ibm

From Year 2007-2009

IBM Three Year Strategic Plan

Corporate Profile

New Orchard Road, Armonk, New York, U.S.A.

Industry: Information Technology

Sector: Diversified Computer Systems

Rankings:

Fortune500 Apr 17 2006: 10th overall

FT Global 500: 13th overall

Dow Jones: Global Titans (Industrial)

2


Business Operations

IBM delivers on demand solutions through the following business segments:

– Software

– System and Financing

– Services

3


4


TASK DISTRIBUITION

5

INTRODUCTION

MISSION & VISION STATEMENT

IMPROVED AND EVALUATE STATEMENTS

INTERNAL ASSESSMENT


CONT…

EXTENAL ASSESSMENT

STRATEGY FORMULATION

6


CONT…

Recommendations

STRATEGY IMPLEMENTATION

STRATEGY EVALUATION

CONCLUSION

7


IBM’s Vision

“The last thing IBM needs right now is a vision. . . . I want to stay away from abstractions and deal with the marketplace. Our mission is to be the most successful information technology company in the world. O.K., you want a vision statement? Fine, you got it, now let’s go back to work.”

CEO Louis Gerstner, Jr.

8


IBM’s Proposed Vision

IBM aims to be a globally integrated open source information technology enterprise, a worldwide leader in on-demand innovative solutions and services and a socially-responsible company

9


MISSION STATEMENT

At IBM, we strive to lead in the invention, development and manufacture of the industry's 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.

10


Components of Mission Statement

Components IBM Remarks

Customer No Mentioned but unspecified.

Products/Services Yes “Creation, development and manufacture”

Markets Yes “Worldwide” or global

Technology Yes Specified as “Information Technology”

Survival, Growth,Profitability

No Mentioned in IBM’s Principal Goals, “long termvalue to shareholders”.

Philosophy No Based on IBM’s Guiding Principles.

Self-Concept Yes Presumed by word “lead”. Based on IBM’sNew Industry Model.

Concern for Public Image

No Mentioned in 2005’s IBM’s Business Model

Concern for Employees No Mentioned in 2005’s IBM’s Business Modeland Business Conduct Guidelines.

11


Proposed Mission Statement

At IBM, we strive to lead in the creation, innovation, development and manufacture of the industry's most advanced information technologies, including hardware, software, networking systems, and Robotics.

We translate these advanced technologies into competitive value for our individual and corporate customers through our professional on-demand solutions and dedicated business services, while consistently generating high returns for our shareholders, and a shared commitment to our employees and the world.

12


Business Values

Dedication to every client's success

Innovation that matters, for our company and for the world

Trust and personal responsibility in all relationships.

13


Competitor Mission Statement (Microsoft)

Our Mission;At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.

Step 3


Ratio Analysis

16


Conti….

17


Conti….

18


Conti….

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Organizational Chart

20

1313

11

3322151510109988

18181717 1919

111144 1616

667755

12121414


Flatter Organization Structure

21

11

12121414

1313

18181717 1919

667755

33226688991010 44 5577


Market Poisoning Map

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Marketing strategies

IBM's new accessibility ad campaign focuses on what people can do, not what they can't.

IBM Systems Magazine

Impression-based to Impact-based formats

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24


25


Value Chain Analysis

Firm infrastructure

– Supply chains of IBM are becoming more complex, harder to manage and more costly to run

– In fact, nearly $3.4 trillion was spent on supply chains in 2006

– IBM’s (2006) Business Performance Management enables companies to visualize end-to-end processes across business and IT systems

26


CONTI……

Procurement

– Business Partner relationships with establishment, best-of-breed Supply Chain Management solution providers.

– Acquisitions and mergers in order to improve their businesses on the high value products and services

– IBM's supply, manufacturing and logistics and customer fulfillment operations are integrated in one operating unit that has reduced inventories

27


E-Commerce Efforts

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E-Commerce Efforts

29

http://www.ibm.com

http://www.ibm.com/support/


Value of the Firm Analysis

30

Items 31-12-04 31-12-05 31-12-06

Total current assets 46,970,000 45,661,000 44,660,000

Total assets 109,183,00 105,748,000 103,233,000

Total current liabilities

39,798,000 35,152,000 40,090,000

Total liabilities 79,436,000 72,650,000 74,727,000

Total Stockholder Equity

29,747,000 33,098,000 28,506,000

Net Tangible Assets $19,521,000 $21,994,000 $13,450,000


Strengths

Professional technical & managerial staff.

