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  1. 1. IBM IBM’S VALUES AND STRATGIES Introduction to International Business AIU Online Prof. Ryan Repich Victoria Rock February 5, 2012 1
  2. 2. IBM ABSTRACTIBM is an example of an international organization with subsidiaries in several countries such asAlgeria, Egypt, Hong Kong, China, the United States and many other countries. In this paper wewill discuss many aspects of this company and the strategies they have used to become one ofthe top leaders in technology today. 2
  3. 3. IBM COMPANY VALUES Chairman, President and CEO Samuel J. Palmisano stated in an article titled; Our Values atWork on being an IBMer, where they brought together thousands of IBMer’s from around theworld to discuss the companies’ values last summer. They determined that IBM’s actions will bedriven by these values: Dedication to every client’s success Innovation that matters, for our company and for the world Trust and personal responsibility in all relationships. Mr. Palmisan said, “We are getting back in touch with what IBM has always been about andalways will be about, in a very concrete way.” (Palmisano, 2010) MISSION STATEMENT Over ten years ago, IBM saw that change was coming, so they worked to remake thecompany as a globally integrated enterprise. As a result they have been able to invest in futuresources of growth and provide record returns for shareholders. The key tenet of their strategywas: • Deliver value to clients through integrated business and IT innovation • Build and expand strong positions in growth initiatives • Shift their business mix to higher-value software and services • Become a premier global integrated enterprise In an Annual Statement to Stockholders, the CEO defined the corporate mission as one ofcapturing new growth in order to provide record returns for its shareholders, as well as positionthe company for continued growth. In order to do this, they had to change their portfolio byleveraging a globally integrated enterprise in order to make targeted growth investments. Theywere able to created a business value for their clients and solve business problems throughintegrated solutions. (IBM, 2012) PRODUCT STRATEGY 3
  4. 4. IBM IBMs core business model supports two principal goals: help clients succeed and providinglong-term value to shareholders. Their global capabilities include; services, software, systems,fundamental research and related financing. During 2010, their focus is on four major growthopportunities: Growth markets: In both mature and growth economies, infrastructure represents a major technology and business opportunity, with more than $2 trillion in fiscal stimulus earmarked by governments. Analytics: IBMs new analytics service line draws on 4,000 dedicated consultants, plus 200 mathematicians and advanced analytics experts in IBM Research. We have invested $10 billion in 14 acquisitions since 2005, creating seven analytics solution centers around the world. Industry: Chemicals & Petroleum (Venezuela) 3-D seismic imaging technology helped Tricon Geophysics cut processing time by 50 percent and realize a 40-percent savings in power and cooling infrastructure, and operational costs. Cloud and next-generation data center: These new models are enabling efficient consumption and delivery of IT-based services. More than 18 million people use Lotus Live, IBMs cloud- based collaboration suite. More than 200 IBM researchers are working on breakthroughs in areas like cloud security and privacy. Smarter planet: We estimate that smarter planet increases IBMs addressable opportunity by 40 percent over the decade ahead. The sampling on this map of recent partnerships with more than 300 clients illustrates the reach of smarter solutions across industries and markets. With this mix of growth opportunity crossing both industry and geographical boundaries, IBM is currently pursuing engagements in more than a dozen industries. (IBM, 2012) DISTRIBUTION STRATEGY IBMs distribution of its resources, capabilities, facilities as well as the reach of its product is truly global, with major operations including Global Technology Services, Global Business Services, Software segment, Systems and Technology segment, and Global Financing segment. Their global services are a critical component of the companys strategy of providing IT infrastructure as well as business insight and solutions to clients. While solutions often include industry-leading IBM software and systems, other suppliers products are also used if a client solution requires it. Worldwide organizations play a key role in the delivery of value to clients. Integrated teams of consultants and product specialists, and the 4
