T HE FALL OF IBM Case was prepared by Gareth R. Jones. Corporate Strategy Dr. Amin Wibowo, MBA. MM UGM Yogyakarta, 23 Okt 2010 Kelompok 3 AP-14: Bayu Setiaji Nureni Susilowati Sri Muniati. Free Powerpoint Templates. IBM (dominant global mainframe manufacturer).
Dr. Amin Wibowo, MBA.
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(dominant global mainframe manufacturer)
another breakthrough,Computer on a Chip
The fourth wave of computers
and New Plans
On September 26, 1993, IBM announced a loss of $ 46 million for the third quarter, compared to $ 40 million loss in 1992, bringing its total loss in 1993 to $ 8,37 billion.
Gerstner became IBM’s CEO between 1993 until 2003 before stepped down, and Sam Palmisano became IBM’s new CEO in 2003, it meant Gerstner’s strategy had well done.
In light of IBM’s history, an obvious morale of this story was that the leadership matters. When IBM’s B.O.D chose an outsider (Gerstner) because they wanted a new CEO who would have a fresh perspective on the company’s problem – had not been a part of IBM’s slow moving bueraucratic, culture characterized by slow, centralized decision making and power struggles between divisions, in spite of he had no background in the computer industry and that was viewed by many analysts as “an enormous mistake”.
A concept of corporate strategy rely on the resources – the assets, skills, and capabilities – of the firm. Resources are the critical building blocks of strategy because they determine not what a firm want to do, but what it can do.
Resources determine the range of market opportunities that are appropriate for a firm to pursue and so have a major impact on corporate strategy.
In this cases, Gerstner realized that IBM also needed to increase integration among divisions so that they could share skills and resources more effectively. He took Cannavino’s performance from PC Division as success model for other division. Through PC industry, IBM was able to build on its reputation and customer list in the computer mainframe business to gain dominance in the market for desktop machines, eventhough it was a late entrant and didn’t have the best technology. Indeed, Gerstner realized that.
Although the idea that resources underpin the sustainability of competitive advantage is simple, companies often have a hard time identifying and evaluating their own resources, assesing whether they are strengths or weaknesses, and understanding whether they can be sources of sustainable competitive advantage.
Among many controversion about “mainframe mindset”, Gerstner made a smart decision. He announced his belief that IBM should continue traditional strategy of providing customers with full line of hardware and software product and services and announced his support for mainframe division. He realized that mainframe had to be a part of culture.
Other firms might discover that some of their resources are not markedly better than those of competitors or are not particularly highly valued by consumer. The challenge for Gerstner was to understand what distinguishes valuable from ‘IBM’s mainframe’.
One of the big problems in IBM was weaknesses culture such as arogant, complacent, believed completely in IBM’s preeminence, ignore the warning sign.
A corporate transformation cannot be achieved without the appropriate culture or attitude within the organization. This requires the process finding the best outcome for a company as a whole not for particular part of company as represent. Besides, the company climate has to be one of honesty and opennes. The process of choosing among alternative strategies, or more generally for making decision should also reflect a culture of constructive conflict.
Gerstner have formalized this approach into “four goals for IBM”
Conclusion : Gerstner can make a huge difference for IBM.