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Placing the Networks on the Web: Challenges and Opportunities for Managing in Developing Asia

Dieter Ernst

No 5, Economics Study Area Working Papers from East-West Center, Economics Study Area

Abstract: Placing the networks on the Web poses a fundamental challenge, but also provides new opportunities for managing in Developing Asia. There is a huge efficiency gap between the region's manufacturing systems and the management of complementary, knowledge-intensive support services. The challenge is to reduce this gap as quickly as possible by embracing the Internet as a core business function, despite a weak base of accumulated knowledge of how to manage IT-based information systems. Asian companies, even the best, lag substantially behind their American and European counterparts. There is a potential vicious circle that needs to be broken: a belated transition to IT-based information systems has prevented the accumulation of knowledge, through trial-and-error, of how to design and implement an appropriate IT organization that reflects the peculiar strengths and weaknesses of diverse Asian management systems. Limited resources prevent any attempt to address these problems in a big leap forward. This implies that in-house efforts need to be supplemented with outsourcing of IT services. There is also a need for strategic partnering with major suppliers of Internet software and networking equipment. The opportunity is that the Internet provides almost unlimited opportunities for the outsourcing of mission-critical support services, such as ERP (enterprise resource planning), HRM (human resource management). Furthermore, fierce competition among major producers of Internet software and networking equipment has created a buyers' market - placing Asian firms in a reasonably strong bargaining position. These developments are generally not well covered by existing studies, which are primarily focused on developments in the U.S. and Europe. The paper tries to fill this gap, and explores how placing global production networks on the Web affects managing in Developing Asia. A conceptual framework is introduced in parts 1 to 3. That framework is then applied to one of the role models of managing in Asia, Taiwan's Acer Group. Part 1 introduces a taxonomy of expected benefits from Internet-enabled transformations of business organization. In part 2, we argue that the real issue is to analyze how the Internet reshapes the organization of global production networks. In part3, we access conflicting claims on how an increased use of the Internet to manage global production networks affects international knowledge diffusion. In part 4, the example of Taiwan's Acer Group is used to describe the challenge for Asian firms to embrace the Internet as a key management function. And in part 5, we ask what Acer's experience tells us about Developing Asia's opportunities.

Date: 2000-09
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