Strategic Planning – Ibm 2009

CASE ANALYSIS IBM IN 2009 Analysis Industry Computer wait on Industry Porters 5 Forces 1) Risk of approach by potence competitors The risk of entry by potential competitors is comparatively low (+). This is due to the newly entrant competitors that lead a sizecapable mart capitalization, softw atomic number 18 materials, function and consulting to gain consumers interests. If consumers be able to have buying their products from a large companionship that are adequate in the computer hardware, services and consulting, opposite technological services, they would quite choose a large firm than a sm anyer firm that do non ready adequate resources. ) The intensity of rivalry among erected companies inwardly an industry The intensity of rivalry among established companies within this industry is relatively highschool (-). This is because there are big firms such as Oracle that are neck in neck with other large firms such as IBM, trying to modernise every(prenominal) so ftware package there is that helps them gain a competitory advantage. 3) The talk terms ply of buyers The bargaining top executive of buyers is relatively low (+).This is because in this industry that is supplying a particular product or service is not composed of some(prenominal) a(prenominal) small companies and the buyers are large and few in number. Also, buyers are unable to purchase in quantity, because many of the firms in this industry offer services and consulting, and software that buyers use. 4) The bargaining index number of suppliers The bargaining power of suppliers is relatively high (-). This is because the product that suppliers sell has few substitutes, and the payability of suppliers is not signifi undersidetly affected by the purchases of companies in this industry.Also, switching costs are great as consumers will need to run into from their original product to another supplier. 5) The deathness of Substitutes to an industrys product The closeness of substitutes to an industrys product is relatively low (+). There are hardly any substitutes as for many consumers, the greatness of the market for technology products and a source of high-tech workers for serving these types of software when consumers need help. The less technological advanced products are unable to cope with similar customer needs. Forces Conclusion This industry is a 3 star industry. What IBM should do is * IBM should use their warring advantage to surpass their competitors, and be the monopoly in the industry, instead of cosmos in a competition neck-in neck with other leading competitors * Since the product that suppliers sells has few substitutes, and the bargaining power is extremely high, IBM should acquire the supplying companies, to reduce their costs some more, and for suppliers not to induce the bargaining power that they have currently.Life Cycle Growth stage * E. G. In this industry, it is maturement because consumers are becoming more and more f amiliar with the forthwith technology-advanced products when technology in the world is advancing rapidly. Also, roughly of the large firms unremarkably have control over technological knowledge as a barrier to entry which diminishes most of the smaller firms, which lessens the chance of a new entrant. The Value Chain IT Provides low cost-traditional IT services or prize-creating, customizing adviser solutions depend on it having the distinctive competencies to develop state-of-the-art software applications across moving in processes and industries * Recent advances have increased the power of business intelligence software to identify ongoing changes and forecasts many events after getting Cognos (software) * Another advancement was that the IT department came up with a new initiative to form it easier for geographically sprinkle mass to interact and join without the time and expense of in-person meetings.They were using virtual technology which other people inside and b etween companies to exchange instant messages, chat verbally, share real-time presentations, and virtual meetings hardware * The systems and technology group put its resources into developing new kinds of mainframes and servers that would appeal to a wider number of customer groups and put out global sales. This will give them more power and flexibility for the IT product they buy from IBM * Currently IBM sells its mainframes presently to customers with its own sales force to protect lucrative software and service revenues that accompany these sales.By doing that, IBMs mainframe installed base had doubled because IBMs ability to deliver change magnitude amounts of processing power to customers at a decreasing cost * Such as self-contained server would eliminate the need for expensive IT consulting and service it would offer companies with a low-cost alternative and companies could simply order as many of Ciscos (one of the acquired software) server racks as needed to operate o r expand their business competitory AdvantageDistinctive Competencies are firm specific strengths that allow a company to contrastingiate its products from those offered by rivals and/or achieve substantially lower costs than its rivals. IBMs distinctive competencies is getting the diverse servers and software to help the company gain a competitive advantage as the company integrated many technological advanced products that surpasses other firms in the industry Intangible Resources are nonphysical entities that are created by managers and other employees, such as brand names, the reputation of the company, the knowledge that employees have gained through experience, and the intellectual lieu of the company, including that protected through patents, copyrights, and trademarks. The intangible source here is the brand name and reputation that IBM had built all these years, leading to one of the top companies in the computer service business. Capabilities refer to a companys skill s at coordinating its resources and putting them to racy use. * IBMs skills at coordinating its resources and putting them to entire and productive use by the drive to focus the efforts of all IBM employees on satisfying the needs of clients was one of the capabilities that do IBM have this competitive advantage Functional-Level Strategies EFFICIENCY * The simplest measure of efficiency is the quantity of inputs that it takes to produce a apt(p) output the more efficient a company is, the fewer the inputs implyd to produce a stipulation output and the lower its cost structure will be. * E. G. In 2007, IBM spent $11. 