CASE ANALYSIS

INTERNATIONAL BUSINESS MACHINES (IBM)

CASE 8

Name- Sanjim Ghansham Ahuja Enrollment Number- 200240

Professor- MR. STUART ARENDS

SUBJECT - BUSINESS POLICY (MGT 4950 WB 5800)

CONTENTS
S.NO 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Introduction Strategic analysis: mission and vision PESTEL, SWOT, Internal and external analysis. SWOT analysis SWOT Matrix Strategic challenge Strategic Option / Future Option Implementation & Change Financial Balance sheet Ratio analysis Competitive Profile Matrix (CPM) Competition Quantitative Strategic Planning Matrix (QSPM) External Factor Evaluation (EFE) Internal Factor Evaluation (IFE) Conclusion References TOPIC

1) INTRODUCTION

IBM one of the leader brand of I.T industry which is basically related to computing, having its arm spreads to almost all dimension of technology weather it is about gadget or the software. IBM is the world's largest information technology company with 2005 revenues of $91 billion. IBM is the biggest provider of IT services ($47B), hardware ($24B) and rental and financing ($2B). The company has approximately 329,000 employees and conducts business in 170 countries. International business machine is an I.T giant now days, stretching it hands. The IBM now a day provides wide range of Data storage devices as well as servers with enormous storage and secure database. IBM is now aiming for animation, consolidation which saves wide range physical assets. IBM has also good contribution in the space research like IBM ThinkPad 750. IBM has established much software for environment management and protection like in 1999 the environment monitoring softwares. IBMs system/390 is the world most powerful main-frame computer. IBM introduced various cost effective technology like instead of pure silicon chip, introduced a blend of silicon and germanium. IBM designed the website for Nagano Olympic winter games, the website made 650 million hits from around the world that is one of the world record. IBM earns more profit than the next nine computer firms generated in total sales, spending more on research and development than they made in earnings. This report is focuses on the new strategies adopted by the IBM and the strategies through which IBM survived over the competitions. This report shows how IBM states itself feasible beside of its massive operation size. (Understanding IBM, 2008)

2) STRATEGIC ANALYSIS
Vision statement: 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. Mission statement: IBM main activity is to find solutions to its wide range of clients using advanced information technology. Its clients are individual users, specialized businesses, and institutions such as government, science, defense, spatial and educational organizations. To meet and respond to its customers needs, IBM creates, develops and manufactures many of the world's most advanced technologies, ranging from computer systems and software to networking systems, storage devices and microelectronics.(Linch, 1997) Through this mission statement IBM is striving to dynamically galvanize their props in various field and trying to maintain a stabilize balance between all above aspect like clients, government, educational organization etc. The main strategy of IBM is to delivers their high value added services (or software)to customers through their server product. And it can be divided into 4 pieces as follows: 1) Reallocating resources to enhance their server product business and reduce operation costs and optimize the efficiency. 2) To pursue an innovation agenda with its clients, partners and in other relationships, and to continue refining its portfolio to achieve higher value. 3) Acquiring businesses that contribute strategically to its portfolio 4) To maintain its leadership of this rapidly changing business by focusing on high-

value innovation-based solutions and services while consistently generating high returns on invested capital for its shareholders. The strategy making of IBM should consider whether the new strategy can satisfy these key stakeholders who have high power. For example, the government element in the keep satisfied, they have high power (legislation power) but low interest. Another example is the shareholders in key players, who have high interest in IBM and high power on affecting the strategic decision. To sum up, if the strategic decisions threaten the benefits of the key stakeholders, this strategy might be difficult to be achieved.

Proposed Mission
COMPONENTS Customer Products/Services Markets Technology Survival, Growth & Profitability Philosophy Self Concept Concern for Public Image Concern for Employees IBM No Yes Yes Yes No No Yes No No REMARKS Mentioned but unspecified. Creation, Development & Manufacture. Worldwide or global. Specified as Information Technology. Mentioned in IBMs Principal goals, long term value to shareholders. Based on IBMs Guiding Rules. Presumed by word lead. Based on IBMs New Industry Model. Mentioned in IBMs Business Model. Mentioned in IBMs Business Model and Business Conduct Guidelines.

