Ibm's Decade of Transformation: Turnaround to Growth

1. What factors led to IBM’s success during the 1960s and 1970s and its problems during the late 1980s and early 1990s.

The factors that led IBM’s success during the 1060s and 1970s could be analyzed by examining its competitive strategic positioning. According to Applegate’s textbook, there are four dimensions that can define a company’s strategic positioning, including product positioning, market positioning, business network positioning, and boundary positioning. (Applegate, p.44)

Given the definition of product positioning, we could determine that IBM, during 1960s and 1970s, offered a competitive product, the 360 series computer, which is the first family of products based on an integrated semiconductor chip and offering interchangeability of components. At the same time, IBM offered several IT innovated products such as hard disk, supermarket checkout station, and ATM. Referred to Applegate’s concept on how IT can be used to pursue revenue growth, IBM’s revenue growth driver was mainly based on launching new IT products. (Applegate, p.110) As for market positioning, IBM’s customers are basically domestic and international large companies. It sold products to technical buyers through key account sales person. Back to 1960s and 1970s, IBM was assumed to be monopoly in the industry. It controlled the business network since it was somehow the only company that could offer business computers. By this, IBM erected the barriers to entry.

Signs of problems were appeared in 1984 as its return on sales, assets, and equity slowed down. There were external and internal reasons for IBM’s value destruction. First, it converted a leasing-oriented business for mainframes into a sales-oriented business. During the same time, need to interconnect mainframe, midrange, and increasingly mobile personal computers led to fewer purchases of mainframes, which contributed 70 percent to 80 percent of its profits in late 1980s. Second, IBM used mainframe thinking to the much faster revolutionary path of PC. In addition, it failed to make effort to sell its PCs. Last, internal turf battles absorbed IBM’s energy that should be spent on marketplace; moreover, organizational silos made its business process inefficient and product complexity worsened the inefficiency. According to business model capability audit frames analysis, it is clearly that IBM’s capability in late 1980s and early 1990s was weak in terms of its business process, organization, and culture. (Applegate, p.46)

2. Evaluate IBM internal IT infrastructure before and after Gerstner's re-org. Which structure was most beneficial for IBM?

Before re-org

Before Gerstner’s re-organization, IBM was gigantic but cumbersome. It had 20 business units that sold 25,000 products. There were different designs for components that served same purpose in