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CHAPTER RESOURCES Reading Content Introduction 11.1 Technology as Physical Infrastructure 11.2 Technology of Information Infrastructure 11.3 Technology of Human Infrastructure 11.4 Technology Trends in International Business Summary and Case ORION: Build your

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APPENDIX

Animation: Technology InfrastructureAnimation: Technology Infrastructure

11.2 Technology of Information Infrastructure

LEARNING OBJECTIVE

Identify the way information infrastructure creates business opportunities.

UPS estimates that it saves nearly 1 million gallons of gas each year across North America just by using mapping technology that minimizes left turns (drivers turning left risk being delayed by oncoming traffic). The mapping system has also eliminated millions of miles of travel by matching packages, delivery times, and truck locations in order to optimize routes and maximize delivery densities. tracking this data in real time and running complex analytics, the firm is able to improve efficiency, thereby saving time and money. Digital technologies make this possible (see Figure 11.7).

FIGURE 11.7 Assessing the level of information infrastructure in countries The information infrastructure consists of communication technologies and information technologies such as data storage and processing.

In a similar way, the country Estonia uses digital technology to run many government operations. Estonia began the process of digitizing its operations in 1997. The system now enables citizens to register vehicles, file health insurance claims, and even vote, all through an electronic platform called X-Road. The system is so successful that over 900 agencies—some global, including energy, telecom, and banking—offer services through the site. Because of the boost in efficiency, the platform saves an estimated five days a year per citizen by eliminating trips to government offices by both citizens and businesses, which can access information such as land deeds. The efficiency of the system adds 7 million workdays to the Estonian economy. For instance, in Estonia taxes can be filed in five minutes using prefilled, auto-generated reports; by contrast, most Germans hire tax consultants to help them fill out tax forms and spend hours on the process.

Digital infrastructure like the Internet can also help international businesses improve their communication networks, data storage, and information processing, as we'll see next.

Communication Technologies Changes in communication technologies can dramatically affect international business opportunities. For example, even in Brazil's

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PRACTICE Chapter 11 Reading Quiz

APPENDIX

Animation: Technology InfrastructureAnimation: Technology Infrastructure

11.2 Technology of Information Infrastructure

LEARNING OBJECTIVE

Identify the way information infrastructure creates business opportunities.

Digital infrastructure like the Internet can also help international businesses improve their communication networks, data storage, and information processing, as we'll see next.

Communication Technologies Changes in communication technologies can dramatically affect international business opportunities. For example, even in Brazil's

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Changes in communication technologies can dramatically affect international business opportunities. For example, even in Brazil's poorest favelas (slums), satellite TV and even Internet access are nearly ubiquitous (Figure 11.8). Because nearly all consumers have access to media, international companies like Samsung, LG, and Apple can market their electronics to global customers. Companies can launch products in new markets more quickly and efficiently when they can harness global media.

FIGURE 11.8 Satellite TV antennae on the houses of Brazil's poorest neighborhoods

Nearly 43 percent of people on the planet have access to the Internet. In the OECD countries, mobile broadband is used by more than 95% of the population. This is 1.27 billion people with access to the Internet. Japan has the highest level of access to the Internet of any country in the world, with close to 150 mobile broadband subscriptions per 100 people. In other words, almost half of the Japanese people have more than one broadband subscription. The numbers are almost as high in Finland as well (see Figure 11.9 States primarily relies on DSL and cable, whereas in Japan, fiber-optic networks dominate the country. There are now more than 7 billion cellular subscriptions worldwide—that is almost one for every man, woman, and child alive today—and 95 percent of the world's population is covered by a cellular network.

FIGURE 11.9 Mobile Broadband, by country, 2016 Source: Andrew Burger, February 2017, “OECD Mobile Broadband Penetration Rises to 95%, Now Reaches 1.2 Billion,” Telecompetitor. http://www.telecompetitor.com/oecd-mobile- broadband-penetration-rises-to-95-percent-now-reaches-1-2-billion/

This statistic highlights the need for international business managers to understand how such nearly universal connectivity affects them. In rural fishing villages in India, for instance, economists recorded the market price that fishermen received for their daily catch before and after the introduction of phones in three separate markets. Look at Figure 11.10; you can see on the left side of each chart that the price of the daily catch varied significantly up and down in each market. Once phones were introduced in these markets, fishermen were

FIGURE 11.8 Satellite TV antennae on the houses of Brazil's poorest neighborhoods

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price of the daily catch varied significantly up and down in each market. Once phones were introduced in these markets, fishermen were able to compare prices efficiently with other fishermen, and prices quickly converged (notice the large price discrepancies on the left side of each chart). That is, prices now varied within a much smaller range than before, because fishermen were able to verify the actual market price. The power of connectivity helped the fishermen better understand their markets, price their catch properly, and earn more money. This study demonstrates an effect that has been witnessed around the world: when more communication is available, information flows more freely, and producers and consumers all benefit.

