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A presentation for the course BA291 (Business Policy), Master in Business Management.
Graphics are courtesy of IBM Corporate web site http://www.ibm.com/us/
Preface
Analyses were based on the given facts of the case (c.1994), although when applicable recent data and events were taken into account. An analysis of IBMs Mission Statement of 2004 was made, instead of creating a new one. Internal and External Audit are based on the IBMs guidelines and other readings. Actual Financial Statements for the years 20002005. Instead of a projection for 1994-2000, an analysis is made between 1994 versus 2005.
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Preface
Analyses were based on the given facts of the case (c.1994), although when applicable recent data and events were taken into account. An analysis of IBMs Mission Statement of 2004 was made, instead of creating a new one. Internal and External Audit are based on the IBMs guidelines and other readings. Actual Financial Statements for the years 20002005. Instead of a projection for 1994-2000, an analysis is made between 1994 versus 2005.
IBM Building, NYC
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Corporate Profile
New Orchard Road, Armonk, New York, U.S.A. Industry: Information Technology Sector: Diversified Computer Systems Rankings: Fortune500 Apr 17 2006: 10th overall FT Global 500: 13th overall Dow Jones: Global Titans (Industrial) S&P 500 Listed IDC: No.1 in 2Q 2006 external disk storage. Global Impact: Celebrated 25th anniversary of IBM 5150, the $1,565 16K-memory PC developed by Don Estridge, the "father of the IBM PC, debuted on 12 Aug 1981.
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Business Operations
IBM delivers on demand solutions through the following business segments: Hardware products like Servers, Storage, Personal systems, Printing systems and Retail store solutions Software Connect operating systems, business processes, and applications seamlessly. Research Innovative technologies that produce leading-edge solutions.
Data Source: IBM Corporate: http://www.ibm.com/us/
Services Comprehensive IT services integrated with business insight to reduce costs, improve productivity, and assert competitive advantage. Financing A leading provider of financing and asset management services to companies selling or acquiring IT related products and services. Technology Develop, market and deliver leading chip technologies and services.
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Corporate Segments
Global Services Strategic Outsourcing. Business Consulting Services, Integrated Technology Services, Business Performance Management, Center for Business Optimization, On Demand Innovation Services, Application Management Services, e-Business Hosting Services, Hardware maintenance. Hardware Servers, Storage, Microelectronics, Engineering & Technology Services, Printer Systems, Retail Store Solutions. Software Middleware (WebSphere, IM, Lotus, Tivoli, Rational), Operating Systems.
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Corporate Segments
Global Financing Client Financing, Commercial Financing, Remarketing. Enterprise Investment Product Lifecycle Management, Document Processing Technology. IBMs Worldwide Organizations Sales & Distribution, Research, Development and Intellectual Property, Integrated Supply Chain Corporate HQ Corporate Legal, Global Skills Marketplace, Information Technology Real Estate Site Operations
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Geographical Operations
Americas U.S. revenues grew 3%, Canada grew 7% and Latin America grew 11%. in 2005. Europe/M.E./Africa Revenues in U.K. 7%; France 2%; and Spain 5%, while Germany and Italy declined 6% and 7%. Asia Pacific Declined 5% in 2005 versus 2004. Japan & China revenue grew 8% and ASEAN revenue grew 20%, led by India (55%). OEM Revenue increased in 2005 versus 2004 primarily due to improved manufacturing yields for game processors.
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IBMs Vision
The last thing IBM needs right now is a vision. . . . I want to stay away from abstractions and deal with the marketplace. Our mission is to be the most successful information technology company in the world. O.K., you want a vision statement? Fine, you got it, now lets go back to work.
CEO Louis Gerstner, Jr.
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At IBM, we strive to lead in the creation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions and services businesses worldwide.
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Yes Presumed by word lead. Based on IBMs New Industry Model. No No Mentioned in 2005s IBMs Business Model Mentioned in 2005s IBMs Business Model and Business Conduct Guidelines.
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At IBM, we strive to lead in the creation, innovation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We translate these advanced technologies into competitive value for our individual and corporate customers through our professional on-demand solutions and dedicated business services, while consistently generating high returns for our shareholders, and a shared commitment to our employees and the world.
