Excel

Case: IBM and the development of the PC

International Business Machines (IBM) is one of the world’s largest corporations, having acquired and maintained leadership position in mainframe computer technology and its marketing. The company’s spectacular success and domination of the mainframe market created a culture in its management ranks that was characterized by confidence, invincibility and resistance to change, to newer bottom up ideas. When the personal computer developed in the late 1970s and 1980s, IBM did not have the technology necessary to be the leader in the new market. Its success with the main frame, combined with the internal inertia, may have interfered with its ability to predict the ensuing huge demand for the PC. It seems as if success is one technology rendered the firm unable to see the need to invest in an emerging competing technology. The result was huge success for start up PC companies such as Apple, a situation that endangered IBM’s historically dominant position. IBM was not about to lose its position, however. It was able to recover from the its initial leadership lag in PC technology development and get back into the PC market by relying on its name and other complementary assets, such as its manufacturing capabilities and strong financial position. IBM used existing technologies that were developed elsewhere in order to get back into the rest for the expending PC market. However it never owned the PC technology or fully controlled it. Its failure to change company strategy – to invest in creating and owning the emerging PC technology in a timely manner – still haunts IBM today. According to Byrne, 1996, it has been estimated that failing to move expeditiously into PC technology cost IBM as much as $90 billion in lost market capitalisation. This failure is considered one of the biggest strategic blunder of the 1980s.

a. What does the IBM case illustrates? What are the FIVE (5) lessons that could be learned from the case...