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CASE ANALYSIS

INTERNATIONAL BUSINESS MACHINES (IBM)

CASE 8

Name- Sanjim Ghansham Ahuja

Enrollment Number- 200240

Professor- MR. STUART ARENDS

SUBJECT - BUSINESS POLICY

(MGT 4950 WB 5800)

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CONTENTS

S.NO TOPIC

1 Introduction

2 Strategic analysis: mission and vision PESTEL, SWOT, Internal and external analysis.3 SWOT analysisSWOT Matrix

4 Strategic challenge

5 Strategic Option / Future Option

6 Implementation & Change

7 Financial Balance sheet

8 Ratio analysis

9 Competitive Profile Matrix (CPM)

10 Competition

11 Quantitative Strategic Planning Matrix (QSPM)

12 External Factor Evaluation (EFE)

13 Internal Factor Evaluation (IFE)

14 Conclusion

15 References

1) INTRODUCTION

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IBM one of the leader brand of I.T industry which is basically related to computing, having its arm

spreads to almost all dimension of technology weather it is about gadget or the software. IBM is the

world's largest information technology company with 2005 revenues of $91 billion. IBM is the biggest

provider of IT services ($47B), hardware ($24B) and rental and financing ($2B). The company has

approximately 329,000 employees and conducts business in 170 countries.

International business machine is an I.T giant now days, stretching it hands. The IBM now a day provideswide range of Data storage devices as well as servers with enormous storage and secure database. IBM is

now aiming for animation, consolidation which saves wide range physical assets. IBM has also good

contribution in the space research like IBM ThinkPad 750. IBM has established much software for

environment management and protection like in 1999 the environment monitoring softwares. IBMs

system/390 is the world most powerful main-frame computer. IBM introduced various cost effective

technology like instead of pure silicon chip, introduced a blend of silicon and germanium. IBM designed

the website for Nagano Olympic winter games, the website made 650 million hits from around the world

that is one of the world record. IBM earns more profit than the next nine computer firms generated in total

sales, spending more on research and development than they made in earnings.

This report is focuses on the new strategies adopted by the IBM and the strategies

through which IBM survived over the competitions. This report shows how IBM

states itself feasible beside of its massive operation size. (Understanding IBM, 2008)

2) STRATEGIC ANALYSISVision statement:

At IBM, we strive to lead in the invention, development and manufacture of the industry's most advanced

information technologies, including computer systems, software, storage systems and microelectronics.

We translate these advanced technologies into value for our customers through our professional solutions,

services and consulting businesses worldwide.

Mission statement:IBM main activity is to find solutions to its wide range of clients using advanced information technology.

Its clients are individual users, specialized businesses, and institutions such as government, science,

defense, spatial and educational organizations. To meet and respond to its customers needs, IBM creates,

develops and manufactures many of the world's most advanced technologies, ranging from computer

systems and software to networking systems, storage devices and microelectronics.(Linch, 1997)

Through this mission statement IBM is striving to dynamically galvanize their props in various field and

trying to maintain a stabilize balance between all above aspect like clients, government, educational

organization etc.

The main strategy of IBM is to delivers their high value added services (or software)to customers through

their server product. And it can be divided into 4 pieces as follows:

1) Reallocating resources to enhance their server product business and reduce

operation costs and optimize the efficiency.

2) To pursue an innovation agenda with its clients, partners and in other relationships,

and to continue refining its portfolio to achieve higher value.

3) Acquiring businesses that contribute strategically to its portfolio

4) To maintain its leadership of this rapidly changing business by focusing on high-

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value innovation-based solutions and services while consistently generating high

returns on invested capital for its shareholders.

The strategy making of IBM should consider whether the new strategy can satisfy these key stakeholders

who have high power. For example, the government element in the keep satisfied, they have high

power (legislation power) but low interest. Another example is the shareholders in key players, who

have high interest in IBM and high power on affecting the strategic decision. To sum up, if the strategicdecisions threaten the benefits of the key stakeholders, this strategy might be difficult to be achieved.

Proposed Mission

COMPONENTS IBM REMARKS

Customer No Mentioned but unspecified.

Products/Services Yes Creation, Development & Manufacture.

Markets Yes Worldwide or global.

Technology Yes Specified as Information Technology.

Survival, Growth &

ProfitabilityNo

Mentioned in IBMs Principal goals, long term

value to shareholders.

Philosophy No Based on IBMs Guiding Rules.

Self Concept YesPresumed by word lead. Based on IBMs New

Industry Model.

Concern for Public Image No Mentioned in IBMs Business Model.

Concern for Employees NoMentioned in IBMs Business Model and Business

Conduct Guidelines.

At IBM we strive to lead in the creation, innovation, development and manufacture of the industrys

most advanced information technologies, including computer systems, software, networking systems,

storage devices and microelectronics.