At IBM we strive to lead in the creation, innovation, development and manufacture of the industrys most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We translate these advanced technologies into competitive value for our individual and corporate customers through our professional on-demand solutions and dedicated business services, while consistently generating high returns for our shareholders, and a shared commitment to our employees and the world.
For 100 years, IBM has transformed industries and advanced the worlds most critical systems. Automating Rail Systems

1915 Nearly all major U.S. railroads used tabulating technology to automate scheduling and accounting operations, starting with New York Central and Hudson River Railroad. 2010 Helped Russian Railways move 1.3 billion passengers and freight more efficiently Modernizing Government 1922 Tabulating technology used to conduct Brazils first mechanized census. 2010 Helped New York State save nearly $1 billion preventing tax fraud with advanced analytics. Automating Aviation Industry Operations 1962 Created the Sabre airline reservation system for American Airlinesa precursor of everything from the ATM to e-commerce. 2010 Helping New Delhis international airport manage growth in air travel from 28 million passengers today to an expected 150 million passengers in 2020. Raising Healthcare Standards 1965 Physicians detected changes in temperature, blood pressure and heartbeat with data collected and visualized by an IBM monitoring system. 2010 Stream computing technology and advanced analytics research at the University of Ontario Institute of Technology are used to monitor the health of premature babies at the Hospital for Sick Children, Toronto. Procurement: IBM has developed Business Partner relationships with establishment, best-of-breed Supply Chain Management solution providers. Their solutions, coupled with IBM products and services, deliver the cost-competitive, scalable and secure infrastructure the customers need. Acquisitions and mergers in order to improve their businesses on the high value products and services, IBM acquired service-related companies into the global services segment, (e.g. Network Solutions, data storage and transferring, mainframes etc) and the software-related companies that were integrated into the software segment.

Inbound & Out bound Logistics and Operations: IBM's supply, manufacturing and logistics and customer fulfillment operations are integrated in one operating unit that has reduced inventories, improved response to marketplace opportunities and external risks and converted fixed to variable costs. This feasibility IBM has acquired after facing a huge flexible competition by Compaq in 1982.Through this flexible and enormous services exchange system IBM now a days possessing almost top position at market in its segment. Key Financial system/ Marketing and sales: In 2005, the company realigned its operations and organizational structure in Europe to give sales and delivery teams greater authority, accountability and flexibility to make decisions and to execute more effectively on behalf of our clients. The company had broaden their dimension to Asian countries in order to increase their sales, company has explored a huge profitable market in Asia specially in the middle and Asian countries which includes some of the fastest growing economies ( China, India, Taiwan and Hong Kong, Singapore, Thailand, Indonesia and the Philippines etc.) Services:

IBM Provides technology and transformation services to clients, businesses, and invests to improve the ability to help their clients innovate. And this is the high value added and profitable process. The service IBM provides beside of above mentioned are Middleware services, Outsourcing services, Security and privacy services, Server services and Site and facilities services, mainframes, communications, mainframe storage, minicomputers, and personal computers. Global Business Services (GBS). IBM Global Business Services replaces what was formerly called Enterprise Business Services and Business Consulting Services. Redbooks are distributed by IBM and are increasingly available through online book stores such as Fatbrain.com and Amazon.com. IBM provides services basically in three categories. 1. The more IT-oriented technology services offerings like strategic outsourcing, integrated technology services, and hosting. 2. IT infrastructure delivery, which is becoming increasingly strategic as a lever to drive productivity, efficiency and margin improvement. 3. And offerings targeted toward transformation and high-end business value -consulting, systems integration, application services, business transformation outsourcing, asset innovation, and strategic business development. (Understanding IBM, 2008) Value System Analysis: The value system of IBM is as follows: In this value network of server products, the processor and the software providers have higher profit pool than other suppliers. Furthermore for the distributors, the retailers have the high profit pool. Therefore, the profit space of server products for IBM is not wide enough. Value drivers: Channels Value Drivers Wholesalers: Price, choice, quality, logistics Retailers: Price, service, guarantee Business orders: Price, service, guarantee. The information above shows the main distributors of IBM and their value drivers. Because of high buyer power, satisfying their distributors is required for IBM.

PESTEL ANALYSIS Political factors: Taxation, the heavy taxes in the UK make the IBM server products increase the weakness on the price factor, especially on the premium price IBM products. Economic factors: GDP factor, the healthy economic environment with strong and stable GDP in the all regions provides a good market for the product and service business of IBM. Although the GDP increase rate is not fast, the stability could balance this disadvantage element.

