Influence of Globalization on Organizational Network Structures - Essay Example

? Influence of Globalization on Organizational Network Structures Introduction: The studies conducted on management theories noticeably imply a trend towards growing environmental complications through and beyond the 20th century. Efforts are also evidently prevailing that tend to measure complexity. It can be realized that the complexities in organizational environment mainly arise owing to globalization and the increased use of technology. Interdependencies are found to grow as a result of such widespread environmental impacts. An indication of more complicated work environments is proved by the fact that organization’s in today’s word “are more networked and less hierarchical”. With greater complex work environments, preference of non technical communication is found more amongst workers (Tucker, Furness, Olsen, McGuirl, Oztas & Millhiser, 2003). Globalization can be identified as the increased “mobility of goods, sources of labor, technology and capital” on a worldwide prospect. Considering the impact of globalization on the organizational factors, it can be studied that several new possibilities and opportunities are opening as a result of globalization. Newer ways are cropping up with respect to delivery of different functions. There is an increase in the number of options available to a company and hence greater number of decisions to be taken. Moreover such decisions have to be communicated to all divisions and all levels within an organization. This undoubtedly increases the complexity of an organizational network structure as well. However corporate globalization increases the number of opportunities for an organization; but at the same time it sets up more numbers of interdependencies between a variety of organizations (Tucker, Furness, Olsen, McGuirl, Oztas & Millhiser, 2003). Learning from a World Class Company: IBM (International Business Machines Corporation): The IBM is “one of the largest providers of information technology and services”. The primary missions of the company include becoming the leader in creating, developing, and manufacturing superior information technologies and transforming those skills and expertise into “value” for its customers. Computer systems that include “software, networking systems, storage devices and microelectronics” are designed, developed and manufactured by IBM. The operations of the company are spread across the world providing work opportunities for more than 200,000 people. The headquarters of the company is in Armonk, New York (Tung, 2001, p.40). A brief history of the company: IBM was first initiated in New York in the year 1911. However the company’s history dated back to 1890s when mass immigrants were entering the United States and an efficient system was required to measure the level of population. Initially although the company had been operating only in New York, but within a short duration of time, its operations expanded worldwide. Under the management of Thomas J. Watson the company’s products and services were even more expanded. “IBM refers to the decades between 1939 and 1963 as the ‘Era of Innovation’”. The product line of the company appreciably enhanced during this period of time. The company moved towards the advancement of computers during the period of the Second World War (Tung, 2001, pp.40-41). Gradually over the years, the company developed several new products that included “automatic-sequence-controlled calculator”, “IBM 701” which was the first large computer manufactured with vacuum tube, “system/360 computer”, and so on. In the year 1969, the company brought in modifications in its product selling and started selling individual components instead of hardware or software devices. IBM had also introduced “personal computers for small businesses, schools and homes”. The company initiated an establishment for network computing and several facilities of such computers. In the year 1993, Louis V. Gerstner joined the company as the CEO and he highlighted the necessity to offer combined solutions for the customers of the company. In the current scenario, the strength of the company lies in its collective proficiency in “solutions, services, products, and technologies” (Tung, 2001, pp.40-41). The Company’s Business Strategy: IBM has shown a great performance by transforming itself from just a seller of hardware and software to a “broad-based supplier of information technology services and solutions”. During a period of 20 long years, the company has moved from success to failure and has again turned to success. Here the strategy of the company seems to be finding its significance which has held the company to today’s top position. “Dynamics capabilities” is what has helped the company to succeed in its business and has reflected how a combination of “theory and practice” can develop novel approaches that are constructive for businesses as well as create new strategy thinking capabilities for a company (Harreld, O’Reilly III & Tushman, 2006, pp.3-4). Till the year 1999, the company’s strategic policies were quite similar to other organizations of that period and included monitoring of technology, working on occasional projects, and reviewing strategic processes annually. In and after the year 1999, things changed. The new strategic model that was developed for the company was the “IBM Business Leadership Model” that comprised of a process of “strategic insight” that would methodically recognize opportunities and “strategic execution” that was intended to get hold of the identified opportunities and ensure that all strategic programs had associated plans for their timely executions. For IBM strategy was not meant just to compete with others and win, but their main intention focused on customer satisfaction. Also IBM never believed in top down approach in its management system; rather the company believes in the line managers getting involved in all decisions and discussions (Harreld, O’Reilly III & Tushman, 2006, pp.16-18). IBM”s Strategy Leading to