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BBM 303 STRATEGIC MANAGEMENT

Table of Content
No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Description
Acknowledgement IBM Company Overview IBM existing strategies IBM Existing Mission Statement IBM External Opportunities and Threats IBM Competitive Profile Matrix (CPM) IBM External Factor Evaluation (EFE Matrix) IBM Internal Strengths and Weaknesses IBM Internal Factor Evaluation (IFE Matrix) IBM SWOT Matrix IBM SPACE Matrix Advantage and Disadvantage of SWOT Matrix Recommend Specific Strategies for IBM Recommend Long Term Objectives Recommendation Can Be Implemented and Expected Result IBM Financial Ratio Analysis (2006) Timetable and Agenda for action Recommend Specific annual objectives and policies Strategy Evaluation Framework References Appendix Appendix

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2 3 4 4 7 8 9 10 11 12-13 14 15-17 17-18 19-22 23-24 25-26 27 28 29 30 31 33

Acknowledgement
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BBM 303 STRATEGIC MANAGEMENT

First and foremost, our heartiest gratitude goes to all who have contributed towards the completion of this case study. I especially, grateful to Madam KAMALJEET KAUR for her advice, supervision and guidance that lead to pursuit of this case study. Her comments and encouragement are greatly appreciated. I would like to thanks to the lecturers for their help and advice and to our group member who contributed and supported in completing this case study. Thank you.

Company Overview
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BBM 303 STRATEGIC MANAGEMENT

International Business Machines Corporation (IBM) develops and manufactures information technologies, including computer systems, software, networking systems, storage devices, and microelectronics worldwide. Its Global Technology Services segment offers IT infrastructure and business process services, such as strategic outsourcing, business transformation outsourcing, integrated technology, and maintenance. The company Global Business Services segment provides professional services and application outsourcing services, including consulting and systems integration and application management. Its Systems and Technology segment offers computing and storage solutions, including servers, disk and tape storage systems and software, semiconductor technology and products, packaging solutions, engineering and technology services, and retail store solutions. IBM Software segment primarily offers middleware and operating systems software comprising information management software for database, content management, and information integration; lotus software for collaboration, messaging, and social networking; rational software, a process automation tool; Tivoli software for infrastructure management, including security and storage management; Websphere software for Webenabled applications; and product lifecycle management software. The company was founded in 1910 as Computing-Tabulating-Recording Company and changed its name to International Business Machines Corporation in 1924. IBM is based in Armonk, New York.

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In 2007. IBM’s business in this group grew at a rate of more than 20 percent in local currency last year and comprised 15 percent of geographic revenues. But their global footprint extends much farther. which improve energy and space efficiency for UNIX customers. India and China and last year their revenue increased 26 percent in those markets. Singapore. modular system for businesses of all sizes. Venezuela and Mexico in each of which grew more than 10 percent in local currency in 2007. Market Development IBM’s global operations are accelerating their company’s growth. IBM today does business in 170 countries and enjoys an increasingly broad-based geographic distribution of revenue. virtualization and open. They also introducing a new BladeCenter offering and a highly innovative storage architecture. including service oriented architecture(SOA). 63 percent of our revenue came from outside the United States. Poland. In aggregate. Russia. Major IBM product launches which is their next generation system z mainframe. South Africa. Consider more than 50 countries including Czech Republic. modularized and embedded technologies. which bring POWER6 innovation to the entry level and POWER based virtualization offerings. information on demand. 4 .BBM 303 STRATEGIC MANAGEMENT IBM Existing Strategies Product Development IBM’s product and technology portfolio today is built around networked. Malaysia. system p servers. Many people think of “emerging markets” as the so-called BRIC countries of Brazil.

