ABSTRACT
This present analysis highlights
possible investment opportunities for IBM in the economies of Latin America
such as, Colombia , Argentina , and Venezuela
The prospect of increased political
integration within the Latin American bloc Mercosur, assures Multinational
Corporations (MNCs) such as IBM a footing in the region. The trade bloc further encourages
Colombia , Argentina , Venezuela
In addition, because the bloc has a population
of more than 263 million people, and the combined Gross Domestic Product of the
full-member nations is in excess of US$2.78 trillion a year, IBM could
strategically position itself in a bloc that badly needs outsourcing
requirements and a specialization of Human Resource Management.
The challenges, therefore, for full business
development in Latin America range from
outsourcing, to the complete integration of women in the workplace; thus, Human
Resources must fulfill a performance enhancing strategy that will accommodate
these challenges.
IBM, in this case, must pursue a strategy
that is culturally adaptive and considers the historical and cultural context
in which HR practices are embedded. This notion is consistent with recent
studies in international HRM that highlights the need to understand the field
within a multicultural context (Brewster, 1999, cited in Elvira, 2005). Lastly,
understanding and solving HR challenges requires using a broad strategic HRM
framework that encompasses the various institutions involved in employment
relations.
IBM’s work in the realm of Human Resources
Management, as it radically changed throughout the past few decades, has made
several productive strides because of automation and new management techniques.
The company’s human capital solutions, moreover, recognize the radical changes
and differences of HR functions, organization, service delivery, operations and
processes, and enabling technology across the globe.
Lastly, for practical purposes, this report
contains a per country analysis of Political, Economic, Social and
Technological (PEST) factors that could encourage IBM to do business in the
countries analyzed.
SWOT ANALYSIS
IBM: STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
|
|
STRENGTHS
|
WEAKNESSES
|
·
Strong horizontal BPO
offerings, especially in F&A, HR/learning & CRM BPO
·
Well-developed vertical BPO
offerings, especially for financial services sector
·
IBM's global brand, financial
assets, customer base and vast global presence
·
Tier-1 customer base for BPO,
as defined by global, multinational Fortune 500 presence
·
Sales and client management
orientation
|
·
Challenged by managing many
types of BPO offerings well across/between regions
·
Lack of attention to and
clarity in BPO marketing efforts
·
Slow to industrialize BPO offerings
and slow to move towards BPUs
·
Poor leverage of IBM's
consulting teams into BPO offerings
·
Inconsistency in methodologies
at global delivery centers
|
OPPORTUNITIES
|
THREATS
|
·
Penetrate IBM's existing customer base
·
Collaborating with Global Business Services
·
Consulting to build services in analytics
and KPO activities
·
Bundled, multidomain offerings for
"Back/Front Office in a Box," particularly for SMBs
·
Leverage IBM Global Financing in large BPO
deals
|
·
Cost-based decision making by customers
dominates in BPO deals
·
Focused competitors operating in targeted
areas of BPO
·
Being undercut by lower cost BPU
alternatives
·
Nontraditional competitors (Google, etc.)
encroach into nascent opportunities, such as BPU
·
Local native-speaking BPO companies
|
STRENGTHS
·
In HR BPO, IBM has excellent geographic
coverage, including global delivery for languages. Geographic scope covers more
than 100 countries and supports more than 24 languages.
·
In F&A BPO, IBM supports 20 languages
and 60 countries. In CRM, IBM employs 30,000 agents who offer sales, marketing
and customer service and customer support services in 31 languages, supported
across the Americas , Europe and the Asia Pacific region.
·
IBM has a great pipeline of BPO clients and
has been able to differentiate its offerings using IBM’s consulting
capabilities, especially around human capital management.
·
This has challenged IBM BPO management to
manage a large amount of input into its BPO pipeline to discern what will be
profitable business to pursue.
·
IBM also emphasizes driving a partnership
approach with clientele, including its 19 clients for HR BPO. IBM now has more
than 40 F&A – related clients, including Unilever, BP, and Cisco. IBM has
built a strong capability for servicing vertical industry F&A processing
requirements.
WEAKNESSES
- IBM’s marketing messages tend to emphasize technology over business
outcomes
- IBM must ensure that its outsourcing implementation teams are
increasingly proactive with the business orientation of their client
account executives
- IBM could improve its ability to combine all of its internal
capabilities within its BPO offerings.
- IBM’s size and organizational complexity can be challenging to navigate and can interfere with timely issue resolution.
OPPORTUNITIES
- IBM’s consultancy business should offer other high value offerings
in services such as life sciences, manufacturing, legal processing,
financial services, and market research analytics.
- IBM should also invest in industrializing and standardizing
business process utilities in target economies in Latin American countries
- IBM should link its current BPO offering with other offerings
already existing in the region.
