International Business Machines Strategy Audit - Coursework Example

IBM Strategy Audit Report Student’s Name: Professor: Institution: Course Code: Date of submission: IBM Strategy Audit Report Executive summary International Business Machines (IBM) remains a strong brand in the Information Technology industry. However, it is currently facing stiff competition especially from multinationals. Although the analysis of IBM strategy identified several strengths and opportunities of the company, it faces quite a high number of challenges. The increasing awareness in use of new technology, expansion of the growth markets and IBM’s distribution network gives them hope in facing the future. However, the increasing cases of counterfeit products and upcoming competitor products keep the company on challenge. This could be addressed through innovation and product development that can compete favorably with products from other companies. The strong organization culture and values of IBM provides a good base for the company’s competitive edge by ensuring satisfaction of customers and motivation of employees. The long history and perception of the IBM brand also gives the company competitive advantage, having been tested and proven. The increasing internet interconnectedness and social networking across the world further boosts the operations and sales of the IBM’s products. The growth prospects of IBM remain fairly healthy. Background of IBM IBM is a multinational corporation designs, manufactures and provide advance information technology solutions to a wide range of clients. Its origins can be traced in the 1890s industrial revolution. At incorporation it was called Computing-Recording Company, then in 1924 it changed its name to International Business Machines. Nowadays, this multinational company is known as the Big Blue (IBM. 2013b). IBM’s clients are individuals, specialized businesses and institutions for instance government, science, spatial, defense, and educational organizations. Its products are designed to meet and respond to its customers’ diverse needs. These products range from computer systems and software, network systems, storage devices and microelectronics including consulting services. The Personal Computer leads the park, AS/400 business system, RS/6000 family of workstations and server systems, S/390 enterprise server, ThinkPad notebook computer and PC Servers. The corporation is also an important supplier of liquid crystal monitors, hard disks and random access memories (IBM. 2013b). The company operations are guided by certain values which include dedication to every client's success, innovation that matters, for our company and for the world and trust and personal responsibility in all relationships. In regard these values the company has created the image of “Solutions for a Little World”. The distribution network of the company is so widespread that people around the world associate the name IBM with computing functions. IBM’s products and components in other firm’s products are dominant across the world (IBM. 2013b). In order to penetrate the market competitively across the globe, IBM has a good distribution network and skilled teams of marketers to deliver its products and services to the consumers. To actualize this the company is organized in 5 worldwide regions, and the business units, that is Application Business Systems, Application Solutions, Enterprise Systems, Networking Systems, Pennant Systems Company, Personal Systems, Programming Systems, Storage Products, Technology Products and Past and current performance (IBM. 2013b). Market analysis IBM is one of market leader brand in the information technology industry mainly related to computing. IBM has been ranked the market leader in the worldwide market share for enterprise social software.  According to Gartner (2012) IBM’s 2011 revenue grew faster than its competitors and almost two times faster than the overall market which grew at approximately 40 percent. The budding popularity of social networking remains high at an ‘explosive’ pace. The current situation has made more and more organizations to look for avenues to adopt social business practices in quest for integration with global teams, propel innovation, enhance productivity and improve customers’ and partners’ accessibility (Black, 2008; Gartner, 2012).  Gartner forecasts the market of enterprise social platforms at $4.5 billion by 2016, translating to growth of 43 percent over the coming three years. The demand is progressively on the rise as institutions are still searching for ways to adopt social capabilities to transform nearly every part of business processes, including marketing and research innovation and development, and human resources. Unfortunately, such businesses lack the tools to gain insight into the huge stream of information and ensuring its use in a meaningful way (Garrison, 2001; The street, 2011). IBM has also the biggest share of high performance computing market at 45% of the supercomputers in the top 500 rankings of high performing machines followed by HP at 26% which has 140 high speed computers in the list. Cray comes third with 27 machines, translating to 5% of the top 500 fastest machines. Customer profile The service, quality, price, convenience, reputation/brand, reliability, support and range of products determine the buying criteria of customers in many markets. The reasons that these criteria dominate the marketplace are perfectly logical. Product features/functions determine if a product can meet a specific business (whether small, medium or large) requirement. Therefore, if a given product meets the business purposeful requirement, businesses or