International Business Management: Strategy and Structure

Introduction

The 21st century is an era of multinational corporations (MNC’s). Since the industrial revolution, the ideas of capitalism and free enterprise have dominated world business and they show little signs of ending soon. The last two centuries have seen the emergence of new companies dominant in different business fields with global operations spanning numerous countries in both the developed and developing worlds. One of the striking features defining such business enterprises is their corporate culture. Like social culture, nearly all corporations have distinct cultural ways that detail company aspirations, missions, objectives and code of conduct of its employees. This corporate culture is closely linked to the company’s core business and aims at shaping its human resources towards the overall goal of the business entity.

International Business Machines

One of premier multinational corporations is the International Business Machines (IBM). IBM is undoubtedly a dominant force in the global information technology sector in terms of innovation and information and communication technology development. Also, the company has a solid and well established corporate culture based on respect for the individual, service to the customer, excellence as a way of life, effective leadership, owing responsibility to stakeholders, fairness to suppliers and good corporate citizenship (Renouf 2009, p. 88). Given its track record, only few companies such as Microsoft and Apple can rival IBM in this particular industry. This discussion will mainly focus on the international strategy and structure of IBM. Additionally, it will examine whether the international strategy and business structure is adequate in achieving IBM’s stated objectives and mission. Furthermore, the discussion will include recommendations on what IBM needs to do in cases where there may be discrepancies in the strategy which may hinder its stated objectives.

Strategy and Structure of IBM

IBM is a massive company with a complex organization structure that reflects the core operations of the company. The company’s system consists of a chief executive officer, chairman, president and board of directors. The chief executive officer is assisted by senior vice presidents, chief financial officer and several junior vice presidents. IBM’s structure spots numerous sub-companies and divisions defined by specific business interests and internal corporate structures (Aswad & Mredith 2005, p. 108). In a nutshell, the organizational structure displayed by IBM and its affiliates can basically be divided into two sections. Root organization and default organization. Between the root organization and the default organization are sire administrators who include officials mentioned above. After the default organization, there are the customers that comprise the customer base that keeps the company in business. For instance, one of the main divisions of IBM is the IBM Global Services which deals with the company’s IT services.

For purposes of demonstration, this discussion will use the IBM Global services structure to highlight the organization of the default organizations that make up the full IBM entity. IBM Global services contains six service lines including such divisions as strategy and transformation, enterprise applications divisions, Business analytics and optimization, application and innovation services, application management services and enterprise resource planning. As a result, IBM is now a world leader in systems and financing, middleware and software and services including IT services and consulting.

According to Bachmutsky, IBM’s strategy is closely linked to its corporate structure (2011, p. 193). The company’s strategy is as complex as its structure. IBM is involved in different IT industry business sections including business value, infrastructure value, services and software, hardware and component values. Its strategy mainly involves acquisitions and divestitures. Besides, the company has heavily invested in research and development for the sole purpose of developing new products. Greulich says that IBM’s business model is a product of numerous trial and error models which has finally settled on strategic investments in services and technologies that spot long-term growth and profitability gained through value delivery to clients (2011, p. 89). Also, the strategy and business model includes a commitment to employees and the different communities in which the company operates.

Effectiveness of IBM Strategy

According to Bashab, a firm’s corporate structure and strategy is mainly tailored to meet its overall mission and objectives. Before any analysis on the adequacy of IBM’s it is important to have a look at its corporate mission and objectives (2009, p. 140). IBM’s mission is to strive to lead in enhancing creativity, availing innovative products, development and manufacture of exceptional technological developments. These technologies include computer, software and microelectronic systems unique to IBM. The mission further says that the company aims at translating these technologies to competitive value for clients, both individual and corporate with the aim of generating health returns for the company and its shareholders. The long-term objectives of IBM is to increase revenue from new markets using new technology and products, focusing on productivity for the sole purpose of improving the company’s margins, use and deployment of cash to fund growth through exclusive use of dividends and buybacks (Greulich 2011, p. 93).

A close analysis of the IBM’s performance in the last decade indicates a close relationship between the company’s investments and divestment closely tailored along company missions and objectives.

In line with the first objective of driving revenue through growth in new markets through developing and acquiring new products, IBM had made considerable progress regarding that front. For instance The Company’s business decisions have mainly been based on the above-mentioned strategy. IBM has since 1999 divested from different market segments while entering completely new areas. For instance, the company exited the DRAM and Global network markets. In 2001, IBM exited the Flat Panel Displays market. In 2002, the company exited the HDD market by selling its HDD business to Hitachi for a $2 billion. In 2005 IBM exited the personal computers market when it’s sold its business to Lenovo for $1.75 billion (Bachmutsky 2011, p. 23).

Nambisan cites the company’s desire to focus on the high-end hardware such as servers as the reason for the previous divestitures (2009, p. 111). On the other hand, IBM’s strategy of acquisitions and saw it carry out a concentric diversification to other companies such as Ascential in 2005, Candle and Maersk Data in 2004 and Rational in 2003 for the sole purpose of focusing on the enterprise and middleware software. Additionally there were joint ventures for development of cell microprocessors with Sony and Toshiba in 2005, development of wireless chips with Infineon and Samsung, development of open technology on its own and venture into business transformation services and service oriented architecture (Nambisan 2011, p. 69). There is also the purchase new consulting service from Price Waterhouse Coopers effectively increasing its share of consulting business considerably.

IBM has also made hug strides in achieving its second objectives of improving margins through focusing on productivity. Through the investments and divestitures outlines above IBM was by 2005 the largest information technology company in terms of revenue generation. Information technology generated $46 billion with hardware generating $31 billion. Financing generated $2.6 billion while software generating $15 billion.

Recommendations

From the business plan laid out by IBM, the company certainly is in a better position that in was a few years ago. It is one of the companies that still made a profit during the 2008 global financial crisis. A careful look at IBM’s trends suggests a drastic departure from its traditional computer and business machine manufacturing. Notable, is the company’s divestiture from personal computer manufacturing. While there has been a lot of diversification by IBM in other information technology related areas, it is fair to conclude that IBM will in the long-run need a computer division to bolster its earnings.

The company has also diversified into financial services especially consulting. This strategy seems to be paying off though its full potential is yet to be realized.

IBM commits considerable resources to research and development. The company has numerous research facilities in the US and abroad that are the engine behind its innovations. In light of the above observations, the company can do with the following recommendations:

  • IBM should seek to acquire more consulting business divisions. With laws such as Sarbanes-Oxley act, many auditing firms such as KPMG are seeking to sell their consulting arms. This offers IBM a chance to acquire such businesses and restructure them according to new government regulations.
  • IBM should consider reverting to its computer business through diversification to tablet computers. Information technology companies such as Apple and Samsung have thrived on the tablet market with very innovative products. Though IBM is not actively involved in computer manufacture, the company has the resources to acquire a computer division that it can easily develop through aggressive research and development.
  • Though IBM has an elaborate research and development operations, there is never any harm in increasing the R&D departments. It always pays off.

Reference List

Aswad E, & Mredith, S 2005, Ibm In Endicott, Thomson Learning, New York.

Bachmutsky, A 2011, System Design for Telecommunication Gateways, Cengage Learning, New York.

Bashab, J et al. 2007, The Executive’s Guide to Information Technology, Thomson Learning, Sydney.

Greulich, P 2011, The World’s Greatest Salesman, Sage Publications, London.

Nambisan, S 2009, Information Technology and Product Development, Springer, Chicago.

Renouf, C 2009, Pro (IBM) WebSphere Application Server 7 Internals, Cambridge University Press, Cambridge.