Introduction:

This assignment will present the strategic direction for the chosen company IBM. It will give an overview of IBM’s strategic decisions that it had followed in the past five years and the way the company develops its tactics. The assignment will analyze the external and internal factors to analyze the environmental factor and strategic capability of the IBM. Finally, it will discuss the possible business and corporate global strategies to defend the core business of IBM.

1.0 Strategic Direction of IBM:

IBM, International Business Machine Corporation produces computer hardware, software, and middleware products and also provides consulting and hosting services. The market segment of IBM divides into several parts such as the government segment, corporate market segment, enterprise products segment, and B2C products segment (Ibm.com. 2020). The B2C product of IBM is BOX sales. The main example of BOX sales product is Laptops (Box, an IBM Strategic Partner - Overview - India, 2020). The DELL company is the main competitor of the IBM, the operating expenditure of IBM was 35%, and operating expenditure of the DELL Company was less than the 9%. 

Fig 1: Annual revenue of IBM

Source: (IBM Revenue 2006-2020 | IBM, 2020)

According to the statistics, the IBM revenue for 2015 was $86.741B, for 2016 IBM revenue was $79.919B, for 2017 the revenue of the IBM was $79.139B declined 0.98% from 2016, for 2018 the revenue of IBM was $79.591B increased by 0.57% from 2017, for 2019 the revenue of the IBM was $77.147B decreased by 3.07% from 2018 and the revenue of the IBM on June 30, 2020, was $75.498B decline 3.03% (IBM Revenue 2006-2020 | IBM, 2020). The IBM restructured, repositioned, and refocused itself to improve the corporate image of the company.

In the last five years, the IBM focuses on corporate entrepreneurship and strategic innovation. The company uses a vertical integration strategy to retain the sustainability of the company. The company focuses on the technological innovation and excellence of the product to provide better services to the corporate entrepreneurial. According to the old business model of IBM, the company was selling the hardware devices to increase the revenue of the company. In the past five years, the IBM changes its strategic thinking and transform the company into a profitable business centre. The company uses the new computing model to deal with its operating cost and to change its operating structure. The company’s operating department focuses on the three areas of new computing models such as integrating middleware, enterprise system, and specialized and high-value components. 

The company focuses on internal development and acquisition to build the biggest middleware business of IBM in the world. The IBM focuses on the new model of the marketplace (an open playing field model) to develop a competitive edge for the company. It helps them to develop a big and fast company, disciplined and entrepreneurial company, market-driven, and scientific sector to develop a worldwide scale for the company.

The company provides several opportunities to its employees for the development of the human resources of the company. The company encourages employees to continually learn, renew and changes themselves and also company provides opportunities, tools, and flexibilities to their employees to continue the distance learning and keep balance into their personal and professional life.

2.0 Strategic analysis:

To perform the strategic analysis of the IBM, this assignment analyzes the PESTLE factors and Porter’s five force factors to conduct the external factor (environmental) analysis.

2.1 PESTLE analysis:

Political factor:

The political uncertainty of the UK government also creates many challenges and barriers in the path of the business operation. The high corporate tax rate around 19% tax rate increases the operational cost of the IBM. On the other hand, the UK governmental move for enhancing the digitalization is a positive external environmental factor for the IBM. Besides, the UK governmental political support for leveraging e-technologies and governmental action to improve the data protection system creates a great opportunity for the IBM. 

Economic factor:

The economic factor of the country creates a major impact on the business of the IBM. Due to the COVID-19 pandemic, the UK economies suffer the deep economic recession in 2020. The inflation rate in the UK is 1.19% in 2020 (United Kingdom - Inflation rate of 2021 | Statista, 2020). This moderate inflation rate allows companies to adjust their prices and wages. The more developing markets increase their economic potential the opportunity for information technology firms like IBM increases as well. The rising demand for online products becomes an opportunity for IT firms.

Social factor:

The socio-cultural environment of the UK creates challenges for operating the business of IBM. According to the recent pandemic situation due to the COVID-19 effect, it increases the use of IT products that increase the sale of IT products. Also, most of the organization prefers the work from home services to keep their business running. It creates opportunities for IT firms to provide the best security, data protection services, and develop a digital workplace for organizations.

Technological Factor:

Technological integration in the markets and various industries increases the chances of the new entrants that become a threat to the company. The diversifying of the business of the new entrants becomes a major threat to IBM. On the other hand, the expansion of the global internet accessibility provides opportunities to IBM to provide better cloud platform services and cyber-security services.

Environmental Factor:

The Government of the UK focuses on the recycling policy and the use of renewable energy to reduce environmental pollution from the organization. It is the challenge for the company also, on the other hand, it becomes an opportunity for the IT firms to improve business sustainability by recycling its production waste and using renewable energy.

Legal factors:

Governmental legal policies such as human rights, employees’ health, and safety protection law cyber-security law, e-waste regulation create challenges for the IBM. The opportunity to improve the overall protection of the intellectual property of the UK brings more opportunity for the company.

