ANALYSIS ON THE FIVE COMPETITIVE

FORCES THAT SHAPE STRATEGY

(By Michael E. Porter)

ON

IBM INDIA LTD.

Under the guidance of: Prepared By:-

Mr Shibashish Chakraborty Anupam Mathur
Faculty Guide- IBS Kolkata Anumita Banerjee
Amit Kumar Dhigra
Avisek Dey
Attrayee Maitra
 TABLE OF CONTENTS

1) ACKNOWLEDGEMENT
2) MISSION AND VISION
3) COMPANY HISTORY
4) HISTORY OF COMPANY LOGO
5) IBM
6) IBM INDIA
7) BUSINESS LINES
8) PORTER’S FIVE FORCE ANALYSIS MODEL

i. Bargaining power of buyers

ii. Bargaining power of suppliers
iii. Existing industrial rivalry
iv. Threat from new entrants
v. Threat from substitutes
vi. Jockeying in the industry

9) CONCLUSION
10) RECOMMENDATION
11) BIBLIOGRAPHY
 ACKNOWLEDGEMENT

This report has been made possible through direct and indirect support of various
people for whom we wish to express our appreciation and gratitude.

Nothing in the World can be achieved without proper coordination. Every work, be it
of marketing, finance, production or successful launching of a product is the result of
teamwork. This project could not have seen the light of the day without the
coordination of Mr. Shibashish Chakraborty, our faculty guide and Mr Kallol Sen,
Business Manager- Sales, IBM (Kolkata). We would like to express our special thanks
and gratitude for guiding us in our research project. Without his overall guidance and
help, the project may not have been completed.

Anupam Mathur
Anumita Banerjee
Amit Kumar Dhigra
Avisek Dey
Attrayee Maitra
MISSION & VISION OF IBM:

At IBM, we strive to lead in the invention , development and manufacture

of the industry’s most advanced information technologies including
computer systems software, storage systems and microelectronics.We
translate these advanced technologies into value for our customers
through our professional solutions , services and consulting businesses
worldwide.
COMPANY HISTORY

International Business Machines Corporation, abbreviated IBM and nicknamed "Big Blue" (for its
official corporate color), is a multinational computer technology and IT consulting corporation
headquartered in Armonk, New York, United States. The company is one of the few information
technology companies with a continuous history dating back to the 19th century. IBM manufactures
and sells computer hardware and software, and offers infrastructure services, hosting services, and
consulting services in areas ranging from mainframe computers to nanotechnology.

IBM has been well known through most of its recent history as the world's largest computer company
and systems integrator. With over 388,000 employees worldwide, IBM is the largest and most
profitable information technology employer in the world. IBM holds more patents than any other U.S.
based Technology Company and has eight research laboratories worldwide. The company has
scientists, engineers, consultants, and sales professionals in over 170 countries. IBM employees have
earned three Nobel Prizes, four Turing Awards, five National Medals of Technology, and five
National Medals of Science. As a chip maker, IBM has been among the Worldwide Top 20
Semiconductor Sales Leaders in past years, and in 2007 IBM ranked second in the list of largest
software companies in the world.

Timeline

1880s–1924: The origin of IBM

1925–1949: IBM's early growth

1950–1959: Postwar recovery and the rise of business computing

1960–1968: The System/360 era

1969–1979: The System/370 era

1980–1989: Information revolution, rise of software and PC industries

1990–1999: IBM's near disaster and rebirth

2000 and on: Recent trends

HISTORY OF COMPANY LOGO

The striped logo was first used in

1967, and fully replaced the solid
logo by 1972. The horizontal stripes
suggesting "speed and dynamism."

The logo that was used from

1956 to 1972. IBM said that the
letters took on a more solid, grounded
And balanced appearance.

THE LOGO THAT WAS USED FROM

1947 TO 1956. THE FAMILIAR "GLOBE"
WAS REPLACED WITH THE SIMPLE LETTERS
"IBM" IN A TYPEFACE CALLED "BETON BOLD."

THE LOGO THAT WAS USED

FROM 1924 TO 1946.
THE LOGO IS IN A FORM
INTENDED TO SUGGEST A GLOBE,
GIRDLED BY THE WORD "INTERNATIONAL”
IBM India
• IBM India is the Indian subsidiary of IBM. It has facilities in Bangalore, Delhi,
Kolkata, Mumbai, Chennai, Pune, Gurgaon, Noida and Hyderabad.
• Between 2003 and 2007, IBM's head count in India has grown by over 800%, from 9,000 in
2003 to 74,000 at the end of 2007. Since 2006, IBM has been the multinational with the largest
number of employees in India.

