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Transcript of Sm Major Report
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STRATEGIC
MANAGEMENT REPORTSTRATEGIC ANALYSIS OF IBM(INTERNATIONAL BUSINESS AND
MACHINE)
SUBMITTED TO : SIR IMTIAZ
SUBMITTED BY : FAIZA ZAKI (09-0006)
TOOBA ATIQ (08-0183)
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Table of Contents
Executive summary ............................................................................................................................ 2
Introduction to IBM ........................................................................................................................ 3
Company vision .......................................................................................................................... 5
Mission statement.5 Proposed mission statement.5 Moral virtue statement.6 Prudential commitment statement.7 Coporate vision.8 Corporate mission..9
Values9
Objectives and strategies..10
Environmental analysis11
External factor .11 Internal factor ...................................................................................................................... 15
Financial analysis..17
External factor evaluation18
Internal factor evaluation.20
Competitive profile matrix..21
Grand strategic planning.22
Swot analysis..23
Space matrix.25
Boston consultant group.27
Quantitative strategic planning matrix .......................................................................................... 28
Conclusion30
Recommendation ..................................................................................................................... 33
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EXECUTIVE SUMMARY
M, our vision is to become the leader in global technology while also maintaining our positionas a top quality business service provider. In this strategic business plan, we have evaluated
both our internal and external environments in an effort to identify major strengths,
weaknesses, opportunities, and threats relevant to our strategic thought process. By conducting
this evaluation, we have identified five corporate mission goals along with the strategies
necessary to achieve them. They are as follows:
Increase market share to 10 percent by end of 2013.
the strategy arrived at is that IBM should use revenues to invest in latest technologies like video
gaming programs
Globalization in order to balance the fluctuations in different economies
IBMs Computers for the Environment Program
Establish IBMs Future Leaders of America youth technology education program.
Establish IBMs Employee Bonus & Education IncentiveProgram for employees
Develop new software technologies and video gaming system. In addition to these corporate
mission goals, we have also provided strategic goal maps, financial assumptions, projected
financial statements, projected key ratios, and a variety of strategic matrices in order to help
assist with goal and strategy clarification. We have also tailored our mission commentary to
reflect these goals and strategies. The commentary is the first section covered in the strategic
business plan. More detail will be provided on all sections later in the strategic plan.
INTRODUCTION TO INTERNATIONAL BUSINESS AND MACHINE
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The business of ours has a future, it has a past of which we are all proud, but it has a future
that will extend beyond your lifetime and mine
MISSION STATEMENT
At IBM, we strive to lead in the invention, development and manufacture of the industrya most
advaced information technologies, including computer systems, software, storage systems and
microelectronics. We translate these advanced technologies into value for our customer
through our professional solutions, services and consulting business worldwide.
Mission Statement (proposed)At IBM, our mission is to engage collaboration with our clients (1) and tackle their most
complex business problems on a global scale (3, 7). We will apply our business insights to
develop fresh, innovative solutions that provide real and measurable business outcomes,
whether it is designing and implementing new service after sales business models,revolutionizing the business model for automotive insurance with innovative technology (4) or
becoming one of the leading logistic providers for supply software, storage devices, printing
systems and PC recycling and buyback programs for business (2). We will work with our
clients to identify the level of change that suits their needs that results in actionable change and
sustainable outcomes (5). We also contribute to the economic strength of society and function
as good corporate citizen (8), providing our employees (9) with excellent working conditions,
superior leadership, compensation and opportunities for growth.
1. Customer
2. Products or services
3. Markets
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4. Technology
5. Concern for survival, profitability, growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
Moral Virtue Statement
The statement of moral virtues is an authentic declaration of commitment made to society by
governing body of the enterprise to act in ways believed to be morally right, good or obligatory.
This is the companys philosophy of ethics.
IBM statement of moral virtues is as follows:IBM is dedicated and committed to abiding by the principles of simple business ethics and
lawful conduct. We will also conduct ourselves ethically and lawfully in all matters, as to
maintain and preserve our high standards of business integrity, in order that we may preserve
our name and reputation for the remainder of our companys existence. We hold all employees
and agent who act on our behalf to adhere to the following principles.
