OBJECTIVE OF OUR STUDY To analyze what business model been use by IBM from the beginning of the company

till nowadays. To know what the innovation, changes or correction action or task done to the old business model that IBM used to overcome threats and to capture opportunities. To classify what strategies IBM used in sustained their position over 100 years. To analyze what factors that used as a forces in developing their business model. To know how IBM adapted to the technologies, social, politic and economic factors that always changes. How they manage, control and responded to the environment and market reaction. To clarify the efficiency and effectiveness of IBMs strategic management.

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INTRODUCTION

INTERNATIONAL BUSINESS MACHINES CORPORATION International Business Machines Corporation, abbreviated as IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM was founded by Thomas J. Watson in June 16, 1991 with response as when three companies that made scales, punch-clocks for work and other machines merged to form the Computing Tabulating Recording Co. Thomas J. Watson, a demanding boss with exacting standards for everything from office wear (white shirts, ties) to creativity (his slogan: "Think").

Watson, and later his son, Thomas Watson Jr., guided IBM into the computer age. Its machines were used to calculate everything from banking transactions to space shots. As the company swelled after World War II, IBM threw its considerable resources at research to maintain its dominance in the market for mainframes, the hulking computers that power whole offices. Till nowadays, many strategies were done by IBM in order to survive such as innovation, findings, acquisition of competitor, acquisition of supplier to reduce cost and many more. By now, the core business of IBM has expanded from manufactures and sells computer hardware, integrated with manufactures and sells software, and IBM offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology. IBM has been well known through most of its recent history as one of the world's largest computer companies and systems integrators. With over 388,000 high skilled and knowledgeable employees worldwide, IBM is one of the largest and most profitable information technology employers in the world. As fact, IBM holds more patents than any other America technology based company and has eight research and development laboratories worldwide. As of December 2011, IBM was the third-largest publicly traded technology company in the world by market capitalization.

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LITERATURE REVIEW

In our study, we want to classify and clarify what strategies IBM used because compared to the other companies that founded as same year with IBM, all of them already gone. What is the secret that IBM uses in sustaining their position in the market? How the company can survive even though their environment keeps continuously changings? How they adapted to the market culture? These issues are very interesting to be analyze, therefore we hope our analysis can expose the strategies used, the effectiveness and efficiency of the strategies and is the environment get effect from IBM strategies and what market reaction towards IBM action is. If you look more closely at why IBM survived its near death experience of 1993, it had little to do with funding big expensive long-term projects. At the time, IBM was losing more money than any company had ever lost in U.S. history. This was because IBMs core mainframe business had been disrupted by the advent of the personal computer and the client server. IBM couldnt compete with smaller nimbler less diversified competitors. When IBM hired Lou Gerstner as the new CEO, it was the first time since 1914 that IBM recruited a leader from outside its ranks. Even more striking was the fact that Gerstner had no background in computing. Not knowing much about computing per se, Gerstner had the good sense to start listening to clients. He discovered that the biggest problem that all the big companies were facing in 1993 was in integrating all the separate computing technologies that were emerging at the time. So while continuing to cut costs, Gerstner reversed the move to spin off IBM business units into separate companies. Having understood clearly IBMs customers needs, he recognized that one of IBMs greatest strengths was its ability to provide integrated solutions for customers, which is a firm that could represent more than piece parts or components, which is something he would not have learned by listening to the proponents of different technologies within IBM. Splitting the company would have destroyed IBMs unique competitive advantage. With clear understand about their opportunities and threats, and take fair advantage of a situation of its own strength, improve a situation of weaknesses, and as result, they able to avoid taking wrong steps in planning, controlling, managing and decision making.

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ANALYSIS

To analyze the strategic management of IBM, we will classify what business model that used by IBM in conducting their operations. After that, we will use internal and external scanning to scan the strength and weaknesses and opportunities and threats of IBM. As result, we will be able to classify the relevant of the strategies implemented by IBM. 3.1 BUSINESS MODEL

In 1993, IBM misreads two significant trends in the computer industry and as a result is poorly positioned in the marketplace. IBM has lost $16 billion, and many feel IBM is no longer a viable player in the industry. IBM was in deep financial trouble at that time. The company had reported a net loss of $8.1 billion. Many analysts think that there are no hopes for IBM. Logically, they definitely cant survive in the industry. Even other competitor such as Oracle, also dont even think IBM as a threats to them anymore. As it seem that IBM dont have a prospect to survive, but amazingly, in 1994, under the leadership of IBM's former CEO - Louis V. Gerstner Jr. (Gerstner), IBM not only turned around but, was able to significantly boost its financial performance. By 2003, IBM able to increase their share price approximately at 700%. Do you believe that? Do you wonder why? What is the secret? What are the strategies used? How they can in just one year, to do turnaround of their business operation from huge loss company that no hope to survive to profitable and sustainable company? The answer is because they abandoned the old business model and do business model innovation. They were integrating their business model from a company that primarily manufactured mainframes to a company that offered complete IT solutions. The company changed its focus from being product centric to being customer-centric. How do they do the innovation to their business model? Actually, as fact, IBM uses the three As to innovate business model. IBM research shows that new and innovative business models can succeed independent of a companys age, industry, or geography. These characteristics the Three As are critical to the successful design and execution of business-model innovation: y Aligned Leverage core capabilities and design consistency across all dimensions of the business model, both internally and externally, that build customer value.

