Strategic Management case study of IBM 201
Table of Contents
Topics
Page
Introduction and brief history of IBM
Vision, Mission, Value
Porters Five Forces Framework
External Audit
Matrix External Factor Evaluation (EFE) Matrix
CPM-Competitive Profile
Internal Audit
10
Internal Factor Evaluation (IFE) Matrix
11
SWOT Matrix
14
SPACE Matrix
17
Grand Strategy Matrix
21
The Boston Consulting Group (BCG) Matrix
23
The Internal-External (IE) Matrix
25
The Quantitative Strategic Planning Matrix (QSPM)
25
References
29
Introduction:
Strategic Management case study of IBM 201
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In 1886 Herman Hollerith, a statistician for the US Bureau of Census formed the Tabulating
Machine Company and Thomas J. Watson became its leader in 1915 and made the company
slogan Think. It changed its name to International Business Machines (IBM) in 1924. It
was taken by the US government at the beginning of World War II in the war effort and
given a one percent profit, which it used to fund war victims and orphans.
During the period between 1910 and 1960, it developed products from punch-card
tabulating machines to room-sized calculators to mainframe computing systems for large
enterprises and changed the nature of accounting, calculation and basic back-office business
processes.
In the 1970s and 80s, IBM product lines expanded from its traditional mainframes to
minicomputer and personal computers and applications moved from backend operations to
departmental operation. In 1981, the company introduced the IBM Personal Computer or
PC, allowing the use of computers in schools, homes and businesses. Components for the
computer were sourced from outside the company. The processor chip came from Intel and
the operating system, called DOS (Disk Operating System), came from Microsoft.
IBM introduced the ThinkPad in 1992, the first in a series of notebook computers to be
manufactured by the company. In 1995, IBM acquired Lotus Development Corporation and
Tivoli Systems. In 1997, IBM demonstrated computing potential with Deep Blue, a 32-node
IBM RS/6000 SP computer programmed to play chess on a world class level.
During the nineties, with the Internet and open standards, IBM embraced the network
computing model and coined e-business to describe how network computing can
transform core businesses and transactions.
In October 2002, IBM acquired PwC Consulting, the global management consulting and
technology services unit of Price Waterhouse Coopers. IBM sold most of its hard disk drive
operations to Hitachi in December 2002. The sale involved the creation of a joint venture
called Hitachi Global Storage Technologies, which was 70%-owned by Hitachi.
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In 2003, IBM Research launched On Demand Innovation services, which teamed customers
with a team of researchers who specialize in business transformation and technology
consulting. Over one billion will be spent over the next three years and will be staffed with
200 IBM research consultants.
Today, IBM is by far the largest information technology in the world and the eighth largest
company in the world. In 2003, it had revenues of US $89.1 billion, a net income of 4.32,
more than 366,000 employees in 170 countries with approximately sixty percent of
revenues generated outside the United States.
Vision
Breakthrough microprocessor architecture that puts broadband communications right on the
chip.
Mission
At IBM, we strive to operate in the invention, development and manufacture of the
industry's most advanced information technologies, including computer systems, software,
storage systems and microelectronics.
Values
We translate these advanced technologies into value for our customers through our
professional solutions, services and consulting businesses worldwide.
Porters Five Forces Framework:
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The Threat of Entrants:
The threat of entry is low because the costs of R&D, support products and services,
manufacturing, and distribution are very high.
Bargaining Power of Buyers:
The power of buyers is high because the switching costs for buyers are low; there are also
many product choices for the buyers.
Bargaining power of suppliers:
There are two biggest processor suppliers in the world who have very strong power on the
chip supplying. However, the power of supplier for other low required materials and parts is
lower than the main suppliers.
Threat of Substitutes
The web hosting business of other companies and some advanced devices and computers
could cause threat of substitutes.
Competitive Rivalry:
The strength of competition in this industry is very high; the main rivals are
HP,
Microsoft, Dell, and Fujitsu Siemens Computers, they compete with international, national,
regional, and local.
External Audit of IBM
Opportunities
Threats
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Video game console market
revenue is projected to reach $12
billion in 2008 and $66 billion in
2012.
2. The IT market in Russia, India,
Brazil, and China are expected to
grow twice as fast as in the rest of
the world.