Honesty Excellence Commitment
Statement of prudential commitment
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The statement of prudential commitments should highlight the companys non-moral
obligations and declaration of commitment. It should abide by operating standard that arebelieved to be simultaneously in the best long run self interest of the company and its
customers.
IBM Statement of Prudential Commitment is as follows:As a leader in both global technology and as a business service provider, we strive to doctrine
of product and service excellence. We hereby make prudential commitments to the following:
Our CustomersOur customers satisfaction is our priority, and if for any reason they are unsatisfied
with our products or services, we will make every effort to resolve the situation.
Our EmployeesOur employees are our greatest resources, and without them, we could not conduct
business. We will make every known effort to ensure our employees a comfortable, safework environment. We will accommodate and please employees fully, without being
unethical.
Our shareholdersTo all of those who have an interest in our company, we will make every decision with
the intent of benefiting our shareholders to the highest level possible, without being
unethical.
Our Surrounding
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We will treat our surrounding communities with respect, and as an organization, we
will attempt to better our communities in every manner possible.
Statement of Corporate Vision
The statement of corporate vision is a statement of aspiration declaring what a company is,
what it is committed to becoming over the long run, all with emphasis on the path to vision in
the current environment.
IBM Statement of corporate Vision is as follows :At IBM, our vision is to become the world leader in global technology while maintaining our
reputation as well a known business service provider. Additionally, we will strive for
excellence, so that when an individual hears or sees our company name, that individual will
associate our brand name with quality, prompt service and dependability.
BY THE YEAR 2014IBM will be the leader in the IT industry with a total market share of 10 percent as a result of
developing the latest computing technology and software.
Statement of Public MissionThe statement of public mission is a statement that clearly declares the companys reason for
being.
IBM Statement of Public Mission is as follows:At IBM, our goal is to produce the finest quality global technology product and to offer the
most reliable business service provision. Our reason for existence is to ensure that our
customer receive the highest quality products and services, outstanding customer support and
dependable products and services that can be depended upon in their enterprise, our main
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focus is to assist them by any means available in order that their organization operates as
efficiently and effectively as possible.
Statement of Corporate Mission
The statement of corporate Mission is a statement that clearly defines the goals that the
company will seek to realize over a defined planning period and, to the degree appropriate, the
path to achieving these goals.
IBM Statement of Corporate Mission is as follows:As we move forward into the future, IBM will develop newer technologies and software that
will reach out to new and existing clientele, while seeking only the best for our employees and
customers. We will strive to become the leader in IT technology by implementing the following
corporate strategies.
Increase market share 10 percent by end 2013
Establish new green program- IBMs Computer for the Environment program
Establish IBMs Future Leaders of America youth technology education program.
Establish IBMs Employees Bonus & Education Incentive Program for employees.
Develop new software technologies and video gaming system.
VALUES
Dedication to every clients success innovation that matters for our company and for the
world trust and personal responsibility in all relationships
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The main strategy of IBM is to deliver their high value added services (or software) to
customers through their server product.
OBJECTIVES AND STRATEGIES
IBM is repositioning itself from a computer company to an information technology service
company through a series of acquisitions and divestitures. Thirteen acquisitions of
approximately $4.8 Billion were completed enabling IBM to expand its business. Since then
IBM concentrated on becoming stronger in high-added businesses. It concentratesondevelopment and manufacture of the advanced information technologies, including
computer systems, software storage systems and microelectronics. It engaged 50,000
employees in an online intranet discussion over a period of three days using its Jam technology
IBM generated over 46,000 ideas through this.
The EFE matrix shows various opportunities to be availed by IBM and the threats it faces. After
listing them, weights were assigned according to their importance and the degree to which
they affect the company. The weights are industry specific and assess the importance of eachfactor in terms of surviving in the industry. The ratings were given as the following:1.
