IBM Network Technology (A)   Case Solution & Answer

IBM Network Technology (A) Case Study Solution


The leading multinational American technological organization – International Business Machines was founded in the year 1911. The financial crisis that took place in the early 1990s,greatly influenced IBM’s business growth, but the organization had recovered its position in the market by the year 1999. During the crisis period, Sun Micros stems, and Hewlett-Packard – the client service networks dominated the computing environment as the leading firms of the technology industry. A significant increase in the client-server networks had resulted in the displacement of mainframes of IBM. After the recovery from the financial crisis, IBM puts an increased emphasis on the services and software followed by a de-emphasis on the mainframe.

Due to the rapidly changing industry dynamics; IBM was unable to position itself as strong and profitable,which is evidenced by around percent increase in sales from the years 1990 to 1998. In response, the management of IBM adopted the terminology of Alchemy of Growth for the development of portfolio i.e. Horizon 1 – mature, Horizon 2 – growth, and Horizon 3 –emerging business.The entrance of IBM in the merchant market represented rapid growth and profitability but the competitive pressure led to stagnant sales. In contradiction, the chip manufacturing business of IBM – Microelectronics division performed better than the rest. (Wood, 2001)

Network Technology BU:

In the year 2000, the team’s aggressive business plan led towards an increase in sales by around five folds. This was primarily the result of the team’s efforts who persuaded the manufacturers of networking gear on the fact that IBM could offer its services as an outstanding supplier in the market. Despite the criticism over the investments by the Skeptics, the projections and demands of the customers were increasing at a rapid growth rate. Due to this reason, IBM found it difficult to meet the forecasted demand of customers. However, it was explained to the customers that the team had been facing trouble to meet their demands as they were out of capacity but still the demand continued to grow,i.e. tripling of orders.

The reason why the Microelectronics division of IBM was out of capacity was based on the adoption of the approach of quick development, production, and delivery of the product. The team accomplished the tasks by moving fast i.e. assisting the customers based on the articulation of they wanted, and bidding by neglecting the details. Although this led to the confident commitment withthe customers, followed by the application of sales skills,but it lacked approach to detail analysis which was is an essential requirement to efficiently manage the division’s capacity.

 Reinvention of IBM strategy:

After the displacement of IBM’s mainframes in the 1990s, Louis V. Gerstner was hired by the Board of Directors of IBM in 1993. He was the first chief executive who was ever hired outside of the organization. As per the careful review of each business of IBM, the management of the organization represented de-emphasis on the mainframe followed by a new emphasis over new services and software,because the traditional manufacturing unit of IBM mainly focused on the production of IBM’s machines only. Similarly, the grouping of the component-making businesses was referred to as the Technology group.

The organization made its entrance in the merchant markets which resulted in increased services, software, and competent sales providing IBM with the opportunity to experience a profitable growth.IBM was unable to develop a strong and profitable position in the market because of significant advancement in technological approaches in the 1990s. Based on this fact, there had been an 18 percent increase in sales from 1990 to 1998. This was because of the organization issued in the conversion of experiments into the growth of businesses and the creation of new experiments leading to emerging businesses. Due to this reason, IBM experienced stagnant sales because of the relentless competitive pressures.

Organization of Microelectronic Division:

The organization of the Microelectronic Division was bythe product technology. The Microelectronics Division was divided into four business units, which are: handling of ASICs, microprocessors, DRAMs Chips (Dynamic Random Access Memory), and semiconductor packaging. For the Microelectronic Division, Chris King was the director of marketing and field service. She was responsible to market all types of products. With the help of individuals in the business unit; the key focus areas of the division mainly included emerging information about the appliance makers, wireless equipment makers, and network equipment makers.

Considering the chip manufacturing business of IBM;some of the products of the Microelectronics division represented better performance in comparison to others. Chips were considered to be the growth business of the organization,because of its sophisticated technology, advanced plants for chip fabrication, unusual design capabilities, and an excellent process control made the application-specific integrated microprocessor and circuits valuable to other computer manufacturers.

Despite of such approach;IBM initiated targeting rival manufacturers of computers as potential customers. Even then, there was a significant decline in sales,because each business unit was found to be busy with the existing customer base in the computer industry and was severely neglecting other opportunities in the market. Due to this reason, the organization was unable to develop relationships with others as well. Similarly, the joining of the employees in the Microelectronics Division occurred when it operated as a design and manufacturing organization. Thus, the company represented technical ability and carefulness, but lacked spontaneous response, which is crucial in the development of a new business. Additionally, the newly hired salespersons also had no experience outside of computing,which was restricting the approach towards new customers.

 Launch of the “Network Technology:

Followed by the creation of the Network Technology business unit in the Microelectronics Division, the business operations were conducted by Chris King and five junior professionals with an increased focus on the assets for efficient utilization to supply the specialized chips to the booming field of networking hardware. In 1999, the sales of networking semiconductors had demonstrated more than double increase i.e. from $75 million to around $220 million,because semi-conductors were crucial to the network equipment performance.


The reorganization of the Microelectronics Division was primarily based on the creation of business units for each of the five customer segments.The responsibility to monitor profitability and loss of semiconductors sale to the networking hardware markers was given John Kelly who was the new general manager and King was named as the Vice President and Business Line Manager of the Network Technology business unit. With an ability to build the world-leading optical-to-electronic chips; the engineers of IBM led the way to combine the benefits of control processes and packet-forwarding ASICs. Thus, the strategic approach of IBM’s Microelectronic Division was to the leader in the designing and manufacturing of chips………………….

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