The World Is Flat

1
The World Is Flat by Thomas L. Friedman
2
Destination-India

• Christopher Columbus went to India and
  discovered America
• The world is Round
• Thomas L. Friedman went to India and find
  America.
• The world is Flat

3
Globalization

• Time period1942-1800-Columbuss Voyage
• Open trade between the Old World and the New
  World, Indians
• Force driving Countries
• Steam Power, Horse Power, Wind Power
• World Large to Medium

4
Globalization

• A macro view Country to Country Affair
• Where does my country fit into global
  competition?
• How can I go global and collaborate with others
  though my country?

5
Globalization

• Force driving Multinational Companies
• Went global for markets and labor
• Decrease in Transportation Cost
• Decrease in Communication Cost
• Multinational Companies Affair
• Where does my company fit into global economy?
• How can I go global and collaborate with others
  though my company?
• Individual Affairs
• Where do I fit into global competition?
• How can I, on my own, collaborate with others
  globally?

6
Infosys software designing company

• Infosys Producing specific software programs
  for American or European companies
• Virtual Meeting
• We could be sitting here, somebody from New
  York, London, Boston, San Francisco, and maybe
  the implementation is in Singapore, so the
  Singapore person could also be live here

7
Infosys Overview

• End-to-end IT Consulting Services company
• Pioneer of industry-defining Global Delivery
  Model
• Most respected company in talent-rich India
• Annual revenues of 754 Million for FY 03,
  Revenue of 216 Million for Q4 FY 03
• 15,000 employees 345 clients 87.5 repeat
  business (for Q4 FY 03)

8
Indian Advantage

• Full of resources
• High-skilled IT expertise
• Good environment in Infosys to attract good
  employees
• Cost benefits
• Indian costs are much less than oversea costs
• Government support
• Geographic location
• 24-hour workday benefits

9
Software Outsourcing
10
Outsourcing --- Tax preparation

• Jerry Rao
• Owner of an Indian accounting firm, MphasiS
• MphasiS
• Do outsourced accounting work from any state in
  America and the federal government
• Have tied up with several small and medium-sized
  CPA firms in US
• http//www.naukri.com/gpw/mphasis3/index.htm

11
Outsourcing --- Tax preparation
US
India
Accountants
Accountants
SCAN
DO the WORK
A Computer Sever

• Data protection and privacy
• The Indian accountants
• can see the data on his screen
• cannot download or print out the data
• are not allowed to take a paper and pen into the
  working place

12
Outsourcing --- Tax preparation

• Can you imagine what will happen in a decade?
• You will assume that your accountant has
  outsourced the basic preparation of your tax
  returns.

13
Outsourcing --- Reuter News Bulletins

• Raw data
• Speed matters
• Not much skills

• Analysis Comments
• Value-added work
• skills
• experiences
• connections

14
Outsourcing --- News Bulletins

• By the summer of 2004, Reuters has 300 staffs in
  Bangalore, aiming eventually for a total of 1,500

15
Outsourcing --- Call Services

• US Accent
• UK Accent
• Canadian Accent

http//www.247customer.com/
16
Outsourcing --- Call Services
Satellite
India
US
Outbound Operators Inbound Operators
Customers

• "24/7 Customer" call center
• Outbound selling everything, i.e. credit cards
• Inbound solving problems, i.e. lost luggage

17
Outsourcing --- Call Services

• Jobs in Indian call center
• High-wage
• High-prestige
• Competitive
• 700 applications/day
• 6 are hired
• Currently, about 245,000 Indians are answering
  phones or dialing out to all over the world.

18
Outsourcing --- Call Services

• A manager of 24/7 said
• A lot of American industry has come into
  Bangalore
• I can work for a multinational sitting right
  here.
• In the flat world I can stay in India, make a
  decent salary, and not have to be away from
  families, friends, food, and culture.