Is the response is poor.2.
Is the response is average.3.
Is response is above average4.
Is response is excellent. The weighted score calculated by multiplying the weights with the
rates assigned. The sum of the total weighted score for opportunities and threats is called the
total weighted score, which for IBM are 2.70. This tells us that the business is performing
below average and is not capitalizing on its opportunities neither is reducing or avoiding
threats.
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ENVIRONMENTAL ANALYSIS
External FactorsExternal factors focus on identifying and evaluating trends and event beyond the control of the
company. An external analysis reveals outside opportunities and threats confronting an
organization, so that managers can strategically develop plans to take advantage of the
opportunities while minimizing threats.
1. Social and Cultural ForcesOur society is dependent upon computer in most areas of our lives. This is especially true as newer
technologies are developed, as they will assist in making our lives easier to live. We must also keep in
mind that as society, we are learning to use these technologies at a faster pace at also very young ages.
For example, children are learning to operate computers at a younger age than previous decades ago.
Additionally, we live in an age of corporate responsibility. Companies are making a positiveimpact on the environment by cutting down on wastes and pollution, in an order to be more
green. We must also follow suit, and continue to be environmentally friendly while
silultaneously strengthening our company image.
2. Legal and regulatory forcesLegal and regulatory forces have the potential to impact our companys operation through the
passage of a regulation, law, act or statute enacted by any government or regulatory agency.
As a company who operates throughout the world, there is always the threat of foreign legal and
regulatory obligations. We must be extra careful when operating in foreign countries, so that we
may continue operations there. This is a threat we must minimize.
Recently, a lawsuit was filed against us by the state of Indiana for reimbursement of a failed
privatized our centralized welfare delivery system. The state is seeking reimbursement of all
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amounts paid to our company; reimbursement of all overtime-state employees incurred because of
performance problems; and they want IBM to be held responsible for any federal penalities or
damages from any pending lawsuits as a result of this shortcoming.
Clearly, it is obvious that this incident could cost time, energy, and resources. This is a good reason
why we need to provide excellent product service, while ensuring that we obey all legal and
regulatory statutes, as to avoid these types of threats from our business.
3. Economic forcesThe U.S economy is currently in a recession. Although some economist believe that the recession is
nearing an end, it is entirely too difficult to tell whether or not that is true. It has yet to significantly
impact our business, and we also believe that it will not affect our business or sales in a significant
manner. However, it is appropriate to at least mention, so that in case we are affected in a huge way,
we can strategize and overcome.
It is also appropriate to mention exchange rate fluctuations, as we are a global company and deal
with several currencies. A rise in the value of a currency can have a positive effect by making our
product less expensive; likewise, a decline in the value of a currency can have an adverse effect by
making our product more expensive. This is a threat, but it is not a huge way, we can strategize andovercome threat. Pease note that we should be aware of currency fluctuation in order to price
appropriately.
In addition, some nations have an economic system where free trade and business are encouraged.
These types of countries present an opportunity for us to conduct operations. We will make every
effort to avoid countries whose economic systems are not open to free trade and business. It would
be difficult to operate profitability in those types of systems.
4. Industry and market forcesWe are fortunate to be in an industry that is projected to continue to grow. This is crucial to our
companys success if we desire o become the world leader in our business. In 2014, our industry of
global IT consulting and other services is forecasted to have an overall value of graphs $561.5
billion, an increase of 12.7% since the year 2009.
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5. Technological forcesTechnology plays a vital role in our industry. With the implementation of new technologies,
companies are becoming more efficient. It is vital to our success that we identify new technology
and implement it quickly, so that we do not fall below our competitors.
Hewlett-Packard has recently discovered a new technology, which could make it possible to develop
computers that turn on and off similar to an electric light. This new technology, titled the
memristor, which is short for memory resistor, could allow computers to retain information even
after the power is cut. In short, this technology could lead to far more energy efficient computers
with pattern matching abilities similar to the human brain. This is obviously a huge breakthrough
for our competitors while a threat to our company.
