Competitive strategy of the company
International Business Machines Corporation, commonly known as IBM was founded in 1911 by Charles Flint (Kros and Brown 28). This American firm is headquartered in New York, United States, and operates in 170 countries around the world. IBM was one of the firms that played a critical role in defining modern computers which are in current use. Before the emergence of Apple Inc. and many other computer manufacturing companies, IMB had full control of the computer industry. However, it is currently facing stiff competition in the market because of numerous firms that have emerged in the local and international markets offering the same products. It has forced this firm to come up with unique strategies to manage the market competition. The strategy that this firm has been using to achieve a competitive edge over its market rivals is to increase the portfolio of its products. Currently, the company offers a wide range of products, from computer hardware, software, and middleware, to hosting and consulting services.
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IBM has also learned to be flexible in its operations. When Apple Inc. started manufacturing personal computers, IBM did not consider it a worthy competitor and failed to redefine its products based on the emerging needs in the market. It was a large company that was inflexible to change. Its inflexibility saw Apple Inc. overtake it as the leading manufacturer and marketer of personal computers. IBM learned from its past mistakes and has become very sensitive to change. The supply chain activities, especially the strategies it uses to get access to raw materials needed for production purposes, show that this firm has become very flexible in its operations. The flexibility of the company is not only reflected in its sourcing activities but also the strategy that it uses in its logistical operations. The move to spread its production plants around the world is meant to lower the cost of transportation. The management understands that the best way of gaining a competitive edge over market rivals is to lower the cost of operations and improve efficiency.
Competitive priorities for the company
According to Wisner et al., when a firm is operating in a highly competitive business environment, it is important for it to define the competitive priorities that can enable it to achieve its vision and strategic objectives (91). At IBM, the primary focus has been on innovation as its main priority in the market. The firm has been keen on understanding the needs of its customers and developing quality products to meet these needs. Through innovation, it has been able to develop new products such as cognitive and cloud computing which offer very unique services to its customers. The management of this company has also given priority to cost-cutting strategies in its operations. Improving its logistical operations and moving the production plants closer to the market has been an important move in lowering the overall cost of delivering its products to customers. The order qualifier of the products of this firm is their ability to meet the computing needs of the customers. The order winner of these products is their unique innovative ways of meeting customer needs.
How the supply chain and operations design aligns with its strategy
The supply chain and operations design of this company align with its strategy and competitive priorities. The firm has decided to decentralize its manufacturing operations to various cities around the world. This strategic move is meant to help the firm access raw materials from various parts of the world with ease. Sustainability of a firm is determined by a number of factors, the top of which is its ability to continuously deliver products to the market needed by the customers (Jacobs and Chase 48). However, it has become challenging to access some of the needed materials, making it necessary to move closer to the source. The strategy of moving closer to the source of materials is in line with its competitive priority of lowering its cost of operations.
The fact that this firm operates a number of plants in different countries also allows it to be innovative in terms of delivering quality products. It has enabled IBM to compete favorably with its market rivals such as Apple Inc. and Samsung Corporation. Decentralized operations of this company mean that it may focus on meeting the unique needs in each market. It has plants in all the continents around the world. There are some needs unique to Africa because of the climatic conditions, social, cultural, and political environmental forces. It is capable of developing products which are designed to specifically meet these needs because it already has a plant in Africa. The same case may apply to other regions where this firm has its plants.
Significant supply chain risks how they mitigate them
In its operations, IBM faces a number of challenges that may affect its ability to achieve success in the market. A firm is capable of managing risks if it is fully aware and capable of dealing with them in the best way possible. There are four different categories of risks that a firm will always face at a given time. The first category is the known-known risks that the firm is aware of and understands how to handle. Known-unknown risks are those risks that firms know how to deal with but are not aware they exist. The unknown-known risks are those that a firm is aware of but does not know how to deal with them. The unknown-unknown risks are those that a firm does not know they exist and does not know how to handle them. The table below shows these four categories of risks.
Table 1. Types of Risks. Source: (Developed by author)
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In this analysis, the focus is on risks that fall in quadrants B and D. The main known-unknown risk that IBM faces is the changing political climate in some of its major markets. In Europe, the United Kingdom opted to move out of the European Union. It means that the United Kingdom and the European Union will now be considered as two different markets. In the United States, the President-elect Donald Trump has promised to increase taxes on American firms that have production plants outside the United States. These are threats that the firm is not clearly aware of the best way to address. The unknown-unknown risk that IBM may face is the possibility of new international environmental laws regarding the production of electronic products. The international community has been trying to come up with new laws that will protect the planet earth. It is possible that some of these laws may force electronic companies to redefine their production strategies. Currently, this firm is yet to come up with ways of mitigating this risk.
