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Sam Palmisano, head of IBM, on Monday called on multinationals to evolve into a new type of corporation if they are to avoid an anti-globalisation backlash that leads to the election of governments hostile to the interests of big business.
In a rare public intervention, Big Blue’s chairman and chief executive writes in today’s Financial Times that traditional multinational companies need to abandon their almost colonial approach to operations outside their home country. He cites as examples of this old-style method the way GM, Ford and his own company built factories in Europe and Asia but kept all the research and development in the US.
Instead, he argues they need to move towards full global integration of their operations so as to stop the current unease about the forces of globalisation turning into an all-out assault on big business. The danger for multi-nationals that fail to change their thinking is that countries will elect political leaders who impose draconian labour regulations or try to constrain free trade.
“The alternative to global integration is not appealing: left unaddressed, the issues surrounding globalisation will only grow...People may ultimately choose to elect governments that impose strict regulations on trade or labour, perhaps of a highly protectionist sort,” he writes.
His views could upset many US anti-globalisation campaigners who see offshoring as a threat to US jobs. But to them, Mr Palmisano replies: “These decisions are not simply a matter of offloading non-core activities, nor are they mere labour arbitrage – that is, shifting work to low-wage regions.”
The IBM chief’s decision to go on the offensive comes less than a week after he announced plans to invest $6bn in India, highlighting the latest step in Big Blue’s efforts to shed its multinational structure.
IBM’s bid to become more global marks an attempt to revive its flagging growth rate while unlocking a new source of productivity growth. Last year, it overhauled its European operations to reduce its strict focus on country-level operations, and executives said last week that the move to a global management approach could produce productivity improvements of 3 per cent a year.
He says traditional multi-national companies were designed to deal with the “protection and nationalism” that held sway in the 20th century. The modern company, Mr Palmisano writes, is a “globally integrated enterprise”, which spreads its strategies, production capacity and management around the world in order to be close to markets and customers.
“The globally integrated enterprise is an inherently better and more profitable way to organise business activities – and it can deliver enormous economic benefits to both developed and developing nations,” he writes.