We translate these advanced technologies into competitive value for our individual and corporate

customers through our professional on-demand solutions and dedicated business services, while

consistently generating high returns for our shareholders, and a shared commitment to our

employees and the world.

For 100 years, IBM has transformed industries and advanced the worlds most critical systems.

Automating Rail Systems

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1915 Nearly all major U.S. railroads used tabulating technology to automate scheduling and accounting

operations, starting with New York Central and Hudson River Railroad.

2010 Helped Russian Railways move 1.3 billion passengers and freight more efficiently

Modernizing Government

1922 Tabulating technology used to conduct Brazils first mechanized census.

2010 Helped New York State save nearly $1 billion preventing tax fraud with advanced analytics.Automating Aviation Industry Operations

1962 Created the Sabre airline reservation system for American Airlinesa precursor of everything from

the ATM to e-commerce.

2010 Helping New Delhis international airport manage growth in air travel from 28 million passengers

today to an expected 150 million passengers in 2020.

Raising Healthcare Standards

1965 Physicians detected changes in temperature, blood pressure and heartbeat with data collected and

visualized by an IBM monitoring system.

2010 Stream computing technology and advanced analytics research at the University of Ontario Institute

of Technology are used to monitor the health of premature babies at the Hospital for Sick Children,

Toronto.

Procurement:

IBM has developed Business Partner relationships with establishment, best-of-breed Supply Chain

Management solution providers. Their solutions, coupled with IBM products and services, deliver the

cost-competitive, scalable and secure infrastructure the customers need. Acquisitions and mergers in order

to improve their businesses on the high value products and services, IBM acquired service-related

companies into the global services segment, (e.g. Network Solutions, data storage and transferring,

mainframes etc) and the software-related companies that were integrated into the software segment.

Inbound & Out bound Logistics and Operations:

IBM's supply, manufacturing and logistics and customer fulfillment operations are integrated in one

operating unit that has reduced inventories, improved response to marketplace opportunities and external

risks and converted fixed to variable costs. This feasibility IBM has acquired after facing a huge flexible

competition by Compaq in 1982.Through this flexible and enormous services exchange system IBM now

a days possessing almost top position at market in its segment.

Key Financial system/ Marketing and sales:

In 2005, the company realigned its operations and organizational structure in Europe to give sales and

delivery teams greater authority, accountability and flexibility to make decisions and to execute more

effectively on behalf of our clients. The company had broaden their dimension to Asian countries in order

to increase their sales, company has explored a huge profitable market in Asia specially in the middle and

Asian countries which includes some of the fastest growing economies ( China, India, Taiwan and Hong

Kong, Singapore, Thailand, Indonesia and the Philippines etc.)

Services:

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IBM Provides technology and transformation services to clients, businesses, and

invests to improve the ability to help their clients innovate.

And this is the high value added and profitable process. The service IBM provides beside of above

mentioned are Middleware services, Outsourcing services, Security and privacy services, Server services

and Site and facilities services, mainframes, communications, mainframe storage, minicomputers, and

personal computers.Global Business Services (GBS). IBM Global Business Services replaces what was formerly called

Enterprise Business Services and Business Consulting Services. Redbooks are distributed by IBM and are

increasingly available through online book stores such as Fatbrain.com and Amazon.com.

IBM provides services basically in three categories.

1. The more IT-oriented technology services offerings like strategic outsourcing,

integrated technology services, and hosting.

2. IT infrastructure delivery, which is becoming increasingly strategic as a lever to

drive productivity, efficiency and margin improvement.

3. And offerings targeted toward transformation and high-end business value --

consulting, systems integration, application services, business transformationoutsourcing, asset innovation, and strategic business development. (Understanding

IBM, 2008)

Value System Analysis:

The value system of IBM is as follows:

In this value network of server products, the processor and the software providers have higher profit pool

than other suppliers. Furthermore for the distributors, the retailers have the high profit pool. Therefore,

the profit space of server products for

IBM is not wide enough.

Value drivers:

Channels Value Drivers

Wholesalers: Price, choice, quality, logistics

Retailers: Price, service, guarantee

Business orders: Price, service, guarantee.

The information above shows the main distributors of IBM and their value drivers.

Because of high buyer power, satisfying their distributors is required for IBM.

PESTEL ANALYSIS

Political factors:Taxation, the heavy taxes in the UK make the IBM server products increase the weakness on the price

factor, especially on the premium price IBM products.

Economic factors:

GDP factor, the healthy economic environment with strong and stable GDP in the all regions provides a

good market for the product and service business of IBM. Although the GDP increase rate is not fast, the

stability could balance this disadvantage element.

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GDP - composition by sector: The service industry in the world contributed nearly73.4% to the GDP in

2006. That indicated that the high value added service market in the world is matured, and the customer

experience on the service would be higher or more difficult to be satisfied.

