Business case of IBM

Analysis of Strategic Management Issues of

Group Members of Survivors

Md. Safiuddin 14119Farhana Sultana Jhumi 14050 Masud Ali Khan 14010Md. Shaikot Jahan 14089Barun Chandra Dey 14176Md. Ibne Nayeem Hasan 14095

Overview of

Md. Safiuddin 14119

IBM or International Business Machines is a well known American computer manufacturer.

Founder Thomas J. Watson

Big Blue IBM is also known as "Big Blue" after the color of its logo. The company has made everything from mainframes to personal computers and has been immensely successful selling business computers.

Company profile

"At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced information technologies, including computer systems, software, storage systems and microelectronics.

We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide."

Mission statement

“Solutions for a small planet”

• "Dedication to every client's success • Innovation that matters, for our company and for the world • Trust and personal responsibility in all relationships"

Vision statement

values

IBM History

1930• IBM began designing and manufacturing calculators• using the technology of their own punch card

processing equipment

1943• IBM together with Harvard University financed the

invention of the Mark 1 computer, the first machine to compute long calculations automatically

1953• IBM was ready to completely produce their own

computers, which began with the IBM 701 EDPM, their first commercially successful general-purpose computer.

1980• Microsoft's Bill Gates agreed to create an operating

system for IBM's new computer for the home consumer

1981• The first IBM PC ran on a 4.77 MHz Intel 8088

microprocessor. IBM had now stepped into the home consumer market, sparking the computer revolution.

The IBM international corporate headquarters are located in Armonk, New York

4,00,000 employees of IBM around the world

Position # 19 out of Fortune 500 companies

IBM Corporation International Headquarters

:

Computer industry

Hardware Software Services

Processing service

•Data entry•Credit card automation•Billing •Pay off processing

Network service

•Electronic data interchange•Electronic mail delivery•File transfer•Electronic funds transfer

Professional computer service

•consulting•Custom programming•Systems integration•Outsourcing

Computer service industry

Computer service industry

Contracts with customers with

designated time, monetary value,

specifications

Solid knowledge

about revenues

Continue………

Strong growth of computer industry

(S & P survey)

USA, the largest

producer and user

segment 2012 2013 2014Global service 56% 55% 56%

Systems and technology

17 17 16

Software 24 25 25

Global financing 2 2 2

Internal service 1 1 1

total 100 100 100

Segment wise revenue

Macro environment Analysis

economic

Political

socialtechnological

legal

• In general international operations are highly

influenced by the governmental policies and their laws, but in this case there is little effect because most of countries are looking for developments and new technologies.

• Heavy taxes in some countries make IBM increase its products price.

Political

• National growth rates.• Fuel Prices

• Positive customers' perception toward new technology around the world.

• Increase in population and internet users

economic

Social

• Advanced technology development.• Internet• Increase numbers of companies that need ERP systems

• Cyber protection and the chemical use in making hardware; like carbon, germanium, and silicon

• Currency exchange• Legal registration for their business outsourcing

facilities

Legal

Technological

Star (IBM)

Question Mark

Cash cows Dog

Market Share

Indu

stry

Gro

wth

High Low

Hig

hlo

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IBM Position Considering IT Skill

Farhana Sultana Jhumi - 14050

• IBM-committed to technology , leadership & rapid delivery of customers solutions.

• Extensive investment in research & development

Advantages• Brand recognition • Global reach• Continuous flow of new products & services

In 2000, IBM faced challenges about whether to continue to be • “everything for everyone” or • shift towards providing solutions for

costumers facing E-Business challenges in sourcing and implementation

• Earlier IGS offered solutions to–Mainframe

–Client Server

–E-Business

• E-business revenue grew 70% in 2000• ‘Future Network Economy or E- Utility’

• Four main issues on the proper course of action that IGS should adopt: I. Shortage of needed IT skill in the industry II. Segmentation of the market III. Analysis of the current marketing situation IV. Assessment of the competition and the Key Success Factors in each segment

• Lack of IT skill:• In an article by the BBC dated March 2000,

“ There is a serious shortage of skilled information technology workers in Europe,

which major companies fear could slow economic growth”.

“The main mitigate for them is to employ people from different backgrounds and then train them on the job for the needed skills.”

• Issues to be considered are:a. Is the cost of such an action justifiable to the “bottom line” of either of these corporations?b. Will these actions have any affect on other industries, and could this cause a shortage in other employment segments that are closely correlated to IT skill?

c. Is the training of these professionals according to specific company needs and tactics more useful than hiring them directly from the industry?

