CHAPTER I INTRODUCTION
International Business Machines Corporation or IBM, is an American multinational technology and consulting corporation, with headquarters in Armonk, New York, United States. IBM manufactures and markets computer hardware and software, and offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology.[3] The company was founded in 1911 as the Computing Tabulating Recording Company (CTR) through a merger of three companies: the Tabulating Machine Company, the International Time Recording Company, and the Computing Scale Company. CTR adopted the name International Business Machines in 1924, using a name previously designated to CTR's subsidiary in Canada and later South America. Security analysts nicknamed IBM Big Blue in recognition of IBM's common use of blue in products, packaging, and logo. In 2012, Fortune ranked IBM the #2 largest U.S. firm in terms of number of employees (433,362), the #4 largest in terms of market capitalization, the #9 most profitable, and the #19 largest firm in terms of revenue. Globally, the company was ranked the #31 largest in terms of revenue by Forbes for 2011. Other rankings for 2011/2012 include #1 company for leaders (Fortune), #1 green company worldwide (Newsweek), #2 best global brand (Interbrand), #2 most respected company (Barron's), #5 most admired company (Fortune), and #18 most innovative company (Fast Company). IBM has 12 research laboratories worldwide and, as of 2013, has held the record for most patents generated by a company for 20 consecutive years. Its employees have garnered five Nobel Prizes, six Turing Awards, ten National Medals of Technology, and five National Medals of Science. Notable inventions by IBM include the automated teller machine (ATM), the floppy disk, the hard disk drive, the magnetic
1
stripe card, the relational database, the Universal Product Code (UPC), the financial swap, SABRE airline reservation system, DRAM, and Watson artificial intelligence. IBM is a global IT manufacturing and consulting company, with 335,000 employees across nearly every industrialized country in the world. Once largely focused on the sale of mainframes and related software contracts, IBM has evolved into lucrative technology and business consulting, supported by a wide range of IBM software platforms and products. Figure 1 shows IBM‘s value system in the marketplace, demonstrating a reliance on knowledge-based transformation and processes. Products such as hardware and software are either sold outright, or used (along with competitor‘s products) as a basis for consulting engagements. IBM is a global technology and innovation company that stands for progress. With operations in over 170 countries, IBMers around the world invent and integrate hardware, software and services to help forward-thinking enterprises, institutions and people everywhere succeed in building a smarter planet. IBM has been present in India since 1992. The diversity and breadth of the entire IBM portfolio of research, consulting, solutions, services, systems and software, uniquely distinguishes IBM India from other companies in the industry.IBM India's solutions and services span all major industries including financial services, healthcare, government, automotive, telecommunications and education, among others. As a trusted partner with wide-ranging service capabilities, IBM helps clients transform and succeed in challenging circumstances. IBM has been expanding its footprint in India - and has a presence in over 200 cities and towns across the country - either directly or through its strong business partner network. IBM India has clearly established itself as one of the leaders in the Indian Information Technology (IT) Industry - and continues to transform itself to align with global markets and geographies to grow this leadership position. Widely recognised as an employer of choice, IBM holds numerous awards for its industry-leading employment practices and policies.
2
CHAPTER II MARKETING Marketing Strategies of IBM Introduction This study aims at examining the use of theoretical marketing approaches in the practical business scenario. In this domain the marketing strategy of IBM has been considered on empirical grounds. It is by the use of marketing theory and concepts that the study evaluates the marketing strategies of IBM and its role in fulfilling the firm' overall goals and objectives. Four specific aspects of marketing strategy evaluation are assessed in this study. Initially the proceedings are related to the importance and the use of information in successful marketing strategies by IBM. This is followed by a discussion on IBM marketing strategies in relation to its organisational strategy. The paper also makes an analysis of the application of IBM marketing strategies in global context. Lastly e-business strategies of IBM in the marketing domain are assessed. Evaluation of marketing strategy of IBM International Business Machines Corporation, better known as IBM, is a multinational IT company involved in the manufacture and retail of computer hardware and software applications, and IT consulting services. Employing the best talents in the industry, IBM is today the largest as well as the most profitable information technology employer in the world. Despite of the adverse economic conditions, the firm achieve a significant increase in its net revenue and income in 2008 compared to previous years. Well - devised and efficient marketing strategies have been the key to IBM' global success. The company strongly believes that devising effective marketing strategies requires making appropriate decisions that can well enhance all kinds of competitive advantages and can create all kinds of new sources of value for the purpose of 3
improving the organisational revenue growth. According to Luq Niazi, Leader of Strategy and Change at IBM, "when the leaders of an organisation think about their business as components, it becomes clear which ones they need to own - and which they do not". This clearly indicates the great emphasis that IBM places on the performance and decision making capabilities of leaders in devising effective marketing strategies. In addition, the firm also considers understanding the requirements and needs of customers as crucial for developing effective marketing strategies. Understanding the innovative demands of customers lies at the core of developing effective marketing strategies. Based on IBM' market share and dominance in the IT industry, the firm can be aptly described as a 'market leader'. Being a market leader, an important marketing strategy which IBM uses against its competitors is the defensive marketing warfare strategy. The defensive marketing strategy involves the firm employing tactics to maintain its market share. There are several tactics that firms use for defending their market share, such as fortification, counterattack, mobile defence and strategic retreat (Ries and Trout, 2005). Being the courageous market leader that IBM is, the firm adopts the best defensive marketing strategy which is "self attack". IBM' strategy is "cheaper and better than IBM". Aware of IBM' tactic, customers wait for IBM' new prospects as they know that the Big Blue will constantly introduce new and better products which makes the firm' own products obsolete. Another key marketing strategy employed by IBM for sustaining its market leadership is product differentiation strategies. Product differentiation can be achieved using a variety of factors such as distinctive products, reliability, durability, product design etc (Kurtz and Boone, 2006). IBM uses a product differentiation strategy based on quality of performance. In line with its quest for further growth and market leadership, the firm adopts a diversification strategy. The importance of IBM' growth strategy has heightened in the current economic situation with companies in the computer industry having faced a massive drop in the industrial production and productivity of computer hardware and the future growth for this segment also appearing dim. In such a context, IBM has strategically reduced its exposure to hardware by diversifying into software and services. IBM also realises the importance of maintaining good relationships with its customers and in line the firm lays great emphasis on trust - based marketing strategies. Trust 4