individuals then focus on cost herein referred to as price. However, cost alone is not the final determining factor when choosing a product, for instance storage subsystem. Customers are particularly retains low levels of tolerance for system failures which is closely connected to loss of revenue. Hence, reliability supersedes the desire to purchase the least expensive storage solution. In case of failure customers (especially business ones) require fast service driven by the probable consequences of delay. This explains why there is high need for customer support in the IT industry. Using these criteria, customers are more empowered to make decision on which product to purchase. IBM offers solid products, highly reliable and the brand quality of its hardware/software is high. The returns of the company related to global technology services, global business service, software, and system and technology increased consistently in 2011 compared to 2010. The increase for these products was 7, 5.8, 10.9, and 5.6 percent respectively. Only the global financing market slammed down by 6.1% from 2010 to 2011 financial years. The software contributes about half of IBM’s segment profit. This remains the key customer segment for the IBM (IBM, 2012; IBM, 2013). More specifically, segment performance was led by Software which increased revenue 10.9 percent driven by key branded middleware which increased 15.6 percent and continued to extend its lead in the middleware market. In the Global Services business, Global Technology Services increased 7.0 percent and Global Business Services grew revenue 5.8 percent driven by strong performance in the growth markets where both segments grew revenue 11 percent at constant currency. Systems and Technology delivered revenue growth of 5.6 percent driven by strong performance in Power Systems which increased 12.0 percent and the growth markets which increased 14.9 percent (IBM, 2010; IBM, 2011; IBM, 2013b). The increasing effect of globalization combined with dramatic expansion in the availability of information, has exponentially extended customers’ options. Organizations are across the globe realizing more and more that ongoing commitment and co-creation with customers result to sustainable differentiation and profitable growth. Furthermore, the information explosion has resulted in an extraordinary opportunity to develop deeper customer insights. From experience, identifying and engaging in the right market and customer strategy can greatly help an organization turn customers into campaigners, accelerate customer interactions across each channel with positive appeals of the company. This makes its customers remain loyal as well as attract even more. The IBM customer experience and market strategy consulting services are designed in such a way that they can help organizations accomplish its goals by assessing, analyzing, and build tactics to win markets, marketing, sales, service and social media interactions. Value proposition to customers From the onset IBM placed in very high regard the need for customer-company contact as an igniter of sales as well as offering after sales service. Thomas J. Watson, Sr. therefore instituted a dress and grooming code that became an inflexible set of rules and regulations within IBM as a basis for branding. Consequently, rules were set where it was mandatory for every salesperson to look like a professional in every respect. At that time one of the highest accolades a person could receive was, "You look like someone from IBM." It is important to be appealing to customers, both the company and the brand. The customers associate the IBM brand with high value. In order to position its products, IBM has continually developed the habit of thinking about how it’s positioned in the hearts and minds of its customers. How do people perceive and talk about IBM Company? What positioning does the company have in the market, in terms of the particular words people use when they describe the company and the staff in terms of what they offer? The IBM brand has to a high extent achieved this by remaining a high quality and dominant brand in the information technology industry; customers associate the brand with quality. According to Collins (2009), positioning is the outward appeal and how a company and its products are thought about by their existing and potential customer which is the critical determinant of triumph in a competitive marketplace. Similarly, the attribution theory argues that most customers think of a product in terms of a single characteristic, either positive or negative. The depth with which an attribute is entrenched in the minds of customers and potential customers determines how willingly they'll purchase the product or service as well as how much they will pay. The other important element of marketing mix is people. This involves developing the routine of thinking in terms of the people within and outside the business who drives every element of the company sales as well as actualizing the marketing strategy. In addressing this IBM has set up a capable human resource department that is responsible for selecting, recruiting, hiring and retention of the right people, with the knowledge, skills and abilities to do the required job. IBM’s expertise ranges from research and development, design, production, customer service, marketing, public relations and finance among others. This sets out the company and its products/services into a success. The team of professionals is well remunerated as a way of energizing them. In addition to this promotion and performance rewards are offered to motivate employees to do even better. According to Collins (2009), the