2.2 Porter’s 5 forces analysis:

Fig 2: Porter’s Competitive Forces

Source: (Lewis, 2017)

Threat of Rivalry: The competitors of IBM produce limited differentiated products from each other. It creates a moderate force on the business. At the same time, high imitability of technology is another strong rival force for IBM that enables competitors of IBM to generate a highly similar product. It shows IBM should focus on the competitive advantage to deal with their competitors.

Bargaining power of the buyers:

The IBM has a large number of customers so it defines that the bargaining power of customers is weak. The cost of changing creates a moderate force on the IBM business. Because changing the provider of the IT products may be costly for the customers but the customers can still have the limited power to change the providers.

Bargaining power of the suppliers:

Suppliers of the company can directly affect the supply chain of the IBM, quality, and price of the IT products. The number of suppliers of IT products is high, so according to this, it represents the moderate force for the supplier’s influence (Lewis, 2017). On the other hand, the power of the suppliers also creates a high impact on the supply chain of the IBM because of the low ability of the IBM to switch the suppliers based on the supply of specific IT materials.

The threat of the substitutions:

The moderate availability of the substitute companies based on the quality of the products creates a moderate effect on the IBM. On the other hand, customers also appreciate the substitute’s products if the products fulfil their requirements. It creates a moderate effect on the IBM business. It suggests that the company should focus on the quality of the products.

Threats of the new entrants:

The entrants of the new IT firms create a strong force on the IBM business that can reduce the market share of the IBM. The high imitation potential of the new entrants in developing similar products creates a strong force on the IBM.

The assignment will conduct the SWOT analysis and BCG matrix analysis to analyze internal factors of the IBM that creates an effect on the business.

2.3 SWOT analysis:

2.4 7s Mc Kinsey analysis:

Fig 3: 7s McKinsey Framework

Source: (Shaqrah, 2018.) 

Strategy: The main strategy of IBM is to solve the hardest problem of its clients and provides them with the best hardware, software, and security services.

Structure: The IBM maintains divisional structure. The company provides IT related services, financial services, industry expertise services, and hardware and software services.

System: The employees of the organization focuses on a fair-minded and dynamic attitude while communicating with other employees and clients. The company focuses on the company’s departmental activities and training sessions for employees to improve their competency skills.

Shared Values: The Company provides equal opportunity to its men, women, and bisexual employees. The company maintains a culture of openness within the organization.

Style: The leaders of the company maintain a dynamic attitude. The company prefers the casual dress of employees and creates a relaxed mood at the workplace.

Staff: The staff of the IBM is dedicated. They give their extra support to get the job done efficiently.

Skills: IBM provides classroom training and web-based learning opportunities to its employees to improve the skills of the employees. It leverages the high-performance skill of employees.

3.0 Mission, vision and strategic capabilities:

3.1 Mission:

The mission of the IBM is to lead the position in the innovation, creation, manufacture, and development of the advanced information technologies that include the services of networking systems, computer hardware and software systems, computer security systems, microelectronics and storage devices (Ibm.com. 2020). The company dedicated to providing proper innovative services to its clients.

3.2 Vision:

The vision of IBM is to be the most successful and efficient IT Services Company in the world. The company’s vision is to provide dedicated and efficient services to its customers to solve their IT related issues (Ibm.com. 2020). The company’s main vision is to innovate new intelligence application to improve the society, business, and human conditions.

3.3 Objectives of the company:

The long-term objective is to innovate new IT security technology for its clients.

The Short-term objective is to empower the teams of the company with the business practices to get their work done remotely in the COVID-19 pandemic situation.

The mid-term objective is to provide hardware and software services to their clients to continue their business operation.

3.4 Reposition IBM

The alliance networks play an important role in repositioning the IBM. The company builds a new network with new partners and transforms its business from a hardware manufacturing company to a software company and global service provider.

3.5 Strategic direction of the company:

The following analysis of Ansoff’s matrix provides the concept of the strategic direction of the IBM.

Market penetration: According to this strategy, the IBM already promotes its existing IT products in their existing market. The company provides installation services and after-sale services to their existing clients to keep them encouraged. Also provides discounts to activate the subscriptions to their existing clients.

Market development: It is the act of the company to enter new markets by launching new products. The IBM operates their business worldwide. The company provides direct sale opportunity and builds a sales centre in new markets to keep its attraction.

Product development: It is the act of the company to introduce new products in the existing markets (Palazzo and Ferri, 2020). The IBM always focuses on introducing the various category of new products such as servers, hardware, software services, and many more to keep the attention of their existing market.

Diversification: it is the act of introducing new products in the new products (Tsatsoula, 2018). The IBM also diversified its company in various ways by expanding its business and introducing a new category of products to provide the services. 

3.6 The company’s strategic capabilities:

In the division of strategic capabilities, the future requisition of manpower is an important part.

Core competences: Dedication to the success of every client. The innovation of intelligence application to improve business, society, and condition of humans (IBM Profile | Best Companies, 2020).

