Business Environment Of IBM Information Technology Essay

IBM is a leading computer, technology, Service providing Company which is operating business in 180 countries. IBM has started its career in the starting of 20th century in the name of Computing-Tabulating-Recording Company. Now IBM providing services in aerospace, defence, Automotive, Banking, Construction, Electronics, Retail, Telecommunications sectors. IBM’s contribution in computer technology development is higher than other companies. This report clearly portrays the Changes in the Business environment IBM in former five years. This report briefly analyzes the succession of steps that has lead to the changes in its business environment. These include formerly the business environment of IBM which explains the background of IBM, nature of business, its products and policies. Secondly, changes of the company environment with the effect of micro environment and a macro environment elements. Thirdly Discussion on analysis such as PESTEL analysis and SWOT analysis and porter’s five force models, which helps in achieving the business and finally the detailed analysis of financial proceedings and recommendations, some of better suggestions helps to perform them better.

2. Introduction

IBM known as an International Business Machines Corporation (IBM) develops and manufactures information technology (IT) products and services towards Worldwide. IBM was formerly known as Computing-Tabulating-Recording Co. and has changed its name to International Business Machines Corporation in 1924. The IBM was established in 1910 and in Armonk, New York (IBM Group 2010).

The IBM business environment is organized in such a way that it considers all the political, economical, social, technological factors. These factors determine the impact positive and negative issues of the business. The IBM business strategy considers the gain and benefit of the business as a vital role and aims for it companies to reach the good position. Apart from the consideration of gain and benefits IBM also aims to become one of the world ranking companies and to reach the good position in worlds market.

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3. IBM Strategy

The main goal of IBM is to promote dedication to every client’s success. It pays more attention to raise the trust to all the clients and the client customers and maintain the personal responsibility. IBM has its own impressive factors and unimpressive factors and business operation is considered as impressive factor whereas the unimpressive factor may be due to some influences of the company. IBM’s business strategy is due to the maintenance of the business stability. The business stability is maintaining the detail analysis of the competition between the top companies of the world. (IBM Group 2010). The IBM considers consumers choice of software’s, hardware products such as price, quality of the product and IT services as the organization competition as so the business environment in IBM is unique. The following factors are some of the business strategies in IBM are as follows,

IBM’s has achieved in its business strategy with the international competitors so it has improved its business and strategy level thus they become the successor in business and they develop quality product in new markets with good services.

IBM’s Systems and Technology segment provides an new vision to the computing and storage solutions, including servers, hard disk, hardware technologies such as microelectronics, retail store solutions, and semiconductor technology, products, and packaging solutions IBM (2008).

Thus the IBM’s Global Financing segment provides lease and loan financing to external and internal clients; and sale and lease of used equipment. It serves financial services, public, industrial, distribution, communications, and general business sectors.

The IBM’s international organizations are more advantageous over the smaller ones as it has a massive collision on international business stakeholders through their activities.

Thus IBM has achieved a tremendous growth in the last five years fulfils market and stakeholder expectations then those business strategies are highly visible.

4. Business Environment of IBM

Business environment of the company is influenced by a lot of external factors that affects the outcomes of the operations of the company and its services. Some of the factors can be restricted within the control of the company whereas others factors may be ahead of control of the Company. (Ian Worthington & Chris Britton, 2006) .Internal and external factors based upon the influence on the business thus to rectify the factors there are some tools that have been developed by decision makers who have vast experience in field based on Micro environment factors, SWOT and PESTLE analysis which provides the superior analysis to the factors that affect a business.

The Business environment can be categorized into two sections, they are

Micro Environment

Macro Environment

4.1 Micro Environment

These are the factors which affects the growth of the organisation.

4.1.1 Customers

Customers are those who play a key role in deciding the Organisation Success. An Organisation should satisfy their customers with good services and innovative products towards their extent as a replica that in turns it should create a rapid growth in Organisation profit. (Ian Worthington & Chris Britton, 2006)IBM has more number of corporate and government bodies as a client for their services like smarter planet, Business process management systems.

The following figure represents the micro environmental factors (Marketing, 2010)

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Figure Micro Environmental Factors

4.1.2 Competitors

An organizations success is deliberated by the benefits offered by the organization which should be ore better than their competitors. (Paul Wetherly, & Dorron Otter 2008) Thus it can be analysed by the competitor analysis and monitoring to maintain its position.

4.1.3 Employees

Employing and motivating the staff is an indispensable part of the strategic planning process of an organization. In-order to gain a competitive edge the training and development plays a crucial role in service sector marketing. This can be clearly evident in the airline industry.

4.1.4 Media

Media’s attention on organizations decides the make or break of an organization. Likewise IBM’s Smarter planet has gained an positive response to the customers by the media.

4.1.5 Suppliers

Price rice in raw material affects the marketing mix strategy of an organization. In order to ensure the competitive and quality products the possible way to achieve is the Closer supplier relationships

4.1.6 Shareholders

IBM requires the better inward investment for growth of the business. IBM should satisfy the shareholder needs may result in a change in tactics employed by an organization. It provides the equity in greater percent to shareholders even during the recession time.

