STRATEGIC MANAGEMENT REPORT

(INTERNATIONAL BUSINESS AND MACHINE) STRATEGIC ANALYSIS OF IBM

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 position as 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 Incentive Program 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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International Business Machines or IBM was founded in 1888 as Herman Hollerith and theTabulating Machine Company. Its name was later changed to IBM in 1924 when it became Fortune 500 company. It is known to have more patents than any other American tech company. It was taken by the US government at the beginning of World War II, in the war effort and given a one percent profit, which it used to fund war victims and orphans.

IBM was one of the leader brands of I.T industry, which is basically related to computingvarious dimension of technology weather it is about gadget or the software. It developed products from punch-card tabulating machines to room sized calculators and main frame computers. In 1980, the company introduced IBM Personal Computer (PC) in which the processor camefrom Intel and operating system from Microsoft. In 1992, the company introduced laptopswhich were named ThinkPad. IBM introduced cost effective technologies like instead of puresilicon chip, they introduced a blend of silicon and germanium. IBM has On DemandInnovation services where different teams offer business transformation and technologyconsultation services.Today, IBM is the largest information technology company and the eight largest company inthe world with workings in over 170 countries. More than 60% revenue of the company isgenerated from outside of US

COMPANY VISION
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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 are believed 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 Customers
Our 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 Employees
Our 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, safe work environment. We will accommodate and please employees fully, without being unethical.

Our shareholders
To 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 fo llows : 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 2014 IBM 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 Mission

The 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 concentrates ondevelopment 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 each factor 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 Factors
External 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 Forces

Our 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 positive impact 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 forces Legal 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 12 | P a g e

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 forces
The 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 and overcome 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 forces

We 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. 13 | P a g e

5. Technological forces
Technology 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 competition

The 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 HewlettPackard, 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-PACKARD
HP 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 constantly develop newer and better technologies in order to stay ahead of HP and our other competitors.

SUMMARY OF MAJOR EXTERNAL FORCES

In 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 Forces With 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 Competition Our 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 Forces Our 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 Forces Although 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 Forces An 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 resources In 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 Governance Our 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 per year 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 Audit
Opportunities threats
Economic fluctuation could crimp

1. Video game console market revenue is 1. Competitors are strong. projected to reach $12 billion in 2008 and 2.
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$66 billion in 2012.

2. The IT market in Russia, India, Brazil, and 3. Government regulation in the computer China are expected to grow twice as fast as in industry is expected to increase by 2008 the rest of the world. by 9% in 2008*. . 3. Mobile phone markets are expected to grow 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.

EXTERNAL FACTOR EVALUATION

Key External Factor Opportunities 1.Video game console market revenue 0.20 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 0.10 as fast as in the rest of the world to grow by 9% in 2008 3.Mobile phone markets are expected 4.Handheld computers markets are expected to grow by 32% in 2008 rose by 11 percent in 2006 Threats 1.Competitors are strong
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Weight

Rating 3

Weighted Score 0.60

0.40

0.10 0.10 0.10 0.20

3 3 2 2 2

0.30 0.30 0.20 0.40 0.20

5. Growth in engineering technologies

2.Economic fluctuation could crimp 0.10 consumers spending 3. Government regulation in the 0.10 computer industry is expected to increase by 2008. total

0.30

1.00

2.70

INTERNAL AUDIT
Key internal factors Strength 1. IBM revenues increased 7 percent to 69.92$.billion in 2006. 2. Invested $5 to 6 billion in R&D. globally integrated corporation. revenues being generated outside the US. businesses. 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 Weakness 1. Declining in revenues of services and systems

3. Strong strategic planning to be an innovation-centric segments in 2006.

2. Decline in revenue of medium business industries 3.Decline in revenues in Asia assets are gradually

4. IBM operates in 170 countries with about 60 percent of its public, industrial, small and 5. IBM concentrated on becoming stronger in high value added in 2006 by 9.6%. 6. IBM ranked number 1 hosted service provider in Western Pacific area by 5.7%.4.Total

INTERNAL FACTOR EVALUATION

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Key Internal Factors

Weight

Rating

Weighted Score

Strength 1.IBM revenues increased 7 percent to 0.10 69.92$.billion 2. Invested $5 to 6 billion in R&D. innovation-centric corporation globally 0.06 4 3 0.40 0.18

3.Strong strategic planning to be an

integrated

4.IBM operates in 170 countries with generated outside the US

0.06

0.18

about 60 percent of its revenues being 5.IBM concentrated on becoming stronger in high value added businesses provider in Western Europe 7.IBM is

0.10

0.40

6.IBM ranked number 1 hosted service 0.10 supercomputing leader as 0.10 0.12

4 4 4

0.40 0.40 0.48

provider of 35 of the world's 100 most powerful supercomputers Weaknesses

1.Declining in revenues of services and systems segments in 2006 2.Decline in revenue of public, industrial, 0.80 small and medium business industries in 2006 by 9.6% by 5.7% 0.80 2 2 0.16 0.16

3.Decline in revenues in Asia Pacific area

4.Total assets are gradually decreasing 0.10 from 109M to 103M in 2006 0.10

2 2

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 position as 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

Critical Success Factor Company reputation Product quality Employee treatment

HP

MICROSOFT
Score 0.8 0.2 0.4 0.2 0.3 0.4 0.8 0.10

Weight Rating Score Rating Score Rating 0.2 0.1 0.1 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

Quality of management 0.1 Financial position Customer loyalty Global expansion Market share 0.15 0.1 0.2 0.05

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total

1.00

3.25

3.05

3.20

The 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

Rapid market growth Quadrant II Quadrant I

Weak competitive position

strong competitive position

Quadrant III Slow market growth

Quadrant IV

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

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SWOT ANALYSIS
Strengths Weaknesses Declining in revenues of services in 2006.