Success: The company wide vision of IBM that is based on the future of business and information technology has been named as “On Demand Business”. By following this strategy, a company is capable of effectively responding to changes. The wide ranging processes of the business are integrated focusing on all corners of the organization and also reach out to the suppliers, customers and partners of the company who may be then able to respond to the external demands or threats. However the On Demand Business strategy is not an invention of IBM; rather it is natural concept that the business community had suggested IBM to utilize and be dynamic in this world of growing competition (Hoskins, 2005, pp.1-2). IBM’s Business Leadership Model: The Business Leadership model followed in IBM gives emphasis to the “role of the general manager and the interdependence between strategy and execution”. Gap between the desired and actual results creates dissatisfaction among different leaders which leads to creation of new strategies for the company. The gap may either be a performance gap or an opportunity gap. In order to remove the gap, strategic insight and strategic execution as parts of this model are required. The strategic insight deals with forming an overall goal and objective for the organization and the strategic execution deals with the execution of the objectives that have been set up. Thus suitable measures have to be available for delivery of performances on time. The strategic insight mainly includes the business design, innovation and market insight factors. The execution on the other hand mainly focuses on the significant tasks and processes, the formal organization, the peoples and skills involved, and the culture of the organization as well (Harreld, O’Reilly III & Tushman, 2006, pp.18-20). Considering the strategy of IBM, the process can be found to be an “ongoing, disciplined conversation” that occurs between the authoritative members of the organization in regard to the future of the corporation. Organizational Model Followed at IBM: On realizing the challenges that salesmen might have to face while selling computers to different categories of customers that may include a bank, or a retailer, or to other companies, IBM understood that the best possible way out to assist the salespeople would be if they were more expert in handling products rather than dealing with customer problems. The organizational structure of IBM hindered offering solutions to its customers; on the other hand those who integrated different systems, and also served customers by providing solutions “were gaining influence at IBM’s expense”. The management thus took a step and assigned different sectors that the company was supposed to control and based on the responsibilities different individuals were appointed as leaders of each sector (Kumar, 2004, p.80). Several new leaders were selected as the heads of different divisions and sectors of the company. The criteria for selection included the personality of the individual and the ability to take responsibilities in sync with other key personalities related to the products. The company however reorganized the structure and developed new measures for coordination that included transfer pricing for internal selling of product units. Also leadership strategies were considered and made stronger that helped in the allocation of resources in providing solutions. The transformation of the company’s selling of computers to selling of solutions required much effort and tactics (Kumar, 2004, pp.80-82). The “transformational leadership” that was introduced by Gerstner played a major role in the “turnaround” of the company. He decided to focus more on customers than on technology and hoarded a rational influence on the company and its members. He also realized that senior management would be required by the company who would accept the new insights into the success of the company and would not remain bonded to the old organizational systems. Thus experts were hired with intentions that they would understand the customers along with lowering costs of the company. The head of the marketing and the communications department were chosen from outside of the company. Gerstner also gave importance to the alignment of organizational structure with the strategy of the company and thus synchronized the different units (Kumar, 2004, pp.80-82). IBM: Organization change strategy: The current scenario has helped the organizational head to determine the importance of innovation that would support fundamental change in organization. The main purposes of the company are to reduce the costs of transformation and operational functions, curtail risks, and enhance the dedication towards the customers of the company. The change strategy of the organization has the major focus on the human factor thus enabling management of all services with sustainable change. The organizational structure is so formed that the strategies of the company are effectively and efficiently conducted by the organizational members led by the heads of each division and level (IBM, n.d.). Outsourcing at IBM: Outsourcing: Outsourcing refers to the process of transferring some of the persistent internal activities of an organization as well as decision making rights to providers who are not internal to the organization. A contract is used for the purpose. Organizations may opt for outsourcing intending to improve effectiveness, enhance flexibility, transform the organization, or raise the value of its products or services. Outsourcing may also be adopted by a firm to improve its performance of operations, to enhance its skills and expertise, to improve management and control systems, or to enhance risk management issues related to the organizational success. Outsourcing processes also reduce investments in “assets” thus making such resources available for utilization in other necessary functions. Greater access to market is also obtained through outsourcing and greater business opportunities are also gained (Greaver, 1999, pp.3-4). Outsourcing