Case IBM - 1

CASE ON IBM
INTRODUCTION TO INTERNATIONAL BUSINESS MACHINES

(IBM):
IBM was founded in 1888 as human Hollerith and the tabulating machine
company. Its name was later changed to IBM in 1942 when it became a
Fortune 500 company. It is known to have more patents than any other
American tech company. It was taken by the US government at the beginning of
World War-II in the war effort and given a one percent profile, which is used to
fund war victims and orphans.
IBM was one of the leader brands of I.T industry which is basically related to
computing various dimension of technology whether is about gadget or the
software. It developed products from punch-card tabulating machines to room
sized calculators and main frame computers.
PORTERS FIVE FORCES MODEL:
Threat of New Entrants: it is relatively low as this field required heavy

investment in research and innovation.
Bargaining Power of Customer: there are a lot of similar products available

which makes power of bargaining higher.
Bargaining Power of Suppliers: in the most areas of IBM, there are number of
a supplier which makes the power of suppliers low.
Substitutes: IBM provides number of products which have low or no

substitutes.
Competitive Rivalry: it is high as there are large companies like HP, Microsoft
and EDS to compete IBM.
SWOT Analysis:
Strengths: brand name. Rising revenue to 91 billion and rising net income to
$9.4 billion. Diversification (Software, Hardware, Financing). Acquisition of
Watchfire Company 2007. Innovation Jam capability. Ranks second in market
capitalization, net income, and long-term growth behind Microsoft. Widespread
operations in 170 countries. Rising earnings per share (23% in 2006).
Weakness: lack of synergy resulting from a serial of acquisitions and
divestitures. Difficult to coordinate over four geographical segments. Too many
employees (around 4, 00,000). Concentration or focus on three major divisions
or segments puts the company at a vulnerable position if revenue from them
decline. Declining profit margins from hardware (-7.6%)
Opportunities: Globalization in order to balance the functions in different

economies. Create product appealing to a younger generation, e.g. iPod. Use
patents to generate revenue. Hire and use international expertise. Focus more on
OEM (17.9% revenue increase).
Threats: over reliance on developing economies like India (38% growth).

Unstable electronic markets. Change in technology (iPad). Customers have low
switching costs. Rapid product development from competitors. Fierce
competition from Microsoft and HP.
CONCLUSION:
The study shows that IBM has ample room for improvement in its internal and
external environment. The fact that the company needs to further strengthen its
brand image can be done through exploiting potential markets in the long run.
In addition, IBM has some loss making departments which are a burden on the
company. The company has not yet come up with any strategy to divestiture
such departments. There is room for improvement IBM needs to reinstate its
linc for brands through effective advertisements around the global market.
SUGGESTIONS:
The company needs invest more in research and development in order to

gain market leadership through differentiation.
IBM needs to get rid of their loss marketing departments; this should be
done through the following: Divestiture.
For companys profit making departments they should use competitive
strategies and opt for: product development and market penetration.
IBM should launch android based tablets to cater the markets new
demand for touch screen tablets.
Another category which should be introduced by IBM in the cell phone
market as they have the IT required for the most of the work.
IBM should cater the youth by providing high end gaming PCs and
Laptops.
They should improvise on their marketing department as well. There can
be more of celebrity or branded programming entertainment.
They should move forward with the plane of acquiring intensive
strategies.
IBM should lay off its employees as they are a burden on the company.

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CASE ON IBM

INTRODUCTION TO INTERNATIONAL BUSINESS MACHINES

PORTERS FIVE FORCES MODEL:

Threat of New Entrants: it is relatively low as this field required heavy

Bargaining Power of Customer: there are a lot of similar products available

Substitutes: IBM provides number of products which have low or no

Opportunities: Globalization in order to balance the functions in different

Threats: over reliance on developing economies like India (38% growth).

The company needs invest more in research and development in order to

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