Tuesday, June 13, 2006

Multinational Corporation Out - GIE In

IBM chief calls for end to colonial companies:

When the Chairman of IBM, invests $6billion in India, then announces that IBM is not a multi national corporation, but a global intetgrated enterprise, something is going on. It might just be spin, but it could be something a lot more important.
From yesterdays, FT.com,
"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."

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.

In the GME the most valuable commodity is time. The most dysfunctional aspect of the multi national "colonial corporation" is that it's not built for speed, but for risk management. Perhaps the GIE (global intergretated enterprise) can solve that problem for business. And has implications for the rest of us.

The issues raised have been articulated at least 15 years ago. In 1991 Robert Reich, in The Work of Nations said

In the United States and probably in Canada as well, there is the supposition that national competitiveness is tantamount to the profitability or world market share of the nation’s major corporations. That is no longer the case. Corporations head quartered in whatever nation are rapidly going global and employing large numbers of non-nationals, often to do complicated work. To the extent that a corporation is profitable or enjoys a large world market share, the citizens of that nation may or may not benefit. Perhaps some of them will benefit by having larger dividends, but they may not be getting the best jobs or the most important experience. The “us” is the nation’s people and their intellectual capacities.

If Mr. Palmisan is correct, maybe the implications for the welfare of national populations of GIE's are more promising than within the context of Multinationals.
According to him, the model is no longer, keep the high paying jobs here, and the low paying jobs there, but rather level the playing field. Jobs are located where they create the most value, the customer defines the value created, and the challenge is to deliver value at a profit.