Competitive Advantage at International Business Machines Corporation - Case Study Example

Topic: Competitive Advantage Name Course Name Course code Instructor’s name Date Competitive Advantage Case Study: International Business Machines (IBM) Introduction Competitive advantage refers to a certain level of advantage over competitors which is mostly aimed at fulfilling the needs of the customers as opposed to other competing companies in the same industry. This is achieved through producing items that are of a higher value through price reduction or improving the services associated by the products such that even at a higher price, they can still buy the products and will not buy other competitive products even at a lower cost. In order to identify a marketing strategy, it is important for a firm to determine the methods it can employ in order to gain the competitive advantage over other companies. In a given industry, when a given firm is able to maintain a higher value of profit as compared to other companies in the particular industry, this firm is said to possess a competitive advantage over the competitors. The main objective of all the multinational enterprises is to have a sustainable competitive advantage that is applicable for future results.(Bartlett and Ghoshal, 2002) According to Michael Porter, there are two categories of competitive advantage. These include: Cost advantage. Differentiation advantage. When a firm is able to give to the customers the same products as the rivals in the industry but at a reduced cost, then this firm is said to have a cost advantage over other firms. Similarly, when a firm is able to produce products that are of higher benefits than the rivals, then the firm is said to have a differentiation advantage. Competitive advantage therefore enables a company to provide goods of better benefits than the competitors with improved profits as compared to the competitors. When a firm is able to combine both cost and differentiation advantages then it is said to have acquired positional advantage because the firm is said to be a leader in the market through cost and product differentiation. In order to acquire a higher competitive advantage, a firm is supposed to deploy the resources needed to improve the customer value as this makes the organization superior in the market as opposed to other companies. (Kim et al., 2012) Porter’s generic strategies can be illustrated in the following model. Resources are very important in ensuring that an organization is able to achieve cost and differentiation advantage. In addition to resources, the firm should also be able to have the needed capabilities for ensuring that the firm can stand out against the competitors in the market. The examples of resources that are able to ensure competitive advantage include the patents and trademarks, existing customer base, proprietary knowledge, brand equity and the reputation of the company. The value creation is also another strategy that is capable of ensuring that the competitive advantage is achieved. This refers to the Value Chain as described by Porter. A firm therefore needs to be involved in activities that increase the value of their products as opposed to the competitors.(Sirmon et al., 2011) In this paper, the company international company that will be addressed is the International Business Machines Corporation. (IBM) Background of the Company International Business Machines is a technology company that is globally integrated and used for consultation. The headquarters of this corporation are based in Armonk, New York. IBM is referred to as an international organization because it has branches operating in over 170 countries across the world. Being a multinational organization, it employs the most talented individuals in the field of technology where they are involved in decision making that influence the private sector, the government corporation and other non-governmental organizations. The company is entirely based on software innovation through development, distribution and maintenance of software and hardware products together with a wide range of infrastructure, cloud computing services and other consultation services in the field of Information Technology.(IBM News Room, 2005) In the modern age, IBM is mainly involved in five strategies that have enhanced growth in the field of computing. These strategies include cloud computing, business intelligence in big data and analytics, mobile computing, security and social business. The entire staff of IBM is committed in working with the customers in meeting their business needs all over the world with a view of using technology, business knowledge and research and development skills through creating interactive systems which are able to meet the customer needs and the dynamic changes in the business environment and enhancing the bridging the gap between the government and the business enterprises. Factor Contributing to the Success of the Enterprise The main issue facing IBM is competition from other multinational organizations offering the same products offered by IBM. Such firms are challenge and therefore the main focus of the organization’s marketing strategy is to deal with competition. Competition being a challenge, there are other factors that contribute to the success of the firm.(Calimeri et al., 2014) The success journey for IBM has been continuous since 2003. The company has experienced an increased productivity of more than 6 billion dollars through improvement in product development and service delivery. The company has an additional 10 billion dollars in form of savings by 2015. This growth is not entirely based on reduced cost of production but other factors are in play. Such factors include investing in new technologies and varied capabilities such as cloud computing services and big data that are indicators of market venture in other sectors.(Taft, 2010) One of the principles for IBM success include the social software use and ‘jams”. These software have enabled the company to determine how the imagination of its work force looks like thereby reformulating the organization into a way that fits the needs of the customers. It has also recreated the culture to fit the needs of the businesses in the 21st century. This has increased the savings significantly whereby the decision making process is now being aimed at the client. Another reason for IBM success is the establishment of a transformation governance. This is through the initiative where decision-making is aimed at transforming the organization to meet the Information Technology needs in the business world. The initiatives are aimed at studying the business environment and devising techniques foresee the future of the enterprises. This is in addition to metrics that measure the value that business add and the areas that need improvement.(Lambert and Davidson, 2013) Another factor contributing to the success of IBM is the data-driven decision making. In the field of big data and analytics, IBM has ventured in transforming data into meaningful information in business intelligence. This provides an insight through which a business is able to analyze the customer requirements and the workforce needs. The hub has helped organizations to utilize the resources thus pursuing the growth aims.