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Formulating Business Formulating Business Strategy UsingStrategy UsingSWOT Analysis SWOT Analysis

IBM Case IBM Case (Solutions)(Solutions)

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What is IBMWhat is IBM’’s Strategic s Strategic Goal(sGoal(s)?)?To grow revenues at least 5% each To grow revenues at least 5% each yearyearTo increase earning per share at To increase earning per share at least 10% least 10%

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What is IBMWhat is IBM’’s Strategic s Strategic Plan(sPlan(s)?)?““OpennessOpenness””--–– sharing IBM innovations sharing IBM innovations –– collaborating with customers and rivalscollaborating with customers and rivals

Reduce the cost of providing servicesReduce the cost of providing services

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SWOT Internal AnalysisSWOT Internal Analysis--Strengths Strengths Valuable intellectual property, Valuable intellectual property, software, patents, ideas...software, patents, ideas...Talented work force Talented work force Research & development ($5.7 Research & development ($5.7 billion)billion)A multiA multi--national organization national organization

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SWOT Internal AnalysisSWOT Internal Analysis--WeaknessesWeaknesses

260,000 expensive employees260,000 expensive employeesHigh operating costs High operating costs

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SWOT External AnalysisSWOT External Analysis--Threats Threats LowLow--cost generic competition cost generic competition (commoditization)(commoditization)OutsourcingOutsourcingNew competitors in services market New competitors in services market (e.g., Dell, Accenture) (e.g., Dell, Accenture)

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SWOT External AnalysisSWOT External Analysis--OpportunitiesOpportunities

Collaborative innovationCollaborative innovationOpenOpen--source source Expensive products of competitorsExpensive products of competitorsAccepting standards brings economic Accepting standards brings economic expansion expansion

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SWOT Analysis SWOT Analysis match strengths with opportunities match strengths with opportunities

••Valuable intellectual propertyValuable intellectual property••Talented work force Talented work force ••Research & development Research & development

•• OpenOpen--source source •• StandardsStandards→→economiceconomic

expansion expansion

Strengths Opportunities

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SWOT Analysis SWOT Analysis match weaknesses with threatsmatch weaknesses with threats

••Expensive workforceExpensive workforce••High operating costsHigh operating costs

•• LowLow--cost competitioncost competition•• OutsourcingOutsourcing•• Bigger competitors Bigger competitors

Weaknesses Threats

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Develop StrategiesDevelop Strategiesto exploit opportunities in areas to exploit opportunities in areas where the organization has strengthswhere the organization has strengthsto defend against threats in areas to defend against threats in areas where organization has weaknesswhere organization has weakness

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ExampleExample

••Valuable intellectual propertyValuable intellectual property••Talented work force Talented work force ••Research & development Research & development

•• OpenOpen--source source •• StandardsStandards→→economiceconomic

expansion expansion

Strengths Opportunities

Openness Making pie biggerIBM can sell services

Expectations

• Support open-source development

• University Programs

• Give precious technology away

TacticsStrategy

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ExampleExample

••Expensive workforceExpensive workforce••High operating costsHigh operating costs

•• LowLow--cost competitioncost competition•• Out sourcingOut sourcing•• Bigger competitors Bigger competitors

Weaknesses Threats

ReduceCost of Services

• Utilize workforce more efficient

• Shutdown operations in EU

• Move to low cost places

Tactics Strategy