Global Integration

A Flatter Organization

Greater Operational Efficiency

Internal Competitive Advantage

Direct sales via mail, phone orders, and the Internet

Well-known Brand Name

31


Conti….

Relationship with the company’s large corporate and government customers and continues to focus on these sales and service relationships

Technology Leader

Financial Recourses

32


Professional technical & managerial staff

IBM has approximately 329,000 employees in 75 countries, and serving clients in 174 countries.

IBM has one of the most

Highly educated workforces

in the world. More than

200,000college graduates,

nearly 54,000 with

post-graduate degrees.

33


Global Integration – a single global system

Global Delivery Centers

Globally Integrated Manufacturing

Globally Integrated Corporate Functions

Global Skills Marketplace

34


Conti…

Global Delivery Centers

35


Conti…


36


Conti…


37


Conti…


38


Greater Operational Efficiency

Reduced Costs

Decreased inventory

Speedier procurement

39


Technology Leader 1990: RISC System/6000

1991: Magnetoresistive heads

1992: ThinkPad

1993: IBM on space (SS/Endeavor, Hubble)

1994: Supercomputing

1995: elementary particle “glueball”

1996: Network Computers for e-Business

1997: e-Business; Deep Blue

1998: 1 GHz microprocessor (experimental)

1999: system-on-a-chip.

40


2000- 2006 Advanced Technologies

IBM eServer, Commercial version of ASCI White, NetVista brand, ThinkPad X series, ViaVoice for Windows

ThinkVantage Technologies, Grid Computing

Enterprise Privacy Authorization Language (EPAL)

DB2 Information Integrator software, TotalStorage

“Cell” microprocessor (jointly with Sony and Toshiba)

Service oriented architecture (SOA).

41


Weaknesses

Older and Aging Technical Personnel.

Non-acceptance of international agreements and standards proposed by international bodies.

IP and Copyright Infringement

Merger and Acquisitions Issues.

Diversity and Workforce Issues

42


Older and Aging Technical Personnel

43


Conti…..

Non-acceptance of international agreements and standards (CSR, Global Compact of UN), standards proposed by international bodies (ISO, GR Initiative, IncoTerms).

44


Conti…..

Merger and Acquisition Issues.

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46

.10.1011.10.10Diversity and Workforce IssuesDiversity and Workforce Issues

.20.2022.10.10 Merger and Acquisitions Issues. Merger and Acquisitions Issues.

.10.1022.05.05IP and Copyright InfringementIP and Copyright Infringement

.30.3033.10.10Non-acceptance of international agreementsNon-acceptance of international agreements

.10.1022.05.05Older and Aging Technical PersonnelOlder and Aging Technical Personnel

WeaknessWeakness

.40.4044.10.10 Well-known Brand Name Well-known Brand Name

2.752.751.001.00TOTALTOTAL

.45.4533.15.15 Greater Operational Efficiency Greater Operational Efficiency

.20.2022.10.10A Flatter OrganizationA Flatter Organization

.30.3033.10.10Global IntegrationGlobal Integration

.60.6044.15.15Professional technical & managerial staffProfessional technical & managerial staff

Weighted

score

Weighted

scoreRatingRatingWeightWeight

IBM—Key Internal FactorsStrengths

IBM—Key Internal FactorsStrengths

Step 4


Major Competitors

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Conti…..

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Industry Comparison

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CPM IBM Microsoft HP

51

3.003.003.40

3.40

3.35

3.35

1.001.00TotalTotal

0.300.30330.30

0.30

440.30

0.30

330.100.10Quality ProductsQuality Products

0.400.40440.30

0.30

330.30

0.30

330.100.10Knowledge ManagementKnowledge Management

0.450.45330.60

0.60

440.60

0.60

440.150.15Global Innovation Forerunner

Global Innovation Forerunner

0.30.3330.30.3330.40

0.40

440.100.10Technology LeaderTechnology Leader

0.150.15330.20

0.20

440.15

0.15

330.050.05Customer Loyalty Customer Loyalty

0.200.20220.30

0.30

330.40

0.40

440.100.10Research & DevelopmentResearch & Development

0.800.80440.60

0.60

330.60

0.60

330.200.20Financial PositionFinancial Position

0.400.40220.80

0.80

440.60

0.60

330.200.20Market ShareMarket Share

Score

Score

Rating

Rating

Score

Score

Rating

Rating

Score

Score

Rating

Rating

Weight

Weight

Critical Success Factor

Critical Success Factor


Opportunities

Shift from commodity to annuity and transactional, from products to solution based segments.

