Strategic management Internal Analysis

Presented to: Dr.Amal Asfour

Prepared by: Eng.Dalia El-Sheikh

Date: 22-3-2012

content
Introduction. Main sources of internal forces. Internal Audit processes. Internal factor evaluation matrix (IFE). IBM Strategic plan (case study).

Internal Environment Assessment

Introduction:

The purpose of the internal assessment is to assess internal structure, process and operations of the organization to pinpoint Strengths and Weaknesses.
This assessment should be made in parallel with the external assessment in order to capture the dynamic changes in the environment.

Main sources of Internal Forces

Competencies (core and distinctive).

VRIO analysis is the core of the resource based view (RBV) of the firm

Organizational culture (Freedom and Fear).

The value chain analysis.

Examples of Distinctive Competencies

Toyota
Low-cost, high-quality manufacturing capability and short design-to-market cycles

Motorola Defect-free manufacture (six-sigma quality) of cell phones

Value Chain Analysis

Internal Audit Process

Managers and employees are involved in determining firms strengths and weaknesses. The information are gathered from :
Management. Marketing. Finance and accounting. Production and operations. R & D. Management information system.

Management

Basic Functions
Planning Organizing Motivating Staffing Controlling
Managerial activities related to preparing for the future

Job description, job specialization, organizational design

Behavior modification, delegation, employee morale Activities related to HR management such as employee safety, hiring, firing, training To ensure that actual results are consistent with planned such as quality control, sales control

Management Audit Checklist

Included but not limited to:

Does the firm use strategic management concepts? Are objectives/goals measurable? Well communicated? Are job descriptions clear? Is employee morale high? Is employee absenteeism low? Are the reward mechanisms effective? Are the organizations control mechanisms effective?

Marketing
Marketing Basic Functions:
1.

Customer analysis (needs, desires, and wants).

2.
3.

Selling products (ability of organization to sell product).

Product planning (Brand positioning , products options, features, style, and quality).

4.

Pricing (consumer, government, suppliers, distributors, and competitors).

Distribution (warehousing, channels, retail sites, carriers)

5.

6.

Opportunity analysis ( assessing the cost, Benefits, and Risks)

Marketing Audit
Included but not limited to:
1. 2. 3. 4. 5. 6.

Are markets segmented effectively? Is the organization positioned well among competitors? Are the distribution channels reliable & cost effective? Does the firm conduct market research? Are product quality & customer service good? Does the firm have effective promotion, advertising, and publicity
strategies?

Finance & Accounting

1. 2. 3.

Investment decision (Capital budgeting) Financing decision

Dividend decision

Financial Ratios
Liquidity Ratios
(ability to meet shortterm obligations)

Leverage Ratios Growth Ratios

(ability to maintain economic position)
(financed by debt)

Profitability Ratios
(Shown by returns on sales & investment)

Activity Ratios
(use of resources)

Finance Audit

What is the firm financial position? Does the firm have sufficient working capital? Are capital budgeting procedures effective? Are dividend payout policies reasonable? Does the firm have good relations with its investors and stockholders? Are the firms financial managers experienced and well trained? Is the firms debt situation excellent?

Production/Operations

Basic Functions

Process
Capacity Inventory

Workforce
Quality

Production & Operations Audit

Are suppliers of materials reliable and reasonable? Are facilities, equipment, machinery, and offices in good condition? Are inventory-control policies effective? Are quality-control policies effective? Are facilities, resources, and markets strategically located? Does the firm have technological competencies?

Research & Development

Basic Functions

Development of new products before competitors Improving product quality

Improving manufacturing processes to reduce costs

R & D Audit
Are the R&D facilities adequate? If R&D is outsourced, is it cost-effective? Are the R&D personnel well qualified? Are R&D resources allocated effectively? Is communication between R&D and other organizational units effective? Are present products technologically competitive?

Management Information Systems Purpose

Improve performance of an organization by improving the quality of managerial decisions

Management Information Systems Audit Included but not limited to:

Do all managers use the information system to make decisions? Is there a Director of Information Systems position in the firm? Are there effective passwords for entry into the firms information system? Do all users understand the competitive advantages that information can provide? Are computer training workshops provided for users? Is the firms system being improved?