Socio cultural factors:

Population and the internet users, in 2006, the population in just U.K it was nearly 60,609,153, and

according to CIA, (2007), more than half of these people (37.6million in 2005) were internet users. Thewell known about the internet indicated the opportunities of relevant products and services.

Technological factors:

Internet, A survey from CIA, (2007) shows that there were 6,064,860 Internet hosts in 2006, and more

than 400 Internet Service Providers in 2000. In this sophisticated market, the opportunity and competition

will exist together.

Environmental factor:

In environmental dimension the IBM made the some of the major technologies like to trace the weather

through-out the world, IBM made computers for NASA for astrology that made them to set the satellite

which monitor the environmental changes over the globe. IBM also added some of the revolutionary

environmental friendly strategies which not just provides environmental saving factors, but also costsaving factors like energy cost.

Legal:

The main legal constraints for IBM are Cyber protection and the chemical the use in making hardware

(like: carbon, germanium and silicon), the cross country business, currency exchange and many legal

registrations for their business outsourcing facilities.

POTERS 5 FORCES ANALYSIS:

The threat of entry:

The threat of entrants for the server market was low because of the enormous costs on the R&D, relevant

support products and services, manufacturing and the distribution. For example, IBM spent nearly $171

million in system and technology for server product in 2005, (Annual Report,2006) and IBM spent over

$1 billion in the Linux operating system in 2001.(Shank land, 2002) This was only the barrier on the cost,

there were other barriers like technique, distribution channels etc.

Power of Suppliers:

Intel and AMD, as the two biggest processor providers (monopolies) in the world, have very strong power

on the chip supplying. Although the power of suppliers might be decreased resulting from the

competition between these two companies, the wide range of customers and high costs on switching cause

the buyers lack of power to bargain with these two giants.

However, the power of suppliers for other low technical required material and parts was much lower than

the core hardware providers.

Power of buyers:

The power of buyers for the server products in the UK was high because the buyer did

not concentrate to the firm and the switching costs for the buyers were low. There

were many product choices for the buyers, e.g. IBM, HP, Dell etc

Competitive Rivalry:

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By 2003, the world server market continues to show promising signs, according to IDC, (2003), the

competitive rivalry in the server market was becoming intense in the world. These competitors included

HP, IBM, Sun Microsystems, Dell and Fujitsu Siemens Computers were becoming the fifth leading server

vendor in the world.

The threat of substitutes:The web hosting business might be the biggest threat of substitute for the server products in the world.

The advantages of web hosting include low cost, tech-support, easy to manage and low switching costs.

In addition, the advanced personal computer might be another biggest threat to the server product.

However, currently, the PC cannot instead of professional server for the business uses.

3) SWOT ANALYSISStrengths:

- Advanced business performance management.

- Good organization culture.

- Strategic outsourcing, mergers and acquisitions.- High efficient fulfillment centre.

- Flexible marketing management.

- Creative services.

As company handling all most 95% of business task of top 1000 companies of wall street, the company

have some of the world fastest main frame and many revolutionary technologies like: speech recognition

a software with which you can work just with your voice, blue gene a supercomputer which is 500 times

fastest than world fastest computer and capable of more than one quadrillion operation per second.

Through such outperforming technologies IBM is able to provide some of the best back hand facilities.

The most recent merge of IBM is with the Lenovo in which Lenovo is providing the outer hardware

technology and IBM providing all of its latest chip technology.IBM has been entered the wide range offields i.e. Business continuity and resiliency services, End user services, Integrated communications

services, IT strategy and architecture services, Maintenance and technical support services, Middleware

services, Outsourcing services, Security and privacy services, Server services and Site and facilities

services, mainframes, communications, mainframe storage, minicomputers, and personal computers. Now

IBM came in market with its revolutionary Green technology through which they can save 40% of energy

cost through animation, consolidation and consultancy.

The emerging market GDP growth rateexpected to be 5 percent through 2015is more thandouble that of major markets.

Global data volumes are predicted to increase by 29 times over the next 10 years to 35zettabytes.* (A zettabyte is a 1 followed by 21 zeros.)

The infusion of digital intelligence into industries, infrastructures, processes and cities can makethem more productive, efficient and responsive.

Weaknesses:

- High costs in the value chain.

- Possible acquisition issues

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Since, IBM spends much on its research and development then its earning and have very limited supplier

in market. Since company owning very sensitive place in market, because of its massive organization size

the immediate change are likely impossible.

Opportunities:

- Strong and stable economic market context.- Sophisticated service market.

- High individual consumption power.

- Matured internet market.

- High level of entry barrier to the server market.

