The Rise and Fall of Ibm

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1. IBM as a product centric organization before its near failure was a bloated organization with 400 000 employees heavily invested in low margin, transactional, commodity-based businesses. As technology progressed, the demand for IBM’s inventions began to diminish. The entire organizational structure was also growing redundant, making it more challenging to face off competition from smaller and less diversified competitors. As Louis Gerstner, Jr embarked on turning the entire company around, there needed to be a shift in how the entire organization was originally structured. The key issues to IBM’s diminishment were identified and linked to its excessive costs, losing touch with customers, increasingly decentralized and bureaucratic and a company that had been living with its old strategy far too long. IBM had once been a company that invented technology but the focus had been shifted to how such technology should be applied. It now needed to focus on services given its explosive growth in the recent years then. IBM needed to exit the network hardware, storage and personal computers business and enter the services and software business. As such, staff of the organization had to acquire new skill sets that would make them well versed in product knowledge and expertise. The key focus was for the organization to work together as a team, with speed and focused execution aligned towards their clients. IBM had to move in a new direction by leveraging on its strengths as a provider of solutions to its customers. Being cheaper was also important with the total IBM workforce being trimmed to 220000 in 1994. Originally specializing in hardware, IBM began to provide integrated solutions for customer that involved bundling and customizing solutions of hardware, software and services. These implementations began to turn around IBM’s financial performance before returning to profitability in 1994.

2. Louis Gerstner was one that envisioned IBM’s future and its possible growth opportunities. He knew that he urgently needed to turn IBM around. Armed with 11 years of experience as a top executive in American Express, he brought with him a customer-oriented strategy sensibility and the strategic thinking expertise that he had developed through years as a management consultant at McKinsey & Co. There was no long-term strategic plan, but rather, just one for the immediate term for he believed that a long-term strategic plan would emerge eventually following a successful slew of implemented initiatives in the short-term. He was able to identify the ever-changing landscape in the technology sector and put forward plans to allow IBM to leverage on its strengths. He was not a bureaucratic but was one who listened to customers, competitors and business divisions. This can be seen from how IBM integrated whatever technologies a client wanted, even if they were from an IBM competitor. This allowed IBM to move from a rule based company to one that was competitively advantageous with quick and early decision-making. Louis Gerstner during his term as IBM CEO was thus able to quickly arrest the problem plaguing IBM by presenting a listening ear to people around him. He found that driving significant cost reductions within the company was important in turning the company around. Most importantly, he addressed the business issue by cutting prices and being customer centric. He was able to educate and influence the entire organization in the acquisition of new skill sets that were important in IBM’s new direction. He was able to convince people of his strategy that was reinforced by a turnaround profit of US$3 billion in 1994. Through Louis Gerstner’s implementations, we can see that most of the changes were successful. He took charge of a company facing the largest corporate loss of all time and efficiently led it to restored profitability.

3. A Globally Integrated Enterprise is an open, modular organization that is integrated into the...
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