ERIC ED422952: The Impact of a Computer Based Information System (CBIS) on Foreign Investments Opportunities.

8 Pages·1997·0.2 MB·English

by  ERIC

DOCUMENT RESUME
ED 422 952
IR 057 110
AUTHOR
Goodwin, Chester
The Impact of a Computer Based Information System (CBIS) on
TITLE
Foreign Investments Opportunities.
PUB DATE
1997-00-00
NOTE
7p.; In: Proceedings of the International Academy for
Information Management Annual Conference (12th, Atlanta, GA,
December 12-14, 1997); see IR 057 067.
PUB TYPE
Reports
Evaluative (142)
Speeches/Meeting Papers (150)
EDRS PRICE
MF01/PC01 Plus Postage.
DESCRIPTORS
*Computer System Design; Corporations; Data Processing;
Foreign Countries; *Information Transfer; *International
Trade; *Investment; *Management Information Systems;
Organizational Change
Canada; *North American Free Trade Agreement; *Technology
IDENTIFIERS
Role; United States
ABSTRACT
The purpose of this paper is to analyze the impact that
computer based information systems (CBIS) could have on U.S. multinational
corporations operating in Canada, particularly in the province of Quebec, and
the implications for the North American Free Trade Agreement (NAFTA) that
went into effect on January 1, 1994. The study focused on how the data
processing, internal audit, and financial intelligence subsystems of a
financial information system can affect the success and viability of foreign
investments. The study showed that when the management information systems
(MIS) are viewed as an organizational resource, the financial information
systems (FIS) must be properly designed and implemented so that financial
goals of the foreign subsidiaries, and those of the parent company, are
communicated to the appropriate responsibility levels within the
organizational hierarchy through the output subsystem. (Author/AEF)
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TIM IMPACT OF A COMPUTER BASED
INFORMATION SYSTEM (CBIS)
ON FOREIGN INVESTMENTS OPPORTUNITIES
OF EDUCATION
Improvement
U.S. DEPARTMENT
Research and
Office of Educational
INFORMATION
"PERMISSION TO REPRODUCE THIS
RESOURCES
Chester Goodwin
EDUCATIONAL
CENTER (ERIC)
MATERIAL HAS BEEN GRANTED BY
reproduced as
has been
Fayetteville State University
0 This document organization
person or
T. Case
received from the
originating it.
to
have been made
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quality.
improve reproduction
in this
opinions stated
Points of view or
necessarily represent
document do not
TO THE EDUCATIONAL RESOURCES
or policy.
official OEM position
INFORMATION CENTER (ERIC)."
The purpose of this paper was to analyze the impact that Computer Based Information Systems (CBIS)
could have on United States (US.) Multinational corporations operating in Canada and particularly the
province or Quebec and the implications for the North American Free Trade Agreement that
came into
effect on January 1, 1994. The study focused on how the data processing, internal audit, and financial
intelligence subsystems of a financial information system, can affect the success and viability of foreign
investments. The study showed that when the Management Information Systems (MIS) are viewed
as an
organizational resource, the Financial Information Systems (FIS) must be properly designed and
implemented so that financial goals of the foreign subsidiaries, and that of the parent company
are
communicated to the appropriate responsibility levels within the organizational hierarchy through the
output subsystem.
significantly in the FrI'A is the Province of
INTRODUCTION
Quebec, Canada.
The world. of the 1990s is certainly very different
from that of the 1980's, it requires shifts in
Quebec's economy is expected to continue to grow.
management
thinking.
Companies'
and
There appears to be a strong sense of confidence
in Quebec's business community, fueled by
capabilities and constraints have changed, and so
have assumptions, methods and solutions that
Quebec's good economic performance and the
served well enough in the past decades.
With
prospect of free trade with the U.S. and Mexico
in
computers
continuing
advances
and
(Lindzon, 1992)
telecommunications, managers will have to shape
organizations that respond quickly to foreign
The Province of Quebec, Canada border on the
investment opportunities.
province of New Brunswick and the States of New
York, Vermont, New Hampshire and Maine to the
According to Deputy Assistant Secretary Ann H.
South. It borders Labrador to the East. Ontario
and Hudson Bay lie to the West and the
Hughes, On January 1, 1989, the United States
(U.S.) and Canada formed the world's largest free
Northwest Territory lies to the North and West.
trade area, stretching from the Arctic Circle to
Quebec has a population of about 7 million with a
the Rio Grande. Not only did this historic U.S.
geographic area of 1.7 million sq km. It is 3 times
Canada Free Trade Agreement (FTA) cover
larger than the area of France. About 81% of the
bilateral trade in goods and services, but 'also
Quebecers speak French, 9% speak English and
investment (Business America,1989.)