- Wireless Applications

(Understanding, 2008)

Well, company possess a good place in market, just with little feasible strategies to market changes, IBM

can hold a large share in market. Since, IBM has very less count of competitors in its segment; almost the

star of its field, through these specifications IBM can create a monopoly in its market. The internet is one

of the wide applications, that is growing faster than anything on earth, the opportunity is open for IBM,

because IBM already in this field by providing huge data storage facilities. Since, IBM is almost created

monopoly on server market, thats why its not easy for othercompanies to enter in this field and compete

over IBM, except some huge market giants like Microsoft. Wireless solutions enable customers to extend

their reach to clients, suppliers and employees using wireless and emerging technologies.

Threats:

- Customers have high experience on the service.

- Customers have low switching costs.

- IBM has high switching costs on the core hardware.

- Intense competition.

- High threat of substitutes.

As being one of the oldest players of its field, Customer may look for change. Today as market is soflexible, IBM may face threat from small companies like Compaq because of their small size they can

change rapidly with customer environment. IBM high spending than its earning on research and

development can be a loophole for IBM. Because of very limited suppliers during value chain process,

IBM can barely afford to substitute.

4) Strategic challenge/issueThese are the aspects that affect the strategy changes within the management of IBM. Stakeholder

Expectations and interests, Owners private/shareholders Profit, Performance, Direction, Government

Taxation, VAT, Legislation, Employment Rate, Senior Management staff Performance, Targets, Non-

Managerial staff Rates of pay, Job security, Working environment and hours, Trade, Unions Workingconditions, Minimum wage, Customers (Distributor/Government) Quality, Customer, Care, Price,

Creditors Credit score, new contracts, Liquidity, Suppliers Long-term Contract,

Stable, Payment, Local Community Jobs, Involvement, Environmental issues, Shares.

5) Strategic option/ future strategy/ Objectives

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It is becoming widely understood that the way in which companies are behaving as a

society is environmentally unsustainable, causing irreparable damage to our planet.

Rising energy prices, together with government-imposed levies on carbon production,

are increasingly impacting on the cost of doing business, making many current

business practices economically unsustainable. It is becoming progressively more

important for all businesses to act (and to be seen to act) in an environmentallyresponsible manner, both to fulfill their legal and moral obligations, but also to

enhance the brand and to improve corporate image.

Future Alliances

IBM has targeted five industries: aerospace, automotive, financial services, government and life sciences.

For example, IBM recently installed a grid-computing system at Charles Schwab that reduced the

processing time on a wealth-management application from more than 4 minutes to 15 seconds.

However, the number of general-purpose applications that now requires -- or is optimized for -- grid

computing is still quite small. "Even in commercial environments, the grid applications IBM points to

tend to be specialized and separate from the rest of a firm's data center," Illuminata's Haff told Tech News

World.

Whenever IBM promotes a new piece of hardware or software, there are usually concerns about it being

based on proprietary technology. There is a hint of that with IBM's grid-computing movement. To

squeeze out the maximum processing power from IBM's grid-computing initiative, a company would

have to purchase IBM hardware and software.

To combat this impression, IBM has been working with other suppliers to promote the grid model and to

facilitate proliferation of grid-enabled technology. This year alone, Big Blue has entered into allianceswith five key middleware vendors: Avaki, Entropia, DataSynapse, Platform Computing and United

Devices.

IBM also has started to support the Open Grid Services Architecture (OGSA), a set of emerging standards

designed eventually to produce multi vendor grid architecture.

A sense of dj vu is sweeping throughIBM's(NYSE: IBM) executive offices. Hardware, a category of

computer technology that has been commoditized over the past several years because of falling prices,

once again has become sexy -- so sexy, in fact, that it has become the linchpin in IBM's quest to maintain

its position as one of the industry's most important vendors.

The hardware model at the center of IBM's technology strategy is called grid computing, a high-end

architectural strategy of making multiple computers work on the same computational problem

simultaneously.

"IBM plans to make all of its key software products as well as its hardware compatible with grid

computing," Gordon Haff, a senior analyst at market research firm Illuminata, told TechNewsWorld.

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IBM's Distributed Terascale facility, for example, is a grid-computing project designed to allow

researchers to perform 13.6 trillion calculations per second, making the series of connected computers

1,000 times faster than IBM's chess-playing Deep Blue machine.

Problem Fragment

To date, however, grid-computing technology has appealed only to select clients -- those supporting

complex academic, engineering, government or scientific applications. IBM plans to push grid computing

into the corporate mainstream by having it serve as the company's computing foundation to make

computers simpler to manage, easier to operate and less costly.

IBM is aggressively moving toward the grid-computing model because the multiprocessing architecture

typically used in high-end servers often runs into bottlenecks when doing massively complex processing

tasks. Grid computing solves that problem by enabling a large number of disparate computing resources

to work on different portions of a large, complex problem.

