IBM computer Hardware Company

Problem analysis and Description.

For years now computer industry has remained the most significant global industry, primarily since the ongoing leaps in modern technology performance as well as steady cost declines are changing lives. Nevertheless, this is not simply obvious for IBM computer Hardware Company. Currently, the most evident symptom of IBM computer Hardware Company is its decline in sales and overall profit margins. Tech giant recorded and posted revenue decline in their major business lines. Business services fell 12%, technology services revenue for the company was down 10%; software dropped 10%; thus the overall hardware revenue sank 32%. The Tech giant company that previously pulled off one of the remarkable reinventions in tech/computer industry history currently appears to be in need of a fresh surge of innovation (IBM Research Home Pg. 29). More specifically, IBM computer Hardware Company reported that second-quarter revenue fell to $22.5 billion, in comparison to $23.4 billion posted in the year-earlier quarter. Following a similar logic, IBM computer Hardware Company had a gap of $ 0.9 billion revenue in this two periods of comparison.

The question that remains to be answered is however why IBM computer Hardware Company had a gap of $ 0.9 billion revenue reported in its second-quarter. Based on the information obtained from the investors report, IBM was difficulty since it abrogated its contracts with their customers and due to the fact that a key strategic error resulted in the company to overextend. Afterwards, it worsened the strategic errors through a radical reorganization that intensified the underlying difficulties. As evident in the report, these errors led to IBM falling profit margins, leaving its earnings severely squeezed (Young, 2003). Likewise, there was loss of investor’s confidence and this has been reflected in the falling prices of shares.

Note

The underlying problem causing all these symptoms is failure to understand the role played by customers in the tech market share. This has made them shift their business model to favoring shareholders instead. This new trend that has cost the company their revenue is different from the past recognition that technology is moving, sustaining and rebuilding customer relationships, as well as motivating their people was key to success to growth.

Solution, evaluation and recommendations.

To regain the previous market share and attain more profit margin.  IBM computer Hardware Company have various solutions. One being IBM needs to fix Global Services. As evident, this is the IBM’s main division affecting most customers as well as a catalyst for company’s sales.  The company’s Global Services has witnessed the worst cost cuts as well as the most layoffs which have hurt their customers (Kozul-Wright,et al.2002).  These cuts have hurt many of IBM’s customers. To fix, IBM computer Hardware Company will need to invest in Global Services as well as in its people.

Secondly, the demand for cloud, security, and infrastructure services is increasing tremendously. For instance, there is a growing marketing in Asia and specifically in China and India. This offers the company with an opportunity to expand its market base.

Finally, there is need for IBM to change their business strategy model. IBM computer Hardware Company has long said their business model is rather geared to profit growth delivery as opposed to sales growth (Hoskins, 2010). However, the recent indications is that investors, are anxious to see signs of tangible revenue growth, particularly since cost-cutting as well as share repurchases have played a huge role in the company’s strong earnings performance currently.

The following matrix compares the three solutions on various creteria.

Weighted categories Weights Choice

i

Choice ii Choice iii
Length of time to implement(10 fast, 1 long) 0.3 8 6 2
Potential increase in revenue (10 high, 1 low) 0.4 3 9 10
implementation plan Flexibility (10 flexible, 1 inflexible) 0.1 9 5 1
Total choice weight (highest is the best)   4.5 5.9 4.7

 

Choices

  1. Enter new markets
  2. Changing business model
  3. Fix Global Services

Based on the matrix above, choice two seems optimal for IBM computer Hardware Company. The company is operating in a rather dynamic technological environment where there is a lot of competition in recent days hence time plays an important part (Hoskins, 2010). This is in easy implementation of the new model so that the flexible model ensures more growth in sales and eventually profits. Other options though optimal may prove not to be cost effective. Case in point is entrance to other new markets. This may not be cost effective for IBM computer Hardware Company in the short run (Kozul-Wright,et al.2002). In this regard, choice two offers the best solution for the company.

Implementation plan

The first step is understanding that company’s hardware business segment continued to drag IBM’s down. So as to ensure a shift in the new business model, there is also need to afterwards restructure its workforce. This will ensure that. IBM computer Hardware Company focuses its attention to the specific sales promotion strategies which demands reestablish itself with their customers and employees. Finally, moving and restructuring various departments in line with these goals. This will call for the understanding that their success is influenced less on the personalities of IBM’s leaders than on appropriately assessing the company’s strategic direction in where the technology is moving, sustaining and rebuilding customer relationships, as well as motivating their people.

Success matrix

In totality, the initial goal in success matrix should be the determination whether sales are increasing to a level that will increase the profit margins. Should this be not the case, IBM should move promptly to diagnose the problem and change their model where necessary. This makes the company be at peace with all stakeholders: customers, investors, shareholders to mention but a few.

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