• June 2000 in BusinessWeek, Cisco’s strategy:“New Economy Shop”

Cisco getting involved in the teaching of student while still in High School, and gearing them towards the IT industry.

According to the Federal Reserve Chairman Alan Greenspan , the problem is that

“we have developed a shortage of highly skilled workers and a surplus of lesser-skilled workers”

Is there really a techie shortage? According to a 1998 article in BusinessWeek ,

“the demand supply is not in shortage, instead the demand is not for all people with IT skills, instead it is for : 20 year old people who can put in 80-hour week”.

In terms of 5 porter forces?bargaining power for the supplier & the

IT skilled professionals.

• Decision should be based on focusing the cost of the IT skill on one promising market and reducing costs allowing them to grow faster and more efficiently.

Segmentation of the market

Md. Shaikot Jahan 14089

Market segments• As the largest computer service provider

and Information Technology Company in the world, IBM with its IGS provides e-business solutions to two main market segments, large and small enterprises.

Large Enterprise IBM's Professional Computer Services segment offers a wide range of

computer services to large firms (more than 1000 employees) that seek IT solutions for its competitive advantage. IBM is able to provide large enterprises with:

• Customized e-business solutions

• Innovative e-business solutions

• Integrated e-business solutions

• All-in-one solutions (package of hardware and software products)

• Business consulting services

• System Recovery solutions

Small Enterprise

IBM e-business solution is also available for small and growing up enterprises (fewer than 100 employees). As stated in its website, IBM's products and services help small firms:

• Streamline business operations

• Improve employee productivity

• Promote their products and services

• Add e-commerce to their site

• Conduct business over the Web more efficiently

• Conduct business in a wireless environment

• Providing outsourcing solutions

Key Success Factors in large and small firms

Major key factors would be:

• Ability to retain small and large enterprise with integrated computer

services

• Provide standardized solutions at competitive prices for small

business

• Ability to power the system of government in government operations

• Ability to adjust for enterprise costs and complexity

• Providing co-location facilities to small firms

• Provide consistent services to non-profit organizations at

the lowest cost possible

• Talent to adjust to price sensitive businesses and markets

• Employ trained professionals to sell their services in

separate and specific industry sectors.

• Provide world-class skills and quality service on a global

scale

Recommendation

Based on the apparent successful segmentation of the market, it is the recommendation of this section that IBM should focus solely on the E-business unit and try to become the market leader in providing the service to both the large and small firms. Reasons are

• by focusing only the e-business model, IBM will be able to successfully beat out the competition from the smaller firms and hence become the leader in this segment.

• IBM can also rely heavily on its trusted brand name in building trust in its services and beating out the competition.

Analysis of Current Marketing Situation

Masud Ali Khan 14010

Current strategy

• Building customer loyalty by using

differentiation strategy

• High reliability, high quality and high

differentiation will build customer loyalty and

increase sales.

Industry Key Success Factors

Large Corporations

• ability to provide a customizable, all-in-one

solution.

• proven track record in fulfilling the specific

needs of the company’s industry.

Industry Key Success Factors (cont’d)

Medium and Small corporations

• ability to provide standardized solutions at a competitive price.

• a strong direct marketing capability .

Government Institutions

• have knowledge of and ability to leverage the bureaucracy found in such organizations.

SWOT Analysis

Strengths

• world renowned for its superior sales force for

many years.

• highly trained and aggressive sales force.

• global reach.

SWOT Analysis (cont’d)

Weaknesses

• Complex management system due to its size.

• Slow to bring new services to market.


Opportunities

• prolonged period of strong growth in industry

• trend towards the use of computers and the

Internet


Threats

• increased competition

• high acquisition and alliance activity

• threat of new competitors

• highly unstable and very difficult to predict

Porter’s five forces model

Intensity of rivalry• Competition is intense for the following factorsIndustry growth rate is fast which attracts new

competitors Existence of powerful competitors like

Electronic Data Systems, Hewlett-Packard, Digital Equipment, Computer Science, Accenture etc.

Intensity of rivalry (cont’d)

Exit barriers are high for all the competitors.

Rivalry weakens a bit because switching costs

are high.

Bargaining power of the buyer

• Bargaining power of the buyer is weak

because

switching cost of the customers is very high

the buyers’ volume is small in comparison to

overall sales of IBM

Bargaining power of the supplier

• Bargaining power of the supplier is weak because

IBM is a huge company. It represents a very high percentage of the

turnover of the suppliers. Revenues of the suppliers are highly affected

by IBM’s purchases.