4.2 Macro Environment

Macro Environment factors are the external factors which affect the company as a whole. Macro Environmental analysis can be done by PESTLE Analysis.

PESTLE Analysis

Whenever a company starts business in a country it should analyse environment of that country. PEST analysis is mainly focused to take decisions in particular market on the basis of external influence. The macro environment situation can be identified by 6 factors political, Economical, Social and Technological, Legal and Environmental. The following factors represent the pestle analysis (Pestle, 2010).

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Figure 2 PESTLE Analysis

Political

Political institutions forms are of various levels which includes the national, regional and international policies. These political factors helps to focus on the policies and actions which is mainly established by administration bodies which authorize the way through which businesses carry out every day activities. Legislation, the might slow down an organization in a number of ways so it has to be strongly examined during decision making. Other concerns based on this legislation are also to be analyzed under the political settings based on the tax schemes and fiscal policy. (Campell & Craig, 2005, p.142). Due to the current global economic recession many governments have been influenced to change their economic and financial policies in order to check for the many factors which lead them are increased. Thus they have solved this problem to an extent by adjusting the prices and taxation levels. The recession has been greatly affected by many foreign countries. Recession mainly affects the foreign trade especially the exports and imports among countries and regions. For Example, Taxation system is most critical issue for IBM as it increases the price of web server products.

Economic

An Organizations business and the outcomes of the business operations are affected by a bunch of economic factors. The most of the factors may be controlled within the company and it can limit its effect whereas there are some factors may be beyond the control of the Company. Thus these external factors are determined by the decision makers who mainly decides as based on the business how the external factors from within and without that may influence the business of an organization in one way or another. During the recession period in 2007-2009 (Campell & Craig, 2005, p.142) there has been a rigorous market clash where the buying ratio of the clients and customers of IBM have been drastically. In order to maintain the marketing condition and financial balance IBM has involved into lot of cost cutting factors that includes the lessening the employees.

Social

As defined by Campell & Craig Social factors are factors those mainly cored on with the people trust and attitudes towards the business and they are directly linked towards the demand and supply for the business (Campell & Craig, 2005, p.142). Demographic factors, which comprises of all the instances such as skills, policies and education, rates of birth of people, statistics on population growth and local population shifts from one place to another this may be the city or an another country, thus they have a key role remaining to the fact that they may assist later in the addition of sales. In order to gain a profit a Businesses need to be capable of place their market in several strategies. Let us consider Population, according to the current survey population of USA in June 2009 is 307,006,550, more than 75 % of these people (230,254,912) are using internet. Due to this IBM got more business on IT services and consulting.

4.3.4 Technological

Technological factors those factors depend on the rate of technological growth in the industries and sectors. The exploitation of technology in business helps the organization in many ways by including reduction of usage costs and enhanced productivity. In order to balance to the technological changes it is mandatory for businesses to upgrade its market to the upcoming technology. Technological advancement is one of the ways to overcome the recession. Many Space projects implemented by the Governments of both developed and developing countries need super computers which should have the capability of taking fastest decisions. In order to implement those projects the computers should perform the highly technological programs towards great extent. Thus IBM computers are more innovative and it almost meets all the requirements and in general it is a master developing the super computing technology.

5 Legal

On considering the legal constraints for IBM are Cyber protection and the production of chemicals that used in making hardware such as carbon, and silicon leads to the cross country business, currency exchange and many legal registrations for their business outsourcing facilities

Environmental

IBM has contributed its major part to the environmental dimension by developing the major technologies like to trace the weather through-out the world, and develop the computers for NASA for astrological factors such as to set the satellite which monitor the environmental changes towards the global. (Campell & Craig, 2005, p.142). IBM has also added some of the innovatory environmental friendly strategies which not only provide the environmental saving factors, but also the cost saving factors like energy cost.

4.4 SWOT Analysis

As defined by Albert Humphrey SWOT analysis is a common tool for Strategic planning in business. It is used to estimate the organisation’s strength, weakness, opportunity and threats. (Paul Wetherly, & Dorron Otter, 2008) This tool describes what an organisation should do in current situation and what it should avoid as well as its possible opportunities and threats. The following figure represents swot analysis. (Swot analysis,2010)

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Figure SWOT Analysis

4.4.1 Strength

IBM has world’s fastest computing and innovative technology like Speech recognition Technology and Blue jene Super computer. It has been reported that Blue jene is 500 times faster than other super computers in the world. Blue jene can compute 500 quadrillion tasks per second. The collaboration between Lenovo and IBM makes extraordinary growth of business in developing countries. Since 2005 IBM maintains a constant growth in Earning per Share (EPS). In 2005 EPS of IBM was $4.91; Innovative business model of the company doubles its EPS to $10.01 in 2009. This rapid growth attracts share holders to invest IBM.

4.4.2 Weakness

There is several problems lead to the shortcoming of IBM. The foremost problem is the Older and Aging Technical Personnel, the rate of workers in old age is higher than comparing to adult workers. These old age professionals are not currently updated to the new technologies as they stick to the same standards of development. Secondly the IBM won’t accept some of the international agreements and standards such as ISO, Global compact of UN, Inco Terms proposed by international bodies and prefer its own standards.

