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Week 2 – DQ1 For a time, people would joke that IBM was an acronym for ‘Inferior But Marketable’. The thinking behind this was that IBM produced inferior products, but did a better job of marketing them than competitor companies that produced superior IT products. What was IBM doing from a competitive capabilities perspective? Consider factors such as brand and core competencies in your answer. Which of these factors may have played a role in earning the company its nickname mentioned above? Please limit your discussion to the 1980???1993 period.
Brief History IBM or otherwise known as International Business Machines Corporation also called Big Blue (because it is their corporate color) is one of the very early information technology companies, which started way back to the 19th century under Thomas J. Watson, Sr. Wikipedia states that it is the second most important global brand. IBM dominated the market and at the start of 1980, they introduced a lot of technology, most specifically the Reduced Instruction Set Computer (RISC), which is the basis of most workstations. IBM, IBM Archives…) It is because of Tom Watson, Jr. , who succeeded his father and became CEO in 1956 that the beginning of the turnaround of IBM and the world into the digital computer age be credited to him. IBM = Inferior But Marketable? Conclusions on how the acronym came to be: Inferior But Marketable probably may have come about by the time when Louis Gerstner became CEO of IBM. According to Gerstner (2002, p107), “You could make fun of IBM all you liked. Our competitors certainly did. )” Such moniker may have also been due to the fact that they have banked on the influence they have built through their mainframes to promote their product without giving much attention to quality and pricing. It is IBM’s failure to keep up with innovations has paved the way for companies such as Microsoft, who is now dominating the software industry and HP or Hewlett Packard, who is one of their fiercest competitors, as a solution provider in computer and ervices, to rise up and build their empires at the cost of IBM’s dominance by way of innovating around the PC, which was ironically invented by IBM. The rise of these companies eventually forced IBM to reinvent itself and focus more on their services business, which also led to IBM selling their PC and laptop division to Lenovo. IBM’s Core Competencies and Competitive Capabilities The established core competency of IBM was its mainframe machine. For three decades IBM has been the leader because of the System/360, which is IBM’s most successful mainframe family. Gerstner, 2002, p114) IBM was a one-product-company way back then. They concentrated on the mainframe machines and because of that IBM was considered a gold-mine (Gerstner, 2002, p. 117) As far as I can remember during the 1980’s IBM was the “in” thing. During that time span IBM was the most dominant technology provider until the “Compatibles” came along. One of IBM’s greatest innovations was the PC which was also one of their core competencies but this innovation is also the cause of IBM’s declining dominance.
Due to the competition brought about by the PC Market of Compatibles, the revenue of gigantic proportions that IBM was expecting started to dwindle. The compatibles started gaining momentum because it was a much cheaper alternative compared to the mainframe systems that IBM had to offer. There came a point in time where the PC’s (Compatibles) became powerful enough to be useful for businesses, thus resulting to customers not wanting what IBM has the offer which is their two core competencies, the mainframe and the PC. Because of this IBM lost its foothold of being the leader.
IBM also got into the semiconductor business (design and manufacturing) (Wikipedia, IBM) and in 1990 ending up as the world’s largest software business (Gerstner, 2002, p65), hardware developments, infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology were considered to be important competencies. (Wikipedia, History of IBM) IBM’s Competitive Deficiency Factors that heavily affected the competitive capabilities of IBM: -The entry of the Compatibles or Clones as some call it, gave IBM a run for their money. Competitors are offering much cheaper alternatives thus resulting in IBM losing their market share. -The compatibles or clones can be good substitutes for IBM PC parts (Thompson/Strickland/Gamble, 2010, p112) The Strategies that Gerstner applied for the significant turnaround of IBM to be able to get back their edge and maintain a stronghold on their core competencies: Strategies that -He kept the company together -Reengineering (cutting down of expenses, information technology) -He changed the culture of IBM from being a local company to being a global integrator. Gerstner, Louis, Jr. 2002) “Who Says Elephants Can’t Dance”. New York: Harper Collins IBM, IBM Archives, Exhibits “History of IBM” [Online] Available at: http://www-03. ibm. com/ibm/history/history/decade_1980. html (Accessed on August 12, 2010) Thompson/Strickland/Gamble (2010), Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. 17th ed. McGraw-Hill Wikipedia, History of IBM [Online] Available at: http://en. wikipedia. org/wiki/History_of_ibm (Accessed on: August 14, 2010) Wikipedia, IBM [Online] Available at: http://en. wikipedia. org/wiki/IBM (Accessed on: August 14, 2010)