Group 3IBM 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 analysisNew strategy Result Conclusion

About IBMInternational 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.

IndustryComputer systemsComputer hardwareComputer softwareIT consultingIT services

HistoryThe 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 1914-1923.

In 1949 DEHOMAG finally took the name

IBM Germany.

IBM logos

1924

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1946

1947

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1956

1956

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1972

1972

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Now

Competitive strategyDifferentiation & Focus strategySuperior productsPremiums priceFocus on large mainframe

CustomerLarge organization(main customer)

End Users (through independent retailers (circuit city) & value-added resellers)

Strategy implementationEnsure 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 internetIntranets emergedDeclining demand for large mainframe

computers and centralized data processing

systems.

Challenge&Problem (1980s - Late1990s)1980s - Early1990sIts 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-1990sIBM’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.

Late1990sThe 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

SWOT analysis-S

R&D and product developmentCompetitive 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 revolutionBuyers 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-Tdot-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 resourcesContinue using superior quality and

premium pricesRe-organize and reallocate internal

resources

New thought1994, 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 strategyde- 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 StrategyBased on internal resourcesContinue using superior quality and premium

pricesRe-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 solvingEach 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

ResultRevenues 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.

ConclusionIBM succeeded in implementing

new strategies to make name all

over the world.