Global Strategy Analysis and Evaluation
Date of Submission
International Business Machine Corporation is best known to many as IBM was formed on June 16, 1911, after a merger of three companies. The Tabulating Machine Company, the International Time Recording Company, and the Computing Scale Company of American management came together and formed IBM Company which was by them known as Computing Tabulating Recording Company. It was not until 1924 when Thomas J. Watson changed the name of the business entity to IBM. Bearing a nickname Big Blue, the company started manufacturing and designing calculators in 1994 using their developed punch card processing equipment (Sparer, 2017). By 1953, the company was equipped to produce their own computers. Since the invention of their first computer, the company has embarked in various product lines ranging from the manufacture of computer peripherals to designing computer codes and software.
The process of a Company to gain a strong global market is engulfed with myriads of challenges that require the management to develop an effective plan to mitigate the challenges. IBM is a good example of a company that has realized global market standards. The primary reason for carrying out a global strategy analysis of IBM Company is based on the fact that the organization is one of the most successful organizations to have attained global standards.
2. Analysis of Strategy
For a company to realize effective global market entry, the management of the organization in consideration needs to devise an effective approach of mitigating all challenges associated with gaining a global market strategy. In response to making an effective entry to the global market, IBM’s global market strategy can be analyzed using a framework provided in the article Are you sure you have a strategy by Hambrick, D. C. & Fredrickson, J. W 2001. The strategy puts forward five major elements that can be utilized in carrying out an analysis of a company’s strategy. Specifically, the elements are arenas, vehicles, differentiators, staging and economic logos.
Successful venture in the global market that IBM has indicated in the 100 years that the organization has been operating in the technology industry can be attributed to a wide range of products it offers its customers. Specifically, the organization manufactures and market computer hardware, middleware, and software and also provides hosting and consulting services in various sectors related to information technology. Other inventions that comprise the organization’s arena include automated teller machines, computer storage devices such as floppy disks and hard disks, dynamic random access memories and venture in the development of SQL programming languages. Even though the organization is venturing into the noted sectors, revenue generated from different sectors varies. For instance, a report compiled between the year 2008 and 2017 indicated a revenue income of about 6.12 dollars in infrastructure and middleware (AIM) software sector. In the hardware and software market, IBM revenues were slightly higher than the revenues gathered from firmware and other sectors.
With the high rate in which technology is growing and considering the fact that IBM is a technology, the organization has the recent past changed its line of production. For instance, instead of manufacturing floppy disks storage devices, IBM has embarked in the manufacture of optic storage devices such as memory cards, external hard disks, and universal serial bus storage devices. Likewise, IBM has introduced other products in the market such as tablets and fast speed processing computers. A focus of the customer served by IBM reveals that the organization had initially targeted big organization in need of information technology devices. Market segmentation has however taken a different turn of events in the past five years with the organization targeting other customers such as the young generation and government institutions who are fond of using technology. By targeting different customers the organization has realized worldwide recognition in various regions across the world. Like on the bases of the line of products revenue, revenue generated by IBM on the basis of the geographical region varies significantly in respect specific region.
From the variance noted in IBM, the organization IBM has currently shifted its regional venture from Europe to Asia specifically in China. The primary reason behind the market change regional market is attributed to the fact that China has indicated an overwhelming economic growth with the majority of its citizens showing dependency on computer technology. Aiming at realizing a good passage to their target customers, IBM utilizes DXC technology that makes available application and data platforms available to customers operating globally. Even though IBM had initially utilized DXC technology, and punch card processing environment, the organization has of rate adopted other cloud computing technology.
IBM reached its global heights via embracing various strategies such as carrying out joint ventures, licensing and acquisition. Vehicles are defined as definite means in which an organization participates in targeted arenas. From its formation time, IBM has undertaken various joint ventures with the most conspicuous venture being between Maersk, and that between Deutsche Bank, Microsoft and HCL. Making use of the defined joint ventures IBM was able to attain its global market. According to Kotabe & Helsen (2009), IBM has been involved in a series of acquisition dated as back as 1923 when the organization purchased Dehamag Company. Since then, IBM has conducted a series of acquisition with the five latest acquisition being made in the year 2018 June and May when the organization acquired Oniqua Inc and Armanta companies respectively.
