Ibm Company I. Current Situation (1991-1993) 1. History of IBM: IBM is a multinational corporation that started its activities in 1911. But its origins can be traced back to 1890, during the height of the Industrial Revolution. It was first known as the Computing-Recording Company, then in 1924, it took the name of International Business Machines. Nowadays, this multinational company is known as the Big Blue .
2. Mission statement IBM main activity is to find solutions to its wide range of clients using advanced information technology. Its clients are individual users, specialised businesses, and institutions such as government, science, defence, spatial and educational organisations. To meet and respond to its customers needs, IBM creates, develops and manufactures many of the worlds most advanced technologies, ranging from computer systems and software to networking systems, storage devices and microelectronics. Indeed, IBM has various product lines and services a few of which are: the Personal Computer that was first created in 1981, AS/400 business system, RS/6000 family of workstations and server systems, S/390 enterprise server, groundbreaking ThinkPad notebook computer; the award-winning IBM Netfinity and finally, PC Servers.
It is an important supplier of hard disks, random access memories, and liquid crystal monitors. IBM has created the image Solutions for a Little World. Its products and components in other firms products are so widespread that people around the world associate the name IBM with computing functions. 3. Organization: IBM is a global information system and computing company. It is organized in 5 worldwide regions, and the following business units: 1.
Application Business Systems 2. Application Solutions 3. Enterprise Systems 4. Networking Systems 5. Pennant Systems Company 6.
Personal Systems 7. Programming Systems 8. Storage Products 9. Technology Products 4. Past and current performance: For many years, IBM succeeded in holding a very good market position. In fact, the company achieved a very high market share and huge profits.
However, this situation did not last forever. In 1990, IBM experienced its first quarterly loss of $2billion due to some unexpected accounting charges. However, revenues increased from $62.7 billion in the previous year to $96 billion. In 1991, the company faced a net loss of $2.83 billion that was mainly due to downsizing and restructuring costs. In addition, total hardware sales were down by 16%.
The years 1992 and 1993 knew a slight increase in revenues that reached $13.4 billion and a net loss of $399 million that changed to a net profit of $392 million in the first quarter of 1994. 5. Industry trends: IBMs old belief was that personal computers are a vital part of their overall strategy to link personal computers, minicomputers, and mainframes, their preferred product in this line. It was not quick in adapting this belief to the new reality and importance of the PC potential, so during the 1980s and early 1990s, IBM was thrown into turmoil by back-to-back revolutions in the trends of the computer industry. The PC revolution placed computers directly in the hands of millions of people, and then, the client/server revolution sought to link all of those PCs (the clients) with larger computers that labored in the background (the servers that served data and applications to client machines).
Both revolutions transformed the way customers viewed, used and bought technology, and both fundamentally rocked IBM. 6. Tactics at IBM were as follows: Marketing at IBM has often been based on recycling and updating older proprietary systems architectures in which it had a vested interest. It was a product rather than consumer oriented strategy. ? IBM has made modest moves towards more industry specific approaches to problem solutions in an effort to better meet customer needs.
? 1988 attempt to restructure decision making from HQ to 6 group executives failed. ? Due to its size, IBM makes sure that when introducing a project, worldwide capacity is available to manufacture it, and those foreign manufacturing requirements are met. 7. 1991-1993 CEO Akers undertook a major overhaul of IBM: he believed the problem was high centralization, so he followed a decentralizing strategy that would greatly reduce employee levels. Layoffs were as follows: 1991 20,000, 1992 20,000.
Although a $3 billion charge was made against 4th quarter earnings, IBM expected savings of $1 billion in 1992, followed by $2 billion in later years. Restructuring objectives: a- Accelerate product deliveries. b- To avoid or minimize costly delays and disruptions IBM would have to completely separate its units into distinct independent divisions with greater control over development strategies, including financial independence. IBM HQ would become a holding company with 6 autonomous divisions reporting to senior vice presidents. Divisions are to present annual plans to executive committee, set goals for return on investment, share in profits, issue stocks in some cases.
Each individual unit to report its results separately thus allowing managers to gain responsibility for controlling costs and developing competitive product marketing strategies. Emphasis to be placed on return on invested capital. Executive pay to be tied to unit profits c- Encourage 3d party relationships d- Reduce staff. e- Reduce product prices to match competitor prices. For example, IBMs lap top model costs about $2,500 more than Dell or AST models.
8. Gerstners strategy is to maintain IBMs broadness to take advantage of consumer confusion in the market. Consumers will recognize IBMs name in different products and purchase it. This will keep costs high however because the different units need to stay coordinated. According to him, IBMs challenge is to develop good working relations across the various operating units. It doesnt need an overall vision but a series of tough minded, market driven strategies for each of its businesses.