Seizing future high-growth opportunities

Forerunner in IT’s shift to Open Computing

Emphasis on Corporate Data Security.

Joint Venture with any firm in Robotics

Resolution of Antitrust Lawsuit

52


Shift of Business and Revenue Mix

53


Seizing future high-growth opportunities

54


Conti….

55


Emphasis on Corporate Data Security

EduCause 2006 Survey: “Security and Identity Management edges out Funding IT as the top challenge.”

Gartner: Compliance, security and mobility for Midsize Enterprise will affect 2006 IT decisions.

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Robotics Sector

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Threats

Increasing Share of competitors

Weakened Dollar and Market Risks

Aftermath of 9/11 to foreign markets’ access

Influx of Offshore Outsourcing

Revival of IT Venture Capitalists and Startup Companies.

58


Increasing Share of competitors

59


Weakened Dollar and Market Risks

60


Aftermath of 9/11 to foreign markets’ access

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.20.2011.15.15Revival of IT Venture CapitalistsRevival of IT Venture Capitalists

.20.2022.10.10 Influx of Offshore Outsourcing Influx of Offshore Outsourcing

.10.1022.05.05 Aftermath of 9/11 to foreign markets’ access Aftermath of 9/11 to foreign markets’ access

.15.1533.05.05 Weakened Dollar and Market Risks Weakened Dollar and Market Risks

.20.2022.15.15 Increasing Share of competitors Increasing Share of competitors

ThreatsThreats

.80.8044.20.20 Joint Venture with any firm in Robotics Joint Venture with any firm in Robotics

2.652.651.001.00TOTALTOTAL

.60.6044.15.15 Emphasis on Corporate Data Security. Emphasis on Corporate Data Security.

.10.1022.05.05 Forerunner in IT’s shift to Open Computing Forerunner in IT’s shift to Open Computing

.15.1533.05.05Seizing future high-growth opportunitiesSeizing future high-growth opportunities

.15.1533.05.05 Shift of Business and Revenue Mix Shift of Business and Revenue Mix

Weighted

score

Weighted

scoreRatingRatingWeightWeight

IBM—Key External FactorsOpportunities

IBM—Key External FactorsOpportunities

Step 5


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IBM’s SPACE Matrix

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IBM’s IE Matrix

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IBM’’s Summary of Strategies Based on Porter’s Value Chain

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Quadrant IV

Horizontal diversificationJoint ventures

Quadrant IV

Horizontal diversificationJoint ventures

Quadrant III

Horizontal diversification

Quadrant III

Horizontal diversification

Quadrant IMarket

developmentMarket penetration

Product development

Backward integrationHorizontal

integration

Quadrant IMarket

developmentMarket penetration

Product development

Backward integrationHorizontal

integration

Quadrant IIMarket

developmentMarket penetrationProduct

developmentHorizontal

integrationDivestiture

Quadrant IIMarket

developmentMarket penetrationProduct

developmentHorizontal

integrationDivestiture

RAPID MARKET GROWTHRAPID MARKET GROWTH

WEAK

COMPETITIVE

POSITION

WEAK

COMPETITIVE

POSITION

STRONG

COMPETITIVE

POSITION

STRONG

COMPETITIVE

POSITION

SLOW MARKET GROWTHSLOW MARKET GROWTH

Grand Strategy Matrix


74

Strong Competitive

Position

Slow Market Growth

Weak Competitive

Position

Quadrant III Quadrant IV

Rapid Market Growth

Quadrant II Quadrant I

Conti…..


75

Strategic Alternatives

Key Internal Factors Weight

Emphasis on Corporate Data

Security.

Joint Venture with firm in Robotics

Strengths Weight AS TAS AS TAS

Professional technical & managerial staff. 0.1 4 0.4 4 0.4Global Integration. 0.05 4 0.2 3 0.15A Flatter Organization 0.1 3 0.3 3 0.3Greater Operational Efficiency 0.15 3 0.45 3 0.45Internal Competitive Advantage 0.1 4 0.4 3 0.3Direct sales via mail, phone orders, and the Internet 0.2 3

0.64

0.8Well-known Brand Name 0.01 3 0.03 4 0.04Technology Leader 0.1 3 0.3 3 0.3Financial Recourses 0.05 3 0.15 3 0.15Weaknesses

Older and Aging Technical Personnel. 0.025 2 0.05 3 0.075Non-acceptance of international agreements and standards proposed by international bodies..

