4ndGen IBMS Case Analysis[1]

Strategic Management

IBM Case Analysis

IBM Case Analysis

OBJECTIVEIn the very high pace of the technological growth in the sector of Information Technology, IBM is surely one of the pioneering organizations. We, the team, have decided to work upon the managerial practices, i.e. work culture, human resource policy, marketing strategy, organizational structure, and business lines of IBM, achievements and awards and SWOT analysis of the Company

INTRODUCTION

International Business Machines Corporation abbreviated IBM and nicknamed "Big Blue" (for its official corporate color), is a multinational computer technology and IT consulting corporation headquartered inArmonk, New York, United States. The company is one of the few information technology companies with a continuous history dating back to the 19th century. IBM manufactures and sells computer hardware and software (with a focus on the latter), and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology.

IBM has been well known through most of its recent history as the world's largest computer company and systems integrator, with over 388,000 employees worldwide, IBM is the largest and most profitable information technology employer in the world. IBM holds more patents than any other technology company and has eight research laboratories worldwide. The company has scientists, engineers, consultants, and sales professionals in over 170 countries. IBM employees have earned five Nobel Prizes, four Turing Awards, five National Medals of Technology, and fiveNational Medal Of Science. As a chipmaker, IBM has been among theWorldwide Top 20 Semiconductor Sales Leader in past years.

COMPANY PROFILEHISTORY OF INTERNATIONAL BUSINESS MACHINESThe company which became IBM was founded in 1896 as theTabulating Machine Company by Herman Hollerith, in Broome County,New York (Endicott, New York or Binghamton, New York), where it stillmaintains very limited operations. It was incorporated as ComputingTabulating Recording Corporation (CTR) on June 16, 1911, and waslisted on the New York Stock Exchange in 1916 by George WinthropFairchild. CTR's Canadian and later South American subsidiary wasnamed International Business Machines in 1917, and the whole companytook this name in 1924 when Thomas J. Watson took control.

1875–1925: The origin of IBMIBM's history dates back decades before the development of electroniccomputers. Of the companies merged to form what later became IBM,the oldest was the Tabulating Machine Company, founded in 1896 byHerman Hollerith, and specialized in the development of punched carddata processing equipment. Hollerith's series of patents on tabulatingmachine technology, first applied for in 1884, drew on his work at theU.S. Census Bureau from 1879–82. Hollerith was initially trying to reducethe time and complexity needed to tabulate the 1890 Census. Histransition to the use of punch cards in 1886 laid a foundation forgenerations of equipment and a core component of what would becomeThe company which became IBM was founded in 1896 as the TabulatingMachine Company by Herman Hollerith, in Broome County, New York(Endicott, New York or Binghamton, New York), where it still maintainsvery limited operations. It was incorporated as Computing TabulatingRecording Corporation on June 16, 1911, and was listed on the NewYork Stock Exchange in 1916 by George Winthrop Fairchild. CTR's

Canadian and later South American subsidiary was named InternationalBusiness Machines in 1917, and the whole company took this name in1924 when Thomas J. Watson took control of it.International Business Machines Corporation, abbreviated IBM andnicknamed "Big Blue” is a multinational computer technology and ITconsulting corporation headquartered in Armonk, New York, United

States. The company is one of the few information technology companieswith a continuous history dating back to the 19th century. IBMmanufactures and sells computer hardware and software (with a focus onthe latter), and offers infrastructure services, hosting services, andconsulting services in areas ranging from mainframe computers tonanotechnology.IBM has been well known through most of its recent history as the world'slargest computer company and systems integrator. With over 388,000employees worldwide, IBM is the largest and most profitable informationtechnology employer in the world. IBM holds more patents than any otherU.S. based Technology Company and has eight research laboratoriesworldwide. The company has scientists, engineers, consultants, andsales professionals in over 170 countries. IBM employees have earnedfive Nobel Prizes, four Turing Awards, five National Medals ofTechnology, and five National Medals of Science. As a chip maker, IBMhas been among the Worldwide Top 20 Semiconductor Sales Leaders inpast years.In 2002, IBM strengthened its business advisory capabilities by acquiringthe consulting arm of professional services firm. The company hasincreasingly focused on business solution-driven consulting, services andsoftware, with emphasis also on high-value chips and hardwaretechnologies; as of 2005 it employs about 195,000 technicalprofessionals. That total includes about 350 «Distinguished Engineers»and 60 IBM Fellows, its most-senior engineers. It should be noted,however, that IBM and some other U.S. firms’ use the term 'engineer' in abroad sense, applying it to technicians from diverse disciplines that maynot be graduates from Engineering Schools of recognized Universities.In 2002, IBM announced the beginning of a US$10 billion program toresearch and implement the infrastructure technology necessary to beable to provide supercomputer-level resources "on demand" to all businesses as a metered utility. The program has since then beenimplemented.In the same year its hard disk operations was sold to Hitachi.IBM has steadily increased its patent portfolio since the early 1990s,which is valuable cross licensing with other companies. In every yearfrom 1993 to 2005, IBM has been granted significantly more U.S. patentsthan any other company. The thirteen-year period has resulted in over

