IBM

Wasiq Hamid Sindhu

INTRODUCTION

In 1886 Herman Hollerith, for the US Bureau of Census formed the Tabulating Machine Company and Thomas J. Watson became its leader in 1915 and made the company slogan Think. It changed its name to International Business Machines (IBM) in 1924. During the period between 1910 and 1960, it developed products from punch-card tabulating machines to room-sized calculators In the 1970s and 80s, IBM product lines expanded from its traditional mainframes to minicomputer In 1981, the company introduced the IBM Personal Computer or PC, allowing the use of computers in schools, homes and businesses. Components for the computer were sourced from outside the company. The processor chip came from Intel and the operating system, called DOS (Disk Operating System), came from Microsoft. IBM introduced the ThinkPad in 1992, In 1995, IBM acquired Lotus Development Corporation and Tivoli Systems.

INTRODUCTION

IBM sold most of its hard disk drive operations to Hitachi in December 2002. The sale involved the creation of a joint venture called Hitachi Global Storage Technologies, which was 70%-owned by Hitachi. In 2003, IBM Research launched On Demand Innovation services, which teamed customers with a team of researchers who specialize in business transformation and technology consulting

Today, IBM is by far the largest information technology in the world and the eighth largest company in the worldwith approximately sixty percent of revenues generated outside the United States.

VISION STATEMENT

Breakthrough microprocessor architecture that puts broadband communications right on the chip.

MISSION STATEMENT

At IBM, we strive to operate in the invention, development and manufacture of the industry's most advanced information technologies.

PORTER FIVE FORCES

The threat of entry is low because manufacturing, and distribution are very high and IBM is one the oldest company in this industry.

The power of buyers is high because the switching costs for buyers are low; there are also many product choices for the buyers. The buyers can easily switch from one company to another if they are not satisfied with the price.

However, the power of supplier for other low required materials and parts is lower than the main suppliers. The number of suppliers in the chip supplying is very few so they have high bargaining power but the suppliers of other raw materials are large in numbers so they have low bargaining power.

PORTER FIVE FORCES

The business of other companies and some advanced devices and computers could cause threat of substitutes. Customers can easily switch to other available substitutes that increase the threat of substitutes.

The strength of competition in this industry is very high; the main rivals are HP, Microsoft, Dell, and Fujitsu Siemens Computers, they compete with international, national, regional, and local market. The competitors are working overall the world and competing with each others all over the world.

PESTEL ANALYSIS
POLITICAL

Companies in this industry are working all over the world so they have to adopt and implement the policies according to the political condition of the country so political factors effect the company a lot. Heavy taxes in some countries make IBM increase its products price.

ECONOMIC

National growth rates. Fuel Prices

PESTEL ANALYSIS
SOCIAL

Positive customers' perception toward new technology around the world. Increase in population and internet users.

TECHNOLOGICAL

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

PESTEL ANALYSIS
ENVIRONMENTAL

IBM made the some of the major technologies like to trace weather throughout the world.

LEGAL

Cyber protection and the chemical the use in making hardware; like carbon, germanium, and silicon Currency exchange
Legal registration for their business outsourcing facilities.

(CPM) COMPETITIVE PROFILE MATRIX

IBM
Critical Success Factors Price
Weight Rating Weighted Score Rating

MSFT
Weighted Score Rating

HPQ
Weighted Score Rating

EDS
Weighted Score

0.12 0.15

3 3

0.36 0.45

3 3

0.36 0.45

4 2

0.48 0.30

3 2

0.36 0.30

Financial Position
Advertising Innovation Market Share Management Global Expansion TOTAL

0.09 0.22 0. 22 0.10 0.10

2 4 3 4 3

0.20 0.88 0.66 0.40 0.30

3 3 4 4 3

0.30 0.66 0.88 0.40 0.30

4 3 2 3 3

0.40 0.66 0.44 0.30 0.30

2 2 2 3 3

0.20 0.44 0.44 0.30 0.30

1.00

3.25

3.35

2.88

2.34

(EFE) MATRIX
KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE

OPPORTUNITIES
Video game console market revenue is projected to increase in future
The IT market in Russia, India, Brazil, and China are expected to grow twice as fast as in the rest of the world Mobile phone markets are expected to grow in future

