SWOT Case Study - IBM

In 1924, The Computing-Tabulating-Recording Company adopted the name International Business Machines Corporation.  IBM has been involved in many technological advances since the early twentieth century from tabulating countries’ census reports to sporting event analysis to developing computer software and e-business.  IBM today is not just the Hardware giant that we have come to know.  Most of their revenue comes from software and consulting and leads the world in technological achievements.

Strengths

• IBM leads the world in technological success with patents in the United States for 17 straight years.  In 2008 IBM earned 4186 patents and in 2009 they increased that amount to 4,914.  It published almost 4,000 technical inventions and products without patent protection in 2009; this is a valuable intellectual property.
• They are the company handling 95% of all business in the 1000 most profitable companies in the US.
• In 2009 they were recognized as the 4th most recognized brand name in the world and they have been consistently in the top 10 for 20 years.
• IBM is one of the largest and most profitable companies in the world, with a value of $66 billion. They have over 400,000 employees worldwide.
• It is an old, established company, founded in 1896 as the Tabulating Machine Company by Herman Hollerith, in Broome County, New York.
• In 1945 they were the first company to establish dedicated research labs for the creation of technological innovation, which lead to the creation of computers, voice recognition software and products that assist those working in medicine and radiology.  

Weaknesses

• IBM’s size is also its weakness.  IBM’s goliath size can make it slower to react to customer’s needs and wants as well as to the industry’s fluctuations.  And it’s more than 400,000 employees can make it difficult to find the support and services needed.
• Enormous operating costs and competitors eating into their market share forced them in 2010 to buy back $8 billion in stock.
• Transferring jobs oversees has been an option IBM is using more and more.  At the end of 2009, IBM USA had a workforce of 105,000 down 30,000 in just a few years.  In 2009, there were rumors that IBM wants to get the US workforce down to 70,000.  This is not a weakness for other countries that are absorbing many of these US jobs.
• Communication across these different countries can be very challenging. For example, having the helpdesks in India creates language barriers in the US.  Also, India has exported many engineers to the US because they are cheaper to pay but also Indian Engineers do not have both the educational and experiential accolades of their US counterparts.  Many of them come over to the states and the few US employees left in the department have to re-train them, wasting countless hours that could be used in supporting their customers. 
• The current recession has hurt everyone and IBM is not exempt.  Financial services, which accounts for 30% of IBM revenue, has declined.  It’s riddled with subprime mortgages forcing to mark down their portfolios to ridiculously low “market” prices on packaged securities that are trading at a fraction of their theoretical value.  This, in turn, is affecting the equity of banks, and therefore their ability to lend. 
• Servers and Storage which account for about 20% of IBM’s revenue has declined to 16% and a 6% decline in margins. 

Opportunities

• Increased globalization is an important opportunity that can be exploited by IBM in order to balance the fluctuations in different economies.
• Their brand image is synonymous with “big” and “old” they need to create products appealing to a younger generation and reposition their company.
• IBM needs to maintain a competitive edge in the marketplace and innovation is key and working with IT-related companies to create new products in the ever changing market; use patents to generate revenue. 
• IBM’s love of open source operating systems, specifically Linux, benefits IBM in both the short and long term.  IBM can sell its i-series platforms with Linux to respond to the growing demands of the operating systems (OS).  Also, IBM can also use Linux on its Z-series mainframe line and even its p-series machines which mostly uses IBM’s own AIX which usually competes against the UNIX operating system.  Open architecture is key to creating and maintaining market share.
• IBM’s small-medium business (SMB) has improved over the years but there is definitely a need to increase its market share to have an overall competitive edge. 

Threats

• The fact that they are completely dependent on Microsoft (in their computer services division) could be a huge problem if anything ever happened to them.
• Hackers and sensitive information can be exposed and exploited by individuals and IBM needs to be innovative with regards to firewalls and protective software.
• The supply chain has very few suppliers, leaving IBM very little to negotiate with or switch to.
• HP, Sun Microsystems are all competitors and are all threats to IBM’s bottom line.  Their competitors are able to create cheaper products and make more a considerable profit. Smaller companies that can move faster and provide less expensive products and services than IBM can become very costly to IBM’s more lucrative bundles focusing more on larger companies with big budgets.

by Mkt Teachers