The Role of Knowledge Management in developing an International Business

Strategy

(Nasrullah Khilji)

Contents:• Introduction• Knowledge Management (KM)• International Business (IB)• International Business

Strategy (IBS)• KM in Developing an IBS• The Knowledge Economy (TKE)• Conclusion ...

IntroductionInformation and knowledge are valuable resources that must be managed with as much care and attention as the traditional resources i.e. human, financial and physical.

Indeed, knowledge management is an asset that should be used effectively while developing an international business strategy.

Role of Knowledge Management

The role of KM in developing an international business strategy ensures that all information and knowledge identified, created and managed is accessible to everyone.

This will ensure that knowledge is managed in a co-ordinated and cost-effective manner.

KnowledgeKnowledge is intangible, dynamic, and difficult to measure, but without it no organization can successfully survive.

Two Kinds of Knowledge

1. Tacit: or unarticulated knowledge is more personal, experiential, context specific, and hard to formalize; which is difficult to communicate or share with others; and is generally in the heads of individuals and teams.

2. Explicit: explicit knowledge can easily be written down and codified.

Why Knowledge Management?

• The new source of wealth is knowledge, and not labor, land, or financial capital.

• It is the intangible, intellectual assets that must be managed.

• The key challenge of the knowledge-based economy is to foster innovation.

Knowledge Management•Knowledge management is the systematic management of an organization's intellectual assets for the purpose of creating value and meeting tactical and strategic requirements.

•Knowledge management consists of the initiatives, processes, strategies, and systems that sustain and enhance the storage, assessment, sharing, refinement, and creation of knowledge.

Need for International Business

Causes the flow of ideas, services, and capital across the world

Offers consumers new choices Permits the acquisition of a wider variety of products

Facilitates the mobility of labor, capital, and technology

Provides challenging employment opportunities

Reallocates resources, makes preferential choices, and shifts activities to a global level

What is International Business?

International business involves all business transactions that involve two or more countries.

What is International Business?

International business consists of transactions that are devised and carried out across national borders to satisfy the objectives of individuals, companies, and organizations.

International Business Trend

More and more firms around the world are going global, including:

– Manufacturing firms– Service companies (i.e. banks, insurance, training and consulting firms)

– Art, film, music companies.

International Business Strategy

International Business Strategy is concerned with the issues facing by international companies including globalisation, market trends, legislation, culture, economy and politics in dealing with all types of cross-border trade and transactions.

International Business Activities

International Business Activities

International business consists of those activities in private and public enterprises that involve the movement across national boundaries of:1. Goods2. Services3. Resources4. Knowledge5. Skills

Types of International Business

Types ScopeImporting and Exporting

Selling and buying goods and services with organizations in other countries.

Multinational Enterprise (MNE)

An organization with operating units located in foreign countries.

Global Organization

An organization having corporate units in a number of countries integrated to operate worldwide.

International Business Network

• International business has created a network of global links that bind countries, institutions, and individuals with trade, financial markets, technology, and living standards.– For example, a reduction in coffee production in Brazil would affect individuals and economies worldwide.

Recent Changes in International Business

• Total world trade declined dramatically after 2000, but is again on the rise.

• The rate of globalization is accelerating.

• Regionalization is taking place, resulting in trading blocs.

• The participation of countries in world trade is shifting.

Source: International Business, 7th Edition

The Composition of Trade

• Between the 1960’s and the 1990’s the importance of manufactured goods increased while the role of primary commodities (i.e. rubber or mining) had decreased.

• More recently, there has been a shift of manufacturing to countries with emerging economies.

• There has been an increase in the area of services trade in recent years.

Source: International Business, 7th Edition

GlobalizationBecause of globalization, for the first time in history, the availability of international products and services can be accessed by individuals in many countries, from diverse economic backgrounds.

KM in Developing an IBS• How will an idea, good, or service fit into the international market?

• Should trade or investment be used to enter a foreign market?

• Should supplies be obtained domestically or abroad?

• What product adjustments are necessary to be responsive to local conditions?

• What are the threats from global competitors, and how can these threats be counteracted?

KM in Developing an IBS ‘Cont..’

The move from an industrially-based economy to a knowledge or information-based one in the 21st Century demands a top-notch knowledge management system to secure a competitive edge and a capacity for learning.

KM in Developing an IBS ‘Cont..’

• Designing and installing techniques and processes to create, protect, and use known knowledge.

• Designing and creating environments and activities to discover and release knowledge that is not known, or tacit knowledge.

• Articulating the purpose and nature of managing knowledge as a resource and embodying it in other initiatives and programs.

Do We Really Need KM?1.Competitive success will be

based on how strategically intellectual capital is managed.

2.Capturing the knowledge residing in the minds of employees so that it can be easily shared across the enterprise.

3.Leveraging organizational knowledge is emerging as the solution to an increasingly fragmented and globally-dispersed workplace.

Do We Really Need KM? ‘Cont..’

