Marketing Dynamics & IBM Case Study

COMPETITIVE DYNAMICS

IBM-Mini Case

4 Important Questions

•  How can market leaders expand the total market and defend market share?

•  How should market challengers attack market leaders?

•  How can market followers or nichers compete effectively?

•  What marketing strategies are appropriate at each stage of the product life cycle?

Hypothetical Market Structure

40%

30%

20%

10%

Market Leader Maket Challenger Market Follower Market Nicher

Competitive Strategies for Market Leaders

v  Expanding Total Market Demand

New Customers

More Usage

Additional Opportunities to use the brand

New Ways to use the brand


v  Protecting Market Share

Proac<ve Marke<ng

Defensive Marke<ng

Posi<on Defense Flank Defense Preemp<ve Defense

Counteroffensive Defense Mobile Defense


v  6 Types of Defense Strategies


v  Increasing Market Share

Possibility of provoking

antitrust action

Economic cost

Danger of pursuing wrong marketing

activities

Effect of increased market share on actual

& perceived quality

Factors to be considered

Strategies for Market Challengers

v Defining the strategic objective & opponent

1.  Can attack the Market Leader

2.  Can attack firms its own size that aren’t doing the job

3.  Can attack small local & regional firms

Strategies for Market Challengers

v Choosing a general attack strategy

AGack Strategies

Frontal AGack

Flank AGack

Encirclement AGack

Bypass AGack

Guerilla AGack

Strategies for Market-Followers

Counterfeiter Cloner

Imitator Adapter

Strategies for Market-Nichers

v What? A leader in a small market (niche).

v Competition? Avoid competing with larger firms.

v Customers? Small markets of little/no interest to larger firms.

v  Profitability? Greater than larger firms.

v  ROI? Higher because they know target customers very well.

①  Creating Niches ②  Expanding Niches ③  Protecting Niches

Three important tasks :-

Product Life Cycles

Growth-Slump-Maturity Cycle-Recycle Scalloped

The different phases of the cycle:- ①  Introduction ②  Growth ③  Maturity ④  Decline

International Business Machines – A mini case study!

Manufactures & sells Computer Hardware & Software

Offers Infrastructural services

Provides Global Consulting Services

What does IBM do?

Company Timeline

1910-‐1940 1950-‐1980 1980-‐present

Thomas Watson Sr.

•  Focus on large-scale custom solutions for businesses

•  Explosive Growth

•  War related Technologies

Thomas Watson Jr.

•  Worked with US Govt during cold war to build air defense SAGE sys

•  70% Market Share

•  Beginning of the Personal Computing era

Louis Gerstner & Samuel P. •  Launched 1st personal computer

•  Outsource components of PC to Microsoft (Sales declined)

•  New CEO turned the fortunes, refocused co. in a strategic direction

1880-‐1924 Custom-‐built solu<ons for businesses, Tabula<ng machines, War related technologies for WW1 &

WW2

1950-‐1980 Innova<ons in computa<on, Air Defense SAGE

computer, System/360 Computers, IBM Architecture-‐ Industry standard

1980-‐2000 Personal Compu<ng era-‐ Launched first PC, Outsourced components of PC to MicrosoZ,

Transformed & focused on high-‐margin business like consul<ng & middleware-‐soZware development

2000-‐present Moved away from Hardware business, embraced

Global Consul<ng & Analy<cs, Acquired 100 companies, focuses on solving world’s most challenging problems like, pollu<on & traffic

Core Business Focus

Re-thinking Marketing Strategy •  In order to rebuild brand image, consolidated marketing efforts from 70 advertising

agencies to 1 & created a consistent, universal message. •  In 1997, IBM’s chess-playing computer system, Deep Blue, also helped lift IBM’s

brand image by defeating the world’s reigning chess champion in a historic event that captured the attention of millions.

•  Latest campaign, “Smarter Planet”, conveys company’s vision.

IBM’s Marketing & Promotional Activities

Few companies have had such a long history of ups and downs as IBM. What were some of the keys to its recent success? Can its plans to solve some of the

world’s most challenging problems succeed? Why or why not?

•  The key to IBM’s recent success is focusing on big problems that might affect businesses and consumers.

•  Yes, I believe that IBM is able to solve some of the world’s problem, such as pollu<on, traffic conges<on, etc. With a technically proficient workforce comprising of scien<sts, engineers, consultants, and sales professionals, they can help solve some of the big problem and make people’s life easier and healthier.

•  IBM has been inves<ng 30% of their annual budget into R&D, which bound to

yield results. We can expect them to come up with something that will fix some of the important problems that we are facing.

Who are IBM’s biggest competitors today, and what risks do they face with their current strategy?

IBM’s major rivals include Technical & Consul<ng firm that are into the Hardware & SoZware sector. For eg, Accenture, HP, XEROX, CSC, etc The risks involved with the current strategy are:-‐ •  Focusing on solving big issues may involve greater resources (<me, money &

energy) & may not yield desirable results.

•  AZer heavily inves<ng resources in solving big issues, IBM may have to face situa<ons when rival companies come out with more efficient solu<ons.

•  R&D may become obsolete coupled with low success rate.

SUMMARY

Market Structure

• Market Leader • Market Challenger • Market Follower • Market Nicher

Compe<<ve Strategies

•  For Market Leader •  For Challenger •  For Follower •  For Nicher

Product Life Cycles

•  Growth-‐Slump-‐Maturity •  Cycle-‐Recycle •  Scalloped

IBM Case Study

DISCLAIMER

Created by Akshay Julka(DTU, Delhi), during a Marketing

internship under Prof. Sameer Mathur, IIM Lucknow.