t he big blue stra teg y
Post on 23-Mar-2022
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Introduction
International Business Machines Corporation (IBM) is a multinational computer technology company.
The company manufactures and sells computer hardware, software, hosting services and infrastructure services.
Company came to be known as IBM in 1924, with initial company Tabulating Machine Company formed in 1896.
Interactive Workshop
Each team will represent the strategic planning committee for a particular organisation
Each organisation will be given a fact sheet
Base your responses to the game master’s questions on these fact sheets
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The situation of IBM:
IBM enters the Personal Computer very late
Suggested strategies to IBM:
Adopt the Emergent Strategy
Be proactive, environmentally aware
IBM - Early 1980s
6
The situation of IBM:
IBM establishes the subsidiary to manufacture and market its first PC
Suggested strategy to IBM:
Establish a division
IBM - Early 1980s
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IBM - Early 1980s
The situation of IBM:
IBM acquires chips from Intel and Microsoft
Suggested strategies to IBM:
Short term strategy: products become incompatible
Long term strategy: IBM to become the “integrator” to make others’ products compatible
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IBM - Early 1980s
The situation of IBM:
IBM recognises the threat from Microsoft and Intel
Suggested strategy to IBM:
React and encounter the problems quickly
Remain one company
Focus on customers
Secure internal support
Reorganise the company
Introduce new corporate culture
IBM - Late 1990s
IBM - Late 1990s
Cut costs
Sale of peripheral companies
Acquire companies
Invest in computer service outsourcing
Strengths
Market leadership
Economies of Scale
Talent magnet
Strong brand equity
Strong R & D capability
USD 5-6 million spent annually
Value generated from their patent portfolio
Wide ranging portfolio of products & services
Diversified revenue streams allow IBM to be primed to take advantage of market specific opportunities
Integrated Global operations
Higher flexibility translates to sharing workloads across divisions & geographies
Weaknesses
Sluggish revenue growth and operating performance
5.4% decline in Total Revenues from USD 96.3 billion to 91.1 billion
Increasing cost base ; less than efficient deployment of assets
Attained profit targets through
Cost cutting
Cyclical surge in mainframe sales
Opportunities
Growth of Indian Operations
Low costs for IBM
Access to Indian IT software talent
Tap into emerging Indian emerging markets
Growth of Business Process & IT Outsourcing industries
Threats
Consolidation in end user markets
Higher bargaining power for customers
Lower margins for IBM
Competition
Stiff competition from large players in the many industries it operates in
Offshore consultancies especially from home-grown Indian companies
IBM: 2003 onwards
On-demand principle : product/service + internal reorganisation
Acquisitions and divestments
Ongoing research and emerging trends
The On-Demand Principle
An on-demand company would be “an enterprise (with) business processes--integrated end-to-end across the company and with key partners, suppliers and customers--(that) can respond with speed to any customer demand, market opportunity or external threat.” - Sam Palmisano
Different departments share the same computing infrastructure and are tightly integrated with others’ operations
The On-Demand Principle
On-Demand as applied in IBM
Unites PCs, servers, software, IT services, outsourcing and management consulting businesses
All IBM executives have repositioned themselves
On-Demand as a business outlook
E-business on demand is more than IT
Acquisitions
2004
10 acquisitions
Including Maersk Data, Candle Corp, Daksh eServices
2005
10 acquisitions
Data Power, Network Solutions Pvt Limited
2006
8 Acquisitions
MRO Software, Internet Security Systems ( USD 1.3 Billion)
Divestment
Sold off PC manufacturing business to Lenovo
USD 650 million cash
USD 600 in Lenovo Stock
Being unable to compete in highly competitive industry
Research and Emerging Trends
BlueEyes, Eclipse, alphaWorks, Extreme Blue
Gaming
Chips for consoles
Visualisation - Second Life
Evaluation
Lacklustre performance for a few years
Underlying health of services uncertain
But IBM 4Q 2006 results encouraging
Services businesses grew more than 6% to USD12.8 billionSoftware sales rose 14% to 5.6 bnNew services contracts signed rose 50% year on year to 17.8bn
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