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Ibm Reduces Energy Costs and Environmental Damages

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IBM Reduces Energy Costs and Environmental Damages

International Business Machines Corporation (IBM) is the world’s largest information technology (IT) corporation. Also known as “Big Blue”, IBM was formed as the result of a merger between the Tabulating Machine Company, International Time Recording Company and the Computing Company of America. The merger took place in 1911 and shortly after Thomas J. Watson Sr. came aboard (IBM, 2008). He is accredited with transforming IBM into a leader of innovation and technology. Currently IBM provides business, technology and consulting services to its customers. In particular they offer consulting, delivery and implementation services, enterprise software, systems, microelectronics and financing. Direct competitors of IBM include: Accenture, Hewlett-Packard, and Microsoft. Whalen (2010) states IBM’s operations expand globally to over 170 countries. IBM headquarters are located in Armonk, New York.
General Environment Social Cultural - IBM’s reputation was previously based on control. “Big Blue” controlled the mainframe market (hardware, software and applications). Presently, IBM has the reputation as an enormous, innovative information technology company (Blankenhorn, 2005). Their reputation is no longer based on control but the quality is experienced by customers. Their expansion has reached not only mainframe customers, but customers and businesses across the entire IT market. It is the opinion of the customers which influence how the company is perceived. Politcal - Conflict in Iraq and Afghanistan has a negative impact on the U.S. economy. The wars significantly impact the U.S. government budget (Hubpages, 2012). It was believed the end results of the conflict would be a model of democracy in the Middle East and controlled oil prices. Some argue the money could have been used to combat other economic problems. The conflict has not only hurt the U.S. government budget but household spending as well. More than likely there is an increase in taxes to fund the wars which results in less money for households to spend on other goods. Economic –The wars in Iraq and Afghanistan has affected the price of crude oil. Crude oil prices have consistently increased since the launch of the wars. According to Hubpages (2012), this bears heavily on the U.S. economy. The conflicts and increased world demands have caused oil prices to increase and become more unstable. As a result governments have to spend more on importing oil and interest payments on outstanding debts. This activity makes it hard to balance budgets, decreases consumer spending and slows down the economy. Technological - Technology directly affects the computer technology industry because it can be used to develop many technological products. Businesses offer a wide array of products and services because of technological advances. The use of internet, e-commerce, social networking and mobile technologies makes it easier for consumers to get information on products and companies. Technological developments affect how people work and do business. Experts forecast the following macroenvironmental trends. AMEInfo.com (2010) states support that an economic downturn began in Fall 2008 and was felt throughout the technology sector. This sector at the time included: semiconductors, consumer electronics, software, computing, and network infrastructure. Consumers and corporate spending was significantly low during 2009 (Harrison, 2010). The following year technology companies implemented cost cutting measures and saw and increase in netbooks and tablets. The five key trends that redefined the technology sector in 2010 were consolidation, growth of cloud computing, consumerisation of technology, acceleration of open innovation, and growing power of emerging markets. According to Vizard (2011) convergence of cellular and WiFi networks, increased video usage, automated data management and cloud computing are technology trends forecasted for 2011.
The Environment Within the Industry The Technology Industry is an enormous industry and the source of striking changes in business practices in all other sectors. IT covers a gamut of related disciplines and areas, from semiconductor design and production, hardware manufacture (mainframes, servers, PCs, and mobile devices), software, data storage, backup and retrieval, networking, and the internet. According to QFinance (2012), IT spending was forecasted to reach $3.4 trillion in 2010, a 5.3% increase from IT spending of $3.2 trillion in 2009. The IT industry continued to show growth in 2011 which was projected to surpass $3.5 trillion. Technology spending was projected to increase less this year than expected. Spending in the computing hardware, enterprise software, information technology services, and telecommunications equipment industries will rise 3.7 percent to $3.8 trillion in 2012, compared with an earlier estimate of 4.6 percent (Pelberg 2012). Organizations have many factors to consider when entering the technology industry. Factors to consider are threat of entry, intensity of rivalry, bargaining power or suppliers, bargaining power of buyers, and threat of substitutes. The threat of entry is low. Capital investment for the industry is high as well as the budget for research and development. Technology of production costs undermines the position of new competitors. The aforementioned aspect prevents new competitors from entering the technology industry. Intensity of rivalry is high. There are a plethora of software manufacturers in the global market. Each company attempts to create new programs and to make computers more powerful. The bargaining power of suppliers is low. IBM uses a generous number of suppliers worldwide. The bargaining power of buyers is high. IBM customers have the power to negotiate because they make purchases in large amounts at one time. This is the result of IBM’s business-to-business marketing. The threat of substitutes is low. Software is the component that allows for the computer to be utilized. There is no product that substitutes computer software.
The Organization’s Market IBM offers several products and services. Their key products include: systems and servers, storage, software, printing systems, and semiconductors. Services offered comprise of business analytics, strategy, consulting, application management, integrated communications, mobility services, technical support, and security to say the least. IBM customers receive several benefits including product warranty, tech support, quality products and services, and industry-leading technologies. IBM’s major operations consist of five business segments: Global Technology Services, Global Business Services, Software, Systems and Technology and Global Financing. Global Technology Services provides IT infrastructure services and business process services. Business value is delivered through the company’s global scale, standardization and automation. Global Business Services provides professional services and application management services, while delivering business value and innovation to clients through solutions. Software consists of middleware and operating systems software. Middleware software allows clients to assimilate systems, processes and applications across a standard software platform. Operating systems are the software that enables computers to run. Systems and Technology provides clients with business solutions. This segment also provides semiconductor technology, products and packaging solutions to clients. Global Financing assists customers’ acquisition of IBM systems, software and services. Customers learn of products and services offered by IBM primarily by technology (mobile, internet, commercials). IBM builds rapport with their customers which result in loyalty and repeat business. Satisfied customers spread the word about their experience to potential customers resulting in free advertisement. According to YCharts (2012), IBM spends 22% of annual revenue on marketing and sales.
Purpose and Mission IBM’s mission is to strive to lead in the invention, development and manufacture of the industry’s most advanced information technologies, including computer systems, software, storage systems and microelectronics. (Treadstone Consulting, 2011) The technologies are translated into value for there customers through professional solutions, services and consulting businesses worldwide. IBM has a clear sense of their mission and train staff to implement it.