Internal Factor Evaluation (IFE) Matrix

1. 2. 3. 4. 5.

List key internal factors Assign a weight ranging from 0.0 to 1.0 Assign a 1 to 4 rating to each factor Multiply the weight times the rating Sum the weighted scores

Strategic
Plan

Content
IBM Overview

IBM Vision & Mission Statements IBM Annual Objectives IBM Resources Allocation IBM Organizational Structure & Restructuring IBM Financial Ratios Competitive Profile Matrix (CPM)
EFE & IFE Matrix The Matching Stage IE Matrix SWOT Matrix SPACE Matrix Grand Strategy Matrix IBM Balanced Score-Card Final Conclusion

IBM Overview
International Business Machines (IBM) is a multinational technology and consulting firm, founded in Armonk in 1888 as Herman Hollerith and the Tabulating Maching Company. later on 1942 the company changed its name to International Business Machines with headquarter complex is located in Armonk, Town of North Castle, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services through its 4 divisions (software, hardware, financing and services). In 2011, Fortune ranked IBM the 18th largest firm in the U.S. as well as the 7th most profitable. Globally, the company was ranked the 31st largest firm by Forbes for 2011.

IBM Overview
IBM in Numbers:

Revenue: US$ 99.870 billion (2010) Operating income: US$ 19.273 billion (2010) Net income: US$ 14.833 billion (2010) Number of employees: 426,751 (2010) Divisions: - Hardware - Software - Services Financing. Website: www.ibm.com

IBM Vision and Mission Statements

Vision Statement:
Solution for a small planet.

Mission Statement:
At IBM we strive to lead in the invention, development and manufacture of the industrys most advanced information technologies including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide.

Mission Statement Evaluation Matrix

Component
1 Customers 2 Products & Services 3 Markets 4 Technology 5 Survival, growth, and profitability Yes

Existence
into value for our customers microelectronics .. through our professional solutions, services and consulting businesses worldwide

Yes .. including computer systems, software, storage systems and

Yes . worldwide Yes most advanced

information technologies

No Yes We translate these advanced technologies into value for our

customers

6 Philosophy 7 Self-Concepts

Yes to lead in the invention, development and manufacture of the

industrys most advanced information technologies

8 Public image
9 Employees

No
No

Mission Statement Evaluation Suggested Phrase:

At IBM we strive to lead in the invention, development and manufacture of the industrys most advanced information technologies including computer systems, software, storage systems and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions, services and consulting businesses worldwide, while empowering our employees , pursuing the highest standards of social responsibility, and maximizing the return on our shareholders investment.

Annual Objectives

IBM Long-term objectives:

Drive revenue growth through new markets, new offerings, and new products both developed and acquired. Focus on productivity. Deploy cash to fund growth and provide shareholders returns via dividends. Deliver 10-12% earnings per share growth over the Long term.

IBM Annual objective:

Annual vertical integrations that enable IBM to expand its software and services. Series of annual defensive (Divestiture) strategies . Developing and encouraging innovation and ideas that focus on new high-profit, value-added business and services.

Annual Objectives
Results achieved:

0.3% increase in total revenue between 2005 and 2006. 1.8% increase In gross profit between 2005 and 2006. Annual Brainstorming sessions for 150,000 employees through 2003 to 2006 generating 46,000 ideas and investing $100 million in the ten best idea.

Investing about $ 4.8billion in a series of acquisitions 2004,2005 to reach 13 acquisitions.

Acquiring Watchfire Corporation, Webdialogs and DataMiror. Corp. during 2007. Despite acquisitions and divestiture strategies not all the products achieved revenue and gross profit.