Entry Barriers

• Entry barriers are high: Presence of a lot of giant corporationsVery high capital requirementExisting companies already have a loyal

customer baseExisting companies enjoy the advantages of

economies of scaleExisting companies have professional and

complete sales force and distribution channels

Substitution threat

• There is a low substitution threat:

Switching costs are very high

Brand loyalty is significant in the computer services

industry

Customers are not very price sensitive

Customers are willing to pay a high price for better

products and services.

Recommendation

• IGS should offer all service products to all customers, because

Its abilities to reach all markets and customers with greater ease than a smaller less developed competitor.

Economies of scaleRecognizable brand nameScope of diversification

Competitors Analysis

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Analysis of ACCENTURE model Mission: to help its clients

create the client’s future. long-term goal: To become a

“network of businesses that will be a market maker of the new e-business economy”.

Specialization: consulting and system integration

Others: ACCENTURE also provides outsourcing of business operations and custom programming services

Strengths: Global Presence operating in 48 countries

with 65,000 employees. leading management and technology consulting firm. Scope: very wide, serve

large, small and medium companies by providing all-in-one solutions.

Broad Industry Coverage: ACCENTURE targeted 16 industry segments, grouped into five global markets Unite: Financial services, products, communications and High Tech. resources and Government.

Strong research and development effort

Weaknesses: Competitive market:

competitors are expanding their operations into related technology consulting and outsourcing operations.

Limited service offerings: solely focusing on consulting and systems integration, leaving outsourcing

Analysis of EDS model EDS offers the following

services: management consulting, e-business solutions, business process management, and information solutions

Strengths: It is a global corporation.

• It has more than 121,000 employees worldwide and solves challenges in a wide variety of industries like communications, energy, government, and healthcare

• outstanding operational efficiency.

Weakness: Its aggressive buying of market share for competing against outsourcing leader IBM Global Services.

Analysis of HP model

• HP focuses on its original core product and wrapped services.• It was seeking to provide e-business support and services, but

did not have the full range of services as some of the other categories of competitors.

• Finally HP is weak in the areas of consulting, custom programming, system integration, and outsourcing.

Analysis of the competition by computer services market segments:

• In this industry, ACCENTURE is the biggest threat to IBM. Consulting and system integration is the specialty of this company

• In the consulting arena, ACCENTURE has a strong position because previously, the company was a business-consulting firm (accounting).

• Offer their clients a wide range of consulting services including both business and information technology services.

• Financially strong, having a strong global presence and broad industry coverage,

• ACCENTURE is a very tough competitor. And in order to overcome it, IBM should differentiate its consulting services and offer better quality solutions that will be better perceived by the target customers.

• Being a Full-Service Provider, we believe IBM should take advantage of the situation by stealing away the market share of the other services industry such as outsourcing and e-business solutions in which ACCENTURE was weak or didn’t focus on.

• Since IBM’s revenues from the custom programming remained constant year to year, while those from the consultant services were steadily increasing, we think that IBM should focus more on the consulting services and aggressively compete with ACCENTURE in this line of business.

Full services providers:

• EDS is the main threat. They pioneered the concept of outsourcing. the largest growth rate among all other industries

• That is why IBM focuses a lot on outsourcing & compete aggressively against EDS who are financially strong and globally present. IBM provides the outsourcing services through “IGS Strategic Outsourcing (SO) line of business.”

• The best way to compete against EDS is to identify the• customer’s business strategy and differentiate core from non-

core operations.

• EDS has a limited Internet presence and this weakness should encourage IBM to prove its Internet presence and launch its e-business program and provide top quality e-business solutions to its 36 customers

• IBM being a large company, the process to implement the e-business strategy was slow and not flexible

• IBM should supports its services by using the Internet in order to communicate, advertise, sell online, and offers their online services using e-business (e-business consulting, e-business systems integration, e-business hosting services).

Evaluation And Final Decision

Md. Ibne Nayeem Hasan 14095

Potential Alternatives

Concentrate Solely On

E-Business Service Offerings

Expanding Full Range of

Professional Services but Emphasis on E- Business

Consider Third Alternative

1 2 3

Shortage of IT Skill


Professional Services but Emphasis on E-

Business

2

Market Segmentation



1

Current Marketing Situation


Professional Services but Emphasis on E-

Business

2

CompetitorsConcentrate Solely

OnE-Business Service

Offerings

1

Shortage of IT Skill

Market Segmentation

Current Marketing Situation

Competitors

1

1

2

2

Best Alternative




Professional Services but Emphasis on E- Business

Consider Third Alternatives

1 2 3

Any Queries ?

Thanks All

Business case of IBM

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