GDP - composition by sector: The service industry in the world contributed nearly73.4% to the GDP in 2006. That indicated that the high value added service market in the world is matured, and the customer experience on the service would be higher or more difficult to be satisfied. Socio cultural factors: Population and the internet users, in 2006, the population in just U.K it was nearly 60,609,153, and according to CIA, (2007), more than half of these people (37.6million in 2005) were internet users. The well known about the internet indicated the opportunities of relevant products and services. Technological factors: Internet, A survey from CIA, (2007) shows that there were 6,064,860 Internet hosts in 2006, and more than 400 Internet Service Providers in 2000. In this sophisticated market, the opportunity and competition will exist together. Environmental factor: In environmental dimension the IBM made the some of the major technologies like to trace the weather through-out the world, IBM made computers for NASA for astrology that made them to set the satellite which monitor the environmental changes over the globe. IBM also added some of the revolutionary environmental friendly strategies which not just provides environmental saving factors, but also cost saving factors like energy cost. Legal: The main legal constraints for IBM are Cyber protection and the chemical the use in making hardware (like: carbon, germanium and silicon), the cross country business, currency exchange and many legal registrations for their business outsourcing facilities. POTERS 5 FORCES ANALYSIS: The threat of entry: The threat of entrants for the server market was low because of the enormous costs on the R&D, relevant support products and services, manufacturing and the distribution. For example, IBM spent nearly $171 million in system and technology for server product in 2005, (Annual Report,2006) and IBM spent over $1 billion in the Linux operating system in 2001.(Shank land, 2002) This was only the barrier on the cost, there were other barriers like technique, distribution channels etc. Power of Suppliers: Intel and AMD, as the two biggest processor providers (monopolies) in the world, have very strong power on the chip supplying. Although the power of suppliers might be decreased resulting from the competition between these two companies, the wide range of customers and high costs on switching cause the buyers lack of power to bargain with these two giants. However, the power of suppliers for other low technical required material and parts was much lower than the core hardware providers. Power of buyers: The power of buyers for the server products in the UK was high because the buyer did not concentrate to the firm and the switching costs for the buyers were low. There were many product choices for the buyers, e.g. IBM, HP, Dell etc Competitive Rivalry:

By 2003, the world server market continues to show promising signs, according to IDC, (2003), the competitive rivalry in the server market was becoming intense in the world. These competitors included HP, IBM, Sun Microsystems, Dell and Fujitsu Siemens Computers were becoming the fifth leading server vendor in the world. The threat of substitutes: The web hosting business might be the biggest threat of substitute for the server products in the world. The advantages of web hosting include low cost, tech-support, easy to manage and low switching costs. In addition, the advanced personal computer might be another biggest threat to the server product. However, currently, the PC cannot instead of professional server for the business uses.

3) SWOT ANALYSIS
Strengths: - Advanced business performance management. - Good organization culture. - Strategic outsourcing, mergers and acquisitions. - High efficient fulfillment centre. - Flexible marketing management. - Creative services. As company handling all most 95% of business task of top 1000 companies of wall street, the company have some of the world fastest main frame and many revolutionary technologies like: speech recognition a software with which you can work just with your voice, blue gene a supercomputer which is 500 times fastest than world fastest computer and capable of more than one quadrillion operation per second. Through such outperforming technologies IBM is able to provide some of the best back hand facilities. The most recent merge of IBM is with the Lenovo in which Lenovo is providing the outer hardware technology and IBM providing all of its latest chip technology.IBM has been entered the wide range of fields i.e. Business continuity and resiliency services, End user services, Integrated communications services, IT strategy and architecture services, Maintenance and technical support services, Middleware services, Outsourcing services, Security and privacy services, Server services and Site and facilities services, mainframes, communications, mainframe storage, minicomputers, and personal computers. Now IBM came in market with its revolutionary Green technology through which they can save 40% of energy cost through animation, consolidation and consultancy. The emerging market GDP growth rateexpected to be 5 percent through 2015is more than double that of major markets. Global data volumes are predicted to increase by 29 times over the next 10 years to 35 zettabytes.* (A zettabyte is a 1 followed by 21 zeros.) The infusion of digital intelligence into industries, infrastructures, processes and cities can make them more productive, efficient and responsive. Weaknesses: - High costs in the value chain. - Possible acquisition issues

