Group 3
IBM case study
Group 3-Members
Yao Ju
M99Y0206
James
M99Z0216
Ninh
M997Z211
Melva
M997Z227
Nancy
M997Z228
Allison
M99Y0105
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 CocaCola).
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 1914-1923.
In 1949 DEHOMAG finally took the name
IBM Germany.
IBM logos
1924
1947
1956
1972
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to
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1946
1956
1972
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
W
O
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.