transition from good to great starts with first of all getting the right people on the bus and the wrong people off the bus. This is followed by getting the right people to occupy the right seats on the bus; skills and or experience match with the position to hold. Success in business comes about by developing the custom of thinking in terms of tasks execution and responsibility on an individual basis. In case of failure its root is easily identified. This is what IBM strategy seeks to achieve by engaging the right personnel in its operations and even outsourcing where necessary. In terms of distribution (place), IBM has a major universal presence, in service in more than 170 countries and a progressive broad-based geographic distribution of revenue. IBM has a strong distribution organization in the global outlook, with devoted country-based operational units with the aim of boosting accessibility and delivering client value. In these units, client relationship professionals work with product experts and delivery implementation teams to enhance clients’ business performance. Through its growth markets, IBM continues to enhance its focus on the emerging markets across the globe that has market growth rates greater than the global average. These markets include countries within Latin America, the Middle East, Southeast Asia and Eastern Europe. In its distribution network, the company’s major markets include the G7 countries of Japan, France, the United States (U.S.), Germany, United Kingdom (U.K.), Italy Canada plus Bahamas, Denmark, the Netherlands, Austria, Iceland, Ireland, Finland, Greece, Norway, Caribbean region, Cyprus, Portugal, Spain, Sweden, Israel, Malta, Switzerland and Belgium. The IBM DemandTec® solutions aid retailers and consumer products firms comprehend, plan, and predict marketing and merchandising activities by understanding of consumer demand. The solutions creates empowerment for retailers and consumer products firms in making informed decisions for assortment, pricing, marketing and promotion activities and positioning them to win. This is a move towards promoting IBM products in the market thus creating awareness and improving their competitiveness (Gartner, 2012; Murray, 2010). Market position of the company The company extended its market leadership in 2011, having posted 15 consecutive quarters of year-to-year share gains. In 2012, IBM was named as the fourth world’s most powerful brand, after Apple, Microsoft and Coca Cola. It was also ranked fifth in market value, 46th in sales and 22nd in profitability (Gartner, 2012). In the fourth quarter of 2011, Gartner incorporation found that IBM was the leader in the UNIX servers market with 52.8 percent market share. IBM improved quarterly revenues by 17 percent annually with IBM Power Systems and enhanced its share in comparison to the fourth quarter of 2010 by 10.9 percent. In 2011 financial year, IBM led with 45.9 percent market share in the UNIX server market, a gain of 6.9 points over 2010. The UNIX revenues grew by 23 percent over 2010 (Gartner, 2012). IBM led the market for servers with approximate cost of $250,000, this translated to 69.4 percent factory revenue share during in the fourth quarter with Power Systems and IBM System z mainframes. Further, IBM also led this market for the financial reporting year of 2011 with 8 percent revenue growth compared to 2010, capturing 63.7 percent market share (IBM, 2011; IBM, 2012). IBM has also the biggest share of high performance computing market at 45% of the supercomputers in the top 500 rankings of high performing machines followed by HP at 26% which has 140 high speed computers in the list. Cray comes third with 27 machines, translating to 5% of the top 500 fastest machines (IBM, 2011; IBM, 2012). Market orientation In attaining strong market orientation, IBM has adopted a market based management philosophy. It has established a process for market performance, organizing the corporation around markets and creating a culture that is responsive to customers and markets dynamic conditions. The strong organizational culture of IBM has proven important for operation and development of the company. The culture is based on the philosophy of Thomas Watson, founder of IBM (IBM, 2013b). The culture entails respect for individual (especially employees), customer service (taking care of customer needs and problems) and superiority (better to aim at perfection and miss that to aim at mediocrity and hit it). Further, the values IBM shape everything the company does and in every choice it makes. The employees of IBM have shared set of values which help them make decisions and in the process make the company great. The values include dedication to every client's success, innovation that matters for IBM and the world and trust and personal responsibility in all relationships. The culture and values of IBM are in unity, which are then translated to deliverable action by being innovative and developing products that the customers need (IBM, 2012). IBM Strengths First, IBM Incorporation has a strong brand in the Information Technology industry across the world. The customers perceive the IBM brand as synonymous with value. It is further boosted by its long history in the market thus its products have been well tested. This makes the customers to associate with the brand. The brand makes the company to have competitive advantage (IBM, 2012). Secondly, the company has an established network serving over 170 countries across the world. This makes launching of new products, creating awareness and marketing somehow easier. The distribution network of the company is a competitive advantage against other companies. This