Although we have developed many recent technologies, we must continue to research and develop
newer technologies in order to remain competitive. Our research and development department will
be a focus for us as we continue to move forward.
6. Competitive forces and competitionThe market that we exist in consists of small players competing alongside multinational
companies. Often, brand recognition is of significant importance when customers look to
purchase products or services from a reputable company, such as IBM. Our buyers range in size
from small businesses to multinational corporation and government agencies. Typically, larger
buyers have greater financial strength and can exert more buyer power. In addition, product
diversity and availability, technical knowledge and expertise, and brand Identity are necessary
factors in the success of our industry. It is also important that we are seen as an attractive
company for both small and large organization.
Although we have three large competitors who are Accenture, capgemini SA, and Hewlett-
Packard, the HP services, a division of the Hewlett-packard company, is our biggest challenge as
a competitor. Listed below are few facts regarding the Hewlett-Packard Company:
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HEWLETT-PACKARDHP services are a provider of technology services, consulting and integration, and outsourcing
services. It is a division of the Hewlett-Packard company, which is a global provider of products,
technologies, software, solution and services to individual customers and small and medium
sized businesses and large corporations. HP also has a strong brand name, similar to IBM.
HP and IBM offer much of the same product and services; therefore, we must constantly
seek new ways to gain a competitive advantage over our competitor. In addition, since our
industry and the technologies available to us are constantly changing, we need to constantlydevelop newer and better technologies in order to stay ahead of HP and our other competitors.
SUMMARY OF MAJOR EXTERNAL FORCESIn order to remain a profitable, successful company, we must constantly analyze and adapt to our
external environment. We have summarized our major external forces, ranking them in order of
importance.
Legal and Regulatory ForcesWith the recent pending lawsuit, this is a huge threat to our operations and our reputation.
Obeying all laws and regulations is considered highly important.
Competitive Forces and CompetitionOur competitors are strong and are in constant battle with us in discovering new technologies.
We will focus on research and development in an order to remain competitive while gaining a
competitive advantage.
Industry and Market ForcesOur industry is growing. We will strive to hold market share of at least 10% by the end of 2013.
Technological Forces
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Hewlett-Packard has discovered the memristor. We must fully engage ourselves in our own
research so that we may reduce the threats of our competitors advancements.
Economic ForcesAlthough the economy is in recession, it does pose an immediate threat. In addition, we must
always keep in mind exchange rate fluctuations, as we operate globally.
Social and Cultural ForcesAn opportunity exist for us expand and grow our organization due to the potential od societys
acceptance of new technologies. We view this as a tremendous opportunity, especially since we
wish to increase our own market share in the industry.
Internal Factors
It is important that we analyze our strengths and weaknesses of our organization quite
often.we have summarized our major internal forces, ranking them in order of importance.
1. Human resourcesIn order to excel in our industry, we must continue to recruit and retain the best employees.
We believe people are our greatest resources, and without their productivity and creativity, we
could not operate.
2. Corporate GovernanceOur company is centered on operating honestly and ethically. We will continue to move
forward with these principles, as they will strengthen our company reputation.
3. Financial performance:At the core of our company success is strong financial performance. As time progresses, we will
work to improve our financial ratio while simultaneously earning bigger profits.These bigger
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profits will allow us to give back to the community through charitable and responsible
programs.
4. Organization structure:Organizations must operate efficiently and effectively. We value the current organizational
structure intact.
5. Strategic performance in functional areas:We will continue to strengthen our training programs while building a stronger more stable
company with our valuable management team.
FINANCIAL PROJECTIONS Financial assumptions: Sales are expected to increase by four percent each year. Cost of revenue is expected to increase by one percent each year. Other operating expenses are expected to increase by one quarter each year. Net income is expected to increase by six percent each year. IBM Employee bonus and education incentive program will receive $1,000,000 per
year.
Net software and video game development will receive an additional $20,000,000 peryear into research and development.
IBM future leaders of America program will receive $500,000 per year. Net income for the current year sent to retained earnings account on balance sheet.
