Business, Management

IBM SWOT Analysis & Recommendations

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

This SWOT analysis of IBM shows strategic fit. The SWOT analysis tool identifies the strengths, weaknesses, opportunities, and threats relevant to the business. IBM’s strengths and weaknesses are internal strategic factors that determine capabilities and challenges based on the organization’s characteristics. On the other hand, opportunities and threats are external strategic factors that reflect the information technology industry. 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 despite major changes in the industry is achievable by addressing the issues outlined in this SWOT analysis of IBM.

Information derived from this SWOT analysis of IBM can guide investors in evaluating the business relative to other firms and the stock market. The company must possess the strengths for overcoming its weaknesses, exploiting opportunities, and protecting the business from threats in the information technology industry.

IBM’s Strengths (Internal 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 support the company’s competitiveness in the information technology industry. IBM’s strengths are:

  1. High-value IT 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. In the SWOT analysis model, 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. This history of innovation shapes the company’s business strategies and human resource development programs for IBMers’ talent and skills. IBM’s organizational culture (company culture) also contributes to this strength. Furthermore, the company benefits from its extensive intellectual property portfolio. Having one of the highest numbers of patents strengthens the company and its competitive advantages. 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 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. IBM’s weaknesses are:

  1. Imitable nature of some products or their characteristics
  2. Limited product mix
  3. Low degree of business diversification

The weakness of the imitability of products is based on cost leadership, which is one of IBM’s generic competitive strategies, used in tandem with the company’s intensive growth strategies. In cost leadership, the company focuses on cost minimization in business processes. However, the strategy may limit product uniqueness. IBM also has the weakness of its limited product mix. In the SWOT analysis context, this internal factor is based on strategic reforms that aim to focus the business on core operations with high profitability potential. For example, with these reforms, the company sold its personal computer business to Lenovo in 2005. Another weakness is IBM’s low degree of diversification. This weakness pertains to the company’s operations in only a limited number of market segments within the information technology industry. Overall, this element of the SWOT analysis of IBM reveals potential difficulties in growing the business and shielding it from market-based risks.

Opportunities (External Factors)

The external strategic factors that favor 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 markets. IBM’s opportunities are:

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

The opportunity to diversify IBM’s business in various industries is 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. In this context of the SWOT analysis, this external factor is based on the trend of technological integration in industries and markets, as shown in the PESTLE/PESTEL analysis of IBM. For example, the company can collaborate with automakers to develop new software solutions for autonomous vehicles. 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 opportunities that support IBM’s long-term business growth objectives.

Threats (External Factors)

In this element of the SWOT analysis, the external strategic factors that decrease or restrict IBM’s performance are determined. These factors make it difficult for the business to maximize revenues and profits in the information technology industry. The threats to IBM are:

  1. Imitation of products
  2. Competition with other multinational IT firms
  3. Cybercrime

Imitation of products is an issue that faces IBM despite its patents, as intellectual property protection is not always guaranteed in some countries. This threat relates to product imitability, which is a weakness of the company. The threat of competition is significant in this SWOT analysis because of the degree of differentiation and aggressiveness of firms in the industry, as illustrated in the Five Forces analysis of IBM. The company competes with technology firms, such as Cisco, Oracle, Google (Alphabet), Microsoft, Amazon, and Intel. Moreover, 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 affects the business and its technological infrastructure.

Recommendations – SWOT Analysis of IBM

This SWOT analysis of IBM enumerates internal and external strategic factors that support long-term business viability. The company’s intellectual property portfolio is a competitive advantage over other information technology firms. Also, IBM’s high-value brand strengthens the business against competitors and new entrants. These strengths support business diversification into other industries.

This SWOT analysis also enumerates challenges based on IBM’s weaknesses, as well as opportunities and threats in the external environment. The company faces the threat of competition and experiences the weakness of product imitability. In this regard, strategic changes may be needed to ensure the fulfillment of IBM’s mission statement and vision statement, which emphasize value and technological breakthrough. Such changes must enhance the company’s growth and competitive advantages. Based on the factors identified in this SWOT analysis, the following are recommendations for IBM:

  1. Enter alliances with firms in other industries to exploit technological integration opportunities.
  2. Diversify the business to spread market-based risk and reduce risk exposure in the information technology market, considering the diversification-related factors in this SWOT analysis.
  3. Reform innovation processes to raise product uniqueness and improve the competitive advantage of products.

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