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IBM Corporation A Case Study Suresh Hosakoppal Vladimir Mazelev Brett Simms Kareem Sumner

IBM Corporation A Case Study Suresh Hosakoppal Vladimir Mazelev Brett Simms Kareem Sumner Strategic Planning for Information Systems Johns Hopkins University – Fall 2002. History. 1911 - Merged three companies to form CTR (Computing-Tabulating-Recording)

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IBM Corporation A Case Study Suresh Hosakoppal Vladimir Mazelev Brett Simms Kareem Sumner

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  1. IBM Corporation A Case Study Suresh Hosakoppal Vladimir Mazelev Brett Simms Kareem Sumner Strategic Planning for Information Systems Johns Hopkins University – Fall 2002

  2. History • 1911 - Merged three companies to form CTR (Computing-Tabulating-Recording) • 1914 - Thomas J. Watson took over as the president • 1924 - IBM was formed and expanded internationally • 1952 - Thomas Watson, Jr. took over the leadership • 1960s - Unsuccessful anti-trust action against IBM by the justice department • 1980s - IBM considered to be “The model” US company

  3. IBM Market Capitalization 1992/93 - Cost reduction efforts. Large scale layoffs. Talks to breakup IBM Corporation. Akers Fired Timeline 1988 – Company wide re-organization for better resource allocation and market trends. Volunteer retirement for 20,000 employees 1991 – Weakened demand for mainframes. End of “No Layoff” policy. 1993 – Louis Gerstner - First “outsider” hired as the CEO. New leadership helped to turn the company around 1981 – IBM introduced PC 1995 – Financial stability proved that recovery was real 1984 – IBM captured 70% of worldwide information industry profits Late 80’s – Several new products flopped and customer relationships weakened 1985- Akers the new CEO’s comments “successful beyond our wildest expectations”. The same year returns on sales, assets, and equity begin to weaken

  4. Lack of response to a changing Industry Situation: Client/server model vs Mainframe. Decentralized computing and moving away from centralized MIS organizations Strategy: IBM did not want to cannibalize mainframe and fell behind Intel, Microsoft, Cisco and Dell in the client server market.

  5. Early signs of trouble Legacy mainframe product did not interoperate with the emerging technology Weakening customer relation IBM’s proprietary products • Complex organization • - 20 separate business units, 5,000 HW products, 20,000 SW products • - Redundant product designs and processes • - Poor internal IT management (125 data centers, 128 CIOs) • - 31 private and separate networks. Parts of the company were still operating in growth model while some were showing losses Customer demanded higher quality

  6. Akers Era • Workforce (20,000) reduction in the mainframe areas via volunteer retirements • Reduction of employee perks • Talks of breaking up the company and spinning off the PC division • Getting into service business, rather than just products • Changes resulted in temporary upside but did not last long

  7. Gerstner Era • Leadership from outside the company (breaking the IBM tradition) • Customer focus • Meet and know your customer • Be on your customer side • Increase customer relationship • “Operation Bear Hug”. Develop relationship with customers to maintain their accounts. • No-nonsense focus on bottom-line business issues

  8. Gerstner Era • Focused on the company strategy • Formed the Corporate Executive Committee and Worldwide Management Council • Input from senior executives to formalize strategies • Executing strategies is the real issue • Cost reduction • More layoffs • Sell non-core businesses (IBM Federal systems) • Re-engineering and global processes development

  9. The New IBM - Strategies • Take “One IBM “ to the market. Integrate and deliver as one company • Think more like a marketing company by connecting research and marketing • Global sale organization to get the right knowledge to the right sales person • Customer relationship managers and sales specialists • Advertise to achieve globalization • Change advertising strategy

  10. The New IBM - Strategies • Regain IBM brand • Initiate product brand names • Keep only the successful one (Thinkpad) • New product strategy • Focus on server rather than PC (Drop OS/2) • Keep the focus on Mainframe • Distributed computing software (Acquired Lotus) • Network products, HW products, and Software products. • Recentralize functions.

  11. The New IBM - Tactics • Empower line managers and executives and hold them accountable • New employee performance evaluation system • Acquired Lotus for collaboration • Coined “e-business” and “network-centric computing” phrases

  12. Future ? Continue to be the industry’s trend leader IBM’s strength’s lie in enterprise and partnering with large companies to deliver complete solutions IBM should continue its corporate cohesiveness with the focus remaining on a “One IBM” Be wary of its competitors (Microsoft, Compaq, SUN etc.) acquiring major consulting firms. Instead of competing against companies such as Dell and 3Com, build and grow relationships with them Continue to fill gaps in its portfolio through acquisitions in the software and consulting sectors

  13. Q & A

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