Question

IBM CEO Sam Palmisano adores to talk about the evolution of global strategy at one of the world's largest computer enterprises. As-per to Palmisano, when IBM first on-going to expand internationally, it did therefore in the classic international pattern of many enterprises, undertaking most of its activities at home, as well as selling its products internationally through overseas sales offices. By the time Palmisano joined IBM in 1972, nevertheless, it had previously moved away from this model and was by then a classic "multinational" enterprise with mini IBMs in major national markets around the world. This structure made sense for IBM in the 1970s, given that several markets were still segmented from each other by high barriers to cross-border trade as well as given that national differences in business practices frequently required considerable localization.

In recent decades though IBM has been moving away from this model as well as toward one that Palmisano characterizes as a globally integrated enterprise. In his words- We are locating work as well as operations anywhere in the world based on economics, expertise as well as the right business environment. We are integrating those operations horizontally as well as globally. We used to have discrete supply chains in different markets. Now we have one supply chain a global one. Our R&D has been global for several years, with research as well as software development carried out in labs around the world. However in our professional services businesses where we used to think about our human capital-our people-in terms of countries and regions and business units we now manage as well as deploy them as one global asset.

Therefore, today's IBM locates its semiconductor R&D as well as manufacturing operation in upstate New York as well as Vermont its global procurement center is in China. Global services delivery is in India, while numerous of the services that support IBM's external as well as internal websites are in places like Ireland and Brazil. The people at each of these centres aren't focused on their national markets, they are foremost integrated global operations.

This strategic shift was a reply to three things- the globalization of the world economy, the global nature of numerous of IBM's customers, who were themselves shifting toward a global integration strategy as well as the emergence of fierce opposition from enterprises in emerging markets such as China and India. Take India as an instance in the 1990s a trio of Indian outsourcing firms-Tata Consulting Services, Infosys, and Wipro-started to take share absent from IBM in its core information technology services business. The Indians enjoyed a privileged based on a large supply of highly educated nonetheless relatively inexpensive engineering as well as managerial talent. IBM believed that to compete, it had to accept the low-cost model being pioneered in India. Consequently in the mid-2000s, it bought Daksh an Indian firm that was a smaller version of India's big three information technology services firms. IBM has invested deeply in its Indian unit, building it into a large global business with leading market share that now contests effectively on cost as well as quality against its Indian rivals. While Palmisano notes that the original motivation for expanding in India was to gain access to low-cost labour he now argues that the skill base in India is just as important if not more so. IBM can discovery a large supply of highly skilled people in India who can staff its global services operations as well as move seamlessly around the world. It does not hurt that most Indians have a good command of the English language which has develop the de facto language of business in much of the world.

Case Discussion Questions

1. In the 1970s as well as 1980s Sam Palmisano states that IBM was organized as a classic multinational enterprise. What does this mean? Why do you think IBM was organized that way? What were the compensations of this kind of strategic orientation?

2. By the 1990s the classic multinational strategic orientation was no longer working well for IBM. Why not?

3. What are the strategic advantages to IBM of its universally integrated enterprise strategy? What kind of organizational changes do you think had to be made at IBM to make this strategy a reality?

4. In terms of the strategic choice framework introduced in this section what strategy do you think IBM is pursuing today