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F INANCIAL ANALYSIS
Current Ratio (2010) =
45,661,000/35,152,000 = 1.3
Current Ratio (2011) =
44,660,000/40,090,000 = 1.1
Return on Equity
(2010) = 7,934,000/33,098,000 = 24%
Return on Equity
(2011) = 9,492,000/28,506,000 = 33 %
Profit Margin (2010) = 7,934,000/91,134,000 = 8 .7 %
Profit Margin (2011) = 9,492,000/91,424,000 = 10. 4%
Debt to Equity Ratio (2010) = 72,650,000/33,098,000 = 2 . 2
Debt to Equity Ratio (2011) = 74,727,000/28,506,000 = 2 .6
Earnings per Share (2011) = 9,492,000/207,663,223 = 4 .5 %
Sales Growth (2011) = (91,424,000-91,134,000)/91,134,000 = 0.3 %
External AuditOpportunities threats1. Video game console market revenue is
projected to reach $12 billion in 2008 and
1. Competitors are strong.
2. Economic fluctuation could crimp
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$66 billion in 2012.
2. The IT market in Russia, India, Brazil, and
China are expected to grow twice as fast as in
the rest of the world.
3. Mobile phone markets are expected to grow
by 9% in 2008*.
4. Handheld computers markets are expected
to grow by 32% in 2008.
5. Growth in engineering technologies rose by
11 percent in 2006
consumers spending.
3. Government regulation in the computer
industry is expected to increase by 2008
.
EXTERNAL FACTOR EVALUATION
Key External Factor Weight Rating Weighted ScoreOpportunities1.Video game console market revenueis projected to reach $12 billion in
2008 and $66 billion in 2012
2.The IT market in Russia, India, Brazil,
and China are expected to grow twice
as fast as in the rest of the world
3.Mobile phone markets are expected
to grow by 9% in 2008
4.Handheld computers markets are
expected to grow by 32% in 2008
5. Growth in engineering technologies
rose by 11 percent in 2006
Threats1.Competitors are strong
0.20
0.10
0.10
0.10
0.10
0.20
3
4
3
3
2
2
2
0.60
0.40
0.30
0.30
0.20
0.40
0.20
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2.Economic fluctuation could crimp
consumers spending
3. Government regulation in the
computer industry is expected to
increase by 2008.
0.10
0.10
3 0.30
total 1.00 2.70
INTERNAL AUDITKey internal factorsStrength Weakness1. IBM revenues increased 7 percent to 69.92$.billion in 2006.
2. Invested $5 to 6 billion in R&D.
3. Strong strategic planning to be an innovation-centric
globally integrated corporation.4. IBM operates in 170 countries with about 60 percent of its
revenues being generated outside the US.
5. IBM concentrated on becoming stronger in high value added
businesses.
6. IBM ranked number 1 hosted service provider in Western
Europe.
7. IBM is supercomputing leader as provider of 35 of the
world's 100 most powerful supercomputers.decreasing from 109M to 103M in 2006
1. Declining in revenues of
services and systems
segments in 2006.
2. Decline in revenue ofpublic, industrial, small and
medium business industries
in 2006 by 9.6%.
3.Decline in revenues in Asia
Pacific area by 5.7%.4.Total
assets are gradually
INTERNAL FACTOR EVALUATION
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Key Internal Factors Weight Rating Weighted Score
