Introduction
The primary objective of this paper is to look at the strategic execution of IBM. The paper looks at the issues to do with strategies currently used by the firm, analysis of its external and internal environment using SWOT analysis. It also looks at the strategy that the firm has pursued in the recent months, regarding the reasons for the execution of the strategy in question.
Company Overview
Product and Services
International Business Machines Corporation (IBM) is one of the biggest technology-related enterprises in the world. IBM is an American company that is involved in the international business of manufacturing as well as marketing computer software, hardware and middleware. Also, it offers services in the area of technology consultations, computer infrastructure and hosting services (IBM, 2016). Its consultation services are mainly in the area of nanotechnology and mainframe computers. It is one of the firms that has managed to build a strong brand name over the years. It operates in the IT industry, where it faces stiff competition from various players, such as Google in the area of software development and Microsoft in the development of computer hardware and software.
Strategy for Achieving Competitive Advantage
For purposes of achieving competitive advantage IBM has implemented two generic strategies. First, it has successfully implemented the differentiation strategy for its products and services so as to gain a competitive edge over its rivals. The differentiation strategy involves the firm ensuring that it implements unique service and product features. The main feature of the company service and product differentiation is their quality and innovative features. The firm offers high-quality products that have innovative features; thereby, managing to gain a competitive edge among customers who need IT services and products around the world (Hitt, Ireland & Hoskisson, 2012). The firm also makes use of focus strategy, by ensuring that it focuses on a certain range of products, particularly IT services, hardware and software products. As a result, the focus strategy has enabled it to build a strong brand name as one of the best companies in the production of computer software and hardware.
Financial Performance Overview
When it comes to the financial performance, IBM has recorded a mix of results. First, it ROA in 2015 increased to 11.57% from 9.86% in 2014. On the other hand, its ROE increased to 100.96% in 2015 from the previous 69% in 2014. The ROE indicates that firm is generating higher returns for its shareholders while the ROA indicates that the firm is utilizing its assets in an effective way to generate revenues. The revenues of the company also increased with a margin of 7.2% in 2015 from the ones recorded in the previous financial year. The growth in revenues clearly indicates that the company’s financial strength in the recent years has been on the rise. On the other hand, the current ratio indicates that the company is well placed to meet its short-term financial obligation while the quick ratio indicates that the company has adequate short-term assets that it convert into cash within a period of three months to keep on meeting its financial obligations. The market share of the company has also been growing in the recent years; a clear indication that its marketing efforts have been successful, as well as its investment strategies, particularly the ones related to launching of new products and strategic acquisitions. Therefore, the overall financial performance of IBM is good compared to its peers in the IT industry.
SWOT Analysis
Strengths: One of the major strengths of the company is strong brand reputation. The firm has been in business over many years; thereby, managing its strong reputation in offering high-quality hardware and software products (IBM, 2016). Second, the firm has strong acquisition competency, allowing it to acquire businesses that give it a competitive edge. Third, the firm has diversified its services and products; thereby, increasing its chances of enhancing its profitability. Also, it has integrated its services and products, ensuring that they help in achieving similar goals in the company.
Weaknesses: One of the key weaknesses of the company is that it offers expensive IT services as well as software solution; thus, failing to capture the small and medium enterprises that cannot afford expensive solutions. The second weakness is that the firm focuses mainly on large firms; thus, ignoring the needs of small companies, which leads to losing essential markets to its competitors, such as Microsoft and Google.
Opportunities: The firm also has some opportunities. First, there is a growing demand for cloud computing services. Hence, the firms can come up with products that will suit the needs of different types of costumers; thereby, being in a position to gain a competitive edge (Hitt, Ireland & Hoskisson, 2012). Second, the company has an opportunity to expand its products and services to meet the growing IT and computer needs of different individuals and business in the world.
Threats: One of the threats facing the company is growing competition in the area of cloud computing services. Hence, unless the firm invests heavily in the area of marketing, it might end up losing some of its market shares to new entrants or existing companies in this area of IT. Second, the slowdown in the growth of the global economy also poses a major threat to the future sales and profitability of IBM.
