Question 3

What are the strategic advantages to IBM of its globally integrated enterprise strategy?

What kind of organizational changes do you think had to be made at IBM to make this

strategy a reality?

IBM refers to its new strategy as a global integration approach. Under this strategy, IBM has

integrated operations both vertically and horizontally, located operations in the optimal place

where ever in the world that may be, and thinks of its workforce as being global rather than being

associated with specific countries, regions, or business units.

As a globally integrated enterprise, IBM has gained the advantages of having work and

operations anywhere in the world based on economics, expertise, and the right business

environment. For example, IBM's global procurement centre is in China while its global services

delivery is in India. Besides that’s, IBM also places their semiconductor R&D and manufacturing

operations in upstate New York and Vermont. IBM has integrated operations both vertically and

horizontally. IBM is a vertically integrated company in both software development and hardware

manufacturing. It has only one global supply chain and global R&D. Its research and software

development are carried out in labs around the world. IBM is now managed and deployed its

workforce as one global assets rather than being associated with specific countries, regions or

business units. Its employees are now leading integrated global operations instead of only focusing

on their national market.

 IBM needs to have an active headquarter where the information needs to be processed for

product development, production, R&D, finance and marketing- at a very systematic, efficient and

effective manner. The communication between the Headquarter and the rest of the operations

should be maintained through advanced software for the omission of errors.

IBM's global integrated enterprise strategy has enabled the company to take advantage of national

differences in the cost and quality of factors of production such as labour, capital and technology

know-how which in turn allow them to lower their cost structures and boost profits. IBM has

pursued strategy of horizontal integration by its acquisition of Daksh, an Indian firm in the mid-

2000s. This has brought IBM to better positioned to effectively competes on cost and quality of

factors of production against its Indian rivals such as Wipro, Infosys and Tata Consulting services

who started to take share away from IBM in its core information technology services business.

From the bought over, IBM is gaining global competitive advantage whereby it gets access to low

cost labour on top of highly educated, but relative inexpensive, engineering and managerial talent

that can staff its global services operations. On top of that, IBM managed to increase the number

of its customers.

IBM has benefited from the globally integrated enterprise strategy in terms of location

advantages. For example, IBM has set up its global procurement centre in China. IBM is taking

advantage of the lower-cost of raw material and wage rate there. IBM can hire cheap labour from

local site. IBM also can hire more skilled people to produce the products or manage the firm, so it

benefits the firm’s human resource. Their goal is to lower production cost. The strategic move

enables IBM to gain access to a more global market.

 Besides that, IBM's strategy of having only one global supply chain has increased the

integration among divisions so that different divisions are able to share skills and resources more

effectively and at the same time serve as a bridge to align enterprise operations horizontally. The

team are able to get together and share a common framework to configure solutions that allows

them to be replicable. This in turn will allow the company to increase its productivity and

efficiency. A global approach to the supply chain helped IBM in leveraging its economic of scale.

To make this global strategy a reality, IBM needs to made changes in its talent management

system or adapt managerial changes. It needs to be more focused on talent recruitment by

attracting, retaining, developing and promoting the best people who can significantly contribute to

the company. The success of the company depends significantly on its human capital. Line

managers could create business model that would take advantage of the company scales and

integrations. The responsiveness of managers to the changing environment or the competition

means very much to the company. Greater speed and clarity can be achieved by the increased

clarity between the "demand signal" in the businesses and the response of the talent system.

Talented workforce able to translate business signals into specific talent capabilities and enable

the company to achieved first mover advantages. Besides that, IBM should communicate openly

about the strategy so that people can work together to understand and respond on any issues.