FIGURE 11.10 The price of fish in rural India before and after cell phones were introduced Source: Robert Jensen, “The Digital Provide: Information (Technology), Market Performance and Welfare in the South Indian Fisheries Sector,” Quarterly Journal of Economics 122, no. 3 (2007): 879–924.

Speed of the Internet Not only is global access to the Internet increasing, but the speed of the Internet itself is also increasing. As Figure 11.11 the global Internet runs on average at 5.6 Mbps, but in Korea—which boasts the world's fastest Internet—the average speed is 21.1 Mbps. By contrast, much of Africa has Internet speeds less than 2 Mbps. This discrepancy means that a web page will load ten times faster in Korea than in most parts of Africa.

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FIGURE 11.11 The speed of the Internet in each country in 2015 Source: “Internet Speeds by Country (Mbps),” Fastmetrics www.fastmetrics.com/internet-connection-speed-by-country.php (accessed July 18, 2017).

The implications of Internet speed are more than simple inconvenience for people who have slower access. Companies operating in global markets need to consider the local Internet speed when designing content for their Internet presence. For example, embedding a video testimonial on a website might be effective in Japan, where download speeds are high, but less effective in India, where speeds are slow.

Peer-to-Peer and the Shared Economy Another significant change stemming from the rise of the digital infrastructure is the emergence of peer-to-peer (P2P) transactions in a virtual marketplace that is sometimes referred to as the “shared economy.” A shared economy, also called collaborative consumption or the peer economy, is a system in which owners rent to strangers something they are not using, such as a room, a car, or even a service, using peer-to-peer services. Constant connectivity and access saturation have enabled people, especially in industrialized nations, to rent their goods and services directly to other people. Hotels, car rental agencies, and even banks have experienced some unexpected competition from the shared economy. For instance, the world's largest renter of rooms is not technically a hotel; it's the lodgings broker Airbnb, which matches individuals willing to rent out space in their own homes to people who want to rent that space. Airbnb's online market for lodgings in private residences boasts over 1.5 million listings around the globe. The average Airbnb host in New York City earned more than $5,000 in 2016. But in some markets such as San Francisco and New York City, the company faces laws that make renting out rooms illegal unless the renters register with the city.

Similarly, Turo, a car-sharing service, enables individuals in the United States and Canada to rent their cars to others. The service matches car owners with prospective renters. Turo then offers insurance to protect the car owner and detailed reviews to protect the renter.

People can even “share” their money now. Those who need money go to the appropriate P2P site, enter the amount they would like to borrow, name the terms, and include details of their employment, location, and other personal information. Lenders from around the globe agree to loan the money at a certain rate. If both parties agree, the deal is completed and the P2P lender, such as Bitbond, Prosper, Upstart, or SoFi, receives a fee between 1 and 5 percent of the loan. The loans can be used to consolidate debt, buy a car, or remodel a house.

The P2P phenomenon is not limited to developed markets. Taobao is a Chinese global market platform similar to eBay, bringing buyers and sellers together in both an auction and a fixed-priced model. The company's site is one of the world's most visited and has over 7 million sellers posting over a billion products. Taobao is so large that it represents over 80 percent of online commerce in China and is growing quickly abroad. Similarly, Yu'ebau is changing China's financial industry by paying interest on money left in people's Taobao Alipay accounts. Alipay is Taobao's payment system, similar to PayPal. With a simple click of a button, users can transfer money from their online account to an attached savings account, where they can earn interest. In just 3 years, the service has accumulated over $60 billion.

Data Storage and Processing Technologies

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Data Storage

The Rise of Global Data Centers

Increased Processing Power

Access to Data

Data Storage and Processing Technologies In addition to the explosion of information that is dramatically affecting international business opportunities, the cost of gathering and using information has decreased dramatically. As a result, the store of global data has increased exponentially.

Thirty years ago, computer systems like the Atari 1040ST helped bring about the personal computing revolution. The Atari was a wonder of its time and could store up to 360 kilobytes of data. Today, most users don't even know how much storage their computers have—the amount is so large it is almost irrelevant. Such large data stores are the result of the cost of data storage decreasing exponentially over the past sixty years. In 1960, one megabyte of data storage, enough to store about 870 pages of plain text, costed about $4,000. In 1994 the cost had fallen to $1, and by 2010 it was a mere thousandth of a cent.

For international businesses, this means that data about customers, inventory, suppliers, and everything else can and does grow at an exponential rate. The BBC estimates that about 2.5 exabytes, or 2.5 billion gigabytes, are created every day; that's the equivalent of 960 trillion pages of plain text. Experts estimate that 40 zettabytes (40 trillion gigabytes) of data will have been created by 2020. Companies are bursting with data, and many are using it to improve operations and interactions. For instance, Shell Oil Company now integrates millions of observations obtained when its crews are looking for oil and gas to determine how much is present and how easy recovering it will likely be.

