IBM is an American based multinational company and its main industry focus is technology. IBM offers a wide range of products. IBM Products portfolio includes Software, Hardware and Services. IBM is globally integrated enterprise working on more than 170 countries spanning the 6 continents.
IBM main business is to find solutions to its clients using advanced information technology. The clients are individual users and organizations or industries such as government, healthcare, banking, retail.
IBM Marketing Role
IBM as a Sales Oriented Company
IBM was known to be a strong sales oriented company since its inception. This was during the era of PC and hardware were dominant and only a very few players on the market providing such a sophisticated technology at that time.
In 1970s IBM start engaging with third party distribution channels, when it started working with applications providers, accrediting them as agents when they introduced new clients. During the 1980s the personal computing work with resellers and independent software vendors (ISVs), and in the 1990s, IBM began experimenting with a wide range of channels as the technology became simpler to use and the people demand increased.
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During 1990s, IBM had reinvented itself as a multi-industry company -conglomerate- of many small high-growth businesses. Each of these industry or product-based businesses had its own competitors with their own channels to serve the customers need. The increasing number of routes to market was chaotic and involved significant duplication.
IBM from Sales to Marketing Company
Starting from 1991 and specifically to 1993, IBM for the first time get slipped from the position of the market leader and had lost more than 11$ billion (Wynn et. al, 2002). The urgent need to return to profitability justified a reduction in the workforce, selling assets, changing the CEO and most important an organization restructure and radical transformation.
IBM has one of the largest sales forces in the industry, and because it's spread out all over the globe, the problems of communicating with this army of marketing reps, systems engineers and administrative people are especially complicated (Buck, 2011).
Greyser (1997) documented that there has been a movement inside IBM toward thinking of marketing less as a function and more as a set of values and processes that all functions participate in implementing. In this view, marketing becomes everybody's job, which potentially diffuses the marketing function's role but increases marketing's influence. Buck (2011) documented that IBM's marketing was completely reorganized and a vast sophisticated educational program was launched, which utilized slides, videotapes, written question-and-answer handouts, as well as a personal presentation by an IBM executive. The message was delivered simultaneously throughout the country.
IBM move to radical transformation and diffuse marketing role was essential to move "beyond bureaucracy" (Bennis, 1993) and position IBM as "Lateral and Flexible Organization" (Galbraith, 1994). This is what Levitt (1960) highlighted as "Marketing Myopia", IBM responded quickly and did not bask in the luxury of its own success and as Buck (2100) -who ran worldwide marketing for IBM- said "The most insidious disease in business is complacency".
IBM Marketing Strategy
"Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably" (CIM, 2001). IBM recognized early that effective marketing requires the talent to speak in a language the marketplace understands, the insight and skill to find solutions to customers' problems, the commitment to give value and move from selling the customers what IBM have to produce what the customers want.
IBM move from pure sales organization to a strong marketing organization toke a smooth curve with sharp slope at the first inception. IBM first created a method called Signature Selling Method (SSM) to increase customer value and shorten the sales cycle. Later IBM complemented its SSM with a more marketing process called Client Value Method (CVM) which is a new sales and delivery engagement method. IBM CVM became an end-to-end, closed-loop process that starts with understanding client preferences and ends with their assessing whether IBM and its Business Partners delivered value. CVM provides the IBM and Business Partner team with a common language of words and best practices to create a uniquely positive client experience. It is designed to help sellers articulate and prioritize client's agenda, and deliver what promised.
Always on Time
Marked to Standard
Eleanor et al. (2002) argue that the first phase of CVM failed. A simple diagnosis for the failure will reveal employee and unit resistance for change, however the reason is related to the interests for the analyst who developed the first phase which were mostly financial (Eleanor et al., 2002)
IBM has two main marketing groups. Mass Marketing group essentially involved in brand building and Segment Marketing group essentially participate in industry events and maintain industry influencer relations.
IBM marketing strategy key points includes differentiation strategy by creating products or services that are unique, Generates good publicity based on past successes, high distribution effectiveness and channel utilization, flexible marketing management according to the place where the function takes place and addresses customer segments through multiple channels.
New Rout to Market (RTM) and Business Impact
One key factor was the forecast that by 1988 approximately 35% of the total industry's information-processing revenues would be generated from nontraditional sales and marketing approaches. Since only a very small percentage of IBM's future revenue was expected to come from these new techniques. IBM didn't hesitate to tell the line executives to initiate creative actions and establish a dual marketing strategy. IBM made use of a complementary network of distribution channels.