31,000 patents for which IBM is the primary assignee. In 2003, IBM earned 3415 patents, breaking the US record for patents in a single year.Protection of the company's intellectual property has grown into a business in its own right, generating over $10 billion dollars to the bottom line for the company during this period. A 2003 Forbes article quotesPaul Horn, head of IBM Research, saying that IBM has generated $1 billion in profit by licensing intellectual property.In 2004, IBM announced the proposed sale of its PC business to Chinese computer maker Lenovo Group, which is partially owned by the Chinesegovernment, for US $650 million in cash and US $600 million in Lenovostock. The deal was approved by the Committee on Foreign Investmentin the United States in March 2005, and completed in May 2005. IBMacquired a 19% stake in Lenovo, which moved its headquarters to NewYork State and appointed an IBM executive, Steve Ward, as its chiefexecutive officer. The company retained the right to use certain IBMbrand names for an initial period of five years. As a result of thepurchase, Lenovo inherited a product line that features the ThinkPad, aline of laptops that had been one of IBM's most successful products.As of 2004, IBM had shifted much of its focus to the provision of businessconsulting & re-engineering services from its hardware & technologyfocus. The new IBM has enhanced global delivery capabilities inconsulting, software and technology based process services—and thischange is reflected in its top-line.On June 20, 2006, IBM and Georgia Institute of Technology jointlyannounced a new record in silicon-based chip speed at 500 GHz. This11was done by freezing the chip to 4.5 K (−269 °C; −452 °F) using liquidhelium and is not comparable to CPU speed. The chip operated at about350 GHz at room temperature. IBM acquires SPSS in July 2009 for $1.2billion.

ACHIEVEMENTS & AWARDS

IBM stands 14 in Fortune 500 companies with a revenue scale of$103,630 million with profits of $12,334 millions.

AWARDS :Corporate Citizenship: IBM was ranked the no.1 ethicalcorporation by Covalence, the Swiss ethical ranking agency, above581 businesses across 18 sectors, The rating is based on captureof information from media and the internet, matching corporateofferings to specific societal expectations.Corporate Citizenship: IBM Singapore won seven awards at theSingapore HR Awards 2009 including the category of CorporateSocial Responsibility.Corporate Citizenship: IBM was named one of the "50 MostSocially Responsible Corporations" by MacLean's, a Canadianweekly magazine.Environment: IBM Canada Ltd. has been selected as one ofCanada's Greenest Employers. This special designation recognizesthe employers that lead the nation in making environmental valuespart of their organizational culture. Winners of this competition havedeveloped exception earth-friendly initiatives and are attractingemployees and customers because of their environmentalleadership.Accessibility: IBM Spain was recognized as the best company for social action in 2008 by the Randstad Foundation.Corporate Citizenship: Stan Litow, Vice President, IBM CorporateCitizenship & Corporate Affairs, was chosen to ring the opening bell at13the NY Stock Exchange on February 23, International CorporatePhilanthropy Day. He accepted the National Philanthropy Award from theCommittee Encouraging Corporate Philanthropy, which recognized IBM'sOn Demand Community.Corporate Citizenship: In Taiwan, IBM was ranked No. 2 in theCorporate Citizen Survey of the foreign company group ofCommonwealth Magazine's 2009. For the last three consecutiveyears, IBM has been selected as one of the top 10 corporate