Since, IBM spends much on its research and development then its earning and have very limited supplier in market. Since company owning very sensitive place in market, because of its massive organization size the immediate change are likely impossible. Opportunities: - Strong and stable economic market context. - Sophisticated service market. - High individual consumption power. - Matured internet market. - High level of entry barrier to the server market. - Wireless Applications (Understanding, 2008) Well, company possess a good place in market, just with little feasible strategies to market changes, IBM can hold a large share in market. Since, IBM has very less count of competitors in its segment; almost the star of its field, through these specifications IBM can create a monopoly in its market. The internet is one of the wide applications, that is growing faster than anything on earth, the opportunity is open for IBM, because IBM already in this field by providing huge data storage facilities. Since, IBM is almost created monopoly on server market, thats why its not easy for other companies to enter in this field and compete over IBM, except some huge market giants like Microsoft. Wireless solutions enable customers to extend their reach to clients, suppliers and employees using wireless and emerging technologies. Threats: - Customers have high experience on the service. - Customers have low switching costs. - IBM has high switching costs on the core hardware. - Intense competition. - High threat of substitutes. As being one of the oldest players of its field, Customer may look for change. Today as market is so flexible, IBM may face threat from small companies like Compaq because of their small size they can change rapidly with customer environment. IBM high spending than its earning on research and development can be a loophole for IBM. Because of very limited suppliers during value chain process, IBM can barely afford to substitute.

4) Strategic challenge/issue
These are the aspects that affect the strategy changes within the management of IBM. Stakeholder Expectations and interests, Owners private/shareholders Profit, Performance, Direction, Government Taxation, VAT, Legislation, Employment Rate, Senior Management staff Performance, Targets, NonManagerial staff Rates of pay, Job security, Working environment and hours, Trade, Unions Working conditions, Minimum wage, Customers (Distributor/Government) Quality, Customer, Care, Price, Creditors Credit score, new contracts, Liquidity, Suppliers Long-term Contract, Stable, Payment, Local Community Jobs, Involvement, Environmental issues, Shares.

5) Strategic option/ future strategy/ Objectives

It is becoming widely understood that the way in which companies are behaving as a society is environmentally unsustainable, causing irreparable damage to our planet. Rising energy prices, together with government-imposed levies on carbon production, are increasingly impacting on the cost of doing business, making many current business practices economically unsustainable. It is becoming progressively more important for all businesses to act (and to be seen to act) in an environmentally responsible manner, both to fulfill their legal and moral obligations, but also to enhance the brand and to improve corporate image. Future Alliances IBM has targeted five industries: aerospace, automotive, financial services, government and life sciences. For example, IBM recently installed a grid-computing system at Charles Schwab that reduced the processing time on a wealth-management application from more than 4 minutes to 15 seconds. However, the number of general-purpose applications that now requires -- or is optimized for -- grid computing is still quite small. "Even in commercial environments, the grid applications IBM points to tend to be specialized and separate from the rest of a firm's data center," Illuminata's Haff told Tech News World. Whenever IBM promotes a new piece of hardware or software, there are usually concerns about it being based on proprietary technology. There is a hint of that with IBM's grid-computing movement. To squeeze out the maximum processing power from IBM's grid-computing initiative, a company would have to purchase IBM hardware and software. To combat this impression, IBM has been working with other suppliers to promote the grid model and to facilitate proliferation of grid-enabled technology. This year alone, Big Blue has entered into alliances with five key middleware vendors: Avaki, Entropia, DataSynapse, Platform Computing and United Devices. IBM also has started to support the Open Grid Services Architecture (OGSA), a set of emerging standards designed eventually to produce multi vendor grid architecture. A sense of dj vu is sweeping through IBM's (NYSE: IBM) executive offices. Hardware, a category of computer technology that has been commoditized over the past several years because of falling prices, once again has become sexy -- so sexy, in fact, that it has become the linchpin in IBM's quest to maintain its position as one of the industry's most important vendors. The hardware model at the center of IBM's technology strategy is called grid computing, a high-end architectural strategy of making multiple computers work on the same computational problem simultaneously. "IBM plans to make all of its key software products as well as its hardware compatible with grid computing," Gordon Haff, a senior analyst at market research firm Illuminata, told TechNewsWorld.

