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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


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.


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


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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29 | P a g e

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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30 | P a g e

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


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.

Sm Major Report

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