socially responsible companies.Corporate Citizenship: IBM Poland has been awarded the statusof 'Best Practice for Business and Society' by the ResponsibleBusiness Forum, the country's largest corporate organizationfocused on corporate social responsibility.Corporate Citizenship: IBM Romania has been recognized with a'diploma' award from the Romanian Donors Forum and the Trust for CivilSociety in Central and Eastern Europe for being one of the top corporatesocially responsible companies.Accessibility: IBM Spain and Association Semilla's joint Social GNUproject has won the title of best 'Best IT Project' at an awards ceremonyhosted at the Ministry of Industry.Corporate Citizenship: IBM China was awarded a certificate ofappreciation for their outstanding contribution to education by the ChinaMinistry of Education (CME) at the Spring Festival Reception for morethan 30 multinational companies.Corporate Citizenship: For the seven consecutive year, IBM Hong Konghas been awarded with "The Caring Company Award" by the Hong KongCouncil of Social Services.

AWARD ASSOCIATED WITH IBM:Impact Best of Show Award - Cross View, Inc.The Impact Best of Show Award recognizes Cross View, one of theIBM sponsors of the Impact conference, for the solution that best demonstrates the unique power of using IBM SOA and WebSphere components to solve customer business challenges.SOA Cost Optimization Award - Miracle Software Systems, Inc.The SOA Cost Optimization Award recognizes Miracle SoftwareSystems, Inc. and its web methods to WebSphere Message Broker andWebSphere Process Server migration solution for exploiting IBM SOA

and WebSphere and providing a proven solution that helps customersachieve cost optimization, agility, and increased ROI (Return oninvestment).Business Process Management Award – Ascendant TechnologyThe Business Process Management Award recognizes AscendantTechnology for its “Invoice Workflow” for Accounts Payables as the most

exceptional solution in helping customers to improve their efficiency, elasticity, and control of their key business processes across the enterprise.

Green Partner Award - Enterprise Information ManagementThe Green Partner Award recognizes Enterprise InformationManagement (EIM) for its GreenCert solution for excellence in helping businesses through use talent, natural resources, and technology in smarter ways. IBM's GreenCert play an important role in helping address business challenges, including rising energy costs, regulatory mandates, and customer demand for eco-friendly products. GreenCert measures the reduction in greenhouse gases an energy company realizes when ittakes steps to reduce emissions.Distributor Excellence AwardThe Distributor Excellence Award recognizes Tech Data Azlan as ahigh value-add distributor who is leading the charge in building theirBusiness Partners' ability to leverage IBM SOA and WebSphere softwarecapabilities in creative, leading edge, and exciting way.

ORGANIZATIONAL STRUCTURE IN IBMProjectized OrganizationAny organizational structure in which the project manager has full authority to assign priorities, apply resources, and direct the work of persons assigned to the project.A project organization is generally a temporary thing. It will only exist from the projects start until its end. All the project team members are coming from different organizations of part of the organization. They will all have a temporary assignment to the project. So, they have not only a project manager, but also their 'normal' boss, who orders him around when the employee is not in the project. These 'normal bosses' are an important group of stakeholders.The projectized organization should be a result from the project strategy;it should be constructed in such a way that the strategy can be implemented within the environment of the project. A very obvious example: if the strategy contains an aspect of having independent reviews,

the organization should support its independence, by creating a separate working group with no ties to the other team members.The project team that does the work should be as small as possible.Small is beautiful, and effective. Don't start inviting everyone to the organization. Only people who have an added value and will spend a significant amount of time to the project can be in the core organization.Try to avoid going overboard on working groups. Working groups can drown a project in communication overhead. If there should be that much discussion anyway, postpone the project and first make up the minds.Next to the people who do the work, are the people that have some influence on it, but do nothing; a large part of the stakeholders. The project organization can be used to satisfy some wishes of stakeholders to create the much needed win-win situations. In its most simple form, you can create a project trashcan where you put in the people who just want to be involved in the project (to save their territory), but which youhave no use for.Current members of the board of directors of IBM are:Cathleen Black – President, Hearst MagazinesWilliam R. Brody – President, Johns Hopkins UniversityKenneth Chenault – Chairman and CEO, American Express CompanyJuergen Dormann – Chairman of the Board, ABB LtdAyan Barua – CEO, PICSimon Shum Siu-hung – CEO, Lenovo Computer Ltd.SOME OTHER INMPORTANT PERSONALITIES ARE:Shanker Annaswamy, Country Manager & South Asia HeadRajesh Nambiar, Vice President & GM, Global Delivery, IBM IndiaDave Seybold, Vice President and Partner Global Delivery, Consulting &Application Services, IBM Global Business Services IndiaArnab Saha, General Manager, Business Development, Global Delivery