Recruitment and selection: The Company provides fair chances to all candidates including men, women, and bi-sexual candidates. The company uses the skill base and fair-minded selection process while recruitment.

Training and development: The IBM provides classroom training and web-based learning services and up to 10 days of training sessions in a year at a multilingual resource centre to develop the professional skill of employees.

Rewards and recognition: The IBM provides good financial rewards to their employees depend on the individual performance of employees with a target of the increment by 10% (IBM Profile | Best Companies, 2020).

Performance management: The KPI of IBM depends on employees, the company provides work-enabled learning to maintain employees’ performance, the company provides equal opportunity to women, provides educational facility to improve skills and performance of students, etc.

Values and culture of the IBM:

Leadership: The IBM usually maintain the dynamic, fair-minded, and transformation leadership quality to operate their business (IBM Profile | Best Companies, 2020).

Culture and values: The Company maintains the open and dynamic culture within the organization. The value of the IBM is to continuous innovation of new technologies. 

Customer centrism: IBM provides dedicated and excellent services to customers to generate a profit from the market.

Relationship marketing: The IBM maintain the trustworthy and take personal responsibility to continue the relationship with their clients by providing various offers such as after-sale services, installation services, discount offers, etc (IBM Profile | Best Companies, 2020).

Total quality management: The IBM tries to close the gap between data science and data analytics to improve the TQM system of the company.

Structure: According to Mintzberg’s six organizational configurations, the IBM maintain the divisional organizational structure based on their products.

4.0 Possible strategies to defend the core business of the IBM

The IBM can focus on the business and corporate strategy to defend the core business of the IBM.

The IBM can use Porter’s generic strategies to maintain the competitive edge of the company and to retain their core business (Islami, Mustafa, and Latkovikj, 2020). Porter’s generic strategy focuses on two variants of cost focus and differentiation focus.

Fig 4: Porter’s Generic Strategy

Source: (Islami, Mustafa, and Latkovikj,  2020)

Cost leadership: According to this strategy, IBM should focus on reducing production costs.  It enables the IBM to reduce the price of selling the products and also maintain the quality of the IT products and services to keep a higher profit margin.

Differentiation: According to this strategy, IBM should focus on the product differentiation strategy by implementing uniqueness in the products that meet the requirements of the clients. It may help IBM to maintain its competitive edge in the market.

Cost Focus: It involves the focus on minimizing the cost of specific segments of products to ensure the competitive advantages of the IBM.

Differentiation Focus: The IBM should keep the focus on bringing differentiation in the products of the specific segments or all segments to differentiate their products from competitors.

According to this analysis, the IBM should focus on the differentiation in products. It may help the IBM to keep the core business of the IBM.

The Company can also improve its corporate-level strategy by using the diversification strategy. According to the diversification strategy, The IBM can introduce the new segments of products for expanding its business in new markets (Gyan, Brahmana, and Bakri, 2017). 

To maintain the diversification strategy, the IBM can keep its core business by strategic alliance strategy to keep diversified profile around the globe and while entering new markets.

The Strategic alliance is the best corporate level strategy under the diversification strategy. It defines that the company can build a partnership with another company to regulate a mutually beneficial project (O'Dwyer and Gilmore, 2018). It also retains the independence of each company. It may help the IBM to introduce more diversified products and services and improve the product line of the company to keep the attraction of the customers in the new market segment.

5.0 Resource implication and recommendation:

According to the above analysis, the IBM should focus on resource allocation and control services to retain the positive value of the company. The IBM should configure the resources by protecting its unique resources such as human resources, physical resources such as storage facility, raw materials, intellectual resources such as brand value, partnership, etc. The company should fit the resources according to the requirements, use the business re-engineering process to reduce the cost and error in manufacturing, use previous experiences, and sustain the competitive advantage by using product differentiation strategy, and low price strategy. The company should prepare the plan for allocating resources based on the priority and success factors. The IBM can control the resource allocation through direct supervision, different planning systems such as centralized regimes and devalued regimes, performance target system such as the revenue of the centre, operational cost, profit and investment on the particular centre, cultured and soul control system, market mechanism system, and personal motivation and self-control system. The company should keep the information of above-identified processes to maintain the competitive edge of the IBM.

IBM can use the Just in Time strategic planning to allocate resources by which the company can increase the efficiency of the production and reduce the waste from the production. It reduces the cost and time of production.

5.1 Recommendations:

According to this analysis, the company should use the Just in Time strategic planning and maintain the proper steps of resources allocation method to improve the efficiency of the production of IT services.

The IBM should implement strategic alliance corporate-level strategy and focus on the product differentiation strategy to keep its competitive advantage in the market.

Conclusion: 

It concludes that the IBM should keep focuses on the above-declared resource allocation services and strategic planning to properly allocate its unique resources to keep their business running. The IBM should focus on the product differentiation strategy to produce unique products for the company that differentiates them from other competitors. The IBM also should focus on the Strategic alliance strategy to expand its business successfully.