Group 3 IBM case study

Yao Ju M99Y0206 Ninh M997Z211 Nancy M997Z228 Melva M997Z227 James M99Z0216 Allison M99Y0105 Group 3-Members

Outline  Background  Previous strategy (before late1990s)  SWOT analysis  New strategy  Result  Conclusion

About IBM  International Business Machines (IBM) (NYSE: IBM) is an American multinational computer, technology and IT consulting corporation headquartered in Armonk, New York, United States.  IBM is the world's fourth largest technology company and the second most valuable global brand. (after Coca- Cola).

 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 computer to nanotechnology.

 Industry  Computer systems  Computer hardware  Computer software  IT consulting  IT services

History  The company which became IBM was founded in 1896 as the Tabulating machine company in New York.  Since November 1910, a Hollerith subsidiary existed in Germany, the DEHOMAG (Deutsche Hollerith-Maschinen GmbH), founded as a license holder from this company.

 In 1922, the renamed CRT took over 90% of DEHOMAG, which was in license debt due to the German inflation  In 1949 DEHOMAG finally took the name IBM Germany.

IBM logos 1924 to to 1956 to 1972 to Now

Competitive strategy  Differentiation & Focus strategy  Superior products  Premiums price  Focus on large mainframe

Customer  Large organization(main customer)  End Users (through independent retailers (circuit city) & value-added resellers)

Strategy implementation  Ensure a steady stream of cutting-edge products by allocating vast resources to R&D  Open architecture policy: license to other manufacturers and software developers in order to develop more innovative applications.

 Purpose ： enhanced the usefulness and customer value of IBM’s hardware.

General environment analysis (1980s - Late1990s)  The change of technology:  Rapid increase in power of desktop PCs and the development of internet  Intranets emerged  Declining demand for large mainframe computers and centralized data processing systems.

Challenge&Problem (1980s - Late1990s)  1980s - Early1990s  Its venerable mainframe business, which had been a low-growth but highly profitable market suffered a profit squeeze due to falling price and declining demand.

 Mid-1990s  IBM’s traditional businesses were in trouble.  The worldwide PC market fell to about 8%, third behind Dell and Compaq.  Unix-based computers, were growing rapidly around the world, IBM was able to capture only a small share of that business.

 Late1990s  The growth rate in the server market was only about one-third as fast as that of major competitors such as SM.

What Should IBM Do?  Chandler (1962) : Strategy follows environment CHANGE

SWOT analysis S WO T

SWOT analysis-S  R&D and product development  Competitive superior depend on the knowledge and experience.  Familiarly with customer’s operation.

SWOT analysis-W  Quality differentiation strategy became less effective as some of its product – markets began to mature and customers’ purchase criteria changed.  IBM’s premium price position put it at a disadvantage in attracting the buyers who became more price-conscious.

SWOT analysis-O  dot-com revolution  Buyers tended to be less technically sophisticated, more price-conscious and easy to use.  The internet would change everything.  The explosive growth is in service.  Internet is really about business, not only information superhighway.

SWOT analysis-T  dot-com revolution  Buyers tended to be less technically sophisticated, more price-conscious and easy to use.  Competitor response (Dell) →low price custom-designed and convenient to purchase on Web. →User friendly service and support program.

 Based on internal resources  Continue using superior quality and premium prices  Re-organize and reallocate internal resources

New thought  1994, a big revolution in reexamined all the firm businesses, customer segments, competitors and potential competitors was made by Lou Gerstner and task force of other executives (including many from marketing and sales ranks).  “ The internet would change everything ”

 The real leadership in the industry is application of the technology instead of creation of technology.  the explosive growth in service  internet is truly business!

Corporate strategy  de- emphasizing the development and manufacture of high – tech hardware (selling the firm ’ s PC business to China ’ s Lenovo group Ltd.)  Provide customers with e – business engineering, software and outsourcing services.  Leverage the firm ’ s existing competences and its long - term relationships with its traditional customers.

 They also expanded the scope of both its new service and old hardware business to embraced smaller customers. (improve the products and supply consulting services)  2002, Samuel J. Palmisano continue broadening the scope of IBM ’ s service offering.

New Business and Marketing Strategy  Based on internal resources  Continue using superior quality and premium prices  Re-organize and reallocate internal resources

 Managing customer relationship by teams integrating representatives from sales, consulting, software, computers and research lab  Retraining salesforce  Help shifting the emphasis from selling products to designing and implementing services

 Acquiring PricewaterhouseCoopers Consulting  Help focusing more on executive-level business problem solving  Each member of IBM may be considered an expert with full ability to serve the customers the best  Issuing ads stressing the firm’s extensive consulting resources& capabilities  Placing ads in a variety of media

Result  Revenues in 2005 were more than $91 billion, revenues overall have grown by $10 billion since the dot-com crash in the first year of century.  More significantly, the firm’s gross margin improved by three points from 2004 to 40 percent, and income from continuing operations topped $8 billion.

Conclusion  IBM succeeded in implementing new strategies to make name all over the world.