No Publicly stated vision statement is available. IBM Customers Products / Services Markets Concern For Survival. efficient and competitive through the use of business insight and information technology (IT) solutions and providing long term value to shareholders.Concept Concern For Public Image Concern For Employee Criteria/ Component         To Become World Globally Integrated Enterprise in Order to Participate in The World’s Growth Markets and Improve IBM Productivity 5 .BBM 303 STRATEGIC MANAGEMENT IBM Existing Mission Statement Vision IBM currently does not seem to have a formally stated vision. New Vision Statement “To Become the Premier Globally Integrated Enterprise” Mission IBM currently does not have a formally mission statement. Profitability Technology Philosophy Self . Growth. No publicly stated mission statement is available New Mission Statement The company business model is built to support two principal goals: helping clients succeed in delivering business value by becoming more innovative.

BBM 303 STRATEGIC MANAGEMENT IBM External Opportunities and Threats Opportunities 6 .

High consumer using IT products for the office or for themselves. 5.S Market risk in terms of outstanding debt and non U.S currencies IBM Competitive Profile Matrix (CPM) IBM MICROSOFT HEWLETT PACKARD(HP) Score ELECTRONIC DATA SYSTEM(EDS) Rating Score Critical Success Factors Weight Rating Score Rating Score Rating 7 . dollar denominated 2. rising of unemployment Increasing new products in the market time by time. to the U. 2. 5. Growth of IT industry in Asian Region 7. transportation. Asia and American region Strong presence in the IT industry Increase in new markets in terms of telecommunication.S assets and liabilities High competitive environment in IT industry Debt crisis.BBM 303 STRATEGIC MANAGEMENT 1. IT competition with Microsoft. 7. 3. 4. HP and others Foreign currency exchange rate risk Currency rate fluctuation in terms of non U. 6. banking etc. Threats 1. utilities. 3. 4. 6. Huge markets of IT industry Increase role of the IT and technology advancements Growth of IT industry in Asia Pacific.

Huge markets of IT industry 2.15 0. Increase in new markets in terms of telecommunication.00 2 4 4 2 4 3 1 2 2 3 0. Increase role of the IT and technology advancements 4. Strong presence in the IT industry 5.24 0.16 0.10 0.45 0.30 0.27 0.18 0.11 2 3 2 2 3 3 2 3 2 4 0.10 0.11 0.48 2.32 0.24 0.24 0.45 0. 3.16 0.20 0.68 2 3 3 3 3 3 2 3 3 2 0.22 0.27 0.08 0. utilities.08 0.48 3. Asia and American region.36 0.08 0.33 0.20 0.60 0.20 0.12 1.24 0.45 0.70 IBM External Factor Evaluation (EFE) Matrix Opportunities 1.33 0.10 4 0. transportation etc.09 0.08 3 3 3 3 0.24 2.10 0.30 0.40 0.08 0.16 0.21 0.24 0.08 0. 6.24 0.24 8 .36 0. Growth of IT industry in Asia Pacific.24 0. Growth of IT industry in Asian Region Weight Rating Weighted Scores 0.27 0.07 0.36 2.09 0.33 0.08 3 0.BBM 303 STRATEGIC MANAGEMENT Advertising Market Share Gross Profit Margin Management Financial Position Customer Loyalty Global Expansion Customer Service Organization Structure Operation Effectiveness Total 0.30 0.16 0.18 0.18 0.30 0.78 2 3 3 4 3 3 3 3 3 4 0.30 0.20 0.24 0.

05 IBM Internal Strengths and Weaknesses Strengths 1. Solid record cash performance was 17. rising of unemployment 4.05 0.15 0. High competitive environment in IT industry 3. and increase of 2. Solid financial statements with net revenue for 2007 increase 7% compare to year 2006 3. Market risk in terms of outstanding debt and non U. Increasing new products in the market time by time 5.1 billion last year 9 . High consumer using IT products for the office and themselves.S dollar denominated assets and liabilities 2.06 0.05 1. IT competition with Microsoft. HP and others 6. Foreign currency exchange rate risk 7.18 0. Currency rate fluctuation in terms of non U.4 billion in 2007.00 3 3 3 2 2 4 2 2 0. Threats 1.S Total 0.10 0. Debt crisis.05 0.05 0.24 0. Aggressive growths strategies 2.BBM 303 STRATEGIC MANAGEMENT 7.08 0.10 0.10 3.05 0. The management is willingness to co-operate in order to develop future projects 4.15 0.40 0.S currencies to the U.10 0.