is further boosted by a long and strong relationship with its distribution network of retailers, wholesalers and company units across the world (IBM, 2012). Thirdly, the company organizational culture presents a competitive advantage in the market. Dedication to every client's success, innovation that matters for IBM and the world and trust and personal responsibility in all relationships values makes both employees and customers comfortable to work and to buy products from the company. The respect for individual’s aspect makes employees motivated to work for the company thus accelerating skills through retention which contributes to innovation and reduce turnover. Quality customers’ service makes them to keep buying from the company, creating loyalty and boosting sales (IBM, 2011; IBM, 2012). IBM capabilities First, the company has a strong capability in regard to its products base. The company enjoys a wide range of products for individuals, specialized businesses and institutions. These products make the company outlook to be widespread because an individual may be involved in a specialized business or an institution. Therefore, if quality is confirmed in an IBM product the IBM brand is seen from quality perspective thus becoming strong (IBM, 2012; IBM, 2013a, IBM, 2013b). Secondly, the marketing teams across the distribution regions have high capability of ensuring customers get the products. The teams represent a strong capability to the company by enhancing sales through awareness creation (IBM, 2013b). Thirdly, the management of IBM has remained true to the organizational culture and values of the company thereby making employees comfortable to work there. This has accelerated skills retention and increased innovation (IBM, 2011; IBM, 2013b). IBM weaknesses First, due to its large distribution network the company works in a reactionary mode whereby it relies on supplier end information self reporting. The accuracy of the information received from suppliers may be questionable (IBM, 2012). Secondly, the large distribution network of the IBM makes its supply chain complex. This contributes to unforeseen inefficiencies associated with the products and services suppliers (IBM, 2013b). Thirdly, the global financing market slammed down by 6.1% from 2010 to 2011 financial years. This is a weakness that IBM needs to address over the coming years (IBM, 2012). IBM opportunities First, there is increasing trend of customers’ awareness in regard to technology around the world. This presents a good and viable opportunity to avail IBMs products for such populations. As the customers adopt use of new technology the more sales the company will make. Secondly, the video game market is forecasted to increase from $12 billion in 2008 to $66 billion in 2013. This presents an opportunity to IBM in more participation in this progressing market (IBM, 2009). Thirdly, cheaper telecommunications costs are being experienced worldwide. Therefore, more people are willing to communicate mainly using the internet thus increasing the demand for hardware and software devices. Threats First, there is strong and growing competition from various multinational companies like Microsoft and Apple among others. In 2012 IBM was ranked the 4th powerful brand worldwide compared to Apple (1st) and Microsoft (2nd). In the coming years competition is likely to be stiffer (Gartner, 2012). Secondly, the bargaining power of the consumers is consistently increasing because of availability of alternative products in the market. The power of consumers is making the company to face pricing competition. Thirdly, increasing cyber crime and increased counterfeit IBM products across the world presents a threat. This is making the company to lose its revenues significantly. Overall evaluation of the marketing strategy IBM takes the advantage of the interconnectedness of today’s world. The networked global economies have created a global business setting and a basis for business change. This integration of global economies have opened markets and accelerated marketing while creating new opportunities and new sources of skills. IBM’s brand remains strong in the Information Industry. In addition, its distribution network is also huge. Both the brand and distribution network have boosted the company’s growth over the years. The company’s innovations have been on a prospective mode based on market orientation. Of importance to note are the emerging opportunities which include increased awareness of new technology and emerging markets in use of technology especially in Asia and developing countries. IBM is keen on exploiting these markets. On the flip side, IBM needs to address the emerging threats mainly increased competition and counterfeit products. These could be addressed through high level innovation of products to remain competitive and also collaborations with government agencies in countries across the world in curbing counterfeit products. In addition, there is need to address the complexity of IBM’s supply chain. This would solve the accuracy question of suppliers end information self end reporting. References Black, E. (2008). IBM and the Holocaust: The Strategic Alliance Between Nazi Germany and America's Most Powerful Corporation. Collins, J. (2009). Good to great: Why Some Companies Make the Leap... And Others Don't (Review)". Garrison, W. (2001). 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New York: HarperCollins. p. 11. The Street. (2011). IBM: 100 Years of Fortitude. Viewed on 06th April 2013 http://www.thestreet.com/story/11153867/1/ibm-100-years-of-fortitude.html Ulrich, S. (2006). Don't Talk – Do It! From Flying To Word Processing. Read More