3. Mobile phone markets are
expected to grow by 9% in 2008*.
4. Handheld computers markets are
expected to grow by 32% in 2008.
1.
Competitors are strong.
Economic fluctuation could crimp
consumers spending.
3. Small & Medium business
demand fails to accelerate.
1.
2.
External Factor Evaluation (EFE) Matrix
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used
for assessment of current business conditions. The EFE matrix is a good tool to visualize
and prioritize the opportunities and threats that a business is facing.
The EFE matrix is very similar to the IFE matrix. The major difference between the EFE
matrix and the IFE matrix is the type of factors that are included in the model. While the
IFE matrix deals with internal factors, the EFE matrix is concerned solely with external
factors.
External factors assessed in the EFE matrix are the ones that are subjected to the will of
social, economic, political, legal, and other external forces.
Following are the steps of External factor evaluation:
List factors: The first step is to gather a list of external factors. Divide factors into two
groups: opportunities and threats.
Assign weights: Assign a weight to each factor. The value of each weight should be
between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero
means the factor is not important. One or hundred means that the factor is the most
influential and critical one. The total value of all weights together should equal 1 or 100.
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Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating
indicates how effective the firms current strategies respond to the factor. 1 = the response is
poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are
industry-specific. Ratings are company-specific.
Multiply weights by ratings: Multiply each factor weight with its rating. This will
calculate the weighted score for each factor.
Total all weighted scores: Add all weighted scores for each factor. This will calculate the
total weighted score for the company.
EFE Matrix of IBM
Key External Factors
Weight
Rating
Weighted
Score
0.20
0.60
2. The IT market in Russia,
India, Brazil, and China
are expected to grow
twice as fast as in the
rest of the world
0.10
0.40
3. Mobile phone markets
are expected to grow by
9% in 2008
0.15
0.45
4. Handheld computers
markets are expected to
grow by 32% in 2008
0.15
0.45
0.20
0.40
Opportunities
1. Video game console
market revenue is
projected to reach $12
billion in 2008 and $66
billion in 2012
Threats
1. Competitors are strong
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2. Economic fluctuation
could crimp consumers
spending
3. Small & Medium
business demand fails to
accelerate
Total
0.10
0.20
0.10
0.30
1.00
2.80
CPM-Competitive Profile Matrix
The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of
rivals offers a legitimate source of competitive advantage. The raw material of competitive
advantage consists of offering superior customer value in the firms chosen market. The
definitive characteristic of customer value is the adjective, superior. Customer value is
defined relative to rival offerings making competitor knowledge an intrinsic component of
corporate strategy. Profiling facilitates this strategic objective in three important ways. First,
profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the
proactive stance of competitor profiling will allow the firm to anticipate the strategic
response of their rivals to the firms planned strategies, the strategies of other competing
firms, and changes in the environment. Third, this proactive knowledge will give the firms
strategic agility. Offensive strategy can be implemented more quickly in order to exploit
opportunities and capitalize on strengths. Similarly, defensive strategy can be employed
more deftly in order to counter the threat of rival firms from exploiting the firms own
weaknesses.
Clearly, those firms practicing systematic and advanced competitor profiling have a
significant advantage. As such, a comprehensive profiling capability is rapidly becoming a
core competence required for successful competition. An appropriate analogy is to consider
this advantage as akin to having a good idea of the next move that your opponent in a chess
match will make. By staying one move ahead, checkmate is one step closer. Indeed, as in
chess, a good offense is the best defense in the game of business as well.