4.4.3 Opportunity

Vast Development in Information Technology and Economic development have moulded people to innovative computing creates more business opportunity to IBM. In 2008 IBM has achieved several business opportunities by its ‘smarter planet’ concept as it is proved by the project Stockholm’s intelligent traffic system which is a part of smarter planet concept which is been developed to reduce emission and waiting time in traffic. This system was implemented in London as it has reduced the emission by 12% and increased the users of public transport by 40000. The success of this system creates an opportunity for IBM to implement this system in Brisbane and Singapore. In similar to this Wireless technology of the company attracts clients to implement their IBM has several systems which would have a tendency to make this emerging world to be a highly automated and eventually smarter.

4.4.4 Threats

IBM has a number of great competitors in the IT industry such as Sun Microsystems and, Microsoft, but along with its major resources and planned investments and a pure dedicated it has brought its client to its closed and proprietary platforms as a way into a particular architecture. But still there is a strong competition in its hardware industry such as in laptops for example the massive introduction of apple Mac books has tremendously overthrown the sales market in IBM laptops. This competition will result in increased pricing pressure and Intellectual Property maintenance and proceedings. Thus in order to set right and to maintain a balance in its sales and to overcome its diminish in the hardware industry, IBM made a tie up with an Lenovo which is one of the Leading company in the computer sales, in order to increase the sales of the computers.

Porter’s Five force Model

The following figure represents the Porter’s Five force Model (Porter5forces, 2010).

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Figure Porter’s five forces Analysis

4.5.1 The threat of new entry

Due to the enormous costs on the R&D the threat of entrants for the server market was low, and therefore it increases the distribution, the relevant support on products and services, and manufacturing. As taken by the report of IBM statistics shows that, IBM have almost spent nearly $171 million in system and technology for server product in 2005, (IBM ,2008). IBM spent over $1 billion in the Linux operating system in 2005. This is only the barrier based on the cost. But have also been several other barriers which include on techniques of the technology, and distribution channels of the products etc.

4.5.2 Power of Suppliers

Biggest processor providers, monopolies of the world are Intel and AMD, is being very strong power on the development and suppliers in chip. Though the rate of power of suppliers capacity has been decreased this result the tough competition between these two companies. The extensive range of customers and towering costs on switching grounds the buyer’s lack of power to bargain as there is a chance of buying results only in these two companies and this make them an chipping technological giants.( IBM 2008). On the other hand, the power of suppliers for other low technical products requisite material and parts is a great extent lower than the core hardware providers.

4.5.3 Power of buyers

Buyers possesses strong bargaining power due to the strong growth of IT business recent times. As IBM has weaker in bargaining there arise a critical situation that there have been many small IT businesses which are competing with IBM. IBM (2008). Moreover the power of buyers on the server products in the UK was high because the buyer did not concentrate to the firm and the switching costs for the buyers were low. Thus there were many product choices for the buyers, e.g. IBM, HP, Dell etc.

4.5.4 The threat of substitutes

Threat of substitution, which is meant that fear of the substitutes for the IBM products, is also assumed to be low in case of IBM. As IBM technology products are diverse from other products and remains outstanding and that’s there has no substitutes for IBM solutions. IBM (2008). The web hosting business is the principal threat of substitute for the server products in the world as due to its tech-support, simple supervise and low switching costs.

4.5.5 Competitive Rivalry

Rivalry of the IBM in the industry is subsequently tougher since there have been many IT businesses emerging in the market and even the smaller companies are competing with and that is different with what differs from IBM offer. As based on the substitutes by 2005, the world server market continues to show promising signs, according to IDC, IBM (2008). the aggressive rivalry in the server market was becoming intense in the world. These competitors of IBM, includes HP, Sun Microsystems, Dell and Fujitsu Siemens Computers.

Financial Charts

Below figures represents the financial chart of IBM (IBM Group, 2010).

Figure Earnings per Share

Figure Financial Performance Histories

Recommendations

IBM can agree to the international agreements and standards in order to maintain the quality of the products.

IBM could provide more opportunity to the upcoming professionals in order to move ahead with the newer technologies.

IBM can provide open resource to Intellectual Property and Copyright Infringement as they paves way to development of newer technologies.

On consideration the market of IBM it maintain its Earning per share as 10$ lead to more shareholders, this has been an gradual increase from the past five years thus in order to maintain and implement more shareholders it can lowers it unwanted costs and reapply it in R&D for innovative development.

7. Conclusion

In order to conclude IBM has almost achieved its success and promote a better level in the business and market strategy in the past five years and fulfilled the Customer expectations. This report has analyzed the strategies of IBM through various factors and analysis and IBM has almost satisfies all the conditions. But there are some factors that IBM can endeavour to be improved. As these factors heavily affects it high business value. The results on Critical evaluation help the IBM business strategy to get more success in to the market. There has been some suggestions are analyzed and quoted in order to overcomes the problem. Thus on the whole IBM provides more value to the business and the customer satisfaction and with stands it rank in the business world for the past five years.