Growth and future initiatives

IBM stated that its India plans are for the long term & committed to invest $6 billion in the next three
years in India, triple the amount invested in the three years preceding the meeting.

IBM world-wide expects its revenues to be around $120 billion by 2010, of which Year Employees
nearly $86 billion (68%) would come from IBM Global Services alone, with an
estimate of about 200,000 employees. IBM India would account for 90,000 of these.
2002 4,900
Roughly translated, IBM's Indian employees would generate $35 billion of IBM's
revenues in 2010.
2003 9,000
IBM Global Services (now split to Business Services & Technical Services) was
called the "jewel in the IBM crown" by the Aberdeen group in 2003. For worldwide 2004 23,000
IBM, this is the group that contributes to more than half its global revenues ($54
billion in 2005) presently and growing at a healthy rate (8% in 2005). With half of 2005 38,500
global service employees to be located in India, IBM India's importance for the
global corporation can be easily fathomed.
2006 53,000
Current activities
2007 74,000
IBM India has now grown to an extent where it poses a stiff challenge to homegrown
Software companies of India in IT global delivery and manpower attraction/retention. 2008 98,000
It now operates the following business lines from India which contributes to
worldwide IBM in a global delivery framework: India Software Labs (ISL), India
Research Lab (IRL), Linux Technology Center, Global Business Services(GBS), Global Technology
Services (GTS), Global Service Delivery Center (GSDC), Global Business Solutions Center (GBSC),
Strategic Outsourcing (SO) and Business Transformation Outsourcing (BTO).

IBM India also sells its products and services for the Indian market and is the number one in Server
sales and Storage Solutions (Citation required). IBM India also has aggressive plans to target the
Small & Medium Businesses (SMBs) market.
BUSINESS LINES
Global Business Services

This division, along with Global Technology Services (which was together called IBM Global
Services earlier) has the largest employee head-count and operates in a global delivery framework.
Although it's impossible to quantify the value-contribution from this unit, since IBM GBS India
operates in the cost recovery mode, it is considered to contribute well in excess of $1 billion per
annum.

IBM India's package implementation & maintenance practice – with its SAP, Oracle, Siebel,
PeopleSoft, J D Edwards & Clarify practitioners is the biggest amongst all Indian IT companies.

This entity is organized as a consulting company, with divisions mirroring the functional expertise
within, for instance Finance Management Solutions (FMS), Customer Relationship Management
(CRM), Supply Chain Management (SCM) ,Energy & Utilities and so forth.

Application consultants from the fledgling SAP practice of IBM India are one of the most mobile of its
workforce – frequently globe-trotting to other IBM Geographies and benefitting from the nearly 3
decade old IBM & SAP alliance.

Linux Technology Center

IBM invests a billion dollars each year in its Linux efforts worldwide. This center in India contributes
in R&D of Linux related IBM products.

Business Transformation Outsourcing

With the acquisition of Daksh in 2004, IBM now also boasts of a formidable BPO service portfolio.
Associates and analysts work out of the Embassy Golf Links, Bangalore office in out-sourced business
processes of IBM clients. The company has send out more than 800 newly recruited employees in the
year 2008 and the process is still going on.
 PORTER’S FIVE FORCE ANALYSIS MODEL FOR IBM
BARGAINIONG THREAT OF
POWER OF BUYERS SUBSTITUTES

(MODERATELY HIGH) (LOW)

AS IBM OPERATES
BUSINESS IN B2B SOFTWARE IS THE
MARKET, MOST MAIN COMPONENT
ORGANIZATIONS OF THE COMPUTER
ALWAYS BUY IN WHICH USED TO
LARGE AMOUNT ENABLE A
PER ONE TIME. COMPUTER TO
THEREFORE, PERFORM SPECIFIC
CUSTOMERS HAVE TASKS. NOWADAYS,
POWER TO THERE IS NO
NEGOTIATE WITH PRODUCT TO
THE COMPANY. REPLACE OR
SUBSTITUTE
COMPUTER
SOFTWARE.