Evaluation of Company Strategy
Overall Strategy
There are some important aspects of the current strategies implemented by the firm. One of the important aspects is that the overall business strategy is aligned with marketing and manufacturing strategies (Vanderstraeten & Matthyssens, 2012). For example, the company’s business strategy on achieving growth is aligned with its marketing strategy of increasing product awareness and product/service differentiation. Also, the strategy is aligned to manufacturing strategy of increasing production capacity and efficiency to reduce costs that impact negatively on the productivity of the firm. The second most important aspect of the overall company strategy is innovation. Innovativeness and creativity are at the center of the company's business strategy, where it invests heavily in research so as to come up with innovative products that can compete effectively in the global market (Hitt, Ireland & Hoskisson, 2012).
The last critical aspect of the company's overall strategy is customers. The firm puts more emphasis on issues to do with customer's getting high quality and IT services so that their needs can be fully satisfied by the teams of employees contracted by the firm to offer services to customers. As a result, the overall firm’s strategy pays a lot of attention to issues to do with customer satisfaction and retention rates, by ensuring that they get value for their money always for using the company’s products as well as services.
Recent Strategic Initiatives
One of the recent strategic initiatives implemented by IBM is the acquisition of Bluewolf Group for an estimated cost of $ 200 million. Strategic acquisition is one of the major strategies used by various big firms in the IT industry, with an objective of increasing their market share as well as enhancing their competitive edge and profitability (Shi, Sun & Prescott, 2011). Google, one of the major rivals of the company, has succeeded in increasing its market share through making major acquisitions. Hence, for purposes of ensuring that IBM remains relevant in the IT consultation business, particularly on sales related services, the management decided to acquire Bluewolf, an organization that is involved in the business of offering IT consultation services in the area of sales. The acquisition by the company has several strategic advantages.
First, the acquisition will allow the company to enhance its focus strategy. The acquisition will enable the company to focus its effort in the area of offering IT consultation services to firms in the field of sales. The strategic capabilities of Bluewolf AGroup will be used by the firm to its advantage; thereby, giving it a competitive edge in the long term by allowing it to focus its services in the area of IT consultation in a more superior way (Allen et al., 2007) .
Second, the strategic acquisition will be instrumental when it comes to increasing the company’s market share around the globe, especially in the IT consultation services niche. The purchase of the enterprise means that all its customers will now become the company's customer, and this will improve its share of the global market (Collis & Rukstad, 2008). Also, the increase in market share will play a significance role in enhancing the profitability of the company. It is also critical to note that the strategic initiative taken by the firm will also give it a competitive edge, as it helps to reduce direct competition in the IT consultation business. Consequently, it will reduce the stiff competition it faces from Bluewolf Group for customers. The firm will thus enhance its capability to generate more revenues due to the strategic acquisition that it has made.
Conclusion
IBM is one of the companies that use strategy execution to its advantage. It first crafts strategies based on meeting a certain need that is related to its overall business strategy, and then implements that plan in a manner that it will gain an overall competitive edge. In conclusion, it has successfully implemented the strategy related to the acquisition; thereby, gaining a competitive advantage in its operations.
References
Allen, R. S., Helms, M. M., Takeda, M. B., & White, C. S. (2007). Porter's generic strategies: An exploratory study of their use in Japan. Journal of Business Strategies, 24(1), 69.
Collis, D. J., & Rukstad, M. G. (2008). Can you say what your strategy is? Harvard business review, 86(4), 82-90.
Hitt, M., Ireland, R. D., & Hoskisson, R. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.
IBM (2016). Contact IBM - - United States. Ibm.com. Retrieved 3 April 2016, from http://www.ibm.com/contact/us/en/
Shi, W. S., Sun, J., & Prescott, J. E. (2011). A temporal perspective of merger and acquisition and strategic alliance initiatives: Review and future direction. Journal of Management, 0149206311424942.
Vanderstraeten, J., & Matthyssens, P. (2012). Service-based differentiation strategies for business incubators: Exploring external and internal alignment. Technovation, 32(12), 656-670.
