Globally integrated enterprise
The globally integrated enterprise is a term coined in 2006 by Sam Palmisano, the then CEO of IBM Corp, used to denote "a company that fashions its strategy, its management, and its operations in pursuit of a new goal: the integration of production and value delivery worldwide."
Palmisano argues that in the international model of the 20th century, most operations were centred in their home country, with only elements of sales and distribution happening overseas. The multinational model of the 21st century—in which companies created small versions of themselves in each country—was a response to the trade barriers that arose after the World Wars. For IBM—Palmisano's employer—this was a successful model because it enabled the company to grow in those markets, understand local customer requirements and cultivate local talent. But it also created redundancy or duplication as each country had its own back-office functions, such as— supply, procurement, finance and human resources.
Now the globally integrated enterprise can locate functions anywhere in the world, based on the right cost, skills and environment, argues Palmisano. For example, IBM now has one supply chain; and this new organizational macrostructure has emerged because everything is connected, and work can move to the place where it is performed cheapest. This approach is made possible due to the rise of globalization, and coming down of many of the barriers that haltered cross-border commerce.
Palmisano mentions the Law of Global Integration, driven by three forces—economics, expertise and openness—without explicitly stating what it is or how it can be verified.
- 'In my view, this underscores a key element of tension in America’s current backlash against globalization that was not evident in the late 1980s. Today, the pressures are being borne disproportionately by labor, whereas 20 years ago, capital and labor were in the struggle together. In the late 1980s, many of the once proud icons of Corporate America were fighting for competitive survival at the same time that US workers were feeling the heat of global competition. The pain was, in effect, balanced. Today, US companies, as seen through the lens of corporate profitability, are thriving as never before while the American workforce is increasingly isolated in its competitive squeeze. In essence, capital and labor are working very much at cross purposes in the current climate, whereas back in the late 1980s they were both in the same boat.'
- Palmisano, Sam (15 March 2006). "The Globally Integrated Enterprise" (PDF). Retrieved 10 June 2012.
- Barker, Colin (12 June 2006). "IBM boss spells out a better future". Retrieved 26 September 2012.
- "Globalisation's offspring". Economist. 4 April 2007. Retrieved 26 September 2012.
- "Global Protectionist Threats: Then and Now" (PDF). 26 January 2007. Retrieved 10 June 2012.
- Samuel J. Palmisano. The Globally Integrated Enterprise. (Foreign Affairs, May/June 2006)
- Criticisms of the paper on Economist's View blog
- Comment on Palmisano's proposal from the IT industry
- And again
- Approbation from the Dean of Cheung Kong Business School