4. If the department wants to stop constantly reengineering and downsizing: talented people are assets to be developed for a global 21st Century

5.If the organisation is interested in the Knowledge Grid

6.If the organisation understands that reuse of knowledge saves work, reduces communication costs, and allows the management to take on more projects

Organizational knowledge:

Why is it important?• Knowledge can be embedded in processes, products, systems, and controls.

• Knowledge can be accessed as it is needed from sources inside or outside the firm.

• It is versatile and can be transferred formally, through training, or informally, by way of workplace socialization.

• It is the essence of the competitive edge!

KM Key Areas

• Competency Management

• Knowledge Sharing

• Competitive Knowledge Management

KM SuccessFocus on five tasks: 1.Generating knowledge2.Accessing knowledge3.Representing and embedding knowledge4.Facilitating knowledge5.Transferring knowledge ‘it is a process of instilling

the culture and helping people find ways to share and utilize their collective knowledge’.

Knowledge Management - Enablers in IBS

1.Leadership2.Knowledge champions, such as

CKOs3.Culture4.Access5.Technology6.Learning Culture

The Importance of Corporate Culture

• To Change the culture is imperative. • To create a climate in which employees volunteer their creativity and expertise, managers need to look beyond the traditional tools at their disposal: finding ways to build trust and develop fair process.

• To get the gatekeepers to facilitate the flow of information rather than hoard it.

• To facilitate the offering rewards and incentives.

The Technological Divide

• Generating organizational knowledge invariably means converting the tacit knowledge of the individual into explicit knowledge accessible by all.

• Information technology is most effective when it enables the social process.

• Organisations must think through their technological systems to facilitate KM.

• Technology such as Intranets and advanced collaborative software have made Knowledge Management possible to play crucial role in developing an effective international business strategy.

Organizational Changes• A knowledge management system cannot work through hierarchies.

• Individual and team learning processes must become the true driver of organizational learning.

• Hierarchal chain between departments and operating divisions blur Knowledge management efforts that can completely collapse boundaries.

Why KM? What’s the Big Deal?

1. By instituting a learning organization (KM-intensive), there is an increase in employee satisfaction due to greater personal development and empowerment.

2. Keeps employees longer and thereby, reduces the loss of intellectual capital from people leaving the international business company.

3. Saves money by not reinventing the wheel for each new project.

Why KM? What’s the Big Deal?

‘Cont ..’4. Reduces costs by decreasing and

achieving economies of scale in obtaining information from external providers.

5. Increases productivity by making knowledge available more quickly and easily.

6. Provides workers with a more democratic place to work by allowing everyone access to knowledge.

Why KM? What’s the Big Deal? ‘Cont ..’

7. Learning faster with KM to stay competitive.

8.Knowledge management software and technological infrastructures allow for global access to an organization’s knowledge, at a keystroke.

In Successful KM Programs

• Information is widely disseminated throughout the organization. Wherever it is needed, it is accessible.

• Accessible at a fast rate of speed.• Virtual communities of practice share what is known in a global fashion, independent of time zones and other geographic limitations.

• Business boundaries are broad, and often virtual in nature.

• Collaboration to support continuous innovation and new knowledge creation.

Symptoms of KM Diffusion Challenges

• No internal learning communities.• Lack of psychological safety.• Lack of workplace trust.• Arrogance of people who believe they know everything, so why try?

• Lack of communication within an organization made evident by continually reinventing the same wheel.

• Negativity and unrealistic expectations.

Sustainability of a KM Endeavor

There are three fundamental processes that sustain profound changes such as the introduction of a KM system:1. Developing networks of committed people2. Improving business results3. Enhancing personal results To achieve sustainability, there must be a focus on learning, and learning how to harness the learning capabilities that lead to innovation.

Sustainability of a KM Endeavor ‘Cont..’

• For significant change to lead to sustainability, hierarchical control must be put aside.

• The emergence and development of informal networks must be supported so that people can share their tacit knowledge and help one another.

• Managers need to surrender control.• Mental models need to be examined.

The Knowledge EconomyFor several decades the world's best-known forecasters of societal change have predicted the emergence of a new economy in which brainpower, not machine power, is the critical resource. But the future has already turned into the present, and the era of knowledge has arrived. "The Learning Organization," Economist Intelligence

Unit

The Knowledge Economy The knowledge economy rests on three pillars:

1. The role that knowledge plays in transactions: it is what is being bought and sold; both the raw materials and the finished goods.

2. The concurrent rise in importance of knowledge assets, which transform and add value to knowledge products.

3. The emergence of ways to manage these materials and assets, or KM.

KM and IBS• Where is the international business going in future?

• What are they after to achieve?• People need awareness of the whole: in what direction is the international business going?

• To have a goal to reach in the future can provide great incentive for a KM initiative.

• Effective leveraging lies within an organization’s capacity for rethinking and recreating.

• Scenario thinking can help IB to see the blind spots, and help to create the future they want.

Conclusion …• The essence of knowledge management is understanding and valuing intangible assets over tangible.

• Understanding that human and intellectual capital are the greatest resources.

• Managing the skills and competencies that lie within an organization, and allowing them to blossom while developing an IBS.

• Allowing people to be the best that they can be; optimizing performance.

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