based marketing strategies stress on the need for organisations to gain ethical hold over consumer dealings and also be honest and open about its products and the services. For IBM, adoption of this strategy has been very effective in developing its brand identity and image. In all of its marketing activities, the firm strives at building customer trust and loyalty. Importance and use of information in IBM marketing strategy The importance and use of information is vital for gaining success. In line, IBM adopted the strategy to take up Social Networking to the work place. It is an absolute means of sharing ideas, complains and letters of appreciation in public. By means of adopting networking opportunities, IBM established its strong hold over competitive market. It is through the provision of Social Networking (SN), that IBM established its commitment to technology and developed an enterprise - wide SN mindset. IBM is the first major IT supplier that has got potential provisions for SN and is in the process of changing the entire enterprise along with a credible application to address the market. By means of investments made in the SN domain, IBM has gained enough market strengths in the enterprise lineage, global services, deep pockets and above all in gaining loyal customers. By success of SN, IBM proved to be a fine player in the domain of information networking. The proceedings have added many advantages to its organisational global services. SN for enterprises have been implemented with enough marketing strategies and this is what is providing IBM with technical expertise in the field of organizational/adoption issues. The launching of more facilities related to SN are relevant to the competition of the market. The launcher came up with a new idea and launched it much before the though had developed in anyone' mind. The second big thing to the adoption of marketing strategy is the IBM's mindset in the launching of Lotus Connection. It is an information networking process with collaboration-centric approach to SN and helps in information sharing and uninterrupted workflow. By few minutes of exploration anybody can well get hold over its functionalities. IBM kept it easy and user friendly; the basics of marketing strategies.
5
When it comes to the use of information system in IBM, the adoption of unique kind of marketing strategies is predominant. The basic approach is in being innovative and adopting something that is very user friendly and easy for the customer to adopt. Complicacies in the same field can lead to failure of the same. This is the reason that IBM lays emphasis over making it simple, easy and sharing more than the consumer can expect. Once there is a kind of trust and sense of being facilitated gets into the consumer, he hardly will opt for any other company and this is what IBM believes to the core. Application of innovative ideas in the field of information sharing units can be of great risk, but under the marketing strategy of IBM, this risk has been taken again and again with enough success. THEORY TO EVALUATE THE MARKETING STRATEGY OF IBM It is by the use of marketing theory and concepts; we are evaluating the determined marketing strategy of IBM in attaining its organisational goals and objectives. Initially the proceedings are related to the importance and the use of information in successful marketing strategies by IBM. Then there is the discussion about IBM marketing strategies in terms of their overall organisational strategy. We will make an analysis over the application of IBM marketing strategies in global context. Lastly we will assess IBM e-business strategies in marketing domain. International Business Machines Corporation, or the IBM, is basically a multinational computer technology and has got hold over IT consulting services. The company has established itself as one of the selected information technology companies since 19th century. Adoption of marketing strategies for IBM has been a planned structure since 19th century and by means of these strategies it has earned enough success all over the world. With its growth in the manufacturing as well as marketing domains of computer hardware and software, it has gained the nickname of "Big Blue". On marketing grounds, IBM follows strict infrastructural services, added by hosting provisions and consulting services in various areas from mainframe computers to the persuasion of nanotechnology. The company considers that to make marketing strategies, it is important to have appropriate decisions that can well enhance all kinds of competitive advantages and can create all kinds of new sources of value for the purpose of improving the 6
organisational revenue growth. As declared in its official website. IBM considers that their strategy and change services target in helping their clients in transforming their economy and related businesses by the scope of identifying strategic options. This further gets added by provisions for developing strategic and planned change programs to meet the demands of their consumers. According to Luq Niazi, Leader Strategy and Change, "When the leaders of an organisation think about their business as components, it becomes clear which ones they need to own - and which they do not" Importance and use of information in IBM marketing strategy The importance and use of information is very vital for gaining success and thus IBM in particular came up with Social Networking provisions. It is an absolute means of sharing ideas, complains and letters of appreciation in public. By means of adopting networking opportunities, IBM established its strong hold over competitive market. It is through the provision of Social Networking (SN), that IBM could establish its commitment to technology and SN mindset. The company uses its technological supports and draws new kinds of driving features. IBM is the first major IT supplier that has got potential provisions for SN in the process of changing the entire enterprise along with a credible application to address the market. By means of investments made in the SN domain, IBM has gained enough market strengths in the enterprise lineage, global services, and deep pockets and above all in gaining loyal customers. By success of SN, IBM proved to be a fine player in the domain of information networking. The proceedings have added many advantages to its organisational global services. SN for enterprises has been implemented with enough marketing strategies and this is what providing IBM with technical expertise in the field of organizational/adoption issues. The launching of more facilities related to SN are relevant to the competition of the market. The launcher came up with a new idea and launched it much before anybody can ever think of it. The second big thing to the adoption of marketing strategy is the IBM's mindset in the launching of Lotus Connection. It is an information networking process with collaboration-centric approach to SN and helps in information sharing and uninterrupted workflow. By few
7
minutes of exploration anybody can well get hold over its functionalities. IBM kept it easy and user friendly; the basics of marketing strategies. When it comes to the use of information system in IBM, the adoption of unique kind of marketing strategies is predominant. The basic approach is in being innovative ad adopting something that is very user friendly and easy for the customer to adopt. Complicacies in the same field can lead to failure of the same. This is the reason that IBM lays emphasis over making it simple, easy and sharing more than the consumer can expect. Once there is a kind of trust and sense of being facilitated gets into the consumer, he hardly will opt for any other company and this is what IBM believes to the core. Application of innovative ideas in the field of information sharing units can be of great risk, but under the marketing strategy of IBM, this risk has been taken again and again with enough success.