How IBM is achieving competitive advantage through superior sourcing
IBM is currently operating in a highly competitive business environment. The management of this firm is aware of the external competitive forces and it is determined to find ways of dealing with them. One area of the supply chain that this firm has registered impressive performance is in sourcing for the raw materials. The materials used in making a number of IT infrastructure are very rare. According to Boyer and Verma, IMB is still one of the world’s leading manufacturers of IT infrastructure (38). However, a number of other new firms have emerged, especially in North America, parts of Asia, and Europe, producing similar products. Unlike in the past when this company dominated the computer hardware and software industry, IBM currently finds itself in a position where it has to compete with these other firms for the raw materials. Some of the minerals used in manufacturing components of computer systems are very rare. They are only available in specific regions in the world and their demand has been rising due to the booming computer industry. As such, every firm in this industry has been trying to find ways of getting access to these raw materials in the cheapest and most reliable way possible.
IBM has come up with ways of ensuring that it gets the needed raw materials in time and delivers them at its manufacturing plants located in various parts of the world. The firm made a decision to decentralize its manufacturing activities to various parts of the world as a way of cutting down the cost of operation and improving efficiency. It has manufacturing plants in Texas, New York, and California in the United States. In Asia-Pacific, it has manufacturing plants in Beijing and Shanghai in China, Melbourne in Australia, Tokyo in Japan, and Delhi in India. In South America, it has a plant in Rio de Janeiro in Brazil.
It has also established a plant in Nairobi, Kenya as it spreads its operations to Africa. One of the most important factors that have made it necessary for this firm to spread its operations globally is the desire to have access to important raw materials needed for its production purposes. Before choosing a city to locate its manufacturing plants, the most important factors the management considers are the cost of operations and availability of the raw materials. The firm often strives at maintaining reliability in its production and that can only be achieved if it has continuous access to the raw materials needed for its operations. The competitive priorities framework below identifies areas that a firm can focus on to achieve a competitive edge over its market rivals.
As shown in the figure above, a firm can decide to focus on quality, cost, flexibility, or delivery in its operations as a way of gaining a competitive advantage over market rivals. The decentralization of the manufacturing plants of this firm near the important raw materials helps it in cost reduction as a way of attaining a competitive advantage in the market. The overseas plants have registered success in terms of accessing the needed materials for the purpose of manufacturing at reduced prices. For instance, China has some of the most important minerals needed to manufacture computer software and hardware. As a move to promote the local manufacturing industry, the Chinese government came up with a number of laws and regulations meant to discourage the exportation of these minerals. When sold locally in China, these materials are very cheap. However, taxation that the Chinese government levies on these minerals when being exported makes them very expensive in the international markets. The decision by the management to set up a plant in China was meant to specifically overcome this problem of sourcing for the materials. With its plants in China, IBM is able to purchase these materials locally and use them without incurring the taxation levied when the minerals are exported.
It is also important to note that this move to spread the manufacturing plants to other countries around the world also helped the firm to cut down its costs of operations. In India for instance, the firm is not just targeting the raw materials available in the country but also the cheap labor. Congo is another country that has important minerals used in this industry. However, the management of this company had to make a strategic decision of the country best suited to locate its manufacturing plant. Despite having the raw materials needed by this firm, Congo is a politically unstable country, which means that security is not guaranteed there. It also has limited skilled labor to help in the operations of the plant. That was why the firm considered locating its plant in Nairobi, a city not far away from Congo. The move has given it a competitive advantage over its market rivals. Lowering the cost of production and increasing reliability levels in access to raw materials has enabled this company to lower the cost of production and increase its reliability in delivering products in the market.
Boyer, Kenneth, and Rohit Verma. Operations & Supply Chain Management for the 21st Century. South-Western, 2010.
Bray, Zane. IBM Netcool Operations Insight: A Scenarios Guide. John Wiley & Sons Publishers, 2016.
Jacobs, Roberts, and Richard Chase. Operations and Supply Chain Management. 2nd ed., Springer, 2016.
Kros, John, and Evelyn Brown. Health Care Operations and Supply Chain Management: Strategy, Operations, Planning, and Control. 2nd ed., Jossey-Bass, 2013.
Wisner, Joel, et al. Principles of Supply Chain Management: A Balanced Approach. Cengage Learning, 2016.