International Business Machines- 2007
Reported By: ALARCON, Lyanne V.
CRUZIN, Richelle Ann
IBM was founded in 1888 as Herman Hollerith and the Tabulating Machine. It was incorporated in 1911 as “Computing-Tabulating Recording Co.” The company later changed its name to International Business Machines (IBM) Corporation in 1924 after becoming a Fortune 500 Company. Also known as “Big Blue,” IBM has won several accolades. It is known to have more patents than any other American technology company. The company operates in 170 countries and has 60% of its revenues coming outside of US.
IBM divested its personal computers and hard disk drives businesses and concentrated on becoming service-oriented architecture (SOA). The company is structurally organized in the following segments: systems and financing, hardware, software and services. IBM’s key competitors in the industry are Microsoft, HP, and EDS.
In 2005, IBM’s Total Revenue declined by $5.1 Billion. It can be attributed to the change the company is heading into, and the trend that its hardware business is also on the decline. Having lost 8.3% from 2004 and a further 7.6% in 2006.
CEO and President, Samuel J. Palmisano
How can IBM increase their revenues and maintain its competitive advantage? IV.1 Objectives
IV.1.1 To drive revenue growth through new markets, new offerings, and new products both developed and acquired IV.1.2To develop and encourage innovation and ideas that focus on new high-profit, value-added business and services V.
Areas of Consideration
Brand Name (IBM is one of the most recognizable Computer Brands in the world)
Diversification (Software, hardware, financing and servicing) V.1.3
Innovation Jam Capability (With this capability, the company doesn’t only rely its ideas from its top officers. It allows their employees and customers to contribute in creating or developing its culture.) V.1.4
IBM has three Nobel prizes, four Turing awards, five National Medals of technology and five National Medals of Science. V.1.5
Ranks 1st in industry sales and 2nd in market capitalization, net income, and long term growth behind Microsoft V.1.6
Widespread operations in 170 countries
Rising earnings per share (EPS) in 2006
V.1.8 Sales-centered business culture
Revenues across all industry sectors are almost the same from 2005 to 2006. V.2.2
Total assets decreased from $105 to $103 in 2005-2006. V.2.3
Huge work force and high pay for human resource
Declining profits from hardware
Concentration or focus on three major divisions or segments puts the company at a vulnerable position if revenues from them decline
Increasing customer’s awareness of new technology around the globe is a good opportunity. V.3.2
IT market in India, Russia, Brazil and China are expected to grow twice as fast as in the rest of the world. V.3.3
Rising demand for game processors in the microelectronics business V.3.4
Emerging markets for software
IBM is facing strong rivalry from multinational companies such as Microsoft, HP and EDS.
Technology life cycle is characterized by rapid changes or development. V.4.3
Customers have low switching costs
Increased market share of competitors
IBM is not advertising heavily to promote their products unlike its competitors. As IBM increases its product line and services, they shall be willing to spend more to let their items be known by their customers. IBM is lacking when it comes to effective advertisement. (composition of the statement)
IBM’s Services segment has the most potential for growth, considering the services they are offering like the Business Process Outsourcing (BPO). Unless major...
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