IBM's Distributed Terascale facility, for example, is a grid-computing project designed to allow researchers to perform 13.6 trillion calculations per second, making the series of connected computers 1,000 times faster than IBM's chess-playing Deep Blue machine. Problem Fragment To date, however, grid-computing technology has appealed only to select clients -- those supporting complex academic, engineering, government or scientific applications. IBM plans to push grid computing into the corporate mainstream by having it serve as the company's computing foundation to make computers simpler to manage, easier to operate and less costly. IBM is aggressively moving toward the grid-computing model because the multiprocessing architecture typically used in high-end servers often runs into bottlenecks when doing massively complex processing tasks. Grid computing solves that problem by enabling a large number of disparate computing resources to work on different portions of a large, complex problem. IBM's grid-computing initiative is so comprehensive that its success or failure might determine whether or not the company will remain a major player in the industry. Dawning of a New Age IBM is not the only company pushing toward grid computing. All major computer vendors -- with few exceptions -- have announced grid-computing initiatives. Hewlett-Packard (NYSE: HPQ), for example, is using grid computing in its Superdome systems, and Sun Microsystems has been developing what it calls the One Grid engine. However, no computer vendor has tackled the problem of pushing grid computing into the mainstream more than IBM has. "While HP and Sun are dabbling with grid computing, IBM has made grid computing a top priority and clearly wants to emerge as the market leader," Mary Johnston Turner, research director at Summit Strategies, told Tech News World. At the unveiling of its grid architecture in January, IBM paraded out 10 grid-computing products. In July, the company made its Web Sphere application development environment compliant with its grid technology, and it seems like only a matter of time before other products, such as the company's Tivoli management suite and DB2 database system, also support grid computing.

6) Implementation and Change

IBM has the biggest threat in front of it that is global recession. The company has to find some strategy which act as cure for their company in this unsteady market. The main focus problems for the company are: - Complexity. - Inflexibility.

- Speed. - Scale. The antidote to complexity is transparency. Complexity can hide the reality about financial condition. This led to great uncertainty in the minds of investors and can cause irrational behavior among players. Runs on solvent companies arise where customers cannot tell the difference between those organizations which can meet their financial obligations and those which cannot. The first remedy to future crises is greater transparency in the form of stronger reporting requirements to the public. The antidote to inflexibility is insurance. Firms and individuals who want to borrow should be required to purchase shock absorbers with which to withstand a loss of income, natural disaster or default. The most basic kind is a rainy day account are serve fund of cash that a firm or individual could use in case of adversity. The antidote to speed is a coordinated braking mechanism. Trading in markets can be suspended, as can provide a cooling off period in which news and information can disperse, allowing panicked player to assess the situation more fully. The brakes need to be applied infrequently and carefully. If player in the market can correctly anticipate a reaction by governments, the player will begin to understand the game system. The antidote to the massive scale of losses will be the creation of larger reserve institutions. The company must maintain a reserve that is equal to the loss they has expected and creates dent to such occasion. The company must consider the another constraints like global currency slump, wealth distribution scheme. (Cure of the crisis,2008) It is important to consider the vitality of the current strength of the company and how it can be used in order to exploit the opportunities that can be found in the external environment. In the case of IBM, the primary strengths focus on the different technologies as well as knowledge that are available for the employees in order to start doing their innovation. In addition, the company also holds a strong team that focuses on research and development of the company. On the other hand, the primary opportunity focuses on the fact that there is a growing demand for open-source products and services, in addition to that standards in the economic expansion. The said aspect is important due to the fact that customers from different part of the globe are looking for an integrated solution in order to solve their application development needs (Novell 2006). The said action will be done by different partnership with different IT-related companies that are engaged in developing different open-source software and application. Open source is a human-readable source code that was made available under a copyright license that meets the Open Source Definition, where in it permits the users to use, change as well as improve the software, and then redistributes it. More often, than not, it is developed publicly and collaboratively. The reason behind the growth of demand for open source software is that it enables the customers to save up to $60 billion every year (2008; 2008). The said strategy will help IBM to focus on the greater demand of the customers, thus, making the company more aware regarding the behavior of the customers. It is also important to consider that the said

strategy will help to boost the image of the company towards their customers, due to the fact that the company is helping their clients to save money and effort.

7) Financial Balance Sheet for IBM

Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges 22,204,000 6,778,000 11,580,000 40,562,000 21,846,000 24,204,000 3,666,000 20,990,000 4,168,000 10,845,000 36,002,000 21,932,000 24,772,000 3,562,000 20,960,000 11,236,000 10,239,000 42,435,000 23,391,000 26,791,000 3,441,000 10,661,000 990,000 29,789,000 2,450,000 4,226,000 48,116,000 16,326,000 14,096,000 25,136,000 3,488,000 3,068,000 3,220,000 113,452,000 12,183,000 1,791,000 28,523,000 2,494,000 3,946,000 48,935,000 16,023,000 14,165,000 20,190,000 2,513,000 3,001,000 4,195,000 109,022,000 12,741,000 166,000 29,097,000 2,701,000 4,299,000 49,004,000 12,757,000 14,305,000 18,226,000 2,878,000 3,536,000 8,818,000 109,524,000

Minority Interest Negative Goodwill Total Liabilities -

126,000

118,000 -

96,058,000

90,405,000 Stockholders' Equity

86,385,000

Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Total Stockholder Equity Net Tangible Assets Currency in USD.