In 1983, IBM formed the National Distribution Division to sell high-volume, low-cost products through alternate distribution channels. Besides the approximately 100 IBM Product Centers in the U.S., an increasing number of retail stores and independent dealers are selling IBM products. In addition, there are hundreds of companies that buy IBM products, add substantial value to them, usually in the form of software or additional hardware, and resell them to customers. In 1984, there were approximately 10,000 dealer outlets worldwide selling selected IBM products. IBM is also reaching thousands of potential customers through catalogs and direct mail campaigns. With its toll-free telephone number for selected customer orders, IBM Direct receives ten thousand calls daily, generating a revenue flow that amounts to several million dollars a day. The results have been impressive. In 1984, sales through nontraditional channels accounted for a growing percentage of IBM's total revenue (Buck, 2011)
Challenges and Conflict of Interests
Considering IBM different product and service offerings, long list of distributors, internal client and support teams, telesales and web-based channels, the potential number of combinations in which these could be coordinated for individual transactions is potentially almost limitless. Additionally the market dynamics especially in the technology industry put additional stress on IT companies. Accordingly IBM challenge is to continuously improve, update and innovate its marketing strategy including internal organization and external RTM.
Some problems still exist where IBM's field force initiates the interest, then the customer goes to another dealer to buy the system. Progress is being made and most of the problems have been overcome (Buck, 2011). Arguably, the overcome is not evenly noticed across different departments and countries..
The concept of conflict of interests includes working at cross-purposes, having incompatible goals, being obstructive and being in conflict with each other (Ken Le Meunier-FitzHugh and Nigel F. Piercy, 2007). The concept of conflict of interests can be seen inside IBM within different departments; between IBM and business partners; and sometimes between different countries. There was strong evidence in the literature that collaboration cannot co-exist with interdepartmental conflict (Ruekert and Walker, 1987; Labianca et al., 1998). For example, there is a conflict of interests between IBM Software Group (SWG) and IBM Global Business Services (GBS). The SWG is mainly targeting software regardless if IBM GBS will do the implementation or any other IBM business partners. Another example is the conflict of interests between IBM GBS and IBM business partner both are competing each other's.
Marketing strategy requires a long-term perspective and sales targets are shorter term, many senior managers have difficulty in assessing the trade-offs between current, short-term financial performance, and the future, long-term financial performance (Webster, 1981, 1997). This classical conflict between achieving sales target and establishing a long-term customer relationship and focus on value is exist in IBM.
Marketing really operates at three distinct levels, reflecting three levels of strategy. These can be defined as the corporate, business or SBU, and functional or operating levels (Boyd and Walker 1990; Hofer and Schendel 1978) Much of the confusion over the years about a definition of marketing and an understanding of the marketing concept can be traced to a failure to make these distinctions (Houston 1986; McGee and Spiro 1988;McNamara 1972: Shapiro 1988).
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The external factors can be divided into six broadly categories which are political, environment, social, technology, environment and legal (PESTEL) (Johnson, 2005). Such external factors usually are out of the firm's control and sometimes present themselves as threats. In this case, political factor, environmental factor and technology factor will be used to analyze the computer technology industry.
IBM is an international company, thus, it get affected by environmental factors that happening around the world. For example, starting from 2002, there were widespread outbreaks of an illness such as SARS and bird flu. These situations adversely affected all businesses that operate especially in China. These crises also effect to IBM in terms of ability to source and deliver products and services to its customers and customer demand since IBM has many suppliers in China and Asia countries.
SARS had a worldwide impact on trade and the travel industry. Worldwide demand for oil was affected to such a degree that members of OPEC held an emergency meeting. Even international flights to places in Europe and Japan, where no cases of SARS were reported, were affected. The outbreak is estimated to have cost the global economy $50 billion largely because of cuts in travel and trade from Asia (CNN, 2005)
In countries affected by the disease, growth declined, export-oriented companies saw their orders drop; small businessmen, shop owners and market vendors saw their sales and incomes plummet due to lack of business. Particularly hard hit were airlines, hotels are other business in the tourism trade.