19
Outsourcing --- Remote Assistant

• What can they do?
• Information collection
• PowerPoint presentations
• Research

20
Outsourcing --- Remote Assistant

• Why choose them?
• Efficient
• Usually be done overnight
• High Quality
• Cheap
• 1,500-2,000 USD/month
• Fresh graduates salary are 3-4,000 USD/Month in
  the U.S

21
Outsourcing --- Remote Assistant

• Hire your assistant here

http//www.b2kcorp.com/meetourpeople.html
22
10 Forces changed the World

• (1) 11/9/89 (Fall of the Berlin Wall)
• (2) Netscape (the internet) email, and web
  browsers
• (3) Work Flow Software
• (4) Open-Sourcing (In 2006, retitled 'Uploading')
  
• (5) Outsourcing
• (6) Offshoring
• (7) Supply-chaining
• (8) Insourcing
• (9) In-forming
• (10) Amplifying technologies, or "steroids"

23
Flattener 1 Berlin Wall

• Constructed in 1961
• Built during the post World War II period of
  divided Germany
• A long separation barrier between West Berlin and
  East Germany,
• permanently closed the border between East and
  West Berlin for a period of 28 years

24
The Fall of Berlin Wall 1989
NOVEMBER
9
25
How it helped flattening the world?

• Liberated captive peoples of the Soviet Union
• Free market capitalism and energies from people
  in India, Brazil, China
• Away from centrally planned economies, toward
  free-market- oriented governance
• Opened the way for more people to tap in others
  knowledge pools
• Global view of future

26
Flattener 2 Netscape

• Created the 1st mainstream browser and the whole
  culture of Web browsing for the general public
• Netscape went public on 9th August, 1995
• The world has not been the same since

27
Digitization

• Words, music, data, films, files, and pictures
• Turned into bits and bytes-combinations of Is and
  Os
• Stored on a microprocessor, or transmitted over
  satellites and fiber-optic lines.

28
How it helped flattening the world?

• 1st broadly popular commercial browser to surf
  the Internet
• Stimulated a massive growth in network
• Student download it for free
• Individual Free trial and encourage to buy
• Company Free trial for 90 days and encourage to
  buy

29
How it helps flattening the world?

• Netscape brought the Internet alive and made
  the Internet accessible to everyone
• Internet-e-mail-browser phase ?Helped
  globalization!!!

30
Flattener 3 Work Flow Software

• How can these works operate?
• Ans By internet
• How can they do this over the internet?
• Ans Application of Work Flow Software

31
Example of Work Flow Software

• Production of animated films via a global supply
  chain
• Recording session near the artist, in NY and
  LA
• Design and direction San Francisco
• Writer network London, NY, Chicago, LA
• Animation and Editing Bangalore and San
  Francisco

32
Flattener 3 Work Flow Software

• Combination of PC and e-mail
• Window-enabled PC ability to create and
  manipulate digital content likes words, data and
  pictures

33
Flattener 3 Work Flow Software

• It also standardized the business process.
• Internet connection
• Internet banking

34

• Suddenly more people from more different places
  found that they could collaborate with more other
  people on more different kinds of work and share
  more different kinds of knowledge than ever
  before.
• We were not just able to talk to each other more,
  we were able to do more things together.

35

• Work flow platform are enabling us to do for the
  service industry what Ford did for manufacturing.
• We are taking each task apart and sending it
  around to whomever can do it best, and then we
  reassembling all the pieces back together at
  headquarters.

36
Flattener 5 Outsourcing

• having another company perform some specific, but
  limited function
• ? reintegrating their work back into overall
  operation.

37
Flattener 5 Outsourcing

• India

38
Flattener 5 Outsourcing

• Four stages
• 1.Before mid-1990s
• Have many talented engineers
• From Indian Institutes of Technology
• Cannot provide good jobs for them
• excellent engineers go to America to work
• Fiber-optics line built in 1996

39
Flattener 5 Outsourcing

• 2. Late 1990s
• The scare of Y2K bug
• Urgently need computer remediation (Huge,
  tedious)
• Only India get enough software engineers to
  complete this task.
• Most important at very low price

40
Flattener 5 Outsourcing

• 3. Early 2000
• dot com bubble had not yet burst
• Engineering talent was scarce
• Start to turn to Indian Companies
• ?Delivery of complex system with great quality
• 4. After the dot com bust
• American IT companies suffered in the boom
• Reduce the cost for the same work
• Increase outsourcing knowledge work to India
• Can find surplus English-speaking engineers at
  any price

41

• Research institute at Tsingtao could connect to
  Lucents computers in America over night.
• No additional cost
• In past, different countries, different things
• Kids in India with a cheap Pc learn the same
  operating system that is running in some of the
  largest data centers in America.