Analytical Use information strategically to create foresight, and prioritize actions while measuring and tracking for rapid course correction.

Adaptable Link innovative leadership to enhance the ability to effect change and institutionalize operational flexibility.

By align internally to provide customer value, IBM understand what the demand and need of the customers and by align externally with partners through open business models, IBM can manage the cost and quality of their product effectively. External alignment with partners, suppliers, and customers is an important characteristic of an effective, collaborative business model.

However, with research shows that virtually every successful business model demonstrates external alignment and the ability to work with a large number of collaboration partners, IBM take a very good care on their supplier, partners and customers. IBM also takes advantage of existing high-value assets and capabilities within the organization, such as unique skills, talent, processes, or technology to create its niche compared to other IT company in the industry.

By analytical, meaning that IBM demonstrates a particularly acute understanding of their customers and the value that their company can deliver to a new segment, through a new delivery mechanism, or a new product or service. By understanding customers, markets, channels and competitors, provide better information in creating advantage in new and unique ways. By adaptable, meaning that IBM mimic the speed, flexibility, and mindset of start-up companies, which describe some of the most radical business-model innovations, while exploiting the advantage of existing capabilities, resources, and assets.

When reviewing both start-ups and established companies, IBM found that business-model adaptability was based on the effective combination of leadership and change capabilities throughout the organization, as well as an operating model that enables dynamic course correction and rapid execution. With that information, IBM choose alternative strategies in maintaining their reputation and sustainability in the market, and proven that IBM successful in doing that.

3.2 Strength
y y y y y y y y y y y y y y

SWOT ANALYSIS Weaknesses

y

Effective communication High R&D Innovation Loyal customers Market share leadership Strong management team Strong brand equity Strong financial position Supply chain Reputation management Unique products Deep resources High skilled human resources Nimble response

Low market share within PC market

Dependency on corporate customer base High operating costs Expensive workforce Undirected learning Reliance on high margins Employee values

y y y y y

Opportunities
y

Threats
y y y y y y

Low market share within PC market

Competition Cheaper technology Economic slowdown Exchange rate fluctuations Lower cost competitors or imports Maturing categories, products, or services

Dependency on corporate customer base High operating costs Expensive workforce Emerging markets Immediate client needs Skills demand

y y y y y

y y y y

Price wars Cost competition Low entry barriers Skills shortage

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Conclusion

As conclusion, the business model that been used by IBM from the beginning of the company till nowadays is from product centric to customer centric. The business model innovation gives a new light to the IBM in surviving within the industry. IBM holds tightly to their strength and weaknesses. They grabbed any opportunities before others and they also turned threats to advantages to them by adopted and observed. Customer as a key objective became factors that guided IBM in sustaining their operation by integrating their business model from manufacturing to services. By complying with demand and needs, plus cope with the current technologies, it give competitive advantages to IBM. With that effective and efficient strategic management, give a huge surprise to the market. By doing business model innovation, it increased the share price of IBM drastically to 700%. With the changes that continuously happened nowadays, same with the strategies of the business in managing their operation. In an increasingly complex and fast-changing business environment, organizations have to rethink and take correction action to their business model more frequently than in the past. They need to continually tweak and enhance their models, especially during periods that affecting market reactions. But designing the right business model is only the first step. To increase execution success, organizations need to ensure their business models are aligned with customer value (and continually updated), are analytical (they gain insight from differentiated intelligence), and are adaptable (they are enabled by a flexible operating model). The business also must use their strength effectively and efficiency by controlling the weaknesses and with the good observation, they must do adopted the best practices from other competitor by capturing opportunities and turning threats to give benefits toward business whether for short term or long term.

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RECOMMENDATION

IBM must continuously scout for new market opportunities and develop products and services that can create niche to IBM, then IBM also must cultivate demand through marketing. Comply with customer demand and needs.

Next, IBM need to systemize employee learning efforts to point to emerging markets and areas of high demand. IBM also can mobilize teams to support client needs. For long term, IBM must formulate new strategy that makes skills provisioning hard to duplicate by competition. IBM stands to dominate the mainframe sector, as most of the competitors have left the field in recent years.

Although the company has shifted its focus from hardware toward its more profitable software and services businesses, the mainframe operations are important for IBM as they carry higher gross margins compared to software and services. So, IBM must continue their business to manufacturing and selling mainframe.

Lastly, IBM needs to improve the workplace cultures by address skills building and fixing employee values issues.

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