at IBM: IT outsourcing: Outsourcing is nowadays very common and found to be adopted across many organizations. IBM has an auxiliary division that provides IT outsourcing services to provincial banks in Japan. In Malaysia the company provides its outsourcing services for financial institutions, other sectors of communication and distribution, and industries of small and medium sizes (Moore & Seymour, 2005, p.28). At IBM, IT outsourcing involves “the management of applications and information technology (IT) systems”. A mutually beneficial agreement is formed between IBM and the other company that strategically enters into the partnership such that IBM would operate and manage that company’s “applications and IT systems” (IBM, n.d.). The process of outsourcing may also include the IT employees and resources of the partnering company getting transferred to IBM. Assurances regarding the level of services are provided by the company that ensures attainment and measurement of services. IBM publishes reports and case studies that help different key personalities in the business world to better comprehend the benefits of outsourcing. IBM is a pioneer in the industry of IT services. Its skills, expertise and experience are thus wide and varied. The company knows very well as to how to serve its customers and strategic partners thereby serving to the customers’ businesses and strategies related to IT (IBM, n.d.). IBM’s need for Outsourcing: Globalization accompanied by swift progress in technology has introduced shifts or changes in the measure of success. Thus companies are ever more concerned regarding their delivery of services. Concerns regarding the company’s capability of capitalizing on the benefits of the company began to crop up among the leaders of different organizations. At the same time it was realized that outsourcing has the ability to bring in unexpected and improved business that provides a company with value much higher than what a company would be able to achieve through simple cost savings and operational competences. Thus companies have come to understand the benefits of outsourcing and instead of limiting their resources; companies are now taking steps ahead to form strategic alliances with other companies thus partnering and serving them or getting their services done by others (IBM, 2008, p.2). Studies on IBM have revealed that innovations in business models are highly necessary for the enhancement of financial benefits. Outsourcing has thus been found to play an important role in the changing business models that has been found to provide companies like IBM in significantly enhancing their financial growth. Outsourcing is a process that to a great deal influences the efforts of such companies by employing fresh ideas, newer outlooks, and elasticity within the organization. New skills and expertise along with new partners also become available. Collaborations and better possibilities open up for innovation and alterations in business (IBM, 2008, pp.5-6). Globalization and new advanced technology have shown that modes of businesses have changed in the modern world. Individual business processes are now not seen independently but with global exposure and access to talents and technology as well as availability of resources, business leaders in the present scenario are looking for processes that would reduce their costs of production, distribution and other operational costs while increasing their financial growth. IBM, like several other IT companies prefer to make outsourcing services essentially to obtain better and improved business results; however, the company also needs the contracts of their outsourcing to be elastic such that “competitive adaptation” may be available to the company in reaction to shifting market forces. Outsourcing brings about important universal know-how and enables innovative partnerships to occur along with opportunities for several new projects. Shared technologies get spread more through the process of outsourcing (IBM, 2008, pp.6-11). Thus IBM had several possible reasons to undertake outsourcing process for serving its partners. Disadvantage of Outsourcing at IBM: Like the way outsourcing has several positive benefits, similarly the process has its disadvantages as well. Outsourcing at IBM resulted in layoffs of thousands of employees which could not be accepted by the advocates of employee rights. Shifting of jobs to other countries thereby leading to job cuts severely leads to crisis particularly with respect to the welfare of the employees of the country where the company has its major operations. Outsourcing jobs to other countries reflect the company’s intensions of taking steps in best interests but that may not be coming up as the best interest for the country as a whole. If outsourcing meant creation of jobs, it would be acceptable. The circumstances in case of IBM however presents a disadvantageous effect of outsourcing that has been shifting jobs thus making several employees jobless (CNN U.S., 2009). Other disadvantages arising out of the IT services outsourcing may include the greater levels of uncertainty that lies with the fast development of IT impacting any decision in regard to IT outsourcing. Shifting from one provider to another may include high costs. This also encourages greater competitions. Moreover, if a company fails to serve its customers adequately through call centers and other similar facilities, then this inadequacy may impact the entire reputation of the company to a great extent. At many other cases several disadvantages occur owing to a company’s not managing problems effectively. Thus this also needs to be focused such that proper relationships are maintained and this remains an ongoing process (Khosrow-Pour, 2006, pp.20-21). Strategic Alliance of IBM: The strategic alliance of the IBM Company has been declared as the best practice in the “alliance management infrastructure”. The alliance strategy has generated large amounts of revenue for the company that has been estimated around $3 billion. The alliance program