Marketing: IBM Case Study

Introduction

Today, companies need to prepare for competition not only in the global market, but also in their home countries following the advent of open global market. Currently even local companies face competition from global multinationals because protectionist regulations have waned down over time. It is important for every company to think of a global marketing strategy that will see it, its product, or service is marketed around the globe for many markets. The idea in marketing strategy is applying a common strategy that is applicable to all or many markets. But this does not mean that the company will have to ignore important local modifications that make the service or commodity suitable for local markets. This idea captures the importance of flexibility within the marketing strategy while maintaining a homogenous face. The driving force is that marketing strategy must the company excel in it marketing endeavor. The company must therefore understand the aspects of global marketing, which is a constituent of international marketing (Hezhong, n.d; 1). Companies must understand and focus their efforts on certain areas if they are willing to be leaders in a globally competitive market. These areas of focus include designing global marketing programs through functional competence, being competitive in managing the global marketing efforts, being able to formulate competitive global marketing strategies, and possessing competitive analytical skills to analyzing the global markets (Jean-Pierre & Hennessey; cited in Hezhong, n.d.; 1).

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The marketing environment, IBM case study

Before entry into countries in the quest to become a globally integrated company, any firm must first analyze the opportunities available in the many places, and drop the less-likely countries i.e. those with lesser opportunities to exploit than others. In this task, the company must consider a number of things discussed in the following paragraph.

One of the considerations is countries’ appropriateness in terms of political, social, geographic, and economic information. These are termed as macrovariables. The company should also identify a similar product which will indicate the demand for their commodity. These are termed as the proxy variables. The company should also focus on the microlevel factors such as profit potential, ease of entry into the market, and competitors. The company must then consider evaluating and ranking in order the potential target countries as concerns the corporate resources, strategies and objectives (Hezhong, n.d.; 6). Companies must seek to understand how consumer behavior is influenced by their culture in the current trend of globalization (Gilovich, & Medvec, 2001; cited in Sayed, Mohan, & Mohammad, n.d.; 4).

In order to come up with effective global marketing strategies, companies must focus on an effective expansion strategy which may be achieved through integration or through more market coverage, determine the effective strategy which they want to use to concentrate in certain geographical areas (including selecting of the markets they will cover), and consider an effective internationalization patterns. The latter may be planned, unplanned or opportunistic (Hezhong, n.d.; 8). Expansion strategy through acquisitions or market coverage will be tied to urges of reducing operational costs, initial capital of launching entities in certain markets, reducing labor costs among others.

International marketing strategy for IBM has undergone through various transformations over a period of time. This has varied with the business needs and focus for the international marketing. IBM shifted from the initial way of operation of businesses in the 1990s, namely as a global organization, to where purchasing decisions were delegated away from departments where IBM’s traditional mainframe business had developed relationships. This delegation of purchasing decisions was driven by movement to decentralized computing and the PC boom.

With the advent in information and communication technology, companies do no longer compete locally with one another. Marketing has been taken to the global scope through technological innovations like the internet. Whereas many companies sought to have global coverage to serve more customers, what has come by is global competition for services and commodities. Companies become even harder to manage with global coverage and marketing strategies must take into consideration global factors as well as local factors. A company may be forced to transform its strategies for marketing because of the prevailing conditions in the global market. This is the case if it wishes to continue being a leader in business and compete effectively with its competitors. Innovations around the world drive competition in the technology arena as well as business processes.

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IBM has participated in purchases to advance its technological agendas. The IBM’s Business Consulting Services after acquiring the global business consulting and technology service unit belonging to PricewaterhouseCooper, in 2002. a new transformation was necessary for the way IBM operated business so as to continue leading, amidst the prevailing business situation that was characterized by service and technology industries leading economies, global connection of communication channels, created highly-skilled labor force around the globe, and free trade agreements were identical in the business environment. Communication channels and technology have continued to improve with innovations and companies having been challenged to keep up with the current or most appropriate technology in order to remain competitive. Technology especially has closed the gap between the customer and the seller. The internet for example has been applied in marketing where there is the possibility of selecting and even paying for the commodity online. Customers can view the goods and learn about services online and make their selection.

