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IBM Company’s Historical Functional Strategies Case Study


Introduction

A historical review of IBM exposes the company’s strategic approach to its target market. This section of the report presents IBM’s historical functional activities, such as market distribution, pricing, performance, degree of automation, degree of integration, plant characterization, inventory, and quality. The historical review in this chapter intends to expose IBM’s position as a leader in the international IT market. IBM integrates full range products and services and targets multiple consumer segments, both locally and internationally. This keeps IBM at the peak of the IT segment since it always has products delivered to its consumers. This chapter presents an overview of IBM’s historical strategies and the effects of these strategies on IBM’s positioning in the global IT market.

Analysis

Historical functional strategic analysis will be incomplete if the focus is not placed on the nature of the target market. IBM’s historical target market comprises of a combination of different market segments. IBM offers products for the government, business organizations, individual consumers, and industries. The company offers these products accords internationally, placing focus on developed regions around the globe. This establishes IBM’s presence in America, Europe, Asia and

Internationally, IBM supplies consumers in the Middle East, South Africa, Taiwan, Norway, Japan, China, Belgium, Australia, India, UK, Canada, and Korea. IBM focuses on the North American market nationally and the New York and Massachusetts at the national level.

The company employs the services of sales teams through satellite offices to facilitate its regional sales. IBM’s offers a full range of products ranging from storage products (which include disks, network-based storage, storage software, and storage area networks), networking devices (which include networking software, switches, and cables), general software, IT services (such as application management, cloud consultancy, and integrated communications), outsourcing services, and other products/services (Garr, 1999). IBM’s ability to offer such a full range of services to its local, national, and international markets has strategically positioned amongst the major competitors in the international IT industry.

A company’s ability to customize its products differentiates it from other companies functioning in the international IT market. Companies’ may utilize standard, custom, or modifications approaches to ensure effective customization. IBM’s diverse and full-ranged services afford it the ability to offer all three levels of customization (Slater, 1999). The possibility for the alteration of IBM’s products depends on the product and/or service and the purpose the product will serve the consumer. IBM may easily alter the products it develops for individual consumers to suit other consumers; however, IBM will not allow easy customization for products that it develops for government or clouds.

To remain profitable, IBM must deliver its products to target consumers. The distribution channel an organization creates must relate directly to the range of products it manufactures and the size of its target consumers. IBM produces a full range of IT products for a diverse international market, and this makes it impossible for IBM to distribute products and services to its consumers through a single distribution channel.

To cater to this, IBM employs multiple distribution channels that are based on the product type and the location of the consumers. The three distribution channels link IBM products to its end users. While the first distribution channel creates a direct link between IBM and its end users, the second and third distribution channels link IBM’s products with its end-users through sales teams/sales firms and retailers, respectively.

Distribution channels are either competitive or complimentary. While in competitive distribution channels, a company solely manages its logistics without any third party consultancy and assistance, complimentary distribution channels enable the company to outsource its distribution and delivery operations to third party companies. A company’s choice of distribution channel type depends on its range of products and the location or how dispersed its target consumers are.

IBM utilizes a complimentary distribution model since it offers a wide range of products and services globally to consumers located in different parts of the world (Emerson, 1996). To ease distribution operations, IBM’s divides its target distribution locations into global and local and then applies the complimentary distribution model to deliver products and services to various points in the selected locations.

Considering the diverse nature of its products and services and the wide range of consumers it offers these products, IBM must ensure effective delivery to each consumer to improve customer satisfaction and loyalty access to all locations. To achieve this, IBM has always employed a low degree of selectivity in its distribution activities, allowing for fair distribution of products and services to every consumer. This allows consumers in different parts of the world, with different IT product and service needs, to access IBM’s diverse IT options.

The IT industry is competitive in nature due to the demand for IT products and the saturation of the IT industry with innovative companies, and IBM responds to this by employing a competitive pricing strategy (Conway & Foges, 2004). Although IBM is a major player in the international IT sector, it understands the fact that there are substitutes for the products and services it offers. IBM, therefore, applies competitive pricing to attract consumers to its already formidable brand without considerable costs.

While other companies, such as Apple, apply high pricing as their strategic approach, IBM is aware of its position as a global brand sought after by consumers across different economics. With this in mind, IBM continues to focus satisfy an array of consumers that would not ordinarily have access to high-quality IT products and services if only economic variables are considered.

Before the high level of competition in the IT industry, most consumers purchased IT products impulsively. The increase in competitiveness in the IT industry resulted in the consumers purchasing products that they actually needed. The change in the factors that drive consumers’ purchasing has resulted in the need for companies operating within the IT industry to improve their advertising and marketing strategies.