8
CHAPTER III IBM MARKETING STRATEGY IN RELATION TO ORGANISATIONAL STRATEGY The measurement of strategic effectiveness in an organizational strategy can be discovered through SWOT analysis. This is a structure that figure out strengths, weaknesses, opportunities and threats of a particular company. Added to this there is the initiation led by Johnson and Scholes model for corporate strategy (Rifkin, 2001). Under this persuasion we can evaluate a company on the basis of three key success criteria. These are marked as following; 1.
Suitability can be assessed to identify the factors that will support the strategies.
2. Feasibility is all about the adoption of executing the strategy into practical field. 3. Acceptability is something that will determine the reactions that the organisation will receive by the execution of the strategies. At IBM there is enough encouragement for creative marketing tactics. Anybody within the organisation can attain these tactics. The application of SWOT and the Johnson and Scholes model proves that IBM has got enough potentiality to gain well crafted assessment about itself. Its main strength lies in identifying its weaknesses. The approaches are all very professional and the marketing persuasions are well structured as per the organisational structure. As per the declarations made by the official site of IBM, the basic marketing strategy in relation to organisational strategy adopted by IBM is more concerned about the proceedings led by HRM. The perspectives of organisational dealings are strategically adopted to meet the demands of HRM. The typical business culture of IBM is customer centric and for that they make their HR department feel the responsibility. It has been marked that on traditional ground
9
many IBM executives along with aspiring general managers are selected for the purpose of improving sales force and market oriented projects. It can be well marked as Samuel J. Palmisano, the current CEO, IBM; initially joined the company in the position of a salesman.
Global context in IBM marketing planning In the global context, IBM has proved itself as a strong contender by managing to sustain in the most difficult situations. It has overcome the twists and turns it initially faced in adjusting to the 'bricks-and-clicks' business structure. Overcoming all the hurdles IBM is now achieving milestones through the advantages forwarded by brickand-click enterprises. It is through this enterprise structure that IBM has transformed into a major player in terms of getting hold over global marketing plans. Its formulisations are inclusive of creating a global brand blueprint. It is a mode that usually gets expressed locally and after attaining some success approaches on global grounds. IBM always follows the process of establishing central framework and then architects the relevant consumer experiences to gain consistency with the brand. IBM always concentrates in gaining single view from its consumers and that helps in assessing the risk factors of global marketing strategies (Rometty, 2001). In order to meet the diversified point of views, IBM follows the structure noted below;
Process of analysing the context of 'when', 'where' and 'how' the appropriate and relevant customer data can be collected. This is an approach that is done under the provision of practical market survey.
The means to create absolute governance framework with special attentions led over management policies and overall practices. These are the sources that are collected through the purpose of encouraging customer centricity added by the scope to safeguard customer privacy.
Approaches led by institute consistent processes for target customer is the next step. In this process the relationship led by the management across all the domains of sales and provided services of the organisation are scrutinized professionally.
10
The process of appointing efficient team leaders and strong management initiators. IBM also appoints a leader who can perform as a single customer advocate and is very much accountable for all the sorted touch points.
The marketing strategies adopted by IBM to meet global demands and competitions are well inclusive of a robust infrastructure. It has the provision for optimising flexibility and a hub-and-spoke architecture for collecting consumer demands on global arena. There is also well marked acknowledgement for all the innovative ways adopted by the partners of IBM. Developments attain by the partners of IBM in global terms is also directly related to the marketing strategies followed by IBM. IBM understands the fact that partners can add much hold over the local market and can reach the consumer with more in-depth formulations. This is the reason that they believe in developing capitalized relationship with these partners for future opportunities.