Annual Objectives

IBM Revenues (in $ Millions)

2006
Financial services Public Industrial Distribution 25,181 13,401 11,535 9,034

2005
24,186 14,064 11,699 8,959

YR to YR percent Change 4.1 % (4.7) % (1.4) % 0.8 %

Communications
Small & Medium Business Original Equip Manufacturers Other Total

8,679
16,981 3,856 2,756 91,424

8,601
17,597 3,271 2,757 91,134

0.9 %
(3.5) % 17.9 % (0.1) % 0.3%

0.3% annual change in total revenue between 2005 and 2006

Resources Allocation

Financial Resources:

Allocating total Investment of $4.8 billion in a series of acquisition till 2006. Committing $ 100 million to develop new ideas to encourage innovations. Annual increase in R&D expenses to encourage innovations IBM short term paying ability was better during 2005 than in 2006 or in 2004. The steady increase in IBM Earnings per share constitute a gain of 149% over a period of 4 years to reach 6.06 in 2006.
2006 2005 2004

Cash and Cash Equivalent

Short term investments Long term investment Increase in R&D expenses as % sales Current ratio Earning per share

8,022,000
2,634,000 18,449,000 6.7% 1.11 6.06

12,568,000
1,118,000 14,602,000 6.4% 1.3 4.91

10,053,000
517,000 16,418,000 5.9% 1.18 4.39

Resources Allocation
Human Resources: IBM human resources are wide base for innovation.

R&D system is being supported

by: over 20,000 software developer. 3000 scientist and technologist work at its research Centers in China, India Israel, Japan and Switzerland and united states.

Physical Resources: IBM utilize its physical resources to operates in 170 countries worldwide which provide high market penetration.

IBM operates 61 Lab located in 15 countries.

Resources Allocation Technological Resources:

IBMs has abundant technological resources.

It has hand on in producing and providing:
Servers, data storage products including disks, taps, optical microprocessors and manufacturing consulting services. Software as information management software and information integration process automation tools and infrastructure management tools.

Services as business process out sourcing ,consulting ,IT infrastructure maintenance services and E- banking.

Organizational Structure

IBMS organizational structure composed of the following : 14 Senior vice president 3 vise president The CEO Innovation and technology Executive vise president Total Number of employees equals 426,751 world wide. Its current CEO started his career as a sales man in the company . Board size: 10-14 Board members the flexibility of board size depends on circumstances. Evaluation of the CEO: The performance of the CEO is reviewed periodically by the Executive Compensation and Management Resources Committee and annually by the Board in executive session.

Organizational Structure
Divisional Structure by Geographic Area:

IBM Operates in 170 countries with about 60% of its revenue being generated outside USA

about 30% of its employees are

in Asia Pacific, 45% are in USA and 25% in other countries in Middle East, Europe and Africa.

AAGSB MBA Fall 2100

Restructuring

In 2005 IBM has revealed restructuring plans which will result in up to 13,000 job losses, mostly in Europe. IBM expected that these actions will accelerate the progress toward more globally integrated operations and will allow the company to shift resources to higher-growth markets & opportunities primarily in Europe. The success of this strategy depended on reducing bureaucracy & infrastructure in lower-growth countries and creating teams that can work across country borders, shifting more employees into direct client roles On a worldwide basis, IBM planed to improve the efficiency of its services operations by consolidating much of the service delivery workload into fewer locations by using standard job roles, processes & tools.

Quick view on Some of Financial Ratios for IBM

Ratio 2004 2005
1.3 times 1.2 times 68.7%

2006
1.11 times 1.04 times 72%

Comment
The higher the current ratio, the more capable the company is of paying its obligations. Industry average: 1.2 times The higher the quick ratio, the better the position of the company. Industry average: 1.1 The higher the ratio, the more risk that company is considered to have taken on. While the company increased its net income, it has done so with diminishing profit margins. A higher profit margin indicates a more profitable company that has better control over its costs. Industry average: 8.8% Because of its high profit margin on sales, IBM is getting a high return on its assets as is the average in its industry (11.7%). The higher the ROA the better, because the company is earning more money on less investment. Industry average: 8.7% The higher the ROE the better, because the shareholders are earning more returns on their money. Industry average: 27.8%

Current 1.18 Ratio times Quick Ratio times Debt Ratio 72.8% Profit Margin on Sales
1.5

8.8%

8.7%

10%

Basic Earning 11.1% Power (BEP) Return on Assets

7.7%

11.8%

13.2%

7.5% 9.35%

Return on 28.35% 23.95% Equity

33.3%

Competitive Profile Matrix (CPM)