FTA
10% speak other languages. (Balogun, 1988)
represented a total market of about $ 80 billion
dollars a year. FTA has affected every province
The Free Trade Agreement (FM) took effect on
in Canada. One of the provinces that benefited
January 1, 1989, after the U.S. Congress and the
362
Proceedings of the 12th Annual Conference of the International Academy for Information Management
2
Canadian Parliament had agreed to implement
Modern economies are complex, interconnected
the legislation. The purpose of the FTA was to
systems that can be changed by applying
remove trade barriers and stimulate investment
information technologies (IT). Whether financial
opportunities between the two countries.
information is viewed as a resource or as a
commodity, according to study done by Lindzon,
New legislation called North America Free Trade
(1992), MNCs doing business in
Quebec are
Agreement (NAFTA) take effect on January 1,
increasingly affected by the rules that govern its
1994. The purpose of the NAFTA was to remove
flow and use. The rules that govern international
trade
barriers
stimulate
and
investment
flow of financial information will determine the
opportunities among the U.S., Canada and
decision-making procedures (Krasner, 1983)
Mexico. The economies of these three countries
actual and potential effects on IT used by U.S.
will be united into the worlds, larget market of
MNCs.
our time. Business acquisitions will be allowed
As a result,
without government screening, tariffs will be
several firms in Quebec are
eliminated or greatly reduced. NAFTA trading
joint
considering
ventures
and
license
zone will serve about 370 million consumers with
manufacturing with several U.S. firms, requiring
a combined purchasing power of more than $ 6.5
the development and use of a complex Computer
trillion (VSCPA,Disclosures, 1994.)
Base Information System (CBIS).
In analyzing investment opportunities in foreign
THE CBIS AS
countries, one must consider the roles played by
FRAMEWORK FOR ANALYSIS
management of the host and that of parent
countries, in maintaining effective and efficient
According to (McCleod, 1996), the CBIS contains
operations. These roles must include the impact
five subsystems Data Processing (DP),
Office
Management Information systems (MISs) will
Automation (OA), Expert Systems (ES), Decision
have on foreign operations.
Support System
and Management
(DSS),
The MIS when
Information systems (MIS).
International financial managers often manage
viewed as an organizational resource is part of
by relying largely on various types of information
the CBIS umbrella for all business applications.
and other environmental factors. Information by
Under the CBIS umbrella, the MIS represents
definition is the collection and processing of
organizational efforts to apply the computer as an
relevant data for managerial decision making.
information
decision making
resource
for
Multinational
managers,
must
therefore,
concerning, marketing, manufacturing, human
require an expanded and more
typically
resource, and finance.
sophisticated information set than their domestic
counterparts. Management information systems
Since the 1989 FM with Canada, U.S. firms have
take into considerations the environmental
in
gained
experience
implementing
joint
complexities vis-a-vis the management roles.
international company-wide functional MIS
These environmental factors are government,
designs, and are ready for managers in certain
financial community, cultural, legal constraints
functional areas to begin applying the concept to
and competitors which impact directly on the
their own needs. In order to provide information
day-to-day operations of a foreign subsidiary.
concerning the money flow to users throughout
Along with the environmental complexities are
the firm, the MIS must contain a subsystem
the roles played by management to assure that
called the Financial Information System.
This
the foreign subsidiary achieves their stated goals
system within the MIS is a concept and is viewed
and objectives.
According to (Howard &
as one of the firms functional areas.
The
Perlmutter, 1969), these are the traditional
Financial Information Systems should be the
management functions: planning, organizing,
heart beat of most MNCs. Its IS technology must
motivating and controlling.
staffing,
be the controlling factor for solving problems
The
economic situation in the world is changing and
before and after they exist within the firm.
MNCs have realized that the use of MISs as part
of their planning process will bridge the gap
A good example of the importance of the
between potential and performance in MIS
conceptual financial Information system is
applications (Goodwin, 1991.)
Proceedings of the 12th Annual Conference of the International Academy for Information Management
363
3
provided by Lee Iacocca, describing the situation
INFORMATION FLOW PROBLEMS
at Chrysler when he became chairman in 1978:
Business information flows have traditionally
"A couple of months after I arrived,
assumed a vertical mode in the organizational
something hit me like a ton of bricks. We
hierarchies, i.e., information moves from lower to
were running out of cash! Gradually, I
higher management echelons and conversely.
was finding out Chrysler had no overall
Therefore, international managers are mainly
concerned with the type and quantity of
system of financial controls
nobody in
the
place
whole
seemed fully
to
information they receive and the source in which
understand what was going on when it
the information originated and processed before
planning
financial
to
came
and
ultimately channelling the data to the users. One
I couldn't find out anything.
