Ibm turnaround group-9
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The document summarizes the history and transformation of IBM from 1911 to 1995. It describes how IBM was founded, grew to dominate the computer industry, but then struggled in the 1980s and 1990s as the industry shifted to personal computers and client-server models. Lou Gerstner was hired as CEO in 1993 to lead a turnaround. He cut costs, reorganized the business around customers, and stabilized IBM's financial position. By 1995, IBM's revenues had grown to $72 billion and net income reached $4.2 billion under Gerstner's new leadership and strategic focus on services, software, and distributed computing.
Ibm turnaround group-9
- 1. Group 9, Section C Palash Agarwal (11P095) Rohan Khandelwal (12P164) Manoj Kapoor (12P147) Mohit Ambwani (12P152) Saket Saurabh (12P165)
- 2. IBM – The making of the Giant Founded in 1911 as CTR (calculated - tabulation - Record) Emphasis on corporate culture of honor and loyalty 1924: renamed as IBM 1954: Thomas Watson II successor Led the company to dominate the global computer companies Automated calculation and information storage system innovations 1960s and years: Be antitrust target 1980: Be a good business problems solution provider
- 3. IBM – The making of the Giant 1990: $ 6,000,000,000 net revenue of $ 69 billion The world's second highest profitable enterprise 1991 to 1993; Two CEO heirs had resigned Gerstner took over in 1993 1994: Turnaround 1995 to 1999: Return as industry leader
- 4. Computer Industry, 1981-1996 1981 launch of the PC 1984 to 1989 compound annual growth rate of 74% 1980s: market capitalization of $ 50 billion (more than all the other computer market segments) In the late 1980s: Networked Client and server-side Lower cost, higher flexibility, open environment to facilitate exchange of information Decline in demand for mainframe computers Distributed Computing (personal productivity) vs mainframes (enterprise backend solutions) Corporate buying decisions were no longer focused on information management unit The mid-1990s: Browser & JAVA Information Use static dynamic trading mechanism New Business: E-commerce
- 5. Recession and Recovery Attempts: 1991 ~ 1992 Burst on the scene like a defeat After 1984 sales, return on assets and shareholders began to decline Rent-oriented Sale-oriented (the pursuit of short-term revenue) Increased maintenance service revenue Loss of rental income from long-term stability Competitors Faster time to market, more competitive prices New product failure Customer relations deteriorated Poor compatibility 1988: organizational transformation Decentralized decision making and accelerate speed to market Six Sigma
- 6. Recession and Recovery Attempts: 1991 ~ 1992 1991 Loss Mainframe’s rapidly dropping demand Ignoring the client / server market Mid-market entry strategy fails 5000 kinds of hardware products & 20,000 kinds of software products Different products with the same parts, but the design is different Different programs designed to accomplish the same thing only for 128 Chief Information Officer Data processing costs were more than three times the industry average
- 7. Recession and attempt recovery: 1991 ~ 1992 Attempt resuscitation Cut staff allowances Lay off employees VR (still could not meet their financial goals) involuntary retirement (in the history of the same) 1991: disappearance of lifetime employment policy Till 1993: more than 40,000 job cuts
- 8. Challenges facing Gerstner Lack of customer intimacy Inefficiency Lights-on high cost Too big organization Too long time to market Culture: too long celebration of past success Weak corporate leadership
- 9. New Leadership and Revitalization: 1993 ~ 1994 1993: Appointment of the new CEO Gerstner History of a non-executive director Background and Technology irrelevant past First Impressions CEO of the same state with customers Competence for the company's most important job is the contact with the customer Focus on fundamental business issues
- 10. New Leadership and Revitalization: 1993 ~ 1994Convince the board to change the placement system within the company is important to prevent brain drain 23 were excluded from the most senior director in the new placement measures Beaten conservatives may hinder reforms Beaten factions Requested the competent business reports and action reports and in-depth interviews Visit sustained industry leader and customer Out of touch with the market research findings Lack of sophisticated marketing Lack of public policy Regressed customer relationships
- 11. Integrated IBM Decided not to split Provide integration and creating solutions that IBM should do Global Features 8:00 Principles (Exhibit 3) More globalized, but also process-centric outlook
- 12. Line Manager's Responsibility and Ownership Primary task: to lower the costs as soon as possible Secondary: Each program was redesigned to comply with globally applicable Line managers make their own decisions Bear hug Customer Operations
- 13. Cost Hiring external personnel chief financial Personal style is quite different from IBM's organizational culture Evaluate each business costs and compared with peers Launched another wave of involuntary separations (approximately 35,000 people) Cut complicated pricing system Sale of non-core business 1993 third quarter price rise from the lowest point twice Turnaround in the fourth quarter of 1993.
- 14. Reorganization 12 senior executives from the corporate executive committee Focus on strategic issues Composed by the 35 top global management including Regional Personnel President New evaluation system Execution results Clear rewards and punishments The regional level business organization originally divided into two categories Responsible for customer relations Product Specialist Report to Product Group Preparation in business and sales organization (Matrix) Preparation of changing to adopt new products, utilities and globalization program Board changes
- 15. Rebranding American Express hired former colleagues to promote global image advertising Re-evaluate the status The fractional concentration of resources Leading PC hired former colleague departments The end of the many brands left unattended ThinkPad With the Pentium processor event to re-establish brand loyalty Comprehensive recycling Media commended (free advertising)
- 16. 1994's financial position Revenues of 64 billion dollars Net profit of 3 billion dollars
- 17. Stabilizing IBM's footsteps The new product strategy PC is still not IBM's expertise OS/2 was hit by Microsoft Windows Did not give up the mainframe From the diode technology (bipolar) the transition to complementary metal oxide semiconductor (CMOS) Abandon OS/2 and wafer manufacturing
- 18. Stabilizing IBM's footsteps Sources of growth Service Business Server Software Distributed Computing Software Middleware In order to compensate for lack of product lines mergers Collaborative communication software (Lotus) Software management software (Tivoli)
- 19. 1995's Financial Position Revenues of $ 72 billion Net Income $ 4.2 billion Outlook Make sure the network-related product strategy Identify hardware-related product strategy To establish large-scale software business
- 20. Looking to the Future Centralized organization is too complex to solve in the past, the program redundancy and solve the most pressing ills. But whether the company's future is still really fit it? Only one model line manager to be able to take full advantage of the company's size and integration of other features. But whether it can continue to make the right decisions, and to maintain revenue it? Execution is the key How to perform "We are integrated company" concept, it is the biggest challenge. Is where the problem lies.
- 21. Thank You