n business, and because the downturn reinforces the idea that if it can happen to IBM, it can happen to anyone. This research examines the current situation of IBM with an emphasis on what the company can do to return to a healthy stance within the market.
Chief among IBM's strengths is its reputation and position in the market. IBM invested more than nine billion dollars in research and development during 1992, a figure that is difficult for any other company to match. Even though the company is planning to cut its research and development by more than one billion dollars, the company remains a dominant force in research in the computer and peripherals industry (Moad, 1993, p. 27).
Another of the company's strengths is the dominance of the IBM-PC architecture in the microcomputer marketplace. While other companies, such as Dell and Packard Bell are able to produce knock-offs of IBM machines, they lack the resources to guide the direction of the market. Because there are so many IBM-compatible machines in the market, it is unlikely that companies will switch to another platform, a change that would result in high training costs and additional hardware investments.
The company has a third strength in its recent management changes and the resulting restructuring of the organization. The appointment of Louis Gerstner as chairman and CEO in early 1993 indicated to the market that the company is willing to make the changes necessary in order to forge a new direction. Since Louis Gerstner is not from within IBM (he was formerly chairman of RJR Nabisco), his appointment indicates that the company is serious about changing the direction it is taking and the way in which it does business.
The company's primary weakness is its recent financial performance. The company's net profit margin fell from a decade-high 14.3 percent in 1984 to a scant 2.2 percent in 1992, and is forecasting a loss for 1993 (Niemond, 1993, p. 1096). A...