42
What can be outsourced?

• Any activity where we can digitize and decompose
  the value chain, and move the work around, will
  get moved around.

01101
Value chain
01101 01000 00100 11010 01011
01000
00100
11010
01011
43
What can be outsourced?

• Goods are traded, but services are consumed and
  produced in the same place.
• And you cannot export a haircut. But we are
  coming close to exporting a haircut, the
  appointment part.
• What kind of haircut do you want? Which barber do
  you want? All those things can and will be done
  by a call center far away.

44

• 1960s-1970s
• eat all of your dinner. Kids in India could not
  have enough foods
• 2000s
• do your homework. Kids in India are waiting for
  your job.

45
Flattener 6 Offshoring

• Moves the whole factory to other countries
• ?produces the very same product in the very same
  way
• Only with cheaper labor, lower taxes, subsidized
  energy, and lower health-care costs.

46
China

• Every morning, a gazelle wakes up
• It knows that it must run faster than the fastest
  lion or it will be killed
• Every morning, a lion wakes up.
• It knows that it must outrun the slowest gazelle
  or it will starve to death.
• It does not matter whether you are a lion or a
  gazelle. When the sun comes up, you better start
  running.

47
Before joining WTO

• At 1977
• China first opened its tightly closed economy
• An incredible market for export
• Western manufacturers wanted to sell a great
  amount of goods to Chinese people
• get a great loss

48
Before joining WTO

• Reasons of loss
• Not subject to world trade rules
• Free to adopt Various trade and investment
  barriers
• sheer bureaucratic and cultural difficulties of
  doing business in China

49
Before joining WTO

• At the beginning of 1980s
• why dont we use chinas disciplined labor to
  make thing there and sell them abroad?
• get profit
• the interests of China's leaders
• Risky
• Policy may be changed in next day

50

• China is threat, a customer, and an opportunity.
• You had better internalize china
• You break down your business and think about
  which part of the business you would like to do
  in china, which part you would like to sell at
  china, and which part you want to buy from china.

51

• Fortune (2004) estimated that cheap import from
  china since the mid 1990s have saved Us roughly
  600 billion
• Japan can recover the recession
• China is the number one importer of Japanese
  products.

52

• Easy one to open shop at china
• Difficult one to find a right local manager
• Too bureaucratic managers from the state-owned
  sector.
• You cant do anything because they keep giving
  excuses china is different
• Too cowboy mangers got drunk on their first sip
  of capitalism
• You cant sleep at night because you have no idea
  what they are going to do. They may do anything
  for money.
• New china manger
• Training abroad
• Growing up in china.

53

• American and European have to run as fast as the
  fastest lion, china, pretty darn fast.

54
Flattener 6 Offshoring

• China
• Joining WTO
• Took Beijing and the world to a whole new level
  of offshoring
• More companies shifting production offshore

55
After joining WTO

• 2001
• Protect foreign companies by international law
  and standard business practices after they
  shifted factories offshore to China
• Foreign companies could sell virtually anything
  anywhere in China
• Beijing agreed to treat all WTO member nations
  equally
• China becomes more attractive

56
Impact

• Positive Impact
• For manufacturers
• ?lower the cost
• For consumers
• ?lower the price

57
Impact

• Negative Impact
• For labor
• ?The wage becomes lower
• ?labor laws and workplace standards become laxer

58
Supply Chain of Wal-mart

59
Background of Wal-mart Well known
retailer with heavy investment in IT

• Types of industry one stop shopping center
• Founder Sam Walton
• Year of establishment 1962
• First store in Arkansas

60
No. of stores 5311 units globally
Wal-Mart has expanded its business to 10
countries U.S., Mexico, Brazil,
Argentina,Germany,Puerto Rico,U.K. , South Korea,
Canada and China.
61
Rapid growth of Wal-mart

• Revenues 315,654,000, 000 in 2005
• Stock value from Aug 1972 to May 2006

62
How well is Wal-mart doing?
63
Why can Wal-mart be so successful?

• Supply chain
• a method of collaborating horizontally among
  suppliers, retailers, and customers to create
  value

64
Wal-mart Supply Chain Flow Chat
Radio, headphone
Retail Store
Manufacturer
Retail Store
Distribution center
Manufacturer
Bar code, RFID
Point of sale terminal
Retail Store
Manufacturer
Satellite system
Company Headquarter
65
Distribution Center

