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1)What factors led to IBMs success during the 1960s and 1970s and its problems during

the late 1980s and early 1990s?


IBM became the most dominant in the growing IT industry. A bold investment in the first
family of products based on an integrated semiconductor chip and offering
interchangeability of components caused IBM to set the dominant design for decades to
come. Furthermore, IBM produced a series of related IT innovations. So successful was
IBM that due to its monopolistic business practices, the US Justice Department outlawed
monopolies by passing the Anti-Trust Act. In addition, IBMs leadership, strategy
contributed to its success.
IBMs deep structural problems revealed themselves quickly.
Factors that contributed to its problems included:
Being over confident, out of touch with its customer, and distracted by internal turf
battles.
The conversion of leasing-oriented business to sales-oriented contributed to the
weakening of the IBM.
IBM was blinded by mainframe thinking and missed the PC mark.
While revenues softened IBMs fixed costs began to grow.
Executives were isolated from growing problems by deep levels of hierarchy.

2) What did Gerstner do when he assumed the role of CEO in April 1993? Evaluate
Gerstners approach to crisis management. How well did he perform as a turnaround
manager? What challenges did he face as he attempted to position the company for
growth?
Gerstners approach to crisis management was to put the customer first. He visited
customers, analysts, and industry experts during the first few months to get input. Rather
than break up the company Gerstner decided to turn it around by going to market as one
IBM. Made senior executives personally responsible for their assigned customer and
accountable for any problems that arose. Additionally, he hired many experts in order to
get costs under control, head the trouble PC company brands, and organize internal IT
organization. Also, due to the many complaints from customers, a customer relationship
manager and a dedicated sales and service team were appointed for each key customer
account.
Gerstner, performed great as a turnaround manager implementing change throughout the
company effectively. IBMs stock price doubled as investors voted with confidence to fix
rather than break up and sell IBM. Profits rose to 5 billion on revenues by the year end of
1994.
Gerstner faced many challenges to include a group of people in the middle who didnt
want to transition. Many found it difficult to operate as a team, as a global entity.

Additionally, IBM employees focused on selling current products, serving current


customers, and executing current operations which did not contribute to the growth of
new businesses.
.
3)Why do large established companies, like IBM, find it so difficult to build successful
and sustainable new businesses?
IBM was complaisant due to its excessive self-confidence. Large companys like IBM
will focus on sustaining profits and loose touch with its customers. IBMs employees
were focused on flawless execution and short-term results that intensified under the
ruthless cost cutting necessary to survive. Also, when competing against large companies
it can be difficult to compete against the others, because they are trying to come up with
The next big thing too.
4)Evaluate IBMs approach to leading mature, high growth, and emerging business
opportunities. What are the organization design and leadership models required to
manage each type of business? How should a company like IBM (or AT&T, for example)
manage the innovation process?
Instead of applying a single approach, IBM worked with business leaders to catergorize
IMBs businesses as H1: Mature Business, H2: Rapidly Growing Business, and H3:
Emerging Business. Each of theses horizons required different leadership and
governance, a different approach to defining and executing strategy, a different way of
organizing and managing different types of people, culture, and incentives, and a
different approach to financing.