Business, Management

IBM PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Christine Rowland
IBM PESTEL PESTLE analysis, political, economic, sociocultural, technological, ecological, legal factors, information technology case study, recommendations
IBM’s office building in Bratislava, Slovakia. A PESTEL/PESTLE analysis of IBM reflects strategic opportunities for expansion and competitiveness based on external factors in the remote or macro-environment of the information technology industry. (Photo: Public Domain)

International Business Machines Corporation (IBM) employs organizational capabilities to continue growing the business, despite challenges based on the opportunities and threats in the information technology industry’s remote or macro-environment, such as the ones outlined in this PESTEL/PESTLE analysis of the firm. The PESTEL/PESTLE analysis is a strategic management instrument that identifies the most significant political, economic, sociocultural, technological, ecological and legal (PESTEL/PESTLE) external factors relevant to the company. IBM, also known as Big Blue, succeeds by developing competencies to exploit the opportunities and overcome the threats based on these external factors. For example, the company can benefit from growth opportunities in the remote or macro-environment through the use of high economies of scale, which is one of the business strengths identified in the SWOT Analysis of IBM. Thus, this external analysis case helps determine the strategic options for the company. Addressing the external factors increases IBM’s rate of success in boosting the performance of its global business.

Managers can use the results of this PESTEL/PESTLE analysis of IBM as basis for developing strategies and programs to strengthen the business. For example, the external factors in the technological aspect of the external analysis can guide the company’s innovation programs. The aim should be to maximize stability and growth while protecting the business from threats in the remote or macro-environment. It is also essential to regularly monitor the external environment to adjust the company’s strategic planning according to environmental changes. A holistic approach to the threats and opportunities shown in this PESTEL/PESTLE analysis can empower IBM in its growth and expansion efforts in the information technology industry.

Political Factors Affecting IBM’s Business

The political climate influences how IBM does its business. This element of the PESTEL/PESTLE analysis deals with the effects of governments and political organizations on the remote or macro-environment of the information technology industry. For instance, political uncertainty can lead to challenges and barriers to growth in the industry and related markets. In IBM’s case, the following political external factors are significant:

  1. Governments’ move for digitization (opportunity)
  2. Political support for e-technologies (opportunity)
  3. Improving governmental efforts for data protection (opportunity)

Governments’ move for digitization is an external factor that creates opportunity for IBM to offer information technology products that address this need in governmental organizations. In relation, the company can enhance its innovation processes to exploit opportunities based on political support for e-technologies. These e-technologies correspond to potentially new market segments in the remote or macro-environment. IBM can target these market segments accordingly. This external analysis also points to governmental action that improves data protection. For example, governments are increasingly facilitating the implementation of intrusion detection systems, thereby presenting opportunities for the company in providing technological tools for such implementation. This element of the PESTEL/PESTLE analysis shows that political changes and trends present opportunities for IBM’s business.

Economic Factors Important to IBM

Economic conditions may present opportunities and threats that affect IBM and the information technology industry. The impact of economic trends and related variables on the company are assessed in this element of the PESTEL/PESTLE analysis. IBM must account for the following economic external factors in its remote or macro-environment:

  1. Stable economic growth in major markets (opportunity)
  2. Rapid growth of developing markets (opportunity)
  3. Rising demand for online products (opportunity)

Stable economic growth in major markets creates opportunities for firms like IBM to continue developing their operations with minimal issues regarding undesirable economic trends in these markets. On the other hand, the rapid growth of developing markets is an external factor that corresponds to growth opportunities for information technology firms, especially through the market penetration strategy (Read: IBM’s Generic Strategy for Competitive Advantage and Intensive Growth Strategies). This external analysis also shows that the company can grow its business through products that specifically target online demand and online markets. For example, new business solutions for online operations can address such demand and further grow IBM’s business. The widespread adoption of online products should prompt the company to increase its investments for targeting online markets. Consequently, the external factors in this PESTEL/PESTLE analysis of IBM demonstrate major growth and expansion opportunities in the remote or macro-environment.

Social/Sociocultural Factors Influencing IBM’s External Environment

The sociocultural situation can present challenges in IBM’s operations and determine the overall condition of the remote or macro-environment. This element of the PESTEL/PESTLE analysis shows social trends and changes that affect how customers and employees interact with the information technology business and its products. In this external analysis case, IBM must strategically address the following sociocultural external factors:

  1. Rising purchasing capacities worldwide (opportunity)
  2. Rising use of customer service in evaluating product quality and business quality (opportunity)
  3. Increasing use of online services (opportunity)

The external factor of rising purchasing capacities relates to IBM’s opportunity to penetrate markets. For example, higher sales revenues are expectable, as target customers are increasingly capable of purchasing information technology products from the company. On the other hand, the remote or macro-environment presents considerable opportunity based on the rising use of customer service in evaluating product quality and business quality. In addressing this external factor, IBM’s organizational culture can provide the foundation for applying higher-quality customer service standards for IBMers to attract a bigger market share. Moreover, the increasing use of online services is marked as an opportunity in this external analysis. For instance, offering more cloud platform products can increase the company’s revenues. This element of the PESTEL/PESTLE analysis shows that IBM has growth opportunities based on market penetration, customer service, and online services.