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Business Values
Dedication
to every client's success Innovation that matters, for our company and for the world Trust and personal responsibility in all relationships.
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Help our clients succeed in delivering business value by becoming more efficient and competitive through the use of business insight and information technology solutions; Provide long-term value to our shareholders.
small s and big E (Less focus on strategic development, maximum push on EXECUTION)
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IBMs business model, developed over time, is through Strategic investments in services and technologies that have the best longterm growth and profitability prospects based on the value they deliver to clients. A commitment to employees and the communities in which it operate.
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IBMs on demand business model, based on 2003s e-business on demand model, considers four essential characteristics:
Responsive intuitively responsive to dynamic, unpredictable changes in demand, supply, pricing, labor, and competition. Variable flexible in adapting to variable cost structures and processes associated with productivity, capital, and finance. Focused concentrated on core competency, differentiated tasks and assets, with tightly integrated strategic partners. Resilient capable of managing changes and threats with consistent availability and security.
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IBMs on demand business model, based on 2003s e-business on demand model, considers four essential characteristics:
Responsive intuitively responsive to dynamic, unpredictable changes in demand, supply, pricing, labor, and competition. Variable flexible in adapting to variable cost structures and processes associated with productivity, capital, and finance. Focused concentrated on core competency, differentiated tasks and assets, with tightly integrated strategic partners. Resilient capable of managing changes and threats with consistent availability and security.
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Integrated integration of core processes and systems so that business can flow inside companies and across multiple enterprises. Open As the basis for integration, open technical interfaces and agreed upon standards are essential. Virtualized Grid computing will allow distributed computing resources to be shared and managed as a single large, virtual computer. Autonomic The enormous complexity of tomorrows computing systems must rely on technology that manages itself.
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Integrated integration of core processes and systems so that business can flow inside companies and across multiple enterprises. Open As the basis for integration, open technical interfaces and agreed upon standards are essential. Virtualized Grid computing will allow distributed computing resources to be shared and managed as a single large, virtual computer. Autonomic The enormous complexity of tomorrows computing systems must rely on technology that manages itself.
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Long-Term Objectives
Long-Term Objectives
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Corporate Culture
Respect for the Individual, for his rights and dignity. Service to the Customer. Excellence Must be a Way of Life. Managers Must Lead Effectively. Obligations to Stockholders Fair Deal for the Supplier. Good Corporate Citizenship
Ibm.swf
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Concentric Diversification, e.g., Ascential in 2005, Candle and Maersk Data in 2004, and Rational in 2003; to focus more on enterprise and middleware software.
[Acsential, provider of enterprise data integration software for 1.14Bn, plus 5 service- and 9 software-related companies.]
Divestiture, e.g., On December 31, 2002, IBM sold its HDD business to Hitachi for approximately $2Bn. Divested its Personal Computing business to Lenovo on April 30, 2005 for 1.75Bn. Strategy employed to focus more on high-end hardware, such as servers.
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Concentric Diversification, e.g., Ascential in 2005, Candle and Maersk Data in 2004, and Rational in 2003; to focus more on enterprise and middleware software.
[Acsential, provider of enterprise data integration software for 1.14Bn, plus 5 service- and 9 software-related companies.]
Concentric Diversification, e.g., Ascential in 2005, Candle and Maersk Data in 2004, and Rational in 2003; to focus more on enterprise and middleware software.
[Acsential, provider of enterprise data integration software for 1.14Bn, plus 5 service- and 9 software-related companies.]
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Joint Venture,
Cell microprocessor with Sony and Toshiba in 2005 for a 4GHz supercomputer. Wireless chip with Chartered Semiconductor, Infineon and Samsung created its first siliconfunctional circuits using a 45 nm production process on 300 mm wafers.
Product Development, e.g. open technology. Market Development, e.g. Business Transformation Services, ServiceOriented Architecture.
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Based on the existing Corporate Profile, Competitive Profile, External Factor Evaluation, and Internal Factor Evaluation Matrices, what specific strategies and longterm objectives should be recommended to sustain growth, increase profitability and maintain its competitive advantage?
