assignment
Read the following Case and Answer the Questions that follow;
IBM: PAST SUCCESS AND FUTURE CHALLENGES
In 1914, Thomas Watson, Sr. founded International Business Machines Corporation (IBM), nicknamed Big Blue. Since then, it has been mass producing business equipment, particularly computers, for a variety of domestic and international markets. In 1985, IBM employed more than 400,000 people and registered sales of more than $50 billion. IBM was highly profitable, and it collected more revenues and controlled more market share than any of its competitors. From 1982 through 1985, IBM was rated as America’s most admired corporation in Fortune’s annual survey evaluating major firms. It dominated its industry and was one company that balanced competing goals: growth, profitability, innovation, and efficiency.
However, between 1985 and 1987 the situation changed. While IBM’s share of the large, mainframe computer market remained overwhelming, its market share eroded in midrange products and personal computers. In 1986, IBM’s revenues were flat; and in 1987, although its revenues were up worldwide, its U.S. revenues were down slightly, while many other computer companies saw business surge. In 1985 and 1986, IBM’s earnings declined, and, in 1987, only special items and extreme cost cutting allowed an earnings increase. In 1986 and 1987, its stock lagged behind the Standard and Poor’s 400 by 40 percent and 10 percent, respectively.
In 1985, John F. Akers became chairman and Chief Executive officer of IBM and was faced with the unprecedented challenge of turning around a corporation that few observers had believed would ever have such problems. Before discussing the current problems and changes at IBM, you should know the reasons behind IBM’s 70-year record of success.
To a certain extent, IBM is fortunate to be a leader in and industry of growing importance to the world’s economy. However, IBM made the right decisions and proper strategic moves at many of the
IBM: PAST SUCCESS AND FUTURE CHALLENGES
In 1914, Thomas Watson, Sr. founded International Business Machines Corporation (IBM), nicknamed Big Blue. Since then, it has been mass producing business equipment, particularly computers, for a variety of domestic and international markets. In 1985, IBM employed more than 400,000 people and registered sales of more than $50 billion. IBM was highly profitable, and it collected more revenues and controlled more market share than any of its competitors. From 1982 through 1985, IBM was rated as America’s most admired corporation in Fortune’s annual survey evaluating major firms. It dominated its industry and was one company that balanced competing goals: growth, profitability, innovation, and efficiency.
However, between 1985 and 1987 the situation changed. While IBM’s share of the large, mainframe computer market remained overwhelming, its market share eroded in midrange products and personal computers. In 1986, IBM’s revenues were flat; and in 1987, although its revenues were up worldwide, its U.S. revenues were down slightly, while many other computer companies saw business surge. In 1985 and 1986, IBM’s earnings declined, and, in 1987, only special items and extreme cost cutting allowed an earnings increase. In 1986 and 1987, its stock lagged behind the Standard and Poor’s 400 by 40 percent and 10 percent, respectively.
In 1985, John F. Akers became chairman and Chief Executive officer of IBM and was faced with the unprecedented challenge of turning around a corporation that few observers had believed would ever have such problems. Before discussing the current problems and changes at IBM, you should know the reasons behind IBM’s 70-year record of success.
To a certain extent, IBM is fortunate to be a leader in and industry of growing importance to the world’s economy. However, IBM made the right decisions and proper strategic moves at many of the