Upon successful completion of this chapter, you will be able to:
- explain the concept of globalization;
- describe the role of information technology in globalization;
- identify the issues experienced by firms as they face a global economy; and
- define the digital divide and explain Nielsen’s three stages of the digital divide.
The Internet has wired the world. Today it is just as simple to communicate with someone on the other side of the world as it is to talk to someone next door. But keep in mind that many businesses attempted to outsource different needs in technology, only to discover that near-sourcing (outsourcing to countries to which your country is physically connected) had greater advantage. This chapter looks at the implications of globalization and the impact it is having on the world.
What Is Globalization?
Globalization refers to the integration of goods, services, and culture among the nations of the world. Globalization is not necessarily a new phenomenon. In many ways globalization has existed since the days of European colonization. Further advances in telecommunication and transportation technologies accelerated globalization. The advent of the the worldwide Internet has made all nations virtual next door neighbors.
The Internet is truly a worldwide phenomenon. As of December 2017 the Internet was being used by over 4.1 billion people world wide. From its initial beginnings in the United States in the 1970s to the development of the World Wide Web in the 1990s to the social networks and e-commerce of today, the Internet has continued to increase the integration between countries, making globalization a fact of life for citizens all over the world.
The Network Society
In 1996 social-sciences researcher Manuel Castells published The Rise of the Network Society, in which he identified new ways economic activity was being organized around the networks that the new telecommunication technologies had provided. This new, global economic activity was different from the past, because “it is an economy with the capacity to work as a unit in real time on a planetary scale.” Having a world connected via the Internet has some massive implications.
The World Is Flat
Thomas Friedman’s 2005 book The World Is Flat uses anecdotal evidence to present the impact the personal computer, the Internet, and communication software have had on business, specifically the impact on globalization. Three eras of globalization are defined at the beginning of the book.:
- “Globalization 1.0″ occurred from 1492 until about 1800. In this era globalization was centered around countries. It was about how much horsepower, wind power, and steam power a country had and how creatively it was deployed. The world shrank from size “large” to size “medium.”
- “Globalization 2.0″ occurred from about 1800 until 2000, interrupted only by the two World Wars. In this era, the dynamic force driving change was multinational companies. The world shrank from size “medium” to size “small.”
- “Globalization 3.0″ is our current era, beginning in the year 2000. The convergence of the personal computer, fiber-optic Internet connections, and software has created a “flat-world platform” that allows small groups and even individuals to go global. The world has shrunk from size “small” to size “tiny.”
According to Friedman, this third era of globalization was brought about, in many respects, by information technology. Some of the specific technologies include:
- Graphical user interface for the personal computer popularized in the late 1980s. Before the graphical user interface, using a computer was relatively difficult, requiring users to type commands rather than click a mouse. By making the personal computer something that anyone could use, the computer became a tool of virtually every person, not just those intrigued by technology. Friedman says the personal computer made people more productive and, as the Internet evolved, made it simpler to communicate information worldwide.
- Build-out of the Internet infrastructure during the dot-com boom during the late-1990s. During the late 1990s, telecommunications companies laid thousands of miles of fiber optic cable all over the world, turning network communications into a commodity. At the same time, the Internet protocols, such as SMTP (e-mail), HTML (web pages), and TCP/IP (network communications) became standards that were available for free and used by everyone through their email programs and web browsers.
- Introduction of software to automate and integrate business processes. As the Internet continued to grow and become the dominant form of communication, it became essential to build on the standards developed earlier so that the websites and applications running on the Internet would work well together. Friedman calls this “workflow software,” by which he means software that allows people to work together more easily, and allows different software and databases to integrate with each other more easily. Examples include payment processing systems and shipping calculators.
These three technologies came together in the late 1990s to create a “platform for global collaboration.” Once these technologies were in place, they continued to evolve. Friedman also points out a couple more technologies that have contributed to the flat-world platform, namely the open source movement discussed in Chapter 10 and the advent of mobile technologies.
Economist Pankaj Ghemawat authored the book World 3.0 in 2011 in an attempt to provide a more moderate and research-based analysis of globalization. While Friedman talked with individuals and produced an anecdotally-based book, Ghemawat’s approach was to research economic data, then draw conclusions about globalization. His research found the following:
- Mailed letters that cross international borders = 1%
- Telephone calling minutes that are international = 2%
- Internet traffic that is routed across international borders = 18%
- National, as opposed to international, TV news sources = 95%
- First generation immigrants as portion of world’s population = 3%
- People who at sometime in their lives will cross an international border = 10%
- Global exports as portion of the value of all goods produced in the world = 20%
According to Ghemawat, while the Internet has had an impact on the world’s economy, it may well be that domestic economies can be expected to continue to be the main focus in most countries. You can watch Ghemawat’s Ted Talk here. Current and future trends will be discussed in Chapter 13.
The Global Firm
The new era of globalization allows virtually any business to become international. By accessing this new platform of technologies, Castells’s vision of working as a unit in real time on a planetary scale can be a reality. Some of the advantages include:
- Ability to locate expertise and labor around the world. Instead of drawing employees from their local area, organizations can now hire people from the global labor pool. This also allows organizations to pay a lower labor cost for the same work based on the prevailing wage in different countries.