- These bundled offerings will allow IBM to venture into new business
with other Latin American countries because of the familiarity that has
been spurred by IBM’s existing clients
THREATS
- IBM must become more aggressive in promoting its services in the
region because many competitors (internal and external) are quickly
entering in the BPO market.
- Many vendors are building BPU offerings for all types of BPO and
IBM needs to ensure that it has these offerings or a justification for
still offering stand-alone BPO offerings.
Politics
- President is Alvaro Uribe
- Democratic republic monopolized by the Liberal Party, which is
economically liberal with a federalist platform
- The Conservative Party advocates Catholicism and centralism
- The National Front (Liberal Party and Conservative Party combined)
advocates power alternation.
- Parapolitics scandal(s) continue to affect decision-making but
despite a number of controversies, improvements were made in security and
continued strong economic performance.
- GDP increases annually at 4% (1970-1998),
reached 8.2% in 2007
- The Colombian stock exchange climbed from
1,000 points in July 2001 to over 7,300 points by November 2008.
- In 2003, the richest 20% of the population had
a 62.7% share of income/consumption and the poorest 20% just 2.5%, and
17.8% of Colombians live on less than $2 a day
- Government spending is 37.9% of GDP A quarter
of this goes towards servicing the country's relatively high government
debt, estimated at 52.8% of GDP in 2007
- Other problems facing the economy include weak
domestic and foreign demand, the funding of the country's pension system,
and unemployment (10.8% in November 2008)
- Inflation has remained relatively low in
recent years, standing at 5.5% in 2007
- On 28 May 2007, the American magazine Business
Week published an article naming
·
Traditionally
a rural society, Colombia is
now one of the most urbanized countries in Latin America
·
The
urban population increased from 31% of the total in 1938 to 60% in 1975, and by
2005 the figure stood at 72.7%
·
The
population of Bogotá alone has increased from just over 300,000 in 1938 to
approximately 7 million today
·
Colombia
·
Colombia
Technological
- Aerospace/Aeronautic
- Has satellites in orbit since April 2007 for
telemetry information and research purposes
- Developed its first airship with completely
Colombian technology
- Naval
- Has the largest shipyard in
- Produces Fluvial Support Patrol Ships to
patrol rivers and littoral waters and features a helicopter deck
- Nuclear
- The IAN-R1, which was donated by the United
States and is currently located in Bogota, is a small nuclear reactor
that was reactivated recently after being inactive for a few years Even
though not powerful enough to be used for energy production, the IAN-R1
is used for research purposes
- Health
- As of 2007 Colombian medicine has been
recognized as one of the most advanced in the world
- When the national constitution was reformed
in 1991, the social security system was reformed through the
implementation of Law 100, which has provided health coverage to much of
the population
- However, a continuing economic crisis has
caused the collapse of many public health institutions and affected both
the public and medical staff
Politics
- Government is Presidential Representative
Democratic headed by President Cristina Fernandez de Kirchner
- A member of, Mercosur, an
international bloc composed of
- Has a relatively stable government, civil
society and among the lowest crime rates in the region
·
Argentina
Economics
·
Domestic instability and global trends contributed to Argentina
·
Systemic problems have included increasingly burdensome debt,
uncertainty over the monetary system, excessive regulation, barriers to free
trade, and a weak rule of law coupled with corruption and a bloated bureaucracy
·
Between 1930 and 1980, the Argentine economy created Latin
America 's largest proportional middle class; but this segment of
the population has suffered from a succession of economic crises between 1981
and 2002, when the relative decline became absolute.
·
In 2003 expansionary policies and commodity exports triggered a rebound
in GDP
o
This trend has been largely maintained, creating millions of jobs and
encouraging internal consumption
·
The socio-economic situation has been steadily improving and the economy
grew around 9% annually for five consecutive years between 2003 and 2007 and 7%
in 2008
·
Inflation, hovering around 9% since 2006, was privately estimated at
12-15% that year and over 15% in 2008, becoming a contentious issue again
·
The urban income poverty rate has dropped to 18% as of mid-2008, a third
of the peak level observed in 2002, though still above the level prior to 1976
·
Income distribution, having improved since 2002, is still considerably
unequal
·
Argentina
·
The Kirchner administration responded at the end of 2008 with a record
US$32 billion public-works program for 2009-10 and a further US$4 billion in
new tax cuts and subsidies Kirchner has also nationalized private pensions,
which required growing subsidies to cover, in a move designed to shed a
budgetary drain as well as to finance high government spending and debt
obligations
- Manufacturing is the nation's largest single
sector in the economy with 21.5% of the GDP in 2007 and is well integrated
into Argentine agriculture, accounting for nearly two-thirds of exports in
all, with half the nation's industrial exports being agricultural in
nature.
