Five Forces Analysis for IBM

The threat of entry

•Also, healthy growth was the Windows server market, which represents the larges
t segment by unit shipments worldwide, accounting for $3.2 billion in sales in t
he first quarter. According to IDC, sales of Windows servers grew almost 10 perc
ent in the first quarter compared with a year ago. The research firm reported th
at Windows servers have seen "modest but steady growth" in recent quarters.
•Coming as no surprise to server-industry observers, the Linux server market exp
erienced the greatest increase, growing 35 percent to $538 million from the firs
t quarter of 2002. "While HP continues to lead the Linux market, Dell and IBM ar
e working hard to post market-share gains in the Linux server market." said Bozm
an
•Signaling a major market shift, Hewlett-Packard has taken the lead in worldwide
server sales in the first quarter, beating traditional front runner IBM, accord
ing to research firm IDC
(http://www.newsfactor.com/story.xhtml?story_id=21646&page=1
http://www.newsfactor.com/story.xhtml?story_id=21646&page=2)
Supplier Power
•Supplier interaction
Procurement is responsible for enhancing IBM's competitiveness by engaging suppl
iers to provide competitive advantage in cost, technology, innovation, speed to
market, quality, and supply assurance. This responsibility includes activities s
uch as supplier selection, negotiation of price, terms and conditions, contract
implementation and ongoing supplier management.
•Supply chain social responsibility
Procurement works with its suppliers, as appropriate, to help them achieve compl
iance with these principles. It is expected that our suppliers will apply these
principles not only in their own companies, but to their extended sources of sup
ply engaged in the production of goods and services for IBM. These principles ar
e embedded in our supplier selection process, and we will actively monitor suppl
iers' performance against them to promote sound business practices across IBM's
extended supply chain. IBM is using the services of an independent third party t
o review supplier facilities and to report to IBM on suppliers' compliance with
these principles.
•Environmental affairs
Suppliers of materials, parts and products for IBM hardware applications provide
information to verify their compliance with IBM's environmental requirements. I
n addition, a subset of suppliers — such as hazardous waste management and produ
ct disposal vendors — undergo additional environmental evaluations by IBM. All s
uppliers of goods and services to IBM are expected to meet the environmental req
uirements of our Supplier Conduct Principles. IBM also works with its suppliers
to develop mutually beneficial designs and processes to enhance environmental pe
rformance, such as in improvements to packaging material and design, and in the
substitution of powder-coatings for liquid-based paints for the decorative metal
finishing of IBM products.
•Supplier diversity
IBM is committed to increasing diversity in its supply chain. The Supplier Diver
sity Program fulfills a corporate policy through our commitment to expand relati
onships with certified minority-owned, women-owned, persons-with-disabilities an
d gay-and-lesbian firms. Each Global Commodity Council has a diversity advocate
assigned it by the corporate supplier diversity man
(http://www.ibm.com/ibm/responsibility/company/relationships/suppliers.shtml)
(http://www.purchasing.com/article/CA631780.html)
Buying Power
•Client Executive Conferences bring together IBM senior leaders with
customer executives to discuss the integration of business and
technology in their enterprises. These annual conferences, held in three
geographic regions worldwide, focus on the application of IBM services
and products to the competitive demands clients face across a range of
industries.
•IBM Board of Advisors comprises a select group of clients who are
engaged with IBM in providing feedback on IBM's transformation to an

on demand enterprise. Representing major companies and organizations

from around the world, members of the board contribute firsthand
knowledge of the transformation of their own business models and the IT
infrastructures that enable them. This knowledge enables IBM to
continually refine its on demand strategy and the metrics for measuring
its success
(http://www.ibm.com/ibm/responsibility/company/relationships/clients.shtml)

•Google gained a major new ally in its campaign to extend its

applications and information services deeper into the enterprise with
IBM's Feb. 28 announcement that it has integrated Google Gadgets with
its WebSphere Portal. They include links to research databases, package
delivery tracking systems, newswires, maps, podcast searches or
YouTube videos—virtually any kind of information service that might be
relevant to a business or consumer Web portal
(http://www.eweek.com/article2/0%2C1895%2C2099449%2Coo.asp)

Competitive Rivalry
•While HDS' new TagmaStore Universal Storage Platform launched last
month with considerable virtualization capabilities, IBM has drawn from
its server technology well, using the technology that drives the
company's Power5 machines to spice up its DS8000. By allowing
administrators to partition storage like a mainframe, IBM is delivering
on the convergence between the server and storage lines.
•The race to safeguard customers' e-mail, spreadsheet and photo files
from loss is on as record retention policies sweep the country. Storage
systems that adhere to some order of information lifecycle management
(define) appear to lead the public's interest, according to analysts. This
makes IBM's upgraded disk systems valuable and competitive with EMC
and HDS.
(http://www.internetnews.com/bus-news/article.php/3418831)
•A worldwide server market analysis for 3Q 2004 that showed IBM
leading the major Linux-based server vendors in revenue, and posting a
growth of 85% in revenue from the same period in 2003. A second
survey, released by Framingham, Mass.-based International Data Corp.,
had Linux revenue growing 52% year-to-year, while competitors
Hewlett-Packard Co. and Dell Inc. lost market share in the same
segment. The two reports mark five consecutive quarters of IBM leading
the global server market. Dell's strong growth reinforces that the global
marketplace squeeze on HP and Sun, by IBM and Dell, continues. A
growth rate of 85% translates into $485 million in Linux servers that
IBM shipped last quarter, as opposed to one year ago when that number
was only $262.2 million.
(http://searchopensource.techtarget.com/originalContent/0,289142,sid39_gci102964
3,00.html)

•The market shares changed dramatically over time, particularly in the

x86 server market. From 1999 to 2004, Dell’s unit shares increased from
23.4% to 29.7% and its revenue shares increased from 23.9% to 27.0%,
while HP’s unit shares dropped from 48.5% to 26.0% and its revenue
shares went down from 42.1% to 31.7%. Dell surpassed HP in 2002 and
became the largest x86 server producer in the U.S. market, though its
revenues still fell behind HP. IBM remained the No. 3 player throughout.
Sun entered the x86 server market in 2002 and has a low presence in
this market, though it is the fourth largest server producer in the entire
server market. In the x86 server market, IBM servers have the highest
price, followed by HP and Dell, and Sun servers have the lowest price.
However, in the high-end server market, IBM and Sun servers are higher-
priced than others. This is true both for wholesale prices and retail
prices.
(http://marketing.wharton.upenn.edu/news/colloquia/pdf/spring2007/Quantifying_Wa
rranty_Value8.pdf