Case Study of IBM

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cc Professor Amjad Ali



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Muhammad Ahmed

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AtifQayyum

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Fatima Mehmood

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Beenish Sattar

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HISTORY OF IBM Õ
 
       abbreviated IBM and nicknamed "Big Blue" (for its official corporate colour), 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 19th century. IBM manufactures and sells computer hardware and software (with a focus on the latter), and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology. Samuel J Palmisano is the chairman and CEO of IBM.

FACTS OF THE CASE This is a case study on IBM from 1993 to the present. Objectiveswere to define the problems within IBM in 1993. Managementused tools to remedy these problems.T his case is mainly focus on innovation of IBM.

PREVIOUS STRATEGY OF IBM What Objectives they were focussing? Mc They were mainly focussing on the hardware side of computer industry that is mainly on main frame PCs, Personal PCs. Mc But when internet began to takeoff in the mid 1990¶s then they started focussing on server and related equipment¶s.

Where they were focusing? Mc Basically they were targeting customers for hardware of large organisation because ‰c they require greater data processing capacity and ‰c have financial resources to afford it

How IBM was gaining competitive advantage? Quality Differentiation Strategy:

Firm followed ³
 
  
 as their competitive advantage by offering superior products backed by excellent technical service and selling them at premium prices. ë  
To fulfil this strategy and for its implementation firm allocated vast resources to R&D and product development. Open Architecture Policy:

IBM also followed ³  
  Î policy. According to this policy the firm licensed its PC-DOS operating system to othermanufacturer, which helped to expand number of PC ± DOS users. 

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 ‰c Increase in number of PC¶sDOS users ‰c elping to provide incentives for IBM licensees helping IBM to develop more innovative applications software ‰c Improve the value of hardware among their customers

What marketing strategy IBM was following? Mc IBM maintained budgets for advertising and promotion to keep their customer up-todate of new products lines. Mc IBM spent millions on recruiting, training and compensating one of the world¶s largest and competent sales forces.

SHIFT OF STRATEGY There was a need to shift the strategy due to the followingÊ
: Mc Decrease in market share Mc Decrease in demand

Decrease in Market Share: The market share of IBM dropped to 8 % in 1999 due to technological changes and competitors.

Decrease in Demand: Mc The server business suffered because of its customer attraction towards UNIXcomputers. IBM server growth rate during late 1990¶s was only about one third(1/3) as fast as that of its major competitors e.g. Sun Microsystems. Mc Its mainframe business suffered because of falling prices and decliningdemand. Mc Central data processing systems of IBMalso suffered during that period due to the declining in demand.

Reasons for the failure of IBM strategy: Factors that made competitive strategy less effective and declined the demand for mainframes and centralized data processing system are 1.c Major    

 in macro environment a.c Increase in power of desktop PCs b.c Internet emergence c.c Development of internal organization wide network 2.c Some of its product market begins to mature due to which the quality differentiation strategies 3.c Customer purchase criteria changed: a.c they become more price conscious -c c

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b.c more interested to buy that is easy to use 4.c Its   

DELL was providing more benefits at lower prices ; they were providing customized design system,convenient direct purchasing over the net, user friendly service and support programme 5.c IBM was focussing mainly on large organizations which provided space for other firms like SUN,P, and other competitors to pursue small start-up business

îEW STRATEGY In 1994 LOU GERSTNER became chief executive of IBM and he reviewed all past strategies and the reason for their failure The top executive brings changes in three levels of strategies are discussed below:

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 the development of corporate level strategy: Following are the steps that were taken at corporate level: Mc Re-focus on the mission Mc De-emphasizing the manufacture of high tech hardware Mc Increasing emphasis on providing customer with e-business engineering, design and service Mc Converting old data bases into new online system Mc Improving efficiency by introducing web technology into their internal business Mc Developing company`s web site Mc Corporate expanded scope of its new service as well as old hardware business to serve smaller customer that were previously neglected Mc They focussed on services and software packages tailoring unique needs of specific industries i.e., banks and hospitals

Results of steps taken by corporate level New corporate level strategy helped to c up to 14% in 2003

Business and marketing strategies Previous business unit objective: Previously firm differentiate itself from competitors on basis of superior quality and charging premium price for its quality.

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îew business unit objective: But in new business strategy this competitive superiority depends on knowledge, experience and expertise of its consultants. For this they c Re-organized and re-allocated the internal resources c alf of the company budget is allocated to solve business problems rather than improving technical performance of hardware. For this team was created involving rc Sales executive in charge of account rc Representative from service division rc Person in software unit rc Someone from research lab

Strengths of new business and marketing strategy Mc Mc Mc Mc

onowledge and expertise of its personnel Ability to develop beneficial relationship with customers Training of their sale person by utilizing sufficient resources Formation of pricewaterhouseCoopers consulting , helped IBM focus more on executive level business problems

Results of new strategies Mc elped IBM to ride out the storm in good way Mc Firms revenues increased more than 7 % over previous years Mc Able to gain market share against competitors like ORACLE ,SUN, in nearly every service and software package Mc Earnings per share increased in 2003 which was less profitable year for others

SWOT Strengths: Mc Mc Mc Mc

Advanced business performance management Good organization culture. Flexible marketing management. Creative services.

Weaknesses: Mc igh costs in the value chain.

Opportunities: Mc igh level of entry barrier to the server market. Mc ireless Applications

Threats: Mc Customers have low switching costs... Mc Intense competition. 2c c

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Mc igh threat of substitutes.

MISSIOî: At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics. e translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.

COMPOîEîTS OF THE STRATEGY SCOPE: IBM is one of the world¶s largest computer companies. The types of the industries served by IBM are: Mc Mc Mc Mc Mc

Computer Systems Computer hardware Computer software IT consulting IT services

GOALS AîD OBJECTIVES: Mc Improving efficiency by introducing web technology into their internal business Mc develop beneficial relationship with customers

IDEîTIFICATIOî OF A SUSTAIîABLE COMPETITIVE ADVAîTAGE: IBM differs from others because of its offerings which provide superior quality. IBM follows the quality differentiation strategy.

SYîERGY IBM using its resources to train its employees in order to maintain competitive advantage and developbeneficial relationship with customer which helps them to increase market share c

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