IBM and e-business strategies The motive of any electronic business is to achieve consumer demands through internet networking. This is a provision that can collect more consumers all over the world with very minimum investment. It is an exclusive means adopted through the dealings related to information and communication technologies. For the development of business proceedings through ICT is considered to be the best means. In case of IBM the role of e-business is very strong. Through e-business strategies, IBM is enabling itself to all kinds of external activities and is applying determined relationships for respective business dealings, with individuals, diversified groups and all other corporate. According to 'Who Says Elephants Can't Dance?'; a book by a former CEO of IBM, Louis Gerstner (2003), the approach of IBM for "e-Business strategies is handled under IBM's marketing provisions and under specialised internet teams since 1996. It is through its e-business strategies that IBM is able to link its internal as well as external data processing systems with more efficiencies and flexibilities. E-business helped IBM in coming much closer to its consumers and that builds the bridge of reliability and consumer loyalty to the brand. The proceedings led by IBM for the
11
development and implementation of e-business are more strategic and led concentration over diversified functions occurring through electronic capabilities.IBM is also a part of the entire value chain proceeding for more profitable dominance over the local as well as global market. There are some predominant sectors where the ebusiness strategies are applied to gain more trust and money from the consumer. These activities are noted below; 1. electronic purchasing 2. supply chain management 3. processing orders electronically 4. handling customer service These proceedings are adding special technical standards in the e-business structure of IBM. It is also utilising e-business strategies to exchange of data between its partners and associate companies. As a matter of fact the e-business strategies of IBM are not much different from the other marketing strategies. The basic difference however depends over the expansion of management for sending and receiving contracts from the consumer. It is under this strategic implementation that IBM has adopted many local dealers to be a part of its services. These dealers are of course selected through some professional modes. The reputations of these dealers are marked by IBM first before offering the partnership. In terms of services for each product sold through ebusiness, IBM provides appropriate training to all those people who are a part of this structure. With strategic planning IBM is also into the dealings related to integrated intra and inter firm business proceedings. It can be well concluded that the marketing strategies adopted by IBM are very much structured on the basis of trust-based marketing strategies. It is through this theoretical approach that IBM has established itself very strongly, amidst burgeoning and very unpredictable online as well as global marketplace. IBM concentrates in providing its consumer every possible facility that he demands and that too with very balanced services. It is more about having the trust of every single consumer, rather than having lots of them without the trust. The products and services provided by IBM can guarantee their utility to the customer's satisfaction. In a nutshell, IBM has got professional and the courage to take a risk for innovative ideas. It explores the consumer's domain through proper hold over the local and global proceedings. 12
CHAPTER IV NEW PRODUCT DEVELOPMENT FOR IBM AND MARKETING STRATEGY FOR THAT PRODUCT The management of new product development involving electronic and computeroriented consumer and systems products is a special case because of the challenges created by high technology and complex systems. There is a big project risk involved as the whole project might fail and make a huge loss for the investors, even if the product performs as designed in development. These factors are external to the project team-in the company organization and culture or in the global marketplace. They are often missed by the technical and engineering personnel in the project because of the tendency to fix narrowly on the product itself and its design and function, And not on the company's success in getting it successfully to the market. IBM WILL DEVELOP A COMPUTER THAT WORKS AS A HUMAN BRAIN IBM is carrying out a project focused on developing a computer that would work as a brain, so it can solve problems by considering the real context in which the things are happening. This type of technology is called ―Cognitive computing‖, and it will require the combined work of neurobiologists, computer and materials scientists and psychologists. In order to develop the project, some researchers from Stanford University, Cornell University and the University of California-Merced are collaborating. Besides, the project is supported by the Defense Advanced Research Projects Agency that has invested $4.9 million. ―The mind has an amazing ability to integrate ambiguous information across the senses, and it can effortlessly create the categories of time, space, object, and interrelationship from the sensory data‖, said Dharmendra Modha, a researcher at IBM who is leading the collaboration.
13
―There are no computers that can even remotely approach the remarkable feats the mind performs‖, said Modha. ―The key idea of cognitive computing is to engineer mind-like intelligent machines by reverse engineering the structure, dynamics, function and behavior of the brain‖. SEGMENTATION OF THE MARKET THE COUNTRY CHOSEN IN THIS CASE IS INDIA NEUROSCIENCE, SUPERCOMPUTING, NANOELECTRONICS Market segmentation is a strategy that involves dividing a larger market into subsets of consumers who have common needs and applications for the goods and services offered in the market. These subgroups of consumers can be identified by a number of different demographics, depending on the purposes behind identifying the groups. Marketing campaigns are often designed and implemented based on this type of customer segmentation. In this case we can segment the market by the age group of the people who will be using the end product; this type of computer will be mostly used by the older group of people who understand what is nanoelectronics and its applications. SELECTION OF TARGET MARKET Target Marketing involves breaking a market into segments and then concentrating your marketing efforts on one or a few key segments. Psychographic segmentation – based on lifestyle preferences, such as being urban dwellers DIFFRENTAITION AND POSITIONING OF THE OFFERING IN THE CUSTOMERS MIND In marketing product differentiation is the process of distinguishing a product or offering from others, to make it more attractive to a particular target market. This
14
involves differentiating it from the competitors products as well as ones own products. Differentiation in quality is what IBM will be aiming for in this product as this product will of superior quality and design which will give IBM a competitive edge over other companies which plan to launch such a product in the future. MARKETING OBJECTIVES Short term targets for milestones with defined measurable achievement. For example if IBM is planning to get over a million units of sale in this particular year, then objectives should be defined in such a way That actual performance can be compared with the objective. A MARKETING MIX FOR THE NEW PRODUCT OR SERVICE Product The product is cognitive computing Price The price would be based on development costs plus profits Place The place of launch would be INDIA Promotion The product would be promoted to the age group of over 25 yrs People
15
Indian organisations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards. Process Banks that send out Credit Cards automatically when their customer's old one has expired again require an efficient process to identify expiry dates and renewal. An efficient service that replaces old credit cards will foster consumer loyalty and confidence in the company. Hence efficiency is our aim. Physical evidence Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organisations perceptual plan of the service.
16
CHAPTER V STRATEGIC POSITION ANALYSIS Strategic Direction
External Analysis
PESTLE Analysis • Skilled Employees - Despite the ranks of skilled workers in India and other countries, competition has shrunk the pool of available candidates. Employees work in a ‗virtual organization‘, where location is no longer defined; employees are connected to each other through networks and technology. • Commoditization of Technology - As competitors become adept at duplicating the same types of services IBM develops, competition increases and profits drop. Because IBM does not force clients to use any particular product, it is easy for clients to move to IBM, at the risk of them easily moving elsewhere. • Pressure to Innovate - Innovation of new products and services (or the acquisition of the same) is the lifeblood of IBM, missteps in predicting industry trends can be costly investments with little return.
A dangerous position for IBM is the non-differentiation between a skilled employee working for IBM and the same employee later working for a competitor. Clients may not see value in paying IBM‘s premium prices if the same services can be found cheaper elsewhere. Simply paying employees more merely increases costs all around and may not be an effective solution – a new way to differentiate the available pool of talent, raise competitive barriers, and yet keep overhead costs low must be found.
