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Turnaround at Ibm

In: Business and Management

Submitted By helena1826
Words 302
Pages 2
Lou Gerstner was entrusted by IBM to take a faltering business and turn it into the multi-billion dollar corporation that it is today. In the early 1990’s, IBM sales were declining at a rate, which would undoubtedly force the company into bankruptcy. This trend was largely caused by IBM’s lack of diversification and primary focus on building and selling computer systems with an emphasis on mainframes. As new corporations began to flood the market with cheaper versions of IBM’s computers, the Board of Trustees recognized the need to alter their strategic plan to ensure IBM would remain in the forefront of the computer industry (Allen, Attner, & Plunkett, 2013, p. 124-125).
Gerstner knew the value of service and returning customers, and with these ideals he created a new branch of IBM which would focus on specific problems for each of their customers. The new IBM would help customers with everyday tasks such as shipping, purchasing, networking, and marketing. Gerstner realized that IBM’s true potential was deeply imbedded in its strengths, which were research and integrated computers. Within about 1 year of Gerstner taking charge, IBM developed software which would allow computer systems to “talk” or network, and this change would cement IBM’s fate and allow the computer giant to remain at the top of the industry (Allen, Attner, & Plunkett, 2013, p. 124-125).

Questions 1. Work with another student to answer the following questions. What strategy changes did Gerstner use to solve IBM’s situation? Develop your answer by selecting specific strategies relating to corporate, business, and functional strategy options.
As soon as Gerstner realized that he had inherited a sinking ship, he devised a bold plan that was crucial to IBM’s ultimate financial stability. Gerstner’s master plan was actually a combination of two different strategies. The

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