IBM's New Business Strategy

A firm’s business strategy is the plan it has for reaching specific objectives. The success of the strategy is recognized through the growth of the business, having a strong competitive position and financial performance. IBM had been lagging behind in its industry of operation with declining sales and loss of competitive advantage. The company’s management decided to change the business strategy which implied changing the supply chain strategy as well. The current business strategy of IBM is to attain success across the world by creating an integrated supply chain management.

IBM Business Strategy

IBM has disappointed its shareholders with the decline in revenue, profits and share prices but the executives have been working to change the business strategy which they are positive will help regain the position the company once held in the market. IBM, therefore, uses a global strategy to attain success across the world. In this strategy, the company has infused three main principles, cloud, data and engagement. Each of the components has something to tell regarding the varying face of world growth and rivalry in this digital era. The management has seen a shift in the competitive advantage which can be generated through data analytics (Bharadwaj et al., 2013). Business structures will, therefore, be designed by cloud and distinct engagement empowered by mobile and social expertise. IBM’s new business model is to create markets by changing businesses with data, remaking enterprise IT for the age of cloud and allowing structures of engagement for organizations. IBM has realized that data is the new natural resource of the world (IBM, 2013). Every discussion regarding business, technology, and society begins with data. The exponentially increasing volume of data and its velocity will transform the world. Through better management of data, IBM plans to create a new basis of competitive advantage. The data will be used to drive business outcome by applying some more sophisticated analytics in most parts of their organization. In regard to cloud, the company has transitioned its business strategy and turned products into services retrieved locally by all its customers. In the spirit of cloud computing, IBM introduced Watson, a service that provides a large data solution through the cloud (Smith, 2014). Through the integration of a computer’s cognitive learning and natural language interface, IBM is able to offer prognostic analytics at a low-cost. The cloud permits IBM to normalize costly solution and then share them. The engagement component occurs because users are the pillar through which IBM improves innovations in social networks, safety, and cloud computing. For instance, any company which is entering into developing markets can only operate effectively on mobile. Moreover, most people in emerging markets still do not have bank accounts, however, a significant number has mobile phones and hope the system is going to store their files and cash safely even when cloud infrastructure weakens. IBM, therefore, is certain it will profit from the mobile-native economy by guaranteeing an end to end reliance.

IBM Supply Chain Strategy

 IBM has an integrated supply chain which consists of service organizations serving all IBM brands and external clients. The supply chain covers areas such as pre-sales, matching supply and demand, procurement, manufacturing, cash collection, and distribution. The strategy includes big data and analytics capabilities which are powering the company’s current evolution of the supply chain. With an integrated strategy, the results have been smarter and transparent supply chain. The integrated supply chain (ISC) has leveraged and showcases innovative analytics developed across the company for business benefit (Smith, 2014).  The deep collaboration with IBM Watson research, software group, IBM business units, governments, universities and external clients are some of the main advantages of the ISC. Everything done within IBM’s supply chain is aimed at supporting its overarching strategic priorities. The ISC is in line with the company’s business strategy for it has integrated social, mobile, cloud and big data analytics. The strategy has helped IBM create a smarter, transparent value chain, create smarter enterprises and enable growth.

The new strategy at IBM focuses on global organization, unlike the old one whose main focus was regional business units. IBM reached a stage in business where it was selling a lot of software and service CPUs but its SC had been planned to accommodate local and regional computer transactions and delivery. The software part of the business was therefore unsupported by the supply chain which causes a lot of challenges for the company. The strategy also prohibited IBM from exploiting one of its utmost strength which is to control its purchasing power with suppliers across the globe. The restructuring of the supply chain was needed for the company had started losing its market share to its competitors due to lack of efficiency in its supply chain.

The new strategy was reinvented not only to support delivery of products and materials but to also create a new system of moving people, insights, results, and motivation.

In 2011, IBM earned over $106 billion in revenue worldwide from hardware, software, and services (IBM, 2012). The company’s ISC oversees two main critical processes, the order to cash cycle and procure to pay. The first process begins when a client is set to conduct trade with IBM and continues to place and execute the order. The process includes manufacturing and supply of the product. The sequence includes billing, invoicing accounting for receivables and after sales support. The second process consists of buying and recompense of suppliers. The procurement procedure permits the incorporation of purchasing and accounts payables departments. The system gives IBM regulation and visibility on its complete lifecycle of a contract that is, from the time an item is ordered to the generation of the last invoice and its payment. The chief procurement officer of the company carries the responsibility of all purchasing ranging from production, travel, and administration among others.

The previous strategy had a SC structure was suitable to support local products sale across 150 nations with various departments supervising sourcing of products, logistics, and supply of orders. There was a regional procurement system, money collection, a distinctive process for each region and each unit had its own information system. The different system made the company to have one of the most complicated supply chains which were difficult to understand. The company has now moved to an international delivery of software products and services which implies that the SC focusing on local and regional businesses is no longer workable. The single global supply chain began with the transformation of procurement and order fulfillment function which included creating standards for all the activities of all business units in every country of operation. The next step involved establishing global sourcing councils where procurement executives were allowed to exchange knowledge with their colleagues in other countries. The council also created a room for professionals to deep source skill to work as a group to resolve difficulties and coordinate during their operations. The integration of procurements offices in different countries has helped in product development, design and delivery of products and has enabled the company to meet government regulations and the voluntary objectives it has set.