17
CHAPTER VI BUSINESS STRATERGY CONSULTING Leverage core competencies to formulate innovative strategies, create new business models and ensure successful transformations for sustainable growth and profitability Overview Business leaders understand that profit, success and continued growth are all achieved through an intelligent, articulate and well-crafted business strategy. Markets, competition, industry changes, adapting business models, and mergers, acquisitions and divestitures are just a few factors that your organization must not only keep pace with, but strive to master in order to drive ongoing business success. IBM's business strategy expertise can help define and understand market drivers, innovative value propositions, risks, technology strategies, globalization, M&A activity and the development of new business models. The business strategy offerings help your enterprise understand and leverage core competencies to drive real value by formulating leading-edge, implementable strategies that result in sustainable growth and profitability. The business strategy consulting practice can assist in the following areas of your organization:
Growth & business model innovation strategies: Continuously innovate to transform your business model, including where and how you compete, in order to spur growth, provide differentiation and increase competitiveness.
M&A services: Take your company from vision to value in pursuit and integration of deal transactions—acquisitions, mergers, divestitures or spin-offs.
Sustainability strategy: Clarify economic logic of sustainable actions, and set a strategy for sustainability (energy, carbon, water, and corporate social responsibility) within the context of your company's business and operating models.
18
Smarter business: Understand what is needed internally and externally to be interconnected, instrumented and intelligent in order to become more nimble and adept.
Cloud enabled business models: Innovative approaches that leverages the dynamic nature of cloud as an enabler of new business models
BUSINESS CHALANGES Business leaders today are addressing many challenges and opportunities in today's growingly digital world, including:
Leveraging business insights and technological capabilities to drive innovation in business models, and across customers, markets and channels in order to create growth and sustainable advantage
Realizing higher value from critical merger, acquisition and divestiture activities
Developing an implementable roadmap for more efficient and environmentally conscious policies and operations
Harnessing and leveraging new technology to become more agile and dexterous while optimizing past and existing investments in technology and infrastructure
IBM's approach to Mergers & Acquisitions (M&A) is based on the need to align strategy, selection and implementation. This means focusing on doing the right deal for the right reason. When these basic principles are followed, organizations are able to use M&A to:
Increase market share
Obtain critical mass
Establish new growth platforms
Extend geographic coverage
Add capabilities
Diversify portfolio
Divest to focus on core businesses / competencies
19
IBM's M&A services practice has a significant track record of helping over 1,000 leading organizations achieve these benefits through mergers, acquisitions and divestitures.
MARKET LEADER IN M&A SOLUTIONS In addition to the consulting services offered, IBM also offers clients the leading ondemand SaaS solution for transaction automation, known as IBM M&A Accelerator. This solution is an online application enabling deal participants to track, manage and share all related M&A activities throughout the deal lifecycle. M&A Accelerator automates all aspects of the M&A process including target tracking, due diligence, pre-close planning, integration execution, and post-deal synergy monitoring.. Achievement of synergies or lack thereof is immediately visible to executives and M&A leaders, allowing them to quickly capture more value from all their transactions or quickly course correct their efforts. IBM‘s M&A Accelerator is a powerful, highly configurable, yet easy to deploy and use, tracking and management solution. This solution will streamline your M&A efforts, while improving results, and providing unprecedented top-down visibility. Overview of IBM M&A Accelerator M&A Accelerator is like having a GPS for executing a mergers, acquisitions or divestment. If you are acquiring another organization, you need ways to achieve consistent success and better results in your M&A transactions. You need an M&A automation solution that provides a complete system of record to help you capture, execute, and monitor your M&A processes and achievements. In essence, it is your M&A system of record, a single place to create and track all assumptions, synergies, documents, activities, risks, issues, and measurements and achievement related to a transaction. M&A Accelerator quantifiable benefits as noted by our extensive commercial client base:
Track & Manage realization of value drivers
20
o
Focus entire deal team on activities tied to value – M&A Accelerator connects the dots between activity and value with our built in SmartLinks
o
Create visible value driver measurement to enable early identification of problems and develop appropriate course corrections
Increase productivity of the entire deal team
o
Eliminate the administrative burdens on the deal team
o
Automated deal tracking, reporting, and measurement
o
We take over the mechanics, tracking all the moving parts, which allows the execution team to focus on high value activities (like decision making) and minimize the distraction to the core business, improve results
Reduce Risk
o
Drive identification and resolution of cross functional issues before they cost you hard dollars
o
Avoid dropping issues between the due diligence/integration handoffs
o
Avoid the cost of a 1 day slip. On a deal with $50 million in synergies, the cost of a 1 day slip is more than $100,000!
Assess, analyze and build strategies for your customers to address markets, marketing, sales, service and online interactions Overview In a massively interconnected world, businesses are prioritizing customer intimacy as never before. Globalization, combined with dramatic increases in the availability of information, has exponentially expanded customers‘ options. Organizations are realizing more and more that ongoing engagement and co-creation with customers produce sustainable differentiation and profitable growth. Moreover, the information explosion has resulted in an unprecedented opportunity to develop deeper customer insights. The right market and customer strategy can help an organization turn customers into advocates, infuse customer interactions across each channel with positive impressions of the company, and help engender a feeling of loyalty across the customer base. The IBM customer experience and market strategy consulting services can help your
21
organization achieve its goals. Assess, analyze, and build strategies to address markets, marketing, sales, service and online interactions. The IBM consulting offerings include the following integral components:
Customer centric strategy: Strategies to help you focus on customer experience and care
Channel transformation: Strategies and approaches to help implement experience and care activities across any and all applicable channels
Social media strategy: Strategies and approaches to create meaningful customer experiences and drive deeper customer relationships in the social web space
Digital brand & presence strategy: Strategies and approaches to better leverage and manage your brand in a digital, web-based world
Smarter sales & marketing: Consulting services to help you understand how to improve revenue and manage the sales and marketing organization through more intelligent, instrumented and interconnected marketing and communications activities.
