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

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for IBM (Germany)

Based on various researches at Oak Spring University , IBM is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing commodity prices, 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 Germany
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 -

Innovation driven organization

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

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.

Operational resilience

– The operational resilience strategy of IBM comprises – understanding the underlying the factors in the Computer Services industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.

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.

Cross disciplinary teams

– Horizontal connected teams at the IBM are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

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.

High switching costs

– The high switching costs that IBM has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.

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 Germany 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.

Ability to recruit top talent

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

High brand equity

– IBM has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled IBM to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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.

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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 -

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.

Capital Spending Reduction

– Even during the low interest decade, IBM has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Computer Services industry using digital technology.

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.

Products dominated business model

– Even though IBM has some of the most successful models in the Computer Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. IBM should strive to include more intangible value offerings along with its core products and services.

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.

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.

Compensation and incentives

– The revenue per employee of IBM is just above the Computer Services industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Slow to strategic competitive environment developments

– As IBM is one of the leading players in the Computer Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Computer Services industry in last five years.

Increasing silos among functional specialists

– The organizational structure of IBM is dominated by functional specialists. It is not different from other players in the Computer Services industry, but IBM needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help IBM to focus more on services in the Computer Services industry rather than just following the product oriented approach.

Need for greater diversity

– IBM has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

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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 -

Reconfiguring business model

– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help IBM to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. IBM can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, IBM can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.

Redefining models of collaboration and team work

– As explained in the weaknesses section, IBM is facing challenges because of the dominance of functional experts in the organization. IBM can utilize new technology in the field of Computer Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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.

Building a culture of innovation

– managers at IBM can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Computer Services industry.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for IBM in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Computer Services industry, and it will provide faster access to the consumers.

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.

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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 -

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.

Easy access to finance

– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. IBM can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, IBM may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Computer Services sector.

Environmental challenges

– IBM needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. IBM can take advantage of this fund but it will also bring new competitors in the Computer Services industry.

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.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for IBM in Computer Services industry. The Computer Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.

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.

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.

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.

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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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