Strength1.IBM revenues increased 7 percent to
69.92$.billion
2. Invested $5 to 6 billion in R&D.
3.Strong strategic planning to be an
innovation-centric globally integrated
corporation
4.IBM operates in 170 countries withabout 60 percent of its revenues being
generated outside the US
5.IBM concentrated on becoming stronger
in high value added businesses
6.IBM ranked number 1 hosted service
provider in Western Europe
7.IBM is supercomputing leader as
provider of 35 of the world's 100 most
powerful supercomputers
Weaknesses1.Declining in revenues of services and
systems segments in 2006
2.Decline in revenue of public, industrial,
small and medium business industries in
2006 by 9.6%
3.Decline in revenues in Asia Pacific area
by 5.7%
4.Total assets are gradually decreasing
from 109M to 103M in 2006
0.10
0.06
0.06
0.10
0.10
0.10
0.12
0.80
0.80
0.10
0.10
4
3
3
4
4
4
4
2
2
2
2
0.40
0.18
0.18
0.40
0.40
0.40
0.48
0.16
0.16
0.20
0.20
total 1.00 3.16
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The internal factor evaluation matrix shows that IBMs internal position is above average.They
can come up with more planned and innovative techniques in order to improve their positionas there is room for improvement. IFE value is above 3.16 which means that IBM is taking
advantage of its strengths and minimizing weaknesses. The IFE matrix lists the weights of each
internal factor, both strengths and weaknesses and assigns them ratings and then finds total
weighed scores to assess the internal position of IBM. The weights areindustry specific and
assess the importance of each factor in terms of surviving in the industry. Coming to the
ratings, they indicate how effectively the firms current strategies respond to the factor. The
total weighted score is found by multiplying the weights with the ratings to find the weighted
score
COMPETITIVE PROFILE MATRIX
IBM HP MICROSOFTCritical Success Factor Weight Rating Score Rating Score Rating ScoreCompany reputation
Product quality
Employee treatment
Quality of management
Financial position
Customer loyalty
Global expansion
Market share
0.2
0.1
0.1
0.1
0.15
0.1
0.2
0.05
4
4
3
3
3
3
3
2
0.8
0.4
0.3
0.3
0.45
0.3
0.6
0.1
4
3
2
3
3
4
2
4
0.8
0.3
0.2
0.3
0.45
0.4
0.4
0.2
4
2
4
2
2
4
4
2
0.8
0.2
0.4
0.2
0.3
0.4
0.8
0.10
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total 1.00 3.25 3.05 3.20The CPM shows the critical success factor for companies, which would be same for all in a
given economy. Eight factors were tested among competitors of IBM. (i.e. Microsoft and HP).
IBM holds a strong competitive position among its competitor.
GRAND STRATEGY MATRIX
The grand strategy matrix defines and analysis the current position of the company. According
to our analysis, we place IBM in the fourth quadrant. It is a slow growth firm which has a
strong competitive position in the industry. IBM can move into promising growth areas
through the following strategies
Related or un-related diversification Joint ventures
Rapid market growth
Quadrant II Quadrant I
Weak competitive position strong competitive position
Quadrant III Quadrant IV
Slow market growth
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SWOT ANALYSISStrengths Weaknesses
IBM
1. IBM revenues increased 7
percent to 69.92$.billion in 2006.
2. Invested $5 to 6 billion in R&D.
3. Strong strategic planning to bean innovation-centric globally
integrated corporation.
4. IBM operates in 170 countries
with about 60 percent of its
revenues being generated outside
the US.
5. IBM concentrated on becoming
stronger in high value added
businesses.
6. IBM ranked number 1 hosted
service provider in Western
Europe.
7.IBM is supercomputing leader
as provider of 35 of the world's
1. Declining i
revenues of service
and systems segment
in 2006.
2. Decline in revenu
of public, industria
small and medium
business industries i
2006 by 9.6%.
3. Decline in revenue
in Asia Pacific area b5.7%.4.Total assets ar
gradually decreasi
from 109M to 103M
in 2006
Opportunities1. Video game console market revenue is
S-O Strategies
Entering the video game console
W-O Strategies
1.Increasing
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projected to reach $12 billion in 2008
and $66 billion in 2012.
2.The IT market in Russia, India, Brazil,
and China are expected to grow
3.Mobile phone markets are expected to
grow by 9% in 2008
4.Handheld computers markets are
expected to grow by 32% in 2008
Recruit talented employees
Threats1.Competitors are strong
2.Economic fluctuation could crimp
consumers spending
3.Government regulation in the computer
industry is expected to increase by 2008
market by produce video game
console, (S5, O1).2.Entering the
mobile phone market, (S5, O3).
