Learning Objectives
By the end of this section, you will be able to:
- Identify different types of global e-business models and enterprise strategies
- Describe logistics issues, models, and strategies
- Explain risk management and mitigation strategies associated with global data and systems sharing
As technology has transformed international business operations, e-business has become a vital tool, along with robust logistics processes and risk mitigation for the global stage. In the global marketplace, information systems are revolutionizing how these processes are handled, shaping the future of global organizations and helping them use technology to be more efficient and competitive throughout the world.
Global E-Business
A global e-business refers to the use of electronic communication and digital technologies to conduct business on a worldwide scale. It encompasses a wide range of activities including online sales, marketing, customer service, and collaboration with partners and suppliers across the globe. Global e-business has become increasingly important in today’s digital economy, enabling organizations to reach customers and markets beyond their traditional geographical boundaries.
The shift to global e-business has revolutionized how companies operate. Businesses can now reach new markets and expand their customer base, streamline internal processes with online tools, and offer enhanced customer experience through global support and personalized online interactions. Consider a sports apparel company looking to compete on a global scale. Without e-business, they have limited market opportunities as they are reduced to selling in physical stores only, restricting their customer base to their domestic market, and limiting their brand awareness to their local market. With an e-business model, they can launch an online store, reach new customers worldwide, and establish their brand as a global player.
Online platforms enable businesses to operate around the clock, catering to different time zones and increasing sales opportunities. E-businesses often have lower overhead costs compared to brick-and-mortar operations as they save on expenses like rent, utilities, and on-site staff. E-business equips companies to compete effectively, streamlining operations, reaching new markets, and building a strong global brand in today’s global marketplace.
Types of E-Business Models
An e-business model refers to the strategies and structures that businesses use to operate and generate revenue online. Table 11.1 outlines some of the primary e-business models. Each model leverages the connectivity and reach of the internet to create value and drive revenue.
| Type | Description | Examples |
|---|---|---|
| Business-to-consumer (B2C) | Businesses sell products or services directly to consumers | Amazon, Zappos |
| Business-to-business (B2B) | Businesses sell products or services to other businesses | Salesforce, Smartsheet |
| Consumer-to-consumer (C2C) | Consumers sell products or services to other consumers, often facilitated by a third-party platform | eBay, Craigslist |
| Consumer-to-business (C2B) | Consumers offer products or services to businesses | Freelancer platforms like Upwork, and crowdsourcing platforms like 99designs |
| Business-to-government (B2G) | Businesses provide goods or services to government entities | Military equipment suppliers, construction companies |
| Government-to-business (G2B) | Government entities provide services or information to businesses | Trade licenses, public-private partnerships |
| Government-to-consumer (G2C) | Government entities provide services or information directly to consumers | Tax filing portals, driver’s license services |
Global Enterprise Strategies
A global enterprise strategy is a comprehensive plan outlining how an organization will achieve its goals and objectives in a global marketplace, or the road map to an organization’s success. Developing and implementing global enterprise strategies involve creating comprehensive plans that align with an organization’s overall goals and objectives while considering the complexities of operating in a global environment. Effective global enterprise strategies are important for companies seeking to expand their operations and achieve success. Examples of companies with global enterprise strategies include Coca-Cola, Toyota, Microsoft, McDonald’s, and Apple.
By developing and embracing innovative global strategies, organizations can unlock growth, navigate complexities, and thrive in today’s interconnected world. Strategies might include the following:
- reaching out to new customers and revenue streams beyond domestic borders
- tapping into a global pool of talent, capital, and raw materials
- spreading operations across regions to mitigate economic and political risks
- gaining a global advantage through increased footprint and brand recognition
- sparking creativity by accessing diverse ideas and best practices worldwide
- establishing a strong, consistent brand identity across international markets
- expanding responsibly, considering environmental and social impacts
To implement a successful global enterprise strategy, an organization should proceed through these steps:
- Complete a thorough analysis of the global business environment. This includes examining market trends, competitor strategies, regulatory requirements, and cultural factors.
- Create clearly defined SMART (specific, measurable, achievable, relevant, and time-bound) objectives for global expansion.
- Outline the specific actions required to achieve the organization’s goals and incorporate the environmental analysis and objectives. Include details on employing market entry methods, managing cultural differences, addressing regulatory requirements, and building a strong global brand.
- Determine the resources needed. These resources include financial capital, human resources with international expertise, and technological infrastructure to support global operations.
- Assemble a diverse and talented team to execute the global enterprise strategy. This team should include individuals with expertise in international business, marketing, finance, operations, and other relevant areas, depending on the specific industry and target markets.
- Measure key performance indicators such as market share, revenue growth, and profitability to assess the effectiveness and the progress of the strategy. Based on ongoing monitoring and evaluation, adjustments to the global enterprise strategy may be necessary. This might involve revising the market entry approach, realigning resource allocation, or refining product offerings to better meet the needs of global customers.