- Ability to operate 24 hours a day. With employees in different time zones all around the world, an organization can literally operate around the clock, handing off work on projects from one part of the world to another as the normal business day ends in one region and begins in another. A few years ago three people decided to open a web hosting company. They strategically relocated to three places in the world which were eight hours apart, giving their business 24 hour coverage while allowing each to work during the normal business day. Operating expenses were minimized and the business provided 24/7 support to customers world wide.
- Larger market for their products. Once a product is being sold online, it is available for purchase from a worldwide customer base. Even if a company’s products do not appeal beyond its own country’s borders, being online has made the product more visible to consumers within that country.
In order to fully take advantage of these new capabilities, companies need to understand that there are also challenges in dealing with employees and customers from different cultures. Some of these challenges include:
- Infrastructure differences. Each country has its own infrastructure with varying levels of quality and bandwidth. A business cannot expect every country it deals with to have the same Internet speeds. See the sidebar titled “How Does My Internet Speed Compare?”
- Labor laws and regulations. Different countries (even different states in the United States) have different laws and regulations. A company that wants to hire employees from other countries must understand the different regulations and concerns.
- Legal restrictions. Many countries have restrictions on what can be sold or how a product can be advertised. It is important for a business to understand what is allowed. For example, in Germany, it is illegal to sell anything Nazi related.
- Language, customs, and preferences. Every country has its own unique culture which a business must consider when trying to market a product there. Additionally, different countries have different preferences. For example, in many parts of Europe people prefer to eat their french fries with mayonnaise instead of ketchup. In South Africa a hamburger comes delivered to your table with gravy on top.
- International shipping. Shipping products between countries in a timely manner can be challenging. Inconsistent address formats, dishonest customs agents, and prohibitive shipping costs are all factors that must be considered when trying to deliver products internationally.
Because of these challenges, many businesses choose not to expand globally, either for labor or for customers. Whether a business has its own website or relies on a third-party, such as Amazon or eBay, the question of whether or not to globalize must be carefully considered.
Sidebar: How Does My Internet Speed Compare?
How does your Internet speed compare with others in the world? The following chart shows how Internet speeds compare in different countries. You can find the full list of countries by going to this article . You can also compare the evolution of Internet speeds among countries by using this tool .
So how does your own Internet speed compare? There are many online tools you can use to determine the speed at which you are connected. One of the most trusted sites is speedtest.net, where you can test both your download and upload speeds.
The Digital Divide
As the Internet continues to make inroads across the world, it is also creating a separation between those who have access to this global network and those who do not. This separation is called the “digital divide” and is of great concern. An article in Crossroads puts it this way:
Adopted by the ACM Council in 1992, the ACM Code of Ethics and Professional Conduct focuses on issues involving the Digital Divide that could prevent certain categories of people — those from low-income households, senior citizens, single-parent children, the undereducated, minorities, and residents of rural areas — from receiving adequate access to the wide variety of resources offered by computer technology. This Code of Ethics positions the use of computers as a fundamental ethical consideration: “In a fair society, all individuals would have equal opportunity to participate in, or benefit from, the use of computer resources regardless of race, sex, religion, age, disability, national origin, or other similar factors.” This article summarizes the digital divide in its various forms, and analyzes reasons for the growing inequality in people’s access to Internet services. It also describes how society can bridge the digital divide: the serious social gap between information “haves” and “have-nots.”
The digital divide can occur between countries, regions, or even neighborhoods. In many US cities, there are pockets with little or no Internet access, while just a few miles away high-speed broadband is common.
Solutions to the digital divide have had mixed success over the years. Many times just providing Internet access and/or computing devices is not enough to bring true Internet access to a country, region, or neighborhood.
A New Understanding of the Digital Divide
In 2006, web-usability consultant Jakob Nielsen wrote an article that got to the heart of our understanding of this problem. In his article he breaks the digital divide up into three stages: the economic divide, the usability divide, and the empowerment divide.
- Economic divide. This is what many call the digital divide. The economic divide is the idea that some people can afford to have a computer and Internet access while others cannot. Because of Moore’s Law (see Chapter 2), the price of hardware has continued to drop and, at this point, we can now access digital technologies, such as smartphones, for very little. Nielsen asserts that for all intents and purposes, the economic divide is a moot point and we should not focus our resources on solving it.
- Usability divide. Usability is concerned with the fact that “technology remains so complicated that many people couldn’t use a computer even if they got one for free.” And even for those who can use a computer, accessing all the benefits of having one is beyond their understanding. Included in this group are those with low literacy and seniors. According to Nielsen, we know how to help these users, but we are not doing it because there is little profit in doing so.
- Empowerment divide. Empowerment is the most difficult to solve. It is concerned with how we use technology to empower ourselves. Very few users truly understand the power that digital technologies can give them. In his article, Nielsen explains that his and others’ research has shown that very few users contribute content to the Internet, use advanced search, or can even distinguish paid search ads from organic search results. Many people will limit what they can do online by accepting the basic, default settings of their computer and not work to understand how they can truly be empowered.
