IBM SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by IBM managers to do a situational analysis of the firm . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) IBM is facing in its current business environment.

The IBM is one of the leading companies in its industry. IBM maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the IBM to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect IBM strengths, and eradicate its weaknesses.

Step by Step Guide to IBM SWOT Analysis

Strengths of IBM – Internal Strategic Factors

As one of the leading firms in its industry, IBM has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of IBM are –

Superb Performance in New Markets – IBM has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Strong Free Cash Flow – IBM has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Automation of activities brought consistency of quality to IBM products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Successful track record of developing new products – product innovation.
Strong distribution network – Over the years IBM has built a reliable distribution network that can reach majority of its potential market.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.

Weakness of IBM – Internal Strategic Factors

Weakness are the areas where IBM can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
Investment in Research and Development is below the fastest growing players in the industry. Even though IBM is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of IBM
Limited success outside core business – Even though IBM is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though IBM is successful at integrating small companies it has its share of failure to merge firms that have different work culture.

Opportunities for IBM – External Strategic Factors

Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of IBM.
Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for IBM to drive home its advantage in new technology and gain market share in the new product category.
The market development will lead to dilution of competitor’s advantage and enable IBM to increase its competitiveness compare to the other competitors.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for IBM to capture new customers and increase its market share.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as IBM to increase its profitability.
New trends in the consumer behavior can open up new market for the IBM . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for IBM in other product categories.

Threats IBM Facing - External Strategic Factors

Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Imitation of the counterfeit and low quality product is also a threat to IBM’s product especially in the emerging markets and low income markets.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Liability laws in different countries are different and IBM may be exposed to various liability claims given change in policies in those markets.

Limitations of SWOT Analysis for IBM

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of IBM
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of IBM

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis IBM managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of IBM

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)