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Market Share Financial Position Quality, Research & Development Customer Loyalty / CRM Technology Leader Global Innovation Forerunner Knowledge Management
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Systems and Financing: World leader in server sales. Software: World leader in middleware and the secondlargest software business overall. Services: World leader in IT services and consulting.
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Leader in Middleware
Leader in Middleware
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A+ A-1
A1 Prime-1
AAF1
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Sources of Funds
For the Year ended Dec 31
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Market Capitalization Revenue (2005) Gross Margin LT Growth (5 year) IT R&D (2005) EPS p.a.(1995-2005) Return on Investment Return on Assets Return on Equity Employees
With more than 3,000 scientists and engineers working at eight labs in six countries. RD&E expense was $5.842B in 2005 (MSFT: 6.2B), $5.874B in 2004 and $5.314B in 2003.
More U.S. patents than any other company for the thirteenth consecutive year in 2005.
With 3,248 patents earned in 2004 2000-2005: received more than 13,000 patents -approximately 5,400 more than any other patent recipient.
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With more than 3,000 scientists and engineers working at eight labs in six countries. RD&E expense was $5.842B in 2005 (MSFT: 6.2B), $5.874B in 2004 and $5.314B in 2003.
More U.S. patents than any other company for the thirteenth consecutive year in 2005.
With 3,248 patents earned in 2004 2000-2005: received more than 13,000 patents -approximately 5,400 more than any other patent recipient.
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Software accounted
for more than 40% of the 3,415 U.S. patents awarded to IBM in 2003. Nearly three times as many patents as Microsoft, Twice the combined total awarded to its four closest software industry competitors.
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Competitors Pitch
Invent
Information on Demand
Business on Demand
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Source: Steve LaBelle and Brian Scheld (2004). CRM done right: executive handbook for realizing the value of CRM, IBM Business Consulting Services, IBM Corporation, pp. 1-34.
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Except for 1995 and 1996, an annual average of five (5) advanced technologies were pursued and completed by IBM, thereby abiding with its own guiding principle of Innovation that matters, for our company and for the world. The adoption of the New Models in 2001 positively turned the company around in terms of revenues and technological advancement.
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1990: RISC System/6000 1991: Magnetoresistive heads 1992: ThinkPad 1993: IBM on space (SS/Endeavor, Hubble) 1994: Supercomputing 1995: elementary particle glueball 1996: Network Computers for e-Business 1997: e-Business; Deep Blue 1998: 1 GHz microprocessor (experimental) 1999: system-on-a-chip.
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IBM eServer, a new generation of servers for managing the e-Business needs. Commercial version of ASCI White (RS/6000 SP) -- the most powerful supercomputer in the world. A joint project of IBM and Microsoft using Windows 2000. NetVista brand of new PC devices, Internet access devices and thin clients. ThinkPad X series, the ultra-portable (slimmer and lighter) full-featured notebook computer. Storage Tank, a universal storage system capable of sharing data across any storage hardware, platform or operating system. ViaVoice for Windows, Release 8.0, a family of voice recognition software.
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eServer p690 (Regatta) as the worlds most powerful UNIX server T220, the worlds highest resolution flat panel monitor, with a 22.2-inch screen that shows 12times more detail than current monitors. Ruthenium magnetic coating quadruples the data density of current HDD products. WebSphere Translation Server software enabling businesses to provide real-time Web pages, e-mail and chat in multiple languages
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IBM Director, a SMS solution automatically reduces server downtime by predicting and repairing software failures before they happen. Blue Sky at the U.S. National Center for Atmospheric Research for predicting climate changes. Strained Silicon a breakthrough method to alter silicon to boost chip speeds by up to 35 percent. Project eLiza initiative, a multi-billion dollar program to create a realm of self-managing servers requiring little or no human interaction.
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ThinkVantage Technologies, PC solutions to help customers drive down IT support costs Grid Computing enhances Web services by coordinating global applications and resources at various locations, regardless of the underlying implementations and services. BlueSpace of IBM and Steelcase Inc -- an interactive and personalized office of the future. Worlds smallest working silicon transistor (6nm in length, and at least 10X smaller than the state-of-the-art production transistors).
