Business, Management

IBM PESTEL/PESTLE Analysis & Recommendations

Updated on Updated on by Christine Rowland
IBM PESTLE analysis, PESTEL analysis, political, economic, sociocultural, technological, ecological, legal factors, information technology business recommendations
IBM’s office building in Bratislava, Slovakia. This PESTEL analysis (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)

IBM (International Business Machines Corporation) employs organizational capabilities to continue growing its business, despite challenges based on the opportunities and threats in the information technology industry, such as the ones outlined in this PESTEL/PESTLE analysis. The PESTLE/PESTEL analysis is a strategic management instrument that identifies the political, economic, sociocultural, technological, ecological, and legal (PESTEL) 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 benefits from growth opportunities in the remote or macro-environment through high economies of scale, which is one of the business strengths identified in the SWOT analysis of IBM. This PESTLE analysis determines the strategic options for the company. Addressing the external factors increases IBM’s success rate in boosting the performance of its global business.

Managers can use the results of this PESTEL analysis of IBM as a basis for developing strategies and programs to strengthen the business. For example, the external factors in the technological aspect of the PESTLE analysis can guide the company’s innovation programs. The aim should be to fulfill IBM’s mission statement and vision statement, while maximizing stability and growth, and protecting the business from threats in the remote or macro-environment. These threats include the threat of competitors, like Cisco, Intel, Google (Alphabet), Amazon, Microsoft, and Oracle. It is also essential to regularly monitor the external environment to adjust the company’s strategic planning accordingly. 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 analysis deals with the effects of governments and political organizations on the information technology industry. Political uncertainty can lead to challenges and barriers to growth in industries and markets. In IBM’s case, the following political 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 opportunities for IBM to offer information technology products to governmental organizations. In relation, the company can enhance its innovation processes to exploit opportunities based on political support for e-technologies. In this PESTLE analysis case, these e-technologies correspond to potentially new market segments in the remote or macro-environment. IBM can target these market segments accordingly. This PESTEL 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 PESTLE analysis shows that political 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 analysis. IBM must account for the following economic factors:

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

In the PESTLE analysis framework, stable economic growth in major markets creates opportunities for IBM to continue developing its 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 business growth opportunities, especially through the market penetration strategy, in relation to IBM’s generic strategy for competitive advantage and intensive growth strategies. This PESTEL 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 information technology 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 PESTLE analysis of IBM demonstrate growth opportunities in the remote or macro-environment.

Social/Sociocultural Factors Influencing IBM’s External Environment

The sociocultural situation presents challenges to IBM’s operations. This element of the PESTEL analysis shows social trends 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 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)

This PESTLE analysis case points to the external factor of rising purchasing capacities as an opportunity for IBM 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 opportunities based on the rising use of customer service in evaluating product quality and business quality. In addressing this external factor, IBM’s organizational culture (corporate 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 PESTEL analysis. For instance, offering more cloud platform products can increase the company’s revenues. This element of the 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 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 factors affect IBM’s business capabilities:

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

IBM faces the external factor of technological integration in industries and markets. In this PESTEL analysis case, such a technological trend is a threat because it attracts new entrants from other industries. New entrants are interested in diversifying their businesses and impose a moderate threat to the company, as established in the Five Forces analysis of IBM. For example, some software market segments attract new entrants to develop their own software that competes with some of IBM’s software products. However, this PESTEL analysis also points to the same trend as an opportunity to expand business operations outside the traditional market for information technologies. For instance, the company can diversify its business by using its technological capabilities to develop new products for smart homes. The product element in IBM’s marketing mix or 4Ps should change accordingly. Cybercrime is another external factor that threatens the company. This threat includes cyberattacks on online infrastructure. Nonetheless, cybercrime is also marked as an opportunity in this PESTLE analysis. IBM can enhance its protective measures against cyberattacks. Also, the company has the opportunity to develop and offer advanced cybersecurity products to its clientele. Aside from these external factors, the company has opportunities to grow its revenues by providing cloud platform services to more markets, to capitalize on expanding Internet accessibility. Thus, in this element of the PESTEL analysis, considerable opportunities and threats affect IBM’s standing in the global market.

Ecological/Environmental Factors

Ecological influences on IBM and the information technology industry are examined in this element of the 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 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. With the ecological factors in this PESTEL analysis case, these efforts also address the opportunity to satisfy the external factor of the rising interest in business sustainability programs. Actions for these opportunities 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 PESTLE analysis of IBM points to opportunities to address ecological concerns in the information technology industry.

Legal Factors

The legal requirements and constraints on business are assessed in this element of the PESTEL analysis of IBM. Legal systems affect the company through regulations. In this regard, IBM must address the following legal factors relevant to the information technology industry:

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

In this PESTLE analysis case, improving 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 a trend of improving protections, the company faces issues in developing markets. For example, despite economic opportunities in Southeast Asia, countries in the region suffer from weak implementation and loopholes in intellectual property protection. This condition is a challenge to IBM’s strategies for generating higher revenues in developing markets. Still, the same external factor in developing markets is considered an opportunity in this PESTEL analysis. For instance, IBM can cooperate with governments 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 addresses the threats and opportunities in this element of the PESTLE analysis.

Summary & Recommendations – PESTLE/PESTEL Analysis of IBM

This PESTEL 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 PESTLE 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 PESTEL 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, the results of this PESTLE analysis point to the following recommendations for IBM:

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

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