0.025 1

0.025

2

0.05IP and Copyright Infringement 0.1 2 0.2 3 0.3Merger and Acquisitions Issues 0.025 1 0.025 2 0.05Diversity and Workforce Issues 0.05 2 0.1 3 0.15SUBTOTAL 1.00 3.23 3.515


Key External Factors Weight

Emphasis on Corporate Data

Security

Joint Venture with firm in Robotics

Opportunities Weight AS TAS AS TAS

Shift from commodity to annuity and transactional, from products to solution based segments 0.11 3 0.33 3

0.33Seizing future high-growth opportunities 0.10 4 0.4 4 0.4Forerunner in IT’s shift to Open Computing 0.09 3 0.27 3 0.27

Emphasis on Corporate Data Security. 0.11 4 0.44 4 0.44Joint Venture with any firm in Robotics 0.12 3 0.36 4 0.48

Resolution of Antitrust Lawsuit 0.09 3 0.27 4 0.36Threats

Increasing Share of competitors 0.11 2 0.22 2 0.22

Aftermath of 9/11 to foreign markets’ access 0.06 1 0.06 1 0.06

Influx of Offshore Outsourcing 0.05 1 0.05 2 0.1

Revival of IT Venture Capitalists and Startup Companies. 0.09 2 0.18 2 0.18

Weakened Dollar and Market Risks 0.07 1 0.07 2 0.14

SUBTOTAL 1.00 2.65 2.98

SUM TOTAL ATTRACTIVENESS SCORE 5.88 6.495


Recommendations

Strategies to be Continued;

– IBM signed an $84.4 million deal with Spanish utility Iberdrola to develop new information technologies and provide services for utility.

– IBM is creating a Global Center of Excellence for Nuclear Power in France to build a Nuclear power plant

– IBM is capitalizing on the global warming-triggered revival of interest in nuclear power as an alternative to coal-fired plants.

77


Conti….. New Strategies to be Started

– Joint venture with National Robotics Engineering Consortium that need finances and technology help to made new generation Robots; for entering Robotic sector that is a future of world. The Joint Venture need an amount of $ 5,300M for fulfillment of all terms and condition of this strategy. Company get this amount through issuing of share or bonds.

– IBM focus more on resolving of corporate security issue. For this purpose company focus more on developing such devices or software that give 100% guarantee of solving corporate internal and external security problem. For this purpose company use its retained earning and annual profits, if needed.

78


Conti…..

IBM need a close focus toward growth technologies like “Information Based Medicine” that is a need of emerging world. For this purpose IBM use its exiting core competencies of hardware and a good relation of needed software to fulfill this unserved segment

79

Step 6


EPS/EBIT Analysis

$ Amount Needed: $ 5,300M

Tax Rate: 32%

Interest Rate: 7%

# Shares Outstanding: 31,271M

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Recession Normal Boom Recession Normal BoomEBIT $2,000,000,000 $4,000,000,000 $6,000,000,000 $2,000,000,000 $4,000,000,000 $6,000,000,000Interest 0 0 0 371,000,000 371,000,000 371,000,000EBT 2,000,000,000 4,000,000,000 6,000,000,000 1,629,000,000 3,629,000,000 5,629,000,000Taxes 640,000,000 1,280,000,000 1,920,000,000 521,280,000 1,161,280,000 1,801,280,000EAT 1,360,000,000 2,720,000,000 4,080,000,000 1,107,720,000 2,467,720,000 3,827,720,000# Shares 2,530,666,667 2,530,666,667 2,530,666,667 2,354,000,000 2,354,000,000 2,354,000,000EPS 0.54 1.07 1.61 0.47 1.05 1.63

Common Stock Financing Debt Financing

Recession Normal Boom Recession Normal Boom

EBIT $2,000,000,000 $4,000,000,000 $6,000,000,000 $2,000,000,000 $4,000,000,000 $6,000,000,000Interest 111,300,000 111,300,000 111,300,000 259,700,000 259,700,000 259,700,000EBT 1,888,700,000 3,888,700,000 5,888,700,000 1,740,300,000 3,740,300,000 5,740,300,000Taxes 604,384,000 1,244,384,000 1,884,384,000 556,896,000 1,196,896,000 1,836,896,000EAT 1,284,316,000 2,644,316,000 4,004,316,000 1,183,404,000 2,543,404,000 3,903,404,000# Shares 2,477,666,667 2,477,666,667 2,477,666,667 2,407,000,000 2,407,000,000 2,407,000,000EPS 0.52 1.07 1.62 0.49 1.06 1.62