CSFs Market share Supply chain Financial position Product Quality Consumer Loyalty Sales Distribution Global Expansion Organizational Structure Production Capacity E-commerce Customer Service Price competitive Mgt. experience Total Wt 0.15 0.08 0.10 0.08 0.02 0.10 0.15 0.05 0.04 0.10 0.10 0.02 0.01 IBM Wtd Rating Score 3 0.45 2 0.16 3 0.30 4 0.32 3 0.06 3 0.30 3 0.45 4 0.20 3 0.12 3 0.30 4 0.40 4 0.08 3 0.03 3.17 Microsoft HP Wtd Wtd Rating Rating Score Score 4 0.60 3 0.45 4 0.32 3 0.24 4 0.40 3 0.30 4 0.32 3 0.24 4 0.08 3 0.06 4 0.40 3 0.30 4 0.60 4 0.60 4 0.20 3 0.15 4 0.16 4 0.16 4 0.40 2 0.20 3 0.30 3 0.30 3 0.06 2 0.04 4 0.04 3 0.03 3.88 3.07

Comment: IBMs 3.17 score represent that it is competing

aggressively with its competitors in the domestic and global markets and its rank is the 2nd after Microsoft.

The External Factor Evaluation (EFE) Matrix

Key External Factors
OPPORTUNITIES

Wght Rate 0.08 2

Wtd score

1-Rapid Growth in engineering technologies such as renewable and nuclear power stations. 2-Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly. 3-The consumer global trend is heading toward depending and spending more on IT products & services 4-Global Communications industry is still growing noticeably 5-Diversified computer industry has high profit, high value added businesses and services. 6-Rising demand for Video game product 7-China government has developed incentive policies to encourage growth in the software industry.

0.16

0.09

0.18

0.07 0.06

2 2

0.14 0.12

0.07
0.07 0.07

3
2 1

0.21
0.14 0.07

The External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rate THREATS 1-Possible legislation to limit the number of software patents 0.08 2 awarded. 2-IBM is facing strong rivalry from the various local as well as 0.08 3 multinational companies such as HP, Microsoft, EDS. 3-High bargaining power of buyers due to the availability of 0.08 2 many alternative products. 4-Technology life cycle is characterized by rapid changing/ 0.07 4 development 5-Government Laws & regulations in the computer industry 0.06 3 are expected to increase. 6-Increased Market share of competitor 0.05 2 7-Leading competitor increased R&D capabilities. 0.07 2 TOTAL 1.00
Wtd score

0.16
0.24 0.16 0.28 0.18 0.1 0.14 2.28

The Internal Factor Evaluation (IFE) Matrix

Key Internal Factors
W

R 4 4 4

WS

STRENGTHS
1-Ranked #1 service provider in IT outsourcing, consulting & systems integration. 0.05

0.2 0.4 0.2

2-Invested from $5.8 to 6.8 billion in R&D.

3-IBM net income increased by $1.6 Billion (20% from 2005) 4-IBM received more patents than any other American technology 0.07 company. 5-IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology 0.05 and 5 national medals of science. 6-IBM has about 426,751 employees residing in 170 countries worldwide 7-IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services. 8-IBM has large global existence through a lot of subsidiaries and partners worldwide. 9-IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide

0.1 0.05

4
4

0.28
0.2

0.04
0.1 0.1 0.04

3
4 4 3

0.12
0.4 0.4 0.12

The Internal Factor Evaluation (IFE) Matrix

Key Internal Factors WEAKNESSES 1-small & medium sized business has declined 3.5% from 2005 to 2006 2-Revenues across all industries sectors are almost the same from 2005 to 2006 3-Total assets decreased from $105 billion to $103 billion in 2005-2006. 4-It has the world's most complex supply chain system 5-Systems & technology gross profit declined 40.4 % in 2006. 6-IBM relied on partners' and distributers' reports and management systems. 7-Huge workforce and high pay for human resource
TOTAL

Wght Rate 0.05 0.05 0.06 0.05 0.07 0.05 0.07 1.00 2 2 2 2 1 1 2

Wtd Score

0.1 0.1 0.12 0.1 0.07 0.05 0.14 3.00

IE Matrix
The High EFE 3.0 4.0 Total Medium 2.99 Weighte 2.0Low d Score 1.0 1.99

The Matching Stage

The IFE Total Weighted Score
Strong 3.0 4.0 Average 2.0 2.99 Weak 1.0 1.99

1 4 7

2 5 8

3 6 9

From the internal Factor Evaluation (IFE) Matrix, the total weighted score = 3.00 From the External Factor Evaluation (EFE) Matrix, the total weighted score = 2.28 So, based on the IE Matrix, IBM lies in the green field 4 which confirm that IBM is in a strong position to grow and build and it shall pursue intensive strategies (Market penetration/Market development)