3. MANAGEMENT PRACTICES3.1 IBM BUSINESS LINES IBM manufactures and sells computer hardware and software (witha focus on the latter)Offers infrastructure services:Helps identify problem areas and determines where further in-depth analysis is required. It also help to remediate and repair issues that have

been identified, including those related to application infrastructure, services management and identity and access management. Hosting services:IBM provides one of the most comprehensive application hosting services in the industry from basic support to global deployments.With IBM Application Hosting services, you can leverage the leading applications that can help reduce your time to market or boost customer satisfaction without the usual upfront infrastructure costs or the ongoing implementation and management headaches.Consulting services:IBM business strategy consultants support clients in the translation of innovative and core competencies into real business value by formulating strategies, managing change, and realizing benefits.Working collaboratively with clients, we provide solutions to the business needs that your organization is confronted with, such as growing revenues, streamlining costs and linking strategy to execution.Recently entered into an outsourcing business (customer services and technical support) a unit called IBM DAKSH is specially set up for the out sourcing business. Dealing in customer service, technical support, billing assistance etc.19Green sigma:IBM’s goal with the Green Sigma TM offering is to partner with clients to drive innovation, achieving economic benefits for the business and reducing impact to the environment. This focus on ways to develop processes to bring down the carbon intensity of products and processes and create a lean green business"

HUMAN RESOURCE POLICYThe Human Resource (HR) policy must be able to deliver deliberate insights to business units, enabling the organization to more effectively source, evaluate and motivate employees in an increasingly turbulent business environment.At the same time, HR needs to continue to provide administrative services that are reliable, cost-effective and responsive to the needs of business units around the globe. HR must perform both roles effectively to contribute to the long-term success of the organization.

This perspective shaped a series of discussions that took place in March2006 with more than 25 senior HR executives from around the globe.Over four days, HR leaders from various industries, including utilities, financial services, retail and government - to name a few - engaged in a dialogue to share insights and best practices on a variety of topics. These included issues such as changing workforce demographics, the role of workforce analytics in developing strategic insights, and the structure and competencies of the HR policies of the future.Across industries, changing business conditions, demographics and globalization have raised the need to understand and manage the dynamics of talent, from sourcing to resource management to recognition systems. To allow HR to focus on these more strategic issues, the next generation HR organization must promote the use of shared services and employee self-service to move away from its traditional role of answering questions and resolving disputes.Further, the HR organization needs to work more effectively with other vendors in its extended enterprise, providing the tighter coordination thatis needed to deliver administrative services. Finally, HR needs to look inward at its own talent model, to help ensure that its employees have the20 capabilities, skills and confidence to provide strategic guidance to thebusiness.

The roundtable participants highlighted the clear need for the HR functionto focus its limited time, energy and resources on four critical areas:

• Understanding the impact of both globalization and changing workforce demographics on the supply of talent.

• Determining the drivers of employee retention and developing strategies for retaining top performers.

• Engaging with the corporate strategy process to determine the need for critical skills and capabilities

• Balancing the supply and demand for talent on a dynamic basis within and across business units.

Implications for the next generation HR organizationFor the HR organization to take on these new responsibilities, it must be able to shed some of its more routine tasks and restore its internal capability. Many organizations have moved to using outsourcing vendors to

perform routine administrative tasks, while others have continued to retain these activities in a shared services environment.The key steps toward achieving this include:• Getting out of the business of “answering questions, ”shifting to dealing with issues that are more strategic. Spend less time managing routine transactions and interactions that too often fill the days of HR professionals. Place the nexus of addressing administrative issues in one place. Track employee inquiries to determine whether HR policies and procedures are easy to understand and apply, and whether they need improvement. At the same time, increase the availability and use of employee and managerial self-service.• Developing relationships across organizational boundaries: More and more, companies are looking to outsiders to take over administrative components of the HR function - particularly non-core tasks such as payroll and benefits administration, as well as employee service center management, recruiting, compensation administration and HR data management. It is increasingly important to view these companies as part of a larger extended enterprise.• Building capability in the HR talent pool: Improve or acquire the skills needed for a greater strategic orientation in several ways: bringing in professionals from outside the company; attracting existing employees from outside the HR function to join the HR team; providing education to existing HR professionals; and fostering opportunities for outside development.To prosper in a new environment, HR professionals need a more strategic perspective on their services and capabilities. The window for evolving into a more strategic HR organization is now - miss it, and more than the power and prestige of the HR function will be at stake.