THREAT OF NEW BARGAINING

ENTRY POWER OF
SUPPLIERS (LOW)
(LOW)

THE HIGH CAPITAL IBM’S BUSINESS

INVESTMENT, HIGH EMPLOYS A WIDE
BUDGET FOR RESEARCH VARIETY OF
AND DEVELOPMENT, COMPONENTS,
AND HIGH EXISTING INDUSTRIAL RIVALRY SUPPLIES, SERVICES
TECHNOLOGY OF (HIGH) AND RAW MATERIAL
PRODUCTION CAN BE FROM A SUBSTANTIAL
SEEN AS FACTORS THAT THERE ARE MANY COMPUTER NUMBER OF
PREVENT NEW SOFTWARE MANUFACTURES IN SUPPLIERS AROUND
COMPETITORS TO TODAY GLOBAL MARKET. EACH THE WORLD.
ENTER INTO MANUFACTURE TRIES TO
COMPUTER DIFFERENTIATE ITS PRODUCT BY
TECHNOLOGY CREATING NEW PROGRAMMES
INDUSTRY. THAT MAKE A COMPUTER MORE
POWERFUL.
 BARGAINING POWER OF BUYERS (Moderately
Moderately High) (Anupam Mathur)

“Buyers compete with the industry by forcing down prices, bargaining for higher quality or more
services, and playing competitors against each other – all at the expense of industry profitability”

The degree bargaining power exercised by the buyers depends on the certain factors like:

i. No. of competitors that are present in that industry

ii. Availability of similar products and services in the market.
iii. Position that is enjoyed by the company in that particular industry.
iv. Brand value
v. Certain characteristics or the USP of the product or services that differentiates it from other
products and services that are available in the market.
vi. Quantity or volume of purchase
vii. Switching cost

IBM manufactures and sells computer hardware and software,, and offers infrastructure services,
hosting services, and consulting services in areas ranging from mainframe computers to
nanotechnology
The bargaining power of buyers for IBM INDIA which is basically in the IT industry is
moderately high because of large number of competitors that in present in the industry and
are well positioned in the industry and also because IBM operates in B2B market and most
organizations always buy in large amount per one time. Therefore, customers have power to
negotiate with the company.
The main competitors of IBM in the IT industry are:

HP

SUN
MICROSOFT MICROSYSTEMS

DELL IBM HCL

WIPRO TCS

ORACLE
Thus, to emerge out as winners the company needs to offer high end product and services to
beat the competition and to capture market even in the presence of such fierce competitors.
IBM has got certain USPs that despite of all the factors and competitors helps it to emerge as
the market leader in the IT INDUSTRY

CHARACTERISTICS OR USPs OF IBM INDIA WHICH MAKES IIT MARKET LEADER

MAXIMUM
PATENTS
RANKED NO-2
DISTRIBUTION
INNOVATION LINE WORLDWIDE
IN SOFTWARE
NO-1 IN
INDIA

PRESENCE IN BRAND
170 COUNTRIES POSITION

HIGH END
PRODUCTS

EMERGENCE OF
IBM AS MARKET
LEADER
The main clients or buyers of IBM products and services in B2B aspect are:

BANKING
RESERVE BANK
SOFTWARES

CANARA BANK

WEST BENGAL
GOVERNMENT

BHARTI AIRTEL

BHARTI AIRTEL HAS CHOSEN IBM

AS ITS PARTNER FOR
OUTSOURCING ITS ENTIRE
NETWORK & IT BACKBONE – A
DEAL THAT IS WORTH $750
million
The above mentioned are the main clients of IBM and although the switching cost in this industry is
low but these and many more companies have chosen IBM as their partner in their business
processes due to its 100+ years old legacy in INDIA as well as the whole world. The other factors that
make IBM a very strong brand are:-

The software that are provided by IBM are highly customized as per the business
requirements of every client that can easily be integrated with the existing business model of
the company and thus are highly differentiated.

The brand IBM in itself means trust, high quality, reliability, value for money and best in class.
This is how the world recognizes the brand and that is exactly what the offer to their
customers.

IBM is ranked no.2 in software industry throughout the world and is India’s top IT player.
Thus, it enjoys a very good position in the market.