(Lavalle et al., 2010) IBM has also ventured in simplification of business processes. The main success feature for IBM is the use of integrated services in business operations. IBM consists of personnel who are highly skilled to undertake several business process with skills in Lean Sigma and other techniques. This has increased its productivity to 500 million dollars in 2009. Another success factor is the transformation innovation process whereby the company has used new technologies in the transformation process and the employees are involved in the effort. The company has an intranet which provides and On Demand Workplace is the most reliable networking platform. Social networks and interaction has become the integral part of the organization’s culture. This has also been increased through the application of cloud applications for storage, research and development. Finally IBM has succeeded due to the formation of creative leadership. Through the leadership program, IBM is able to develop global leaders who are an integral part of any organization’s success. The company offers skills related to leadership and guidance to its employees. The result of this is that the company is able to achieve a strong workforce that is trained to become leaders and are able to embrace the new revenues in the growth process. Porter’s Competitive Forces IBM competitors include all the technology companies in the world such as Apple, Cisco, Microsoft and Oracle among others. In order for IBM to excel in this sector, it has to show the customers that it can produce better products and services than the competing companies. Using Michael Porter’s competitive forces model, the company applies the model as follows to achieve a competitive advantage over the competitors.(Magretta, 2013) Threat of new entry is low because although other companies can venture into the industry, it will take some time for this company to reach the level of IBM. Having established a solid customer base especially in the business environment, competition as a result of new entry is considerably low. This factor is also supported by the fact that the organization is a multinational corporation. This means that the products are known across almost 200 countries in the world. This level of popularity is not easily broken by a new firm. Threat of substitute products high because there are other companies that can offer the software and hardware products that are offered by IBM.(Rajan, 2012) For instance, Oracle Corporation is an organization that has ventured into cloud computing services with a well-established customer base. This means that in order to be better in the market, IBM has to develop mechanisms that will make their customers choose their services as opposed to the competitors’ services. Equally, Apple and Microsoft are also involved in the production of hardware and software products and these organizations are also international. This means that substitute products are available and mechanisms of either cost or product differentiation are to be put in place. The bargaining power of buyers is moderate because although there are substitute products in the market, IBM customers portray some level of loyalty and they will always choose the IBM products in the market.(Soo Wook Kim, 2012) The bargaining power of buyers is slightly high because of the existence of other products from other multinational companies. What makes IBM unique is because it has been in existence for quite a long time and this has helped in building the customer trust which is an advantage when it comes to competition. In meeting the business needs, business analytics has increased IBM’ popularity and as a result the buyers’ bargaining power is moderate. The bargaining power of suppliers is low because due to various products produced by the company, the suppliers are distributed hence their low bargaining power. For instance, since IBM produces hardware products, then it requires different materials from different suppliers to build these devices. This also applies to third party software purchasing from different vendors. As a result, there is no monopoly supplier reducing their bargaining power. Rivalry against the existing firms is high because all the firms mentioned above are involved in the production of similar products. (Bresnahan and Greenstein, 2014)This means that there is great rivalry between these firms creating the need for IBM trying to achieve competitive advantage. For instance, Oracle has also ventured into business information technology with attractive software and integrated cloud computing services. This has made IBM to develop other mechanisms in the same field through big data and analytics. Apart from offering software and hardware products, the organization is also able to offer advice on workforce and customer satisfaction metrics for businesses hence increasing the sales. This technique can be categorized under product differentiation which has contributed to an increased level of revenue in the recent past years. In addition to the competitive forces, the Miles and Snow Typology can be used to classify this organization. It is therefore categorized under the defender strategy. (Shoham and Lev, 2015)This classification is arrived at by looking at the main objective of an organization under study. It is categorized under the defender strategy because its main objective is to maintain the existing customers, ensure enhanced growth and improve customer services.(Steven Davidson et al., 2015) Maintaining the existing customers is achieved by ensuring that these people do not buy other products from the competing firms and no matter what they remain loyal. This has been achieved by IBM through a mature customer trust mechanism and quality products being produces. Growth has been achieved through continued market research on the rising needs of the customers. This growth has been marked by the introduction of cloud computing and business intelligence technology to meet the dynamic needs of the customers. Moreover, improved customer service has increased the organization’s customer base which is described by the high level of revenue over the last few years. Improving customer services not only enhances their loyalty but draws new customers in the organization. Conclusion Competitive advantage is a major indicator of success for various organizations. A firm with a high competitive advantage is an indicator that it is doing well than other competitors in the same industry. Competitive advantage means that a firm is able to produce particular products with reduced cost of production and also the organization is able to enjoy a higher value of revenue as opposed to other organizations. IBM is one such company that has a high competitive advantage in the technology industry. It is correct to say that the organization has a sustainable competitive advantage(Barney, 2012) that is useful for its future. This is because the organization has an upward trend in terms of revenue collection since it was established. It also has an upward growth through establishment in various countries in the world and the expansion is increasing. References Barney, J.B., 2012. 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