St.internal Analysis & IBM St.plan Final Ppt Mid Term Case

Strategic managementStrategic managementInternal AnalysisInternal Analysis

Presented to: Dr.Amal Asfour

Prepared by: Eng.Dalia El-Sheikh

Date: 22-3-2012

contentcontent•Introduction.•Main sources of internal forces.•Internal Audit processes.•Internal factor evaluation matrix (IFE). •IBM Strategic plan (case study).

The purpose of the internal assessment is to assess internal structure, process and operations of the organization to pinpoint Strengths and Weaknesses.

This assessment should be made in parallel with the external assessment in order to capture the dynamic changes in the environment.

Internal Environment AssessmentIntroduction:

Main sources of Internal Forces

Competencies (core and distinctive). VRIO analysis is the core of the resource based view (RBV) of the firm Organizational culture (Freedom and Fear). The value chain analysis.

Examples of Distinctive Competencies

• ToyotaLow-cost, high-quality manufacturing capability and short design-to-market cycles

• MotorolaDefect-free manufacture (six-sigma quality) of cell phones

Value Chain AnalysisValue Chain Analysis

Managers and employees are involved in determining firm’s strengths and weaknesses. The information are gathered from :◦Management.◦Marketing.◦Finance and accounting.◦Production and operations.◦R & D.◦Management information system.

Internal Audit Process

Management

Planning

Basic FunctionsManagerial activities related to preparing for the future

Organizing Job description, job specialization, organizational design

Motivating Behavior modification, delegation, employee morale

Staffing

Controlling

Activities related to HR management such as employee safety, hiring, firing, training

To ensure that actual results are consistent with planned such as quality control, sales control

Management Audit ChecklistManagement Audit Checklist

Does the firm use strategic management concepts?Are objectives/goals measurable? Well communicated?Are job descriptions clear?Is employee morale high?Is employee absenteeism low?Are the reward mechanisms effective?Are the organization’s control mechanisms effective?

Included but not limited to:

MarketingMarketing Basic Functions:

1. Customer analysis (needs, desires, and wants).

2. Selling products (ability of organization to sell product).

3. Product planning (Brand positioning , product’s options, features, style, and quality).

4. Pricing (consumer, government, suppliers, distributors, and competitors).

5. Distribution (warehousing, channels, retail sites, carriers)

6. Opportunity analysis ( assessing the cost, Benefits, and Risks)

Marketing Audit

1. Are markets segmented effectively?

2. Is the organization positioned well among competitors?

3. Are the distribution channels reliable & cost effective?

4. Does the firm conduct market research?

5. Are product quality & customer service good?

6. Does the firm have effective promotion, advertising, and publicity strategies?


Finance & Accounting1. Investment decision (Capital budgeting)

2. Financing decision

3. Dividend decision

Financial RatiosLiquidity Ratios

(ability to meet short-term obligations)

Leverage Ratios (financed by debt)

Activity Ratios(use of resources)

Profitability Ratios(Shown by returns on sales & investment)

Growth Ratios(ability to maintain economic position)

Finance AuditFinance Audit What is the firm financial position? Does the firm have sufficient working capital? Are capital budgeting procedures effective? Are dividend payout policies reasonable? Does the firm have good relations with its investors and

stockholders? Are the firm’s financial managers experienced and well

trained? Is the firm’s debt situation excellent?

Production/Operations

Basic Functions Process Capacity Inventory Workforce Quality

Production & Operations AuditProduction & Operations Audit

Are suppliers of materials reliable and reasonable?Are facilities, equipment, machinery, and offices in good

condition?Are inventory-control policies effective?Are quality-control policies effective?Are facilities, resources, and markets strategically located?Does the firm have technological competencies?

Research & Development

Basic Functions

Development of new products before competitors Improving product quality Improving manufacturing processes to reduce costs

R & D AuditR & D Audit

Are the R&D facilities adequate?If R&D is outsourced, is it cost-effective?Are the R&D personnel well qualified?Are R&D resources allocated effectively?Is communication between R&D and other

organizational units effective?Are present products technologically competitive?