70 Percent Debt - 30 Percent Stock70 Percent Stock - 30 Percent Debt


83

Total Assets 2006 2007 2008 2009

Assets $ Million $ Million $ Million $ Million

Current assets:

Cash and cash equivalents 8022 9000 10000 11000

Marketable securities 2634 2800 2900 3000

Notes and accounts receivable 10789 11000 11500 12000

Short-term financing receivables 15095 16000 16500 16530

Other accounts receivable 964 1000 1100 1200

Inventories 2810 2900 3000 4000

Deferred taxes 1806 1803 1832 1865

Prepaid expenses and other current assets 2539 2550 3000 2590

Total current assets 44660 47053 49832 52185

Plant, rental machines and other property 36521 40000 41000 42100

Less: Accumulated depreciation (22082) (23000) (24000) (25000)

Plant, rental machines and other property—net 14440 17000 17020 17100

Long-term financing receivables 10068 8868 7668 6468

Prepaid pension assets 10629 11000 11050 12500

Goodwill 12854 13000 13050 13150

Intangible assets—net 2202 2500 1886 2403

Investments and sundry assets 8381 8500 8600 8700

Total Assets $103,234 $107,921 $109,106 $112,506


84

Liabilities and Stockholders’ Equity 2006 2007 2008 2009Current liabilities: $Million $Million $Million $Million Taxes 4670 4700 4800 4900Short-term debt 8902 9000 9050 10000Accounts payable 7964 8000 9000 10000Compensation and benefits 4595 5435 4650 4700Deferred income 8587 8600 8700 8800Other accrued expenses and liabilities 5372 5500 5600 5700Total current liabilities 40091 41235 41800 44100Long-term debt 13780 15370 15370 15370Retirement and non-pension 13553 14000 14500 15000Other liabilities 7304 7500 7600 7700Total Liabilities 74728 78105 79270 82170Contingencies and Commitments 0 0 0 0Stockholders’ equity: Common stock, par value $.20 per share and additional paid-in capital 31271 32013 32013 32013Shares authorized: 4687500000 Retained earnings 52432 53000 53020 53520

Treasury stock, at cost (shares: 2006—501,987,771; 2005—407,279,343) (46296) (46296) (46296) (46296)Accumulated gains and (losses) not affecting retained earnings (8901) (8901) (8901) (8901)Total Stockholders’ Equity 28506 29074 29836 30336Total Liabilities and Stockholders’ Equity 103234 107179 109106 112506


85

Consolidated Statement of Earnings 2006 2007 2008 2009Revenue: $Million $Million $Million $MillionGlobal Services 48,247 57896 69476 83371Hardware 22,499 26999 32399 38878Software 18,204 21845 26214 31457Global Financing 2,379 2855 3426 4111Other 94 113 135 162Total Revenue 91,424 109709 131651 157981Cost:Global Services 34,972 41966 50360 60432Hardware 14,175 17010 20412 24494Software 2,693 3232 3878 4654Global Financing 1,182 1418 1702 2042Other 107 128 154 185Total Cost 53,129 63755 76506 91807Gross Profit 38,295 45954 55145 66174Expense and Other Income:Selling, general and administrative 20,259 24311 29173 35008Research, development and engineering 6,107 7328 8794 10553Intellectual property and custom development income (900) (1080) (1296) (1555)Other (income) and expense (766) (919) (1103) (1324)Interest expense 278 334 400 480Total Expense and Other Income 24,978 29974 35968 43162Income from Continuing Operations Before Income Taxes 13,317 15980 19176 23012Provision for income taxes 3,901 4681 5617 6741Income from Continuing Operations 9,416 11299 13559 16271


Liquidity Ratios

86


Profitability Ratios

87

Step 7


89


90


Published Sources of Strategy Evaluation

Fortune 1000, Fortune 500, Fortune 50

The Annual Report on American Industry

Business Week, Industry week and other publications

Rating Agencies

91


Evaluation

Financial Objectives Projected Financial statements show a steady increase in

revenues by almost 10-15% that lead towards increase in shareholder wealth maximization

Non-Financial Benefits

Entry into new markets that is a requirement for growing world such as Robotics, Information based medicine etc

Grasping the major opportunities like resolving security problems lead toward higher satisfaction of corporate customer

92

Step 7


94

Conclusion

Objective of Company

On-Going vs. New Strategies

Innovation

– R&D budget increases from 5.9% in 2004 to 6.4%, and 6.7% increase in 2006

– Innovation also lies in the core values

– Innovation-Jam

ibm

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