The Matching Stage

SWOT Matrix
Strengths S
1. Ranked #1 service provider in IT
outsourcing, consulting & systems integration. 2. Invested from $5.8 to 6.8 billion in R&D. 3.IBM net income increased by $1.6 Billion (20% from 2005) 4. IBM received more patents than any other American technology company. 5. IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology and 5 national medals of science. 6. IBM has more than 426,751 employees residing in 170 countries worldwide 7. IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services. 8. IBM has large global existence through a lot of subsidiaries and partners worldwide. 9. IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide.

Opportunities O
1. Rapid Growth in engineering
technologies such as renewable and nuclear power stations. 2. Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly. 3. The consumer global trend is heading toward depending and spending more on IT products & services 4. Global Communications industry is still growing noticeably 5. Diversified computer industry has high profit, high value added businesses and services. 6. Rising demand for Video game product 7. China government has developed incentive policies to encourage growth in the software industry

Exploit internal R&D capabilities to capitalize on external growing demand of related products

SO Strategies

S2 O1, S2 O2, S2 O4, S2 O6, S1 O3, S1 O7

Increase IT services in China & India Exploit Human resources and diversified products to gain a larger market share

S7 O5, S8 O3, S6 O4

The Matching Stage

SWOT Matrix
Weaknesses W
1. small & medium sized business has declined 3.5% from 2005 to 2006 2. Revenues across all industries sectors are almost the same from 2005 to 2006 3. Total assets decreased from $105 billion to $103 billion in 2005-2006. 4. IBM has the world's most complex supply chain system 5. Systems & technology gross profit declined 40.4 percent in 2006. 6. IBM relied on partners' and suppliers' reports and management systems. 7. Huge workforce and high pay for human resource

Opportunities O
1. Rapid Growth in engineering
technologies such as renewable and nuclear power stations. 2. Service-oriented architecture market (SOA), information on demand & open business modular are expected to grow rapidly. 3. The consumer global trend is heading toward depending and spending more on IT products & services 4. Global Communications industry is still growing noticeably 5. Diversified computer industry has high profit, high value added businesses and services. 6. Rising demand for Video game product 7. China government has developed incentive policies to encourage growth in the software industry

WO Strategies
Increase revenue from the small and medium-sized business segment

To compensate the loss in the systems & technology gross profit by encouraging the global consumers to shift toward their products & services. Deploy the large No. of employees in a diversified industries

W1 O5,

W5 O3,

W7 O5,

SWOT Matrix
Strengths S

The Matching Stage

Threats T 1. Possible legislation to limit the
number of software patents awarded. 2. IBM is facing strong rivalry from the various local as well as multinational companies such as HP, Microsoft, EDS. 3. High bargaining power of buyers due to the availability of many alternative products. 4. Technology life cycle is characterized by rapid changes/development 5. Government Laws & regulations in the computer industry are expected to increase. 6. Increased Market share of competitor 7. Leading competitor increased R&D capabilities.

1. Ranked #1 service provider in IT outsourcing,

consulting & systems integration. 2. Invested from $5.8 to 6.8 billion in R&D. 3.IBM net income increased by $1.6 Billion (20% from 2005) 4. IBM received more patents than any other American technology company. 5. IBM has 3 Noble prizes, 4 Turing awards, 5 national medals of technology and 5 national medals of science. 6. IBM has more than 150,000 employees residing in 104 countries worldwide 7. IBM is diversified into the business of computer hardware and software, infrastructure services, consulting services and hosting services. 8. IBM has large global existence through a lot of subsidiaries and partners worldwide. 9. IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide.