- Leading sectors by production value are: food
processing, chemicals and pharmaceuticals, motor vehicles, farming
equipment & auto parts, iron, steel & aluminum, petroleum, as well
as home appliances and industrial machinery
Social
- About 3 million people live in the autonomous
city of Buenos Aires and the Greater Buenos Aires metro area totals 12.8
million (2008), making it one of the largest conurbations in the world
- Together with their respective metropolitan
areas the second and third-largest cities in Argentina, Córdoba and
Rosario, contain around 1.3 and 1.2 million inhabitants respectively with
five other metro areas being home to at least half a million people
Technology
·
Medicine
o
Argentina
o
Argentines have been responsible for major breakthroughs in world
medicine; their research has led to significant advances in wound-healing
therapies and in the treatment of heart disease and several forms of cancer
·
Communications and Media
o
The print media industry in Argentina
o
There are over two hundred newspapers in the country
o
The Argentine publishing industry ranks with those in Spain and Mexico
as the most important in the Spanish speaking world Argentine readers can avail
themselves of the largest bookstore chains in Latin
America , El Ateneo and Yenny
·
Radio and Television
o
Argentina
o
The 1930s were the "golden age" of radio in Argentina
o
The Argentine television industry is large and diverse, widely viewed in
Latin America , and its productions seen around
the world
Politics
·
There are currently two major blocs of political parties in Venezuela:
the incumbent leftist bloc United Socialist Party of Venezuela (PSUV), its
major allies Fatherland for All (PPT) and the Communist Party of Venezuela
(PCV), and the opposition bloc led by A New Era (UNT) together with its allied
parties Project Venezuela, Justice First, Movement for Socialism (Venezuela)
and others
·
Following the fall of Marcos Pérez Jiménez in 1958, Venezuelan politics
was dominated by the third-way Christian democratic COPEI and the center-left
social Democratic Action (AD) parties; this two-party system was formalized by
the puntofijismo arrangement
Economics
·
The petroleum sector dominates Venezuela
·
They also have gold, diamonds, and iron ore but they do not have as
great of an impact on the economy
·
Venezuela
·
The Government of Venezuela has opened up much of the hydrocarbon sector
to foreign investment, promoting multi-billion dollar investment in heavy oil
production, reactivation of old fields, and investment in several petrochemical
joint ventures
·
Almost 60 foreign companies representing 14 different countries
participate in one or more aspects of Venezuela
Manufacturing, Trade, and Agriculture
·
Manufacturing contributed 17% of GDP in 2006
·
The manufacturing sector continues to increase dramatically at a rate of
26.93% annually
·
Agriculture accounts for approximately 3% of GDP, 10% of the labor
force, and at least one-fourth of Venezuela 's
land area Venezuela
·
In 2002, U.S. firms exported $347 million worth of agricultural
products, including wheat, corn, soybeans, soybean meal, cotton, animal fats,
vegetable oils, and other items to make Venezuela one of the top two U.S.
markets in South America
·
In 2002, the United States
exported $4.4 billion in goods to Venezuela ,
making it the 25th-largest market for the U.S.
Including petroleum products, Venezuela
exported $15.1 billion in goods to the U.S.
CONCLUSION
Although
Latin America is essentially different from
its northern continental neighbors, many of its trade and management practices
largely follow North American models that adopt local business and cultural
idiosyncrasies.
Because of the region’s cultural diversity,
many analysts believe, human resource management is a critical competency for
any firm seeking to conduct business successfully. And as Latin American
economies continue to grow, globalization and internationalization trends have
opened opportunities for foreign investments from Europe, North America, and Asia . In fact, the past two decades saw Latin American
Countries initiate a process of economic opening and a democratic
transformation of societies, attracting foreign direct investment to the
region.
Multinational Corporations or MNCs who found homes in various Latin
American countries rarely leave their host countries amidst economic crises
because they have learned to overcome the volatility of this region’s economies
and exploit its potential contribution in the global market.
This is where IBM’s HR learning prowess comes in. IBM considers Human
Resources (HR) outsourcing and learning services to help MNCs face Human
Resources (HR) and learning challenges, including mounting costs and increased
complexity.
ETHICAL
CONSIDERATIONS
Since its incorporation, IBM
has focused more on the manufacturing and sales of computer hardware and
software. Although, the company boasts of sustainable growth, responsiveness,
and agility within an enterprise with human resources outsourcing and learning
services, much of its campaign to promote its services tends to ignore
fundamental cultural and ethnic values that exist in the host country.
Finally, modernizing and
outsourcing HR practices in Latin America ,
must consider a profound humanism underlying social contracts in the region.
IBM must prepare to do its business in a hybrid cultural environment, where regional
and national values, and global local practices, coexist (Elvira, 2005).
As a bonus, this report includes a Geert Hofstede analysis of human relations in Latin
America vis-à-vis IBM’s global human resources outsourcing. The
table below provides a simple yet comprehensive study of how culture
influences values in the workplace.
Hofstede Analysis of Human Relations in Latin America
Vis-à-vis
IBM’s Global Human Resources Outsourcing