22
CHAPTER VII IBM IN INDIA
Big Blue is not only a leading employer in India, it also has the highest IT services revenues. IT giant IBM is not just one of the largest private sector employers in India, but is also the biggest player in the domestic IT services space. Its portfolio of clients includes Bharti Airtel, Idea, Vodafone and Max New York Life, to mention a few. Data collated from various reports, analysts and industry shows that the US company derives annual revenues of over $2 billion from the domestic IT services market, with a marketshare of over 13 per cent. At this level, Big Blue — as IBM is known — is ahead of domestic rivals HCL (both HCL Technology and HCL Infosystems), TCS, Wipro and even global rivals like the HP-EDS combine (including MphasiS) and Accenture. HCL's IT services revenues in India are estimated to be around $1.2 billion. Wipro, which draws around 22 per cent of its IT services revenues from India, is believed to be the number-three player, with estimated revenues of $1 billion, closely followed by HP/EDS. TCS, which recently renewed its focus on India, generates revenues of $500 million. An email sent to IBM India's spokesperson for this article remained unanswered. Being among the first IT firms to establish its presence in India, for its hardware business back in the 1930s, IBM has been able to harness its offshore operations for global delivery. With an offshore workforce estimated at 100,000, IBM has paid India and Indian firms no less than what it has made from India. For example, most Indian IT services providers provide manpower to IBM on contract to cater to its domestic as well as global customers. ―IBM is an exception in the domestic market. Its association with India is longer than most Indian or global companies. Other than as a market, it has used India as a
23
strategic location for its global delivery model,‖ says Amneet Singh, vice-president of Global Sourcing at research firm Everest Group. While IBM no longer furnishes the geographic break-up of its headcount, the company's last publicly announced figure for India was 53,000 employees as on January 1, 2007. The latest figure, according to estimates of HR consultants and analysts, is expected to be double that, of which 70,000 work at its strategic global services division, which includes BPO IBM Daksh. This means that of every three employees working with its global services division, at least one is from India. IBM's global services division is estimated to have a worldwide headcount of 190,000. Besides, of the 70,000 working for its global services division in India, 20,000 work for the BPO business. The domestic business is also believed to have around 10,000 people. The R&D and consulting divisions are estimated to have 3,500 and 2,000 people, respectively. While the employee strength of IBM's hardware division in India is unknown, this is manpower intensive and requires strong sales and service capabilities. But more than IBM's success in utilising India as a strategic global delivery centre, its success may be viewed more for its success in leveraging India as a key growth market. In the last five to six years, IBM has clinched most of the IT outsourcing contracts announced in the domestic telecom space, thereby maintaining its leadership position. Starting with an outsourcing contract worth $1 billion from India's largest telecom service provider, Bharti Airtel, in 2004, it signed another multi-year mega outsourcing contract with Idea Cellular in 2007, worth about $800 million. In the same year, it bagged an outsourcing contract from Vodafone, which is estimated to be worth more than $600 million. Besides, state-run BSNL has also awarded IBM an outsourcing contract, although the size is comparatively smaller. ―The only other company which has been able to compete with IBM in the domestic telecom space to a certain extent is Wipro, especially since it pocketed a $600-million outsourcing deal from Aircel and similar-sized deals from Unitech Wireless in the last two years,‖ said an industry analyst, requesting anonymity. 24
Other than telecom, IBM has also established a solid presence in the domestic insurance sector, snapping up large outsourcing contracts from leading insurance players like Max New York Life, Reliance Life, Birla Sun Life and ICICI Prudential. The largest deal it signed in this space was with Max New York Life in 2008, estimated to be worth around $500 million. In banking, though, it has not been able to make much of a dent. It has only managed deals with Canara Bank and Kotak Mahindra Bank. Its customers in manufacturing include Bhilai Steel Plant and SAIL, mostly for SAP implementation.
25
CHAPTER VIII CORPORATE LEVEL STRATERGY IBM operates primarily in a single industry using several segments that create a value byoffering a variety of solutions that include, either singularly or in some combination,technologies, systems, products, services, software and financing. This may lead you to believethat IBM has adopted a corporate level strategy of concentrating on a single business unit, butthis is only half the picture. For IBM there is not one general type of corporate strategy that bestsuits their needs, but a combination of both a concentration on a single business strategy aswell as a vertical integration strategy.A single business unit strategy means that IBM is concentrating on competing successfullywithin the confines of a single business unit. An advantage of choosing such a strategy is thatthe IBM can focus its total and collective resources to dominating and becoming successful inthis business area. If IBM were to attempt to pursue some other strategy such asdiversification, they might spread their resources out too thin, thus inhibiting them from takingadvantage of some other opportunities that may come about due to a lack of availableresources. Another advantage to pursuing a single business unit strategy is that IBM isremaining within an area with which it has a great deal of competence and experience. Thisdecreases the likelihood of IBM partaking in a venture that may be unsuccessful and it keepsIBM in an area where their existing capabilities and resources can contribute and add value.But concentrating on just one business area may not be enough and so as previously stated,IBM has also adopted a corporate level strategy that involves vertical integration. Verticalintegration can be seen in the corporate level strategy of IBM in their acquisition of variousinputs such as the LSG Group Inc., which offers services ranging from application developmentto information technology consulting. This is known as backward or upstream integration.Choosing a strategy such as vertical integration generally gives a company a competitiveadvantage by improving scheduling, by creating efficiency-enhanced assets, by protectingproduct quality and by enabling the company to build barriers to new competition.IBM operates in more than 150 countries worldwide and derives more than half of its revenuesfrom sales outside the United States. IBM has adopted an international strategy with respect tohow it plans to compete and operate globally. By adopting an international strategy 26
IBM looksto create value on a global basis by transferring valuable skill and products to foreign marketswhere local competitors lack those skills and products. Although much of IBM's revenues comefrom overseas sales, they tend centralize the majority of the decision-making and other company functions right her in the United States. This means that they first develop marketingand product decisions in the United States and then transfer what they have done in the UnitedStates to other countries.This does not mean that no adaptation was done at all but it does mean that any adaptation thatmay have been done was kept to a minimal. In many cases the modifications IBM may carry outwith respect to its business decisions in a particular market may be due to the laws and policiesin a particular country. IBM could also be forced to modify its business decisions in a certaincountry due to the economic and political changes in those countries and by macroeconomicchanges, including recessions and inflation. An example of this would be when a weakness inthe economy of Asia had an adverse effect on the companies business in 1998 and forced it tochange its strategy with respect to that market while the countries economy got itself back together. CORPORATE GRAND STRATEGIES: As the previous discussion implies, corporate-level strategists have a tremendous amount of both latitude and responsibility. The myriad decisions required of these managers can be overwhelming considering the potential consequences of incorrect decisions. One way to deal with this complexity is through categorization; one categorization scheme is to classify corporate-level strategy decisions into three different types, or grand strategies. These grand strategies involve efforts to expand business operations (growth strategies), decrease the scope of business operations (retrenchment strategies), or maintain the status quo (stability strategies).