Management Information Systems

Purpose

Improve performance of an organization by improving the quality of managerial decisions

Management Information Systems AuditManagement Information Systems Audit

Do all managers use the information system to make decisions?Is there a Director of Information Systems position in the firm?Are there effective passwords for entry into the firm’s information

system?Do all users understand the competitive advantages that

information can provide?Are computer training workshops provided for users?Is the firm’s system being improved?


Internal Factor Evaluation (IFE) MatrixInternal Factor Evaluation (IFE) Matrix

1. List key internal factors2. Assign a weight ranging from 0.0 to 1.03. Assign a 1 to 4 rating to each factor4. Multiply the weight times the rating5. Sum the weighted scores

StrategicStrategic PlanPlan

ContentContent IBM OverviewIBM Vision & Mission StatementsIBM Annual ObjectivesIBM Resources AllocationIBM Organizational Structure & Restructuring IBM Financial RatiosCompetitive Profile Matrix (CPM)EFE & IFE Matrix The Matching StageIE MatrixSWOT MatrixSPACE MatrixGrand Strategy MatrixIBM Balanced Score-CardFinal Conclusion

IBM OverviewIBM OverviewInternational Business Machines (IBM) is a multinational technology

and consulting firm, founded in Armonk in 1888 as “Herman Hollerith and the Tabulating Maching Company”. later on 1942 the company changed its name to International Business Machines with headquarter complex is located in Armonk, Town of North Castle, New York, United States.

IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services through its 4 divisions (software, hardware, financing and services).

In 2011, Fortune ranked IBM the 18th largest firm in the U.S. as well as the 7th most profitable. Globally, the company was ranked the 31st largest firm by Forbes for 2011.

IBM OverviewIBM Overview

IBM in Numbers:

Revenue: US$ 99.870 billion (2010)Operating income: US$ 19.273 billion (2010)Net income: US$ 14.833 billion (2010)Number of employees: 426,751 (2010)Divisions: - Hardware - Software - Services -

Financing.Website: www.ibm.com

IBM Vision and Mission StatementsIBM Vision and Mission StatementsVision Statement:Vision Statement:

“ Solution for a small planet.”

Mission Statement:Mission Statement:“ At IBM we strive to lead in the invention, development and manufacture of the industry’s most advanced information technologies including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.”

Mission Statement Evaluation MatrixMission Statement Evaluation MatrixComponentComponent ExistenceExistence

1 Customers Yes Yes “ …………… into value for our customers”

2 Products & ServicesYes Yes “……….. including computer systems, software, storage systems

and microelectronics”

..………… “through our professional solutions, services and consulting businesses worldwide”

3 Markets Yes Yes “……. worldwide”

4 Technology YesYes “ most advanced information technologies”

5 Survival, growth, and profitability NoNo

6 Philosophy Yes Yes “We translate these advanced technologies into value for our customers”

7 Self-Concepts Yes Yes “to lead in the invention, development and manufacture of the industry’s most advanced information technologies”

8 Public image NoNo

9 Employees NoNo

Mission Statement EvaluationMission Statement EvaluationSuggested Phrase:Suggested Phrase:

IBM Long-term objectives:IBM Long-term objectives:◦Drive revenue growth through new marketsnew markets, new offerings, and new

products both developed and acquired.developed and acquired.◦ Focus on productivity.Focus on productivity.◦ Deploy cash to fund growth Deploy cash to fund growth and provide shareholders returns via

dividends.◦ Deliver 10-12% earnings per share growth Deliver 10-12% earnings per share growth over the Long term.

IBM Annual objective:IBM Annual objective:◦ Annual vertical integrations Annual vertical integrations that enable IBM to expand its software

and services. ◦ Series of annual defensive (Divestiture) strategies .Series of annual defensive (Divestiture) strategies .◦ Developing and encouraging innovation and ideas Developing and encouraging innovation and ideas that focus on new

high-profit, value-added business and services.

Annual ObjectivesAnnual Objectives

Results achieved: Results achieved: 0.3% increase in total revenue between 2005 and 2006. 1.8% increase In gross profit between 2005 and 2006. Annual Brainstorming sessions for 150,000 employees through 2003 to

2006 generating 46,000 ideas and investing $100 million in the ten best idea.