IBM's grid-computing initiative is so comprehensive that its success or failure might determine whether

or not the company will remain a major player in the industry.

Dawning of a New Age

IBM is not the only company pushing toward grid computing. All major computer vendors -- with few

exceptions -- have announced grid-computing initiatives.Hewlett-Packard(NYSE: HPQ), for example, is

using grid computing in its Superdome systems, and Sun Microsystems has been developing what it calls

the One Grid engine.

However, no computer vendor has tackled the problem of pushing grid computing into the mainstreammore than IBM has. "While HP and Sun are dabbling with grid computing, IBM has made grid computing

a top priority and clearly wants to emerge as the market leader," Mary Johnston Turner, research director

at Summit Strategies, told Tech News World.

At the unveiling of its grid architecture in January, IBM paraded out 10 grid-computing products. In July,

the company made its Web Sphere application development environment compliant with its grid

technology, and it seems like only a matter of time before other products, such as the company's Tivoli

management suite and DB2 database system, also support grid computing.

6) Implementation and ChangeIBM has the biggest threat in front of it that is global recession. The company has to

find some strategy which act as cure for their company in this unsteady market. The

main focus problems for the company are:

- Complexity.

- Inflexibility.

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- Speed.

- Scale.

The antidote to complexity is transparency. Complexity can hide the reality about financial condition.

This led to great uncertainty in the minds of investors and can cause irrational behavior among players.

Runs on solvent companies arise where customers cannot tell the difference between those organizationswhich can meet their financial obligations and those which cannot. The first remedy to future crises is

greater transparency in the form of stronger reporting requirements to the public.

The antidote to inflexibility is insurance. Firms and individuals who want to borrow should be required to

purchase shock absorbers with which to withstand a loss ofincome, natural disaster or default. The

most basic kind is a rainy day account are serve fund of cash that a firm or individual could use in case

of adversity.

The antidote to speed is a coordinated braking mechanism. Trading in markets can be suspended, as can

provide a cooling off period in which news and information can disperse, allowing panicked player to

assess the situation more fully. The brakes need to be applied infrequently and carefully. If player in the

market can correctly anticipate a reaction by governments, the player will begin to understand the game

system.

The antidote to the massive scale of losses will be the creation of larger reserve institutions. The company

must maintain a reserve that is equal to the loss they has expected and creates dent to such occasion. The

company must consider the another constraints like global currency slump, wealth distribution scheme.

(Cure of the crisis,2008)

It is important to consider the vitality of the current strength of the company and how it can be used in

order to exploit the opportunities that can be found in the external environment. In the case of IBM, the

primary strengths focus on the different technologies as well as knowledge that are available for the

employees in order to start doing their innovation. In addition, the company also holds a strong team that

focuses on research and development of the company.

On the other hand, the primary opportunity focuses on the fact that there is a growing demand for

open-source products and services, in addition to that standards in the economic expansion. The said

aspect is important due to the fact that customers from different part of the globe are looking for an

integrated solution in order to solve their application development needs (Novell 2006).

The said action will be done by different partnership with different IT-related companies that are

engaged in developing different open-source software and application. Open source is a human-readable

source code that was made available under a copyright license that meets the Open Source Definition,

where in it permits the users to use, change as well as improve the software, and then redistributes it.More often, than not, it is developed publicly and collaboratively. The reason behind the growth of

demand for open source software is that it enables the customers to save up to $60 billion every year

(2008; 2008).

The said strategy will help IBM to focus on the greater demand of the customers, thus, making the

company more aware regarding the behavior of the customers. It is also important to consider that the said

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strategy will help to boost the image of the company towards their customers, due to the fact that the

company is helping their clients to save money and effort.

7) Financial Balance Sheet for IBM

Assets

Current Assets

Cash And Cash Equivalents 10,661,000 12,183,000 12,741,000

Short Term Investments 990,000 1,791,000 166,000Net Receivables 29,789,000 28,523,000 29,097,000

Inventory 2,450,000 2,494,000 2,701,000

Other Current Assets 4,226,000 3,946,000 4,299,000

Total Current Assets 48,116,000 48,935,000 49,004,000

Long Term Investments 16,326,000 16,023,000 12,757,000

Property Plant and Equipment 14,096,000 14,165,000 14,305,000

Goodwill 25,136,000 20,190,000 18,226,000

Intangible Assets 3,488,000 2,513,000 2,878,000Accumulated Amortization - - -

Other Assets 3,068,000 3,001,000 3,536,000

Deferred Long Term Asset Charges 3,220,000 4,195,000 8,818,000

Total Assets 113,452,000 109,022,000 109,524,000

Liabilities

Current Liabilities

Accounts Payable 22,204,000 20,990,000 20,960,000

Short/Current Long Term Debt 6,778,000 4,168,000 11,236,000Other Current Liabilities 11,580,000 10,845,000 10,239,000

