Term Paper on "Computer IBM, Entered the Computer Field"

Term Paper 20 pages (8433 words) Sources: 1+

[EXCERPT] . . . .

COMPUTER

IBM, entered the computer field during the 1960's, into a market where Apple Computer Inc. And Tandy Corporation's Radio Shack Division had been dominating until then with one of its initial attempts to make a 'mini super computer'. The IBM machine came to be known for its technological impressiveness, and this impressiveness stemmed not from any one single breakthrough, but from a good combination of its excellent features. Also until the time of the launch of the personal computer, IBM had been selling its computers at the rate of $10,000 for a desktop model to several small businesses, and to doctors and to other small companies for the purpose of book keeping and accounting and for billing. This particular model costing considerably less was a matter of ease for it to capture a big slice of the market for itself, even during its initial stages. However due to wrong strategic choices, IBM's share in the personal computer market has been gradually eroding and decreasing dramatically, until finally, in the year 2005, IBM had to literally exit the business by selling out to Lenovo, which was a Chinese company, getting a share of the equity in return. How did Dell happen to ascend to the number one position, after IBM met with downfall? IBM's absolute and relative decline led to its ultimate demise in the year 2005, when it had to sell out to a Chinese company, Lenovo. Today, the most important question being asked all over the world is whether or not the Chinese Lenovo would be able to succeed in the personal computer market, in the same way that IBM did, years ago? Will this company be able to rise to the ranks of the large company IBM? Can Lenovo actually succeed in becoming a global player, and also be able to integrate the managers of IBM, in the United States of America into their company? Will the numerous customers of IBM computers feel the need to defect over to Dell Computers; now that IBM is no longer in the running, or will they continue with the Chinese company Lenovo? Will the state owned Chinese companies like Lenovo start to gain in domination in the emerging trends of the international market of today? Will have a sustainable competitive advantage going forward? What are the key challenges for the existing players in this industry today? This paper shall provide an answer to several of these questions raised.

Computer

According to the New York Times, dated August 13, 1981, the 'International Business Machines Corporation', also known as IBM, entered the computer field during the 1960's, with one of its initial attempts to make a 'mini super computer'. IBM, it is said was also slow to enter the field, because of the fact that several 'upstarts', like the 'Digital Equipment Corporation', who made attempts to enter the field at around the same time, managed to acquire a large share of the mini computer market, and to subsequently grown into a company with more than a billion dollars in annual revenue. The newspaper article goes on to state that just the day before, IBM had announced that it would start to sell a certain type of a computer known as a 'desk top' that could be used in homes and in schools and in places of businesses. (Pollack, 1981)

This was a relatively early entry, thought experts at the time, because IBM was in fact entering into a market where Apple Computer Inc. And Tandy Corporation's Radio Shack Division had been dominating until then. Thomas J. Crotty, an analyst with the Gartner Group, also said that perhaps they did not want to allow yet another entrant into the Digital technology field, and especially so in the area of personal computers, and when IBM did indeed succeed in a spectacular entry, even though the entry had been expected for many months, it still did manage to send a few reverberations throughout the industry. With the entry of IBM into the 'personal computer business, it is possible, stated the article, that because of the endorsement for personal machines that a large corporation such as IBM would be able to provide, maybe the already fast growing business of digital technology and the sale of personal computers that can be used at home or at schools and offices, would be able to grow manifold within the next few years.

However, even though the entry of IBM would help business in general, it still posed an extremely difficult problem for Apple and also for Tandy, which together had a huge 39% of the entire personal computer market, with their sales going up to a sum of $2.4 billion in 1980. Christopher Morgan, the Editor in Chief of the Computer Magazine, Byte, stated that the proposed entry of IBM into the computer business was one of the "most important announcements we've seen in the industry." (Pollack, 1981) Another expert in the computer field, Michael Mc Connell, the executive Vice President of Computerland, stated that because IBM had entered the market, it would mean that personal computers are neither a "fad nor a flash in the pan," and that more people would start to take the concept of actually owning a personal computer for themselves, at home, which could be kept on a desk top, seriously, if IBM said that they could do so. The price of the IBM machine, when it was initially launched in 1981, was $1,565, for a simple machine that would need the users to provide for their own television screen like display units, and also cassette tapes, while the more sophisticated machines, would cost a prohibitive $6,000. (Pollack, 1981)

One of the typical home versions, with a memory of 64,000 characters, or about 10,000 words, would have a single storage disk, as well as a display screen, and this would cost about $3,000, and a business computer, with color graphics, two storage disks, and a printer, would cost about $4,500. IBM was planning to sell its computers through stores like Computerland, Sears, Roebuck, and Company, to several large corporations, as well as through IBM's own retail stores. At the time when IBM started to manufacture and sell the personal computer in America, it was the time when several large American companies were in fact buying the so-called 'desk-top' computers so that the efficiency and the effectiveness of the executives and the various other personnel within their offices would be able to benefit from the machines. Also until the time of the launch of the personal computer, IBM had been selling its computers at the rate of $10,000 for a desktop model to several small businesses, and to doctors and to other small companies for the purpose of book keeping and accounting and for billing. This particular model costing considerably less had been recently announced, and since IBM had a good reputation already, it was a matter of ease for it to capture a big slice of the market for itself, even during its initial stages.

In addition, the IBM machine was known for its technological impressiveness, and this impressiveness stemmed not from any one single breakthrough, but from a good combination of its excellent features. The new model launched by the IBM had a microprocessor that would be capable of handling 16 bits of information at any one particular time, and this would in turn allow the computer to perform more difficult and complex tasks than any other personal computer of the same kind, of which most had mere 8 bit microprocessors. IBM had in addition launched several different models, some of which were capable of storing up to 260,000 characters in its memory. However, there was intense debate and disagreement on whether the price of the new IBM personal computer was low enough to be able to knock Apple and Tandy out of reckoning, and while some felt that the IBM had not been priced, as aggressively as had been expected, it would not succeed in throwing the others out of the market, and this fact brought about a feeling of immense relief, especially for Tandy, as stated by Garland P. Asher, chief of financial planning for the Tandy Corporation, that he was actually relieved that "whatever they were going to do, they finally did it," and also said that he was in fact "relieved" at the pricing of the IBM Computers, and that that company had not introduced anything new that would eventually succeed in rewriting the ground rules that had been laid out years ago. (Pollack, 1981)

Therefore, as many analysts believed and stated, there would be room for all the many different computer companies, and that nobody would have to down their shutters with the introduction of the IBM model of the desktop or the personal computer. As far as the IBM was concerned at that time, during the early years of the 1980's, the entrance into the field of personal computers was a mere evidence of the fact that… READ MORE

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