IBM Competitive Capabilities - Management Assignment

The company which became IBM (International Business Machine's) the world's largest computer company was founded in 1896 as the Tabulating Machine Company by Herman Hollerith in Broone County, New York. In the past 15 years, the IBM Company has undergone a remarkable transformation from a struggling seller of hardware to a successful broad range solutions provider (Harreld et al, 2006)

After the company's heyday in the 1960s and 1870s, IBM had begun struggling to keep pace with its rapidly changing marketing environment. The Internet had already made its presence known, personal computing was quickly becoming the order of the day, and the “.com“ mentality was just beginning to take root.

In 1990, IBM had its most profitable year ever. By 1993, the company was on a watch list for extinction, victimized by its own lumbering size, an insular corporate culture, and the PC era IBM had itself helped invent (Kerber & Laseter, 2006), in 1993 IBM suffered major losses in profits and their stock price was at its lowest for almost a decade. This was down to a poor corporate strategy and the image they portrayed, there was a period when people would joke that IBM was an acronym for ‘Inferior But Marketable’ (OHE Campus, 2009).

For such a large well renowned company why did IBM deserve this nickname? Perhaps the biggest problem and the reason that they earned this nickname was marketing myopia, IBM were marketing non-competitive products, notably OS/2 which, despite being technically superior, was a costly sinkhole and gobbled management time, plus it had a negative public image, (Feather, 2008). IBM were producing inferior products, that were expensive, underpowered and too bulky and by the mid 80's the shift to smaller, open systems, along with greater competition in all of IBM's segments, gradually weakened IBM's competitive position.

IBM appeared to have lost its edge, its focus, and to a considerable degree its brand identity. Its business unit were siloed. Internal competition-for resources and business-sometimes seemed more intense than with external competitors. The company, far more often than not, displayed an extreme product focus, a lack of unity in direction, and an absence of a cohesive corporate strategy.

IBM had the money and had the people to keep up with the ever changing market place but due to the fact they were very product focused and product development was tightly confined within differing business units the communication was poor and a silo mentality existed throughout the company. Very little effort went into cross-product collaboration, much less cross-functional synergies. (Kerber & Laseter, 2006)

Conclusion:

IBM Chiefs had not realised that their existing strategies and technology were not keeping up to the pace of the fast moving IT industry; their products were outdated, cumbersome and losing them not only their reputation but also a lot of money. It was obvious to all that this had to change or they would eventually fold; in 1993 with losses of $8.1 billion IBM woke up and had to make an attempt to stop the rot and adjust their strategy, they did this by reinventing themselves; they sold off their disk manufacturing dropped the OS/2 along with other products such as printers and networking equipment. Along with this they brought into a new CEO called Lois V, Gerstner and with his reinvention and saviour of the company we have the very successful IBM of this era.

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