0.20
0.10 0.15

3
4 3

0.60
0.40 0.45

Handheld computers markets are expected to grow in future

0.15

0.45

THREATS
Competitors are strong 0.20 2 0.40

Economic fluctuation could crimp consumers spending

Small & Medium business demand fails to accelerate

0.10
0.10

2
3

0.20
0.30

TOTAL

1.00

2.80

(IFE) MATRIX
KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE

STRENGHTS
IBM revenues increased 7 percent to 69.92$.billion A unique approach to engage their employees in an online intranet using its Jam technology Strong strategic planning to be an innovation-centric globally integrated corporation IBM operates in 170 countries with about 60 percent of its revenues being generated outside the US IBM concentrated on becoming stronger in high value added businesses 0.10 0.06 0.06 0.10 0.10 4 3 3 4 4 0.40 0.18 0.18 0.40 0.40

IBM ranked number 1 hosted service provider in Western 0.10 Europe

IBM is supercomputing leader as provider of 35 of the world's 100 most powerful supercomputers 0.12

4
4

0.40
0.48

(IFE) MATRIX
KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE

WEAKNESSES
Declining in revenues of services and systems segments in 2006 Decline in revenue of public, industrial, small and medium business industries in 2006 by 9.6% Decline in revenues in Asia Pacific area by 5.7% 0.08 0.08 0.10 2 2 2 2 0.16 0.16 0.20 0.20

Total assets are gradually decreasing from 109M to 103M 0.10 in 2006

TOTAL

1.00

3.16

STRENGTHS

WEAKNESSES

SWOT ANALYSIS

1.IBM revenues increased 7 percent to 69.92$.billion in 2006. 2.A unique approach to engage their employees in an online intranet using its Jam technology. 3.Strong strategic planning to be an innovation-centric globally integrated corporation. 4.IBM operates in 170 countries with about 60 percent of its revenues being generated outside the US. 5.IBM concentrated on becoming stronger in high value added businesses. 6.IBM ranked number 1 hosted service provider in Western Europe. 7.IBM is supercomputing leader as provider of 35 of the world's 100 most powerful supercomputers.

1)Declining in revenues of services and systems segments in 2006. 2)Decline in revenue of public, industrial, small and medium business industries in 2006 by 9.6%. 3)Decline in revenues in Asia Pacific area by 5.7%. 4)Total assets are gradually decreasing from 109M to 103M in 2006.

OPPORTUNITIES 1.Video game console market revenue is projected to increase in future 2.The IT market in Russia, India, Brazil, and China are expected to grow twice as fast as in the rest of the world. 3.Mobile phone markets are expected to growin near future. 4.Handheld computers markets are expected to grow in upcoming years..

S-O STRATEGIES 1.Entering the video game console market by produce video game console, (S5, O1). 2.Entering the mobile phone market, (S5, O3). 3.Entering the Handheld computers market, (S5, O4).

W-O STRATEGIES

1.Increasing marketing efforts into Asia Pacific,

(W3, O3).

THREATS

S-T STRATEGIES

W-T STRATEGIES

1.Competitors are strong. 2.Economic fluctuation could crimp consumers spending. 3.Small & Medium business demand fails to accelerate.

1.Hedge threats from US companies by increasing marketing efforts into Asia and Europe, (S4, T1).

1.Offer discounts on products for Small & Medium business, (W2, T3).

DIRECTIONAL VECTOR POINT IS ( 3.167, 1.163)

FS Conservative Aggressive

AGGRESIVE
Backward, forward, horizontal integration
Market Penetration Market Development

C A

IS

Defensive

Competitive

ES

SPACE MATRIX
FINANCIAL STRENGTH
Return on assets Leverage Net Income EPS ROE Cash Flow AVERAGE

RATING
6 5 5 5 5 6 5.33

ENVIRONMENTAL STABILITY RATING

Rate of inflation Technological changes Price Elasticity of demand Competitive pressure Barriers to entry new markets Risk involved in business AVERAGE Y-axis -3 -5 -4 -6 -3 -4 4.167 1.163