40 0.16 0.07 0. Aggressive growths strategies Solid financial statements Profitable joint ventures Solid record cash performance Future development of business towards banking.21 0. 2. Advertising and promotion expenses decrease IBM Internal Factor Evaluation (IFE) Matrix Strengths 1. 4.40 0.08 0.000 employees.10 4 0. High maintenance cost to overlook due to managing many operations 3. 2. 5. transportation etc 6.8 percent.10 4 0.10 4 0.10 10 . Total expense and other income increased 2.000 employees. Effective tax rate is declined in 2006 compared to 2005 Weaknesses 1.40 0. High maintenance cost to overlook due to managing many operations Weight Rating Weighted Scores 0. Increase was primarily due to R&D and engineering expense.10 4 0.BBM 303 STRATEGIC MANAGEMENT 5. High long-term debt 5. 2. Future development of business towards banking.10 3 2 1 0. 4. 3. The effective tax rate is declined in 2006 compared to 2005 Weaknesses 1. Largest workforce 150.40 0.27 0. Largest workforce 150. transportation etc 6.09 3 0.

Advertising and promotion expenses decrease. transportation etc 6. Increase was 11 .08 1. Advertising and promotion expense decrease Total 0. Total expense and other income increased 2. Solid record cash performance 5.08 0. Largest workforce 150. Management willingness to co-operate in order to develop future projects 4.8 percent. 2. Solid financial statements 3.16 2.76 IBM Strengths – Weaknesses – Opportunities – Threats (SWOT) Matrix STRENGTHS – S WEAKNESSES – W 1. High long-term debt 4.BBM 303 STRATEGIC MANAGEMENT 3. Future development of business towards banking. High long-term debt 5.10 0.10 0. Effective tax rate declined in 2006 compared to 2005 1. Total expense and other income increased 2. High maintenance cost to overlook due to managing many operations 3.8 percent.000 employees. Aggressive growths strategies 2.00 2 1 2 0.16 0. Increase primarily due to R&D and engineering expense 4. 5.

Increase role of the IT and technology advancements 3.(S1-02. 1. Growth of IT industry in Asia Pacific. Growth of IT industry in Asian region 7.S dollar denominated assets and liabilities.O6) 2.O6) THREATS – T ST STRATEGIES WT STRATEGIES 1. Increase in new markets in terms of telecommunication.S5 – O3. High consumer using IT production for the office or for themselves. Create more new products to compete with other competitors(S3T2. Strong presence in IT industry 5.T5) 1. utilities. Asia and American region 4. 1. Huge markets of IT industry 2.BBM 303 STRATEGIC MANAGEMENT primarily due to R&D and engineering expense. Outsourcing the industry towards globalization (S3. More refinance on advertising and promotion(W4-O3. OPPORTUNITIES – O SO STRATEGIES WO STRATEGIES 1. Market risk in terms of outstanding debt and non U. transportation etc 6.05 1. Create Non Union environment to reduce turn over (W1 – T3) 12 . More involve in other industry or environment like banking etc.

Increasing new products in the market time by time 5. Currency rate fluctuation in terms of non U. rising of unemployment 4.BBM 303 STRATEGIC MANAGEMENT 2. HP and others 6. companies stronger in high value-added businesses Financial Strength (FS) Average Environment Stability (ES) +6 +6 +6 +18 +6. Debt crisis. IBM. Asia Pacific region 3. Foreign currency exchange rate risk 7.S currencies to the U.9% 2. High profitability ratios: Gross Profit Margin 41.S IBM Strategic Position and Evaluation (SPACE) Matrix Financial Strength (FS) 1. Profitable from Asian.0 13 . High competitive environment in IT industry 3. IT competition with Microsoft.