Investing about $ 4.8billion in a series of acquisitions 2004,2005 to reach 13 acquisitions.

Acquiring Watchfire Corporation, Webdialogs and DataMiror. Corp. during 2007.

Despite acquisitions and divestiture strategies not all the products achieved revenue and gross profit.


IBM IBM RevenuesRevenues (in $ Millions) (in $ Millions)20062006 20052005 YR to YR percent YR to YR percent

ChangeChange

Financial services 25,181 24,186 4.1%

Public 13,401 14,064 )4.7% (

Industrial 11,535 11,699 )1.4% (

Distribution 9,034 8,959 0.8%

Communications 8,679 8,601 0.9%

Small & Medium Business 16,981 17,597 )3.5% (

Original Equip Manufacturers 3,8563,856 3,271 17.9%

Other 2,756 2,757 )0.1% (

TotalTotal 91,424 91,134 0.3%0.3%


0.3% annual change in total revenue between 2005 and 2006 0.3% annual change in total revenue between 2005 and 2006

Financial Resources:Financial Resources:Resources AllocationResources Allocation

20062006 20052005 20042004

Cash and Cash EquivalentCash and Cash Equivalent 8,022,000 12,568,000 10,053,000

Short term investmentsShort term investments 2,634,000 1,118,000 517,000

Long term investment Long term investment 18,449,000 14,602,000 16,418,000

Increase in R&D expenses as % salesIncrease in R&D expenses as % sales 6.7% 6.4% 5.9%

Current ratioCurrent ratio 1.11 1.3 1.18

Earning per shareEarning per share 6.06 4.91 4.39

Allocating total Investment of $4.8 billion in a series of acquisition till 2006. Committing $ 100 million to develop new ideas to encourage innovations. Annual increase in R&D expenses to encourage innovations IBM short term paying ability was better during 2005 than in 2006 or in

2004. The steady increase in IBM Earnings per share constitute a gain of 149%

over a period of 4 years to reach 6.06 in 2006.

Human ResourcesHuman Resources:: Physical ResourcesPhysical Resources:: IBM human resources are wide

base for innovation.

R&D system is being supported

by: ◦over 20,000 software

developer.

◦3000 scientist and technologist work at its research Centers in China, India Israel, Japan and Switzerland and united states.

IBM utilize its physical resources to operates in 170 countries worldwide which provide high market penetration.

IBM operates 61 Lab located in 15 countries.

Resources AllocationResources Allocation

Technological ResourcesTechnological Resources::IBM’s has abundant technological

resources. ◦ It has hand on in producing and providing:

Servers, data storage products including disks, taps, optical microprocessors and manufacturing consulting services.

Software as information management software and information integration process automation tools and infrastructure management tools.

Resources AllocationResources Allocation

Services as business process out sourcing ,consulting ,IT infrastructure maintenance services and E- banking.

IBM’S organizational structure composed of the following :◦14 Senior vice president◦3 vise president ◦The CEO◦ Innovation and technology Executive vise president◦Total Number of employees equals 426,751 world wide.

Its current CEO started his career as a sales man in the company . Board size: 10-14 Board members the flexibility of board size

depends on circumstances. Evaluation of the CEO: The performance of the CEO is reviewed

periodically by the Executive Compensation and Management Resources Committee and annually by the Board in executive session.

Organizational StructureOrganizational Structure

Divisional Structure by Geographic AreaDivisional Structure by Geographic Area : :IBM Operates in 170 countries

with about 60% of its revenue

being generated outside USA

about 30% of its employees are

in Asia Pacific, 45% are in USA

and 25% in other countries in

Middle East, Europe and Africa.

Organizational StructureOrganizational Structure

•AAGSB•MBA – Fall 2100

In 2005 IBM has revealed restructuring plans which will result in up to 13,000 job losses, mostly in Europe.

IBM expected that these actions will accelerate the progress progress toward more globally integrated operations and will allow the toward more globally integrated operations and will allow the company to shift resources to higher-growth markets & company to shift resources to higher-growth markets & opportunities primarily in Europe.opportunities primarily in Europe.