of IBM has been found to be successful in both its initiation of ideas as well as the implementation of those plans. IBM is capable of managing individual alliances in the manner of “stand-alone businesses”. Targets of revenue, marketing objectives and responsibilities are clearly performed by the company for its alliance partners. The main focus of the company is to provide its partners with facilities such that they have access to new customers and greater opportunities to gain profits. All this comes through the “marketing, sales and solutions resources” of IBM. Organizations have been learning over the years that in order to make successful strategic alliances between companies, companies require making appropriate investments in planning and operations. People who are responsible for such functions also need to be focused on (IBM, n.d.). IBM is a company that clearly represents how a company has attempted to serve its customers more powerfully by investing to create a “solid alliance management infrastructure” that focuses on effective implementation of ideas leading to quantifiable outcomes. IBM has proved to be different from other organizations in that where other companies have faced troubles in recognizing suitable alliances for partnering and many fail during the time of implementation, IBM has surprisingly won over such difficulties by investing and excelling. Along with a team’s cooperative planning and initiatives, the execution of a strategic alliance as managed by the company has led to its ultimate success. IBM makes detail planning after a lot of research work and senior management and authoritative organizational members are involved in the process on a regular basis. The main aim of the alliance group at IBM is to create an “alliances culture within the existing organizational culture”. Through the strategic alliances of the company, the different interests of the company across different divisions, sectors and levels are engaged and taken care of. Program operations, Sales operations and Business operations are the three main functions that the alliance team of IBM is mainly concerned with. Thus it manages day-to-day functions, deals with the leads and closures of sales possibilities, and takes suitable measures for effective “ongoing communication” among the senior managers in regard to performance of the alliance (IBM, n.d.). Globalization and the Organizational Network Structures with a view on the study on IBM: As Bernard Guillon had mentioned, a network can be described as a form of an organization growing within facilitating its members to organize their actions by building a surrounding which creates “dynamic externalities, complementarities, and cumulative phenomena”. Globalization has enabled this concept to take different forms such as vertical partnerships, networks of organizations derived from strategic alliances or agreements between corporations. The largest networks merge chains of delivery and coordinate them parallel with alliances. Several advantages can be found in organizational structures and in the current scenario of universal rivalry, “networking” seems to have become a prerequisite for “investors’ enterprises as well as cooperatives” (Kalmi & Klinedinst, 2006, p.238). “Globalism is a state of the world involving networks of interdependence at multi-continental distances”. Mutual reciprocations and interdependence among different countries are increasing as a result of globalization, thus involving different industries, economies as well as different organizational networks. Along with increase in competitions that different companies have to face as a result of globalization, newer challenges are also cropping up for such industries (Morales, 2006, pp.18-19). Organizations like IBM can be found to experience the effects of this globalization as a consequence of which the company can be seen to enhance its global organizational network structure thus performing greater outsourcing jobs for its partners. Amalgamation of markets has become active in many countries through “commercial trade agreements”. Several changes as a result of increasing competition in the global economy have led the different countries to design their network structures in newer profiles. Companies are all the more required to battle profitably in the “dynamic and innovative environment”. Thus globalization can be seen to have great influences on the organizational network structures thus leading companies to change their structures to compete effectively and gain profits, which has also been the case with IBM (Morales, 2006, pp.19-20). In today’s global economy organizations are moving beyond their limitations intending to search for newer markets where they can sell their products and services. However, in the process of globalization, companies may encounter threats as well; as in the case of IBM, different disadvantages of outsourcing have been discussed. The effect of globalization needs to be studied and realized by every organization so that they can strategically develop new measures to effectively participate in the global economic competition. Thus globalization has influenced the different companies to look for better strategic policies and newer structures to effectively deal with the changing business environment (Morales, 2006, pp.19-20). Both smaller and bigger firms are now “developing network of relationships” that provide them with a competitive position in the global market. A nation’s growth and expansion has been found to be a focus under the impacts of globalization. In many cases, such influences have taken an active participation in the national development of economy of a country thus influencing the organizations prevailing in that country. Conditions of the market as well as the movements in financial resources reflect the impacts of globalization. The “distribution of income and wealth within an economy” is greatly determined by the effects of globalization. Entrepreneurship has taken a major role in the state of rising globalization and is considered as