IBM or International Business Machines is a well known
American computer manufacturer.
Founder Thomas J. Watson
Big Blue IBM is also known as "Big Blue" after the color
of its logo. The company has made everything from
mainframes to personal computers and has been immensely
successful selling business computers.
"At IBM, we strive to lead in the invention, development and
manufacture of the industry's most advanced information
technologies, including computer systems, software, storage
systems and microelectronics.
We translate these advanced technologies into value for our
customers through our professional solutions, services and
consulting businesses worldwide."
“Solutions for a small planet”
• "Dedication to every client's success
• Innovation that matters, for our company and for the world
• Trust and personal responsibility in all relationships"
• IBM began designing and manufacturing calculators
• using the technology of their own punch card processing equipment
• IBM together with Harvard University financed the invention of the Mark 1
computer, the first machine to compute long calculations automatically
• IBM was ready to completely produce their own computers, which began with the
IBM 701 EDPM, their first commercially successful general-purpose computer.
• Microsoft's Bill Gates agreed to create an operating system for IBM's new
computer for the home consumer
• The first IBM PC ran on a 4.77 MHz Intel 8088 microprocessor. IBM had now
stepped into the home consumer market, sparking the computer revolution.
The IBM international corporate headquarters are located in
Armonk, New York
4,00,000 employees of IBM
around the world
Position # 19 out of Fortune
• Data entry
• Credit card
• Pay off
• Electronic data
• Electronic mail
• File transfer
Computer service industry
Strong growth of
(S & P survey)
segment 2012 2013 2014
Global service 56% 55% 56%
17 17 16
Software 24 25 25
Global financing 2 2 2
Internal service 1 1 1
total 100 100 100
Segment wise revenue
Macro environment Analysis
• In general international operations are highly
influenced by the governmental policies and
their laws, but in this case there is little effect
because most of countries are looking for
developments and new technologies.
• Heavy taxes in some countries make IBM
increase its products price.
• National growth rates.
• Fuel Prices
• Positive customers' perception toward new
technology around the world.
• Increase in population and internet users
• Advanced technology development.
• Increase numbers of companies that need ERP systems
• Cyber protection and the chemical use in making
hardware; like carbon, germanium, and silicon
• Currency exchange
• Legal registration for their business outsourcing
IBM Position Considering IT Skill
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• IBM-committed to technology , leadership &
rapid delivery of customers solutions.
• Extensive investment in research &
• Brand recognition
• Global reach
• Continuous flow of new products & services
In 2000, IBM faced challenges
about whether to continue to be
• “everything for everyone” or
• shift towards providing solutions for
costumers facing E-Business challenges in
sourcing and implementation
• Earlier IGS offered solutions to
• E-business revenue grew 70% in 2000
• ‘Future Network Economy or E- Utility’
• Four main issues on the proper course of
action that IGS should adopt:
I. Shortage of needed IT skill in the industry
II. Segmentation of the market
III. Analysis of the current marketing situation
IV. Assessment of the competition and the
Key Success Factors in each segment
• Lack of IT skill:
• In an article by the BBC dated March 2000,
“ There is a serious shortage of skilled
information technology workers in Europe,
which major companies fear could slow
“The main mitigate for them is to employ
people from different backgrounds and then
train them on the job for the needed skills.”
• Issues to be considered are:
a. Is the cost of such an action justifiable to
the “bottom line” of either of these
b. Will these actions have any affect on other
industries, and could this cause a shortage in
other employment segments that are closely
correlated to IT skill?
c. Is the training of these professionals
according to specific company needs and
tactics more useful than hiring them directly
from the industry?
• June 2000 in BusinessWeek, Cisco’s strategy:
“New Economy Shop”
Cisco getting involved in the teaching of
student while still in High School, and gearing
them towards the IT industry.
According to the Federal Reserve Chairman
Alan Greenspan , the problem is that
“we have developed a shortage of highly
skilled workers and a surplus of lesser-skilled
Is there really a techie shortage?
According to a 1998 article in BusinessWeek ,
“the demand supply is not in shortage, instead
the demand is not for all people with IT skills,
instead it is for : 20 year old people who can
put in 80-hour week”.
In terms of 5 porter forces?
bargaining power for the supplier & the IT
• Decision should be based on focusing the cost
of the IT skill on one promising market and
reducing costs allowing them to grow faster
and more efficiently.
Segmentation of the market
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• As the largest computer service provider
and Information Technology Company in
the world, IBM with its IGS provides e-
business solutions to two main market
segments, large and small enterprises.
IBM's Professional Computer Services segment offers a wide range of
computer services to large firms (more than 1000 employees) that seek
IT solutions for its competitive advantage. IBM is able to provide large
• Customized e-business solutions
• Innovative e-business solutions
• Integrated e-business solutions
• All-in-one solutions (package of hardware and software products)
• Business consulting services
• System Recovery solutions
IBM e-business solution is also available for small and growing
up enterprises (fewer than 100 employees). As stated in its
website, IBM's products and services help small firms:
• Streamline business operations
• Improve employee productivity
• Promote their products and services
• Add e-commerce to their site
• Conduct business over the Web more efficiently
• Conduct business in a wireless environment
• Providing outsourcing solutions
Key Success Factors in large and small firms
Major key factors would be:
• Ability to retain small and large enterprise with integrated computer
• Provide standardized solutions at competitive prices for small
• Ability to power the system of government in government operations
• Ability to adjust for enterprise costs and complexity
• Providing co-location facilities to small firms
• Provide consistent services to non-profit organizations at the lowest
• Talent to adjust to price sensitive businesses and markets
• Employ trained professionals to sell their services in separate and
specific industry sectors.
