Technological Globalization: IT's Role in Global Markets

Expanded Efficiency in Service of a Diversified Customer Base

IT plays a central role in adapting corporate strategy to increase efficiency and service toward a new, more diversified consumer base. Essentially, "greater efficiency can be achieved by dividing the overall problem-solving effort into tasks, showing maximal interaction" with the new market environment (Arora et al., 2004). IT must coordinate and assign Research and Development tasks accordingly to better understand the market. Through comprehensive investigation of new markets, IT can then provide the most successful strategies for targeting the primary characteristics of the chosen market demographic.

IT strategies that prove successful can then serve as a model for other firms. As Arora et al. (2004) explain, "the idea is that R&D investments by a firm spill over into other firms, thereby increasing the productivity of R&D in other firms, or directly improving efficiency and productivity in other firms." Thus, meta-analysis can also come into play in determining how to increase the overall efficiency of corporate and sales strategies. IT can dramatically help a firm enter new markets by introducing the right technology needed to understand and engage with unfamiliar environments.

Evolution of Distribution Systems

The way products are distributed will also be heavily impacted by changes prompted by IT departments. According to the research, "product developers and marketers must understand competition and the distribution channels" already present in a new market in order for a company to adapt a new distribution system properly (Yunker, 2002). The nature of the distribution channel may be quite different in new market environments. For example, it may be more efficient for a firm to adopt new strategies of licensing on an international scale, allowing the firm to take advantage of distribution systems already in place and benefit from existing structures within the market it wishes to enter. In this case, "the firm has no need to learn how to deal with the local context: it is the licensee that brings in this knowledge" (Arora et al., 2004). This becomes an effective way to adapt and create new distribution channels that are better suited for success in individual markets. Smaller companies in particular can benefit from the cost-effective strategy of licensing, which requires minimal upfront investment to enter a market because the firms are utilizing what was already a work in progress in newly opening international markets. Licensing thereby becomes a way for smaller firms to enter the globalized community without committing extensive investment capital.

Distributing technology is also a way to increase a market's appetite for certain products and goods. Diffusing technology with international partners can be risky, but it often smooths transitions into new global market environments. Sharing technology with business partners in the region increases the speed and ease of distribution systems (Arora et al., 2004). This can eliminate inefficiencies in a nation's existing distribution infrastructure and allow a firm to maintain its standard of quality and efficiency, since it can rely on the same technology it uses at home. Still, regardless of the approach a firm takes, there will ultimately be some restructuring of the costs associated with distribution (Yunker, 2002). Companies must therefore anticipate such changes from multiple perspectives. Working with familiar technologies helps keep cost changes minimal and establishes a more trusted method for building distribution networks in new markets.