an essential element of competitiveness in today’s “knowledge economy” (Morales, 2006, pp.20-21). Analysis and Discussion: Every organization has its own particular organizational structure and network. As considered in the case with IBM, the company has been following an organizational structure that was not only suitable to its functions but also made the company successful in its perspectives in the industry of information technology. However, slowly and gradually the company, like many other companies in the modern world, introduced different network structures in its organization that were primarily meant to battle and win in the competitive global world. In today’s competitive world, where globalization plays an utmost role in the overall economy of any nation and the world as a whole, companies realize that restricting their organizational network structures would not lead them to success. Companies like the IBM have thus found out measures to bring in newer organizational network structures that would successfully fight the competitions in the global world. Globalization can thus be found to influence the organizational network structures of any organization in today’s world. IBM, one of the largest companies in the industry of information technology, is a highly successful company and has effectively been performing in serving its customers with IT services over several years. The main focus of the company has always been its customers. However in the present scenario when globalization has so much of a significant role to play and influence not only on the world economy but also on the individual organizations in every country, it has had its influence on IBM as well. The company can now be found to explore more and restructure its organizational networks and engage its services in more and more outsourcing thus providing its partners and managing their IT services to their utmost satisfaction. Outsourcing in fact has become one of the major activities that is seen to increase the level of networking among different companies and in different countries far more than before. This has all been possible due to increasing globalization. Owing to globalization and ever increasing competition companies are forced to bring in newer technologies and facilities for their customers and are increasingly integrating their services with other companies and countries. Partnering with other companies has greatly facilitated the ability of such companies to serve and get served more which in turn tends to increase the financial growth of the company. This can be understood by the case of IBM that has successfully partnered with several companies and are providing them with IT services and managing their operations effectively. Globalization has thus created several new possibilities and opportunities for different organizations. Companies are now realizing the importance of spreading their products and services across the world thus modifying their network structures. IBM and many other similar organizations have either undertaken measures of outsourcing jobs or partnering with other companies to enhance their services and gain greater competitive advantages in the global economy. Owing to globalization, companies have started to alter their limitations into greater opportunities for themselves by offering more services to the outside world, which in turn has increased the global network of organizational prospects. More and more companies are taking advantages of globalization in enhancing their product and service selling thus proving globalization to have a positive influence on the world economy. Conclusion: Today’s world can be seen to move towards a trend of increasing globalization. The world economy and the organizations in particular are having its influence to a great extent. Newer opportunities and possibilities have opened up for different organizations. Likewise, companies like the IBM have started initiating innovative measures in response to the growing globalization and are thus involved in increasing partnerships and outsourcing services that reflect the ultimate changes being cropped up in the organizational network structures. IBM has a long history in serving its customers with IT services. Studying the company at the present scenario reveals that the company has realized the importance of introducing newer policies and strategies in its organizational network structures, and has thus initiated more and more outsourcing jobs partnering with several companies throughout the world. Keeping in focus the main purpose of the company to satisfy the demands of its customers IBM has shown that it has been able to take advantage of the increasing globalization and enhanced its operations to a greater extent across the world. The main reasons for IBM serving its partners through outsourcing can be found to be the increasing competition. To succeed in the competitive world, every organization, like the IBM, would focus more and more on better measures to serve their customers intending to increase the financial growth and expansion. Although certain disadvantages and threats are also inevitable in the process but IBM has clearly proved that focusing on advanced strategic measures, a company can succeed by spreading its functions across the world through outsourcing facilities or strategic alliances as IBM has been found to be doing. Increasing networks enhance a company’s opportunities to perform more and in better environments with improved measures in support. Thus from a detailed study on the concerned topic, it can be realized that globalization has a long term influence on the organizational network structures and if companies are capable of utilizing the opportunities then they can become successful with respect to the entire global economy. Reference 1) Greaver, M.F. (1999), Strategic outsourcing: a structured approach to outsourcing decisions and initiatives, New York: AMACOM Div American Mgmt Assn 2) Harreld, J.B. O’Reilly III & M.L. 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