References

AMEInfo.com. (2010). Booz and Company Releases Report on Technology Industry Trends in 2010. Retrieved April 18, 2012 from http://www.ameinfo.com/223438.html
Blankenhorn, D. (2005). The Value of Reputation. Retrieved April 16, 2012 from http://mooreslore.corante.com/archives/2005/02/17/the_value_of_reputation.php eHow. (2012). Formal & Informal Business Communication. Retrieved April 13, 2012 from http://www.ehow.com/about_6708973_formal-informal-business-communication.html
Harrison, E. (2010). Weak Consumer Spending Will Last for Years. Retrieved April 18, 2012 from http://www.nakedcapitalism.com/2009/08/weak-consumer-spending-will-last-for.html
Hubpages. (2012). How the Wars in Iraq and Afghanistan Have Affected the U.S. Economy. Retrieved April 16, 2012 from http://fritz11235.hubpages.com/hub/How-the-Wars-in-Iraq-and-Afghanistan-Have-Affected-the-US-Economy
International Business Machine Corporation (IBM). (2008). Think Our History of Progress. Retrieved April 14, 2012 from http://www-05.ibm.com/uk/ibm/history/interactive/ibm_history_2.pdf
Pelberg, H. (2012). Gartner Cuts Information Technology Spending Forecast for 2012. Retrieved April 18, 2012 from http://www.stamfordadvocate.com/news/article/Gartner-cuts-information-technology-spending-2446705.php#ixzz1sSJoyb6x
QFinance. (2012). Information Technology Industry:Major Industry Trends. Retrieved April 18, 2012 from http://www.qfinance.com/sector-profiles/information-technology
Sterman, D. (2011). The Death of Pensions: 5 Emerging Trends That Will Effect Us All. Retrieved April 16, 2012 from http://www.investinganswers.com/investment-ideas/stock-market/death-pensions-5-emerging-trends-will-affect-us-all-2153
Treadstone Consulting. (2011) Partners. Retrieved April 13, 2012 from http://www.treadstoneconsulting.net/partners/
Vizard, M. (2011). Top 10 Emerging Technology Trends for 2011. Retrieved April 18, 2012 from http://www.ctoedge.com/content/top-10-emerging-technology-trends-2011
Whalen, M. (2010). IBM Turns its Headquarters into a Smart Building. Retrieved April 15, 2012 from http://www.pcworld.idg.com.au/article/370186/ibm_turns_its_headquarters_into_smart_building/
YCharts. (2012). IBM Income Statement. Retrieved April 18, 2012 from http://ycharts.com/financials/IBM/income_statement/annual

Appendix
International Business Machines Corporation Income Statement
|Income |2011 |2010 |2009 |2008 |2007 |
|Revenue |106.92B |99.87B |95.76B |103.63B |98.79B |
|Cost of Revenue |56.78B |53.86B |51.97B |57.97B |57.06B |
|Gross Profit |50.14B |46.01B |43.79B |45.66B |41.73B |
|Research & Development Expense |6.258B |6.026B |5.82B |6.337B |6.153B |
|Selling, General, & Admin. Expense |23.59B |21.84B |20.95B |23.39B |22.06B |
|Depreciation & Amortization | | | | | |
|Operating Interest Expense | | | | | |
|Other Operating Income (Expense) | | | | | |
|Total Operating Expenses |86.63B |81.72B |78.74B |87.69B |85.27B |
|Operating Income |20.29B |18.15B |17.01B |15.94B |13.52B |
|Non-Operating Income |717.00M |1.573B |1.126B |778.00M |973.00M |
|Pretax Income |21.00B |19.72B |18.14B |16.72B |14.49B |
|Provision for Income Taxes |5.148B |4.89B |4.713B |4.381B |4.071B |
|Income after Tax |15.86B |14.83B |13.42B |12.33B |10.42B |
|Minority Interest | | | | | |
|Minority Interest | | | | | |
|Equity In Affiliates | | | | | |
|Income Before Extraordinaries & Disc. Operations |15.86B |14.83B |13.42B |12.33B |10.42B |
|Investment Gains/Losses | | | | | |
|Other Income/Charges | | | | | |
|Income from Discontinued Operations | | | | | |
|Net Income |15.86B |14.83B |13.42B |12.33B |10.42B |
| | | | | | |
|Earnings Per Share Data |2011 |2010 |2009 |2008 |2007 |
|Average Shares to compute diluted EPS |1214 |1287 |1341 |1388 |1457 |
|Average Shares used to compute basic EPS |1197 |1269 |1327 |1369 |1434 |
|EPS - Basic net |13.25 |11.69 |10.12 |9.02 |7.27 |
|EPS - Diluted net |13.06 |11.52 |10.01 |8.89 |7.15 |

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