45,418,000 92,532,000 (96,161,000) (18,743,000) 23,046,000 (5,578,000)

41,810,000 80,900,000 (81,243,000) (18,830,000) 22,637,000 (66,000)

39,129,000 70,353,000 (74,171,000) (21,845,000) 13,466,000 (7,638,000)

8) Ratio Analysis
Ratio Current ratio Description A liquidity ratio calculated as current assets divided by current liabilities. The company International Business Machines Corp.'s current ratio improved from 2008 to 2009 but then slightly deteriorated from 2009 to 2010 not reaching 2008 level. International Business Machines Corp.'s quick ratio improved from 2008 to 2009 but then slightly deteriorated from 2009 to 2010 not reaching 2008 level. International Business Machines Corp.'s cash ratio improved from 2008 to 2009 but then deteriorated significantly from 2009 to 2010.

Quick ratio

A liquidity ratio calculated as (cash plus short-term marketable investments plus receivables) divided by current liabilities. A liquidity ratio calculated as (cash plus short-term marketable investments) divided by current liabilities.

Cash ratio

Ratios (Summary)

Ratio Current ratio

Dec 31, 2010 1.19

Dec 31, 2009 1.36

Dec 31, 2008 1.15

Dec 31, 2007 1.20

Dec 31, 2006 1.11

Quick ratio

0.98

1.13

0.95

1.01

0.94

Cash ratio

0.29

0.39

0.30

0.36

0.27

Source: Based on data from International Business Machines Corp. Annual Reports

9) COMPETITIVE PROFILE MATRIX (CPM)

Competitive profile matrix is essential tool used in strategic management process, it contain all the important critical success factors of industry. Success factor can vary from industry to industry, every industry consider different success factor, and all the companies in CPM are measured on same scale by considering the same success factor. Note: Ratings are as follows: 1=major weakness, 2=minor weakness, 3=minor strength, 4=major strength.

IBM Critical Success Factors Price Financial Position Advertising Innovation Market Share Management Global Expansion Total Weight 0.12 0.15 0.09 0.22 0.22 0.10 0.10 1.0 Rating 3 3 2 4 3 4 3 Score 0.36 0.45 0.18 0.88 0.66 0.40 0.30 3.23

MICROSOFT Rating 3 3 3 3 4 4 3 Score 0.36 0.45 0.27 0.66 0.88 0.40 0.30 3.32

HPQ Rating 4 2 4 3 2 3 3 Score 0.48 0.30 0.36 0.66 0.44 0.30 0.30 2.84

As shown in the Competitive Profile Matrix (CPM) above, Innovation and Market Share are the most important factor to become successful in this industry that are indicated with the same weight i.e. 0.22, and IBM is currently the second most strongest amongst its competitors. Microsoft is the strongest in Market Share whereas as Hewlett-Packard (HPQ) is the strongest on Innovation. Both International Business Machines (IBM) and Microsoft are equally strong on the two factors i.e. Price and Financial Position. Overall Microsoft is the strongest as it is indicated by the total weighted score i.e. 3.32.

10) Competition
Although IBM's main competitors are [Hewlett-Packard Company (HPQ)] and [Dell (DELL)], each of these companies has a different focus area. Dell makes most of its money on PC and server hardware, while [Hewlett-Packard] is more diversified as the leader in PCs and Imaging & Printing as well as offering IT services. Since IBM relies heavily on its Software and Services segment, it mainly competes with [Hewlett-Packard] in the servers and IT services markets and with Dell in the servers and software markets. IBM is the leader in servers, IT services, and software. Also IBM leads HP and Dell in all measures of profitability, largely because IBM is focused on high-margin sectors such as services and software and has gotten out of the thin-margin PC business, in which HP and [Dell] are still heavily involved. In addition to HP and Dell, IBM also competes with smaller IT consulting firms such as [Accenture (ACN)]. However, IBM leads these companies by a large margin in terms of revenue, profitability, and scale.

