IBM case presentation

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the relapse and revival story of IBM


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Brief overview of IBM:

Brief overview of IBM IBM stands for International Business Machine. Founded on 1888 in Endicott, NY by Herman Hollerith. It is known to have more patent than any other company in the world.


IBM THEN… In 1880 a company named CTR - Computing-Tabulating-Recording was formed. On Feb 14, 1924 CTR was renamed as IBM- International Business Machine. Was market leader in 1970-85 in large mainframe computers. IBM NOW… IBM's closing value of $214 billion on September 29, 2011 surpassed Microsoft which was valued at $213.2 billion. It was the first time since 1996 that IBM exceeded its software rival based on closing price. However, as of June 11, 2012, IBM's value remained less than half of Apple's value of $541 billion.

Thus, the main strategy of IBM is to…:

Thus, the main strategy of IBM is to… Deliver their high value added services (or software) to customers through their server product.

IBM Market Domination…1970-85:

IBM Market Domination…1970-85 During the 1970s and early 1980s, IBM became the first-choice computer company for many of the world’s leading companies. Had a remarkable global market share of 60%. IBM offered large, fast and reliable machines. Overall, choosing IBM meant that risk was low for customers.



The crisis at IBM began innocently enough…:

The crisis at IBM began innocently enough… The IBM culture was relaxed and supremely confident of its abilities and resources. Because of its sheer size and global reach, the company was split into a series of national companies, leading to confinement of central management control. Culture was slow and blinkered. Under estimated its competitors greatly. Did not recognized the importance of patents. No clear vision and mission statements.

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…... At IBM

Breaking 2 promises: A root cause of decline :

Breaking 2 promises: A root cause of decline One promise was to IBM’s customers: the other to its employees. To its customers, IBM had guaranteed effective, high-quality technology and excellence of service support, maintained by a close and continuing relationship with the customer. IBM rented equipment to its customers and was their partner in data processing and office work. IBM's one-stop shopping ensured large companies that their information systems were up-to-date (though not necessarily state-of-the-art) and reliable. When in doubt, information officers could buy IBM and be confident that their choices could not be faulted. To its employees, IBM had guaranteed job security. Once a person had a job with IBM, he or she was set for life. Benefits were good; salaries competitive; and the working environment excellent.

Customers were happy, and employees were productive.:

Customers were happy, and employees were productive. But during the late 1980s and early 1990s, IBM abrogated both contracts.

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Competitive Profile Matrix (CPM):

Competitive P rofile Matrix (CPM) Key success factors Market share Global competition Pricing Advertising Product quality Technology Customer loyalty Product image Financial position Innovation Total IBM Weight rate score .10 3 .30 .10 4 .40 .08 3 .24 .08 2 .16 .06 3 .18 .08 4 .32 .08 3 .24 .10 4 .40 .10 3 .30 .12 4 .48 1.00 3.62 Microsoft rate score 4 .40 4 .40 3 .24 4 .32 3 .18 4 .32 4 .32 4 .40 3 .30 4 .48 3.36 HP rate score 3 .30 3 .30 3 .24 3 .24 4 .24 4 .32 4 .32 4 .40 3 .30 3 .36 3.02

Michael Porter’s Five Force Analysis:

Michael Porter’s Five Force Analysis

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COMPETITIVE RIVALRY : The strength of competition in this industry is very high. The main rivals of IBM are HP, Microsoft, Dell, and Fujitsu Siemens Computers. They compete with international, national, regional and local area. THE THREAT OF ENTRANTS : It is very high because the costs of R&D, support products and services, manufacturing, and distribution are very high. BARGAINING POWER OF BUYERS : The power of buyers is high because the Switching costs for buyers are low, there Are also many product choices for customers. BARGAINING POWER OF SUPPLIERS : There are two biggest processor suppliers in the World who have very strong power on the chip supplying. However, the power of supplier for other low required Materials and parts is lower than the main suppliers. THREAT OF SUBSTITUTES : The web hosting business of other companies And some advanced devices and computers Could cause threat of substitutes.


SWOT ANALYSIS…!!! Strengths IBM leads the world in technological success with patents in the United States for 17 straight years. They are the company handling 95% of all business in the 1000 most profitable companies in the US. In 2009 they were recognized as the 4th most recognized brand name in the world and they have been consistently in the top 10 for 20 years. IBM is one of the largest and most profitable companies in the world, with a value of $66 billion. They have over 400,000 employees worldwide. It is an old, established company, founded in 1888 as the Tabulating Machine Company by Herman Hollerith, in Broome County, New York. In 1945 they were the first company to establish dedicated research labs for the creation of technological innovation, which lead to the creation of computers, voice recognition software and products that assist those working in medicine and radiology.