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A common technique is to create detailed profiles on each of your major competitors. These
profiles give an in-depth description of the competitor's background, finances, products,
markets, facilities, personnel, and strategies. This involves:
Background
location of offices, plants, and online presences
history - key personalities, dates, events, and trends
ownership, corporate governance, and organizational structure
Financials
P-E ratios, dividend policy, and profitability
various financial ratios, liquidity, and cash flow
Profit growth profile; method of growth (organic or acquisitive)
Products
products offered, depth and breadth of product line, and product portfolio balance
new products developed, new product success rate, and R&D strengths
brands, strength of brand portfolio, brand loyalty and brand awareness
patents and licenses
quality control conformance
reverse engineering
Marketing
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segments served, market shares, customer base, growth rate, and customer loyalty
promotional mix, promotional budgets, advertising themes, ad agency used, sales
force success rate, online promotional strategy
distribution channels used (direct & indirect), exclusivity agreements, alliances, and
geographical coverage
pricing, discounts, and allowances
Facilities
plant capacity, capacity utilization rate, age of plant, plant efficiency, capital
investment
location, shipping logistics, and product mix by plant
Personnel
number of employees, key employees, and skill sets
strength of management, and management style
compensation, benefits, and employee morale & retention rates
Corporate and marketing strategies
objectives, mission statement, growth plans, acquisitions, and divestitures
marketing strategies
Competitive Profile Matrix of IBM
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IBM
MSFT
HPQ
EDS
Critical
Success
Factors
Weig
ht
Rati
ng
Weight
ed
Score
Rati
ng
Weight
ed
Score
Rati
ng
Weight
ed
Score
Rati
ng
Weight
ed
Score
Price
0.12
0.36
0.36
0.48
0.36
Financial
Position
0.15
0.45
0.45
0.30
0.30
Advertisi
ng
0.09
0.20
0.30
0.40
0.20
Innovatio
n
0.22
0.88
0.66
0.66
0.44
Market
Share
0. 22
0.66
0.88
0.44
0.44
Managem
ent
0.10
0.40
0.40
0.30
0.30
Global
Expansio
n
0.10
0.30
0.30
0.30
0.30
Total
1.00
3.25
3.35
2.88
2.34
Internal Audit of IBM
Strength
1. IBM revenues increased 7 percent
to 69.92$.billion in 2006.
2. A unique approach to engage their
employees in an online intranet
using its Jam technology.
3. Strong strategic planning to be an
innovation-centric globally
integrated corporation.
Weakness
1. Declining in revenues of services
and systems segments in 2006.
2. Decline in revenue of public,
industrial, small and medium
business industries in 2006 by
9.6%.
3. Decline in revenues in Asia
Pacific area by 5.7%.
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4. IBM operates in 170 countries
with about 60 percent of its
revenues being generated outside
4. Total assets are gradually
decreasing from 109M to 103M in
2006.
the US.
5. IBM concentrated on becoming
stronger in high value added
businesses.
6. IBM ranked number 1 hosted
service provider in Western
Europe.
7. IBM is supercomputing leader as
provider of 35 of the world's 100
most powerful supercomputers.
Internal Factor Evaluation (IFE) Matrix
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or
evaluating major strengths and weaknesses in functional areas of a business.
IFE matrix also provides a basis for identifying and evaluating relationships among those
areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy
formulation.
The IFE matrix comprises factors i.e. strengths and weaknesses.
Following are the steps of internal factor evaluation:
List factors: The first step is to gather a list of internal factors. Divide factors into two
groups: Strengths and weaknesses.
Assign weights: Assign a weight to each factor. The value of each weight should be
between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero
means the factor is not important. One or hundred means that the factor is the most
influential and critical one. The total value of all weights together should equal 1 or 100.
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Rate factors: Assign a rating to each factor. Rating should be between 1 and 4. Rating
indicates how effective the firms current strategies respond to the factor. 1 = the response is
poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are
industry-specific. Ratings are company-specific.
Multiply weights by ratings: Multiply each factor weight with its rating. This will
calculate the weighted score for each factor.
Total all weighted scores: Add all weighted scores for each factor. This will calculate the
total weighted score for the company.
Internal Factor Evaluation (IFE) Matrix of IBM
Key Internal Factors
Weight
Rating
Weighted Score
1. IBM revenues increased 7 percent 0.10
to 69.92$.billion
0.40
0.06
0.18
0.06
0.18
0.10
0.40
0.10
0.40
0.10
0.40
Strengths
2. A unique approach to engage
their employees in an online
intranet using its Jam technology
3. Strong strategic planning to be an
innovation-centric globally
integrated corporation
4. IBM operates in 170 countries
with about 60 percent of its
revenues being generated outside
the US
5. IBM concentrated on becoming
stronger in high value added
businesses
6. IBM ranked number 1 hosted
service provider in Western
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Europe
7. IBM is supercomputing leader as
0.12
0.48
0.08
0.16
0.08
0.16
0.10
0.20
0.10
0.20
provider of 35 of the world's 100
most powerful supercomputers
Weaknesses
1. Declining in revenues of
services and systems
segments in 2006
2. Decline in revenue of
public, industrial, small
and medium business
industries in 2006 by 9.6%
3. Decline in revenues in Asia
Pacific area by 5.7%
4. Total assets are gradually
decreasing from 109M to
103M in 2006
Total
1.00
3.16
SWOT Matrix
SWOT analysis, method, or model is a way to analyze competitive position of your
company. SWOT analysis uses so-called SWOT matrix to assess both internal and external
aspects of doing your business. The SWOT framework is a tool for auditing an organization
and its environment.