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Enterprise Privacy Authorization Language (EPAL) provides enterprises automation of the enforcement of privacy policies among IT applications and systems. The worlds first smallest solid-state singlemolecule light emitter, a molecular research breakthrough. ThinkCentre S50 desktop, a redesigned PC with easy access, tool-free chassis design, simple maintenance, upgrades and customer service. DB2 Information Integrator software to instantly access, integrate, manage and analyze all forms of info on any platform across & beyond the enterprise.
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MareNostrum, based in Spain, the most powerful supercomputer in Europe at a sustained performance of 20.53 to 40.00 teraflops. High-speed photodetector to increase the speed at which information travels to and from microchips. SurePOS 500 point-of-sale systems for the demanding food service and hospitality industries. TotalStorage, integrates storage, server and software retention components into a single, securable cabinet. Infoprint multifunction printer, enables customers to print, copy, fax and scan from a single machine.
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Cell microprocessor (jointly with Sony and Toshiba) with supercomputer-like floating point performance with observed clock speeds greater than 4 Ghz. Grid and Grow, a packaged set of software, hardware and services to deliver the benefits of Grid computing to businesses of all sizes. Watson Blue Gene (BGW), the worlds largest privately owned supercomputer, installed at the IBM TJ. Watson Research Center in Yorktown Heights, N.Y. With a processing speed of 91.29 teraflops. Viper, next-generation DB2 database, designed to help customers manage and access data across a service oriented architecture (SOA).
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BladeCenter LS41 server using AMDs Opteronbased chips offering 25% greater memory throughput. (01 Aug) System z9 Business Class special-purpose mainframe, with starting price to $100,000 for search, regulatory compliance and security growth. (28 Aug) On Demand Innovation Services (ODIS) to provide customers any sort of strategic view possible for 20 years into the future (01 Sep)
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Global, Multidisciplinary, Collaborative and open. 2004: GIO 1.0: focused on 3 broad societal themes: Healthcare, Government and its Citizens, and the Business of Work and Life 2005: GIO 2.0: focused on the Future of the Enterprise, Transportation and the Environment.
Ecosystem participants included representatives
from academia, governments, nongovernmental organizations (NGOs), major multinational corporations, venture capital firms, think tanks and other leading organizations.
Data Source: IBM Corporate: http://www.ibm.com/us/
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Innovation Enablers
Smart objects The connectedness of every thing Supercomputing for everyone Information put to work Collaboration and co-creation The marketplace for expertise The virtual corporation
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Early adopter in 1994, IBMs four KM Portals: Asset management (BCSs KnowledgeView, Global Services Worldwide Asset Reuse, Software Divisions Xtreme Leverage) Expertise Location (BluePages: a corporate-wide directory; Knowledge Point for consultants with research and expertise location). Collaboration (Collaboration Central for collaboration guidance, tools and best practices, Jams to collaborate and share knowledge on a particular topic; ThinkPlace is focused on innovation). On-demand Learning (On Demand Workplace portals focus on critical job roles within IBM; Learning@IBM an application that streams profile-driven learning right to learners' desktops).
IBM earned KMWorld's KM Reality Award for 2005.
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Computer Internet Penetration Hardware Commoditization Technological Development Computer Transformational Services Services Growing Security Threat Data Protection
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EduCause 2006 Survey: Security and Identity Management edges out Funding IT as the top challenge. Gartner: Compliance, security and mobility for Midsize Enterprise will affect 2006 IT decisions. Sarbanes-Oxley compliance requirements
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Areas: Enterprise Technology Security/Compliance Virtualization Open Source New Technology: Pervasive Computing Knowledge Management Real Time Deep Computing Ease-of-use
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Michael E. Daniels
Senior VP, Global Technology Services, IBM Global Services
Nicholas M. Donofrio
Executive Vice President Innovation and Technology
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Global Delivery Centers Globally Integrated Manufacturing Globally Integrated Corporate Functions Global Skills Marketplace
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Global Delivery Centers Globally Integrated Manufacturing Globally Integrated Corporate Functions Global Skills Marketplace
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IBM garnered clients from countries with the biggest population: considered as all potential customers : China, India, Brazil, and Russia.