8 billion to acquire 36 software and 18 service companies in the fields such as security, info worry, and entanglement commerce * QUALITY * The CEOs strategy was to focus on high- winnings margin products that directly complemented its service and software offerings.IBM had sold off its PC business to Lenovo its disk drive business to Hitachi, and its printer bu siness to Ricoh. By doing this, IBM is able to focus on high- lettuce margin products and ditch the separateing products in the company that are sold off to other companies * INNOVATION * By keeping up with the technology advancements, IBM had announced a new virtual world IT initiative to make it easier for geographical dispersed people to interact and collaborate without the time and expense of in-person meetings. These virtual worlds are interactive, immersive Web sites based on the use of three-d graphics.This allows people to exchange instant messages, chat verbally, share real-time presentations and ideas in private, virtual meeting spaces that hold out permanently in real time so people jackpot meet on regular, periodic, or impromptu bases. * CUSTOMER RESPONSIVENESS * At this stage, the sales of its new mainframes of IBM were up by 25% software revenue rose 5%, helped by increasing sales of its popular WebSphere software package that breaks the effect of a companys elec tronic commerce and business applications Building Competitive Advantage by Business-Level Strategy Competitive Positioning High Market Segmentation * What IBM is doing is high market segmentation where they could choose to recognize the differences between customer groups and make a product targeted toward most or all of the different market segments. The customer responsiveness and high and products are being customized to meet the needs of customers in individually group. * E. G. IBM had shifted its products to higher profit-margin services and automating traditional business processes such as procurement, finance and human resources which was leading to increasing numbers of long-term service contracts between large firms. Differentiators * Clearly, IBM is a differentiator. This is due to how IBM was able to acquire different software from companies which then was able to offer clients high profit-margin software application to satisfy their needs. IBM was able to key their p roducts from the leading competitors and satisfy consumers that the other competitors clearly could not Business-Level Strategy and the Industry Environment Main strategies that companies can adopt to deal with decline * Leadership strategy The speed of decline and the intensity of competition in the declining industry are moderate. Through aggressive acquisitions, IBM was able to acquire much software to create high profit-margin products to satisfy customer needs and to also provide clients with their best service and consulting. The open standards approach that Gerstners approach was that as IBMs consultants went from client to client assessing their needs they were able to provide detailed feedback to IBMs other divisions about whether their products were adequately meeting clients needs.Gerstners strong focus on being close to clients had the additional advantage of spurring innovation throughout the organization. Chaining * They establish networks of linked merchandising outle ts that are co-ordinated by IT and function as one large company. The enormous buying power these companies possess through their set up of nationwide stores allows them to negotiate large price reductions with suppliers that promote their competitive advantage * With IBM, the company is able to link with other software companies and IT back up servers that could connect as one large company.By doing so, it allows IBM to create a competitive advantage in regards to price reduction from suppliers. Strategy & Technology technological Paradigm Shifts * This occurs when new technologies come along that revolutionize the structure of the industry, dramatically alter the nature of competition, and require companies to adopt new strategies to survive. * E. G. When technology has been advancing, IBM innovated a new product that made geographical dispersed people to interact and collaborate without the time and expense of in-person meetings called the new virtual world from the IT departm ent.Also, IBM had put its resources to good use by developing new kinds of mainframes and servers that would appeal to a wider number of customers groups and expand global sales. copyrighted standard * Establishing a proprietary standard as the industry standard whitethorn require the company to win a format war against a competing and incompatible standard. Strategies for doing this include producing complementary products, leveraging grampus applications, using aggressive pricing and marketing, licensing the technology, and cooperating with competitors * E. G.IBM could produce complementary products, leverage killer software that they have been acquiring and perfecting it, also using aggressive pricing and marketing to let gain new consumers. Strategy in the Global Market By serving as a global market, a company can potentially utilize its production facilities more intensively, which leads to higher productivity, lower costs and greater profitability. Global sales also increase the size of the enterprise, so its bargaining power with suppliers increase, which may allow it to bargain come out the cost of key inputs and boost more profitability. IBM made the investment to establish huge, low-cost service saving centers for its global clients by improving the software needed to automate the management of networks and data centers, and develop IT to improve telecommunications, especially Internet services. From India, IBM runs a whole range of IT services for its global customers. In Bangalore, IBM has a direct center that monitors the operation of the database server networks of more than 16,000 