Total Current Liabilities 40,562,000 36,002,000 42,435,000

Long Term Debt 21,846,000 21,932,000 23,391,000

Other Liabilities 24,204,000 24,772,000 26,791,000

Deferred Long Term Liability Charges 3,666,000 3,562,000 3,441,000

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Minority Interest 126,000 118,000 -

Negative Goodwill - - -

Total Liabilities 90,405,000 86,385,000 96,058,000

Stockholders' Equity

Misc Stocks Options Warrants - - -

Redeemable Preferred Stock - - -

Preferred Stock - - -

Common Stock 45,418,000 41,810,000 39,129,000

Retained Earnings 92,532,000 80,900,000 70,353,000

Treasury Stock (96,161,000) (81,243,000) (74,171,000)

Capital Surplus - - -

Other Stockholder Equity (18,743,000) (18,830,000) (21,845,000)

Total Stockholder Equity 23,046,000 22,637,000 13,466,000

Net Tangible Assets (5,578,000) (66,000) (7,638,000)

Currency in USD.

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8) Ratio Analysis

Ratio Description The company

Current

ratio

A liquidity ratio calculated as current

assets divided by current liabilities.

International Business Machines Corp.'s current ratio

improved from 2008 to 2009 but then slightly deteriorated

from 2009 to 2010 not reaching 2008 level.

Quick ratio A liquidity ratio calculated as (cash plus

short-term marketable investments plus

receivables) divided by current liabilities.

International Business Machines Corp.'s quick ratio

improved from 2008 to 2009 but then slightly deteriorated

from 2009 to 2010 not reaching 2008 level.

Cash ratio A liquidity ratio calculated as (cash plus

short-term marketable investments)

divided by current liabilities.

International Business Machines Corp.'s cash ratio

improved from 2008 to 2009 but then deteriorated

significantly from 2009 to 2010.

Ratios (Summary)

Ratio Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006

Current ratio 1.19 1.36 1.15 1.20 1.11

Quick ratio 0.98 1.13 0.95 1.01 0.94

Cash ratio 0.29 0.39 0.30 0.36 0.27

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

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9) COMPETITIVE PROFILE MATRIX (CPM)

Competitive profile matrix is essential tool used in strategic management process, it contain all the

important critical success factors of industry. Success factor can vary from industry to industry, every

industry consider different success factor, and all the companies in CPM are measured on same scale by

considering the same success factor.

Note: Ratings are as follows: 1=major weakness, 2=minor weakness, 3=minor strength, 4=major strength.

As shown in the Competitive Profile Matrix (CPM) above, Innovation and Market Share are the most

important factor to become successful in this industry that are indicated with the same weight i.e. 0.22,

and IBM is currently the second most strongest amongst its competitors. Microsoft is the strongest in

Market Share whereas as Hewlett-Packard (HPQ) is the strongest on Innovation. Both International

Business Machines (IBM) and Microsoft are equally strong on the two factors i.e. Price and Financial

Position. Overall Microsoft is the strongest as it is indicated by the total weighted score i.e. 3.32.

IBM MICROSOFTHPQ

Critical Success Factors Weight Rating Score Rating Score Rating Score

Price 0.12 3 0.36 3 0.36 4 0.48

Financial Position 0.15 3 0.45 3 0.45 2 0.30

Advertising 0.09 2 0.18 3 0.27 4 0.36

Innovation 0.22 4 0.88 3 0.66 3 0.66

Market Share 0.22 3 0.66 4 0.88 2 0.44

Management 0.10 4 0.40 4 0.40 3 0.30

Global Expansion 0.10 3 0.30 3 0.30 3 0.30

Total 1.0 3.23 3.322.84

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10) Competition

Although IBM's main competitors are [Hewlett-Packard Company (HPQ)] and [Dell (DELL)], each of

these companies has a different focus area. Dell makes most of its money on PC and server hardware,

while [Hewlett-Packard] is more diversified as the leader in PCs and Imaging & Printing as well as

offering IT services. Since IBM relies heavily on its Software and Services segment, it mainly competes

with [Hewlett-Packard] in the servers and IT services markets and with Dell in the servers and softwaremarkets.

IBM is the leader in servers, IT services, and software. Also IBM leads HP and Dell in all measures of

profitability, largely because IBM is focused on high-margin sectors such as services and software and

has gotten out of the thin-margin PC business, in which HP and [Dell] are still heavily involved.

In addition to HP and Dell, IBM also competes with smaller IT consulting firms such as [Accenture

(ACN)]. However, IBM leads these companies by a large margin in terms of revenue, profitability, and

scale.

11) Quantitative Strategy Planning Matrix (QSPM)Strategic Alternatives

Key Internal Factors Weight Enter the Hand

Held PC Market

Increase

Advertising

Worldwide

Strengths AS TAS AS TAS

1. Ranked #1 service provider in IT outsourcing,

web hosting, and consulting.