GROWTH STRATEGIES Growth strategies are designed to expand an organization's performance, usually as measured by sales, profits, product mix, market coverage, market share, or other accounting and market-based variables. Typical growth strategies involve one or more of the following:
27
1. With a concentration strategy the firm attempts to achieve greater market penetration by becoming highly efficient at servicing its market with a limited product line (e.g., McDonalds in fast foods). 2. By using a vertical integration strategy, the firm attempts to expand the scope of its current operations by undertaking business activities formerly performed by one of its suppliers (backward integration) or by undertaking business activities performed by a business in its channel of distribution (forward integration). 3. A diversification strategy entails moving into different markets or adding different products to its mix. If the products or markets are related to existing product or service offerings, the strategy is called concentric diversification. If expansion is into products or services unrelated to the firm's existing business, the diversification is called conglomerate diversification.
STABILITY STRATEGIES: When firms are satisfied with their current rate of growth and profits, they may decide to use a stability strategy. This strategy is essentially a continuation of existing strategies. Such strategies are typically found in industries having relatively stable environments. The firm is often making a comfortable income operating a business that they know, and see no need to make the psychological and financial investment that would be required to undertake a growth strategy.
RETRENCHMENT STRATEGIES: Retrenchment strategies involve a reduction in the scope of a corporation's activities, which also generally necessitates a reduction in number of employees, sale of assets associated with discontinued product or service lines, possible restructuring of debt through bankruptcy proceedings, and in the most extreme cases, liquidation of the firm.
28
Firms pursue a turnaround strategy by undertaking a temporary reduction in operations in an effort to make the business stronger and more viable in the future. These moves are popularly called downsizing or rightsizing. The hope is that going through a temporary belt-tightening will allow the firm to pursue a growth strategy at some future point. A divestment decision occurs when a firm elects to sell one or more of the businesses in its corporate portfolio. Typically, a poorly performing unit is sold to another company and the money is reinvested in another business within the portfolio that has greater potential. Bankruptcy involves legal protection against creditors or others allowing the firm to restructure its debt obligations or other payments, typically in a way that temporarily increases cash flow. Such restructuring allows the firm time to attempt a turnaround strategy. For example, since the airline hijackings and the subsequent tragic events of September 11, 2001, many of the airlines based in the U.S. have filed for bankruptcy to avoid liquidation as a result of stymied demand for air travel and rising fuel prices. At least one airline has asked the courts to allow it to permanently suspend payments to its employee pension plan to free up positive cash flow.
BUSINESS-LEVEL STRATEGIES: Business-level strategies are similar to corporate-strategies in that they focus on overall performance. In contrast to corporate-level strategy, however, they focus on only one rather than a portfolio of businesses. Business units represent individual entities oriented toward a particular industry, product, or market. In large multiproduct or multi-industry organizations, individual business units may be combined to form strategic business units (SBUs). An SBU represents a group of related business divisions, each responsible to corporate head-quarters for its own profits and losses. Each strategic business unit will likely have its' own competitors and its own unique strategy. A common focus of business-level strategies are sometimes on a particular product or service line and business-level strategies commonly involve decisions regarding individual products within this product or service line. There are also 29
strategies regarding relationships between products. One product may contribute to corporate-level strategy by generating a large positive cash flow for new product development, while another product uses the cash to increase sales and expand market share of existing businesses. Given this potential for business-level strategies to impact other business-level strategies, business-level managers must provide ongoing, intensive information to corporate-level managers. Without such crucial information, corporate-level managers are prevented from best managing overall organizational direction. Business-level strategies are thus primarily concerned with: 1. Coordinating and integrating unit activities so they conform to organizational strategies (achieving synergy). 2. Developing distinctive competencies and competitive advantage in each unit. 3. Identifying product or service-market niches and developing strategies for competing in each. 4. Monitoring product or service markets so that strategies conform to the needs of the markets at the current stage of evolution. In a single-product company, corporate-level and business-level strategies are the same. For example, a furniture manufacturer producing only one line of furniture has its corporate strategy chosen by its market definition, wholesale furniture, but its business is still the same, wholesale furniture. Thus, in single-business organizations, corporate and business-level strategies overlap to the point that they should be treated as one united strategy. The product made by a unit of a diversified company would face many of the same challenges and opportunities faced by a one-product company. However, for most organizations, business-unit strategies are designed to support corporate strategies. Business-level strategies look at the product's life cycle, competitive environment, and competitive advantage much like corporate-level strategies, except the focus for business-level strategies is on the product or service, not on the corporate portfolio. Business-level strategies thus support corporate-level strategies. Corporate-level strategies attempt to maximize the wealth of shareholders through profitability of the overall corporate portfolio, but business-level strategies are concerned with
30
(1) matching their activities with the overall goals of corporate-level strategy while simultaneously (2) navigating the markets in which they compete in such a way that they have a financial or market edge-a competitive advantage-relative to the other businesses in their industry.
