International Business Machines Corporation Matrix Structure Marketing Essay

IBM has applied the same matrix structure worldwide. Matrix structure is formed by two sides: vertical lines and horizontal lines. Vertical lines include S&D (Sales and Distribution), IGF (IBM Global Financing) and Marketing. Horizontal lines include STG (System Technology Group), GTS (Global Technology Service), GBS (Global Business Server), and SWG (Soft Ware Group). On each vertical and horizontal line’s point of intersection, Plan-Do-Feedback takes place independently. This is IBM’s matrix structure applied worldwide.

In upper level over each nation like Asia-Pacific, IBM has integrated matrix structure of each country in the same zone by combining the same intersection points of each nation in the same zone. In last level over each zone, IBM has integrated worldwide matrix structure of each zone all over the world by combining the same intersection points of each zone globally. With this integrated three-level matrix structure, IBM can control all the global process efficiently. IBM is the first all matrix structure group in the world.

Dynamic IBM

IBM is one of the largest companies in the world, so people can think IBM is stable in terms of almost everything. But this is exactly not right. IBM is really dynamic as it has changed its organizational structure of STG once in every six month. This restructuring even includes executives.

IBM has wanted to change current situation dynamically to optimal one in response to everything including environmental change, new technology and so on. IBM always hungers for something new and has a very strong experimental mind. As a result, in terms of the number of patent, IBM is absolute rank number 1 as it has much more patents than the sum of patents coming from rank number 2 to rank number 10. With this passion for something new and change, there has been lots of the first invention of technology in IBM. For example, IBM developed NANO (element dial) firstly which was technology that made possible for people to write letters with element.

Now, in IBM, there are 72 fellows meaning engineers treated as extreme geniuses by IBM. Out of these fellows, now, there are three Nobel Prize winners. IBM has invested extremely huge amount of money to R&D because it always wants something new and innovative. IBM thinks people are the most important driver to make innovation. With huge investment and human driver concept, IBM now has 3 novelists in R&D.

Analysis

Horizontal lines of matrix structure in IBM

There are 4 main parts in horizontal lines.

STG (System Technology Group): This part is for Hardware.

GTS (Global Technology Service): This part is for Service. There is ST (Service Team) in here.

GBS (Global Business Server): This part is for Consulting.

SWG (Soft Ware Group): This part is for Software.

There are a lot of brands in each part, and each brand considers itself only. These 4 parts are very important respectively but STG is the most important part because Hardware is the most basic and fundamental one in IBM. Without this part, IBM can not exist now. And also many people in IBM think we should focus on STG first with same reason.

We analyze STG to certain meaningful level. To analyze the product in detail with specification is meaningless because this paper is not for technological proposal but for international business.

STG (System Technology Group)

In STG, there are 2 main categories, Server and Storage.

Server

There are 3 main servers depending on the level of openness to environment.

Mainframe: Extremely close server to environment. The size is very big and the price is very expensive. Mainframe is 99% utilized, so never-die server. We can say ENIAC as an example. Among the Mainframes, now, Z series are the most popular.

In Mainframe, very huge profit comes from the related software. The point is that IBM is almost the only producer to make software related to Mainframe. The reason of using the word ‘almost’ is that recently Korean company, TMAX comes to produce software related to Mainframe. But for IBM, that’s not a big deal because the gap is really big.

Qnix server: This is open to environment, so this can die. Linux can be applied to this Qnix server.

X series: Very basic one. This is for entry and very open to environment. For producing this, chips manufactured by Intel are used. Many people use this X series in the real world. It has about 30% market share of total server market.

Storage

Storage is a product to store the data. We can categorize all the storage brands into high-end, mid-end, and entry. It is meaningless to see all brands in detail because there is almost no big difference among the storage brands.

Vertical lines of matrix structure in IBM

There are 3 main parts in horizontal lines, S&D (Sales and Distribution), IGF (IBM Global Financing) and Marketing.

S&D (Sales and Distribution)

S&D is treated as a flower of IBM because it is really important to IBM. IBM’s main customer is not a small individual customer but a big company. In S&D, there are 6 sectors categorized by the traits of customers.

Public: school, hospital, government, and somewhere like this

Industrial: iron industry, building industry, and somewhere like this

Com and Air (Communication and Air): Gimpo Airport, Incheon Airport, Koreana Air, SKT, KT, LGT, and somewhere like this

General Business: small products for individual customers

.com (Dot Com): smaller ones than General Business

BPO (Business Partner Operations): companies. For these customers, there is Client Team in IBM.

In IBM, there is Account Team which is group among the top managers (representatives) in each brand. This team makes the voice of IBM usually in face-to-face situation.

