Organizations that embrace the needs of a changing environment are more open to the fact that they can react fast to their opportunities and threats. This is why it is normally said that a single external factor will most of the times affect all business aspects within its sector and line of operation.
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But should the management decide that they need to change by perceiving the needs of these external effects, they will outdo the competition and surely come out on top. IBM is a computer manufacturing company that has undergone some changes in its quest to be the leading computer company (IBM n. d).
IBM has strived in all aspects to be a major household name but their efforts fall short in a number of ways. Major factors that influence IBM in Australia are environmental and technological. These are referred to as contingency factors.
When structuring in Australia, IBM needed to design itself in a way that it would accommodate external and internal factors. This is clearly seen under IBM where the parent company exercised strong control by deploying decentralization in decision making and electing managers who are nationals from the parent’s headquarters. Normally most managers are nationals of the host country.
IBM came up with a form of management commonly referred to as geocentric management. The IBM organizational structure is normally in a cosmopolitan with minimum concentration of decision making or employees not bound by geographical location or race. Business and society are closely related to each other (Jain, Trehan & Trehan 2009).
IBM Australia was affected by a number of external trends. Most of these comprised of pressure for globalization, environmental uncertainty, integration and differentiation, competitors, customers, regulatory agencies, human resource markets, cultural influences and physical resources.
It is almost impossible for an organization to explore the aspects of its environment fully. External environment of a business is the area of the business environment outside the business which affects the growth and the existence of the business (Corry, 2003). When considering the external environment, the most important aspects are:
Pressure for globalization: This is the pressure on the subsidiary companies to work together in a bid to integrate and connect economically, socially and politically across various geographical regions (Marcic & Daft 2011). This was done in a bid to make the employees in these organizations and their countries become interdependent.
Environmental uncertainty: This is another aspect that has affected IBM in that the company not in a position to predict the set of forces and conditions outside the organizational boundaries. These forces have played a great role in affecting the way IBM does its operations and has also shaped the organization’s behavior.
The need for understanding the external environment is seen to be tied with uncertainty, which highlights that it should not only be understood for security but also to minimize the risk imposed by it (Fitzen 2009). The forces are also seen to change over time depending on the economic, social and political systems across countries, culture and geographical locations.
Economics tends to emulate the concept defined as the production, distribution, and allocation of resources in a given geographical location. The organization is under the influence of the various regulatory guidelines that check various institutions. When operating in an economy which enjoys stability, an organization is able to thrive and withstand outside forces.
If IBM engages in trade with countries that are not economically or politically stable, it will be engaging in a dangerous form of business in that it risks doing business without assurance of getting returns if at all there are any returns.
Competitors: IBM was recognized as the world’s leading computer hardware manufacturer. They focused on hardware development and avoided the software development aspect. Due to this move, they were outshined by Microsoft’s entry into the software market and the coming in of other gadget manufacturing companies who had seen a raw market in the computer hardware.
Some of these companies included Toshiba, HP, Apple Inc. and Mackintosh. IBM market share suffered a blow with the entry of new competitors, considering the fact that they had overlooked the software development aspect which by then was really booming and also helped catapult the Microsoft Corporation to being the world’s software giant developer.
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This type of segmentation (concentrating on one line of production) made their competitive advantage decline.
Advanced technology: In a bid to remain in business, IBM had to make machines which were compatible to the Microsoft software since Microsoft had already become a household name and almost all machines in the world were using Microsoft products.
This made the IBM Corporation conform to its competitor’s tune thus seeming like they had some form of informal deal. However, by manufacturing machines which were not subjected to one form of software, IBM increased their sales and their revenue started improving. IBM also took to developing machines that were both productive and attractive to the eyes (IBM n.d).
This was also a key feature that customers were looking for when buying machines. Corporate companies were offered discounts on large orders and this was seen as a comeback strategy for the IBM Corporation. By offering free samples and after sales services, IBM was sure on its way to regaining the top position.
Relationships between trends and strategic approach
Factors affecting the external environment may call for intervention by the management team. A clear understanding of these factors is not only vital for security purposes but also for minimizing risks that could have been brought about by the assumptions of these factors.
Formulation of strategies to curb the effects of the external environment’s aspect is laid down. At this point, the two are merged: the effects of external aspects and the strategic approaches.
IBM was keen to highlight the needs of the changing environment, their implications and reacted more quickly to the opportunities and threats. This is the first of strategy formulation. A single force or condition of an external event affects all the firms within that sector in equal measure (Gorshkov, 2005).
