IBM (International Business Machines Corporation) successfully operates in the global information technology industry through its generic strategy for competitive advantage and intensive growth strategies. In Michael Porter’s model, generic strategies ensure competitive advantage in the industry or market. In this case, technological innovation is at the core of IBM’s generic competitive strategy. Nicknamed Big Blue, the company also applies its intensive strategies for business growth based on technological innovation. These intensive growth strategies address business potential and opportunities in the information technology industry. IBM’s success indicates the effectiveness of the company’s generic competitive strategy and intensive strategies in driving business growth and stability.
IBM’s generic strategy influences managers in determining the best decisions for maintaining competitive advantages over other information technology firms, such as Oracle, Hewlett Packard Enterprise, Microsoft, Google (Alphabet), Amazon, Intel, and Apple. IBM’s intensive strategies for growth promote business competitiveness in relation to the company’s generic competitive strategy.
IBM’s Generic Strategy (Porter’s Model)
IBM’s generic strategy for competitive advantage is cost leadership. This strategy entails maintaining low costs in business processes to establish competitive pricing or maximize profit margins. Such low costs are possible through high economies of scale, which is one of the strengths identifiable in the SWOT analysis of IBM. For example, because of its large-scale operations, the company is capable of minimizing costs in providing cloud platform products and technology services. As a cost leader, IBM can implement competitive pricing for these products and services. Also, the cost leadership generic strategy supports competitive advantage through expertise in production processes and materials management. In this case, IBM’s more than 100 years of business experience equates to expertise and high efficiencies in various processes in developing, producing, and providing information technologies and related services.
The cost leadership generic competitive strategy leads to the strategic objective of expanding the scale of business processes to further enhance economies of scale that strengthens IBM’s information technology business. For example, the company must invest more in expanding software development mechanisms to increase the cost-effectiveness of developing new solutions for customers. Another strategic objective based on this generic competitive strategy is to invest more in research and development (R&D) to boost IBM’s competitiveness based on product value. This generic strategy contributes to the foundation used for the company’s intensive growth strategies that support competitive advantages.
IBM’s Intensive Strategies (Intensive Growth Strategies)
Product Development (Primary Strategy). IBM’s primary intensive growth strategy is product development. A strategic objective in implementing product development is to grow the business through continuous innovation to introduce new products to the target market. For example, applying this intensive strategy, IBM can grow by developing and providing novel computing systems and automation solutions. The cost leadership generic strategy supports product development through efficiencies that enable the company to offer new products at competitive prices. The resulting competitive advantage supports the industry leadership aims emphasized in IBM’s mission statement and vision statement. This intensive strategy also adds to the company’s intellectual property portfolio.
Market Penetration (Secondary Strategy). Market penetration is a secondary intensive growth strategy in IBM’s information technology business. One of the strategic objectives in applying market penetration is to maximize the company’s market share for each product line or product type. For example, IBM aims to maximize its market share for cloud platform products. The cost leadership generic competitive strategy provides cost minimization measures to empower the company to succeed in using this intensive strategy. Considering that the firm is already among the biggest players in the global industry, market penetration now holds only a secondary role in facilitating the growth of the business.
Market Development (Supporting Strategy). IBM applies market development as a supporting intensive strategy for business growth. A strategic objective based on market development is to develop new applications of the company’s current products to enter new markets or market segments. For example, the business can develop new applications of its information technologies in autonomous vehicle development, such as those at General Motors and Ford. The cost leadership generic strategy supports market development through cost-effectiveness that leads to competitive advantages in new markets or market segments. In this intensive growth strategy, entry into new markets or market segments should lead to corresponding changes in IBM’s marketing mix or 4Ps.
Diversification (Supporting Strategy). Diversification is an intensive strategy that has a supporting role in IBM’s growth in the information technology industry. The strategic objective is to diversify business operations. For example, IBM can acquire smaller firms in other industries as a way of achieving more growth. Diversification supports the cost leadership generic competitive strategy through an increase in potential advantages based on newly acquired business capabilities. The company can implement this intensive growth strategy to take advantage of the trend of technological integration in various markets, which is an opportunity identifiable in the PESTEL/PESTLE analysis of IBM.
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