3.Entering the Handheld
computers market. IBM should
use revenues to invest in latest
technologies (S5, O4)
ST Strategies1. Increase RD spending (S2, T3)
marketing efforts int
Asia
Pacific, (W3, O3)
The SWOT Matrix of IBM lists its strengths, weaknesses, opportunities and threats and then
devises strategies by aligning the strengths with the opportunities, weaknesses with the
opportunities, strengths with the threats and weaknesses with the threats. The aim is to
capitalize on the strengths by taking advantage of the opportunities, overcoming the
weaknesses, and undermining the threats. Coming to the strengths and opportunities cell,
Strength5 and opportunity 2 it can use the innovation jam technique to appeal to the demands
of a younger population. Coming to the weakness opportunities cell, weakness 3 and
opportunity 3 by increasing market in asia IBM can overcome its weaknesses .Coming to the
strengths threat cell and aligning the weakness of change in technology (opportunity 4) with
the strength of rising revenues (strength 5) the strategy arrived at is that IBM should use
revenues to invest in latest technologies.
SPACE MATRIX
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x-axis: -1.8 + 5.0 = 3.2
X-axis: -1,8+5.0 = 3.2Y-axis: 4.8 + -4.0 = 0.8
FS
CONSERVATIVE 6 AGGRESSIVE
5
4
3
Financial Strength (FS) Environmental Stability (ES)
Return On Asset 6 Rate of Inflation -3
Leverage 4 Technological Changes -6
Net Income 6 Price Elasticity of Demand -3
Income/Employee 4 Competitive Pressure -5
Inventory Turnover 4 Barriers to Entry into Market -3
Financial Strength (Fs) Average 4.8 Environmental Stability (Es) Average -4.0
Competitive Advantage (CA) Industry Strength (IS)
Market Share -2 Growth Potential 5
Product Quality -2 Financial Stability 5
Customer Loyalty -2 Ease of Entry into Market 5
Technological Know-How -1 Resources Utilization 5
Control Over Suppliers And Distributor -2 Profit Potential 5
Competitive Advantage (CA) Average -1.8 Industry Strength (IS) Average 5.0
Backward, forward horizontalintegration
Market penetration Market development Product development Diversification (related and
unrelated)
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2
CA 1 IS
-6 -5 -4 -3 -2 -1 1 2 3 4 5
6
DEFENSIVE -1 COMPETITIVE
-2
-3
-4
-5
-6
ES
The average of FS, IS, CA and ES were calculated after giving them points between3.2 to
0.8.Then the co-ordinates were calculated by adding FS & IS and CA & ES. After calculating
theco-ordinates for the vector on the space matrix, the vector has been drawn which
pointstowards the defensive strategies. Under defensive strategies come retrenchment,
divestitureand liquidation. According to the case, IBM should go for divestiture
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BOSTON CONSULTANT GROUP
MARKET SHARE POSITION
INDUSTRY
SALES
GROWTH
RATE
(QSPM) QUANTITIVESTRATEGIC PLANNING MATRIXStrategy 1Enter video game console market
Strategy 2 Increasingmarketing efforts intoAsia and Europe
Key Internal Factors Weight AS TAS AS TAS
Strengths
1.IBM revenues increased
7 percent to
0.10 4 0.40 2 0.20
STARS QUESTION MARK
CASH COWS DOGS
IBM
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69.92$.billion
2. Invested $5 to 6 billion
in R&D.