Understanding the digital divide using these three stages provides a more nuanced view of how we can work to alleviate it. More work needs to be done to address the second and third stages of the digital divide for a more holistic solution.
Refining the Digital Divide
The Miniwatts Marketing Group, host of Internet World Stats, has sought in 2018 to further clarify the meaning of digital divide by acknowledging that the divide is more than just who does or does not have access to the Internet. In addition to Nielsen’s economic, usability, and empowerment divides, this group sees the following concerns.
- Social mobility. Lack of computer education works to the disadvantage of children with lower socioeconomic status.
- Democracy. Greater use of the Internet can lead to healthier democracies especially in participation in elections.
- Economic growth. Greater use of the Internet in developing countries could provide a shortcut to economic advancement. Using the latest technology could give companies in these countries a competitive advantage.
The focus on the continuing digital divide has led the European Union to create an initiative known as The European 2020 Strategy. Five major areas are being targeted: a) research and development, b) climate/energy, c) education, d) social inclusion, and e) poverty reduction.
Sidebar: Using Gaming to Bridge the Digital Divide
Paul Kim, the Assistant Dean and Chief Technology Officer of the Stanford Graduate School of Education, designed a project to address the digital divide for children in developing countries.  In their project the researchers wanted to learn if children can adopt and teach themselves mobile learning technology, without help from teachers or other adults, and the processes and factors involved in this phenomenon. The researchers developed a mobile device called TeacherMate, which contained a game designed to help children learn math. The unique part of this research was that the researchers interacted directly with the children. They did not channel the mobile devices through the teachers or the schools. There was another important factor to consider. In order to understand the context of the children’s educational environment, the researchers began the project by working with parents and local nonprofits six months before their visit. While the results of this research are too detailed to go into here, it can be said that the researchers found that children can, indeed, adopt and teach themselves mobile learning technologies.
What makes this research so interesting when thinking about the digital divide is that the researchers found that, in order to be effective, they had to customize their technology and tailor their implementation to the specific group they were trying to reach. One of their conclusions stated the following:
Considering the rapid advancement of technology today, mobile learning options for future projects will only increase. Consequently, researchers must continue to investigate their impact. We believe there is a specific need for more in-depth studies on ICT [Information and Communication Technology] design variations to meet different challenges of different localities.
To read more about Dr. Kim’s project, locate the paper referenced here.
Information technology has driven change on a global scale. Technology has given us the ability to integrate with people all over the world using digital tools. These tools have allowed businesses to broaden their labor pools, their markets, and even their operating hours. But they have also brought many new complications for businesses, which now must understand regulations, preferences, and cultures from many different nations. This new globalization has also exacerbated the digital divide. Nielsen has suggested that the digital divide consists of three stages (economic, usability, and empowerment), of which the economic stage is virtually solved.
- What does the term globalization mean?
- How does Friedman define the three eras of globalization?
- Which technologies have had the biggest effect on globalization?
- What are some of the advantages brought about by globalization?
- What are the challenges of globalization?
- What perspective does Ghemawat provide regarding globalization in his book World 3.0?
- What does the term digital divide mean?
- What are Jakob Nielsen’s three stages of the digital divide?
- What was one of the key points of The Rise of the Network Society?
- Which country has the highest average Internet speed? How does your country compare?
- Compare the concept of Friedman’s “Globalization 3.0″ with Nielsen empowerment stage of the digital divide.
- Do some original research to determine some of the regulations that a US company may have to consider before doing business in one of the following countries: China, Germany, Saudi Arabia, Turkey.
- Give one example of the digital divide and describe what you would do to address it.
- How did the research conducted by Paul Kim address the three levels of the digital divide?
- Go to speedtest.net to determine your Internet speed. Compare your speed at home to the Internet speed at two other locations, such as your school, place of employment, or local coffee shop. Write a one-page summary that compares these locations.
- Internet World Stats. (n.d.). World Internet Users and 2018 Population Stats. Retrieved from http://internetworldstats.com/↵
- Castells, M. (2000). The Rise of the Network Society (2nd ed.). Cambridge, MA: Blackwell Publishers, Inc.↵
- Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century. New York: Farrar, Straus and Giroux.↵
- Ghemawat, P. (2011). World 3.0: Global Prosperity and How to Achieve It. Boston: Harvard Business School Publishing.↵
- Kim, K. (2005, December). Challenges in HCI: digital divide. Crossroads 12, 2. DOI=10.1145/1144375.1144377. Retrieved from http://doi.acm.org/10.1145/1144375.1144377↵
- Nielsen, J. (2006).Digital Divide: The 3 Stages. Nielsen Norman Group. Retrieved from http://www.nngroup.com/articles/digi...-three-stages/↵
- Miniwatts Marketing Group. (2018, May 23). The Digital Divide, ICT, and Broadband Internet. Retrieved from https://www.internetworldstats.com/links10.htm↵
- Kim, P., Buckner, E., Makany, T., and Kim, H. (2011). A comparative analysis of a game-based mobile learning model in low-socioeconomic communities of India. International Journal of Educational Development. Retrieved from https//doi:10.1016/j.ijedudev.2011.05.008.↵