0.02 --- --- --- ---

2. Leads in supercomputer, 219 out of 500systems.

0.03 --- --- --- ---

3. Invested $5 to 6 billion in R&D. 0.10 4 0.40 2 0.20

4. Stockholders equity increased from $31,688M

to 33,098M.

0.02 2 0.04 3 0.06

5. 13t year IBM received more patents than any 0.03 3 0.09 1 0.03

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other company.

6. 9 factors/plants have been integrated into a

single flexible network.

0.10 --- --- --- ---

7. Has a skills market that indexes 68,000

professionals worldwide.

0.06 4 0.24 2 0.12

8. Decreased the time it takes to process a

purchase within 10 years to a few hours.

0.10 --- --- --- ---

9. Leader in provider with approximately 500

certified partners worldwide.

0.08 1 0.08 3 0.24

10. Engineering & Technology services revenue

increased 28 percent.

0.04 4 0.16 2 0.08

11. IBM has generated $60.8 billion in cash over

past 5 years.

0.06 4 0.24 3 0.18

Weaknesses

1. Only gained nine percent in China in 2006. 0.03 1 0.03 4 0.12

2. Only grew 6 percent in small & medium-sized

businesses.

0.04 1 0.04 4 0.16

3. Increased loss from discontinued operations,

$18 million to $24 million.

0.01 --- --- --- ---

4. Revenues across all industries sectors decreased

5.4 percent.

0.03 1 0.03 3 0.09

5. Total assets decreased from $111 billion to

$105 billion in 2006.

0.10 1 0.10 3 0.30

6. IBM website isnt as aesthetically pleasing,

user-friendly, and innovative as competing

firms.

0.02 --- --- --- --

7. Communications sector declined revenue 13.6

percent in 2006.

0.03 1 0.03 4 0.12

8. Systems & technology gross profit declined

40.4 percent in 2006.

0.10 1 0.10 3 0.30

SUBTOTAL 1.00 1.58 2.00

Key External Factors Weight Enter the Hand

Held PC Market

Increase

Advertising

Worldwide

Opportunities AS TAS AS TAS

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1. Growth in engineering technologies rose by 11

percent in 2006.

0.04 3 0.12 1 0.04

2. A shift from software to service-oriented

architecture market is expected to double to

$143 billion by 2008.

0.05 1 0.05 3 0.15

3. Sony Corporation expected to lose more than $1

billion in the Playstation 3 consoles first year of

existence.

0.07 --- --- --- ---

4. Global spending on IT services is expected to

increase by 5.7 percent growth rate between

2005 and 2010.

0.03 --- --- --- ---

5. Telecommunications industry grew by 14 percent

in 2006.

0.07 --- --- --- ---

6. Diversified computer systems industry grew 72percent in 2005. 0.02 3 0.06 2 0.04

7. Video gaming industry rose 17.5 percent for year

2006.

0.07 --- --- --- ---

8. US software producers hold roughly 70 percent of

the world market.

0.04 2 0.08 3 0.12

9. China government has developed incentive

policies to encourage growth in the software

industry.

0.08 1 0.08 3 0.24

10. Diversified computer industry has a profitmargin of more than 6 percent.

0.04 --- --- --- ---

11. Hand held computers are expected to grow 31

percent.

0.09 4 0.36 2 0.18

Threats

1. Possible legislation to limit the number of

software patents awarded.

0.09 --- --- --- ---

2. Leading competitor has developed new

technology to reduce greenhouse gas emissions by

37 million pounds in 2007.

0.03 --- --- --- ---

3. Revenue in major European countries decreased

by 31 percent.

0.07 1 0.07 3 0.21

4. Leading competitor has over 12 percent more

market share as leading vendor of external disk

storage systems.

0.04 --- --- --- ---

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5. China forming contracts withAustralia for biochip

technology research.

0.05 --- --- --- ---

6. Government regulation in the computer industry

is expected to increase by 2008.

0.05 --- --- --- ---

7. Leading competitor expected to acquire majorsoftware firm.

0.02 --- --- --- ---

8. Leading competitor increased R&D by 1.2

percent.

0.02 --- --- --- ---

9. Interest rates are expected to grow 1.7 percent

annually.

0.03 --- --- --- ---

SUBTOTAL 0.82 0.98

SUM TOTAL ATTRACTIVENESS SCORE 2.40 2.98

12) External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted

Score

Opportunities

1. Growth in engineering technologies rose by

11 percent in 2006.

0.04 2 0.08

2. A shift from software to service-orientedarchitecture market is expected to double to

$143 billion by 2008.

0.05 3 0.15

3. Sony Corporation expected to lose more than

$1 billion in the Playstation 3 consoles first

year of existence.

