Fall of Ibm
I. Executive Summary
The purpose of this case study analysis is to analyze the situation of IBM in the 1990s, to come up with possible mutually exclusive alternatives for IBM’s management and ultimately, to recommend a possible strategy to regain back IBM’s throne in the industry.
The problem of the case study is all about the survival of IBM in a much more competitive market ever encountered by the company. And also, overcoming new challenges brought about IBM’s new management and the dynamic technological environment.
The methods of analysis used for this case study are the Porter’s Five Forces Model and the ANSOFF matrix analysis. Brief explanations were provided in …show more content…
Customer demand drove the prices of IBMs products down to cope with the existing and unavoidable price competition. Switching costs of buyers are also becoming low, as there are many product choices for the buyers. Consumers began to feel more comfortable about buying clones from companies that promised quality support and service at low costs. Thus, bargaining power of buyers is assessed to be high. * Competitive Rivalry: HIGH
Competition was increasing from companies that were trying to find ways to attract IBM’s customers and share in the huge revenues in the mainframe computer market. Early 1970s major competitors were Honeywell, Burroughs, Univac, NCR, and Control Data. Competitors began selling cheaper and high performing IBM compatible central processing units that posed a threat to the company. The end of the leasing program also led to increased competition from independent computer leasing companies that would buy older mainframes and then sell the older processors at a price that was frequently only 10% of the cost of IBMs newest machine. These companies were also said to dismantle mainframes to make smaller computers. Moreover, entry of Japanese competitors posed a threat to IBM because they had the technical capability to build a powerful computer that matched IBM’s mainframe system. Customers began buying clones from competing