• 108 centers in USA
• Place that various goods are gathered, sorted and
  delivered to different store
• About 80 of merchandises shipped from centers
• 24 hours operation

66
Minilift Trucks

• Inside distribution centers
• equipped with headphone
• Computer give direction to driver in voice
• What merchandises to transport
• Where the merchandises should be carried to
• Which truck the merchandises be loaded
• Report progress, ahead or behind schedule
• Benefit productivity and efficiency

67
Bar Code System

• Standardized bar code system
• Pallets passed through conveyor belt are scanned
  automatically
• Product codes are transferred to centralized
  computer system
• Matching with the computer database and generate
  useful information
• What it is. What quantity it is. Which packing
  compartment and truck to go. Which store to go

68
RFID

• Radio Frequency Identification System
• Use radio waves to identify objects
• Tags with microchip and antenna built in
• Store data (type, quantity, manufacturer, expired
  date)
• Generate HF signal to transfer data
• Allow Wal-mart to keep track of pallets at
  various stage of supply chain

69
Large-scale satellite system

• Installed in 1987
• to improve communication
• Link all of the stores to headquarter, giving
  Wal-Marts central computer system real-time
  inventory data.
• Allow sales data to be collected and analyzed
  daily, and enable managers to adjust immediately.
• Daily information of individual store can be
  compared.

70
CPFR Program

• A Collaborative Planning, Forecasting, and
  Replenishment program.
• Just-in-time inventory program began.
• Advantage
• To reduce carrying costs.
• Less excess inventory.
• Cost of goods is estimated to be 5 to 10 percent
  less.

71
Suppliers

• As Wal-Mart grew, its relationships with some
  suppliers evolved into partnerships
• Sharing information electronically to improve
  performance.
• How do they share information?
• Open its databases
• Retail Link private extranet system
• - to see exactly how its products are
  selling and when it might need to up its
  production
• - to give more than 2000 suppliers computer
  access to point-of-sale data
• Advantages
• - Gain more information about the customers.
• - Shelves will always be stocked with the
  right items at the right time.

72
Electronic data interchange (EDI)

• Enabled an estimated 3600 suppliers (about 90 of
  Wal-Marts dollar volume) to receive orders and
  interact with Wal-Mart electronically.
• Later expanded to include forecasting, planning,
  replenishing, and shipping applications.

73
How Wal-mart affects suppliers

• Wal-mart imported 18 billion worth of goods from
  5,000 Chinese suppliers in 2004
• Ranked as Chinas 8 biggest trading partner ahead
  of Russia, Australia and Canada
• Used power to squeeze domestic suppliers profit

74
How Wal-mart affects dometic workers

• Domestic workers
• Face keen competition from overseas markets,
• offshore manufacturing
• Close down of factories
• Loss of jobs

75
How Wal-mart affects economy

• Reallocation of capital and technology to the
  foreign markets
• Less to employ domestic workers and invest in
  local economy
• Decline in labor productivity and real incomes of
  the country

76
How Wal-mart affects dometic workers

• Unemployment is a structural problem ,rather than
  a cyclical problem
• Mismatch of job skills with the market demand
• Unskilled labors cannot match with increasing
  skilled labor demand
• Not loss of job , but cannot find a job matches
  with their skills

77
How Wal-mart affects economy

• may not necessarily imply a decrease in real
  income and productivity
• For example,
• Globalization and lower technology cost,
• Lead to higher American productivity growth
• ? added 230 billion extra GDP between 1995 and
  2002
• Equivalent to extra 0.3 points of growth a year

78
Flattener 8 Insourcing

• What is insourcing?
• the delegation of operations or jobs from
  production within a business to outsiders that
  specialize in that operation
• such as a subcontractor

79
Flattener 8 Insourcing

• Case studies UPS
• Founded in 1907
• Messenger service ?Dynamic supply-chain manager
• Synchronizing global supply chains

80
Flattener 8 Insourcing

• Why UPS?
• Its fleet of 270 aircraft is the 11th largest in
  the world
• Largest private user of wireless technology in
  the world
• Owned 88 thousands vehicles
• E.g. package cars, vans, tractors and motorcycles
• On any given day, 2 of the worlds GDP can be
  found in UPS delivery trucks
• Maintains a think tank
• Operation Research Divison
• Specializing in Package flow technology
• Developed a software program
• Smart label on all packages
• Can be tracked and traced easily

