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IBM' International Business Strategies

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Carolina Ascencion

on 25 May 2015

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Transcript of IBM' International Business Strategies

IBM' International Business Strategies
International Business Machines Corporation (IBM)
IBM Background
Porter's Analysis
SWOT Analysis
Leadership - from Gerstner to Palmisano
Computer Hardware & Software (manufacture & sell)

Infrastructure services

Hosting services

Consulting services (from computers to nanotechnology)
Businesses
Computer Technology & IT Consulting Co.
Founded in 1911 by Thomas Watson
3 regions for global operations:
Movements Towards Globalization
The extended Family and Ecosystem Neighbors
Europe
Middle-East
Africa
Rivalry Among Existing Competitors
(HIGH)
Threat of New Competitors
(Low)
Bargaining Power of Customers
2007
Large profits from Europe & emerging countries
Workforce & revenues shifted outside the U.S
Invest $1.6 billion in developing countries in Asia, the Middle East, and Latin America --> IBM family grew considerably
Bargaining Power of Suppliers
Threat of Substitutes
(Moderately High)
(Low)
(Low)
Management by Flying Around
Technology and Innovation
Change the Center of Gravity
Localizing
Many software manufactures in today's global market
Importance in relationships with channel partners :
Focus on technology education to help ensure future technical competence
Train small & mid-sized businesses & improve business practices.
IBM purchases in large quantities per-time

high capital investment
high budget for R&D
high technology
No product to substitute or replace computer software
IBM size = IBM extended family, employees & subsidiaries

Price
Supplier reputation
Service reliability
Supplier flexibility
“I’m not just coming and taking money as some Western, some American company, and that’s it. We develop the skills of the market. I am part of this project to contribute to the country’s agenda– to develop the high-tech element of the national agenda.”
2006:
July,
Innovation Jam
= “largest on-line brainstorming session ever”
November, Invest $100 billion in initiatives from the jam
October, Partnership with Google for cloud computing initiative
90's
The Internet + World Wide Web = IBM lose innovation edge
IBM was agile & adaptive -> Linux & open source computing
IBM's innovation included processes as well as products
ThinkPlace -> Employees could submit and discuss ideas
Critics of IBM’s turnaround, increase in revenues comes from:
Controversial switch in IBM's pension plan
Share price supported by stock buybacks and not earnings
Financial Plans
Strengths
Global presence
Strong brand name
Huge client base
Big patent tool
Integration of products and services
Weaknesses
Company has become too large
Attrition
Expensive service and software solutions
Focus mainly on large enterprises
Opportunities
Emerging markets
Domestic projects in counties like India and China
Expand services and software divisions
Increasing demand of cloud based services
Threats
Increasing competition in the cloud computing market
Late size of the company
Slowing growth of world economy
Globally integrated work and problem solving
Other trouble shooting requires physical presence
Future in globalization & changes in technology
Need to be a
Globally-Integrated Enterprise (GIE)
Location decisions -> talent availability + environment openness
Palmisano & other senior executives frequent flies worldwide
Meetings: national competitiveness, policies on education, infrastructure and the environment
Face-to-face coaching and monitoring -> “corporate community relations”
(global responsibilities or global teams that worked virtually)
Transferring center of the world away from Armonk & “U.S.-first mentality”
Regional headquarters moved from U.S. to respective region

HR was changed to exploit nations characteristics
Lower the center of gravity & Transfer decision-making

Circles of Influence
But: Opportunities = moving upward
Changes -> example of integration
IOT (Integrated Operating Team)
Elevating the role of account manager
China

Marcelo Zuccas( VP of Software for IBM Latin America)
Physically located in São Paulo
Business risk and opportunity

Global integration <--> Deep national and local connections
Reasons :
Governments = big customers
National and local policies affected business
Public goodwill -> attract talent & business partners
Deep connections with communities and cultures -> know-how in communicating with customers
May 2007, Henry Chow (IBM Greater China chairman)
Facilitate development of the U.S.-China relationship
Find areas of collaboration ex: environmental issues.
Help Chinese education system = get best qualified people + benefit for Chinese students
Work hard at localizing rather than appearing too global
Gerstner
Palmisano
Firsthand of actual state of affairs Visited IBM facilities & met customers, competitors, senior executives, financial analysts, consultants
Services-heavy
business model
SBU’s better integration = synergistic effect (↑ quality ↓ drag)
IT solutions = more than a productivity tool
IBM's 7th CEO (1993 – 2006)
1993
Deep financial trouble (losses of $8.1 billion)
Gerstner reversed this & boost IBM’s financial performance
1997
Strengths in big servers
Huge storage capability
Bullet-proof databases
Massive processing power
Expert systems integration
Provide complete e-business package
ex: hardware, software, training, security, networking and services
E-business strategy
IBM's 8th CEO (2002)
IT industry’s tough time due to the economic slowdown (reduced corporate spending on IT)
Palmisano perceived as an operations expert not a strategic thinker
Eliminate market access barriers & eradicate future barriers
Customs duties and non-tariff barriers on IT
Government procurement “buy local” requirements or preferences
Local partner requirements
Unique national standards and duplicative testing requirements
Unnecessary product security certification requirements
Forced transfer or exposure of intellectual property
Regulatory transparency and due process
Bans on foreign company in certain markets
Cross-border data restrictions (privacy, security, etc.)
Customs issues
International market-access issues:
Management system rewarded short-term results & didn’t value strategic business-building.
Preoccupation on currently served markets and existing offerings
Business model focused on sustained profit & earnings per share improvement rather than actions towards higher price/earnings

Major reasons IBM missed new technology and market opportunities
Detailed internal analysis:

Economies of scale
Product differentiation
Servers - Microsoft, HP
Development software - CTS, Wipro Tech
Development software - Microsoft (email client), Microsoft (operating system), Oracle (data warehousing)
Rivals in different categories
Factors that prevent new entrants
Supplier Selection
Bargaining power based on certain factors:
Number of competitors in industry
Availability
Brand value
Quantity
Switching costs
Since 1995 ,IBM: aggressive buybacks
(2004-2013) hundreds of billions of dollars
But is IBM to blame for this strategy?
High debt ratio -> responding rationally to low interest rates in home country (the US)

Avoiding market fluctuations & benefiting from the cheap debt

Desperate to repurchase shares, IBM bonds used to buy-back stock

Increase in debt = Stocks riskier to hold
Interest paid on debt = tax-deductible & interest earned on cash = taxable
Increasing debt to finance buybacks or dividends = less firm’s tax bill
Incentives for his behavior:
Full transcript