. The scope of this international operation can be observed in the significant price reductions in product categories like electronics, clothing, and numerous types of services.

The IT Service industry has expanded rapidly. Many companies worldwide have made the decision to outsource this industry to offshore companies. Worldwide demand has increased growth to 40 to 50 percent on an annual compounded rate basis. Many developing nations like Latin America and Asia have made an attempt to obtain some of the IT offshoring business from countries like the United States because it is seen as not only a source for

International business meshes across multiple domains most notably market entry strategies and sociocultural variances. Factoring in those two critical aspects and giving them the right amount of attention is the separating line between success and failure. Terralumen, Blue Ridge, and Delta are all successful companies; However, by not observing the basic requirements of

In the book, International Business: Theory and Practice, Verizon-MCI in its domestic environment, the United States, is placed in the cultural cluster with the Anglo countries. This cluster consists of Australia, Canada, United States, United Kingdom, Ireland, and South Africa. The company’s cultural cluster, for its global environment, China, is with the Far Eastern countries. This cluster includes China, Hong Kong, Indonesia, and the Philippines. These cultural clusters approaches are based on the countries’ geographic similarities. They are grouped together depending on the location of the people in the world. Each cluster demonstrates differences within each cluster, as well as, differences among the countries. These differences reflect that other factors should have been considered when the groups were placed together.

There are also disadvantages for transnational companies as well as advantages. Many times these can be one and the same depending on the perspective. As the Multilanguage abilities can be a benefit, they can also be a challenge. Even though people can speak a foreign language, they sometimes do not understand all the inflections or the meaning of some idioms that may be common to an area that the company serves. This can cause some annoyance and even offensive for some customers.

Technology and Globalization have changed the landscape of organizational functionality. The technological advent of virtual communication has created opportunities to collaborate with individuals anywhere around the globe. Globalization has provided organizations with several opportunities to maximize their profits by allowing strategic placement of operations in countries where resources are cheaper or more abundant. Capitalizing on these opportunities requires communication and coordination of global teams (Griffith & Harvey, 2007).

Information technology (IT) industry is expanding worldwide starting with western IT firms conducting its operations in various countries with the help of offshore sourcing. IT offshoring is economically benefiting to source IT operations from the countries, which incurs low cost to develop software (Carmel & Tjia, 2005). Cultural differences may look like barrier for the regular operations in the offshore countries, but it can offer skilled operators and engineers to ensure quality output. The distance, politics, and business models can allow diverse issues to be addressed on a regular basis, which may create hindrances to control the operations related to the projects. Numerous advantages are triggered from cost advantages,

Transnational organizations have a complex business structure and require a multidimensional concentration of resources which are customized to meet the requirements of each local market. The central office requires a transnational strategy in order to attract local benefits which are important to the organization. Among the advantages of transnational organizations is the capacity to maintain a great degree of quick to response to local market needs from where they have operations. This report focuses on the General Electric (GE) which holds substantial assets and with operations in most countries in the world.

The first topic to be discussed is the idea of globalization. Merriam Webster online defines globalizing as “to make worldwide in scope or application.” Globalization is an important aspect in expanding an organization. Swanson and Holton (2009) state “Multinational companies are taking advantage of economies of scale and scope, proximity to markets and suppliers, and differences in the natural, political, and human resource-related infrastructure in countries around the world in order to achieve and maintain competitive advantage” (p. 421). It is more beneficial for companies to expand globally than to try to continue increasing profits just within their country. Eventually, they will reach a maximum profit that they can make unless they decide to globalize their organization.

The social, economic, and technological market places are incorporating information technology (IT) systems in many countries that support the activities of a business. Competition throughout several industries have brought about many new changes, but specifically, a growth of transnational opportunities. “A transnational business conducts operations in several countries with varying degrees of coordination and integration of strategy and operations” (Basu, n.d., para. 1).

The world offers significant business opportunities for every company, however, opportunities are accompanied by significant challenges for managers. Managing global operations across diverse cultures and markets represents a big challenge and opportunity for companies. To compete in the global market and be successful, companies must learn the strategies, policies, norms and technology necessary to conduct international business. The opportunities for global expansion are numerous, and attaining success is a matter of developing the right strategy to win local markets and its consumers.

The most challenging decision that a company may face in internationalization is the degree of standardization or adaptation in its operations. The question of standardization or adaptation affects all avenues of a business’ operations, such as R&D, finance, production, organizational structure, procurement, and the marketing mix. Whether a company chooses to standardize or adapt its operations depends on its attitudes toward different cultures. These attitudes are defined by three orientations toward foreign culture: ethnocentric, polycentric, and geocentric.

Microsoft has a global presence and a global workforce. This global workforce helps maintaining the balance between labour cost and optimum deliverance in swift response in adherence with the respective laws and regulations of the particular nations. And this is also done with keeping the culture of the region in mind which goes a long way in maintaining the comfortable and flexible work style culture that has existed at Microsoft since inception. Development of products overseas greatly profits Microsoft and also keeps the global image of a Corporate Giant intact.

There are four international competitive strategies that include: global standardization, localization, transnational, and international. Global standardization is a business model based on pursuing a low-cost strategy on a global scale. Localization, on the other hand is a strategy that is focused on increasing profitability by customizing the company’s goods or services so that the goods provide a favorable match to tastes and preferences in different national markets. Moving on transnational strategy, which is a business model that simultaneously achieves low cost, differentiates the product offering across geographic markets, and fosters a flow of skills between different subsidiaries in the company’s global network operations. Last of the international competitive strategies is the international strategy which involves making products at home, while leaving other functions to foreign business units.