2. 2.00 Conservative 5 4 3 2 1 Aggressive (+2.BBM 303 STRATEGIC MANAGEMENT 1.00 Y – Axis: -3.00) CA -5 -4 -3 -2 -1 -2 -3 1 2 3 4 5 IS Defensive -4 -5 ES Competitive Advantages and Disadvantages Strengths – Weaknesses – Opportunities – Threats(SWOT) Matrix Advantages The SWOT analysis can serve as an interpretative filter to reduce the information to a manageable quantity of key issues. Strong focus on customer service and satisfaction Competitive Advantage (CA) Average Industry Strength (IS) 1.00 Industry Strength (IS)Average FS Directional Vector Coordinates: X – Axis: -4. 3. IBM compete with other competitors like Microsoft.00 = 2. IT industry will remain stronger in the future 2. Currency rate fluctuation in terms of non U. IBM is a key player in the hypercompetitive Diversified Computer System industry.00 + 6. +2.00. The SWOT analysis classifies the internal aspects of the company as strengths or weaknesses and the external situational factors as 14 .S currencies to the US.00 = 2. Companies strong presence in the IT industry Future development of business towards other industry Increased use of technology and the IT industry -3 -6 -3 -12 -4.00 +5 +5 +5 +15 +5.00 + 5.0 -2 -4 -3 -9 -3. More stronger in US presence by acquired local IT companies 3. HP and others 3. Environment Stability (ES) Average Competitive Advantage (CA) 1.

all with the objective of generating consistently strong returns on equity. it is more important than the superficial classification of these factors is the firm’s awareness of them and its development of a strategic plan to use them to its advantage. including the downturn in the housing market and credit concerns. and weaknesses may hinder it. Global Financing invests in financing assets. correct its weaknesses. Perhaps. and leverages with debt. By understanding these four aspects of its situation. Solution and ideas in an improvement We believe that economic conditions in the global financing. The classification of some factors as strengths or weaknesses. particularly those outside of United States. and deter potentially devastating threats. during the latter half of 2007 and into 2008 have had. software and services. Strengths can serve as a foundation for building a competitive advantage. a firm can better leverage its strengths. a negative impact on our operating results. the information presented in this section is consistent with this separate company view. A technological change can be a either a threat or an opportunity. the SWOT framework has a tendency to oversimplify the situation by classifying the form’s environment factors into categories in which they may not always fit. and could continue to have. 15 . capitalize on golden opportunities. Disadvantages While useful for reducing a large quantity of situational factor into a more manageable profile. Accordingly. Global Financing is a reportable segment that is measured as if it were a standalone entity. or as opportunities or threats is somewhat arbitrary. The impact is currently most noticeable at our global operation.BBM 303 STRATEGIC MANAGEMENT opportunities or threats. The mission of Global Financing is to generate a strong return on equity and to facilitate clients’ acquisition of IBM hardware. manages the associated risks.

Global Financing comprises three lines of business: • Client financing provides lease and loan financing to end users and internal clients for terms generally between two and seven years. key drivers of Global Financing’s results are interest rates and originations. Global financing also factors a selected portion of the company’s accounts receivable. • Commercial financing provides primarily short-term inventory and accounts receivable financing to dealers and remarketers of IT products. The System and Technology segment may also sell the equipment that it purchases from Global Financing to external clients. primarily for cash management purposes. Externally-remarketed equipment revenue represents sales or leases to clients and resellers. Internally-remarketed equipment revenue primarily represents used equipment that is sold or leased internally to the System and Technology and Global Services segments. In addition to the strength of the economy and its impact on corporate IT budgets. Participation rates are the 16 . This equipment is primarily sourced from the conclusion of lease transactions. Interest rates directly impact Global Financing’s business by increasing or decreasing both financing revenue and the associated borrowing costs. Internal financing is predominantly in support of Global Services’ long-term client service contracts. which determine the asset base of Global Financing’s annuity-like business. Originations. Global Financing has the benefit of both a deep knowledge of its client base and a clear insight into the products that are being leased.BBM 303 STRATEGIC MANAGEMENT The primary focus on IBM products and IBM clients mitigates the risks normally associated with a financing company. are impacted by IBM’s non-Global Financing sales volumes and Global Financing’s participation rates. All internal financing arrangements are at arm’s-length rates and are based upon market conditions. This combination allows Global Financing to effectively manage two of the major risks (credit and residual value) that are normally associated with financing. • Remarketing sells and leases used equipment to new or existing clients both externally and internally.