In the year 2017 September and October respectively acquired Vivant and Cloudigo respectively (Marković, Rakita & Filipović, 2016). The noted acquisition was made in various countries such as Australia, Asia, Philippines, and Israel. Most of the noted acquisition was carried out in developed countries reason being that IBM aims of venturing into the global market were increasing its profits. From the acquisitions and mergers, IBM earned $104.5 billion dollars in revenue. From the observed illustration, it can be argued that IBM ventured its acquisition in developed countries with the aim of taking advantage of the branding of the country. The provided explanation can be extrapolated on the basis that many people possess an ideology that goods made from certain countries are better than those made from others. Through venturing its global market strategies in such countries, IBM took full advantage of customer’s purchasing powers.
According to Hambrick & Fredrickson (2001), differentiators are features and attributes of products offered by a company that beat its competitors in the market. The most conscious differentiator that helped IBM gain an effective global market is acceptance its brand has on the customer. It is the oldest technology company, IBM has high levels of standards of customer’s faith. Together with having customers trust additional differentiator that have contributed to successful global market entry are is the branding of their computer appliances. All IBM products bear the company’s logo a practice that has enabled the organization’s products standout amidst other computer brands. Branding strategy utilized by IBM has undergone various transformations that have continued capturing the attention of their customers. As indicated below, IBM has changed with time making an adaption of various logos.
(White & Bruton, 2011)
The primary ideology behind changing IBM’s act in changing its logos was aimed at embracing the progress that application of intelligence, reason, and science plays a vital role in improving business, society and the human condition (Hambrick & Fredrickson, 2005). Together with capturing the attention of their global customers via a frequent change of logos, an additional benefit that IBM has enjoyed through changing its logos frequently is creating an ideology in their customers that the organization is growing with the growth in technology. Pricing strategy used by IBM goes in line with the economic status of the country in which the organization is selling its products. Products offered by IBM are not as expensive as those manufactured by competing companies such as Apple. Regardless of the fact that IBM sell’s its computers cheaply, traits and interfaces of products manufactured by IBM are customized in such a way that they bear similar traits exhibited by other computer brands.
Staging and pacing
Staging and pacing in reference to conducting an organization’s global market entry strategy analysis refer to the timing and speed at which the organization gained roots in the global market. Immediately after Thomas J. Watson took over the topmost management position at IBM, the individual focused his attention on planning out an effective strategy of gaining successful global market entry. Explained ideology implies that the organization displayed its intention in entering the global market. After gaining a strong foundation, however, the organization IBM started making its moves in entering the global market. Following the fact that the organization had enough resources and there was an urgency of winning many markets, the international market expansion that IBM underwent a slow international market expansion growth rate (Sebastian & Spencer, 2005). This can be evidenced by looking at the rate at which IBM bought other companies. The growth of technology that has given rise to globalization has however changed the rate of international market expansion that the organization is undergoing recently.
With globalization in play, IBM is able to reach a wide scope of customers and market its products overseas more easily. The primary reason why IBM chooses to enter particular sets of countries and venture in other countries later can be based on various factors that affect an organization global market acceptance. For instance, it was wise for the organization to venture into an economically stable country since it was assured of high rates of returns and profits. The same case applies to IBM’s move in regard to diversifying its products.
The economic logic element of the global market strategies focuses its evaluation move in defining means applied by the organization with the aim of generating positive returns over and above its costs of capital. Following the definition provided, it can be argued that IBM applied product diversity in ensuring that it does not operate at a loss. By venturing into different lines of product requiring the same level of expertise, IBM mitigated the costs of employing more workers to perform different tasks (Bragg, 2010). Additional strategies applied by IBM in the realization of economic logic during the organization’s transformation journey are embracing horizontal integration, simplification, and radical change. Additionally, aiming at reducing costs incurred in catering for the employee’s welfare, IBM consolidated its vital departments comprising of Human resource department, finance department, procurement, and supply chain department (Institute of Management & Administration, 2016). Following the fact that development of computer-based software and programs is not an ongoing task; IBM embarks on outsourcing programming experts in times when extensive programming is required at the organization’s premises. Regardless of embracing the noted moves, IBM ensures premium production of computer and computer accessories through employing highly trained experts.
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