IBM’s Organizational Structure & Its Characteristics: An Analysis

IBM organizational structure design, information technology corporate structure divisions, departments, company hierarchy, business analysis case study
IBM’s Rochester building in Minnesota. International Business Machines Corporation (IBM) has an organizational structure (corporate structure) that supports product development and company management in the information technology business. (Photo: Public Domain)

IBM (International Business Machines Corporation) uses its organizational structure as a strategic means to streamline its product development and delivery in the information technology market. Structural characteristics enable the alignment between various aspects of the business and the strategic objectives of IBM’s mission statement and vision statement. A firm’s organizational structure or corporate structure defines the makeup of the business, in terms of form, systems of interaction among components, and the design that influences processes. For example, IBM’s corporate structure determines how its regional offices communicate with each other. The structural features are also key factors that influence the interactions among the company’s employees, who are called IBMers. These conditions affect managers’ decisions at IBM’s headquarters, especially in terms of how strategies are implemented throughout the company structure’s hierarchy. Such business impact and significance put IBM’s organizational structure as one of the basic variables that dictate the performance of the business and its ability to effectively respond to challenges in the industry.

Known as Big Blue, IBM has an organizational structure that reflects the priorities of the business in its organizational design. For example, emphasis on continuous innovation and product development is represented through the company’s main structural characteristic that considers the management of various product types. Such innovation and product development mirror the priorities in IBM’s strategies for growth and expansion in international operations. Also, employees fulfill their job requirements and make decisions within their limits based on the corporate structure. These effects are an indication of the significance of structural features in facilitating IBM’s success in the global information technology industry.

IBM’s Organizational Structure Type & Characteristics

IBM has a product-type divisional organizational structure. The main characteristic of this type of organizational structure is the representation of business processes involved in managing the development, production, distribution, and sale of products. For example, product-type divisions or segments are a primary structural feature that determines how the business hierarchy addresses opportunities in the information technology market. Thus, the business structure supports strategies and tactics that push for competitive products. The following characteristics define IBM’s corporate structure:

  1. Product-type segments
  2. Function-based departments
  3. Geographic divisions

Product-Type Segments. The product-type segments in the organizational structure represent the core business offerings of IBM. These segments are recognized as reportable segments in the company’s annual filings with the U.S. Securities and Exchange Commission. This primary structural attribute is based on efforts to focus on the firm’s core businesses that match the transformation of the industry and market. For example, through the Infrastructure Segment, the company addresses an increasing market demand for cloud-based solutions. IBM’s corporate structure has the following product-type segments:

  1. Software
  2. Consulting
  3. Infrastructure
  4. Financing

Function-Based Departments. This secondary characteristic of IBM’s organizational structure focuses on key functions that support the global information technology business. The main objective of having this structural feature is to provide organization-wide support for each of the product-type divisions. For example, in terms of sales and marketing, the company’s Communications Department supports all the product-type divisions. The Research Department contributes to the company’s competitiveness despite significant competition involving other technology firms, like Intel, Google (Alphabet), Amazon, and Microsoft, as illustrated in the Five Forces analysis of IBM. For instance, significant R&D investment in the department ensures that the company continues developing and offering competitive products in the global market. The following are the function-based departments or offices in IBM’s corporate structure:

  1. CEO
  2. Communications
  3. Legal
  4. Operations
  5. Research
  6. Finance
  7. Revenue
  8. Human Resources
  9. Privacy and Trust
  10. Commercial

Geographic Divisions. This characteristic of IBM’s corporate structure is based on the need to effectively manage the global business despite differences among regional markets. For example, the company has a geographic division to address the market issues specific to the Asia Pacific region. This structural element also provides support for strategies and tactics in implementing IBM’s marketing mix or 4Ps in different regional markets for information technology products. Thus, geographic divisions facilitate effective business management despite the complexity of market-based variables. IBM’s organizational structure has the following geographic divisions:

  1. Americas
  2. Europe, Middle East, and Africa
  3. Asia Pacific

IBM’s Organizational Structure: Advantages & Disadvantages, Recommendations

A major advantage of IBM’s organizational structure is its alignment with the company’s aims for continued business growth based on innovation. For example, the corporate structure enables the business to prioritize efforts to develop products that match market demand and emerging trends in the information technology industry. Such product development efforts are aligned with IBM’s generic competitive strategy and intensive growth strategies. Another advantage of the organizational structure is the integrative effects of the function-based departments on the company’s global operations. For instance, in spite of the priorities for product management, the structural characteristic of function-based departments ensures organization-wide support for all product-based segments, with consideration for IBM’s corporate goals.

A disadvantage of IBM’s corporate structure is its limitation in addressing imitation in the global market for information technologies. In using a cost-leadership strategy with reduced emphasis on product uniqueness, the company’s advanced and high-quality technological products are imitable. This threat is identified in the SWOT analysis of IBM. Another disadvantage is the organizational structure’s limited support for diversification. Diversification is seen as a potential growth factor for the company, especially because of the rapid and radical technological advances happening in different industries and markets. A more integrated company structure can address this issue. For example, additional structural elements that support universal strategic positioning in the global market can promote managerial and corporate decisions that lead to diversification and related business growth. Thus, the following are the recommendations for improving IBM’s corporate structure:

  1. Shift the organizational structure to one based on function-type groups or teams to further emphasize research and development efforts that address the threat of imitation.
  2. Create a new structural division that addresses opportunities for diversification based on the trend of technological integration in various industries and markets.
  3. Split current geographic divisions into multiple smaller ones to account for significant differences among regional markets, such as differences between the European market and the market in the Middle East.