Term Paper on "IBM International Business Machines"

Term Paper 10 pages (2542 words) Sources: 4 Style: APA

[EXCERPT] . . . .

IBM

International Business Machines

International Business Machines Corporation (IBM) is one of the largest and well-known enterprises worldwide. The company's success is based on its tradition, innovation capabilities, and high quality products and services. Ever since IBM's establishment in 1911, the company led the way in the technological area, as well as in the strategic area. IBM became one of the leaders in the computer industry through the innovation oriented strategy the company always had, ever since its beginning, and the ability to reinvent and to renew itself over and over again.

IBM's rebirth produced between 1990-1999, when the company's traditional mainframe business went through a series of major changes, as customers increased the focus on departmental and desktop computing (Wikipedia, 2007). As a consequence, in 1992 IBM launched the first Thinkpad laptop computer. However, the 1992 financial year ended with important losses for IBM. Given these losses, IBM strategists came up with a series of changes in its business activities. This is the time when IBM shifted its attention away from computers and hardware and towards software and services, by acquiring Lotus Development Corporation and creating the Software Group and expanding it to five brands: DB2, Lotus, WebSphere, Tivoli and Rational.

Also, IBM's strengthened position on the global market can be attributed to the acquisition of the consulting part of professional services firm PricewaterhouseCoopers. This acquisition helped the company not only to increase its focus on business solution-driven consulting, services and software, but it also helped the company orient towards manufacturing and selling high-value chips and hardware technologies.

IBM's renewal process continued in 2 when the company announced the beginning of a U.S.$10 billion program for researching and implementing the infrastructure technology able to provide supercomputer-level resources "on demand" to all businesses (Wikipedia, 2007). The company's rebirth is also proven by its continuous increase in its patent portfolio since 1990. Between 1993-2005 IBM has had the highest patent increase ratio in the United States.

Since 2004, the company shifted a little its direction, by focusing more on the provision of business consulting and re-engineering services from its hardware and technology focus. "The new IBM has enhanced global delivery capabilities in consulting, software and technology-based process services - and this change is reflected in its top-line" (Wikipedia, 2007).

Brief history of IBM

International Business Machines Corporation was founded in 1889 and was incorporated in 1911 (Wikipedia, 2007). The company is headquartered in Armonk, New York, USA. IBM's main object of activity is manufacturing and selling computer hardware, software, infrastructure services, hosting services and consulting services in areas ranging from mainframe computers to nanotechnology.

The company's tradition, accomplishments, and size grant IBM the world's largest computer company title. IBM's number of employees, 350,000 employees worldwide respectively, recommend the company as the largest information technology employer in the world.

The company's evolution had a series of phases. Therefore, although IBM's activity relies entirely on computers nowadays, the company's beginning dates back decades before the development of electronic computers, as the company developed the punched card data processing equipment (Wikipedia, 2007). IBM was initially named Computing Tabulating Recording (CTR) and was formed through a merger of three corporations: the Tabulating Machine Company, the International Time Recording Company and the Computing Scale Corporation. Along with the three founders of these corporations, a very important role in the company's establishment was played by financier Charles Flint. Herman Hollerith's activity (the president of the Tabulating Machine Company) and his accomplishments were very important to the company's future development. However, the first CEO of IBM was Thomas J. Watson Sr., who became the company's General Manager in 1914 and President in 1915. In 1924, CTR changed its name to International Business Machines Corporation.

Strategy IBM used to build the company

The company's strategy had various forms throughout the years, changing in accordance with the evolution of the economic coordinates.

In the company's early beginning, its strategy was based on innovation, on developing new technologies that could be used in various aspects of the human activity, and that were meant to facilitate work processes. Therefore, Herman Hollerith, one of the founders, had a series of patents on tabulating machine technology that were designed to reduce the time and complexity of work processes. IBM's later product strategy was based on Hollerith's transition to the use of punch cards in 1886 that laid a foundation of generations of equipment (Wikipedia, 2007).