SWOT ANALYSIS…!!! Weaknesses IBM’s size is also its weakness . Enormous operating costs and competitors eating into their market share forced them in 2010 to buy back $8 billion in stock. Transferring jobs oversees has been an option IBM is using more and more. . Communication across these different countries can be very challenging. The recession of 2009 hurted everyone and IBM was also not exempted. Financial services, which accounts for 30% of IBM revenue, has declined. Servers and Storage which account for about 20% of IBM’s revenue has declined to 16% and a 6% decline in margins.


SWOT ANALYSIS…!!! Opportunities Increased globalization . Their brand image is synonymous with “big” and “old” they need to create products appealing to a younger generation and reposition their company. IBM needs to maintain a competitive edge in the marketplace and innovation is key and working with IT-related companies to create new products in the ever changing market; use patents to generate revenue. IBM’s love of open source operating systems, specifically Linux, benefits IBM in both the short and long term.  IBM can sell its i -series platforms with Linux to respond to the growing demands of the operating systems (OS). IBM’s small-medium business (SMB) has improved over the years but there is definitely a need to increase its market share to have an overall competitive edge.


SWOT ANALYSIS…!!! Threats The fact that they are completely dependent on Microsoft (in their computer services division) could be a huge problem if anything ever happened to them. Hackers and sensitive information can be exposed and exploited by individuals and IBM needs to be innovative with regards to firewalls and protective software. The supply chain has very few suppliers, leaving IBM very little to negotiate with or switch to. HP, Sun Microsystems are all competitors and are all threats to IBM’s bottom line.  Their competitors are able to create cheaper products and make more a considerable profit. Smaller companies that can move faster and provide less expensive products and services than IBM can become very costly to IBM’s more lucrative bundles focusing more on larger companies with big budgets.

Big Blue found the future, got the Net, and learned to love the People in Black. :

Big Blue found the future, got the Net, and learned to love the People in Black. In April 1993, when CEO Lou Gerstner arrived, IBM looked like one more giant company bent on self-destruction: out of touch, out of steam. Younger, hungrier rivals were stealing its best markets and attracting the best talent. There was lots of talk, in lots of places, of an AT&T-style breakup. Less than five years later, IBM is back. The company is growing. It is a genuine presence on the Net. It even wants to be cool -- relevant to the programmers flocking to Netscape, Starwave, and other fast-moving software companies.

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Solutions for a smaller planet We translate advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide. Innovation that matters for the world IBM’s new vision 2003

The new shift…:

The new shift… There was a shift from computer manufacturing value added in to two computer related areas- software & IT consultancy. Realized the world market for software which was estimated to be worth around US $30 BILLION. Vertical integratio n -chip making, operating systems, databases, collaboration tools and middleware.

IBM Strategy Conclusion…:

IBM Strategy Conclusion… To the present, the results of IBM’s new strategies have been successful, with a major recovery in profitability from the difficulties of the early 1990s. It was also well placed with new growth strategies to develop further into the 21 st century. But whether its new vision would be achieved was not entirely clear. It shows how IBM’s objectives changed and the new strategies that were developed to address the new objectives of the company. Both were changed significantly during the long time frame.

Disadvantages of vertical integration…:

Disadvantages of vertical integration… Capacity balancing issues: for ex, the firm may need to build excess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions. Potentially higher costs due to low efficiencies resulting from lack of supplier com petition. Decreased flexibility due to previous upstream or downstream investments. Deceased ability to increase product variety if significant in-house development is required. Developing new core competencies may compromise existing competencies.

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Hungry for change. Innovative beyond customer imagination. Globally integrated Disruptive by nature Genuine, not just generous.

5 Management Lessons from IBM…:

5 Management Lessons from IBM… They’ve made it 100 years, so must be doing something right. 1. At the start, convince the troops you’re a company of destiny, even if that seems crazy. 2. Build a cult-like culture that people either buy into, or run away from. 3. Bet the company once in a while. 4. Make people talk about you. 5. Hand off to a successor who is better than you.

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Presented by Sumedha Gupta A02 Shipra Singh A06 Sanjita TandonA14 Kumar David A27 Vijeta Jain A31 Meenu Chaudhary A39

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