according to a statement released by IBM. In August 2007. joint venture or acquired the Electronic Data System(EDS) because it would help it stand out from other computer hardware in an increasingly difficult business. I choose the integration strategy and diversification strategy industries because International Business Machine (IBM) can be even more successful if they fulfilled the horizontal strategy (integration) and unrelated diversification strategy (diversification strategy) Horizontal Integration In July 2007. A purchase would be a smart way for IBM to take on its rival like Hewlett Packard (HP) years. while known as a hardware maker has derived the bulk of its sales and profit from software and services for . A privately held security and compliance testing Software Company based in Waltham.. In August 2007." will integrate IBM's Lotus Notes software with SAP's Business Suite. IBM acquired Watchfire Corporation. The product. I believe that IBM should pursue the integration strategy and diversification strategy. 17 which. In addition. But if IBM want to be more stronger competitor it should be merging. though they noted that their mutual customers have requested the specific functions that the "Atlantic" software will provide. Massachusetts. Inc. The two companies have dodged rumors of a merger.BBM 303 STRATEGIC MANAGEMENT propensity of IBM’s clients to finance their purchases through Global Financing in lieu of paying IBM up-front cash or financing through a third party. IBM acquired WebDialogs. codenamed "Atlantic. and then a month later completed the acquisition of DataMirrorCorp. International Business Machines (IBM) and SAP the local software companies in the US can join team up to create new technology that the two companies will launch their first joint software product in the fourth quarter of 2008.. Recommend Specific Strategies for IBM Based on the calculation on the space matrix.

specific information such as salary. preserve capital and address issues they simply may not defer. In addition. telecommunications companies continue to upgrade their infrastructure to broadband. calendars and instant messages. Underlying both the measurement of benefit obligations and net periodic cost are actuarial valuations. and Northrop Grumman are the companies that using full of latest technology on computer systems. the transformation from analog to digital and new regulatory requirements. we have computed for the following figure for year 2006 according to different category. it gives IBM more getting profit than ever before not just in IT industry profit but it also profit comes from other industry which is defense industry. Recommend long term objectives Based on research on IBM annual report of previous year (2005. inventory management and accounting. age and years of service. SAP's contribution will include programs that help companies to back office work such as payroll. For example. Lockheed Martin. This is the opportunities for IBM to involve in new industry on defense industry. Across the world. the most significant of which 18 . These valuations use participant. as well as certain assumptions. businesses and institutions are continuing to make investments that save them money. currently used by more than 135 million people around the globe. such as defense companies like BOEING.BBM 303 STRATEGIC MANAGEMENT IBM's Lotus Notes. It should provide IBM industry bigger than other competitors. IBM can see multiple areas of investment growth within particular industries. Also. is a system of accessing business email. Unrelated Diversification In Defense Industry Some industries in the United States. utilities face outdated systems. 2006 and 2007). In Other Industry In addition.