IBM is flexible company; they can remix their strategy base on happening. Even though
variable factors make noises in linear path, IBM has potential to reduce the direct impacts of
them.

The company is known for its continuous innovation process and invests a huge amount in
research and development activities that helps in meeting the ever changing demands of
customers and the company remains one step forward in the dynamic environment

With the acquisition of Daksh in 2004, IBM now also boasts of a formidable BPO service
portfolio and IBM DAKSH is one of the top BPOs in India

IBM, at a very early stage understood Value was shifting in the IT industry, driven by the rising
tide of global integration, a new computing paradigm and new client needs. Economies of
developing nations were growing rapidly, driven by historic investments in fundamental
business infrastructure. Enterprises were looking to tap skills and expertise available all over
the world and to integrate their operations globally. Change in computing architecture was
rippling across the data center and the network, along with a proliferation of technology
infused into all aspects of work and life. Companies were seeking to integrate advanced
technology with their business processes and operations, not only to reduce costs, but to
enable innovation and growth.IBM remixed their businesses in order to move to the emerging
higher- value spaces by focusing on software and IT industry. This giant leap at a nascent
stage helped IBM reach the pinnacle with continuous innovations and despite of the
prevailing forces like high bargaining power the company due to low switching costs and large
number of competitors IBM was able to establish itself at a very formidable position in both
hardware as well as the software sector in the IT industry and was able to offer differentiated
products and services including a long list of patented products which makes it the most
profitable information technology company and world’s largest computer and system
integrator throughout the world with more than 3,88,000 employees worldwide.
THREAT OF NEW ENTRANTS (Anumita Banerjee):-
One of the most important competitive forces is threat of new entrants . It discusses about how IBM
reacts to when any new entrant comes into the market.IBM is one of the leading provider of IT
services. It has a very strong research and development department.ibm has a very high capital
investment and enjoys strong profitability.IBM also helps clients succeed in delivery business value by
becoming more

• Innovative
• Efficient
• Competitive

through use of business insight and information technology.

We can say that competition and innovation in the computer industry is taking place not only along
segmented integrated lines but also along vertical integrated lines where
leaders emerge in respective domains. Examples can be cited such as
Intel in Microprocessors ,Microsoft in desktop software, Novell in
networking ,Hp in printer & laptops, Segate in disk drive and Oracle
corporation in data base software . IBM’s dominance in personal
computers is challenged by Compaq, Dell, HP,HCL etc. Now, threat of
new entrants can be discussed in details.

1)Economies of scale- These economies deter entry into the market by forcing the new
aspirants either to come on a large scale or to accept a cost disadvantage
.Scale economies of production, research marketing ,and service are
probably the key barriers to enter in mainframe computers which is a
product of IBM .even Xerox and GE tried to capture the mainframe
market but failed to do so.

2)Product differentiation- This means brand identification .IBM is an old player in the market for
both hardware and software .It has its own unique features in the product
.One of the most sophisticated product of IBM that we generally find
in our daily life is the billing counter .It has a very strong domain in
software and hardware which makes it highly efficient and durable
with a long life cycle.IBM always innovates in respect to user and tries
to make it user friendly .This uniqueness as well as innovation forms
the product identification part of IBM.
3)Capital requirement- it is the need to invest large amount of financial resources in order to
compete ,create a barrier to entry particularly if the capital required is
for unrecoverable expenditures in upfront advertising and R&D. In
case of IBM, it is a very old and highly demanded brand in the
market. For the last 29 years IBM is a market leader in the field of IT.
They have large capital to diversify in any new product. suppose if
IBM wants to diversify in the field of database, there will be a huge
requirement of capital for R&D and also need advertisement for the
sake of awareness among the companies and customer.

4)Cost disadvantage: if the cost of the product is higher than the other substitutes product having
some added properties then it is very difficult to survive in the market and
also existing company is going to invite the other new company in the
market. In case of IBM, they launched laptop having high cost which was
out of reach of the common people. This created market for other players
like DELL, HP and HCL etc. Therefore they lost a market for their products
and finally sold the laptops to LENOVO.
THREAT OF EXISTING RIVALRY::( Avisek Dey )-----------------
Profit is the main aspect in terms of success in the industry for a company. According to the porter’s
theory of five forces rivalry between the companies is very important to judge the success of the
industry. The relation between the force and profit is given below.