projecting.
must be aware of the potential for information
This was probably the greatest jolt I've
overload when using the conceptual Financial
where an excess
ever had in my business career. I already
Information
System,
of
knew about the lousy cars, the bad
information is available and forwarded to the
morale and the deteriorating factories.
managers through the use of forecasting, funds
But I simply had no ideal that I wouldn't
management, and control output subsystems.
even be able to get hold of the right
The situation is even more precarious for
numbers so that begin to attack some
multinational managers who are often confronted
basic problems." (Newsweek, 1984).
with information overload and at the same time
are asked to make instantaneous decisions that
The influence of communication technology on
will affect the local operations of the company as
organizational structure has changed and the
a whole (Certo, 1992.)
focus will be on project management integrating
users and data (Hauptman & Allan, 1987).
There are rules for the international flow of
As the financial information
information.
Moreover, Sears Canada, a MNC doing business
requirements grow, issues such as privacy,
in Quebec could not maintain its financial health,
intellectual property rights, telecommunications,
without a financial information System being
and trade have to be resolved through global
part of its MIS.
cooperation among the U.S. and Canada. Sector
specific principles are critical (Mashatt, 1989)
The perplexing issue of distance faced by MNCs
when enhancing telecommunications-network-
management can be eased through the use of
The ?IA does not change the
based services.
telecommunications. However, the communica-
right of either country to allow monopolies in
tion between the parent company and its
basic telecommunications services.
However, it
subsidiary becomes extremely tedious when the
recognizes that these services are essential for
information flows through many channels that
marketing of many other services, like electronic
are thousands of miles apart. More succinctly,
mail. The FTA guarantees companies who need
information flow must deal with cultural and
to use basic telephone services the right to
language interpretations. A case in point is the
connect to and use those services. All computer
foreign operations in Quebec. Since Quebec is a
services, such as software and computer leasing
French speaking province, the provision of timely
and rental services, which do not necessarily use
information, which often is written in English
basic telephone services as their means of
from the parent company often relies on the use
distribution to customers, are granted rights
of output from a financial input subsystems
under FI'A legislation (Mashatt, 1989.)
internal
where
auditors
workable
give
recommendations on how to deal with the great
TRANSLATION/TRANSPOSITION
diversity of external conditions that bear upon
PROBLEMS
financial decisions of a foreign subsidiary. Large
firms usually have a staff of internal auditors
Another major information problem is the
who periodically study the firm's conceptual
question of the translation or transposition from
one information code to another, i.e., from
systems to insure that the integrity of the data is
maintained.
English
In
to
the
French.
appraising
performance of a foreign
subsidiary, U.S.
364
Proceedings of the 12th Annual Conference of the International Academy for Information Management
4
managers generally express a preference for
(Balogun ,1988),
some U.S. firms operating in
management reports stated in English and the
Quebec suggested that there are cost advantages
foreign currency is also translated to U.S. dollars.
to transplant as much of the control subsystem to
In every translation, some cogent and relevant
Quebec as
Some international
possible.
information may be lost due to translation or
managers in Quebec further pointed out that
it may be
In fact,
transposition problems.
many managers are familiar with the foreign
impossible
translate
to
a
word-for-word
subsidiary's MIS. As a result, the use of identical
management report from English to French.
financial control subsystems internationally will
the
speaking manager
Evidently,
French
achieve uniformity in the organizational financial
receiving a report so transposed may not receive
information systems. However, since one of the
the same message (information content) the
objectives of the financial information system is
financial manager in the U.S. would receive on
safeguarding enterprise assets, a CBIS with its
the basis of the original report. This factor makes
hardware in either location could meet the
a lot of difference in the information content of
organizational needs for both locations.
The
transmitted messages (Daley, 1985).
potential impact of environmental diversity on
the financial information system cannot be
must be
Multinational
information
flows
overemphasized.
Home management should
premised upon a solid basis on which foreign
seriously consider a method for designing and
subsidiaries must operate.
Such premisses are
implementing financial control in its Quebec
parent
policy
the
decisions of
company.
subsidiaries so as to achieve the MIS's objectives
According to (Perlmutter, 1969), in analyzing
that are established for the organization.
investment opportunities, the parent company
In analyzing investment opportunities in Quebec,
must classify multinational organization policies.
U.S. firms must adapt their MISs so that they
contain a financial intelligence input subsystem
FINANCIAL CONTROL PROBLEMS
in order to gather information on various
industrial features and characteristics, and
The MIS will be ineffective and inefficient
environmental elements that influence the
without the proper management of the financial
money flow. The Financial Information System
information systems designed and implemented
pictured in Figure 1.
is designed to gather
for both domestic and foreign investments. By
industrial features and environmental data and
the same token, the financial information system
information.
control subsystem must be designed and properly
implemented so that financial goals of the
FIGURE 1
company can be communicated to the appropriate
responsibility levels within the organizational
FINANCIAL INFORMATION SYSTEM
hierarchy.