2007. fixed income debt instruments. the changes in discount rate assumptions resulted in a decrease in the PBO of $1. respectively. where markets for high-quality long-term bonds are not generally as well developed. respectively. 2007. to which a credit spread is added to simulate corporate bond yields at these maturities in the jurisdiction of each plan. a portfolio of corporate bonds is constructed with maturities that match the expected timing of the benefit obligation payments. The company evaluates these assumptions. In the non-U. and makes changes as necessary. interest crediting rates and mortality rates. For purposes of measuring the net periodic cost for the years ended December 31. long-term government bonds are used as a base. investment strategy and the market-related value of plan assets. as the benchmark for developing the respective discount rates. expected return on plan assets. 2007 and 2006. the changes in discount rate assumptions impacted both net periodic cost and the PBO. For the PPP. defined benefit pension plans.S. For the U. at a minimum. rate of compensation increases.S. the changes in discount rate assumptions had no material impact on net periodic cost for the years ended December 31. For purposes of measuring the PBO. 2006 and 2005 and on the APBO at December 31. discount rate assumptions. Discount Rate The discount rate assumptions used for the retirement-related benefit plans accounting reflect the yields available on high-quality.240 million at December 31.S. annually.BBM 303 STRATEGIC MANAGEMENT include estimates of discount rates. in accordance with 19 . Changes in discount rate assumptions had no material impact on the 2005 net periodic cost.S. 2007 and 2006. For the U.185 million and $1. Expected Long-Term Returns on Plan Assets The expected long-term return on plan assets assumption takes into account long-term expectations for future returns. respectively. the changes in discount rate resulted in an increase in the 2007 and 2006 net periodic cost of $30 million and $274 million.. nonpension postretirement benefit plan. 2006 and 2005. The market-related value of plan assets is a calculated value. For the significant non-U. the changes in discount rate assumptions resulted in a decrease in the 2007 net periodic cost of $92 million and an increase in the 2006 and 2005 net periodic cost of $94 million and $90 million.

usually over a 10-year period. 2006 and 2005 and. the changes in the expected long-term return on plan assets resulted in an increase in the 2007. the expected long-term return on plan assets of 8. respectively. defined benefit pension plans. the expected long-term returns are designed to approximate the actual long-term returns and therefore result in a pattern of income and expense recognition that more closely matches the pattern of the services provided by the employees. consequently. The use of expected long-term returns on plan assets may result in recognized pension income that is greater or less than the actual returns of those plan assets in any given year. As a result. however. Differences between actual and expected returns are recognized over five years in the expected return on plan assets line in net periodic cost and also as a component of net loss or gain in the Accumulated gains and (losses) not affecting retained earnings. Rate of Compensation Increases and Mortality Rate The rate of compensation increases is determined by the company. highly liquid trust fund balance to ensure payments are made timely.S. had no incremental impact on net periodic cost.00 percent remained constant for the years ended December 31. for the years ended December 31. For the PPP.BBM 303 STRATEGIC MANAGEMENT accounting guidance that recognizes changes in the fair value of plan assets in a systematic manner over five years. 2007. Mortality rate assumptions are based on life expectancy and death rates for different types of participants. respectively. The rates of expected return are developed by the company in conjunction with external advisors. $18 million and $140 million. Over time. as provided by accounting standards. and increased the 2007 benefit obligation approximately $790 million. Mortality rates are periodically updated based on actual experience. are calculated using an arithmetic average and are tested for reasonableness against the historical return average by asset category. the expected long-term return on plan assets and the actual return on those assets were not material. nonpension postretirement benefit plan. 2007. based upon its longterm plans for such increases. For the U. the company maintains a nominal. Changes to defined benefit pension plans mortality rate assumptions increased the 2007 and 2006 net periodic cost approximately $80 million and $55 million. which is recognized over the service lives of the employees in the plan.S. 2006 and 2005. 20 . provided such amounts exceed thresholds which are based upon the obligation or the value of plan assets. For the material non-U. 2006 and 2005 net periodic cost of $50 million.