MARKETING STRATEGYToday’s marketplace involves substantial risk and full of surprises.We can consider a few recent twists and turns in marketing point of view:• Bricks and Clicks — not “simply clicks”: Despite an early lead byInternet pure plays with their plentiful brand awareness campaigns, brick and- click enterprises now-a-days seem to have the major advantages.• Private trumps public: Creative marketing tactics could not save the multitude of public interactions launched over the last few years. With the exception of a few, large industry stalwarts, enthusiasm surrounding public

exchanges has now shifted to private models that enable true business value to be more readily achieved.• Inside turns out: Companies are discovering that internal assets, suchas online employee training, can be turned into effective marketing tools.Business-model experimentation does not always produce expected results. In fact, to many executives, today’s marketing expenditures can feel more like wagers than investments.Through IBM works with leading marketers across a variety of industries,IBM has honed in on five pragmatic tips that can help position a businessfor solid performance — even in turbulent times also.Creation of Global Brand BlueprintMany leaders establish a central framework for their brand —one that clearly communicates what elements should remainconstant across geographies and what elements can vary in orderto capitalize on local insights.

A blueprint should be “global” — not only in geographic terms,but also in marketing dimensions. It should address the entiremarketing mix — from advertising to the Web presence. Example— a company’s website might vary in appearance, even functionalarea across different geographies.Architect Consistent Customer ExperienceAn experience is not simply about the quality of services received during a business transaction, but also it is the overall feeling a consumer has after each encounter with a company. IBM has developed a methodology that can help the companies architect the exact type of emotional “imprint” they would like to leave with customers at each and every touch point. This“Experience Architecture” begins with a ornamentation — a easily understandable set of target emotional outcomes, marketing and operations into alignment and reinforce the brand blueprint.Gain a Single View of the CustomerWhile providing the customer with a single, consistent view of the enterprise is critical; enterprises must also develop an overall view of each customer. A consolidated view benefits both the customers and the business. IBM practices on some practical ways to achieve a unified picture of the customer:

Look At The Details: Analyzes when, where and how customer data can be gathered.

Establish Rules: Create a governance framework with the management policies and practices that encourage customer centricity.

Build Common Ground: Set up consistent processes for customer relationship management across all sales and service organization.

Take Leadership Seriously: A strong leader, who is accountable for all touch points, must be appointed. IBM has established an executive position — Chief Experience Officer, for this particular matter.

Insist On Robust IT InfrastructureMarketing in a complex business environment requires sophisticated IT support. Marketers cannot go far without the right technology platform for implementing marketing initiatives. To position themselves and retaining their positions most flexibly, IBM is putting in place a hub-and-spoke architecture. This allows them to build a “spoke” whenever new application needs to be integrated with a “hub” — a preferable alternative to constructing point-to-point connections between the new application and all other systems.Partner In Innovative WaysAs businesses search for the right relationship to capitalize on future opportunities, IBM evaluates potential partners from several perspectives:

Pick an appropriate mix of global and local partners Find a spot in someone else’s net value

As one of the world’s most recognized brands, IBM make out theconstant challenges of being on the market frontline.

WORK CULTUREEmployees are the essence of each and every organization. IBM has oneof the largest professional workforces around the world. IBM is the one ofthe most admired company in the world, and is also retaining theposition. It is possible only with the support of the quality of the leadersand managers. IBM brought the expertise of their people, a workforcethat is responsive to market requirements, with the skills and expertise todeliver value to clients, is resilient to market forces and delivers strong