COMPETITIVE ADVANTAGE
Market share Product Quality Customer Loyalty Control over other parties Technological know-how

RATING
-2 -2 -2 -2 -2

INDUSTRY STRENGTH
Growth potential Financial stability Ease of entry new markets Resources utilization Profit potential Demand variability

RATING
6 5 5 4 6 5 5.167 3.167

AVERAGE

2.0

AVERAGE X-axis

GRAND STRATEGY MATRIX

Rapid Market Growth Quadrant II Quadrant I

Weak Competitive Position

Strong Competitive Position

Quadrant III

Quadrant IV

Slow Market Growth

Market Development Market penetration Product Development Forward Integration Backward Integration

IE MATRIX
High
3.0 to 3.99
I

The IFE Total Weighted Score

Medium 2.0 to 2.99 Low 1.0 to 1.99

Strong 3.0 to 3.99

II

III

The EFE Total Weighte Medium d Score 2.0 to 2.99

IV

VI

IBM

Low
1.0 to 1.99

VII

VIII

IX

QSPM MATRIX
KEY INTERNAL FACTORS Weight

STRATEGY 1

STRATEGY 2

Enter video game console market

Increasing marketing efforts into Asia and Europe

AS TAS

AS

TAS

STRENGTHS
IBM revenues increased 7 percent to 69.92$.billion in 2006 A unique approach to engage their employees in an online intranet using its Jam technology 0.10 0.06 4 0.40 2 0.20 -

Strong strategic planning to be an innovation-centric globally integrated corporation IBM operates in 170 countries with about 60 percent of its revenues being generated outside the US IBM concentrated on becoming stronger in high value added businesses IBM ranked number 1 hosted service provider in Western Europe IBM is supercomputing leader as provider of 35 of the world's 100 most powerful supercomputers

0.06 0.10 0.10 0.10 0.12

3 4 2 -

0.30 0.40 0.20 -

4 4 4 -

0.40 0.40 0.40 -

WEAKNESSES
Declining in revenues of services and systems segments in 2006 Decline in revenue of public, industrial, small and medium business industries in 2006 by 9.6% Decline in revenues in Asia Pacific area by 5.7% 0.08 0.08 0.10 2 3 2 0.16 0.24 0.20 4 4 4 0.32 0.32 0.40

Total assets are gradually decreasing from 109M to 103M in 2006

0.10

0.30

0.30

SUBTOTAL

1.00

2.20

2.42

STRATEGY 1

STRATEGY 2

Enter video game console market (Product Development)

Increasing marketing efforts into Asia and Europe (Market Penetration)

AS TAS

KEY INTERNAL FACTORS OPPORTUNITIES

Video game console market revenue is projected to in future

Weight

AS

TAS

0.20

.80

0.60

The IT market in Russia, India, Brazil, and China are expected to grow twice as fast as in the rest of the world Mobile phone markets are expected to grow in future Handheld computers markets are expected to grow in future

0.10

0.10

0.30

0.15 0.15

THREATS
Competitors are strong Economic fluctuation could crimp consumers spending Small & Medium business demand fails to accelerate
0.20 0.10 0.10 4 1 1 0.80 0.10 0.10 4 3 4 0.80 0.30 0.40

SUB TOTAL

1.00

1.90

2.40

(BCG) MATRIX
MARKET SHARE POSITION
INDUSTRY SALES GROWTH RATE

IBM

Question Marks

Cash Caw

Dogs

RECOMMENDATIONS

Company should penetrate the market with the existing products and the markets. Company should transform itself into an innovation-driven integrated global company as it should seeks to pursue value-added businesses and services that will generate high value for its customers and high profits for its shareholders. Company has done the acquisition of $ 4.8 billion in 2006 but companys total revenue in 2006 as compared to 2005 has not been increased with high rate so company should penetrate the market and increase its sales. Companys revenue in industrial sector and in Small & Medium Business has been reduced as compared to 2005 so company should concentrate on these sectors. Companys revenue in Europe/Middle/Africa has remains constant from 2005 to 2006 and companys revenue in Asia Pacific has been reduced in 2006 from 20.4 % to 19.2%. .

THANK YOU!