2007 and 2006. the change in the interest crediting rate to 6. 2006. 2005 from 2.3 percent for the year ended December 31. Healthcare Cost Trend Rate For nonpension postretirement benefit plan accounting. The company assumes that the healthcare cost trend rate for 2008 will be 8 percent. 2006 from 3.1 percent for the year ended December 31. the company assumes that the same trend rate will decrease to 5 percent over the next six years.0 percent for the year ended December 31. However.BBM 303 STRATEGIC MANAGEMENT Changes to the rate of compensation increases had no material impact on the 2007 net periodic cost and reduced the 2006 net periodic cost approximately $32 million. 2005 resulted in an increase in the 2006 net periodic cost of $170 million. 2007 from 5. 2006 and 2005 net periodic cost or the benefit obligations as of December 31. The change in the interest crediting rate to 5.S. A one percentage point increase or decrease in the assumed healthcare cost trend rate would not have a material effect on the 2007. In addition. 2006 resulted in an increase in the 2007 net periodic cost of $125 million. 21 .1 percent for the year ended December 31. This assumption provides a basis for projecting the expected interest rate those participants will earn on the benefits that they are expected to receive in the following year and is based on the average from August to October of the one-year U.0 percent for the year ended December 31. Treasury Constant Maturity yield plus one percent. the company reviews external data and its own historical trends for healthcare costs to determine the healthcare cost trend rates. Interest Crediting Rate Benefits for certain participants in the PPP are calculated using a cash balance formula. For the PPP. An assumption underlying this formula is an interest crediting rate. Changes to the rate of compensation increases or to mortality rate assumptions had no material impact on the 2005 net periodic cost and on benefit obligations at December 31. 2004 resulted in an increase in the 2005 net periodic cost of $55 million. which impacts both net periodic cost and the PBO. the healthcare cost trend rate has an insignificant effect on plan costs and obligations as a result of the terms of the plan which limit the company’s obligation to the participants. The change in the interest crediting rate to 3.0 percent for the year ended December 31.

Management 1. 22 .BBM 303 STRATEGIC MANAGEMENT Recommendation Can Be Implemented and Expected Result After I have carefully analyzed IBM and the industry in which it operates. I have used the company’s strengths and the industry’s opportunities to develop strategic recommendations to overcome IBM weaknesses. Develop a vision and mission statement I recommend development of a vision and mission statement. Upper management can develop these statements by identifying where IBM can be in the future and prioritize company goals. Definition of a company’s purpose allows all employees a means to focus on goals and methods of obtaining goals.

IBM needs to conduct a market research. 23 . This markets research will allow IBM to identify and study a perfect way to customer main preferences in terms new high tech technology in IT industry to improve every aspect of company’s business division.. Defense industry and other industry in telecommunication. Conduct Market Research In order to expand markets and efficiently meet its customers or clients. Operations Financial Reduce long-term debt I recommend that IBM reduce its long-term debt. but we recommend expanding into different markets. On top of investing in new projects with IBM available cash flow. Diversify of Top management’s workforce I recommend moving toward a more diversify in higher management workforce. Expand to different markets IBM high growth strategy has proven to be extremely successful. can use this portion of what would have previously been paid to interest to continually pay off more of the debt. utilities is a perfect way for IBM businesses more bigger and I feel this market is a potential or more giving a profit to IBM. IBM needs to actively recruit a younger professional group into top management executives’ position. These will generate more new innovative idea in managing IBM corporation.BBM 303 STRATEGIC MANAGEMENT 2. I suggest that the company could benefit by putting more effort into opening new markets. Marketing 1. the company should also use a portion of their profits to reduce its debt. Reducing debt will decrease the interest payments and in turn. 2.

090.BBM 303 STRATEGIC MANAGEMENT International Business Machine (IBM) Financial Ratio Analysis (2006) International Business Machine (IBM) Financial ratios Liquidity Ratio Liquidity ratios measure a firm’s ability to meet maturing short term obligations.000 =1. Current Ratio = Current Assets / Current Liabilities = 44.000 = 1.660.2.000.000 / 40.000 / 40.810.660.044 Leverage Rations Leverage ratios measure the extent to which a firm has been financed by debt. 24 .Inventory / Current Liabilities = 44.114 Quick Ratio = Current Assets.090.