Link to Learning
The Strategy Institute is an organization that offers certifications for global information systems professionals and provides other resources to help these professionals excel.
Global Logistics
The process of global logistics involves planning and managing the international transportation of goods to their destination. Global logistics is how clothing, shoes, medications, health products, or food can be ordered online and delivered to you a few days later. Global logistics entails detailed planning of how goods will be transported, what routes to take, and how to navigate customs regulations around the world. It considers the transportation mix (air, land, and water means) needed for the efficient movement of goods, and factors including cost, speed, and cargo type. It ensures the right amount of stock is in the optimal places with the goals of avoiding stock-outs and minimizing storage costs. It uses technology to track shipments, manage inventory, and ensure smooth communication across the supply chain.
Types of Logistics Models
Organizations employ different logistics models to efficiently manage the flow of goods, information, and resources. These models each offer distinct advantages and come with their own set of challenges. Choosing a suitable model depends on various factors, including the nature of the business, customer demand patterns, geographical reach, and cost considerations. Three common types of logistics models are third-party, just-in-time, and hub-and-spoke.
Third-party logistics (3PL) involves outsourcing logistics operations to a third-party service provider. Outsourcing can reduce operational costs by leveraging the provider’s established networks and economies of scale. These vendors manage transportation, warehousing, distribution, and other logistics-related activities on behalf of the company. Providers of 3PL bring specialized knowledge and expertise, helping businesses optimize their supply chain. They also offer flexibility in scaling operations up or down based on fluctuations in demand without significant capital investment from the business using their services. Keep in mind that heavy reliance on a third-party provider can pose risks if the provider faces issues or disruptions.
Just-in-time (JIT) logistics focuses on minimizing inventory levels by receiving goods only as they are needed in the production process. This model strives to reduce costs and increase efficiency by lowering inventory levels, reducing storage costs, and minimizing waste from unsold or obsolete products. JIT offers streamlined operations, and reduced lead times can enhance supply chain efficiency, plus it promotes responsiveness to market demand, reducing excess stock. However, JIT is highly sensitive to supply chain disruptions, and delays from suppliers can halt production.
Hub-and-spoke logistics uses a central hub (distribution center) to consolidate and distribute goods to various spokes (destinations). Centralizing distribution can lead to significant cost savings in transportation and warehousing. Consolidation at the hub allows for efficient sorting, routing, and scheduling of deliveries, allowing expansion of networks and increased volumes. Managing a hub and spoke network requires sophisticated planning and coordination to ensure timely deliveries.
Why Use a Global Logistics Information System?
The implementation of a global logistics information system offers a compelling solution to several business problems. A global logistics information system (GLIS) is designed to manage and track the flow of goods across international borders, encompassing all aspects of a global supply chain. Imagine the transformative potential of possessing real-time visibility into the entirety of the supply chain. This includes both a comprehensive inventory overview and the precise location of every shipment in transit. Such transparency empowers a proactive approach to problem-solving and facilitates the formulation of informed decisions based on the most current data available.
The benefits of a GLIS extend far beyond mere visibility. It optimizes transportation routes to minimize costs and delivery times and automates repetitive tasks, minimizing human error and streamlining operational workflows. By providing accurate delivery estimates and proactively communicating potential delays, a GLIS empowers an organization to become a customer champion. A GLIS equips organizations with the agility necessary to adapt to the ever-evolving market landscape and seamlessly scale operations in support of global expansion. The consequence of these improvements is a leaner and more cost-effective logistics operation with a reduced risk profile. This is achieved through improved supply chain visibility, robust security features that safeguard sensitive data, and the ability to leverage data-driven insights to optimize decision-making across the entire logistics spectrum.
Global Supply Chain Management
Imagine you are managing the global supply chain for a company that designs cutting-edge athletic wear. The framework of global supply chain management keeps this global operation running smoothly. It encompasses everything from the first stitch to the final delivery, across international borders. The process of global supply chain management (GSCM) involves the planning, coordination, and optimization of the flow of goods, information, and finances across international borders to meet customer demands. It involves managing the entire supply chain from sourcing raw materials to delivering finished products to end customers, taking into account factors such as global sourcing, production, distribution, and logistics.
