1. Why is there a need to improve performance of IBM?
- IBM is acquiring one cloud computing company after another but its overall market share is just 5%.
- Nearly half of its revenues are generated from the North American market only.
- Its employee annual turnover rate is nearly one-fourth.
- Its overall revenues are dwindling.
- The cost of its products is increasing.
- It is not focusing on risk diversification and instead spun off its one unit which can most likely turn into its competitor in future.
- It entered into litigation against its own ex-employees which sends a wrong message to other employees in the company.
2. IBM: Company Details
IBM (International Business Machines) is a multinational hi-tech company based in the US. The company is operating in 171 countries. It has pioneered several technology artifacts such as hard drive, magnetic strip card, ATM, UPC barcode, floppy disk, dynamic random-access memory (DRAM) and SQL programing language (Cortada, 2019). Its market value is estimated to be $119.54 billion (YCharts, 2022). The company was established in 1911 and over the course of decades came to be known as the Big Blue following the blue colour in its logo (Appendix – 2) as it was the early developer of business machines and personal computers (Pugh, 2009). Its products were found in every large organization and its corporate culture was imitated by organizations around the world (Cortada, 2019). Over the course of years, the company went through several phases of success and failures as it nearly went out of business in 1990s but soon bounced back due to strong leadership of Lou Gerstner. It was dubbed as business turnaround of the decade by Garr (2000) while Lou Gerstner himself dubbed it as Who Says Elephants Can’t Dance as he wrote a book with this title (Gerstner, 2003) and highlighted the momentous strategic turnaround IBM achieved under his leadership (Cortada, 2019). Recently, the company has expanded its operations in the cloud market, marked with acquisition of Red Hat in 2019 for $34 billion (Panettieri, 2018). However, the company faces service provision issues from time to time (The Register, 2022). Hence, the current research is an effort to devise a plan to improve the cloud services of the company.
IBM highlights cloud computing as one of the three pillars of IBM (Berman, 2014). The current CEO of the company, Arvind Krishna, reiterates the position of cloud computing as that of one of the pillars of IBM (IBM.com, 2022a). Cloud computing represents the online storage solution that is available to customers on the dedicated data storage facility of service providers of which IBM is the one (Schouten, 2013; Cortada, 2019). The customers buys the data storage space from the service provide such as IBM and upload their data on the data storage for the space allocated to them by the service provider. This saves the customers from the hassle of building data storage center for themselves. Hence, governments besides individual persons and companies are using such data storage facility or cloud computing to store and access data from anywhere i.e., without any geographical restrictions (Cortada, 2019).
3. Key Frameworks used in Business Plan
To conduct the external environment analysis of the company. It showed that the company is losing the opportunity in Asian market due to trade war between US and China. However, Chinese government on the other hand has included cloud computing in free trade zone. Therefore, the company should focus on acquiring market share in Asian market.
3.2 Business Model Analysis
This model analysis was used to identify Who, What, and How of IBM. This analysis also revealed that the company spun off one of its units. I advise IBM to refrain from spinning off its units in future because it can turn its autonomous units into its competitors in future.
3.3 VRIO Analysis
This analysis helped in understanding the resources which can generate sustainable competitive advantage for the company. Any organization should include VRIO in its business performance improvement plan as it keeps the resources of the organziation under review.
3.4 ROCK Team Framework
The application of this framework revealed that IBM is facing issues related to human resource management. Its workforce lacked killer attitude, meaning thereby that their motivation level was affected.
In the light of analyzing IBM’s performance, I advise applying the following:
- Cost Leadership strategy: As there are multiple providers of cloud computing with Amazon leading the market (Stashko, 2022), IBM may not be able to develop product differentiation; because the cloud market is increasingly becoming saturated according to Lenovo (Ballard, 2019). Therefore, IBM should focus on using cost leadership strategy (one of the strategies in Porter’s Generic Strategies – Appendix-3) to gain more market share.
- Risk Diversification: The company should focus on risk diversification instead of attempting product differentiation because its earlier product differentiation strategy regarding IBM Watson failed which consumed significant amount of money for development and yet was sold for way less and in parts (Davis et al., 2022; Konam, 2022; Ross, 2022; Lohr, 2021; O’Leary, 2022).
- Expand in non-US markets: The e-government initiative across the world represents a lucrative opportunity for cloud computing companies such as IBM. However, due to trade war between US and China, US companies are refraining from fully exploiting the Chinese market even though China has included cloud computing in free trade zone (ITIF, 2021). IBM should exploit cloud computing market opportunities in Chinese market as well. Chinese market alone represents a potential of $19.38 billion in cloud computing (China Internet Watch, 2022). This is also evident from the fact that over 50% of IBM revenues come from the US market (Statista, 2022b).
- Apply suitable rewards scheme: The company should use combination of extrinsic and intrinsic rewards because extrinsic rewards generate motivation critical to kick start motivation and the motivation so generated is then continued for long-term by intrinsic rewards. It is this appropriate combination of extrinsic and intrinsic rewards which will instill killer attitude in its workforce.
5. Model Business Plan
Please refer to the image attached herewith.