The Fall of Ibm

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Title: Case # 15 The Fall of IBM and Case #16 IBM in 2009

Objective
To be the world’s leading mainframe and software Service Company that offers its customers professional innovative services that deliver value by providing them with state of the art solutions that leverage IBM’s industry and business process industries.

Problems
During the mainframe system era, IBM’s competitors began selling cheaper and high performing IBM compatible central processing units that posed a threat to the company. Entry of Japanese competitors posed a threat to IBM because they had the technical capability to build a powerful computer that matched IBM’s mainframe system. Customers began buying clones from competing companies who promised quality similar to IBM. Due to the price competition, IBM was forced to reduce the price of its products to cope with the customer’s demands. There was also a threat on new technologies being developed to outperform the products of IBM. An example was the introduction of Minicomputers which acted as a substitute to some IBM mainframe applications. Even though IBM was successful with its PC division, clones were being made which reduced IBM’s sales. IDM had a hard time acquiring programmers because they were not attracted to IBM’s bureaucratic and conservative corporate culture in which centralized decision making limited their opportunities to be creative and innovative. At some point, IBM was slow to realize the impact of innovative technology on the industry. Due to its bureaucratic culture there was slow decision making and there was power struggle among the divisions. IBM was also experiencing an increase on low-cost competitions on its outsourcing services business. An example was with its competition with Indian companies who had a low cost of operation. There was an intense competition on designing software’s that met the needs of customers. Many of IBM’s competitors were merging and this posed a threat to IBM’s capacity to provide quality software and services.

Alternatives
It should base the price of its mainframes with the capacity of the customers. Developing new and improve products should be based on customer needs. The mainframe era was too focused on one product. They should have embraced the introduction of new technologies like the minicomputers and PC’s so that they can achieve a broader range of customers. They should not have been to attached to the idea that there mainframe system was superior and irreplaceable. There are always possible technologies that can provide the same services that there product can give. They should think outside their capacities and try to produce products that are low cost and customer oriented. They should always have the capacity to meet the demands of the customers so that take advantage of their needs and generate profit from sales. Overpricing their products will result to their customers finding different substitutes. Clone manufacturers are unavoidable so what they should have done was to develop even better and customer oriented products so that they would outsmart those competitors. They should continue to find means of reducing their operation cost. IBM’s move on outsourcing its operation activities is something that they should focus on. If they can find means to produce good quality products at a low operation cost, profit from sales will surely increase the company’s reputation and make it a favorable supplier of computer hardware and software. Mergers are also important in developing better products. If IBM continues to acquire companies that add value to their products, competitors won’t pose a threat to them anymore. Restructuring the company to add more efficiency on production and sales is also important. They should focus on rebuilding their losses from high operating cost. If they focus on change brought about from decentralizing the company’s decision making strategy, there will always be room for product innovation....
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