Why Do Large Established Companies, like Ibm, Find It So Difficult to Build Successful and Sustainable New Businesses?

IBM has been in business since 1911 and is known to have strong corporate pride and loyalty which ensures lifetime employment and work ethics (Lynda M. Applegate, Coporate Information Strategy and Management). The company has been doing very well until the first quarter of 1991, where IBM was reporting substantial losses between 1991-1993 and internal structure problem.

Since IBM is in the IT industry, it is consider being a fast and competitive industry where the company that comes up with the most innovative idea will gain a competitive advantage over the competitor. This made it very difficult for IBM to enter new markets because before IBM had a vision of “One IBM”, IBM is a large and mature company backed up by their traditional corporate culture and complicated internal business structure, which consist of 20 separate business unit which serve the same purpose and accomplish the same thing. Within the company it has 125 separate data centers worldwide and 128 CIOs. There were 31 private and separate networks and variety of configurations for PC installations. These complicated internal structures have made IBM costs above the industry average (Lynda M. Applegate, Coporate Information Strategy and Management). The inadequate structure of the company made the company inflexible to compete with younger companies because it is easier for younger companies to adapt to the new market, whereas if IBM was to do the same, it would require change to their traditional corporate culture and change in their internal business structure, which could cause problems within the company because big changes can affect employees.

The manager earning reward system is more directed at short term results than long term, which could lead managers to focus more on the existing markets. This makes IBM business model more focus on sustaining profits, rather than to move up in the market where they could make more profits. Due to lack of discipline, processes for selecting,