Selected GDPs 1999-2008
R.P. ASEAN USA OECD World
GDP 10.0 8.0 6.0 4.0 2.0 0.0 (2.0) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year
GDP
8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
Source: World Bank, CRU Forecast Data Source: IBM Corporate: http://www.ibm.com/us/
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Worldwide, 45,000 business partners and 33,000 suppliers connected to IBM through the Web. IBM clients include
the five largest companies in India and five of the top 15 companies in China. 2004 revenue growth
in Russia was 75 percent, in Brazil 15 percent, 45 percent in India, and 25 percent in China.
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North America
Rochester, MN, USA Poughkeepsie, NY, USA San Jose, CA, USA Guadalajara, Mexico
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Europe
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Asia Pacific
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North America
Asia Pacific
Rochester, MN, USA Poughkeepsie, NY, USA San Jose, CA, USA Guadalajara, Mexico
Europe
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Legal Corporate Legal Human Resources handled by Global Skills Marketplace Finance handled by Global Financing Information Technology handled by inhouse Services Business. Real Estate Site Operations
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IBMs Global Services is the world's largest information technology services and consulting provider. Approximately 190,000 professionals in some 160 countries, revenues totaled $46.2B in 2004.
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IBMs Global Services is the world's largest information technology services and consulting provider. Approximately 190,000 professionals in some 160 countries, revenues totaled $46.2B in 2004.
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Sales Support Center; Deal Hubs Restructured operations in Europe New lead-management process
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Navi Radjou, (2005) IBM Transforms Its Supply Chain To Drive Growth, March 24 2005.
Data Source: IBM Corporate: http://www.ibm.com/us/
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Shortage of developers with mainframe skills. Tight labor market for experienced audit professionals.
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Shortage of developers with mainframe skills. Tight labor market for experienced audit professionals.
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IBMs Strategy: made 500 of its software patents freely available to anyone working on opensource projects. In 2004,IBM collected $1B or more from licensing its invention.
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IBMs Strategy: made 500 of its software patents freely available to anyone working on opensource projects. In 2004,IBM collected $1B or more from licensing its invention.
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July 31, 2003, Cooper et al. v. IBM Personal Pension Plan and IBM Corp. Agreement to pay $314.293B to class members finalized May 2005. May 2005, the Louisiana Supreme Court denied a motion to review and reverse a Louisiana state courts certification of a nationwide class suit filed in 1995. No date has been set for trial. January 24, 2006, Rosenburg, et. al., v. IBM, alleges the company failed to pay overtime wages pursuant to Fair Labor Standards Act.
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Matching Stage
TOWS Matrix
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TOWS/SWOT Matrix
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Industry Data based on Reuters, CNN Money, Yahoo Financials, MarketWatch websites
% Industry Sales Growth Rate, three-year average IBM Data based on 2005 Annual Report
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Industry Data based on Reuters, CNN Money, Yahoo Financials, MarketWatch websites
% Industry Sales Growth Rate, three-year average IBM Data based on 2005 Annual Report
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IBMs IE Matrix
Note: IFE and EFE weighted scores per segment are based on respective, i.e., different factors than IBM as a firm
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IBMs IE Matrix
Note: IFE and EFE weighted scores per segment are based on respective, i.e., different factors than IBM as a firm
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IBMs IE Matrix
Note: IFE and EFE weighted scores per segment are based on respective, i.e., different factors than IBM as a firm
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Short-Term Recommendations
Capitalize on technological, business and social trends and the need of enterprises to innovate in addressing those trends; Maintain market-share leadership in systems, middleware software and services, as a platform to drive growth; Focus investment and resources on emerging growth areas, including Business Performance Transformation Services and emerging countries;
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Short-Term Recommendations
Continue IBMs global integration for productivity gains and higher value in service delivery; Further IBMs leadership in innovation initiatives, advanced semiconductor design and development, collaborative intellectual capital, business process expertise and integration, and advanced supercomputing systems; Acquire businesses that contribute strategically to its portfolio, and exit those that no longer support its strategy for innovation and higher value.
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Long-Term Recommendations
Monitor economic environment and corporate spending budgets. Leverage internal business transformation and global integration initiatives. Spearhead innovation initiatives. Push for open standards. Continue investing in growth opportunities.
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