Effects of Sales Force Restructuring Towards Ibm Success

[pic 1][pic 2]Republic of the Philippines

Taguig City

Taguig City University

General Santos Avenue Central Bicutan Taguig City

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Case Study

In

Global Management

Submitted By:

        Jocelyn C. Villamor

        BSBM A41am

                                                        Submitted to:

                                                                Dr. Queencifel B. Mabugay

Company Case 17

IBM: Restructuring the Sales Force

TAKING OVER

In early 1993, IBM’s Board of Directors decided the time was right for dramatic action. The once-proud company had seen its sales fall from almost $69 billion in 1990 to $64.5 billion in 1992. Moreover, in the same period, profits had plunged from $5.9 billion to a loss of $4.96 billion. In April, the Board hired Louis V. Gerstner. Jr., a former McKinsey Company consultant and R. J. Reynolds CEO, to serve its new Chairman and Chief Executive Officer and to turn the company around.

        In July 1993, just three months into his new job, Gerstner announced his first major strategic decision. Gerstner identified IBM’s sales force as a key source of the company’s problems. Many observers had expected that he would restructure the sales force in his efforts to refocus the company. These observers felt that IBM’s sales force was too large and unwieldy and that it was too slow to change to meet changing customer needs. However, Gerstner surprised many people by announcing that he would postpone his decision as to what to do about IBM’s sales force.

        In an internal memo to his 13 top managers, Gerstner concluded that, “it is clear to me that our current (marketing) organization doesn’t always function well, i.e., doesn’t always permit us to serve our customer in the most efficient and effective way”. However, he noted, “I don’t want to undertake a major reorganization of IBM at this time.” Gerstner argued that radical reform would pose unacceptable risks to customer loyalty. Therefore, he had decided to try to make IBM’s current sales and marketing systems work better.

GETTING INTO TROUBLE

You might wonder how IBM, one of the largest and most successful companies in the world, had gotten into such a fix. In early 1994, in his introduction to the 1993 IBM Annual Report, Gerstner wrote that IBM’s problems resulted from the company’s failure to keep pace with rapid industry change. He also argued that IBM had been too bureaucratic and too preoccupied with its own view of the world. He suggested that the company had been too slow to take new products to market and had missed the higher profit margins that are typical of the computer industry early in a product’s life cycle.