Essay About Ceo Of Ibm And Stiff Competition

Ibm Analysis
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Written Case Analysis – IBM
Salient Case Facts at a Glance:
John Akers became the CEO of IBM in 1985. By this time, IBM
had registered a drop in earnings for the first time. This trend
continued, creating various other problems till John Akers was
forced to resign in 1993.
IBM was perceived as a ruthless giant with tremendous growth.
Naturally, it was singled out for criticism by the entire industry
and the government. IBM also attracted anti-trust legislation as
a result.
IBM lost out once the Personal Computer industry began to boom.
It found that the old paradigm of closed proprietary systems
applicable to the mainframe business was not relevant to PCs.
Reasons for decline of IBM in the late 80s and early 90s:
* IBMs earlier investments were yet to pay dividends and the
future investments planned were high.
* IBMs products were treated as generic. PC parts were
available cheap and assembly was also cheap. Therefore
customers opted for cheap clones. A high cost manufacturer
like IBM had an obvious disadvantage.
* IBM failed to read the industry trends and was still banking
on the mainframe business to earn major revenues. It was
losing market share in PC and laptop segments, which were
growing fast and had tremendous potential.
* IBM had excess manpower which resulted in heavy overheads.
* IBM was seen as a single entity by customers. So the splitting
of the company into autonomous business units was not
acceptable to the customers. The customers would find it
difficult to deal with different divisions of IBM.
* IBM also did not appreciate that software was becoming more
important than hardware in the light of the IT revolution.
Louis Gerstner took over as CEO in 1993. The major policy
initiatives that he launched included a decision not to split up the
company but to make it even more closely linked, concentrate on
networking and minimizing bureaucracy. Under his leadership,
IBMs earnings showed a remarkable turnaround in the next two
years after registering a huge loss in 1993.
PC Industry – Structural Analysis: (Using Michael Porters
Model)
Based on the information provided in the case, we can do a
structural analysis of the PC industry which will help us in better
analysis of the case.
Threat of New Entrants: Entry was easy in the industry due to
its huge potential. However, the major market share was held only
by a few players.
Rivalry: Stiff competition among a few major players having equal
strength and potential. This led to intensive rivalry.
Bargaining Power of Customers: High bargaining power because of
stiff competition, and a large number of suppliers offering similar
products to choose from.
Bargaining Power of Suppliers: Bargaining power of suppliers is
high because of the dominant position of players such as
Microsoft and Intel.
Substitutes: The PC industry was a highly dynamic one. However
an immediate substitute did not seem likely.
Major Problems Facing IBM :
In the current scenario, the most important task was to initiate a
long term growth strategy that would sustain IBMs recovery and
spearhead it into the future. An associated