The success of this strategy depended on reducing bureaucracy & reducing bureaucracy & infrastructure in lower-growth countries and creating teams that infrastructure in lower-growth countries and creating teams that can work across country borders, shifting more employees into can work across country borders, shifting more employees into direct client rolesdirect client roles

On a worldwide basis, IBM planed to improve the efficiency of its IBM planed to improve the efficiency of its services operations by consolidating much of the service delivery services operations by consolidating much of the service delivery workload into fewer locations workload into fewer locations by using standard job roles, processes & tools.

RestructuringRestructuring

Quick view on Some of Financial Ratios for IBM

Ratio 2004 2005 2006 Comment

Current Ratio

1.18 times

1.3 1.3 timestimes

1.11 times

The higher the current ratio, the more capable the company is of paying its obligations.

Industry average: 1.2 times

Quick Ratio 1.5 1.5 timestimes

1.2 times

1.04 times

The higher the quick ratio, the better the position of the company.

Industry average: 1.1

Debt Ratio 72.8%72.8% 68.7% 72% The higher the ratio, the more risk that company is considered

to have taken on.

Profit Margin on

Sales8.8% 8.7% 10%10%

While the company increased its net income, it has done so with diminishing profit margins.

A higher profit margin indicates a more profitable company that has better control over its costs.

Industry average: 8.8%

Basic Earning Power

(BEP)

11.1% 11.8% 13.2% Because of its high profit margin on sales, IBM is getting a high

return on its assets as is the average in its industry (11.7%).

Return on Assets

7.7% 7.5% 9.35%9.35% The higher the ROA the better, because the company is earning

more money on less investment. Industry average: 8.7%

Return on Equity 28.35% 23.95% 33.3%33.3%

The higher the ROE the better, because the shareholders are earning more returns on their money.

Industry average: 27.8%

Competitive Profile Matrix (CPM)Competitive Profile Matrix (CPM)IBM Microsoft HP

CSF’s Wt Rating Wt’d Score Rating Wt’d

Score Rating Wt’d Score

Market share 0.15 3 0.45 4 0.60 3 0.45Supply chain 0.08 2 0.16 4 0.32 3 0.24Financial position 0.10 3 0.30 4 0.40 3 0.30Product Quality 0.08 4 0.32 4 0.32 3 0.24Consumer Loyalty 0.02 3 0.06 4 0.08 3 0.06Sales Distribution 0.10 3 0.30 4 0.40 3 0.30Global Expansion 0.15 3 0.45 4 0.60 4 0.60Organizational Structure 0.05 4 0.20 4 0.20 3 0.15Production Capacity 0.04 3 0.12 4 0.16 4 0.16E-commerce 0.10 3 0.30 4 0.40 2 0.20Customer Service 0.10 4 0.40 3 0.30 3 0.30Price competitive 0.02 4 0.08 3 0.06 2 0.04Mgt. experience 0.01 3 0.03 4 0.04 3 0.03Total 3.17 3.88 3.07

Comment: IBM’s 3.17 score represent that it is competing aggressively with its competitors in the domestic and global markets and its rank is the 2nd after Microsoft.

The External Factor Evaluation (EFE) MatrixThe External Factor Evaluation (EFE) MatrixKey External Factors Wght Rate Wtd score

OPPORTUNITIES

1-Rapid Growth in engineering technologies such as renewable and nuclear power stations.

0.08 2 0.16

2-Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly.

0.09 2 0.18

3-The consumer global trend is heading toward depending and spending more on IT products & services

0.07 2 0.14

4-Global Communications industry is still growing noticeably

0.06 2 0.12

5-Diversified computer industry has high profit, high value added businesses and services.

0.07 3 0.21

6-Rising demand for Video game product 0.07 2 0.14

7-China government has developed incentive policies to encourage growth in the software industry.

0.07 1 0.07

The External Factor Evaluation (EFE) MatrixThe External Factor Evaluation (EFE) MatrixKey External Factors Weight Rate Wtd

score

THREATS1-Possible legislation to limit the number of software patents awarded.