11) Quantitative Strategy Planning Matrix (QSPM)

Strategic Alternatives Key Internal Factors Weight Enter the Hand Held PC Market AS 0.02 0.03 0.10 0.02 0.03 ----4 2 3 TAS ----0.40 0.04 0.09 Increase Advertising Worldwide AS ----2 3 1 TAS ----0.20 0.06 0.03

Strengths 1. Ranked #1 service provider in IT outsourcing, web hosting, and consulting. 2. Leads in supercomputer, 219 out of 500 systems. 3. Invested $5 to 6 billion in R&D. 4. Stockholders equity increased from $31,688M to 33,098M. 5. 13th year IBM received more patents than any

other company. 6. 9 factors/plants have been integrated into a single flexible network. 7. Has a skills market that indexes 68,000 professionals worldwide. 8. Decreased the time it takes to process a purchase within 10 years to a few hours. 9. Leader in provider with approximately 500 certified partners worldwide. 10. Engineering & Technology services revenue increased 28 percent. 11. IBM has generated $60.8 billion in cash over past 5 years. Weaknesses 1. Only gained nine percent in China in 2006. 2. Only grew 6 percent in small & medium-sized businesses. 3. Increased loss from discontinued operations, $18 million to $24 million. 4. Revenues across all industries sectors decreased 5.4 percent. 5. Total assets decreased from $111 billion to $105 billion in 2006. 6. IBM website isnt as aesthetically pleasing, user-friendly, and innovative as competing firms. 7. Communications sector declined revenue 13.6 percent in 2006. 8. Systems & technology gross profit declined 40.4 percent in 2006. SUBTOTAL Key External Factors Weight 0.03 0.04 0.01 0.03 0.10 0.02 1 1 --1 1 --0.03 0.04 --0.03 0.10 --4 4 --3 3 --0.12 0.16 --0.09 0.30 -0.10 0.06 0.10 0.08 0.04 0.06 --4 --1 4 4 --0.24 --0.08 0.16 0.24 --2 --3 2 3 --0.12 --0.24 0.08 0.18

0.03 0.10 1.00

1 1

0.03 0.10 1.58

4 3

0.12 0.30 2.00

Enter the Hand Held PC Market AS TAS

Increase Advertising Worldwide AS TAS

Opportunities

1. Growth in engineering technologies rose by 11 percent in 2006. 2. A shift from software to service-oriented architecture market is expected to double to $143 billion by 2008. 3. Sony Corporation expected to lose more than $1 billion in the Playstation 3 consoles first year of existence. 4. Global spending on IT services is expected to increase by 5.7 percent growth rate between 2005 and 2010. 5. Telecommunications industry grew by 14 percent in 2006. 6. Diversified computer systems industry grew 72 percent in 2005. 7. Video gaming industry rose 17.5 percent for year 2006. 8. US software producers hold roughly 70 percent of the world market. 9. China government has developed incentive policies to encourage growth in the software industry. 10. Diversified computer industry has a profit margin of more than 6 percent. 11. Hand held computers are expected to grow 31 percent. Threats 1. Possible legislation to limit the number of software patents awarded. 2. Leading competitor has developed new technology to reduce greenhouse gas emissions by 37 million pounds in 2007. 3. Revenue in major European countries decreased by 31 percent. 4. Leading competitor has over 12 percent more market share as leading vendor of external disk storage systems.

0.04 0.05

3 1

0.12 0.05

1 3

0.04 0.15

0.07

---

---

---

---

0.03

---

---

---

---

0.07 0.02 0.07 0.04 0.08

--3 --2 1

--0.06 --0.08 0.08

--2 --3 3

--0.04 --0.12 0.24

0.04 0.09

--4

--0.36

--2

--0.18

0.09 0.03

-----

-----

-----

-----

0.07 0.04

1 ---

0.07 ---

3 ---

0.21 ---

5. China forming contracts withAustralia for biochip technology research. 6. Government regulation in the computer industry is expected to increase by 2008. 7. Leading competitor expected to acquire major software firm. 8. Leading competitor increased R&D by 1.2 percent. 9. Interest rates are expected to grow 1.7 percent annually. SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE

0.05 0.05 0.02 0.02 0.03

-----------

----------0.82 2.40

-----------

----------0.98 2.98

12) External Factor Evaluation (EFE) Matrix

Key External Factors Opportunities 1. Growth in engineering technologies rose by 11 percent in 2006. 2. A shift from software to service-oriented architecture market is expected to double to $143 billion by 2008. 3. Sony Corporation expected to lose more than $1 billion in the Playstation 3 consoles first year of existence. 4. Global spending on IT services is expected to increase by 5.7 percent growth rate between 2005 and 2010. 5. Telecommunications industry grew by 14 percent in 2006. 6. Diversified computer systems industry grew 72 percent in 2005. 7. Video gaming industry rose 17.5 percent for year 2006. 0.04 0.05 2 3 0.08 0.15 Weight Rating Weighted Score

