Case Study About Ibm

International Business Machines- 2007 Case Study Reported By: ALARCON, Lyanne V. CRUZIN, Richelle Ann DIA, Minette SACE, Carla I. Introduction IBM was founded in 1888 as Herman Hollerith and the Tabulating Machine.

It was incorporated in 1911 as “Computing-Tabulating Recording Co. ” The company later changed its name to International Business Machines (IBM) Corporation in 1924 after becoming a Fortune 500 Company. Also known as “Big Blue,” IBM has won several accolades. It is known to have more patents than any other American technology company. The company operates in 170 countries and has 60% of its revenues coming outside of US.

IBM divested its personal computers and hard disk drives businesses and concentrated on becoming service-oriented architecture (SOA).

The company is structurally organized in the following segments: systems and financing, hardware, software and services. IBM’s key competitors in the industry are Microsoft, HP, and EDS. II. Time Context In 2005, IBM’s Total Revenue declined by $5. 1 Billion.

It can be attributed to the change the company is heading into, and the trend that its hardware business is also on the decline. Having lost 8. 3% from 2004 and a further 7. 6% in 2006. III.

Viewpoint

CEO and President, Samuel J. Palmisano IV. Problem Definition How can IBM increase their revenues and maintain its competitive advantage? IV. 1 Objectives IV. 1.

1 To drive revenue growth through new markets, new offerings, and new products both developed and acquired IV. 1. 2To develop and encourage innovation and ideas that focus on new high-profit, value-added business and services V. Areas of Consideration V. 1 Strengths V. 1.

1Brand Name (IBM is one of the most recognizable Computer Brands in the world) V. 1. 2Diversification (Software, hardware, financing and servicing) V. 1. Innovation Jam Capability (With this capability, the company doesn’t only rely its ideas from its top officers. It allows their employees and customers to contribute in creating or developing its culture.

) V. 1. 4IBM has three Nobel prizes, four Turing awards, five National Medals of technology and five National Medals of Science. V. 1. 5 Ranks 1st in industry sales and 2nd in market capitalization, net income, and long term growth behind Microsoft V.

1. 6Widespread operations in 170 countries V. 1. 7Rising earnings per share (EPS) in 2006 V. 1.

8 Sales-centered business culture V. 2 Weaknesses V. 2. Revenues across all industry sectors are almost the same from 2005 to 2006. V. 2.

2Total assets decreased from $105 to $103 in 2005-2006. V. 2. 3Huge work force and high pay for human resource V. 2.

4Declining profits from hardware V. 2. 5Concentration or focus on three major divisions or segments puts the company at a vulnerable position if revenues from them decline V. 3 Opportunities V. 3.

1Increasing customer’s awareness of new technology around the globe is a good opportunity. V. 3. 2IT market in India, Russia, Brazil and China are expected to grow twice as fast as in the rest of the world. V. 3.

3Rising emand for game processors in the microelectronics business V. 3. 4Emerging markets for software V. 4 Threats V. 4.

1IBM is facing strong rivalry from multinational companies such as Microsoft, HP and EDS. V. 4. 2Technology life cycle is characterized by rapid changes or development. V. 4.

3Customers have low switching costs V. 4. 4Increased market share of competitors VI. Major Assumptions VI. 1IBM is not advertising heavily to promote their products unlike its competitors.

As IBM increases its product line and services, they shall be willing to spend more to let their items be known by their customers.

IBM is lacking when it comes to effective advertisement. (composition of the statement) VI. 2IBM’s Services segment has the most potential for growth, considering the services they are offering like the Business Process Outsourcing (BPO). Unless major inventions or developments are done in the hardware business, IBM should be in track in improving their software and service businesses. VII.

Alternative Courses of Action VII. 1IBM should invest more heavily on Research and Development to counter the improvements being developed by the competition or even overtake the competition. VII. 1. 1Advantages VII.

. 1. 1 The company will gain market leadership through differentiation. VII. 1. 1.

2Provides new product innovation to keep itself ahead of competitors VII. 1. 1. 3Innovation drives additional sales volume and reduces costs through process improvements. VII. 1.

1. 4This would be of great value in creating a good climate of cooperation within the organization. VII. 1. 2Disadvantages VII. 1.

2. 1Difficulties in anticipating how conditions will change in the market and whether customer needs will change during the long R;D process. Competitors will come up with a rival product that is just as effective.

VII. 2. 2.

2There is always uncertainties about whether the product will meet the original brief and customer requirements. VII. 2Put major investments in services, technologies and in emerging markets particularly in the software segment and integrate IBM’s operations at the same time by locating the work and functions wherever it makes the most sense. VII. 2.

1Advantages VII. 2. 1. 1The employees’ skills will be utilized and the productivity will increase. VII. 2.

1. 2This will enable clients to achieve higher levels of cost efficiency and quality. VII. 2. 2Disadvantages

VII.

2. 2. 1 The competitiveness for hardware segment is at risk. VII. 2. 2.

2This will incur additional costs for IBM VIII. Recommendation IBM should keep its position in the market as the world’s largest information technology. IBM understands that the demand for software and services skills worldwide is growing. So, in order to move to the emerging higher- value spaces, IBM should increase its revenues and maintain its competitive advantage. It should also focus on its software and IT industry.

Therefore, we recommend ACA 2. IX. Criteria for Decision Making

CriteriaProfitabilityCost-effectivenessEase of ImplementationAdaptability ACA 1AverageAverageHighVery high ACA 2Very HighVery HighLowAverage Profitability ACA1 is average in terms of profitability because investing in R&D may increase productivity which drive technology company profits while considering the risk inside of it, however, ACA 2 is very high in terms of profitability because this will assure the make a profit though it will takes time and takes a greater investment, “The greater the investment, the greater the return”, “Slowly but surely”.

Cost-effectiveness ACA 1 is average in terms of cost-effectiveness because the world of R&D is full of questionable spending, uncertain results and payoffs that can be hard to measure while ACA 2 is very high in terms of cost-effectiveness because it must have a greater investment (cost?? ) to implement such however this investment (cost?? ) will be maximize the utility by locating the work and functions wherever it makes the most sense. Ease of Implementation

ACA 1 is very high in terms of ease of implementation because this IBM has abundant technological resources while ACA 2 is low because this entails more time, most probably years, this activity is a step by step basis whereas you are just going to put your investment to major segments instead of putting your investments to all segments of the company.

Adaptability ACA 1 is very high in terms of adaptability because … ACA 2 is average because. X.

Plan of Action (lyanne pki tnung nlang c rhea about sa sched at person involve, d ko kc sure at alm) sbi maximum of 6 mos dw pero ewan din. haha ActivitySchedulePerson Involved Exit businesses on part of hardwareCEO Shift some business to more profitable segmentsCEO Partnerships with universities, new programs, tools, and support for modern languages and architectures. CEO Expand new markets with promising growth through its partner’s strategy network program. CEO Continue IBM’s global integrationCEO