IBM realized this and reacted to the factors of the external environment and in turn came to the forefront in raising the flag of competitive advantage high. One of the elements of operational excellence is being always ahead of your competitors. IBM in its bid to perform never neglected this factor.
Consideration should not only be given to the external events that form the external environment but also to the strategic approaches that go a long way in securing firms from risks and further alteration of the tasks, roles, relationships and organizational structure. Without strategies and goals, it is difficult to make proper decisions that lead to problem solving.
Without a problem or a course of action, it is impossible to formulate strategies; therefore, there is a relationship between the factors of the external environment and the strategic approaches that have to be implemented with an intention of gaining competitive advantage.
In a bid to restore its declining market share, IBM decided that it was time to restructure the organization. The management went into an in-depth planning and strategizing process where they identified and selected appropriate goals and courses of action. This kind of strategy was vital in attaining organizational goals and ensuring competitive advantage.
The IBM incorporated a SWOT analysis, a planning exercise, where they identified their strengths and weakness inside the organization and opportunities and threats in the environment. Top managers at the corporate level made decisions that were in regard to the overall organizational structure and promoted deserving employees to management level in a bid to bring in new innovative ideas while showing their support for the employees.
A plan of action to take advantage of favorable opportunities was incorporated hence the long term divisional goals made allowed for disintegration of the sales and marketing department into smaller sub-divisions in order to increase productivity and make it easy to monitor.
A functional strategy was put in place to help managers of individual functions add value to IBM’s goods and services. Low cost strategy formulation helped in driving IBM’s total cost of their products down to a level lower than that of its rivals in a bid to restore their market share which was declining. The company restructured the entire sales and marketing department.
This change in organizational structure made the company move from its present state towards some desired future state, in a bid to increase its efficiency and effectiveness. An effective sales and marketing department helped in customer retention and acquisition.
A good foundation of customer intimacy helps outperform other organizations because it produces desired goods or services more efficiently and effectively than its competitors.
The sales and marketing department was a vital organ in IBM’s corporate restructuring. The marketing department was in charge of creating new selling ideas and sourcing for new businesses both locally and internationally. The marketing department also had the task of enforcing the company’s brand and image.
The marketing department was charged with the duties of conducting studies as to what the customers were looking for when they were buying computers. They extensively created awareness of the existing products and services thus creating a good rapport and customer relationships binding them together. The sales team was solely responsible for driving the company’s sales revenue up in a bid to maximize on the profits.
Restructuring the sales and marketing department reinforced synergy. This encouraged team work which in turn enhanced performance, increased responsiveness to customers, increased innovation, motivation and customer satisfaction (building blocks of competitive advantage).
These factors pooled together helped IBM gain a competitive advantage against its competitors, taking it a notch higher as it produced goods and services more efficiently and effectively. This strategic approach was able to counter the external forces and conditions curbing the threats and challenges that would have caused IBM’s poor market performance.
IBM formed a product creation department that was solely responsible for looking into what the competition had brought into the market and creating something much better and more advanced than their competitors. A creative employee workforce is the key to innovation.
Product differentiation is a business level strategy that IBM used to distinguish its products from those of its competitors in one or more dimensions. The overall change in design and quality of products made IBM better placed in the market. They also offered after sales service as a way of acquiring and retaining their customers. IBM’s management focused on outcomes that led to higher motivation and job satisfaction of the staff.
Motivation is a key aspect as worker attitude towards managers plays a great role in the level of workers’ performance. A motivated and satisfied workforce known to yield better performance as compared to a coerced and demotivated workforce. The company established task and authority relationships that allowed people to work to achieve organizational goals.
The overall job design led to appropriate division of labor resulting to an efficient and effective workforce. The people process was intense also in that they reconsidered when hiring new graduates and had a set a standard of the entry points.
Managers engaged in activities to develop a pool of candidates to fill up the open vacancies. Employees were recruited on basis of their qualifications and potential to perform in line with the company’s standards. This special selection of qualified employees is an important strategic approach which IBM’s management used to ensure a rich and effective workforce.
Impact on recruitment, selection, training and development
Recruitment is the process that managers in their given position engage in to develop a pool of candidates with an intention of filling up open positions (Marcic & Daft 2011). Recruitment is vital as it gives qualified people an opportunity to serve and showcase their talent and creative nature in a professional manner. During the time employees perform and deliver, they are doing so in a bid to better the organization they are working for.