Force is inversely proportionate to the profit.

if the force is very intense then profit will be less ,and if the force is benign then company will make
good profit..Now in case of software industry the intensity of rivalry is very high. Because there are
thousands of Companies working in same domain and same platform. So company has to come up
with some new offers to increase their profit and they have to think something out of box to provide
some unique products to their client..

Rival companies of IBM in different categories are:

1. Server

a. Microsoft.

b. HP

2. Development of Software:

Platform Rivals

AS 400 Convergys, CTS

Mainframe keane, Wipro Tech.

3. Products in case of software:

Name working function rival company

a. Lotus email client Microsoft outlook (Microsoft)

b. Linux operating System Windows(Microsoft)
c. DB2 Data warehousing Oracle

These are very strong brand in respect of competition.

Now there are some important criteria on which the intensity of rivalry is judged…

1. Bundling: Bundling means giving extra privilege with the base product..

Like IBM Bundled computer hardware and software and service support for many years to get the
business over the competitors like Microsoft, HP etc. So customer will go for them as they will get
everything with in a single package.

In other word Bundling is nothing but the offers and promotion that company provides to get the
new customers.

Present offers::

a. SVC Entry Edition combined with IBM System Storage DS4700 with in a single package.
b. Now! Get the IBM x3400 Server & Microsoft® Windows Server bundle offerings and save
thousands..etc
2. Point of parity (POP):

When some of the features are same in the products of different companies is called as point of
parity.

So the basic of the product should be included in the final out come of the product.

The mainframe Platform was introduced by IBM initially…so the clients of mainframe had the
inclination towards the IBM to get their project done…But afterwards different companies came up
with mainframe platform. So the projects got divided among companies like WIPRO, HCL Tech.etc. So
the profit got affected. Same thing happened with the IBM LOTUS..IBM introduced email client
server LOTUS in the year 1989.till the Microsoft outlook they were doing good amount of business.
After Microsoft launch they started to run in loss.Because both the product had POP but Microsoft
Outlook was more cost effective. Finally they updated the product n started to to run in profit once
again…still now they keep on updating their products in regular interval ..The latest release of LOTUS
is 8.5.

3. Point of difference (POD)—

These are the points where the product is different from the same kind of product of rival company
on the basis of features of the product.This is a very important parameter in getting the success in
terms of profit as well as customer.

The unique features of IBM Brand (reason for making profit over other software tycoons) :-

a. Maximum number of patents.

b. Strong distribution system.
c. Innovation in Technology & product.
d. Presence in 150 Countries.

4. Exit Barriers:-
Barriers of exit are obstacles in the path of a firm which wants to leave a given market or
industrial sector.
Barriers like
a. High investment in non-transferable in fixed assets.
b. Company reputation and high redundancy cost.
c. Contract contingencies with suppliers or buyers and any penalty costs incurred from cutting short
tenancy agreements

Same thing happened with IBM PC market. They ran their business in loss for long time.Finally they
sold it to Lenovo. But still they have stake in it.
BARGAINING POWER OF SUPPLIERS (Amit Dhigra)
From its inception almost a century ago, IBM has been based on a set of fundamental values.
IBM's values shape and define its company and permeate all of our relationships--between its
company's people and its shareholders its clients, the communities where people live and work,
and among their network of suppliers.

Supplier diversity:

IBM spends nearly $2 billion a year with diverse suppliers, for example, greater than any other
technology company. Building and maintaining a community of diverse suppliers increases
IBM's opportunity to hear new ideas, apply different approaches, and gain access to additional
solutions that respond to customer needs. Such collaboration helps IBM deliver innovation,
quality products, and world-class service to a growing global marketplace.
Supplier selection:

It can be done through supplier evaluation model in which we can look for following attributes:

• Price
• Supplier reputation
• Product reliability
• Service reliability
• Supplier flexibility

All of the above factor help a company to figure out with which supplier it can move forward.

IBM products:

• Operating system :
IBM provides its services in various different fields like Environmental, Office Supplies,
Security and Utilities etc. It provides its operating system as Z/Os, Z/OSe Linux, TPF and
many others.

