Globalization and Influence on Corporations In many cases, corporations consider globalization as a matter of taking a superior business model and extending it geographically, with basic modifications, in order to exploit the firm’s economies of scale. Based on this perspective, therefore, the corporations’ key challenge is simply to decide how much to adapt the business model—how much to standardize from country to country versus how much to localize to respond to local differences (Ghemawat, 2004).
Ghemawat further says that the future of the globalization process is by no means obvious since he looks the market will integrate further once economic conditions improve. However, some people argue that the process could actually shift into reverse, toward even greater economic isolation, if the experience between the two World Wars is any precedent. Amidst the complex situation that globalization possesses, Malcom Waters (1993) defines globalization as “a social process in which the constraints of geography on social and cultural arrangements recede and in which people become increasingly aware that they are receding”.
In addition, Waters (1995) sees the globalization continually erodes the authority of traditionally sovereign states. In this situation, he suggests that within the sense that the sovereign states have control over actions, events, and persons within their borders, he sees that the powerful states will touch their vital interests abroad. In this situation, Waters (1995) describes the processes of globalize economic as the process that gives up the exceptional power into a variety of cross borders or transnational player.
These player or economical actors composes of people and institutions such as transnational business, corporations, and financial interests. In these circumstances, Waters (1995) considers globalization as one forceful global process and sees the results of global society in the growing number of multinational companies (MNCs), international action of human rights and many others. In addition, globalization also enables the communication between people in other parts of the world.
This is useful since the communication between two or more parties over the Internet may lead to business deals. Concerning globalization, this paper will discuss about an insurance company and the insurance industry and the affects of globalization and technology. To be precise, this paper will elaborate the adoption of technology on Allstate Insurance Company. 2. Information Technology as the Engine of the Global Economy In general, information technology is considered as the main engine that enables the adoption of global economy.
This is true especially in relation with the globalization ideas where as corporations grew to be larger and more complex, managerial activities could no longer rely on traditional organizational methods to produce the demanded daily operational quality. Under such circumstances, a multinational companies (MNCs) need more integrated way of communication, a plan delegation and decisions, record and exchanging information, in order to save time and increase productivity of daily operations. To meet the needs, the use of information technology has been increasingly significant for business nowadays.
Firms who lack the sensitivity to realize the benefit of this development and being the last to take advantage of the technology are lagging behind its competitors in terms of managerial efficiency and effectiveness. Computer-based Management Information System has now the ability to provide managers with: • Easier ways to records, stores and process data and corporate information • Strategic decision making support system, which allows managers to ask the system the ‘what if’ questions, and then receiving the most accurate response.
The system has now become an integral part of decision making activities. • Performance monitoring system, which will immediately alert managers if actual conditions differ materially from expected ones. No wonder if nowadays companies spend millions of dollars to provide themselves with the best and the latest design of information technology equipments. Various service providers of installing specialist software and hardware appliances for establishing information system infrastructure had make millions in benefits because increasing importance of the technology.
Almost every company is now using or requiring using this important corporate resource. The need does not vary greatly by differences of corporate size, corporate stage of development, and the nature of the industry in which the firms are operating. Two companies operating in different industries, being in different stage of development and having a significantly different annual income might have similar needs of providing managers with a helpful and trustworthy information system. 3. Allstate Insurance Company 3. 1 Corporate Background
Allstate is established in 1931 and became a traded company publicly in 1993. Currently, the company 40,000 employees manage assets more than US $134 billion and US $32 billion in revenue. The company, which headquartered in Northbrook, Illinois, USA, currently serves over 16 millions of customers by offering a wide range of protection and savings tools to fulfill financial security. 3. 2 IT Implementation on Allstate Insurance Company The important of having suitable information system for insurance company has driven Allstate Insurance Company to develop powerful information technology.
They consider information technology (IT) as a critical area. The company reveals that they have IT team that combines technology, creativity, and expertise to fulfill the company’s needs in dealing with competitive market (Allstate Insurance Company, 2008). Concerning the IT implementation in Allstate Insurance Company, prior to 2000, the company did not employ any formal IT control framework. In order to enhance the operation, the company adopts information technology.
It is the new director of internal audit who starts the implementation of information technology by introducing Control Objectives for Information and related Technology (COBIT) as the platform of IT governance for Allstate Insurance Company (ISACA, 2008). In addition, the use of COBIT especially rule out when the Sarbanes-Oxley Act was passed in the U. S. to deal with the monitoring of Allstate internal audit operations, evaluating the company’s IT governance and control, conducting benchmarks for measuring key business processes.
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