Types of Supply Chain Management Models
Choosing the right supply chain model is critical for businesses. It can affect everything from cost control to risk management and brand reputation. Table 11.2 shows six common models that organizations utilize based on the best fit for the company. There’s no one-size-fits-all model, and selecting the right one depends on the specific industry, products, and business goals of the organization.
| Supply Chain Management Model | Description | Businesses Best Suited For | Advantages | Disadvantages |
|---|---|---|---|---|
| Continuous flow | Streamlined operations with minimal waste | Industries characterized by stable demand and production patterns | Fits ideally with the production of standardized goods | Is inflexible and therefore less suitable for dynamic markets with rapidly evolving consumer preferences |
| Fast chain | Expeditious delivery of trend-driven products to market, capitalizing on short-lived consumer interest | Businesses operating in environments with short product life cycles, such as the fashion industry | Fosters competitiveness | Necessitates a high degree of adaptability and can be susceptible to disruptions in the supply chain |
| Efficient chain | Prioritization of efficiencies and cost reduction | Highly competitive industries with tight profit margins | Offers meticulous production forecasting to ensure minimal waste and optimal resource utilization | Is vulnerable to disruptions and requires accurate forecasting |
| Agile | Handling of expensive specialty goods | Businesses dealing with high-value, specialty products that demand precise handling | Utilizes premium pricing | Requires expertise in product transportation and handling |
| Custom configured | Combining elements of both agile and continuous flow models | Companies engaged in prototype design and low-volume, customized production | Facilitates tailoring products to specific customer needs | Often necessitates a significant financial investment in customization processes |
| Flexible | Scales to fluctuating supply chain needs | Businesses grappling with variable demand patterns throughout the year | Allows for scaling production up or down in response to market fluctuations, minimizing stocking risks | Carries potential for increased complexity and challenging coordination |
Effective Supply Chain Management
Managing the supply chain effectively involves overseeing processes such as sourcing, procuring, producing, and delivering goods and services to customers while optimizing costs, quality, and delivery times. Supply chain managers need to develop strong relationships with suppliers as well as communicate regularly, share information, and collaborate with partners to ensure timely delivery of high-quality goods and services. To align production and inventory levels with customer demand, reducing stock-outs and preventing excess inventory, companies need to consider historical data, evaluate market trends, and assess customer insights.
Managing costs is also a critical component of effective SCM. This includes using inventory management practices to minimize holding costs while ensuring product availability that can meet customer demands. Risk management is another important component of effective SCM, allowing for identification of potential risks and supply chain disruptions in order to minimize their impact. One area that cannot be overlooked is the use of performance indicators to monitor and measure supply chain performance so that areas of improvement can be identified and addressed.
Challenges of Global Risk Management
Understanding global enterprise risk management (ERM) is essential for businesses working internationally. For example, Uber uses a system for dynamic pricing, or surge pricing, which changes fare prices based on factors like where riders and drivers are, traffic conditions, and past data.13 This system helps Uber manage supply and demand. By adjusting prices in real time, Uber makes sure riders can get a ride when they need one and encourages drivers to work in busy areas. However, managing this system globally comes with challenges like ensuring data accuracy and following different regional laws.
The importance of developing and implementing effective strategic and global ERM strategies boils down to two key concepts: proactive protection and sustainability. Enterprise risk management helps to proactively identify and mitigate global threats, safeguarding an organization’s reputation, building resilience in a volatile world, and ensuring avoidance of costly mistakes. Informed decision-making, optimized resource allocation, and a competitive edge all stem from a strong ERM strategy that fosters sustained success.
Developing and implementing a strategic and global ERM strategy is essential for success, but it’s not without its hurdles. Here’s a breakdown of the key challenges and considerations:
- Gaining a comprehensive view of risks across a global organization: Data silos, cultural differences in reporting, and complex supply chains can hinder risk identification and assessment.
- Standardizing risk management practices across diverse geographical locations: Differences in regulations, languages, and risk tolerances can lead to inconsistencies in how risks are identified, assessed, and managed.
- Failing to consider cultural differences can lead to misinterpretations and ineffective risk mitigation strategies: Communication styles, legal frameworks, and risk perceptions can vary greatly across regions.
- Implementing a global ERM program requires dedicated resources like personnel, technology, and budget allocation.
- Securing buy-in from all levels of leadership and employees is crucial for successful system implementation.
By acknowledging these challenges, organizations can develop a robust and effective global ERM strategy that protects their operations and fosters long-term success in today’s interconnected world. For example, in 2017, global shipping giant Maersk fell victim to a cyberattack perpetrated by the NotPetya malware.14 Maersk utilizes a complex global information system to manage its vast network of shipping containers, ports, and logistics across the globe. The NotPetya attack, disguised as a ransomware, infiltrated Maersk’s global information system and wreaked havoc. Terminals closed down, shipping schedules were disrupted, and communication between locations became nearly impossible. This resulted in significant financial losses and delays for Maersk and its clients. Moreover, the attack potentially exposed sensitive information within the system, such as customer data, shipment details, and internal communications. The Maersk attack serves as a reminder of the importance of robust security measures within global information system supply chain management.
Footnotes
- 13Rohan Whitehead, “How Uber Utilises Data Science,” Institute of Analytics, May 30, 2024, https://ioaglobal.org/blog/how-uber-utilises-data-science/
- 14Jacob Gronholt-Pedersen, “Maersk Says Global IT Breakdown Caused by Cyber Attack,” Reuters, June 27, 2017, https://www.reuters.com/article/technology/maersk-says-global-it-breakdown-caused-by-cyber-attack-idUSKBN19I1N5/