Technological Factors in IBM’s Business

Technological trends are evaluated in this element of the PESTEL/PESTLE analysis of IBM and the remote or macro-environment of the business. Technologies and related changes determine the business tools and equipment available in the information technology industry. The following technological external factors affect IBM’s business capabilities:

  1. Technological integration in various industries and markets (threat & opportunity)
  2. Cybercrime (threat & opportunity)
  3. Expanding global Internet accessibility (opportunity)

IBM faces the external factor of technological integration in various industries and markets. This trend is a threat because it attracts new entrants from other industries. These new entrants have interests in diversifying their businesses and impose a moderate threat against the company (Read: Porter’s Five Forces Analysis of IBM). For example, some information technology market segments could attract industrial robotics firms to develop their own products to compete against some of IBM’s products. However, the trend also presents an opportunity to expand business operations outside the traditional market for information technologies. For instance, the company can develop new products for smart homes, as a way to diversify the business while utilizing the organization’s technological capabilities. The product element in IBM’s marketing mix or 4Ps should change accordingly. On the other hand, cybercrime is another external factor that threatens the company. This threat comes in the form of potential cyber attacks on online infrastructure. Nonetheless, cybercrime is also marked as an opportunity in this external analysis. For instance, IBM has the opportunity to enhance its protective measures against cyber attacks. Also, the company has the opportunity to develop and offer advanced cyber-security products to its clientele. Aside from these external factors, the remote or macro-environment presents the opportunity to grow the company’s revenues in providing cloud platform services. Thus, in this element of the PESTEL/PESTLE analysis, considerable opportunities and threats affect IBM’s standing in the global market.

Ecological/Environmental Factors

The influence of the ecological situation on IBM and the information technology industry is examined in this element of the PESTEL/PESTLE analysis. For example, the company’s remote or macro-environment is subject to the availability of resources from the natural environment. In this external analysis case of IBM, strategies must address the effects of the following ecological external factors:

  1. Increasing availability of renewable energy (opportunity)
  2. Increasing availability of recycling programs (opportunity)
  3. Rising interest for business sustainability programs (opportunity)

IBM has an opportunity to improve its sustainability by utilizing more renewable energy and by recycling its byproducts and production waste. These efforts also address the opportunity to satisfy the external factor of the rising interest for business sustainability programs. These actions can contribute to the effectiveness and success of the programs and initiatives in IBM’s corporate social responsibility strategy. For example, increasing renewable energy utilization can satisfy the stakeholder group of communities concerned about the effects of the information technology industry on the environment. As a result, this element of the PESTEL/PESTLE analysis of IBM points to opportunities to address the ecological concerns in the remote or macro-environment of the information technology industry.

Legal Factors

The legal requirements and constraints on business are assessed in this element of the PESTEL/PESTLE analysis of IBM. Legal systems affect the company and its remote or macro-environment through regulations. In this regard, IBM must address the following legal external factors relevant in the information technology industry:

  1. Improving overall intellectual property protections (opportunity)
  2. Weak legal protection for intellectual property in developing markets (threat & opportunity)
  3. Expanding e-waste regulation (threat & opportunity)

Improving overall intellectual property protections are an external factor that creates opportunities for IBM’s business expansion by reducing intellectual property violations in the information technology industry. However, despite such trend of improving protections, the company still faces issues in developing markets. For example, despite significant economic opportunities in Southeast Asia, countries in the region suffer from weak implementation and loopholes in intellectual property protection. This condition in the remote or macro-environment is a challenge against IBM’s strategies of generating higher revenues in developing markets. Still, the same external factor in the context of developing markets is considered an opportunity in this external analysis. For instance, IBM can cooperate with the governments of developing countries to address intellectual property concerns while boosting the company’s brand recognition and popularity in these markets. In addition, the external factor of expanding e-waste regulation presents an opportunity for IBM to improve its environmental impact. This opportunity exists even though such regulations threaten the business in terms of greater pressure and potential restrictions based on ecological concerns. Therefore, improving processes for legal compliance and cooperation with other organizations can address the threats and opportunities in this element of the PESTEL/PESTLE analysis.

Summary & Recommendations – PESTEL/PESTLE Analysis of IBM

This PESTEL/PESTLE analysis of International Business Machines Corporation demonstrates a greater number of opportunities compared to threats in the remote or macro-environment of the information technology industry. For example, the company has opportunities to develop products to satisfy demand for digitization in governments and related organizations, and to satisfy market demand for online services. The external analysis also identifies opportunities to diversify IBM’s business based on the external factor of technological integration in industries and markets.

However, considerable threats are also determined in this external analysis of IBM’s information technology business. For example, the cybercrime threat imposes significant pressure on the company and its clientele. Intellectual property issues also face the company, especially in efforts to expand operations in developing countries. Based on these external factors in the remote or macro-environment, the results of this PESTEL/PESTLE analysis point to the following recommendations for IBM:

  1. Develop and implement a diversification strategy to exploit the technological integration in various industries and markets.
  2. Develop and implement advanced cyber security solutions for the organization and for target customers.
  3. Establish a cooperative movement with governments and other organizations to improve intellectual property protections.
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