S2 T2, S2 T4, S2 T1 S4 T1 , S4 T6

Increase in R&D spending to reduce the threats arising from competitors, rapid life cycle and political/governmen tal regulations

ST Strategies

Increase political alliances The strong brand name creates a customer loyalty

S5 T3

The Matching Stage

SWOT Matrix
Weaknesses W
1. small & medium sized business has declined 3.5% from 2005 to 2006 2. Revenues across all industries sectors are almost the same from 2005 to 2006 3. Total assets decreased from $105 billion to $103 billion in 2005-2006. 4. IBM has the world's most complex supply chain system 5. Systems & technology gross profit declined 40.4 percent in 2006. 6. IBM relied on partners' and suppliers' reports and management systems. 7. Huge workforce and high pay for human resource Threats T 1. Possible legislation to limit the
number of software patents awarded. 2. IBM is facing strong rivalry from the various local as well as multinational companies such as HP, Microsoft, EDS. 3. High bargaining power of buyers due to the availability of many alternative products. 4. Technology life cycle is characterized by rapid changes/development 5. Government Laws & regulations in the computer industry are expected to increase. 6. Increased Market share of competitor 7. Leading competitor increased R&D capabilities.

WT Strategies
Using the influence of F & B integration to minimize the threat of the global competition

Using the huge workforce to minimize the threat of high bargaining power of buyers (increase loyalty to IBM brand name)

W6,W7,T6

W7 T3

The Matching Stage

SPACE Matrix
Internal Strategic Position
Financial Strength (FS)
Return on investment Leverage Liquidity Net Income Working capital Cash flow +6 +4 +5 +6 +4 +4

External Strategic Position

Environmental Stability (ES)
Technological changes Rate of inflation Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand Ease of exit from market Risk involved in business -2 -3 -2 -3 -2 -3 -2 -3

Average Competitive Advantage CA

Market share Product quality Product life cycle Customer loyalty Competitions capacity utilization Technological know-how Control over suppliers & distributors

+4.83 Average
-1 -1 -2 -3 -2 -1 -2

-2.50
+6 +5 +5 +6 +4 +4 +5

Industry Strength (IS)

Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization

Average

-1.71

Average

+5.00

The Matching Stage

SPACE Matrix
Conservative FS +6 +5 +4 +3 +2 +1 Aggressive

CA

(3.29; 2.33)

IS

Based on the strategic position and action evaluation Matrix which shows that IBM is strong internally and externally, so the best strategic position is to pursue one of the below Aggressive strategies:
Integration Market Penetration Market Development Product Development Diversification

-6 -5 -4 -3 -2 -1 -1 +1 +2 +3 +4 +5 +6 -2 -3 -4 -5 Defensive Competitive -6 ES

The Matching Stage

Grand Strategy Matrix
RAPID MARKET GROWTH
Quadrant II
1. 2. 3. 4. 5. 6.

Quadrant I
1. 2. 3. 4. 5. 6. 7.

Market development Market penetration Product development Horizontal integration Divestiture Liquidation

Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification Quadrant IV

WEAK COMPETITIVE POSITION

1. 2. 3. 4. 5.

Quadrant III Retrenchment Related diversification Unrelated diversification Divestiture Liquidation

1. 2. 3.

STRONG COMPETITIVE POSITION

Related diversification Unrelated diversification Joint ventures

SLOW MARKET GROWTH

The Matching Stage

Grand Strategy Matrix
Based on the Grand Strategy Matrix which shows that: IBM is in a strong competitive position as mentioned in its strength (IBM ranked 1st in sales and 2nd in market capitalization net income and long term growth worldwide) As mentioned in the opportunities, IBM competes in a rapid growth industry IBM position is in quadrant I in which one the following strategies: Market development Market penetration Product development Forward integration Backward integration Horizontal integration Related diversification

Suggestion:
As long as IBM has an excellent strategic position, so we prefer that the suitable alternative strategy would be intensive strategy (Market penetration / Market development)

IBM Balanced Scorecard Yr 2011

Pers pecti ve Objective Increase profits Measure Net Income. Method Net Income this year in comparison with last year achieved. Target Realizing 12% Vs. 10% in 2010

Weig ht
11%

Improving ROE percentage

Return On Equity Calculating Net Ratio ROE. income/average stockholders equity.

Calculating Cash flow from operations/Net sales.
New water conservation & recycling initiatives.

