What factors led to IBM‘s success during the 1960’s and 1970s and its problems during the late 1980 and earry1990s? Factors led to IBM’s success during the 1960’s and 1970s:- First mover in IT industry advantages (less competition, more customers)- Right investment to S/360 Success of PC Great reputation attract top talent Factors led to its problems during the late 1980 and earry1990s: -Did not keep in touch with customers Didn’t understand market need (fewer purchase IBM mainframes)- Marketing effort missed the mark
Turf battles between autonomous divisions Spending too much on fixed cost (building, data processing cost, .. ) – Management IT problems such as poor internal IT problems Products complexity and the organization to develop them Executives were isolated to growing problems (deep level of hierarchy) 2) What did Gerstner do when he assumed the role of CEO in April 1993? Evaluate Gerstner’s approach in crisis management. How well did he perform as a turnaround manager? What challenges did he face as he attempted to position the company for rowth?
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What Gerstner did: Focus on customers and get executives involved in their own customers – Keep key employees Hired Jerry York charged with get the cost in control and Rick Thoman took charge of cutting inefficient brand and keep important brand – ThinkPad- Cut unnecessary cost Few months since Gerstner took charge, IBM posted small profit (382 million). By the end of 1994, profit had risen to 5 billion on revenues of 64 billion. In comparison with the loss of 4 billion in 1992, what Gertsner did was amazing.
He coped with IBM roblems by solving the most severe to the less one.
At that time, problems of products and customers was the most serious which cost IBM billion dollars in loss. Challenges that Gertsner faced as he attempt to position company for growth: – IBM was a large corporation based on different countries with different culture. – High cost (each brand had its own procurement, logistics, and fulfillment services)- It took IBM longer time to get products to market than its competitors- IBM applied approach which were designed to large established business to start-up business ) Why did large established company, like 18M, find it so difficult to build successful and sustainable new businesses? Problem of IBM in Exhibit 8 4) Evaluate IBM’s approach to leading mature, high growth, and emerging business opportunities. What are the organization design and leadership models required to manage each type of business? How should a company like IBM manage the This approach was necessary for the IBM at that time it faced problems in managing and operating different projects.
IBM could not only focus on current problems but also nurture innovation of products for the future.
Organization and leadership for each type (Exhibition 9) 5) What challenges did Palmisano face as he assumed the control of IBM in March 2002? Can a company like IBM be organized for both innovation and efficient operation? What advice would you give Palmisano at the end of the case? Challenge: Find out strategic direction for IBM when business opportunities were staggering in their scope and scale. Suggestions: Deliver new value-added services Verify products and services, combined service and technology- Acquire potential business like PW’C Consulting