• Hardware :

Microprocessors and logic semiconductor electronic components including X86/CISC

processors, power PC/RISC processors, core logic, graphics chips, video chips and super
I/O. , DSP, network products, peripherals/controllers, automobile industry, A&d industry,
health care, mobile, personal computers, point-of-sale, ATMs, servers, mainframes,
midrange, storage devices and associated peripherals. It also has supplies of major
product for hardware from major jaints like AMD, Intel. IBM provides world-class IBM
mainframe technology to help today's enterprises respond to business conditions quickly
and with flexibility. From automation to advanced virtualization technologies and open
industry standards, IBM mainframes help deliver competitive advantages for the on
demand business.
Software :

Commercial established catalog software to be used on PC/Work station, midrange or

mainframe systems for both internal use and resale. This does not include any
programming or modifications on the existing off-the-shelf software. As matter of fact
software is developed by is by company itself therefore it does not require any supplier
for this.
THREAT FROM SUBSTITUTES (Attryee Moitra)
Substitutes are the alternatives that can be used in absence of the original product. These are generally used
to keep the work in motion. If any software is absent then it will always affect the performance of any
program or event, this may leads to wastage of time, money and labor.

In organizations time is money, they need fast n efficient work. If any important work gets stopped because of
some important software or system failure, then this will results in heavy loss to the company. Some
important alternatives were introduced so as to save the company from heavy losses

These substitutes are always used as some alternatives threat to the original software, for software industry is
low, as there is no replacement for the software.

These various substitutes;

1) Software piracy: software piracy is something that deals with the theft of copyright product without
the prior or any kind of permission from the owner.

Demerits:
• All the features will not be available.
• Limited trial period.
• Crack key read to get the full version.
• No customer service.

Merits:

• Cost effective- the software is not original so it’s not expensive.

• Risk space effective.

So, in companies people can not go for pirated version as per NASSCOM rules. So threat of piracy is low in
case of software.

1) Software created in houses:

Instead of going for costly software, company can develop their own software through their
development team according to the requirements of the software. This is a threat for the software
builders,

2) Open source: Open source is an approach to the design, development, and distribution of software
offering practical accessibility to a software’s source code. Some consider open source as one of various
possible design approaches, while others consider it a critical strategic element of their operation
 So to come out of these threats company has to take few steps, that are ;

1) Innovative product: The Company should introduce new features to their products. This will stop
piracy. Introducing new features from time to time will also makes the customer aware of the latest
technology.

2) Cost and size effective: Customers always wants best buy. They want to get the best product at lowest
price. IBM has a great research network so they spend a huge amount of money in research and
development. The cost of their product increases because they provide best quality of products. If IBM
can also provide products at lower prices then it can acquire more and more market.
Jockeying in the industry: (AVISEK DEY)

It means brand positioning in the industry..it depends on unique features of product as well as
innovation. Under this Point of difference (POD) is very important. The company having maximum
number of POD will do well in the market. They can snatch customer from their rival companies.

To get the success in the market company has to follow following Steps:-

1. Brand positioning:
They have to design the company’s offering and image to occupy the distinctive
space in the market to maximize the potential benefit to the firm.
From the point of view of IBM they keep on updating their products as well as they always
come up with new products to keep a hold in the market.

2. Marketing Strategies:
This is a very important parameter in case of success in the industry. Here under this
part company need to analyze the market.They have to plan accordingly,like whether they
should go for a new product or or they should introduce some new features.

3. Forward & backward Integration:

This is the process of providing the final product whose part is build in house.and
vice versa. In case of IBM they used to provide hardware ,software and service with in a same
package.So all products of the package were made from their company. so it was more cost
effective for them to provide the maximum facility to the customer. Through this way they can
get the huge amount of customers.
CONCLUSION
 RECOMMENDATION
1)Sometimes the product manufactured are to expensive that they are beyond the range of some
consumers.

2)In our view IBM should work on some modern operating system so that IBM can cut on cost and
can develop new softwares at a very low cost.

3)So in our view we will suggest that instead of buying hardware from other companies,we suggest
IBM to manufacture there on hardware.
 BIBLIOGRAPHY

WEBSITES:

• www.ibm.co.in

JOURNALS

• HARWARD BUSINESS REVIEW (THE FIVE FORCES THAT SHAPE COMPETATIVE STRATEGY)

BOOKS

• Marketing Management (Philip Kotler) Eleventh Edition.

• Five force analysis (Michael E Porter)