Achieving 68.8 in 2011 Vs. 64.5 in 2010.

7%

Finance

Increasing Free cash flow business margin. performance & liquidity

Cost Reduction Production Cost.

Aiming to realize 6.23 in 2011 Vs. 5.76 in 2010

7%

Achieving 2.2% savings in 2011 through new water conservation & recycling initiatives Vs. 1.8% in 2010.

4%

IBM Balanced Scorecard Yr 2011

Perspe ctive Objective
Improve brand awareness

Measure
Market Share

Method
Questionnaires & Surveys

Target
Realizing 33.5% market share in 2011 Vs. 31.5% in 2010 . Decreasing % of complains received reaching 1 %. No. or unfulfilled/defecte d orders between 0.5% & 1% of total orders.

Weight

8%

Customer

Increase Customer satisfaction Increase product availability

No. of complains. No. of satisfied customers % of fulfilling orders on time with high quality.

Questionnaires, Surveys & Customer Service division. Questionnaires & Surveys.

8%

7%

IBM Balanced Scorecard Yr 2011

Perspe ctive

Objective
Improving Brand Image

Measure
Global Corporate contributions to education, human services, environment, health & others. Product Energy efficiency.

Method

Target
Contributing 210 M$ in 2011 Vs. 185.9 M$.

Weight

6%

Customer

Hazardous waste management worldwide.

Questionnair es, Surveys & Advertising.

58% to 70% reduction in in power consumption per unit by introducing 4 models of Power Systems servers. 23% decrease in hazardous waste generation in 2011 Vs. 21.6% decrease in 2010. 0.25% in 2011 per 100 employees Vs. 0.27% in 2010

Global Illness/Injury rate

IBM Balanced Scorecard Yr 2011

Perspe ctive Objective
Improve Supply Chain Efficiency

Measure
Average total inventory.

Method
Inventory turnover ratio.

Target
Realized 19.8 on June 30, 2011 Vs. 19.46 Oct. 31, 2010. 100% achievement of targeted monthly plan. 100% availability of high quality RM around the year.

Weight
9%

Internal Process

Average monthly production plan. Availability of raw material Deviation from targeted plan due to shortage of raw material. Average time needed for handling customer complains.

Actual production plan Vs. monthly achieved plan No. of unfulfilled orders due to RM shortage.

7%

Improving customer feedback process.

Survey & Questionnaires.

Efficient meeting of 100% of customers calls & complains.

9%

IBM Balanced Scorecard Yr 2011

Pers pect ive Objective
Improving operations quality & safety.

Measure
Worker productivity.

Method
Productivity per man hour.

Target
35% point increase in productivity in 2011 Vs. 32% in 2010. Reducing % of accidents in 2011 Vs. percentage in 2010. Aiming to reach 73% in 2011 Vs. 69% in 2009. Contributing approximately 530 M$ in 2011 Vs. 490 M$ in 2009.

Weight
9%

Internal Process

Applying safety standards. Increase employees satisfaction. Increasing employees learning investment worldwide. Hunting high calibers. % of employee satisfaction.

No. of accidents per year. Employees Questionnaires & interviews. % of net income directed to employees investment. No. of accepted offers.

3%

Money contribution to employees learning investment. Ratio of accepted employment offers to the total offers.

2%

3%

Final Conclusion
We can summarize our analysis & our review of the state of IBM's efforts to transform itself into an innovation driven integrated global company as follows: IBM Ranked #1 service provider in IT outsourcing, consulting & systems integration. IBM ranked 1st in sales & 2nd in market capitalization net income & long term growth worldwide. Invested from $5.8 to 6.8 billion in R&D. Diversified businesses.

IBM has large global existence through a lot of subsidiaries & partners worldwide.

Final Conclusion
Series of Annual horizontal integrations represented in acquisitions from 2003 till 2006 to reach 13 acquisitions of approximately $ 4.8billion that enable IBM to expand its software & services. Based on (SPACE) Matrix, IBM is strong internally & externally. Based on the Grand Strategy Matrix IBM is in a strong competitive position.

IBM has come a long way to transform itself into an innovation-driven integrated global company as it seeks to pursue value-added business & services that will generate a high value for its clients & high profit for its shareholders.