IBM SWOT

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IBM SWOT

  1. 1. IBM SWOTIn 1924, The Computing-Tabulating-Recording Company adopted the name International BusinessMachines Corporation. IBM has been involved in many technological advances since the earlytwentieth century from tabulating countries’ census reports to sporting event analysis to developingcomputer software and e-business. IBM today is not just the Hardware giant that we have come toknow. Most of their revenue comes from software and consulting and leads the world intechnological achievements. Would you like a lesson on SWOT analysis?StrengthsIBM leads the world in technological success with patents in the United States for 17 straight years.In 2008 IBM earned 4186 patents and in 2009 they increased that amount to 4,914. It publishedalmost 4,000 technical inventions and products without patent protection in 2009; this is a valuableintellectual property.They are the company handling 95% of all business in the 1000 most profitable companies in theUS.In 2009 they were recognized as the 4th most recognized brand name in the world and they havebeen consistently in the top 10 for 20 years.IBM is one of the largest and most profitable companies in the world, with a value of $66 billion.They have over 400,000 employees worldwide.It is an old, established company, founded in 1896 as the Tabulating Machine Company by HermanHollerith, in Broome County, New York.In 1945 they were the first company to establish dedicated research labs for the creation oftechnological innovation, which lead to the creation of computers, voice recognition software andproducts that assist those working in medicine and radiology.WeaknessesIBM’s size is also its weakness. IBM’s goliath size can make it slower to react to customer’s needsand wants as well as to the industry’s fluctuations. And it’s more than 400,000 employees can makeit difficult to find the support and services needed.Enormous operating costs and competitors eating into their market share forced them in 2010 to buyback $8 billion in stock.Transferring jobs oversees has been an option IBM is using more and more. At the end of 2009,IBM USA had a workforce of 105,000 down 30,000 in just a few years. In 2009, there were rumorsthat IBM wants to get the US workforce down to 70,000. This is not a weakness for other countriesthat are absorbing many of these US jobs.Communication across these different countries can be very challenging. For example, having thehelpdesks in India creates language barriers in the US. Also, India has exported many engineers tothe US because they are cheaper to pay but also Indian Engineers do not have both the educationaland experiential accolades of their US counterparts. Many of them come over to the states and the
  2. 2. few US employees left in the department have to re-train them, wasting countless hours that couldbe used in supporting their customers.The current recession has hurt everyone and IBM is not exempt. Financial services, which accountsfor 30% of IBM revenue, has declined. It’s riddled with subprime mortgages forcing to mark downtheir portfolios to ridiculously low “market” prices on packaged securities that are trading at a fractionof their theoretical value. This, in turn, is affecting the equity of banks, and therefore their ability tolend.Servers and Storage which account for about 20% of IBM’s revenue has declined to 16% and a 6%decline in margins.OpportunitiesIncreased globalization is an important opportunity that can be exploited by IBM in order to balancethe fluctuations in different economies.Their brand image is synonymous with “big” and “old” they need to create products appealing to ayounger generation and reposition their company.IBM needs to maintain a competitive edge in the marketplace and innovation is key and working withIT-related companies to create new products in the ever changing market; use patents to generaterevenue.IBM’s love of open source operating systems, specifically Linux, benefits IBM in both the short andlong term. IBM can sell its i-series platforms with Linux to respond to the growing demands of theoperating systems (OS). Also, IBM can also use Linux on its Z-series mainframe line and even its p-series machines which mostly uses IBM’s own AIX which usually competes against the UNIXoperating system. Open architecture is key to creating and maintaining market share.IBM’s small-medium business (SMB) has improved over the years but there is definitely a need toincrease its market share to have an overall competitive edge.ThreatsThe fact that they are completely dependent on Microsoft (in their computer services division) couldbe a huge problem if anything ever happened to them.Hackers and sensitive information can be exposed and exploited by individuals and IBM needs to beinnovative with regards to firewalls and protective software.The supply chain has very few suppliers, leaving IBM very little to negotiate with or switch to.HP, Sun Microsystems are all competitors and are all threats to IBM’s bottom line. Their competitorsare able to create cheaper products and make more a considerable profit. Smaller companies thatcan move faster and provide less expensive products and services than IBM can become very costlyto IBM’s more lucrative bundles focusing more on larger companies with big budgets.

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