However, this explosion of information has challenges of its own. As economist Herbert Simon predicted over fifty years ago, global leaders today face a hard limit on their ability to use all available data. Simon noted, “In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence, a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.” This information explosion has global leaders feeling overloaded in a flood of information. Indeed this problem affects not only leaders of organizations; a 2015 study by Fortune found that 65–76 percent of companies struggle with employees who feel overwhelmed.

With the creation of so much data, global companies have emerged to help companies securely store their data either on-site, in remote data centers, or in “cloud-based” storage options. For instance, Interxion is a pan-European data storage company with 42 data centers in 12 countries. Its nondescript London location is tucked away in the remains of an old brewery. But inside is a state-of-the-art, high-security data center conveniently close to London's financial companies. These firms could save money by using a center outside London rather than one right in the heart of the city, but the milliseconds required to send and retrieve the data from a more distant location would slow the time-sensitive trades they make. As the pace of business increases, even the smallest fraction of a second can mean the creation or loss of a fortune.

As the cost of data storage has been reduced, the importance of the ability to process data has increased. In 1965, Gordon Moore, a cofounder of Intel, suggested that processing power—measured by the number of transistors that amplify or switch signals and electrical power on a microchip—would double every 24 months. This prediction has become known as Moore's law, and so far it has proven to be largely true. Processing power has increased by 3,500 times over the past fifty years, even as the cost has come down.

Energy use in microchips is 90,000 times more efficient today than in 1965, and the price per transistor has decreased by a factor of 60,000 over the same period. While these improvements have fueled many innovations—such as smartphones and tablets—some argue that the trend predicted by Moore's law has reached its limit. Horst Simon, the deputy director of Lawrence Berkeley National Laboratory, is among those who say our need for computing power may have plateaued. As a result, while Intel has led the pack in driving innovation, companies in Taiwan, Korea, and China are capturing an increasingly large share of the memory chip market by producing chips that are cheaper because they are sufficient for most purposes.

Another major hurdle for international business today is ensuring access to critical data. In the past, companies kept their own data on site in order to maintain integrity and security. However, keeping data in-house makes it more difficult for an increasingly mobile workforce to access. For that reason, companies are moving to cloud-based solutions.

In the United States, Amazon, Google, Microsoft, and others offer cloud-based hosting for data from hundreds of global companies via remote data centers with more than a million servers to handle the flow of the data. Spotify, the Swedish music streaming company, uses Google to host its music streaming services. Netflix uses Amazon's twelve regions to stream films to global markets. important advantage for global business is that cloud-based solutions enable companies to quickly take their electronic content global. For instance, Amazon has existing infrastructure in the United States, Canada, Brazil, the European Union, India, Singapore, Australia, China, Korea, and Japan. The company's services span thirty-five of the world's thirty-eight time zones. Thanks to cloud-based applications, Amazon's data centers in India can host the same business processes as those in the United States.

Despite the availability of data, a persistent challenge faced by global firms is sharing knowledge across country boundaries. Global

Data Storage

The Rise of Global Data Centers

Increased Processing Power

Access to Data

Despite the availability of data, a persistent challenge faced by global firms is sharing knowledge across country boundaries. Global

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Despite the availability of data, a persistent challenge faced by global firms is sharing knowledge across country boundaries. Global companies frequently need to transfer data across borders in order to complete credit card transactions, make reservations, or transfer employees, yet such actions can actually be illegal. Different nations often have different rules for how data must be handled, and passing data across borders can cause companies to accidentally run afoul of those laws. For example, Adobe and Unilever have each been fined by the EU for transferring data to the United States in ways that did not meet the EU's data privacy standards.

Another key global challenge is the security of devices and data. In February 2017, hundreds of thousands of cash register printers in the United Kingdom began printing out a picture of robot along with the phrase, “the hacker god has returned from the dead. Ⱦ YOUR PRINTER HAS BEEN OWNED ȼ” (Figure 11.12.) The culprit was purportedly a high school student who was upset that companies were so vulnerable and didn't seem to care.

FIGURE 11.12 Security of devices and data

With the proliferation of the “IOT,” or the “Internet of things,” everything from mundane devices such as refrigerators and headphones to critical health care products such as pacemakers and cars are connected and susceptible to hackers. Part of the problem is the volume of source code that runs major global companies. Google maintains over 2 billion lines of code. Growth in global cyber security is expected to grow quickly in the coming decades.

Concept Check 11.2 !

Question 1 of 3

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Question 1

Technological physical infrastructure includes all of the following EXCEPT:

Schooling

Shipping

Electricity

Roads