SWOT is the first stage of planning and helps decision makers to focus on key issues.
SWOT method is a key tool for company top officials to formulate strategic plans. Each
letter in the word SWOT represents one strong word:
S = strengths,
W = weaknesses,
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O = opportunities,
T = threats.
SWOT model analyzes factors that are internal to your business and also factors that affect
your company from outside. Strengths and weaknesses in the SWOT matrix are internal
factors. Opportunities and threats are external factors.
SWOT can be used in conjunction with other tools for strategic planning, such as the
Porter's Five-Forces analysis or the Balanced Scorecard framework. SWOT is a very
popular tool in marketing because it is quick, easy, and intuitive.
SWOT Matrix of IBM
Strengths
1. IBM revenues increased 7
percent to 69.92$.billion in
2006.
2. A unique approach to engage
their employees in an online
intranet using its Jam
technology.
3. Strong strategic planning to
be an innovation-centric
globally integrated
corporation.
4. IBM operates in 170
countries with about 60
percent of its revenues being
generated outside the US.
5. IBM concentrated on
Weaknesses
5. Declining in
revenues of services
and systems
segments in 2006.
6. Decline in revenue
of public, industrial,
small and medium
business industries
in 2006 by 9.6%.
7. Decline in revenues
in Asia Pacific area
by 5.7%.
8. Total assets are
gradually
decreasing from
109M to 103M in
2006.
becoming stronger in high
value added businesses.
6. IBM ranked number 1 hosted
service provider in Western
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Europe.
7. IBM is supercomputing
leader as provider of 35 of
the world's 100 most
powerful supercomputers.
Opportunities
1. Video game
console market
S-O Strategies
1. Entering the video
game console market
by produce video game
revenue is
projected to reach
W-O Strategies
1. Increasing
marketing efforts
into Asia Pacific,
(W3, O3).
console, (S5, O1).
2. Entering the mobile
phone market, (S5,
$12 billion in 2008
and $66 billion in
O3).
3. Entering the Handheld
computers market, (S5,
2012.
O4).
2. The IT market in
Russia, India,
Brazil, and China
are expected to
grow twice as fast
as in the rest of
the world.
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3. Mobile phone
markets are
expected to grow
by 9% in 2008.
4. Handheld
computers
markets are
expected to grow
by 32% in 2008.
Threats
1. Competitors are strong.
2. Economic fluctuation
could crimp
consumers spending.
3. Small & Medium
business demand fails
to accelerate.
S-T Strategies
1. Hedge threats from US
companies by
increasing marketing
efforts into Asia and
Europe, (S4, T1).
W-T Strategies
1. Offer discounts on
products for Small &
Medium business, (W2,
T3).
SPACE Matrix
The SPACE matrix is a management tool used to analyze a company. It is used to determine
what type of a strategy a company should undertake.
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The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic
management tool that focuses on strategy formulation especially as related to the
competitive position of an organization.
The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis,
BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix).
To explain how the SPACE matrix works, it is best to reverse-engineer it. First, let's take a
look at what the outcome of a SPACE matrix analysis can be, take a look at the picture
below. The SPACE matrix is broken down to four quadrants where each quadrant suggests
a different type or a nature of a strategy:
Aggressive
Conservative
Defensive
Competitive
The particular SPACE matrix tells us that our company should pursue an aggressive
strategy. Our company has a strong competitive position it the market with rapid growth. It
needs to use its internal strengths to develop a market penetration and market development
strategy. This can include product development, integration with other companies,
acquisition of competitors, and so on.
