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IBM¡¦s ¡§On Demand Business¡¨ Strategy                                                                                                                                                                                                                                            
Product Ref: 05/257C Company: IBM

Product Type: Case Industry: Software & Services
Technology Hardware

Related Product(s): Teaching Note
In the late 1990s, IBM successfully moved up the value chain and became one of the largest business and information technology (IT) solution providers in the world. To achieve such transformation, the company made a number of strategic moves to reduce its exposure in the commoditization of IT hardware manufacturing. A key success factor was the creation of IBM Global Services and its venture into the high-margin management consulting and technology services industries. Moreover, IBM orchestrated a series of strategic acquisitions, sold ailing business units and outsourced low-value added manufacturing to external contractors and joint venture partners. In 2002, with the success of its business model and the introduction of the new computing architecture (ie, grid and utility computing), IBM made a high-profile announcement about its new corporate strategy centred on the concept of "on demand business". Nonetheless, followed by the disappointing financial results in the first quarter of 2005 (sales increased by merely 3% from the previous year, far lower than many industry analysts¡¦ forecast of a 6% increase), IBM's stock price plummeted and hit the lowest point since Sam Palmisano took over as chief executive officer (CEO) in March 2002. The company announced a massive restructuring in its European operations to be carried out in late 2005. Although the second quarter results had improved, some began to doubt whether the "on demand" strategy would deliver the promised results. More specifically, many started to question why and how such a strategy was justified in the first place. Would this new makeover ever work? What difficulties would the company encounter in implementing its new corporate strategy?
Functional Area : Strategy & General Management

Issues: Industry development, strategic positioning
Length: Text: 16 pages
Exhibits: 4 pages
Country: Worldwide

Pub. Year: 2005 Level of Difficulty: 2
This product type is available in the following language(s):      English   Simplified Chinese
Related Information: N/A
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