IBM announced today their newest Risk Management service offering, Contingency Planning Assessment in their press release, IBM TO HELP COMPANIES DETERMINE PANDEMIC PREPAREDNESS. I had the opportunity to speak with Rich Cocchiara, IBM Distinguished Engineer & CTO for Business Resilience at IBM prior to their announcement. Rich made the point that business continuity and disaster recovery and crisis management is constantly evolving and that new threats need new strategies. Rich outlined a few of the differences to consider in planning for a Bird Flu Pandemic versus a traditional business continuity and disaster recovery issue.
1) People vs. Infrastructure Resources - Bird Flu scenarios can affect up to 40% of employees where traditional business continuity has been all about the physical property infrastructure of buildings, transportation, data and communications.
2) Global vs. Local Geographies - a Pandemic is forecast to affect multiple cities, regions and entire countries simultaneously where traditional business continuity planning has been focused on reactions to single localized events.
3) Long term vs. Temporary Impacts - Avian Flu may have several waves lasting several years and may change the way business is conducted on the long term, where traditional business continuity has been thought of as a few days to a few weeks in duration.
Rich posed the question on corporate preparedness "Does your organization know how operations will be impacted due to a health Pandemic? What business areas will need to be shut down or functions, locations or processes abandoned? Rich also pointed out that all organizations are impacted, including small and medium sized businesses, not just the largest enterprises and government agencies.
Rich also commented on the importance of risk management software tools to support an Enterprise Risk Management program for identifying and assessing scenarios, evaluating options as well as planning and tracking results. Further, having Corporate Objectives and a Performance Management view in mind can also help address current business operations issues to help make your business better today. For example, enabling business processes for greater effectiveness in telecommuting or shifting operational capabilities for work between offices and regions can help business reduce costs and increase productivity today even if a bird flu pandemic does not materialize.
This announcement by IBM validates the critical need to put an enterprise framework in place with both a methodology and process to constantly reevaluate thinking and planning on how risk can impact your business and what actions need to be taken.
In 200-2001 companies started to develop a new business models and route to market (RTM) that had changes the customers behavior in buying technology. For example, Dell started direct selling to customers with lowers prices depending on its lean supply chain and offer individual customization. Another example is Accenture who started to gain market share by focusing on business outcomes rather than just technology.
IBM analyzed buying behaviors, made a key insight: that the same company, the same individual buyer, could behave in different ways when buying different products. For example, when buying PCs for desktops their choice would be driven by product comparison; but when making a purchase that entailed organizational change their motivation would be more around successful outcome. Accordingly IBM simple segmentation around customer size was not sufficient to form the basis of an effective marketing strategy. (CCFM, 2013)
IBM started to examine what changed the customers behavior, dictated new and complementary approaches to the basic IBM selling and marketing approach. A broad distribution system had to reach more customers and at competitive prices. IBM set out to be not only the low-cost producer but the low-cost seller as well. Corporate marketing was asked to review what was happening throughout the industry and recommend a course of action. This study analyzed our direct mail, telephone selling and other marketing program
In turbulent times, the best companies seek to maintain flexibility in all aspects of their business from strategy to operations.
Between 1995 and 2004 IBM successfully grew its revenues from $72 billion to more than $96 billion but saw its gross profit margins shrink by 5 percent as some of its businesses became more commoditized. Given its business portfolio at the time, the company was forced to seek ever-greater expense reductions in order to grow earnings. The solution was to reposition the company. Over the last few years IBM has shed lower margin businesses such as PCs and hard disk drives while adding higher margin service and software businesses such as PWC and Cognos. The results are clear. While revenues in 2007 were only marginally higher than in 2004; net income increased by more than 38 percent from $7.5 billion to $10.4 billion and gross profit margins increased from 36.9 percent to 42.2 percent.
Despite the global economic crisis, 2008 proved to be even better: revenues grew to $103.6 billion; net income rose to $12.3 billion; and gross profit margins rose to 44.1 percent. Jesse Greene, VP of Financial Management at IBM commented, "We anticipated the major issues with our business and repositioned ourselves well in advance." Greene's advice to others is clear, "Don't wait until you are materially
threatened to act."
Beyond having the courage and confidence to make key portfolio decisions, the best are also tuning their operations to operate in a more volatile world. The ability to adjust to either sharp increases or decreases in the level of business activity is crucial to survival. Throughout the second half of 2008 we saw companies adjusting capital expenditure plans, production schedules and inventory levels as
they sought to adapt to rapidly falling demand in many segments.
Management master Michael Porter (2003) said, in the 21st century the multinational companies are unlikely to be manufacturing companies, but the service industry