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BACKGROUND OF THE STUDY STATEMENT OF THE PROBLEM OBJECTIVE(S) ENVIRONMENT ANALYSIS A. Demographic Environment B. Social Environment C. Cultural Environment D. Legal Environment E. Political Environment F. Government Environment G. Technological Environment H. Economic Environment Michael Porters Five Forces Model

Porters 5 Forces Model Analysis:

THE THREATS OF NEW ENTRANTS: The threat of entrants for the server market was low because of the enormous costs on the R&D, relevant support products and services, manufacturing and the distribution. F o r e x a m p l e , I B M s p e n t n e a r l y $ 1 7 1 m i l l i o n i n s y s t e m a n d t e c h n o l o g y f o r s e r v e r product in 2005, (Annual Report,2006) and IBM spent over $1 billion in the Linux o p e r a t i n g s y s t e m i n 2 0 0 1 . ( S h a n k l a n d , 2 0 0 2 ) T h i s w a s o n l y t h e b a r r i e r o n t h e c o s t , there were other barriers like technique, distribution channels etc. BARGAINING POWER OF SUPPLIER: Intel and AMD, as the two biggest processor providers (monopolies) i n t h e w o r l d , have very strong power on the chip supplying. Although the power of suppliers might be decreased resulting from the competition between these two companies, the wide r a n g e o f c u s t o m e r s a n d h i g h c o s t s o n s w i t c h i n g c a u s e t h e b u y e r s l a c k o f p o w e r t o bargain with these two giants. However, the power of suppliers for other low technical required material and parts was much lower than the core hardware providers. BARGAINING POWER OF BUYER: The power of buyers for 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. There were many product choices for the buyers, e.g. IBM, HP, Dell.

COMPETITIVE RIVALRY: By 2003, the world server market continues to show promising signs, according to IDC, (2003), the competitive rivalry in the server market was becoming intense in the world. These competitors included HP, IBM, Sun Microsystems, Dell and Fujitsu Siemens Computers were becoming the fifth leading server vendor in the world. THREAT OF SUBSTITUTE: The web hosting business might be the biggest threat of substitute f o r t h e s e r v e r products in the world. The advantages of web hosting include low cost, tech-support, easy to manage and low switching costs. In addition, the advanced personal computer might be another biggest threat to the server product. However, currently, the PC cannot instead of professional server for the business uses.







INDUSTRY ANALYSIS Strengths Solid systems management expertise that can handle large infrastructure projects. An array of products & services that provide end-to-end solutions. Leading provider of IT service Strong research and development Advanced business performance management. Good organization culture. Strategic outsourcing, mergers and acquisitions. High efficient fulfilment centre. Flexible marketing management. Creative services

Opportunities Threats While IBM has no problem with being considered a strategic partner, the drawbacks of being part of a very large corporation still show in the time it takes to bring innovation to market. economic slowdown in US and Europe Customers have low switching costs. High threat of substitutes. Expansion in emerging markets Growing demand for information tools Strong and stable economic market context. High individual consumption power. Matured internet market. High level of entry barrier to the server market.

Weaknesses IBM has shown a significant weakness in the service desk area: The importance of the service desk as a communication platform for processes is more and more obvious and IBM does not have a good solution. The challenge will be to accommodate what clients have bought and to coexist with technologies from IBM's competitors. Weak enterprise mobility product portfolio Intense competition



Focus on Enterprises that value innovation Own the innovation conversation o Broadest range of innovation o Collaborate with clients and partners o Premier innovation forums/ jams Lead the shift to Global Value o Global Business Services o Business Process Services o Collaborate Innovation Services Drive Efficiency Through Global Integration o Global Supply Chain o Global Infrastructure and Delivery o Asset development and leverage Deliver Flexible on Demand Infrastructure o Information on Demand o Services Oriented Architecture (SOA) o Leadership Systems and Technology

Focus on the development or innovation of new and unique ideas (like the web engines) that will give impact on the increasing number of internet users. And with regards to hardware, provide or improve the existing hardware and make some value added modifications on it or add more features on their hardware. Focus on the high demand of computer software of every business and prospect businesses. VII. VIII. ALTERNATIVE COURSES OF ACTION RECOMMENDATION