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The International Business Machines Company (IBM)
IBM’s main competitors
There are many computer manufacturing companies worldwide, the largest one in the
world being the International Business Machines (IBM), which manufactures both the computer
hardware and software. Other companies dealing in the same include Apple, Hewlett-Packard
(HP), Dell, Compaq, Intel Corporation and Lenovo.
Of the above, Hewlett-Packard and Dell are the two major IBM competitors. This is as
per wikinvest.com. Of the two, Hewlett-Packard came on top in 2006 after overtaking IBM
annual revenue with a gap of $235 million HPQ and IBM revenues. Three years afterwards, the
gap widened when Hewlett-Packard’s annual generated revenue rose to $118.3 billion while on
the other hand, IBM was at $95.76 billion in the same year.
However, in terms of gross profit, IBM is still on the lead with a gross profit of $43.8 for
FY09 as compared to Hewlett-Packard’s $28.4 for FY08. IBM’s profitability has been on the
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increase annually since the year 2005. One of the major factors that have contributed to this is
the indefatigable efforts directed towards raising the standards of services and software sectors
rather than concentrating on cyclical and commoditizing business.
How close the competitors’ products are to IBM products
As much as the IBM’s main competitors are Hewlett-Packard and Dell, each one of them
has a different area of specialization. This means that IBM’s competitors’ products are not so
close to those produced by IBM. Dell for instance, generates its money mainly from the sale of
personal machines (PC) and server hardware. Hewlett-Packard on the other hand, being more
diversified, leads is in the sale of Personal Computers, offering of IT services, Imaging &
Printing. IBM competes with both companies in their specific areas of specialization. It competes
with Hewlett –Packard in the markets when it comes to Servers and services pertaining
Information Technology. It competes with Dell in the marketing of servers and software. As
from 2009, IBM has retained its title of being on the lead in software, Information Technology
Services and Servers.
Brand loyalty
Of the areas of specialization of IBM, the leading segments are the servers, software and
IT services. This is even after being overtaken in terms of revenue by HP; IBM still remains at
the top in terms of IT services, servers and software. In addition to that, it is ahead of both HP
and Dell in all profitability measures. This is due to its involvement in high margin sectors. This
give a good reason why its brand loyalty remains high not only now but years to come unless the
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competitors abandon their focus from the thin-margin PC business in which they are still heavily
involved.
There is greater trade leverage in IBM. Its customers represent a stable income source,
since they find IBM’s products to be less cost-sensitive, they purchase them at high frequency, in
large quantities, and they most probably buy additional goods and services, thus contributing to
more profit in this business. The equity value of IBM with loyal brands is often greater than
competitors with similar profit figures and sales, given that brand loyalty is the engine of future
growth. Walker Information, a research firm reported in 2007 that IBM was one of the firms with
high percentage of brand loyalty and low proportion of high-risk customers. IBM’s earnings
increment per share for more than ten years (1997-2007) was higher than that of Intel, Apple,
and Hewlett-Packard, all of which were not ranked as loyal brand leaders.
The ease of entering the computer hardware and software market
Due to the income generated from the business of computer manufacturing companies,
many business ventures would wish to start the same. However, the capital needed to enter and
actually remain competent with the big names in this technological market is ridiculous.
Considering that IBM spent more than three Billions on development and research last year only
makes an individual or group to think twice about entering the market. New ideas and
components are often being developed by the large Brand names, which only few can compete.
Moreover, the brand name products sold by Dell, HP, and Apple are household names. On the
other hand, if an individual or business is technologically confident and can come up with new
language or a kind of innovativeness, they can sell the concept to the large firms. This would be
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the most significant step when trying to create some profit within the PC industry. In a nutshell,
the ease of starting a computer manufacturing firm is uncertain, depending on ones expectations
for the potential business. This means, how much one expects to be generating after a given
period, which can be a day, week, month or even a year or years.
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Work Cited
International Business Machines; Wiki Analysis. (2013). Retrieved from,
http://www.wikinvest.comstock/International_Business_Machines_%28IBM%29