Global Management Assignment – The IBM Case

Please answer the following questions:

(1) What global forces drove IBM to become a globally-integrated enterprise?
An increasingly global world creates many opportunities – easier and faster communication, more affordable and more refined solutions, as well as a better interconnectivity between customers and suppliers around the globe. As the internet has deeply integrated itself into the economic performance of companies and countries at meso and macro levels, the competition between suppliers is increasing and fostering a more rapid innovation cycle. As new markets open up and offer new profit pools for companies, it is essential for firms such as IBM to be on top of their game. They need to analyze and understand market trends before they are even born and respond with a global solution, which is capable of taking transnational strategies and skillfully translating them for the local market needs. The biggest market for any company might not always be its home market. Free markets around the world create many opportunities for growth. However, if IBM fails to identify these opportunities, it can cost the company its survival, as the competition quickly moves in and takes over. Globalization means more options and power for customers, as all over the world people can virtually connect with companies, goods and services anywhere. Therefore, open markets, new market entries, developing government policies, increased customer purchasing power as well as rapidly developing innovations forced IBM to globally-integrate itself in order to expand its business around the world, while understanding local needs and being accepted into new cultures and economies.

(2) How has IBM adapted thus far? Have they been successful?
IBM has been very successful in adapting to the mentioned global forces, as it is not limiting its focus on one part of operations, but is introducing new solutions on many different levels. They have understood that the location of business activity is important in many ways. Yet, by simply using an American strategy and putting American employees in their offices abroad, IBM would not reach the desired outcome. Nowadays, they have offices in over 170 countries around the world. Their advantage to other companies is that they have successfully identified the need to integrate the local government into their operations, while showing a genuine interest in and support for the country’s well-being. By sending locals abroad to their US headquarters and equipping them with the knowledge and expertise they need to deliver IBM’s values and strategy, they ensure that their employees, once they return to their home countries, understand how the company operates at a global level and how this could be adapted to local solutions. As a globalization of processes creates a high level of complexity, IBM has also successfully introduced an inverted pyramid model, in which responsibilities are shared among different hierarchical levels. This ensures smoother and quicker decision-making across a large number of business units in many different locations. Not only responsibilities, but also opinions are openly shared through initiatives such as the Global Innovation Outlook (GIO), where internal and external experts can raise their voice and offer IBM valuable and free of charge suggestions for entrepreneurial projects and innovations. Thus, IBM’s true success was the realization that communication at different levels and in different locations varies a lot, but is equally important for their future success.

(3) What skills should global leaders have?
Global leaders need to have the capacity to accept and absorb new knowledge and use it to benefit and improve their already existing assumptions and judgements. They need to be able to understand local issues and demands and put them into a global context, thereby connecting ideas with an emphasis on country-specific value creation. Furthermore, they need to have an international experience, which fosters their cross-cultural communication skills to appropriately deliver meaningful messages. As global leaders act as a bridge for their international units, they need to be willing to share responsibilities and to be flexible to adapt to varying points of views and interest. Their communication skills also need to include the ability to understandably formulate core values and strategies among complex business structures, so that they can be understood and implemented at every level.
Global leaders need to constantly look out for innovations, and not only consider the competition as an enemy, but as a possible partner for a synergy (e.g. IBM and Oracle collaborate in their consulting activities). They need to value people, their work and ideas as an important part of the greater outcome, and should emphasize crowdsourcing and opinion-sharing platforms. While a successful global leader should separate political interests and economic motivations, they should be able to identify shared needs. As they make their decisions, the ability to properly assess the level of risk is crucial for the company’s success.

(4) If you were Jon Iwata and John Kelly, what recommendations would you make to Sam Palmisano?
If I were Jon Iwata or John Kelly, I would recommend to Sam Palmisano to embrace growth, but in a controlled and balanced way. While he emphasizes a globally-integrated enterprise, he needs to understand the right level of: 1) horizontal vs vertical integration of operations and services 2) a global vs a local emphasis on strategy formulations 3) an internal vs an external focus on expansion 4) traditional hierarchical structures vs the inverted pyramid of shared responsibilities 5) complexity vs focused operations 6) risk taking vs certainty.
It is crucial for Sam Palmisano to maintain a balance between all of these indicators, in order to respond to globalization and successfully deliver to the highly diverse customer pool IBM is attracting. While it is important for Palmisano to be present in the many different locations and communicate the company’s core values, he should not only focus on external growth. Also internally, he needs to attend to his employees and should constantly seek to adjust and improve existing processes. As the complexity level rises with more IBM locations all over the world, Palmisano needs to analyze whether additional growth will not increase the risk disproportionally. It is only then, that he can understand the true benefit of each location, and henceforth he can decide on the fitting growth model, specific strategies and responsibility distribution at each location and level.