3.Strong strategic
planning to be an
innovation-centric
globally integrated
corporation
4.IBM operates in 170
countries with about 60
percent of its revenues
being generated outside
the US
5.IBM concentrated on
becoming stronger in
high value added
businesses
6.IBM ranked number 1
hosted service provider inWestern Europe
7.IBM is supercomputing
leader as provider of 35
of the world's 100 most
powerful supercomputers
0.06
0.06
0.10
0.10
0.10
0.12
-
-
3
4
2
-
-
-
0.30
0.40
0.20
-
-
-
4
4
4
-
-
-
0.40
0.40
0.40
Weaknesses1.Declining in revenues of
services and systems
segments in 2006
2.Decline in revenue of
public, industrial, small
and medium business
0.80
0.80
2
3
0.16
0.24
4
4
0.32
0.40
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industries in 2006 by
9.6%
3.Decline in revenues in
Asia Pacific area by 5.7%
4.Total assets are
gradually decreasing
from 109M to 103M in
2006
0.10
0.10
2
3
0.20
0.30
4
3
0.30
0.30
Subtotal 1.00 2.20 2.24Strategy 1Enter video game console market
Strategy 2 Increasingmarketing efforts intoAsia and Europe
Key External Factors Weight AS TAS AS TAS
Opportunities1.Video game console
market revenue is
projected to reach $12
billion in 2008 and $66
billion in 2012
2.The IT market in Russia,
India, Brazil, and China
are expected to grow
twice as fast as in the rest
of the world
3.Mobile phone markets
are expected to grow by9% in 2008
4.Handheld computers
markets are expected to
grow by 32% in 2008
5. Growth in engineering
0.20
0.10
0.10
0.10
0.10
4
1
-
-
2
0.80
0.10
-
-
0.20
2
3
-
-
1
0.60
0.30
-
-
0.10
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technologies rose by 11
percent in 2006
Threats1.Competitors are strong
2.Economic fluctuation
could crimp consumersspending
3. Government regulation
in the computer industry
is expected to increase by
2008.
0.20
0.10
0.10
4
1
1
0.80
0.10
0.10
4
3
4
0.80
0.30
0.40
subtotal 1.00 2.10 2.50
The Quantitative Strategic Planning Matrix states critical internal and external success
factorsand evaluates each of them for alternative strategies that are
Strategy 1Enter video game console market
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Strategy 2 Increasing marketing efforts into Asia and EuropeNow the relative attractiveness of each strategy has been evaluated against critical internal andexternal success factors that can be improved upon or capitalized. Weights are the same for
these internal and external factors as were previously used in the IFE and EFE matrix
respectively. These are industry specific and show the importance of each factor in terms of
surviving in the industry. Both strategies are inter-related or similar as both relate to product
development. Note that the strategies are mutually exclusive and cannot be assigned the same
AS for a given factor. The total attractiveness scores (TAS) have been arrived at by multiplying
the weights for each internal/external factor by the AS. The sum of the total attractivenessscores for each factor is then calculated .Strategy 1 has a higher Sum Total Attractiveness
Score(STAS=2.10) as compared to Strategy 2 (STAS=2.50) which suggests that IBM should
adopt Strategy 1, that is, increase market effort in Asia and E urope.
Conclusion
The study of IBM and its current position shows that with its current situation and strategist
will be forced into the lane of defensive strategies. IBM in order to maintain its competitive
advantage strives on research & development and diversifies its operations. The study shows
that IBM has ample room for improvement in its Internal as well as external environment. The
fact that the company needs to further strengthen its brand image can be done through
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exploiting potential markets in the long-run. In addition, IBM has some loss making
departments, which are a burden on the company. The company has not yet come up with anystrategy to divestiture such departments. There is room for improvement IBM needs to reinstate
its line of brands through effective advertisements around the global market
RECOMMENDATION
The company needs invest more in research and development in order to gain market
leadership through
differentiationIBM needs to get rid of their loss making departments; this should be done throughthe
following1.
DivestitureFor the companys profit making departments they should use competitive strategies and opt
for
Product development Market penetration1. IBM should launch android based Tablets to cater the markets new demand for touch
screen Tablets
2. Another Category, which should be introduced by IBM, is the cell phone market as theyhave the IT required for most of the work
3. IBM should cater the youth by providing high end gaming PCs and Laptops.4. They should improvise on their marketing department as well. There can be more of
celebrity or branded programming entertainment.
5. They should move forward with the plan of acquiring intensive strategies.