leadership into the market.There are mainly three-fold initiatives for the employees because ofWhich IBM is able to retain its position as one of the World’s topEmployer over the years:Capability: Rigorous and ongoing career/skills developmentprogramsClimate: A challenging, empowering work environment, with worldclass infrastructureCulture: Sensitive to a global workforceThe attributes that qualify these 3Cs are the Top Reasons that people come to work at IBM.CAPABILITY – Molding Global Leaders and FosteringEmployee Talent: To be a leading international company, it is important to develop an organization of global leaders and dynamic international employees. IBM is committed to the employee wellbeing and career growth. CLIMATE: Flexibility At Work and Employee WellnessPrograms: IBM believes in empowering employees as partners to success, offering a global work culture and best workplace amenities. At IBM, cubicles are out and mobile offices are in.Workforce flexibility is a competitive advantage for IBM. It helps make the Employer of Choice for new hires, and enables them to retain their top talent. Some of IBM’s workplace flexibility programs include individualized daily work schedule, Flexible Work Week,Regular Part-Time, Leave of Absence, and Remote/Mobile Work Options. IBM strives to make life more convenient for the employees so they can save their energy and be more productiveat work. The idea is to ensure IBMers work better even when they are home, or on the move. Most mobile employees are provided with IBM laptops, which function like their office “cabinet,” containing all their files, presentation materials, and a whole extent of support services that they need to meet their clients’ and other requirements. Be it downloading files, checking and replying to mail, or linking to the electronic library, IBMers can dial into the IBM network, and get connected, through the nearest landline telephone.

CULTURE:

Workforce Diversity: Diversity in IBM means welcoming all the people to the workplace regardless of factors unrelated to job performance. The mission of IBM’s Global Workforce Diversity is to guide in creating a business environment, which recognizes our individual differences as a competitive strength and a critical requirement for our success in the global market. This environment enhances the success of the employees, enhances the ability to satisfy their clients and advance IBM’s continued growth. IBM's definition of diversity includes all human characteristics that make us unique as individuals. It includes everyone and excludes no one. Race, gender, geographic origin, culture, lifestyle, age, disability, economic status, marital status, and religion are just some of the characteristics that define them as people. IBM has received numerous awards for workforce diversity. Recently, Jyotindra Mehta, an employee of IBM, was awarded theHelen Keller Award in 2004, by the National Center for Promotionof Employment of Disabled People.

4. ENVIRONMENTAL SCANNING (PEST)

Overview of Egypt climate

Egypt has entered a new era of opportunity. Political, economic and social reforms have brightened up the economic climate, encouraging private enterprise and a surge of new investment, increasingly from abroad. It's business sectors have risen to the challenge

Egypt is looking for developments and new technologies

Political Forces

Egypt has a perfect relation to USA and EU in different fields. The political life is totally stable in Egypt and people live in piece

Egypt witnesses political reform

Foreign investors are regarded by the government as a big investment opportunity and laws have recently streamlined procedures, making the purchase procedure easy.

Egypt topped the list of reformers in the region and worldwide according to the World Bank and IFC's.

The use of other non-tariff barriers on imports and export restrictions has also been reduced. Bureaucratic barriers, however, still hamper investment

Economic Forces

Economic reform and investment: creating jobs, Improving economic governance and the overall business climate, building up the private sector, financial sector and tax reforms, boosting inward investment

The government of Egypt is committed to transforming the country’s economy through the promotion of foreign direct investment over the long term

It has recently introduced new reforms to customs, income and corporate taxations, while privatizing certain sector industries, and developing an export market for their natural gas deposits.

Foreign capital investment has a place in the country's economic development

so new projects financed with foreign capital were protected, capital was freed for re-export within five years of its investment in Egypt

new projects financed with foreign capital are exempt from taxation for five to ten years; in addition, payments of interest on foreign loans are not taxable and investors are exempt from certain customs duties

Unemployment Rate

Year Unemployment rate Rank Percent Change Date of Information

2003 12.00 % 84 2001 est.2004 9.90 % 98 -17.50 % 2003 est.2005 10.90 % 102 10.10 % 2004 est.2006 9.50 % 95 -12.84 % 2005 est.2007 10.30 % 118 8.42 % 2006 est.2008 9.10 % 114 -11.65 % 2007 est.2009 8.40 % 114 -7.69 % 2008 est.

Definition: This entry contains the percent of the labor force that is without jobs. Substantial underemployment might be noted.

Source: CIA World Factbook - Unless otherwise noted, information in this page is accurate as of September 17, 2009

https://www.cia.gov/cia/publications/factbook/

Agriculture counts for the maximum employment in Egypt. 42% of the employed population in Egypt is involved in agriculture. However there is very little demand for employment in this sector. Moreover agriculture’s contribution to employment in Egypt has also declined over the years.