0.08 2 0.16

2-IBM is facing strong rivalry from the various local as well as multinational companies such as HP, Microsoft, EDS.

0.08 3 0.24

3-High bargaining power of buyers due to the availability of many alternative products.

0.08 2 0.16

4-Technology life cycle is characterized by rapid changing/ development

0.07 4 0.28

5-Government Laws & regulations in the computer industry are expected to increase.

0.06 3 0.18

6-Increased Market share of competitor 0.05 2 0.17-Leading competitor increased R&D capabilities. 0.07 2 0.14

TOTAL 1.00 2.28

The Internal Factor Evaluation (IFE) MatrixThe Internal Factor Evaluation (IFE) MatrixKey Internal Factors W R W S

STRENGTHS1-Ranked #1 service provider in IT outsourcing, consulting & systems integration. 0.05 4 0.2

2-Invested from $5.8 to 6.8 billion in R&D. 0.1 4 0.43-IBM net income increased by $1.6 Billion (20% from 2005) 0.05 4 0.24-IBM received more patents than any other American technology company. 0.07 4 0.28

5-IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology and 5 national medals of science. 0.05 4 0.2

6-IBM has about 426,751 employees residing in 170 countries worldwide 0.04 3 0.127-IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services. 0.1 4 0.4

8-IBM has large global existence through a lot of subsidiaries and partners worldwide. 0.1 4 0.4

9-IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide 0.04 3 0.12

The Internal Factor Evaluation (IFE) MatrixThe Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Wght Rate Wtd Score

WEAKNESSES1-small & medium sized business has declined 3.5% from 2005 to 2006

0.05 2 0.1

2-Revenues across all industries sectors are almost the same from 2005 to 2006

0.05 2 0.1

3-Total assets decreased from $105 billion to $103 billion in 2005-2006.

0.06 2 0.12

4-It has the world's most complex supply chain system 0.05 2 0.15-Systems & technology gross profit declined 40.4 % in 2006. 0.07 1 0.076-IBM relied on partners' and distributers' reports and management systems.

0.05 1 0.05

7-Huge workforce and high pay for human resource 0.07 2 0.14TOTAL 1.00 3.00

The Matching StageThe Matching StageIE MatrixIE Matrix

The IFE Total Weighted ScoreStrong

3.0 – 4.0Average

2.0 – 2.99Weak

1.0 – 1.99

High3.0 – 4.0 1 2 3

Medium2.0 – 2.99 4 5 6

Low1.0 – 1.99 7 8 9

The EFE Total

Weighted

ScoreFrom the internal Factor Evaluation (IFE) Matrix, the total weighted score = 3.00From the External Factor Evaluation (EFE) Matrix, the total weighted score = 2.28

So, based on the IE Matrix, IBM lies in the green field “4” which confirm that IBM is in a strong position to grow and build and it shall pursue intensive strategies (Market penetration/Market development)

The Matching StageThe Matching StageSWOT MatrixSWOT Matrix

Strengths – SS1.1. Ranked #1 service provider in IT outsourcing, consulting & systems integration.2.2. Invested from $5.8 to 6.8 billion in R&D.3.3.IBM net income increased by $1.6 Billion (20% from 2005)4.4. IBM received more patents than any other American technology company.5.5. IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology and 5 national medals of science.6.6. IBM has more than 426,751 employees residing in 170 countries worldwide7.7. IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services.8. 8. IBM has large global existence through a lot of subsidiaries and partners worldwide.9. 9. IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide.