  5. 5. IBM delivery fulfillment team are crucial in improving clients business performance. These teams deliver value through understanding the clients businesses and needs, and bring together capabilities from across IBM and an extensive network of Business Partners to develop and implement solutions, thus combining global expertise with local experience. (IBM, 2012) PRICING STRATEGY Sometimes, given the lack of explicit information regarding pricing strategies used by a specific firm, revenue provides an interesting substitute. For example, approximately 60 percent of the Global Services revenue is annuity-based, meaning they are coming from outsourcing, maintenance and custom application management services. The majority of IBMs revenue occurs in industries broadly grouped into six sectors: Financial Services: Banking, Financial Markets, Insurance Public: Education, Government, Healthcare, Life Sciences Industrial: Aerospace and Defense, Automotive, Chemical and Petroleum, Electronics Distribution: Consumer Products, Retail, Travel and Transportation Communications: Telecommunications, Media and Entertainment, Energy and Utilities General Business: Mainly companies with fewer than 1,000 employees (IBM, 2012) COMPETITIVE ENVIRONMENT IBMs competitive environment has changed drastically. During the last decade, the conventional wisdom that IT growth of the 1990s would continue even after the dot- com bust, most believed it would resume. Industry professionals thought that buyers of IT would continue to self-integrate which would mean that IBMs industry would remain highly disaggregated and client/server computing would become the pre- dominant enterprise model. Looking forward to the next decade, IBM concluded that the views of the last decade were no longer tangible given the undercurrents of fundamental change and perceived that major shifts were underway that would reshape the industry and the global economy. 5
  6. 6. IBM Changes in the world, technology, and client demand were the main factors that led IBM to transform its mix of products, services, skills and technologies, and getting out of commodity businesses like PCs and hard disk drives. By doing this, IBM amassed industry expertise and re-invented the way they deployed that expertise by shifting skills and decision making closer to the clients needs. They invested more in teams and capabilities in emerging markets around the world, and accelerated the global integration of its operations. Today IBMs portfolio is built around embedded technologies, such as SOA, service-oriented architecture, business intelligence and analytics. (IBM, 2012) TARGET MARKET IBMs investments in 2010 are focused on four high-potential opportunities: Growth Markets: IBM serves clients in more than 170 countries around the world. And since 2005, these markets have expanded their contribution to IBMs geographic revenue by a point a year, growing at least 8 points faster than major markets over the last three years. Analytics: Data is being captured today as never before, both from the so-called Internet of Things and hundreds of millions of individuals using social media. In just three years, IP traffic is expected to total more than half a zettabyte. It includes rich media of all kinds, from video, audio, images, avatars, simulations, and applications. Cloud and Next-Generation Data Center: As the planet becomes more interconnected, IBM claims that its computing model is evolving to support it. Smarter Planet: Describes the infusion of knowledge into the way the world actually works. This means that industries, infrastructures, processes, cities and entire societies can be more productive, efficient and responsive. (IBM, 2012) COMMUNICATION STRATEGY IBMs clear strategy has enabled steady results in core business areas. The key tenets of their strategy are: 6
  7. 7. IBM Deliver value to enterprise clients through integrated business and IT innovation Build/expand strong positions in growth initiatives Shift the business mix to higher-value software and services Become the premier globally integrated enterprise These priorities reflect a broad shift in client spending away from "point products" and more towards integrated solutions, as companies seek higher levels of business value from their IT investments. They have been able to deliver this enhanced client value thanks to its strengthened capabilities, aligned with client priorities. (IBM, 2012) IMPACT OF CULTURE ON GLOBAL OPERATIONS Since 2005, global integration has enabled IBM to cut expenses by $5 billion and improve service quality. They have shifted resources toward building client relationships and employee skills, while positioning themselves in new market opportunities such as business analytics, smarter cities, and large-scale infrastructure build outs underway in emerging markets. In the five years since the global integration began, IBM has pioneered a new operating model, changing from a classic "multinational," in to a global model with one set of processes, shared services and broadly distributed decision making, carried out by a highly skilled global workforce and managed by a common set of values. IBMs shift to a globally integrated model allowed the company to refocus its organizations on generating growth and serving clients. (IBM, 2012) KEY MANAGEMENT ISSUES AND DRIVERS FOR 2010 Historical revenue growth Margin Expansion Share Repurchases Growth initiatives and future acquisitions Retirement related costs 7
  8. 8. IBM With the key management issues listed above, IBM’s management concerns are still somewhat traditional. In the event that they cannot meet their growth mandate organically, IBM will need to pursue more aggressive growth initiatives and external acquisitions as a way to foster the growth that its shareholders demand. Finally, the future costs of unfunded and variable commitment costs, such as those associated with retirement or pension continue to be a huge concern for executive management. (IBM, 2012) 8
  9. 9. IBM REFERENCEIBM. (2012). Retrieved from IBM:, S. J. (2010). Our Values at Work on being an IBMer. Retrieved from IBM: 9