595.000 / 28.022.810.000 / 8.000 = 0.727.BBM 303 STRATEGIC MANAGEMENT Debt to Total Assets Ratio = Total Debt / Total Assets = 74.000 / 278.492.077 Profitability Ratios Profitability ratios measure management’s overall effectiveness as shown by the returns generated on sales and investment.022.780.621 Long Term Debt to Equity Ratio = Long Term debt / Total stockholders equity = 13.65 Operating Profit Margin = Earning before interest and taxes (EBIT) / sales = 13.8 Activity Ratios Activity ratios measure how effectively a firm measure is using its resources.295.810.022.41 Total Assets Turnover = Sales / Total Assets = 8.506.000 / 103.483 Times Interest Earned Ratio = Profits before interest and taxes / Total interest charges = 38.022.724 Debt to Equity Ratio = Total Debt / Total Stockholders’ Equity = 74.000/ 28.000 = 137.000 = 0.000 = 2.000 25 .506.233. Inventory Turnover = Sales / Inventory of finished goods = 8.000-2.000 = 0.000 / 2. Gross Profit margin = Sales-cost of goods sold / Sales = 8.000 / 8.727.000 / 103.000 / 8.855 Fixed Assets Turnover = Sales / Fixed Assets = 8.022.233.695 Net Profit Margin = Net Income / Sales = 9.022.293 = 0.430.000 = 1.000 / 17.000 = 0.022.000 = 2.

000 / 28.05% increase compare to year 2005 Timetable and Agenda for action Strategy Horizontal Integration strategy  Merge or acquired local IT companies Unrelated Diversification strategy  Enter new market into Defense industry and other industry like telecommunication etc January 2007-January 2009 Time August 2007– August 2008 26 .492.183 Return on Total Assets (ROA) = Net Income / Total Assets = 9.233.000 / 103.000 / 31. Net Income = Annual % growth in total sales = 1.BBM 303 STRATEGIC MANAGEMENT = 1.333 Earning per Share (EPS) = Net Income / Number of share of common stock Outstanding = 9.492.262 = 2.684 Growth Ratios Growth ratios measure the firm’s ability to maintain its economic position in the growth of the economy and industry.81/ 6.492.304 Price Earnings Ratio = Market price per share / Earning per share = 16.000 = 0.2% increase compare to year 2005 Net Income = Annual % growth in profits = 1.271.506.000 = 0.000 = 0.092 Return on Stockholders’ Equity (ROE) = Net Income / Total Stockholders’ Equity = 9.

DIVISION IT Increase divisional revenues by 30% next year (current revenue $ 7million.BBM 303 STRATEGIC MANAGEMENT Recommend Specific annual objectives and policies IBM Company’s Long Term Objectives LONG TERM COMPANY OBJECTIVE Achieve 42. 27 .33% annual improvements in gross margin and to reinvest this growth in acquire latest technology and investment expenditures. so as to maintain a relatively steady operating margin.

BBM 303 STRATEGIC MANAGEMENT Marketing annual objective Increase Marketing in Areas of new development promoting job and economic growth increase 25% of new development annual marketing budget Finance annual objective Increase Gross Revenues 10%/year while maintaining gross margins through Acquisitions. Strategy Evaluation Framework 28 . New future development.

BBM 303 STRATEGIC MANAGEMENT ACTIVITY ONE: REVIEW UNDERLYING BASES OF STRATEGIES Prepare revised Internal Factor Evaluation (IFE) MatrixPrepare revised External Factor Evaluation (EFE) MatrixCompare Revised to existing Internal Factor Evaluation (IFE) MatrixCompare revised to existing External Factor Evaluation (EFE) Matrix Do significant differences occur? YE S NO ACTIVITY TWO: MEASURE ORGANIZATIONAL PERFORMANCE Compare planned to actual progress toward meeting stated objectives ACTIVITY THREE: TAKE CORRECTIVE ACTIONS Do significant differences occur? YE S NO Continue present course References: 29 .

2.ibm.david.forbes. www. International Business Machine (IBM): www. Fred R.com 30 . Pearson International Edition.com 3. Strategic Management 12th edition.BBM 303 STRATEGIC MANAGEMENT 1.

BBM 303 STRATEGIC MANAGEMENT 31 .