International Business Machines (IBM)

SM CASE -3 Sanjay Prasad Gupta

Regd Id. 1225116431
MBA 2nd year
INTRODUCTION:

IBM is the largest computer company in the world and its known as Big Blue. Before changing
its name to IBM the Computing Tabulating Recording Corporation (CTR) was incorporated on
June 16th, 1911 which were increased business efficiency. It has more patents than any other
company. It was taken by the US government at the beginning of World War II in the war effort
and given a one percent profit, which it used to fund war victims and orphans. IBM was one of the
leader brands of I.T industry which is basically related to computing various dimension of
technology weather it is about gadget or the software. It developed products from punch-card
tabulating machines to room sized calculators and main frame computers. In early 1935 the
company was awarded by the biggest accounting operation of all time by the U.S. government.
When it passed the Social security Act, IBM was then put in charge of tracking employment
records for 26 million American Workers. IBM has On Demand Innovation services where
different teams offer business transformation and technology consultation services.

SUMMARY :

International Business Machines is the largest computer company in the world involved in
hardware and software which adopted innovative changes inside the organization as per economic
trend changes. In order to increase the impact of consulting and software it entered in three
complementary areas of System and financing, software and services. IBM introduced its own
computer in 1981and brought operating system from Microsoft and processor from Intel and sold
20% of its stake in Intel, meanwhile IBM held on tight control to other activities as well in the
computing value chain only to find that is vertically integrated business model had no advantage
in evolving computer Industry PCs should be sold in variety of retail outlets by eliminating need
for high trained sales force, data processing centers were no longer essential as PC had their own
memory and processing system inside and there was also no need for IBM to maintain machines
because business increasingly internalized the service functions and highly hired their own
computer technicians. Again news strategy was formulated by Sam Palmisano he organized IBM
into three complementary areas of hardware, software and services though helped IBM consultants
to visit a company and outline an integrated solution to meet customer expectations and IT needs,
through this strategy IBM earned high margins in hardware and Palmisano focused on inorganic
growth strategy for acquiring software based small companies, after this tenure IBM focused and
invested on cloud computing much data and big-data system to provide much data base to its
clients. To be survive much more on market and give tough competition to its competitor the IBM
used different corporate and business level strategies to create market capitalization and loyalty
inside customers.

HISTORY OF IBM :
IBM and nicknamed "Big Blue" (for its official corporate color), is a multinational computer
technology and IT consulting corporation headquartered in Armonk, New York, United States.
The company is one of the few information technology companies with a continuous history dating
back to the 19thcentury. IBM manufactures and sells computer hardware and software and offers
infrastructure services, hosting services, and consulting services in areas ranging from mainframe
computers to nanotechnology. Virginia Marie "Ginni" Rometty is the chairman and CEO of IBM
and first woman to head the company.

FACTS OF THE CASE

This is a case study on IBM from 1970s to the present. Objectives were to define the problems
within IBM in 1993. Management used tools to remedy these problems. This case is mainly focus
on innovation, failure and different business and corporate level strategies used by Company to
give strong completion in the market.

Corporate level Strategy :

Corporate Goals and Objectives:
The new corporate level strategy of IBM was to become one of the leading e-business service
providers and to develop new commerce engineering, software and consulting services.
Steps taken for development of corporate level strategy:
Re-focus on mission
De-emphasizing the manufacture of high tech hardware.
Increasing emphasis on providing customer with e-business, design and service.
Converting old data base into new online data processing system.
Improving efficiency by introducing web technology into their internal business
Developing companys website
Corporate expand scope of its new service as well as old hardware business to serve smaller
customer that were previously neglected.
They focused on services and software packages tailoring unique needs of specific
industries i.e. banks, hospitals and educational institutions.

Business Level Strategy:

IBM re-organized and re-allocated the internal resources.
Half of the company budget is allocated to solve business problems rather than improving
technical performance of hardware.
This strategy helped the company to ride out the storm in good way.
Able to gain market share against competitors like Oracle, SAP, Microsoft, SUN in nearly
every service and software package.
PORTERS FIVE FORCES MODEL
Threats of new entrants: It is relatively low as this field requires heavy investment in
research and innovation.
Bargaining Power of Supplier: In most areas of IBM, there are number of suppliers
which make the power of supply low.
Bargaining power of Customer: There are lots of similar products which make the power
of bargaining higher.
Substitute Products : IBM provides number of products which have low or no substitute
Competitive rivalry: It is high as there are large companies like HP, Microsoft, Dell, intel,
Oracle, SAP and EDS to compete IBM.

SWOT
Strengths :
Brand name with more than hundred years old company and live long customers believe.
Advance business performance management
Diversification (System and financing, hardware, software and services).
Good organization culture
Ranks second in market capitalization, net income, and long-term growth behind
Microsoft.
Providing creative services and advancement.

Weakness:
High cost in the value chain.
Lack of synergy resulting from a series of acquisitions and divestitures
Difficult to coordinate over four geographical segments
Too many employees are there.
Concentration or focus on three major divisions or segments puts the company at a
vulnerable position if revenues from them decline
Declining profit margins from hardware in year 2014.

Opportunities :
Globalization in order to balance the fluctuations in different economics.
Create products appealing to a younger generation, e.g. iPod.
Use patents to generate revenue.
I Lire and use international expertise.

Threats :
Customers have low switching cost.
Intense competition.
High threat of substitutes.