81
Flattener 8 Insourcing

• Case 1. Toshiba
• Laptop computer warranty
• in charged of the picking-up and delivery part
• UPS
• insourced the repairing service as well

82
Flattener 8 Insourcing

• Case 2. Plow Hearth
• A large national catalog and Internet retailer
• Specializing in Products for Country Living
• Furniture were broken when it is delivered to
  customers
• UPS sent its package engineer to help
• Conducted a packaging seminar
• Guidelines about the selection of their suppliers
• HPs purchase decision should focused on
• Quality of products
• As well as how those products will be packaged
  and delivered

83
Flattener 8 Insourcing
Case3. eBay
Selling a golf club from the internet
Buying a golf club from the internet
Invoice
Seller
Buyer
Mailing label
Golf Club
Golf Club
84
Flattener 8 Insourcing

• Case 4. Ford Motor Co.
• Snarled and slow distribution network
• Cars take more than a month to arrive
• Dealers lose track of the stocks and delivery
  schedule
• UPS
• Pasting bar codes on the windshields of the cars

85
Flattener 8 Insourcing

• What has UPS achieved?
• Since 1997, more than 60 companies have moved
  operations close to UPS hub in Louisville
• Invited their customers to use the service over
  internet
• Changing the definition of inventory
• Flattening the world

86
Flattener 4 Open-Sourcing

• Definition of Open Source
• Free Redistribution
• Source Code are included
• Derived Works
• Integrity of The Author's Source Code

87
Flattener 4 Open-Sourcing
Needs
88
Flattener 4 Open-Sourcing

• Example of Open-Source Software
• Apache
• Web server software
• Start with a group of 8 people to over 1000
• They had never met before but knew only by
  email/chat.
• The first popular open-source software

89
Flattener 4 Open-Sourcing

• Open-Source online encyclopedia
• Originally a volunteer project
• Open-Edit at 2001
• Track of article status
• Over 1,000,000 articles now
• A collaborative encyclopedia sounds like a crazy
  idea, but it naturally controls itself.

90

• Dog-shit girl
• U-tube, one korean guitarist New York times

91
Flattener 4 Open-Sourcing

• Advantage of open-source in a business view

http//www.computereconomics.com/article.cfm?id10
43
92
Flattener 4 Open-Sourcing

• Why people work for free?
• Pure scientific challenge
• Believe of open-source is the best way to produce
  software
• Karl Marx

93

• Google, Amazon and ETrade
• Linux operating system Intel-based server
• Customization
• Mozilla firefox, free web broswer,
• One month, 10 million dowload

94
Flattener 4 Open-Sourcing

• Controversial of open source
• If everyone contributes his or her intellectual
  capital for free, where will the resources for
  new innovation come from?
• Bill Gates, You need capitalism to drive
  innovation.
• I will be a barber during the day and do free
  software at night
• Where is the guy at the barbershop? when your
  system is broke down.

95
Conclusion

• Communication has connect the world together,
  allowing instant information transmitting
  possible.
• ? Competitions all over the world
• The only difference between us are
• 1) Language
• 2) Time zone
• 3) Geographical Location

96
On contrast

• When you look around at 24/7's call center,
• you see that all the computers are running
  Microsoft Windows.
• The chips are designed by Intel.
• The phones are from Lucent.
• The air-conditioning is by Carrier
• Coke.
• In addition, 90 percent of the shares in 24/7 are
  owned by U.S. investors.
• This explains why, although the United States has
  lost some service jobs to India in recent years,
  total exports from American-based
  companies-merchandise and services-to India have
  grown from 2.5 billion in 1990 to 5 billion in
  2003.
• So even with the outsourcing of some service jobs
  from the United States to India, India's growing
  economy is creating a demand for many more
  American goods and services.

97

• Focus
• NOT how to fight against globalization
• BUT Where does my company fit into the global
  economy?
• How the make use of resources we have?
• How does it take advantage of the opportunities?
• How can I go global and collaborate with others
  through my company?

98
Conclusion

• Ten flatteners solves the problems from distances
  and boarders
• The more the world is flattened, the more the
  power an individual can have.
• Flattened world means the success in
  globalization which improved international trade
  and multinational firms