Such a well-designed financial
INPUT SUBSYSTEMS
information system subsystems should include a
control subsystem that enables the company to
evaluate the degree to which established
[ Data
>>>
Internal
]
[ Financial
]
«<
processing audit
intelligence
objectives are being achieved and the corrective
actions that are being taken when actual
performance deviates from standards.
Its
functions
should
include
measurement,
Data base
communication, evaluation and motivation. Also,
providing information on the annual operating
OUTPUT SUBSYSTEMS
I
budget, actual expenses are important. Cultural
and language attributes must be intricately
Funds
Forecasting
]
[
[ Control
]
considered and properly evaluated so as to make
Management
the control subsystem work effectively and
efficiently.
MNCs' User
According to the research study, Analyzing
Quebec Investment Opportunities: Accounting
Decision Making for Multinational Corporations
Proceedings of the 12th Annual Conference of the International Academy for Information Management
365
5
The data processing input subsystem performs
function or by a special group that has planning
the firm's data processing tasks of gathering data
as its only responsibility.
that describes the firm's activities, transforms
the data into information, and makes the
The management of funds is
critical to the
information available to functional financial
success of MNCs. The flow of money from the
managers.
environment, through the firm, and back to the
environment is important because money is used
In evaluating the profitability, efficiency and
to obtain the other physical resources. The flow
effectiveness of foreign investments, the parent
can be managed through the funds management
company must get score keeping, performance
subsystems output.
Managers can be assured
that the revenue inflow is greater than the
evaluation, and problem solving to the internal
audit
These are traditionally the
subsystem.
expense outflow.
The conversion from U.S.
roles of management accounting.
Internal
dollars to the foreign country's currency and vise
auditors are sent to the foreign subsidiaries to
versa, can be done before the output is presented
assess the quality of operations and the status of
for use.
This information in part is
a going concern.
in the
gather and
internal
audit
stored
The best way to control, is to use an operating
subsystem.
budget. This bugget is used by managers to meet
the operational objective of the company. The
MNCs financial manager will need access
control subsystem can provide valuable ratio
intelligent information in order to manage their
reports to the users. The CBIS has probably done
resources. Information from data such as: energy
a better job in the control area than any other.
cost, exchange rates,
industrial land cost,
When an accurate and current database exists, it
industrial building costs, manpower costs, the
is a simple process to compare actual and
financial community, stockholders, and the
budgeted expenses, produce reports, and compare
government must be
gathered
the
ratios.
from
environment using the financial intelligence
All of the above data from
input subsystem.
CONCLUSION
environmental sources as well as internal sources
should be stored in the firm's database.
The pace of technological change exceeds the
This
information is critical, and must be processed and
ability of many organizations to keep up with the
presented to financial functional area managers
versatility. Many MNCs today have realized the
so the firm may have qualitative as well as
change and are using CBIS technology to prevent
quantitative
information
their operations from lagging behind in the
making
before
investment decisions.
foreign investment markets.
Many MCNs which have tried to invest in foreign
The impact that the CBIS can have on foreign
countries have realized that the key issue is the
investment is critical. That MNCs doing business
output subsystems of the Financial information
in other countries, especially Canada, must have
The output subsystem
system.
contains
a CBIS that contains a Financial Investment
information pertaining to forecasting, funds
part
their
Subsystem
as
is
MIS
of
management and control.
unquestionable.
Forecasting is used to predict what will tend to
The growth of CBIS technology offers MNCs the
happen in the future by taking a look at what has
opportunity to improve the performance of their
firms in the global market.
happened in the past. Since the output used from
The functional
the forecasting subsystem helps users make
manager as end-user, can use the output from the
semistructured decisions, the decision support
CBIS to control day to day activities of the host
system is a great tool that supports this model.
country foreign firm.
In the CBIS model, the managers from the
areas
functional
can
short-term.
forecast
The CBIS should become the dominant kind of
However, long-term forecasting is usually done
computing for MNCs doing business in foreign
by an area other than marketing, by the financial
countries, especially the NAI`TA countries, and
366
Proceedings of the 12th Annual Conference of the International Academy for Information Management
MIS executives need such an approach for
Hughes, Ann. (1989). "United States and Canada
dealing with the demands of new foreign
Form World's Largest Free Trad Area." Business
investment legislation such as NAFTA.
America 2 January, pp. 2-3.
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7
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