IBM (IBMI) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for IBM (United Kingdom)

Based on various researches at Oak Spring University , IBM is operating in a macro-environment that has been destablized by – there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, technology disruption, cloud computing is disrupting traditional business models, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of IBM

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that IBM can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the IBM, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which IBM operates in.

According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of IBM can be done for the following purposes –
1. Strategic planning of IBM
2. Improving business portfolio management of IBM
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of IBM

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Strengths of IBM | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of IBM are -

Sustainable margins compare to other players in Computer Services industry

– IBM has clearly differentiated products in the market place. This has enabled IBM to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped IBM to invest into research and development (R&D) and innovation.

Effective Research and Development (R&D)

– IBM has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – IBM staying ahead in the Computer Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Innovation driven organization

– IBM is one of the most innovative firm in Computer Services sector.

Analytics focus

– IBM is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Computer Services industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Highly skilled collaborators

– IBM has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of IBM have helped the firm to develop new products and bring them quickly to the marketplace.

Training and development

– IBM has one of the best training and development program in Technology industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Superior customer experience

– The customer experience strategy of IBM in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– IBM is present in almost all the verticals within the Computer Services industry. This has provided IBM a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

Successful track record of launching new products

– IBM has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. IBM has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Ability to recruit top talent

– IBM is one of the leading players in the Computer Services industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

Digital Transformation in Computer Services industry

- digital transformation varies from industry to industry. For IBM digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. IBM has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Strong track record of project management in the Computer Services industry

– IBM is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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Weaknesses of IBM | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of IBM are -

Low market penetration in new markets

– Outside its home market of United Kingdom, IBM needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Employees’ less understanding of IBM strategy

– From the outside it seems that the employees of IBM don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.

Skills based hiring in Computer Services industry

– The stress on hiring functional specialists at IBM has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Workers concerns about automation

– As automation is fast increasing in the Computer Services industry, IBM needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Slow decision making process

– As mentioned earlier in the report, IBM has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Computer Services industry over the last five years. IBM even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

High operating costs

– Compare to the competitors, IBM has high operating costs in the Computer Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract IBM lucrative customers.

Ability to respond to the competition

– As the decision making is very deliberative at IBM, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. IBM has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High dependence on IBM ‘s star products

– The top 2 products and services of IBM still accounts for major business revenue. This dependence on star products in Computer Services industry has resulted into insufficient focus on developing new products, even though IBM has relatively successful track record of launching new products.

Lack of clear differentiation of IBM products

– To increase the profitability and margins on the products, IBM needs to provide more differentiated products than what it is currently offering in the marketplace.

Interest costs

– Compare to the competition, IBM has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Aligning sales with marketing

– From the outside it seems that IBM needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Services industry have deep experience in developing customer relationships. Marketing department at IBM can leverage the sales team experience to cultivate customer relationships as IBM is planning to shift buying processes online.

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IBM Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of IBM are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, IBM can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help IBM to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. IBM can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. IBM can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.

Better consumer reach

– The expansion of the 5G network will help IBM to increase its market reach. IBM will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Buying journey improvements

– IBM can improve the customer journey of consumers in the Computer Services industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

Leveraging digital technologies

– IBM can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for IBM to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for IBM to hire the very best people irrespective of their geographical location.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, IBM can use these opportunities to build new business models that can help the communities that IBM operates in. Secondly it can use opportunities from government spending in Computer Services sector.

Identify volunteer opportunities

– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. IBM can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– IBM has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Developing new processes and practices

– IBM can develop new processes and procedures in Computer Services industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.

Creating value in data economy

– The success of analytics program of IBM has opened avenues for new revenue streams for the organization in Computer Services industry. This can help IBM to build a more holistic ecosystem for IBM products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Learning at scale

– Online learning technologies has now opened space for IBM to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

Use of Bitcoin and other crypto currencies for transactions in Computer Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for IBM in the Computer Services industry. Now IBM can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats IBM External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of IBM are -

Increasing wage structure of IBM

– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of IBM.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents IBM with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.

Technology acceleration in Forth Industrial Revolution

– IBM has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, IBM needs to keep up with the evolution of technology in the Computer Services sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

Backlash against dominant players

– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of IBM business can come under increasing regulations regarding data privacy, data security, etc.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. IBM will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Stagnating economy with rate increase

– IBM can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Computer Services industry.

Consumer confidence and its impact on IBM demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Computer Services industry and other sectors.

Aging population

– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.

New competition

– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for IBM in the Computer Services sector and impact the bottomline of the organization.

Shortening product life cycle

– it is one of the major threat that IBM is facing in Computer Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

High dependence on third party suppliers

– IBM high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, IBM can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate IBM prominent markets.

Regulatory challenges

– IBM needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Computer Services industry regulations.

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Weighted SWOT Analysis of IBM Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at IBM needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants. We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –

First stage for doing weighted SWOT analysis of IBM is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.

Second stage for conducting weighted SWOT analysis of IBM is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.

Third stage of constructing weighted SWOT analysis of IBM to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that IBM needs to make to build a sustainable competitive advantage.

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