Selection is the process that managers use or follow to determine the relative qualifications of job seekers or applicants and their potential for performing well in a particular job. This has seen the coming in of new graduates who have new, creative and innovative ideas. This is generally transformed into new products which are readily accepted and available in the market.
Innovation is vital in ensuring competitive advantage. IBM realized this and entered into a session of recruiting and selecting based on the graduates’ qualifications and potential to perform well in the jobs that were assigned to them. This increase in the employee base meant an increase in productivity, which led to increased revenue for the company.
IBM had to pay more in terms of salary and wages but it was a sacrifice that was worth making. The IBM’s management had talked about not wanting to downsize the workforce but come up with strategies on how they could restructure without firing.
This was supported by the services industry because whether there were sales made or not the service department had jobs because they did not only service the IBM machines but all computer machines in general.
Training is a process where organizational members are taught to perform current jobs. They are coached and helped to acquire the knowledge and skills they need to be effective performers. Development compliments training as it involves building the knowledge and skills (acquired through training) of organizational members to enable them take on new responsibilities, challenges and threats.
By training the new graduates, IBM was able to experience a revitalized system and they were on the track of competing on a level playing field. The new software and hardware engineers were very vital in determining the next phase of the organization. These were referred to as the “special ones” for they had new brilliant ideas which were very well embraced and received not only in the organization, but also in the market.
Had IBM not specialized on one product, probably they would not have fallen in the kind of predicament they were in. Diversification was of great importance and the then CEO should have known that. The fact that they did not see the competition coming their way can be termed as sheer ignorance by the top management and complete lack of vision for the IBM organization.
IBM management department engaged in the above activities to attract and retain employees, ensuring they performed at a high level thus contributing to the accomplishment of their goals postulated in its mission and vision statements.
After a process of recruiting, selection, training and development, employees were evaluated on their job performance and contributions to the organization (performance appraisal). This process of evaluation helps to keep employees on their toes and ensure that they are ‘hands on’ at work (Daft 2008).
In an effort to see positive development take place, change is inevitable. The external environment is highlighted as one of the key elements that influence the day-to-day running of a firm’s operation. It is therefore important to understand this kind of environment so as to minimize the risks, challenges and threats offered by uncertainty created by the external environment.
Strategic approaches have to be put in place in cases where implications of this kind of environment occur (Kaswethappa 2010).
Changes in the three factors that affect the structure of a country; economic-dependent issues, socially-influenced factors and a politically-determined environment have to be monitored as they play a key role in creating changes in the external environment. The management team was essential in coming up with new structural changes which involved people, process and also technology.
This was in turn boosted by the rate at which technology was growing thus an increase in demand for computers. It is however almost impossible for IBM to have the controlling market share that they once enjoyed. This is due to the bad decisions made by the management that was there before the changes were implemented.
Also a competitive pension package was one of the motivating things that were introduced in a bid to make the employees feel that they were appreciated. When it came to lying off staff, the old were settled their dues first for it was more difficult for them to get jobs elsewhere compared to the young vibrant generation that had opted to resign in a bid to join the competition and make quick bucks instead.
IBM is still a company to reckon with and a force in the IT industry and even though they have suffered a minor setback, they still are as strong as ever. Many graduates dream of working there in a bid to sharpen their skills and learn more from a world class recognized corporation (IBM 2011).
Every company’s policy is in many ways affected by its environment because the accomplishment of its objectives depends largely on the degree of interaction of the enterprise and its environment (Saleem, 2006). IBM Australia has therefore been affected by its environment in its operations in Australia as has been describe above.
List of References
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Daft, R. L. (2008), New era of management, second edition. Mason, OH: Thomson Higher Education.
Fitzen, L. (2009), Marketing environment: what factors “internal “to an organisation can have an influence on the way it perceives and responds to its external. Germany, GRIN Verlag: Norderstedt.
Gorshkov, V. G. (2005) Biotic regulation of the environment. Russia: Petersbough Nuclear Institution.
IBM. (2011), About IBM. IBM.COM. [Online] Available at: <https://www.ibm.com/au-en/about>
IBM. (n.d.), IMB products. IBM.COM. [Online] Available at: <https://www.ibm.com/au-en/about>
Jain, T. R. Trehan, M. and Trehan, R. (2009), Business environment, second edition. New Delhi: V.K Enterprises.
Kaswethappa, G. K. (2010), Management concepts practice and cases. New Delhi: Tata McGraw Hill.
Marcic, D. & Daft, R. L. (2011), Understanding management. Cengage Learning.
Saleem, S. (2006), Business environment. India: Doring Kindersley.