In Egypt, unemployment has also been the result of underperformance of labor markets. This is also the reason for decline in labor income in Egypt. Unemployment among literates is much higher (almost ten times) than that among illiterates in Egypt. According to reports of ALO (Arab Labor Organization), higher unemployment among the educated is a trend of the entire Arab world.

In 2007, Egypt had an average unemployment rate of 8.3% as per the estimates of the national economic research center of Egypt.

The government, the private institutions and the labor force need to co-operate in order to solve the problem of unemployment in Egypt. Some of the important measures of solving the problem of unemployment are –

Social Forces

improving quality of life and living standards for citizens

Rich cultural and historical interest, dating back some five thousand years.

Friendly nature of the Egyptian people.

Increase in internet users

Technological Factors

Egypt still an evolving market, not yet saturated with technological aids.

The government bolster the use of technology & try to modernize its sectors by introducing technological aids

Egypt today has a state-of-the-art communication system, including three mobile phone companies servicing a subscriber base that has seen exponential growth

Increase number of companies that need ERP systems

Legal Procedure

Standardized company

Legal Form: Sharikat that Massouliyyah MahdoodahCity: Cairo

Registration Requirements Summary:

The founder deposits the company documents at the reception desk, where they are reviewed immediately by a lawyer. A registry employee reviews the documents, and issues a detailed invoice for all fees associated with the company's establishment.

General Factors

Egypt is the first recipient in North Africa and the second largest recipient in Africa after Nigeria of Foreign Direct Investment, namely accounting for $13.2 billion, which equals 45 % of FDI in the Middle East North Africa (MENA) Region. Click here for more details

With introduction of the new tax law and the liberalization of the economy, the highest tax rate in Egypt for individuals and companies is only 20%. Also certain industrial sectors are even exempted from taxes on revenues and profits.

Egypt was awarded the title "Top Reformer of the Year" in the World Bank's Doing Business Report 2008, making it a popular investment target.

In the fiscal year 2007/08 GDP rose about 7.2%, mostly contributed by tourism, IT, construction, industry and transportation.

Unique strategic location provides excellent access to the markets in Europe, the Arabian World, Africa and India.

Holding a major role in the production of Arabic media, in addition to the rapid development in internet access and mobile networking, Egypt has an immense potential to be the driving force in information technology in the region.

Egyptian real estate is indeed the most lucrative investment due to inexpensive land and construction prizes and also as tourism guarantees continuous real estate demand in addition to the demand for private use.

Amid the international economic crisis, Egypt's economy remains unaffected due to the strong liquidity of its banks as compared to the US and Europe.

In spite of tragic terror attacks in the past, Egypt has always managed to stabilize its economy quite quickly. Despite the Dahab and Sharm El Sheikh bombings, FDI doubled from 2006 to 2008.

Political stability and low crime rate. Egypt's stable political climate and low crime rate (Cairo is one of the world's safest big cities) make it an attractive foreign direct investment (FDI) destination in a region that otherwise tends to be quite volatile.

5. Porters ‘Five forces model of competition

1. Rivalry among competing firms

2. Barrier to entry

3. Potential development of Substitute products

4. Bargaining Power of suppliers

5. Bargaining Power of buyers

1. Rivalry among competing firms

The strength of competition in this industry is very high; the main rivals are HP, Microsoft, Dell, they compete with international, national, regional, and local. There are many strong competitors.

2. Barriers to entry

The threats of entry is low because the costs of R&D, support products and services, manufacturing, and distribution are very high

3. Threat of substitutes

Up till now there are no substitutes for computers or Laptops, so the threat of substitutes is low.

4. Bargaining Power of suppliers

• There are many Chinese suppliers, bargaining power is low.

5. Bargaining Power of buyers

• The power of buyers is high because of switching costs for buyers are low, there are also many product choices for the buyers.

6. Financial Ratios

Quick ratio

• Current assets-inventory/liability

• Quick ratio=45,764-2,989/38,338=1.12

The quick ratio analysis is good, as IBM will still manage to cover its liabilities without relying on sales revenues

Debt to Equity Ratio

Total debt/Total stockholders' equity=75,604/30,451=2.5.