0.07

0.28

0.03

0.03

0.07 0.02 0.07

1 4 2

0.07 0.08 0.14

8. US software producers hold roughly 70 percent of the world market. 9. China government has developed incentive policies to encourage growth in the software industry. 10. Diversified computer industry has a profit margin of more than 6 percent. 11. Hand held computers are expected to grow 31 percent. Threats 1. Possible legislation to limit the number of software patents awarded. 2. Leading competitor has developed new technology to reduce greenhouse gas emissions by 37 million pounds in 2007. 3. Revenue in major European countries decreased by 31 percent. 4. Leading competitor has over 12 percent more market share as leading vendor of external disk storage systems. 5. China forming contracts with Australiafor biochip technology research. 6. Government regulation in the computer industry is expected to increase by 2008. 7. Leading competitor expected to acquire major software firm. 8. Leading competitor increased R&D by 1.2 percent. 9. Interest rates are expected to grow 1.7 percent annually. TOTAL

0.04 0.08

4 2

0.16 0.16

0.04 0.09

3 1

0.12 0.09

0.09 0.03

2 1

0.18 0.03

0.07 0.04

2 3

0.14 0.12

0.05 0.05 0.02 0.02 0.03 1.00

2 3 4 1 2

0.10 0.15 0.08 0.02 0.06 2.24

13) Internal Factor Evaluation (IFE) Matrix

Key Internal Factors

Weight

Rating

Weighted Score

Strengths 1. Ranked #1 service provider in IT outsourcing, web hosting, and consulting. 2. Leads in supercomputer, 219 out of 500 systems. 3. Invested $5 to 6 billion in R&D. 4. Stockholders equity increased from $31,688M to 33,098M. 5. 13th year IBM received more patents than any other company. 6. 9 factors/plants have been integrated into a single flexible network. 7. Has a skills market that indexes 68,000 professionals worldwide. 8. Decreased the time it takes to process a purchase within 10 years to a few hours. 9. Leader in provider with approximately 500 certified partners worldwide. 10. Engineering & Technology services revenue increased 28 percent. 11. IBM has generated $60.8 billion in cash over past 5 years. Weaknesses 1. Only gained nine percent in China in 2006. 2. Only grew 6 percent in small & medium-sized businesses. 3. Increased loss from discontinued operations, $18 million to $24 million. 4. Revenues across all industries sectors decreased 5.4 percent. 5. Total assets decreased from $111 billion to $105 billion in 2006. 6. IBM website isnt as aesthetically pleasing, user0.03 0.04 0.01 0.03 0.10 0.02 2 2 1 2 2 1 0.06 0.08 0.01 0.06 0.20 0.02 0.02 0.03 0.10 0.02 0.03 0.10 0.06 0.10 0.08 0.04 0.06 4 3 4 3 3 4 4 4 3 3 4 0.08 0.09 0.40 0.06 0.09 0.40 0.24 0.40 0.24 0.12 0.24

friendly, and innovative as competing firms. 7. Communications sector declined revenue 13.6 percent in 2006. 8. Systems & technology gross profit declined 40.4 percent in 2006. TOTAL 0.03 0.10 1.00 2 2 0.06 0.20 3.05

14) Conclusion
The success or failure of IBM's initiative will not necessarily depend on the company itself, but rather on its ability to entice software suppliers to make the necessary investments to make their products compatible with grid capabilities. Currently, there is a scarcity of programming tools, applications and management systems to help developers make their products compatible with a grid-computing architecture. Retooling existing products to run on new computer hardware is a complex task -- one that vendors undertake only when they see a customer base willing and able to buy such products. The information and fact available above in report, gives a brief over-view of IBM strategies and core operation via SWOT and Internal analysis which includes sales and distribution, KFS, PESTEL and Porter 5 forces. This report also lightens the future objectives and challenges for organization. And on the bases of above analysis the last aim of this report is to suggest some of the strategy which covers the loophole of the organization weak points.

15) References

1) 2) 3) 4)

http://www.ibm.com/annualreport/2010/downloads.html www.personal.psu.edu/auk3/teaching/portfolio/ist301/cases/SwotAnalysis_IBM.pdf http://finance.yahoo.com/q/co?s=IBM+Competitors http://www.stock-analysis-on.net/NYSE/Company/International-Business-MachinesCorp/Ratios/Liquidity#Ratios-Summary