The most important mission of Account Team is OI (Opportunity Identification). For OI, this team always analyzes the customers, mainly the companies, in 6 sectors. When the team finds some opportunity, it finishes the deal and then offers this opportunity to OO (Opportunity Owner) that is each one in horizontal lines of matrix structure. This means to ask OO to review this opportunity and say what they can do and offer to this opportunity.

In horizontal lines, there are 4 main parts, STG (System Technology Group), GTS (Global Technology Service), GBS (Global Business Server), and SWG (Soft Ware Group). In each part, there are lots of brands, and each brand cares about itself only. In this condition, when Account Team asks 4 main parts in horizontal lines to think about the opportunity, each part sends this to each brand.

In each brand, there is SS (Sales Specialist) who is charged with covering everything about the brand in terms of S&D as SS sometimes identifies opportunity and consults the brand in direct or indirect way. In response to Account Team’s offer, each SS gathers opinions of each brand respectively in selfish way to his/her brand. And then these opinions are integrated by CR (Client Representative) who is the chief executive officer in Account Team. We can call CR AR (Account Representative). By integrating the opinions, CR finalizes the mega deal. CR gets incentive for integration and whole sales. CR is influential to the deal directly because CR always makes face-to-face deal with the CEO, CIO, CFO, and someone in this level of IBM’s client (customer) companies.

IGF (IBM Global Financing)

IGF does M&A, lease, and BBP (Buy Back Program). M&A and lease are very common concepts. But Buy Back Program is somewhat special. This is for supporting S&D. When Account Team finds opportunity in some company, there can be competitor’s products in that company. In this situation, BBP buys all the products of left depreciation for supporting the deal of S&D.

Marketing

For each brand, there is each brand marketing respectively. In each brand’s marketing, there are 3 main parts, OIR (Opportunity Identification Rally), Marketing Campaign Team, Activity Team.

ORI (Opportunity Identification Rally): This is marketing team that is very close to actual S&D works. This is for supporting sales of S&D.

Marketing Campaign Team: This team is only for conducting an event like a seminar.

Activity Team: This team makes some marketing messages and thinks deeply how to conduct these messages with perspective of marketing. And then it conducts the messages.

Internal Departments

In IBM, there are 4 independent departments internally, HR (Human Resource), Finance Team, R&D, and Legal Department.

HR (Human Resource): This department is charged with employing new and experienced employees, distributing employees to proper parts and training new employees for 6 months. All the process is standardized. IBM is one of the best companies in training in the world.

Finance Team: This Team is different from IGF. This department is related to the job of CPA. They calculate GP, PTI and something like this. The chief of this department is CFO.

– Pricing Team: This team is included in Finance Team. They care about only the price of each deal. This team is the only team that can know the margin in terms of GP. For example, assuming that the margin of some product is 5% in terms of GP and in national level, agreement of upper level is needed if the margin is less than 20%, this will be sent to zone level like Asia-Pacific. But if agreement of upper level is needed if the margin is less than 15% in zone level, this will be sent to worldwide level. And then final decision will be made usually in U.S.

R&D: There are 2 R&D labs in Korea, Software lab and UCL (Ubiquitous Computing Lab). UCL played a very important role in conducting Songdo Ubiquitous City Project. All the things related to R&D is so confidential that common people can not know about R&D.

Legal Department: This department is for protecting all the IBM’s legal actions. It reviews everything in terms of law. This part is a group of lawyers. Every contract should pass through Legal department. This department also manages the sign up of BCG (Business Conduct Guidance) which is IBM’s own conservative international standard.

Operations

In IBM, operation is not that special. Plants are in U.S, Mexico, China, Europe, and so on. All the operations are based on BCG. All the things are similar to other global companies.

But IBM is very sensitive to manage people because of security problems. And also to minimize the claims from the employees, IBM focuses on human management and it was the first company using the concept of Work & Life Balance.

Recommendation for the future international strategy of IBM

In the past, when internet was on boom, the objective of IBM was e-business and on-demand meaning that IBM will send what customers want. Now, IBM’s objective has changed. That is ‘Smarter Planet’ which means that IBM wants to change everything over the world.

For changing the world, IBM looks very good. There is almost no problem. But we find some problem for IBM and many managers of IBM agree with that.

IBM is dynamic company so it is sensitive to local changes. But as a global company, IBM has standardized all the process and is going to standardize all the process more in the future. But this will lead to lack of localization. So with standardization, IBM should consider localization also to make optimal point between standardization and localization.

For example, Japan was not included in Asia-Pacific zone because the sales of IBM Japan were 10 times more than that of IBM Korea. It meant Japan was treated as a special nation. IBM Korea contributed only 1% to total IBM’s sales while IBM Japan contributed 10% to total IBM’s sales. So, IBM gave more local managerial rights to IBM Japan. This action was quite effective.