IBM CASE ANALYSIS (Term Paper Sample)

Unit IV IBM Case Analysis Student Name Columbia Southern University Unit IV IBM Case Analysis Introduction IBM’s history is traced back to the Tabulating Machine Company back in 1896. According to the case study, the company has survived, and experienced several changes related to technology. Recently IBM has been threatened by the introduction of personal computers, cloud computing technologies, and the rapid growth of mobile phone technologies. IBM has been very slow to respond to these changes, and when there was a disruption in its mainframe computer business, the company recorded a loss of $8.1 billion. This is the largest loss by a US company in history. After the company recorded this loss, it quickly moved to reorganize its business model focusing on complementary areas such as software, hardware, and service items. The current CEO, Virginia Rometty is now experiencing similar problems with the company at crossroads, and being threatened by heightened competition, with most companies occupying strategic sectors of the technology industry. IBM’s revenues are significantly declining, its stock prices have been tumbling for 12 successive quarters. Now IBM is at crossroads and people are questioning whether this company will use its strategy to sufficiently grow. Organizational Background IBM is an American based computer manufacturer, the company occupies a large market share in the United States and all over the world. It is headquartered in New York. The company was incorporated in 1911, and by that time it was a top manufacturer of tabulating systems. IBM specialized in manufacturing mainframe computers that could process large data at great speeds (Cortada, 2018). However, the company has since entered new markets which include selling personal computers, computer network technologies, and graphic chips. Now the company is diversified and into selling IT technologies, cloud offerings and computer software. The technological industry is very competitive all over the world, and IBM has faced multiple challenges in its industry (“Automation Robotics Artificial intelligence Cloud computing Block chain Computer hardware”). Situation Analysis Details of the situation- IBM has survived several technological shifts in the market including the introduction of cloud computing and personal computers. Following the disruption of mainframe computers, and IBM’s slow responsiveness to changes, the company recorded a loss in excess of $8.1 billion. IBM then slowly responded by introducing software, services and hardware components. The current CEO, Rometty says the company is at crossroads again because of heightened competition, and the need to move into strategic positions. IBM’s revenues have been falling significantly, and its stock prices are undesirable. The current organizational challenges at IBM are that the company is slow to react to changes. The responses have been slow in relation to market changes and revolutions happening in the technological sector. The company is also largely dependent on its home market more than international markets. IBM has been involved in several legal issues which have affected its brand, and the move towards high margin products is now alienating customers. Competitors’ analysis Company Attributes How to build Competitive advantage How it impact strategy Microsoft * Brand loyalty * Highly reputable brand * Create a brand which is differentiated * Improve employees’ morale so they become brand The strategy has to focus more on dealing with competitors’ activities above advocates everything else HP * Strong presence in international markets * Diversified products * Produce innovate products which can compete at lower prices Decisions will be focused on delivering value in order to meet objectives CISCO * Targets several market segments (cybersecurity, software, cloud computing) * If IBM improves a certain product line and refines it, then it can compete with CISCO which is in several segments. More focus will be put towards learning the customer and refining the product to match their needs. Industry analysis IBM is in the software and services industry. Over $2 trillion is spent each year in the industry and 45% of this money goes towards IT issues. The revenues by segment in the industry are quite high because software support contributes 6.5%, hardware support 10.8%, IT outsourcing 29.2%, and BPO 26 % to mention just a few (Visually, 2020). The industry has grown towards adoption of cloud computing services, and big data analytics. All these trends have necessitated the shift towards implementing better technological infrastructure. The Global market share in the IT services is headed by IBM which holds over 7% followed by HP with 5% and Accenture PLC with 3.1%. IBM $204 billion market cap EPS:$14.2 Operating margin: 19.6% Beta: 0.9 HP $43 billion market cap EPS:-$1.58 OM: 7.8% 1.12 ACCENTURE $30.1 billion EPS:$4.95 OM: 13.1% 1.2 market cap Advanced SWOT Analysis Strengths-Presence in many geographical areas and a strong presence on the internet Weaknesses-Poor customers’ experiences and job stress on workers leading to low morale. Threats- Heightened competition and shortage of human capital Strengths-Opportunities Weaknesses-Opportunities * IBM is geographically present in different regions, and it can easily tap into international markets. * IBM at cross roads should improve customers’ experiences so that they refer others through word of mouth * The company has a strong online presence on its websites and social media. The company can exploit opportunities through e-commerce offerings. * Job stress on workers should be reduced and morale increased as a way of bringing out innovative ideas. Strengths-Threats Weaknesses-Threats * Human capital which is competent and dedicated can help overcome shortage of skilled labor in the market. * Increased expenditure towards research and development so as to counter competition. * Costs imposed by rising inflation can be overcome by choosing cheaper suppliers. * Pricing strategy should be re-aligned so as to maximize value for money. Problem IBM is currently facing multiple challenges which include increased competition which is threatening its revenue base, declining sales due to inability to adapt, and falling stock prices which are unattractive to shareholders. These challenges have long term effects on the organization because if stock prices are unattractive then equity financing becomes difficult, and the organization has to rely on debt financing which is risky. Declining sales can also be undesirable for overall profitability, and availability of funds for further expansion. Alternatives IBM should focus on big data analytics and be a leader in AI technologies, this should be supported by some strategic alliances with established companies, and using market development techniques in the form of B to C operations. Big data analytics are important for IBM because it will lead to higher profits, better customer satisfaction and efficiency in operations (Shabbir, 2020). These are things which have been lacking in the organization. However, these big data analytics may need skilled workers which IBM may not be able to higher the moment given its situation. Having strategic alliances with other firms on common issues such as software, computer servicing and cloud computing will benefit IBM through building its own capabilities by learning from partners. However, strategic alliances can breed unwanted and wasteful competition which may end up affecting the company’s growth in the long-term. IBM is now using the marketing development strategy through traditional, and conventional advertising. Potential customers are being informed about the evolving product lines and this is beneficial because a competitive advantage is being created. However, the process is capital intensive, and IBM’s current financial situation may not be able to withstand such heavy investments. Some key considerations in alternative selection include time constraints in the form of internal pressures and timing issues. IBM has always been known to be slow in responding to changes and things around. This means that time should be a key consideration. The competitors’ reaction should also be considered because an alternative which will lead to a strong reaction from competitors is undesirable and should not be adopted (Aitha, 2018). On the other hand, the organization may face information constraints on the external factors and when selecting an alternative these information constraints should be closely looked at. Innovation at IBM will be essential in crafting a strategic plan because it will help in coming up with ways to create value for the customers. That is the product will be aligned with IBM’s vision and strategy. Recommendation and Implementation Trends show that IBM takes a long time to react to market trends and improvements...