The SPACE Matrix analysis functions upon two internal and two external strategic
dimensions in order to determine the organization's strategic posture in the industry. The
SPACE matrix is based on four areas of analysis.
Internal strategic dimensions:
Financial strength (FS)
Competitive advantage (CA)
External strategic dimensions:
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Environmental stability (ES)
Industry strength (IS)
There are many SPACE matrix factors under the internal strategic dimension. These factors
analyze a business internal strategic position. The financial strength factors often come
from company accounting. These SPACE matrix factors can include for example return on
investment, leverage, turnover, liquidity, working capital, cash flow, and others.
Competitive advantage factors include for example the speed of innovation by the
company, market niche position, customer loyalty, product quality, market share, product
life cycle, and others.
Every business is also affected by the environment in which it operates. SPACE matrix
factors related to business external strategic dimension are for example overall economic
condition, GDP growth, inflation, price elasticity, technology, barriers to entry, competitive
pressures, industry growth potential, and others. These factors can be well analyzed using
the Michael Porter's Five Forces model.
The SPACE matrix calculates the importance of each of these dimensions and places them
on a Cartesian graph with X and Y coordinates.
The following are a few model technical assumptions:
By definition, the CA and IS values in the SPACE matrix are plotted on the X axis.
CA values can range from -1 to -6.
IS values can take +1 to +6.
The FS and ES dimensions of the model are plotted on the Y axis.
ES values can be between -1 and -6.
FS values range from +1 to +6.
How do I construct a SPACE matrix?
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The SPACE matrix is constructed by plotting calculated values for the competitive
advantage (CA) and industry strength (IS) dimensions on the X axis. The Y axis is based on
the environmental stability (ES) and financial strength (FS) dimensions. The SPACE matrix
can be created using the following seven steps:
Step 1: Choose a set of variables to be used to gauge the competitive advantage (CA),
industry strength (IS), environmental stability (ES), and financial strength (FS).
Step 2: Rate individual factors using rating system specific to each dimension. Rate
competitive advantage (CA) and environmental stability (ES) using rating scale from -6
(worst) to -1 (best). Rate industry strength (IS) and financial strength (FS) using rating scale
from +1 (worst) to +6 (best).
Step 3: Find the average scores for competitive advantage (CA), industry strength (IS),
environmental stability (ES), and financial strength (FS).
Step 4: Plot values from step 3 for each dimension on the SPACE matrix on the appropriate
axis.
Step 5: Add the average score for the competitive advantage (CA) and industry strength
(IS) dimensions. This will be your final point on axis X on the SPACE matrix.
Step 6: Add the average score for the SPACE matrix environmental stability (ES) and
financial strength (FS) dimensions to find your final point on the axis Y.
Step 7: Find intersection of your X and Y points. Draw a line from the center of the SPACE
matrix to your point. This line reveals the type of strategy the company should pursue.
Financial Strength
Rating
Environmental
Stability
Rating
Return on assets
Rate of inflation
-3
Leverage
Technological
changes
-5
Net Income
Price Elasticity of
demand
-4
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EPS
Competitive
pressure
-6
ROE
Barriers to entry new -3
markets
Cash Flow
Risk involved in
business
-4
Average
5.33
Average
4.167
Y-axis
1.163
Competitive
Advantage
Rating
Industry Strength
Rating
Market share
-2
Growth potential
Product Quality
-2
Financial stability
Customer Loyalty
-2
Ease of entry new
markets
Control over other
parties
-2
Resources utilization
Technological knowhow
-2
Profit potential
Demand variability
Average
5.167
X-axis
3.167
Average
2.0
Directional vector point of IBM i.e.( 3.167, 1.163)
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Conservati
ve
F
S
Aggressive
C
A
IS
Defensive
Competitiv
e
ES
Grand Strategy Matrix
Military historian B. H. Liddell Hart says about grand strategy:
Grand strategy comprises the "purposeful
employment of all instruments of power available to a security
community".
The role of grand strategy higher strategy is to co-ordinate and directs all the resources
of a nation, or band of nations, towards the attainment of the political object of the war
the goal defined by fundamental policy.