IBM

1. IBM revenues increased 7 1. 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 integrated corporation.

and systems segments

globally 2. Decline in revenue of public, industrial, small and medium

4. IBM operates in 170 countries business industries in with about 60 percent of its 2006 by 9.6%. revenues being generated outside the US. 3. Decline in revenues in Asia Pacific area by

5. IBM concentrated on becoming 5.7%.4.Total assets are stronger in high value added gradually decreasing 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 Opportunities S-O Strategies W-O Strategies from 109M to 103M in 2006

1. Video game console market revenue is Entering the video game console 1.Increasing
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projected to reach $12 billion in 2008 market by produce video game marketing efforts into and $66 billion in 2012. console, (S5, O1).2.Entering the Asia 2.The IT market in Russia, India, Brazil, mobile phone market, (S5, O3). and China are expected to grow grow by 9% in 2008 4.Handheld 3.Mobile phone markets are expected to computers markets are computers market. IBM should use revenues to invest in latest technologies (S5, O4) 3.Entering the Handheld Pacific, (W3, O3)

expected to grow by 32% in 2008 Recruit talented employees Threats 1.Competitors are strong 2.Economic consumers spending fluctuation could

crimp ST Strategies

1. Increase RD spending (S2, T3)

3.Government regulation in the computer industry is expected to increase by 2008

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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Financial Strength (FS) Return On Asset Leverage Net Income Income/Employee Inventory Turnover Financial Strength (Fs) Average 6 4 6 4 4 4.8

Environmental Stability (ES) Rate of Inflation Technological Changes Price Elasticity of Demand Competitive Pressure Barriers to Entry into Market -3 -6 -3 -5 -3

Environmental Stability (Es) Average -4.0

Competitive Advantage (CA) Market Share Product Quality Customer Loyalty Technological Know-How Control Over Suppliers And Distributor -2 -2 -2 -1 -2 -1.8

Industry Strength (IS) Growth Potential Financial Stability Ease of Entry into Market Resources Utilization Profit Potential Industry Strength (IS) Average 5 5 5 5 5 5.0

x-axis: -1.8 + 5.0 = 3.2 X-axis: -1,8+5.0 = 3.2

Competitive Advantage (CA) Average

Y-axis: 4.8 + -4.0 = 0.8 FS CONSERVATIVE 5 4 3

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AGGRESSIVE
Backward, forward horizontal integration Market penetration Market development Product development Diversification (related and unrelated)

2 CA -6 -5 -4 1 -3 -2 -1 6 DEFENSIVE -1 -2 -3 -4 -5 -6 ES COMPETITIVE 1 IS 2 3 4 5

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

IBM
STARS
INDUSTRY SALES GROWTH RATE

QUESTION MARK

CASH COWS

DOGS

(QSPM) QUANTITIVE STRATEGIC PLANNING MATRIX

Strategy 1 Enter video game console market Key Internal Factors Strengths 1.IBM revenues increased 0.10 7 percent to 4 0.40 2 0.20 Weight AS TAS Strategy marketing AS 2 Increasing efforts TAS into

Asia and Europe

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69.92$.billion in R&D.

2. Invested $5 to 6 billion 3.Strong planning globally to

0.06

strategic 0.06 be an

innovation-centric corporation

integrated 0.10

0.30

0.40

4.IBM operates in 170 percent of its revenues

countries with about 60 being generated outside 0.10 the US 5.IBM concentrated on becoming high stronger value added 4 0.40 4 0.40

in 0.10

0.20

0.40

businesses

6.IBM ranked number 1 0.12 hosted service provider in Western Europe 7.IBM is supercomputing leader as provider of 35 of the world's 100 most powerful supercomputers Weaknesses services

1.Declining in revenues of 0.80 and systems segments in 2006

0.16

0.32

2.Decline in revenue of 0.80 public, industrial, small and medium business

0.24

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 gradually 2006 Subtotal assets

0.10

0.20

0.30

are 0.10

0.30

0.30

from 109M to 103M in

decreasing

1.00 Strategy 1

2.20 Strategy marketing AS 2

2.24 efforts TAS Increasing into

Enter video game console market Key External Factors Opportunities 1.Video market game console 0.20 is 4 0.80 Weight AS TAS

Asia and Europe

0.60

projected to reach $12 billion in 2012

revenue

billion in 2008 and $66 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

0.10

0.10

0.30

0.10

0.10

markets are expected to grow by 32% in 2008 5. Growth in engineering

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0.10

0.20

0.10

technologies rose by 11 percent in 2006

Threats 1.Competitors are strong 2.Economic spending fluctuation 0.10 0.20 4 1 0.80 0.10 4 3 0.80 0.30

could crimp consumers 3. Government regulation 0.10 in the computer industry is expected to increase by 2008. subtotal 1 0.10 4 0.40

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 Europe Now the relative attractiveness of each strategy has been evaluated against critical internal and external 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 attractiveness scores 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 any strategy 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 differentiation IBM needs to get rid of their loss making departments; this should be done throughthe following1. for Divestiture For the companys profit making departments they should use competitive strategies and opt Product development Market penetration screen Tablets

1. IBM should launch android based Tablets to cater the markets new demand for touch 2. Another Category, which should be introduced by IBM, is the cell phone market as they 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 5. They should move forward with the plan of acquiring intensive strategies. celebrity or branded programming entertainment. have the IT required for most of the work

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