IBM SWOT Analysis & Recommendations

IBM SWOT analysis, strengths, weaknesses, opportunities, threats, internal external factors, information technology case study and recommendations
IBM’s building in São Paulo, Brazil in 2009. A SWOT Analysis of International Business Machines Corporation (IBM) shows that the business has strengths and opportunities to grow despite its weaknesses and the threats in the information technology industry. (Photo: Public Domain)

International Business Machines Corporation (IBM) engages in continuous efforts to address concerns shown in this SWOT analysis of the business. The SWOT Analysis is a strategic tool to identify the strengths, weaknesses, opportunities and threats most significant and relevant to the business. IBM’s strengths and weaknesses are internal strategic factors that determine capabilities and challenges based on the organization’s characteristics. For example, the company’s global operations facilitate economies of scale that strengthens the business against competitors. On the other hand, the opportunities and threats in IBM’s business are external strategic factors that reflect the situation of the information technology industry and the markets where the business operates. Big Blue needs to develop appropriate strategies and tactics to stay ahead of competitors while maintaining growth and stability based on business strengths. Long-term growth and survival despite major changes in the industry are achievable by addressing the issues outlined in this SWOT Analysis of IBM.

Information derived from this SWOT analysis of IBM can guide investors in determining the attractiveness of the business in relation to the conditions of the stock market. The company must possess the strengths needed to overcome its weaknesses, exploit its opportunities, and protect itself from threats in the information technology industry. In spite of its position as one of the biggest players in the market, IBM is subject to a variety of internal factors and external factors that could serve as barriers to long-term success.

IBM’s Strengths (Internal Strategic Factors)

The internal strategic factors that support or promote business growth and resilience are identified in this element of the SWOT analysis of IBM. These factors are strengths that continue to support the company in its more than 100 years of business operations in the global information technology industry. IBM can achieve further growth and development by adding to or improving the following business strengths:

  1. High-value brand
  2. Expertise in production processes and materials management
  3. Extensive intellectual property portfolio
  4. High economies of scale

The IBM brand is one of the strongest in the global information technology market. The brand’s value is based on product popularity and time-tested effectiveness, and the company’s expertise in providing hardware and software solutions to clientele. This internal factor empowers the company to successfully attract and retain customers for current and new products. Another strength is IBM’s expertise in production processes and materials management. Such expertise is based on a long history of innovation, which shapes the company’s business strategies and human resource development programs for IBMers’ talent and skills, and influences the development of the industry. IBM’s organizational culture also contributes to this strength. In addition, the company benefits from its extensive intellectual property portfolio. For example, having one of the highest numbers of patents strengthens the company and its competitive advantage. On the other hand, the high economies of scale contribute to business capabilities in maintaining competitiveness despite the high costs of developing new technological products. This element of the SWOT analysis shows that IBM has major strengths that can keep the business growing despite tough competition.

IBM’s Weaknesses (Internal Strategic Factors)

In this element of the SWOT analysis, the internal strategic factors that reduce or limit IBM’s business performance are determined. These factors are weaknesses that the company must overcome through strategic initiatives or reforms in business operations and processes. In the context of the information technology market, IBM must address the following weaknesses:

  1. Imitable products
  2. Shrinking product mix
  3. Low degree of diversification

The weakness of the imitability of products is based on the cost leadership generic strategy (Read: IBM’s Generic Strategy & Intensive Growth Strategies). In this strategy, the company focuses on cost minimization in business processes. However, the strategy is applied with minimal emphasis on product uniqueness. As a result, it is easy for competitors to develop technological products similar to those of IBM. The company also has the weakness of a shrinking product mix. This internal factor is based on recent strategic reforms that aim to focus the business on core operations with high profitability potential. For example, the company sold its personal computer business to Lenovo in 2005. In relation, IBM has a low degree of diversification. This weakness pertains to the company’s operations in only a limited number of markets within the information technology industry, leading to high risks based on these markets. This issue has even worsened because of the firm’s shrinking product mix. This element of the SWOT analysis of IBM reveals potential difficulties of growing the business and shielding it from market-based risks.

Opportunities for IBM (External Strategic Factors)

The external strategic factors that contribute to favorable conditions for business growth are identified in this element of the SWOT analysis of IBM. These factors are opportunities linked to changes in the information technology industry and related markets, such as the transformation of the dominant technological strategies used in the market. The following are opportunities for the growth of IBM’s business:

  1. Business diversification in various industries
  2. Alliances with firms from different industries or markets
  3. Rapid innovation of new products

The opportunity to diversify IBM’s business in various industries is directly linked to the company’s weakness of having a low degree of diversification. In exploiting this opportunity, the company can use its strengths to penetrate other markets. Another opportunity for IBM is to develop alliances with other firms in different industries and markets. This external factor is based on the trend of technological integration in industries and markets (Read: PESTEL/PESTLE Analysis of IBM). For example, the products of other industries, such as the automotive industry, are becoming increasingly dependent on computing technologies. On the other hand, the opportunity to rapidly innovate supports the company’s competitiveness based on its research and development expertise and the strength of having an extensive intellectual property portfolio. Thus, this element of the SWOT analysis shows a number of opportunities that can realistically support IBM’s long-term business growth objectives.

Threats Facing IBM (External Strategic Factors)

In this element of the SWOT analysis, the external strategic factors that decrease or restrict IBM’s growth are determined. These factors threaten the company in terms of potential failure in strategy implementation. They also make it difficult for the business to maximize revenues and profits in the information technology industry. IBM needs to implement measures to protect its business from the following threats in the external environment:

  1. Imitation of products
  2. Competition
  3. Cybercrime

Imitation of products is an issue that faces IBM. This threat is based on the weakness of product imitability, which is due to the company’s focus on cost leadership with minimal product uniqueness. On the other hand, the threat of competition is significant because of the degree of differentiation and aggressiveness of firms in the information technology industry (Read: Porter’s Five Forces Analysis of IBM). Also, cybercrime is a significant threat, especially because of the company’s extensive online operations involving servers for its clientele. For example, cloud platform products expose the firm and its clientele to potential cyber attacks and related risks. In this element of the SWOT analysis of IBM, threats are a major concern that could bring down the business and its technological infrastructure.

Summary & Recommendations – SWOT Analysis of IBM

The results of this SWOT analysis of International Business Machines Corporation (IBM) enumerates internal and external strategic factors that support long-term business survival. For example, the company has an extensive intellectual property portfolio that contributes to competitive advantage against other information technology firms. In addition, IBM has a high-value brand that strengthens the business against competitors and new entrants. Also, this strength can support the company in diversifying its business and entering other industries.

Despite IBM’s strengths and positive position in the industry, there are considerable challenges based on the weaknesses of the business, and the opportunities and threats in the external environment. For example, the company faces the threat of competition and experiences the weakness of the imitability of its products. It is necessary to make some strategic changes to ensure the fulfillment of IBM’s vision statement and mission statement, which emphasize value and technological breakthrough. Such changes must contribute to the company’s continued growth and competitive advantage. Based on these factors identified in the SWOT analysis, it is recommended that IBM:

  1. Enter alliances with firms from other industries to exploit technological integration opportunities.
  2. Diversify the business to spread risk and reduce risk exposure in the information technology market.
  3. Reform innovation processes to raise product uniqueness and improve the advantage of products against imitation and competition.