0.07 4 0.28

4. Global spending on IT services is expected to

increase by 5.7 percent growth rate between

2005 and 2010.

0.03 1 0.03

5. Telecommunications industry grew by 14percent in 2006.

0.07 1 0.07

6. Diversified computer systems industry grew

72 percent in 2005.

0.02 4 0.08

7. Video gaming industry rose 17.5 percent for

year 2006.

0.07 2 0.14

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8. US software producers hold roughly 70

percent of the world market.

0.04 4 0.16

9. China government has developed incentive

policies to encourage growth in the software

industry.

0.08 2 0.16

10. Diversified computer industry has a profit

margin of more than 6 percent.

0.04 3 0.12

11. Hand held computers are expected to grow

31 percent.

0.09 1 0.09

Threats

1. Possible legislation to limit the number of

software patents awarded.

0.09 2 0.18

2. Leading competitor has developed new

technology to reduce greenhouse gasemissions by 37 million pounds in 2007.

0.03 1 0.03

3. Revenue in major European countries

decreased by 31 percent.

0.07 2 0.14

4. Leading competitor has over 12 percent more

market share as leading vendor of external

disk storage systems.

0.04 3 0.12

5. China forming contracts with Australiafor

biochip technology research.

0.05 2 0.10

6. Government regulation in the computer

industry is expected to increase by 2008.

0.05 3 0.15

7. Leading competitor expected to acquire major

software firm.

0.02 4 0.08

8. Leading competitor increased R&D by 1.2

percent.

0.02 1 0.02

9. Interest rates are expected to grow 1.7 percent

annually.

0.03 2 0.06

TOTAL 1.00 2.24

13) Internal Factor Evaluation (IFE) Matrix

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Key Internal Factors Weight Rating Weighted

Score

Strengths

1. Ranked #1 service provider in IT outsourcing, web

hosting, and consulting.

0.02 4 0.08

2. Leads in supercomputer, 219 out of 500 systems. 0.03 3 0.09

3. Invested $5 to 6 billion in R&D. 0.10 4 0.40

4. Stockholders equity increased from $31,688M to

33,098M.

0.02 3 0.06

5. 13th year IBM received more patents than any other

company.

0.03 3 0.09

6. 9 factors/plants have been integrated into a single

flexible network.

0.10 4 0.40

7. Has a skills market that indexes 68,000 professionals

worldwide.

0.06 4 0.24

8. Decreased the time it takes to process a purchase

within 10 years to a few hours.

0.10 4 0.40

9. Leader in provider with approximately 500 certified

partners worldwide.

0.08 3 0.24

10. Engineering & Technology services revenue

increased 28 percent.

0.04 3 0.12

11. IBM has generated $60.8 billion in cash over past 5

years.

0.06 4 0.24

Weaknesses

1. Only gained nine percent in China in 2006. 0.03 2 0.06

2. Only grew 6 percent in small & medium-sized

businesses.

0.04 2 0.08

3. Increased loss from discontinued operations, $18

million to $24 million.

0.01 1 0.01

4. Revenues across all industries sectors decreased 5.4

percent.

0.03 2 0.06

5. Total assets decreased from $111 billion to $105

billion in 2006.

0.10 2 0.20

6. IBM website isnt as aesthetically pleasing, user- 0.02 1 0.02

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friendly, and innovative as competing firms.

7. Communications sector declined revenue 13.6 percent

in 2006.

0.03 2 0.06

8. Systems & technology gross profit declined 40.4

percent in 2006.

0.10 2 0.20

TOTAL 1.00 3.05

14) Conclusion

The success or failure of IBM's initiative will not necessarily depend on the company itself, but rather on

its ability to entice software suppliers to make the necessary investments to make their products

compatible with grid capabilities.

Currently, there is a scarcity of programming tools, applications and management systems to help

developers make their products compatible with a grid-computing architecture. Retooling existing

products to run on new computer hardware is a complex task -- one that vendors undertake only when

they see a customer base willing and able to buy such products.

The information and fact available above in report, gives a brief over-view of IBM strategies and core

operation via SWOT and Internal analysis which includes sales and distribution, KFS, PESTEL and

Porter 5 forces. This report also lightens the future objectives and challenges for organization. And on the

bases of above analysis the last aim of this report is to suggest some of the strategy which covers the

loophole of the organization weak points.

15) References

1) http://www.ibm.com/annualreport/2010/downloads.html2) www.personal.psu.edu/auk3/teaching/portfolio/ist301/cases/SwotAnalysis_IBM.pdf3) http://finance.yahoo.com/q/co?s=IBM+Competitors4) http://www.stock-analysis-on.net/NYSE/Company/International-Business-Machines-

Corp/Ratios/Liquidity#Ratios-Summary

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