clients. Through this, IBM was forced to eliminate 20,000 jobs in Europe and the US, and trip these jobs to India as the cost of labour in India is significantly low.Corporate Level Strategy Vertical consolidation * This could enable IBM to achieve a competitive advantage by helping build barriers to entry, facilitating investments in specialized assets, prote cting product quality, and helping to improve scheduling between adjacent stages in the value chain * One of the disadvantages is that it increases bureaucratic costs if IBMs supplier becomes lazy or inefficient, and it reduces flexibility when technology is ever-changing fast or demand is uncertain Strategy Outsourcing By strategic outsourcing of value creation activities, it may allow a company to lower its costs, better differentiate its products, and make better use of peculiar resources, while also enabling it to respond rapidly to changing market conditions * One of the disadvantages is that if IBM outsources most-valuable value creation activities or becomes too dependent on the key suppliers of those activities * IBM has invested in India to take advantage of its growing importance as a market for technology products and a source of high-technology workers.IBM made the investment to establish huge, low-cost service delivery centers for its global clients, improve the softw are necessary to automate the management of networks and data centers, and develop IT to improve telecommunications. IBM runs a whole range of IT services for its global customers, including software delivery services such as upgrading and maintaining client software and managing and protecting database centers in India. Also in Bangalore, IBM has a educational activity center that monitors the operation of the database server networks.The largest of IBMs three global IT service centers are in India, Brazil, and China. IBMs scope was to expand traditional outsourcing operations and attract more and more global clients to compensate for decreased profit margins so it can still increase profits from this group. Related and Unrelated Diversification Acquisitions * Acquisitions are used to pursue vertical integration or diversification when a company lacks the distinctive competencies necessary to compete in the industry.Acquisitions are often perceived as being less risky than infor mal new ventures because they involve less commercial uncertainty. * IBM has done many acquisitions, such as Lotus, CenterPoint Energy, Phillippines PSBank, PTT Chemical overt Company of Thailand, Skynet in Lithuania, Cognos etc. which helps IBM increase its expertise in specialized IT services to strengthen its competitive advantage Corporate Performance, Governance, and Business moral philosophy ROIC 1) Participate in growing market 2) Take market share from competitors ) Consolidate industry through horizontal integration 4) International expansion, vertical integration or diversification * E. G. For IBM, pursing strategies to maximize profitability and profit growth helps a company to better satisfy the demands that some(prenominal) stakeholder groups place on it, not the other way around. Also, by maximizing returns to stockholders, IBM could boost its profitability and profit growth rate to be consistent in satisfying the claims of several other key stakeholder groups.Ethic s * Despite the argument that maximizing long-run profitability and profit growth is the best way to satisfy the claims of several key stakeholder groups, a company must do so within the limits set by the law and in a manner consistent with societal expectations * It is incumbent on managers at IBM to make sure that the company is in compliance with these laws when pursuing strategies.Unfortunately, there is plenty of evidence that managers can be tempted to cross the line between the legal and illegal in their pursuit of greater profitability and profit growth. IBM could hold many various seminars on the topic of ethics and to try and implement ethical protocols when relations with an issue that arises. Implementing Strategy in Companies that Compete in a Single Industry Strategic return Systems * Organizations strive to control employees behavior by linking reward systems to their control systems.Based on a IBMs strategy (cost leadership or differentiation), strategic manager mu st decide which behaviors to reward. Selecting, Developing an Action/ death penalty Plan * Disadvantage of acquisitions * Many acquisitions fail to increase the profitability of the acquiring company and may moment in losses. Acquisition may fail to raise the performance of the acquiring companies suggesting that acquisitions usually destroy rather than create value. As IBM is acquiring many types of software to enhance its competitive advantage, but it may fail to raise the performance of the acquiring companies for four reasons * Companies frequently experience management problems when they attempt to integrate a different companys organizational structure and culture into their own * Companies often overestimate the potential economic benefits from an acquisition * Acquisitions tend to be so expensive that they do not increase in store(predicate) profitability * Companies are often negligent in screening their acquisition targets and fail to recognize important problems with t heir business models * IBM should be firm on their management organization structure to refrain any management problems with IBM makes an acquisition * IBM should weight out all the pros and cons to distinguish whether the acquisition is beneficial to the company or not.Also, when doing the acquisition, IBM should work out of all the important problems that align with their current business model * Outsourcing * IBM will fail when their profitability is now substantially lower than the average profitability of its competitors it has lost the ability to attract and deliver resources, so its profit margins and invested capitals are shrinking rapidly. IBM will have to acquire many new software to keep their competitive advantage * IBM should incorporate quality control in those countries that they have outsourced their services and consulting to continue to attract and generate resources and have profit margins still high