Besides innovation and technology development, IBM's strategy was always based on offering a wide range of products, that included time-keeping systems, weighing scales, automatic meat slicers, and also punched car equipment. In time, IBM's strategy started focusing only on the punched card business.

IBM's current strategy still focuses on pursuing innovation, developed together with clients, partners, and others, and on "refining its portfolio to achieve higher value" (IBM, 2005). The company's strategic decisions rely on understanding the direction that technology, client requirements, and global businesses are taking. These strategic decisions are meant to "maintain the company's leadership of this rapidly changing business by focusing on high-value innovation-based solutions and services while consistently generating high returns on invested capital for its shareholders" (IBM, 2005). The company's leadership is maintained by ensuring a mixture of its complete portfolio (that includes hardware, software, and technology) and research activity.

IBM's strategy is based on exploiting the company's strengths: broad capabilities that can ensure enterprise innovation; the company's global workforce that has proven to have great expertise and diversity; the large network of suppliers and business partners that the company managed to establish throughout the years. These strengths allow IBM to better exploit the opportunities that the current economic environment offers: the needs of the company's clients and the current trends in economics and society. IBM strategists consider these opportunities to have very important effects on business, government, education, healthcare, transportation, and other fields.

IBM's future strategy will be based on capitalizing the following opportunities: the globalization of capabilities, skills, and markets; the interconnected nature of companies, industries, and economies that is continuously increasing; the growing influence of open standards and open source software; the rise in collaborative models of ideation, creation, and development; the maturation and availability of semiconductor and wireless chip technology; the use of service-oriented architectures and Web services in software development; the increasing number of service providers for a wider range of traditional and emerging business processes and functions; the progresses that IBM made in increasing computational speed, capacity and access (IBM, 2005).

On a regular basis, IBM reviews its businesses and continues investing only in those that present a certain strategic growth potential, reallocating resources in accordance with the needs that must be fulfilled. Also, in order to continuously develop its portfolio, the company acquires businesses that may have a real strategic contribution to its current portfolio. If the company's diagnosis reveals that there are certain businesses that no longer support the company's strategy for innovation and higher value, the company will remove them from its portfolio. This strategy ensures the company's renewal on a regular basis. Also, IBM's strategy always strives to improve productivity and drive efficiencies by integrating its global operations.

The company's current strategy priorities rely on: capitalizing on the company's technological, business, and social trends and the company's need to innovate in addressing those trends; maintaining market-share leadership in systems, middleware software and services, as a basis to induce growth; focusing investments and resources on emerging growth areas, including Business Performance Transformation Services and emerging countries; continuing IBM's global integration, driving productivity gains and higher value in service delivery; continuing IBM's leadership in innovation initiatives, including advanced semiconductor design and development, collaborative intellectual capital, business process expertise and integration, advanced systems for supercomputing capability, including mainframes and grid networks; acquiring business that present strategic contribution potential to its portfolio, and exiting businesses that no longer support the company's strategy for innovation and higher value.

As mentioned above, IBM changed its strategy in every age if its development, in accordance with the changes in the economic and social environment. During 1925-1949, which is IBM's early growth period, the company's strategy was based on the innovation of the product lines, which grew steadily. Despite the Great Depression, IBM was developing and manufacturing new products. Because of the United States' implication in World War II, IBM showed its abilities in to manufacturing military devices, expanding its product lines to bombsights, rifles and engine parts. Also, IBM's punch-card machines were used for calculations made at Los Alamos. This is the time when IBM built the first large-scale digital computer in the United States.

Between 1950-1959 IBM became a chief contractor for developing computers for the United States Air Force's automated defense systems. This allowed IBM to gain access to the research activity at Massachusetts Institute of Technology, working on the first real-time, digital computer (Wikipedia, 2007). However, this is the period when IBM's strategy had certain flaws. The company's strategy in that period was based on the company's access to cutting-edge research into digital computers being done under military… READ MORE

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