Grand strategy should both calculate and develop the economic resources and manpower of nations in order to sustain the fighting services. Also the moral resources for to
foster the people's willing spirit is often as important as to possess the more concrete forms
of power. Grand strategy, too, should regulate the distribution of power between the several
services, and between the services and industry. Moreover, fighting power is but one of the
instruments of grand strategy which should take account of and apply the power of
financial pressure, and, not least of ethical pressure, to weaken the opponent's will. ...
Furthermore, while the horizons of strategy is bounded by the war, grand strategy
looks beyond the war to the subsequent peace. It should not only combine the various
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instruments, but so regulate their use as to avoid damage to the future state of peace for its
security and prosperity.
Issues of grand strategy typically include the choice of primary versus secondary theaters in
war, distribution of resources among the various services, the general types of armaments
manufacturing to favor, and which international alliances best suit national goals. Grand
strategy has considerable overlap with foreign policy, but grand strategy focuses primarily
on the military implications of policy, and is typically directed by the political leadership of
a country, with input from the most senior military officials. The development of a nation's
grand strategy may extend across many years or even multiple generations.
Some have extended the concept of grand strategy to describe multi-tiered strategies in
general, including strategic thinking at the level of corporations and political parties.
Grand Strategy Matrix of IBM
Rapid Market Growth
Quadrant
II
Quadrant I
Weak
Strong
Competitiv
e
Competitiv
e
Position
Quadrant
III
Quadrant
IV
Position
Slow Market Growth
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The Boston Consulting Group (BCG) Matrix
The BCG matrix (Boston Consulting Group matrix) is a chart that had been created by
Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with
analyzing their business units or product lines. This helps the company allocate resources
and is used as an analytical tool in brand marketing, product management, strategic
management, and portfolio analysis.
To use the chart, analysts plot a scatter graph to rank the business units (or products) on the
basis of their relative market shares and growth rates.
Cash cows are units with high market share in a slow-growing industry. These units
typically generate cash in excess of the amount of cash needed to maintain the business.
They are regarded as staid and boring, in a "mature" market, and every corporation would
be thrilled to own as many as possible. They are to be "milked" continuously with as little
investment as possible, since such investment would be wasted in an industry with low
growth.
Dogs, or more charitably called pets, are units with low market share in a mature, slowgrowing industry. These units typically "break even", generating barely enough cash to
maintain the business's market share. Though owning a break-even unit provides the social
benefit of providing jobs and possible synergies that assist other business units, from an
accounting point of view such a unit is worthless, not generating cash for the company.
They depress a profitable company's return on assets ratio, used by many investors to judge
how well a company is being managed. Dogs, it is thought, should be sold off.
Question marks (also known as problem child) are growing rapidly and thus consume
large amounts of cash, but because they have low market shares they do not generate much
cash. The result is large net cash consumption. A question mark has the potential to gain
market share and become a star, and eventually a cash cow when the market growth slows.
If the question mark does not succeed in becoming the market leader, then after perhaps
years of cash consumption it will degenerate into a dog when the market growth declines.
Question marks must be analyzed carefully in order to determine whether they are worth
the investment required to grow market share.
Stars are units with a high market share in a fast-growing industry. The hope is that stars
become the next cash cows. Sustaining the business unit's market leadership may require
extra cash, but this is worthwhile if that's what it takes for the unit to remain a leader. When
growth slows, stars become cash cows if they have been able to maintain their category
leadership, or they move from brief stardom to dogdom
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BCG Matrix of IBM
Market share position
Industry
Sales Growth
Rate
IBM
Stars
Cash Caw
Question Marks
Dogs
The Internal-External (IE) Matrix of IBM
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The IFE Total Weighted Score
Strong 3.0 to 3.99
High
I
3.0 to 3.99
Medium IV
The EFE
2.0 to
Total
Weighted
2.99
Score
Medium 2.0 to 2.99
II
Low 1.0 to 1.99
III
VI
IBM
VII
VIII
IX
Low
1.0 to 1.99
The Quantitative Strategic Planning Matrix (QSPM)
Quantitative Strategic Planning Matrix (QSPM) is a high-level strategic management
approach for evaluating possible strategies. Quantitative Strategic Planning Matrix or a
QSPM provides an analytical method for comparing feasible alternative actions. The QSPM
method falls within so-called stage 3 of the strategy formulation analytical framework.