Balancing shareholder needs of higher margins with customer needs of lower margin open system products. Gerstner brought with him a customer-oriented sensibility and the strategic-thinking. He tried to rebuild IBM’s product line, to reduce the workforce and to make significant cost reductions. Despite mounting pressure to split IBM into separate, independent companies, Gerstner decided to keep the company together. He recognized that one of IBM’s enduring strengths was its ability to provide integrated solutions for customers — someone to represent more than piece parts or components. Splitting the company would have destroyed a unique IBM advantage. II.
SWOT analysis: ? External environment: 1.OPPORTUNITIES: 1.1. E-business: the use of the Internet is rapidly becoming an important distribution method for multinational companies, and a source of products for businesses and consumers. it is a way of doing business electronically using new concepts. By emphasizing on marketing this kind of operations, IBM will increase its presence in world operations, by making easier for a company to trade with another one, without any physical contact. 1.2.
Strategic alliances: three days ago, IBM announced its alliance with a huge IT company, DELL. This constitutes an opportunity for IBM to become stronger and acquire new knowledge. This part will be discussed later in the presentation. 1.3.As a third point, it seems that IBM should change its image among customers: when you think of IBM, the first image that comes to you is that of a computer, whereas IBM manufactures much more products: servers, mainframes, supercomputers, Internet services, and so on. Therefore, a good opportunity for the Big Blue would be to change this conception and make its diversified range of products better known.
There must be more advertising made about the other products in order to make people aware of IBM diversity. 2. Threats: 2.1.IBM most important competition is not within the mainframe market, but outside it, in the increasing range of other machines that can do much of what a mainframe does. ? Indeed, throughout the first half of the 1990s, the apparition of very small PCs attacked and reduced demand for mainframes, and this drove IBM almost to bankruptcy. However, the company responded by slashing prices and developing new mainframes that shared many of their components (such as memory) with PCs, thus benefiting from the PC industry’s economies of scale.
2.2.It seems that customers are beginning to buy products from different companies, due to a decrease in the confidence put in one single company. Their belief is that if their hardware come from different manufacturers, they will have a more open system, and diversified configurations. However, this trend leads to problems of compatibility among the different products. IBM is now trying to discourage customers from switching to other suppliers, by striving to improve the connectability of its computers. 2.3.Y2K: the Y2K issue arises because many computer hardware and software systems use only two digits to represent the year.
As a result, these systems may not process dates beyond 1999, which may cause errors in information or system failures. According to its CEO, IBM is considered to be Y2K ready. However, the Y2K readiness of the company’s customers varies, and the company continues actively to encourage its customers to prepare their own systems. While this behavior may increase demand for certain of IBM products, it could also soften demand for other offerings or change customer buying practices from past trends. ? while IBM continues to believe that the Y2K matters discussed above will not have a material impact on its business, financial condition or results of operations, it remains uncertain whether or to what extent the company may be affected.
? Internal environment: 1. Strengths 1.1 IBM is the largest IT company in the world: ? It has 240,600 employees ? It has commercial activities in 164 countries ? It is the 6th company ranked in Fortune magazine 1.2. Education and training are key factors in providing IBM partners with the necessary skills to sell and support IBM software products. The delivery of this education can be done through many formats, from traditional classroom settings to seminars and satellite broadcasts. IBM provides education and certifications on both IBM software products and other software technologies.
1.3 Industry knowledge: before launching any product, IBM managers completely understand the industry organization, key contacts, strategies and offerings, in order to be fully integrated in the organization. 1.4 IBM marketing approach consists of analyzing market and competition, performing segmentation and developing plans and solutions that respond to End User/market needs and competitive trends, and finally differentiating IBM/Business Partner solutions in the marketplace. 1.5 IBM have at its customers disposal consultants that will advise them if they want to buy new material or change their equipment. IBM employees do their best to satisfy the client and to understand his/her needs. 1.6 Helping businesses optimize their IT infrastructure A Total Systems Management (TSM) solution leverages IBM skills, services and systems expertise to help customers increase the business value of their IT solutions. ? TSM brings IBM Global Services systems management experts together with a customer’s IT executives to assess the customer’s information technology environment against its business goals and identify the key IT areas that are critical to achieving those objectives. IBM develops a customized services solution to enhance the customer’s system-wide operations and enable its IT infrastructure to better support its business goals, such as e-business.
1.7 All IBM interfaces, going from PC servers to supercomputers can be connected to Internet. 1.8 Teamwork: watch the video cassette. 2. Weaknesses: 2.1 Gerstner, the new IBM CEO, fo …