IBM is a globally integrated technology and consulting firm. It specializes in computer hardware, software, and Information Technology. It offers infrastructure, hosting and consulting services for the enterprise market. IBM's clients include many different kinds of enterprises, from sole proprietorships to the world's largest organizations, governments and companies representing every major industry and endeavor.
The majority of the company's enterprise business, which excludes the company's original equipment manufacturer (OEM) technology business, occurs in industries that are broadly grouped into six sectors: Financial Services: Banking, Financial Markets, Insurance; Public: Education, Government, Healthcare, Life Sciences; Industrial: Aerospace, Automotive, Defense, Chemical and Petroleum, Electronics; Distribution: Consumer Products, Retail, Travel, Transportation; Communications: Telecommunications, Media and Entertainment, Energy and Utilities; Small and Medium Business: Mainly companies with less than 1,000 employees.
IBM's business model
The company's business model is built to support two principal goals: helping clients succeed in delivering business value by becoming more innovative, efficient and competitive through the use of business insight and information technology (IT) solutions; and, providing long-term value to shareholders. The business model has been developed over time through strategic investments in capabilities and technologies that have the best long-term growth and profitability prospects based on the value they deliver to clients. The company's strategy is to focus on the high-growth, high-value segments of the IT industry.
The company's global capabilities include services, software, hardware, fundamental research and financing. The broad mix of businesses and capabilities are combined to provide business insight and solutions for the company's clients.
The business model is flexible, and allows for periodic change and rebalancing. The company has exited commoditizing businesses like personal computers and hard disk drives, and strengthened its position through strategic investments and acquisitions in emerging higher value segments like service oriented architecture (SOA) and Information on Demand. In addition, the company has transformed itself into a globally integrated enterprise which has improved overall productivity and is driving investment and participation in the world's fastest growing markets. As a result, the company is a higher performing enterprise today than it was several years ago.
The business model, supported by the company's long-term financial model, enables the company to deliver consistently strong earnings, cash flows and returns on invested capital in changing economic environments.
Recent Developments
IBM also acquired global Big 4 Auditing Firm PricewaterhouseCoopers in 2002, giving it ownership of extensive business support consulting operations. Also, it acquired SPSS in 2009, giving it valuable product offerings in the data analytics industry. In 2005 the company sold its personal computer business to Lenovo, reducing revenue and expenses in its Systems and Technology division.
About Value Chain Analysis
Value Chain Analysis attempts to identify the most efficient aspects of a company's business operations by measuring each of the company's activities individually. It analyzes a business through the organization's generic value-added activities to understand how a firm develops a competitive advantage and creates shareholder value.
The value chain categorizes these activities into both primary activities and support activities. The "primary activities" include: inbound logistics, operations (production), outbound logistics, marketing and sales (demand), and services (maintenance). The "support activities" include: administrative infrastructure management, human resource management, technology (R&D), and procurement.
Analysis consists of identifying the costs and value drivers for each value activity. The "margin" or "added value" is the difference between the total value and the cost of performing the value activities.
The Need for Value Chain Analysis for IBM
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