The global ISC serves as the foundation of two main principles which are pillars of strength and pillars of growth. The ISC of IBM gives it strength and stability because it has created identical operations at its center for procurement, industrial and order fulfillment across the world. For instance, all fulfillment hubs despite their location use a standard process for taking orders and controlling the collected revenue. The driving power of the company has been to do something once and consistently across the world hence process standardization. The practice has allowed IBM experts situated across the globe to sustain customers’ everywhere the corporation conducts business at any time of the day. Under pillar of value, IBM has attained effectiveness in serving customers. The ISC has enabled supply chain professionals located all over the globe to work on creating a particular solution to solve consumer requirements of a given industry or geographical location. By rubbing on its collective proficiency to resolve consumer problems, IBM is able to raise customer value.

IBM has managed to achieve objectives of its ISC, however, it is continuing to seek ways to improve the model. One of the current initiatives has been the use of prognostic and prescriptive analytics to create operational enhancements. IBM uses several analytic software applications to sift through contrasting categories of data and to identify designs or suggest answers to complications. IBM uses analytics in areas such as discernibility, cost containment, sustainability, consumer insight and risk management. The analytic software is also used to model the effects of potential situations on dealer networks (Hazen et al., 2014).  Through the use of analytics in the ISC, IBM has managed to respond to natural disasters that have threatened its SC in a timely and effective way.

Blockchain in supply Chain

IBM has used blockchain in its supply chain to enhance transparency (Webb, 2017). The company has collaborated with the key food producers and distributors to minimize contamination in the global food supply chain. The blockchain is helping create a trusted environment for transactions. The technology helps track transactions, throughout the world and use the information to quickly identify and isolate any products which are contaminated.  Corporations have been operating without basic knowledge of their supplies and some have struggled to name their suppliers for a given time with surety. Technology has failed to give businesses a solution to these problems and as the SC has grown more international and complex, the challenge of supply chain visibility has become more acute. The recent interest of corporations on blockchain come from the near total absence of system offering complex SC with the required level of transparency. Blockchain has stepped to close the gap in the market through innovative proliferation.

Challenges of IBM Supply Chain

Despite all the benefits IBM has attained through the use of its ISC, there are some challenges. The biggest challenge facing the company is protecting the enterprise, shareholders, and clients against the unknown. While the SCM of any company has many challenges, organizations are now prepared to solve any problems arising from their SC through use of backups. For instance in IBM, one of the common challenges is security breach. Most large organizations are facing the problems in ensuring security for their websites. The intensive use of cloud makes the issue of security breach even more dangerous because it risks the data of the corporation as well as that of its clients. In IBM, any security breach on its supply chain implies compromising the safety of IBM, its customers, and suppliers. The overall cost of a single breach is very high that it can cause the company to incur losses (Wisner et al., 2014). The breaches not only cause financial problems, but they affect the reputation of a business not to mention the high financial penalties a business pays for negligence.  In response to this threat, corporations have come up with massive security to ensure their data and that of its stakeholders are protected. Businesses have to constantly keep up with the latest methods of ensuring security from cyber theft. Currently, IBM has an information protection strategy that protects the business both internally and externally and ensures there are no weak links in its supply chain. Firewalls and other parameters are used to provide security against outside intruders although the measures are not adequate because one employee can jeopardize the company’s security. Therefore, IBM uses passwords which are constantly changed to prevent unauthorized access.

Recommendation

The business strategy of IBM, as well as its supply chain, are a success today due to the ability of the company to be innovative. Therefore, for IBM to continue growing and having a viable SCM, it must continue being innovative. The company must provide its customers and suppliers with innovative services which will help make the business process easier and faster hence the creation of value. IBM should also continue integrating its supply chain across the world so that it covers all its areas of operation. Having a SC that integrates all processes of a business enables the company to become more effective. Supply chain analytics is becoming a common feature whereby corporations maintain big data which comprises of all data that is, one which is structured, and unstructured, internal, partner and macro environment. Secondly, IBM should ensure it stays abreast of any innovations in the market especially on security matters. The company is operating a cloud network which is prone to cyber threat and whose security breach can cost billions of profits, reputation and high penalties. New technologies are being introduced in the market every now and then which help strengthen the security of a company’s data.

Conclusion

IBM has been in operation for years during which it has experienced ups and downs mainly caused by high competition in the market. The current market for cloud computing is also facing high competition which makes the company advocate for a more viable business strategy. The current strategy of IBM is to attain success across the world through the incorporation of data, cloud, and engagement to create a competitive advantage. The supply chain strategy of the company looks into integrating all the process of the business starting from when the customer is ready to make an order for the delivery of the product and service across the world. The SC has ensured the processes are fast and efficient hence creating value for its stakeholders which in turn helps create a competitive advantage. Despite facing different challenges such as security threat, IBM has managed to create a workable SC which should be improved through continuous innovation.

References

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IBM. (2012). IBM ANNUAL REPORT- 2011. Retrieved from https://www.ibm.com/annualreport/2012/bin/assets/2012_ibm_annual.pdf

IBM. (2013). The IBM Strategy. Retrieved from http://2013_ibm_strategy.pdf

Smith, R. H. (2014, May 2). Supply Chain Transformation –A Case Study in the Innovative Use of Analytics. Retrieved from http://PitipongLin.pdf

Webb, J. (2017, August 31). Alibaba, EY, IBM And Microsoft Use The Blockchain To Create A Transparent Supply Chain. Retrieved from https://www.forbes.com/sites/jwebb/2017/08/31/alibaba-ey-ibm-and-microsoft-use-the-blockchain-to-create-a-transparent-supply-chain/#57dd2e744b37

Wisner, J. D., Tan, K. C., & Leong, G. K. (2014). Principles of supply chain management: A

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