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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
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
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
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
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
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
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.