When company executives think about what to do, and which way to go, they usually have
a prioritized list of strategies. If they like one strategy over another one, they move it up on
the list. This process is very much intuitive and subjective. The QSPM method introduces
some numbers into this approach making it a little more "expert" technique.
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Strategic Management case study of IBM 201
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The Quantitative Strategic Planning Matrix or a QSPM approach attempts to objectively
select the best strategy using input from other management techniques and some easy
computations. In other words, the QSPM method uses inputs from stage 1 analyses,
matches them with results from stage 2 analyses, and then decides objectively among
alternative strategies.
Stage 1 strategic management tools...
The first step in the overall strategic management analysis is used to identify key strategic
factors. This can be done using, for example, the EFE matrix and IFE matrix.
Stage 2 strategic management tools...
After we identify and analyze key strategic factors as inputs for QSPM, we can formulate
the type of the strategy we would like to pursue. This can be done using the stage 2
strategic management tools, for example the SWOT analysis (or TOWS), SPACE matrix
analysis, BCG matrix model, or the IE matrix model.
Stage 3 strategic management tools...
The stage 1 strategic management methods provided us with key strategic factors. Based on
their analysis, we formulated possible strategies in stage 2. Now, the task is to compare in
QSPM alternative strategies and decide which one is the most suitable for our goals.
The QSPM method allows us to evaluate alternative strategies objectively.
Conceptually, the QSPM in stage 3 determines the relative attractiveness of various
strategies based on the extent to which key external and internal critical success factors are
capitalized upon or improved. The relative attractiveness of each strategy is computed by
determining the cumulative impact of each external and internal critical success factor.
Quantitative Strategic Planning Matrix (QSPM) of IBM
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Strategic Management case study of IBM 201
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Key Internal Factors
Weight
Strategy 1
Strategy 2
Enter video
game console
market
Increasing
marketing efforts
into Asia and
Europe
AS
AS
TAS
TAS
Strengths
IBM revenues increased 7 percent to
69.92$.billion in 2006
0.10
0.40
0.20
A unique approach to engage their employees
in an online intranet using its Jam technology
0.06
Strong strategic planning to be an innovationcentric globally integrated corporation
0.06
IBM operates in 170 countries with about 60
percent of its revenues being generated outside
the US
0.10
0.30
0.40
IBM concentrated on becoming stronger in
high value added businesses
0.10
0.40
0.40
IBM ranked number 1 hosted service provider
in Western Europe
0.10
0.20
0.40
IBM is supercomputing leader as provider of 35
of the world's 100 most powerful
supercomputers
0.12
Declining in revenues of services and systems
segments in 2006
0.08
0.16
0.32
Decline in revenue of public, industrial, small
and medium business industries in 2006 by
9.6%
0.08
0.24
0.32
Decline in revenues in Asia Pacific area by
5.7%
0.10
0.20
0.40
Total assets are gradually decreasing from
109M to 103M in 2006
0.10
0.30
0.30
Weaknesses
SUBTOTAL
1.00
2.20
2.42
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Strategic Management case study of IBM 201
1
Key Internal Factors
Weight
Strategy 1
Strategy 2
Enter video
game console
market
Increasing
marketing efforts
into Asia and
Europe
AS
AS
TAS
TAS
Opportunities
Video game console market revenue
is projected to reach $12 billion in
2008 and $66 billion in 2012
0.20
.80
0.60
The IT market in Russia, India, Brazil,
and China are expected to grow twice
as fast as in the rest of the world
0.10
0.10
0.30
Mobile phone markets are expected
to grow by 9% in 2008
0.15
Handheld computers markets are
expected to grow by 32% in 2008
0.15
Competitors are strong
0.20
0.80
0.80
Economic fluctuation could crimp
consumers spending
0.10
0.10
0.30
Small & Medium business demand fails to
accelerate
0.10
0.10
0.40
Threats
SUBTOTAL
1.90
2.40
Reverences
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Strategic Management case study of IBM 201
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1. www.IBM.com
2. www.304.ibm.com
3. www.manonamission.blogspot.com
4. www.euromonitor.com
5. www.moneycentral.msn.com
6. WWW.SCRIBD.COM
7. Www.wikipedia.com
8. www.sec.gov
9. www.hp.com
10.
www.microsoft.com
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