• Provide world-class skills and quality service on a global scale
Based on the apparent successful segmentation of the market, it is
the recommendation of this section that IBM should focus solely on
the E-business unit and try to become the market leader in
providing the service to both the large and small firms. Reasons are
• by focusing only the e-business model, IBM will be able to
successfully beat out the competition from the smaller firms and
hence become the leader in this segment.
• IBM can also rely heavily on its trusted brand name in building trust
in its services and beating out the competition.
Analysis of Current Marketing
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• Building customer loyalty by using
• High reliability, high quality and high
differentiation will build customer loyalty and
Industry Key Success Factors
• ability to provide a customizable, all-in-one
• proven track record in fulfilling the specific
needs of the company’s industry.
Industry Key Success Factors (cont’d)
Medium and Small corporations
• ability to provide standardized solutions at a competitive price.
• a strong direct marketing capability .
• have knowledge of and ability to leverage the bureaucracy found
in such organizations.
• world renowned for its superior sales force for
• highly trained and aggressive sales force.
• global reach.
SWOT Analysis (cont’d)
• Complex management system due to its size.
• Slow to bring new services to market.
SWOT Analysis (cont’d)
• prolonged period of strong growth in industry
• trend towards the use of computers and the
SWOT Analysis (cont’d)
• increased competition
• high acquisition and alliance activity
• threat of new competitors
• highly unstable and very difficult to predict
Porter’s five forces model
Intensity of rivalry
• Competition is intense for the following
Industry growth rate is fast which attracts new
Existence of powerful competitors like
Electronic Data Systems, Hewlett-Packard,
Digital Equipment, Computer Science,
Intensity of rivalry (cont’d)
Exit barriers are high for all the competitors.
Rivalry weakens a bit because switching costs
Bargaining power of the buyer
• Bargaining power of the buyer is weak
switching cost of the customers is very high
the buyers’ volume is small in comparison to
overall sales of IBM
Bargaining power of the supplier
• Bargaining power of the supplier is weak
IBM is a huge company.
It represents a very high percentage of the
turnover of the suppliers.
Revenues of the suppliers are highly affected
by IBM’s purchases.
• Entry barriers are high:
Presence of a lot of giant corporations
Very high capital requirement
Existing companies already have a loyal customer
Existing companies enjoy the advantages of
economies of scale
Existing companies have professional and
complete sales force and distribution channels
• There is a low substitution threat:
Switching costs are very high
Brand loyalty is significant in the computer services
Customers are not very price sensitive
Customers are willing to pay a high price for better
products and services.
• IGS should offer all service products to all
Its abilities to reach all markets and customers
with greater ease than a smaller less
Economies of scale
Recognizable brand name
Scope of diversification
Analysis of ACCENTURE model
Mission: to help its clients
create the client’s future.
long-term goal: To become a
“network of businesses that
will be a market maker of the
new e-business economy”.
Specialization: consulting and
Others: ACCENTURE also
provides outsourcing of
business operations and
custom programming services
operating in 48 countries with
leading management and
technology consulting firm.
Scope: very wide, serve large,
small and medium companies
by providing all-in-one
Broad Industry Coverage:
ACCENTURE targeted 16
industry segments, grouped
into five global markets
Unite: Financial services,
and High Tech. resources
Strong research and
competitors are expanding
their operations into related
technology consulting and
Limited service offerings:
solely focusing on
consulting and systems
Analysis of EDS model
EDS offers the following
solutions, business process
management, and information
It is a global corporation.
• It has more than 121,000
employees worldwide and
solves challenges in a wide
variety of industries like
government, and healthcare
• outstanding operational
Weakness: Its aggressive
buying of market share for
competing against outsourcing
leader IBM Global Services.
Analysis of HP model
• HP focuses on its original core product and wrapped services.
• It was seeking to provide e-business support and services, but
did not have the full range of services as some of the other
categories of competitors.
• Finally HP is weak in the areas of consulting, custom
programming, system integration, and outsourcing.
Analysis of the competition by
computer services market segments:
• In this industry, ACCENTURE is the biggest threat to IBM. Consulting
and system integration is the specialty of this company
• In the consulting arena, ACCENTURE has a strong position because
previously, the company was a business-consulting firm
• Offer their clients a wide range of consulting services including both
business and information technology services.
• Financially strong, having a strong global presence and broad
• ACCENTURE is a very tough competitor. And in order to overcome
it, IBM should differentiate its consulting services and offer better
quality solutions that will be better perceived by the target
• Being a Full-Service Provider, we believe IBM should
take advantage of the situation by stealing away the
market share of the other services industry such as
outsourcing and e-business solutions in which
ACCENTURE was weak or didn’t focus on.
• Since IBM’s revenues from the custom programming
remained constant year to year, while those from the
consultant services were steadily increasing, we think
that IBM should focus more on the consulting services
and aggressively compete with ACCENTURE in this line
Full services providers:
• EDS is the main threat. They pioneered the concept of
outsourcing. the largest growth rate among all other
• That is why IBM focuses a lot on outsourcing & compete
aggressively against EDS who are financially strong and
globally present. IBM provides the outsourcing services
through “IGS Strategic Outsourcing (SO) line of business.”
• The best way to compete against EDS is to identify the
• customer’s business strategy and differentiate core from non-
• EDS has a limited Internet presence and this weakness should
encourage IBM to prove its Internet presence and launch its e-
business program and provide top quality e-business solutions
to its 36 customers
• IBM being a large company, the process to implement the e-
business strategy was slow and not flexible
• IBM should supports its services by using the Internet in order
to communicate, advertise, sell online, and offers their online
services using e-business (e-business consulting, e-business
systems integration, e-business hosting services).
Evaluation And Final Decision
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1 2 3
Shortage of IT
but Emphasis on E-
but Emphasis on E-
1 2 3