-IBM’s debt ratio of 69% seems less onerous debt-equity ratio 0f 220% which means creditors have more than twice as much money in the company than equity holders. Ratio is not a pure measurement of a company’s debt because it includes operational liabilities in total liabilities. Companies with a large amount of purchased goodwill from heavy acquisition activity can end up with a negative equity position

-The ratio is high. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debts. It is above the industry ratio, which is under 0.5

Long term debt to equity ratio

Long term debt/total stockholders' equity

Long term debt to equity ratio=37,257/30,451=1.2

It is a bit high, means a higher proportion of debt is used for the permanent financing for the firm as opposed to investor funds.

Activity ratio

Inventory turnover=Sales/Inventory of finished goods

Inventory turnover=92,950/8,967=10.3

Turnover time=365/10.3=35 days

This means that it takes IBM 35 days to sell its finished goods.

Fixed assets turnover=sales/fixed assets

Fixed assets turnover=92,950/60,291=1.5

High ratio means that the company has been more effective in using the investment in using the investment fixed assets to generate revenues.

Profitability ratios

Gross Profit Margin=Sales-COGS/Sales

Gross Profit margin41, 950-92,950=0, 45

This ratio is used to assesses the profitability of a firms' core business , excluding the fixed costs, each dollar of the company’s revenue is available

to meet expenses and profits after paying for goods and services to be sold.

Operating profit Margin

Operating income/net sales

Operating Profit Margin=12,524/92,950=0.13

IBM makes $0.13 (before interest and taxes)on each dollar of sales

Net profit margin

Net Income/Sales

Net profit margin=8,619/92,950=0,092

Return on assets (ROA)

Net income/Total assets

Return on assets (ROA)=8,619/106,055=00.81 or 8.1

This ratio tells how much profit the company generates for each $1 sales.

Return on stockholders' equity

Net income/Total stockholders' equity

Return on stockholders' equity=8,619/30,451=0.28

Leverage ratios

Debt to Total Assets Ratios=Total debts/total assets

Debt to total assets ratios=75,604/106,055=0.71

Low level of risk, the company has more assets than debt

7.SWOT/TOWS MATRIX

Strength Weakness

1-its Image or brand name 2-Good organization culture 3-IBM revenues increased 7% to $69.92 billion in 20064-A unique revenues to engage their employees in an online intranet using its Jam technology5-strong strategic planning to be an innovation-centric globally6-IBM operates in 170 countries with about 60% of its revenue being generated outside the US.7-IBM concentrated on becoming stronger in high value added business8-IBM ranked number hosted service provider in western Europe9-IBM is supercomputing leader as provider of 35 of the world’s 100 most powerful supercomputers10-Global integration11-Flatter organization

1-Declining in revenues of services and systems segments in 20062-Decline in revenues 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 20065-Mergers and acquisitions issues

Opportunities S-O Strategies W-O Strategies

1-The video game market revenue is projected to reach$12 billion in 2008 and $66billion in 20122-Mobile phone market is expected to grow in Egypt3-Handheld computer markets are expecting to grow 4-Egyptian government launched its development strategy of “computer for everyone

1-Enterning the video game console market by producing video game console (S7O1)

2-Entering the mobile phone market, (S7,O2)3-Enter the handheld computer market(S7,O3)

1-Sponsorship and training programs with the Government(W1,O4)

Threats S-T W-T 1-Unrelibility of the Egyptian Government 2-Competitors are strong3-Economics fluctuation could crimp consumers' spending3-Small & Medium business demand fails to accelerate.4-Low switching costs

1-Further IBM’s leadership in innovation initiatives(S9,W2)2-Capitalize on technological, business and social trend and the need of enterprises to innovate in addressing those trends(S9,W1)

1-Leverage the internal business transformation process (W5,T2)

8. Recommended Strategies

“At IBM, we strive to lead in the creation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics.

We translate these advanced technologies into value for our customers through our professional solutions and servicesbusinesses worldwide..”

9. Objectives

Drive revenue growth through new market, new offering and new products both developed and acquired.

Focus on productivity to improve margin

Deploy cash to fund growth and provide shareholder returns via dividends/buybacks

Sustain growth, increase profitability and maintain competitive advantage

4ndGen IBMS Case Analysis[1]

Documents

Transcript of 4ndGen IBMS Case Analysis[1]