Opportunities – O 1.1. Rapid Growth in engineering technologies such as renewable and nuclear power stations.2. 2. Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly.3. 3. The consumer global trend is heading toward depending and spending more on IT products & services4.4. Global Communications industry is still growing noticeably5.5. Diversified computer industry has high profit, high value added businesses and services.6. 6. Rising demand for Video game product7. 7. China government has developed incentive policies to encourage growth in the software industry

SOSO Strategies StrategiesExploit internal R&D capabilities to capitalize on external growing demand of related productsS2 O1, S2 O2, S2 S2 O1, S2 O2, S2 O4, S2 O6, O4, S2 O6, Increase IT services in China & IndiaS1 O3, S1 O7S1 O3, S1 O7Exploit Human resources and diversified products to gain a larger market shareS7 O5, S8 O3, S6 S7 O5, S8 O3, S6 O4O4


Weaknesses – W 1.1. small & medium sized business has declined 3.5% from 2005 to 20062.2. Revenues across all industries sectors are almost the same from 2005 to 20063.3. Total assets decreased from $105 billion to $103 billion in 2005-2006.4.4. IBM has the world's most complex supply chain system5.5. Systems & technology gross profit declined 40.4 percent in 2006.6.6. IBM relied on partners' and suppliers' reports and management systems.7.7. Huge workforce and high pay for human resource

Opportunities – O 1.1. Rapid Growth in engineering technologies such as renewable and nuclear power stations.2. 2. Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly.3. 3. The consumer global trend is heading toward depending and spending more on IT products & services4.4. Global Communications industry is still growing noticeably5.5. Diversified computer industry has high profit, high value added businesses and services.6. 6. Rising demand for Video game product7. 7. China government has developed incentive policies to encourage growth in the software industry

WO StrategiesWO StrategiesIncrease revenue

from the small and medium-sized

business segmentW1 O5, W1 O5,

To compensate the loss in the systems &

technology gross profit by encouraging the global consumers to shift toward their products & services.

W5 O3, W5 O3, Deploy the large No.

of employees in a diversified industries

W7 O5,W7 O5,


Strengths – SS1.1. Ranked #1 service provider in IT outsourcing, consulting & systems integration.2.2. Invested from $5.8 to 6.8 billion in R&D.3.3.IBM net income increased by $1.6 Billion (20% from 2005)4.4. IBM received more patents than any other American technology company.5.5. IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology and 5 national medals of science.6.6. IBM has more than 150,000 employees residing in 104 countries worldwide7.7. IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services.8. 8. IBM has large global existence through a lot of subsidiaries and partners worldwide.9. 9. IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide.

Threats – T1.1. Possible legislation to limit the number of software patents awarded.2. 2. IBM is facing strong rivalry from the various local as well as multinational companies such as HP, Microsoft, EDS.3. 3. High bargaining power of buyers due to the availability of many alternative products.4. 4. Technology life cycle is characterized by rapid changes/development5. 5. Government Laws & regulations in the computer industry are expected to increase.6. 6. Increased Market share of competitor7. 7. Leading competitor increased R&D capabilities.

ST StrategiesST StrategiesIncrease in R&D

spending to reduce the threats arising from competitors, rapid life cycle and political/governmen

tal regulationsS2 T2, S2 T4, S2 S2 T2, S2 T4, S2 T1T1

Increase political alliances

S4 T1 , S4 T6S4 T1 , S4 T6The strong brand name creates a

customer loyalty S5 T3S5 T3


Weaknesses – W 1.1. small & medium sized business has declined 3.5% from 2005 to 20062.2. Revenues across all industries sectors are almost the same from 2005 to 20063.3. Total assets decreased from $105 billion to $103 billion in 2005-2006.4.4. IBM has the world's most complex supply chain system5.5. Systems & technology gross profit declined 40.4 percent in 2006.6.6. IBM relied on partners' and suppliers' reports and management systems.7.7. Huge workforce and high pay for human resource

Threats – T1.1. Possible legislation to limit the number of software patents awarded.2. 2. IBM is facing strong rivalry from the various local as well as multinational companies such as HP, Microsoft, EDS.3. 3. High bargaining power of buyers due to the availability of many alternative products.4. 4. Technology life cycle is characterized by rapid changes/development5. 5. Government Laws & regulations in the computer industry are expected to increase.6. 6. Increased Market share of competitor7. 7. Leading competitor increased R&D capabilities.