ANALYSIS OF BUSINESS-LEVEL STRATEGIES:
PORTER'S GENERIC STRATEGIES: Harvard Business School's Michael Porter developed a framework of generic strategies that can be applied to strategies for various products and services, or the individual business-level strategies within a corporate portfolio. The strategies are 1. Overall cost leadership, 2. Differentiation, and 3. Focus on a particular market niche. The generic strategies provide direction for business units in designing incentive systems, control procedures, operations, and interactions with suppliers and buyers, and with making other product decisions. Cost-leadership strategies require firms to develop policies aimed at becoming and remaining the lowest cost producer and/or distributor in the industry. Note here that the focus is on cost leadership, not price leadership. This may at first appear to be only a semantic difference, but consider how this fine-grained definition places emphases on controlling costs while giving firms alternatives when it comes to pricing (thus ultimately influencing total revenues). A firm with a cost advantage may price at or near competitors prices, but with a lower cost of production and sales, more of the price contributes to the firm's gross profit margin. A second alternative is to price lower than competitors and accept slimmer gross profit margins, with the goal of gaining market share and thus increasing sales volume to offset the decrease in 31
gross margin. Such strategies concentrate on construction of efficient-scale facilities, tight cost and overhead control, avoidance of marginal customer accounts that cost more to maintain than they offer in profits, minimization of operating expenses, reduction of input costs, tight control of labor costs, and lower distribution costs. The low-cost leader gains competitive advantage by getting its costs of production or distribution lower than the costs of the other firms in its relevant market. This strategy is especially important for firms selling unbranded products viewed as commodities, such as beef or steel. FUNCTIONAL-LEVEL STRATEGIES:
Functional-level strategies are concerned with coordinating the functional areas of the organization (marketing, finance, human resources, production, research and development, etc.) so that each functional area upholds and contributes to individual business-level strategies and the overall corporate-level strategy. This involves coordinating the various functions and operations needed to design, manufacturer, deliver, and support the product or service of each business within the corporate portfolio. Functional strategies are primarily concerned with:
Efficiently utilizing specialists within the functional area.
Integrating activities within the functional area (e.g., coordinating advertising, promotion, and marketing research in marketing; or purchasing, inventory control, and shipping in production/operations).
Assuring that functional strategies mesh with business-level strategies and the overall corporate-level strategy.
Functional strategies are frequently concerned with appropriate timing. For example, advertising for a new product could be expected to begin sixty days prior to shipment of the first product. Production could then start thirty days before shipping begins. Raw materials, for instance, may require that orders are placed at least two weeks before production is to start. Thus, functional strategies have a shorter time orientation than either business-level or corporate-level strategies. Accountability is also easiest to establish with functional strategies because results of actions occur sooner and are more easily attributed to the function than is possible at other levels of strategy. Lower-level managers are most directly involved with the implementation of functional strategies. 32
Strategies for an organization may be categorized by the level of the organization addressed by the strategy. Corporate-level strategies involve top management and address issues of concern to the entire organization. Business-level strategies deal with major business units or divisions of the corporate portfolio. Business-level strategies are generally developed by upper and middle-level managers and are intended to help the organization achieve its corporate strategies. Functional strategies address problems commonly faced by lower-level managers and deal with strategies for the major organizational functions (e.g., marketing, finance, production) considered relevant for achieving the business strategies and supporting the corporatelevel strategy. Sub Business Unit: In IBM, a strategic business unit (SBU) is a profit centre which focuses on product offering and market segment. SBUs typically have a discrete marketing plan, analysis of competition, and marketing campaign, even though they may be part of a larger business entity.
An SBU may be a business unit within a larger corporation, or it may be a business unto itself. Corporations may be composed of multiple SBUs, each of which is responsible for its own profitability. General Electric is an example of a company with this sort of business organization. SBUs are able to affect most factors which influence their performance. Managed as separate businesses, they are responsible to a parent corporation.
33
CHAPTER IX CONCLUSION As the conclusion, we believe that the best way to research IBM strategy in India is to try and contact IBM and perhaps, brief interview should conduct with the global brand, we think wider marketing strategy is universal across the globe. At the heart of the IBM philosophy and their aim is to bring Good Quality product which is easy to utilizes and delight mothers. HR department work efficiently and now their customers that is their employees need Psychological satisfaction. It is a relatively new Multinational on the Indian front as compared to its competitor which has a lot bigger area of operation and also manufactures same type of items. But it has established a strong footing for itself in the computer industry. Management has designed rules and regulations which are supposed to be followed by everyone. Policies have been formulated for major and minor issues both. Relationship with the employees is maintained at a cordial level. Employees work with commitment and dedication to achieve the best for the organization. Job satisfaction soars at a high level.
34
CHAPTER X BIBLOGRAPHY BOOKS
Gerst, Louis V. (2003) Who Says Elephants Can't Dance. Leading a Great Enterprise through Dramatic Change. Harper Paperback
Bruce Barkley (2008) Project management in new product development. McGraw-hill books
Rifkin, J. (2000) The Age of Access, Putnam Books, New York
WEBSITES
IBM Global Business Services, http://www.935.ibm.com/services/uk/index.wss/home
http://www.935.ibm.com/services/au/index.wss/ibvstudy/igs/a1006209?cntxt=a10058 48
http://news.cnet.com/IBM-meets-lowered-estimates/2100-1014_3-885259.html
http://www.modha.org/
http://www.ibm.com/
35
