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Five Forces That Shape Strategy; I.B.M

The International Business Machines (I.B.M) Company is a multinational corporation in America that has been in operation since 1911. It is known to market and manufacture computer software and hardware. The management has in the recent past adopted a strategy that has seen the company’s profit margin swell and stock prices surge.

After Samuel J. Palmisano took over from Louis V. Gerstner Jr, in 2002, he focused on taking the company to a unique strategic position. The move to sell the company’s personal computer business was driven by the need to venture into unique business that yielded high profits. The personal computer business was viewed to be a fading low-margin business. The business also has a lot of substitutes and the power of buyers and suppliers is also quite high (Porter, 82). IBM shifted its innovation focus to software and other related services which aimed to curb these strategic issues.

Despite being approached by Dell and other private equity firms, the company decided to sell the personal computer business to China’s Lenovo. The strategy behind this move was to take advantage of the Chinese government support when it came to investment in businesses. The company also targeted the large Chinese market which was also controlled by the Chinese government. This was a barrier in itself and it is meant to keep in check the number of new entrants into the industry (Porter, 85). The rivalry that existed amongst the company’s competitors operating in the United States of America was also eliminated because the company now focused majorly on the Chinese and the general global market. The approach to sell the personal computer business turned out to be a very good idea in the long run. This is because by the time of his retirement, Mr. Palmisano’s strategy had helped raise the I.B.M’s stock value to $217 billion, which was almost four times that of its rival, Hp.

Works Cited

Porter Michael E. The Five Competitive Forces That Shape Strategy. Harvard Business Review (2008): 78-93. Print