WT StrategiesWT StrategiesUsing the influence of F & B integration

to minimize the threat of the global

competitionW6,W7,T6 W6,W7,T6

Using the huge workforce to

minimize the threat of high bargaining power of buyers

(increase loyalty to IBM brand name)

W7 T3W7 T3

SPACE MatrixSPACE MatrixInternal Strategic Position External Strategic Position

Financial Strength (FS)Return on investmentLeverageLiquidityNet IncomeWorking capitalCash flow

+6+4+5+6+4+4

Environmental Stability (ES)Technological changesRate of inflationPrice range of competing productsBarriers to entryCompetitive pressurePrice elasticity of demandEase of exit from market Risk involved in business

-2-3-2-3-2-3-2-3

Average +4.83 Average -2.50

Competitive Advantage CAMarket shareProduct qualityProduct life cycleCustomer loyaltyCompetition’s capacity utilizationTechnological know-howControl over suppliers & distributors

-1-1-2-3-2-1-2

Industry Strength (IS)Growth potentialProfit potentialFinancial stabilityTechnological know-howResource utilizationEase of entry into marketProductivity, capacity utilization

+6+5+5+6+4+4+5

Average -1.71 Average +5.00

The Matching StageThe Matching Stage

SPACE MatrixSPACE Matrix

FS+6

+1

+5+4+3+2

-6-5-4-3-2-1-6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6

ES

CA IS

Conservative Aggressive

Defensive Competitive

•Based on the strategic position and action evaluation Matrix which shows that IBM is strong internally and externally, so the best strategic position is to pursue one of the below Aggressive strategies:

•Integration•Market Penetration•Market Development•Product Development•Diversification

(3.29; 2.33)


Grand Strategy MatrixGrand Strategy Matrix

Quadrant IV

1. Related diversification

2. Unrelated diversification

3. Joint ventures

Quadrant III

1. Retrenchment


3. Unrelated diversification

4. Divestiture

5. Liquidation

Quadrant I

1. Market development

2. Market penetration

3. Product development

4. Forward integration

5. Backward integration

6. Horizontal integration


Quadrant II

1. Market development

2. Market penetration

3. Product development

4. Horizontal integration

5. Divestiture

6. Liquidation

RAPID MARKET GROWTH

SLOW MARKET GROWTH

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION


Grand Strategy MatrixGrand Strategy MatrixBased on the Grand Strategy Matrix which shows that:IBM is in a strong competitive position as mentioned in its strength (IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide)As mentioned in the opportunities, IBM competes in a rapid growth industry IBM position is in quadrant I in which one the following strategies:Market developmentMarket penetrationProduct developmentForward integrationBackward integrationHorizontal integrationRelated diversification

Suggestion: As long as IBM has an excellent strategic position, so we prefer that the suitable alternative strategy would be intensive strategy (Market penetration / Market development)


IBM Balanced Scorecard – Yr 2011IBM Balanced Scorecard – Yr 2011





We can summarize our analysis & our review of the state of IBM's efforts to transform itself into an innovation – driven integrated global company as follows:

IBM Ranked #1 service provider #1 service provider in IT outsourcing, consulting & systems integration.

IBM ranked 1st in sales & 2nd in market capitalization net income & long term growth worldwide.

Invested from $5.8 to 6.8 billion in R&D$5.8 to 6.8 billion in R&D.

Diversified businesses.

IBM has large global existence large global existence through a lot of subsidiaries & partners worldwide.

Final ConclusionFinal Conclusion

Series of Annual horizontal integrations represented in acquisitions from 2003 till 2006 to reach 13 acquisitions of 13 acquisitions of approximately $ 4.8billion that enable IBM to expand its software approximately $ 4.8billion that enable IBM to expand its software & services& services.

Based on (SPACE)(SPACE) Matrix, IBM is strong internally & externally.IBM is strong internally & externally.

Based on the Grand Strategy Matrix Grand Strategy Matrix IBM is in a strong is in a strong competitive position.competitive position.

IBM has come a long way to transform itself into an innovation-driven integrated global company as it seeks to pursue value-added business & services that will generate a high value for its clients & high profit for its shareholders.

Final ConclusionFinal Conclusion

St.internal Analysis & IBM St.plan Final Ppt Mid Term Case

Documents

oriented architecture

facing strong

nuclear power

developed

external factor

open business

consumer global

technology