Globally integrated enterprise in an information age: Impact on African economies

world_of_technology-624x415In a 2006 article in the journal FOREIGN AFFAIRS Samuel Palmisano, former CEO of IBM wrote of “The Globally Integrated Enterprise,” which he claims is the new world economic reality.

He used the term 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 write “by one estimate, between 2000 and 2003 alone, foreign firms built 60,000 manufacturing plants in China. Some of these factories target the local Chinese market, but others target the global market.

European chemical companies, Japanese carmakers, and U.S. industrial conglomerates are all building (or have declared their intention to build) factories in China to supply export markets around the world.

Similarly, banks, insurance companies, professional-service firms, and IT companies are building R&D and service centers in India to support employees, customers, and production worldwide.”

He argues that in the international model of the 20th century, most operations were centered 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.

Now the globally integrated enterprise can locate functions anywhere in the world, based on the right cost, skills and environment, argues Palmisano.

According to Palmisano, “the globally integrated enterprise can deliver enormous economic benefits to both developed and developing nations.

The integration of the work force in developing countries into global systems of production is already raising living standard, improving working conditions, and creating more jobs in those countries.

Small and medium-sized businesses everywhere, particularly, are benefiting: as new services–from back-office administration to sales support–create infrastructures once only affordable to large organisations, these businesses can now participate in the global economy.”

We all have been reading of the Indian and Chinese miracle of economic growth. And, we would like to see an “African miracle” comparable to the “China miracle” and the “Indian miracle.”

If so, how can all of us make that happen. Clearly Africa has disadvantages in the search for such global partnerships: geography, climate, and the rest. One great barrier is that Africa has been portrayed in the West as the “Dark Continent,” an unknown and dangerous and backward world. This is not just a matter of racism, although racism is at work here: China is yellow and India is brown and racism has not slowed their transformation.

We know these stereotypes are false: that Africa has potentially as much to contribute to the world economy, and to its own development, as China, or India, or the four Asian tigers, or any of the nations who have gone from the old poverty to a new condition.

The West’s dramatic escape from poverty has always been a good place to start in attempting to understand globally integrated enterprises.

The rapid economic and social progress of Europe, during which people first rose out of the dismal poverty that characteried most of human history, was largely limited to a specific kind of regime—classical liberalism. The resulting systems generally allowed markets to operate, respected the rule of law, protected private property, and permitted competition.

This experience has been repeated rather more quickly in East Asia, where it has taken but a generation or two for desperately poor nations to develop among the world’s most successful economies. Most of them broadly relied on market forces, despite varying degrees of government economic involvement.

We cannot talk about Africa’s development without mentioning the role of the World Bank in this process.  Over the years, the World Bank has intervened in the economies of most African countries. Today, most of African economies are integrated into the global economy as exporters of primary commodities and importers of manufactured products, leading to terms of trade losses.

Policies of liberalisation, privatisation and deregulation as well as an unsound package of macro-economic policies have been imposed through structural adjustment conditionality by the World Bank and the IMF. These have now been institutionalised within the WTO through rules, agreements and procedures, which are biased against most African countries.

Africans have responded by initiating series of initiatives aimed at addressing the developmental challenges of the continent. For example, the Lagos Plan of Action and the companion African Alternative Framework for Structural Adjustment; the United Nations Economic Commission for Africa’s Compact for African Recovery; the World Bank’s Can Africa Claim the 21st Century; etc., and others are some of such initiatives.

The attention has now shifted to “home-grown” solutions. Regional bodies such as The Common Market for Eastern and Southern Africa (COMESA), a free trade area with twenty member states stretching from Libya to Swaziland; the West African Economic and Monetary Union (also known by its French acronym, UEMOA); and ECOWAS have emerged. The New Partnership for African Development (NEPAD) is an attempt to pursue Africa-wide development strategies, that are situated in the context of globalisation.

 

Now the globally integrated enterprise can locate functions anywhere in the world, based on the right cost, skills and environment, argues Palmisano.

It is crucial to realize the continent need a new generation of leaders who are committed to fostering development and democracy; tackling conflict, corruption, and dictatorship; and building a new Africa. Africa need a new group of leaders who can bring prosperity and wealth to the continent. Unless we can create wealth and prosperity, we will forever be dependent on the rest of the world.

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