IBM has responded to these changes by developing marketing campaigns that directly aim its target consumers. IBM integrates different advertising media to target its wide range of consumers. It combines adverts campaigns TV, Internet, and print ads to constantly register its brand in consumers’ minds (TV and billboard ads are found on the following links: https://www.youtube.com/watch?v=ITExqF-p3HY and http://www.theverge.com/2013/6/8/4408722/ibm-people-for-smarter-cities-advertising-campaign-ogilvy-france-video). The integration of different advertising medium has positively affected the performance of the company because IBM strategically selects and positions the advert campaigns to target potential consumers.

Sustainable companies seek to grow. The dynamic industry within which IBM operates makes it understand the need for growth. IBM’s growth strategy integrates internal development and external acquisition (Walters, 2001). Through this, IBM improves its efficiency internally and acquires prospective companies in the international IT sector. IBM’s executives identify IT startups and small companies with potential products and or services, and acquire these companies. This allows IBM to gain the innovative advantage characteristic to these companies and expand in its coverage, products and services.

IBM’s current Market Cap exceeds $224.82B. It currently offers the highest dividend IT industry at $14.45 per share. The table below summarizes its equity performance in comparison with other players in the industry.

Direct competitor comparison

All of IBM’s strategy depends on its application of an efficient operations system. IBM employs a medium automation manufacturing/operations system to develop product and services that are universal but alterable for specific consumer needs. IBM also applies the R&D process to improve previously offered products. The production process is also designed to have a high level of integration (Gerstner, 2002). All manufacturing processes are developed to depend on, and influence the functionality and performance of each other. This allows the products to conform to uniform standards and also ensures negligible errors during the production process.

It is important for businesses to strategically locate their production plants. The understanding of this necessity informs IBM’s decision to strategically locate it plants. IBM employs a near market strategy in locating its plants. In the near market strategy, a company locates its plants close to its target markets. IBM has different plants that serve its diverse consumer bases and each plant is positioned centrally, to effectively serve the consumers within that location.

IBM installs general purpose and specific purpose equipment in these strategically positioned plants. This ensures that IBM is able to cater for the demands for individual products for consumers in the general market, as well as the demand for specific products by product-specific consumers.

The sustainability of a company depends on its ability to engage in consistent R&D activities. IBM understands the importance of R&D and delegates R&D functions to its employees at different levels. IBM is the leader in R&D activities in the IT industry and spends $6 billion yearly only on R&D activities.

Quality control is an important aspect of production. The quality of products offered by other companies in the IT industry makes it necessary for IBM to produce high quality products. IBM employs a tight quality control method and ensures that all its products and services conform to the necessary IT standards. Although IBM conforms to standards, it also understands the importance of innovation and this informs its persistent R&D activities.

IBM’s R&D activities ensure that its products are meticulously developed and tested to ensure functionality for end-users. IBM also employs a modular nature of product design to allow for the production of similar, but customizable products. IBM’s R&D focuses on creating products that can undergo major changes for specific consumers. Once the products are tested and deemed functional, IBM employs continuous developments and innovations for the products.

Conclusion

This section of the report presented a historical review of IBM. The analysis exposed IBM’s strategic approach to its target market as well as IBMS’s the historical functional activities, such as market distribution, pricing, performance, degree of automation, degree of integration, plant characterization, inventory, and quality. The historical review in this chapter exposes IBM’s position as a leader in the international IT market. IBM integrates full range products and services and targets multiple consumer segments both locally and internationally. This keeps IBM at the peak of the IT segment since it always has products delivered to its consumers.

References

Conway L. M. and Foges, C. (2004). Logos, Letterheads & Business Cards: Design for Profit. NY: Rotovision.

Emerson W. P. (1996). Building IBM: Shaping an Industry. MA: MIT Press.

Garr, D. (1999). IBM Redux: Lou Gerstner & The Business Turnaround of the Decade. NY: Harper Business.

Gerstner, L. V. (2002). Who Says Elephants can’t Dance? NY: HarperCollins.

Slater, R. (1999). Saving Big Blue: IBM’s Lou Gerstner. NY: McGraw Hill.

Walters. E. G. (2001). The Essential Guide to Computing: The Story of Information Technology. NJ: Prentice Hall.

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IvyPanda. (2020, November 25). IBM Company’s Historical Functional Strategies. Retrieved from https://ivypanda.com/essays/ibm-companys-historical-functional-strategies/

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IvyPanda. "IBM Company’s Historical Functional Strategies." November 25, 2020. https://ivypanda.com/essays/ibm-companys-historical-functional-strategies/.

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IvyPanda. 2020. "IBM Company’s Historical Functional Strategies." November 25, 2020. https://ivypanda.com/essays/ibm-companys-historical-functional-strategies/.

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IvyPanda. (2020) 'IBM Company’s Historical Functional Strategies'. 25 November.

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