The then president of IBM, Palmisano, wanted to make the corporation a globally integrated business. This would mean that the corporation would shift to a new trend of structuring itself around skills, business environment and economics. Changes would ensure that the company would have one supply chain to serve the whole globe and the Research & Development (R&D) and professional services would also be operated as global units than having individual units for each region. The changes also included the organization being more responsive to clients. The then president of IBM described globally integrated enterprise as to deviate from the previous practice. Companies had in the ninetieth and twentieth centuries, adopted the system where headquarters were operated in the home countries and the sales and distribution offices spread around the globe. The multinational structure was adopted in the twentieth century as a need to respond to the prevailing conditions whether economic, social, political and business environment. These conditions included the Great Depression, world wars, protectionist policies and nationalism. The corporations under this strategy kept the R&D in the home country, conducted operations in other countries but plants were placed in major markets. With advent in worldwide information technology and communications technology, organizations began to become globally integrated enterprises, and IBM had to follow suit in order to remain a leader. In this restructuring, various company units were moved to various places around the globe where they could gain the most advantage. In this kind of restructuring, each of the centers handled IBM operations on a global scope rather than national scale. The company based its web technology in Ireland and Brazil, the global procurement mission was to be based in China, Brazil was to have the financing back office, and other operations such as the semiconductor R&D were moved.

The company had a unit in its Innovation and Technology unit, named the CCCA-Corporate Citizenship and Corporate Affairs group (CCCA). One of its tasks at one time was to evaluate the effectiveness of company’s globalization moves. The company unit worked closely with the top leaders and together with the research, Human Resources and other management areas. IBM made moves to improve on their product safety, workforce diversity, and its supply-chain practices and to reduce the environmental footprint. The CCCA later became an important function within the Marketing and Communications for the company.

The company launched innovative outreach program to enhance its market in the society. Through its education initiative, the company made a step that would transform K-12 public education through its technological solutions. In addition, the company utilized its employees to create educational tools that were using the company’s technology. The whole education program initiative was termed as Reinventing Education.

A central program that would have a global coverage was necessary as a shift from the former operation of having decentralized programs up to mid 1990s. The move was important as the decentralized programs were run with different guiding principles, and only received limited allocation of resources. In the new centralized focus, every geographical region received benefits of technological innovation that would be delivered locally, and the society would benefit more by having its problems focused through the use of the company’s talent and technology. Also, the company was to use a centralized budget. The employees of the company were also free to undertake projects even where they had no direct commercial focus. The company did not approach to undertake societal projects by traditionally applied style of offering grants and donations, but was able to come up with innovations, such as, through using the employees to use the company’s technology. An example is the innovations resulting from the use of the company’s scanning and multi-media technologies to capture the experience of visits to Egypt’s historical sites. The company gave the community another round of community program, namely the On Demand Community, where the company employees would participate in volunteering in local community schools and non-profit organizations which would also benefit by the company’s technology tools and equipment meant to equip the employees and the organizations involved. An example is the effort to transform the public and voluntary agencies through the donation of 8 million hours by about 130, 000 volunteers in the year 2008 (Christopher & Rosabeth, 2009; 5).

Marketing the company extends beyond the use of advertising of the company’s services and products to using corporate social responsibility approaches and giving back to the community. Through engaging in non-profitable activities, the company may identify projects it will seek to sponsor or fund in the society. The activity may appear to have no financial or other returns, but the organization benefits through becoming popular among the citizens or that the company rating improves. The community may view the company with a positive attitude.

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Core values are important in marketing the organization because they tell a lot more about what the company wants the employees to be and how it will be beneficial to the society which is consuming its products.

The global market is a network of very complex items; namely political, economic, social and cultural issues. International trade and global marketing is not free of influence of these powerful factors and companies must be keen to understand them and apply the necessary mitigations so as to succeed globally. While companies may be willing to launch their products and services world over, they must understand that the world has become more integrated as countries have realized the importance of coming together to reduce the taxes and charges associated with trade between them. This has been achieved through trade alliances some of which discriminate against non-members. Globally integrated companies must therefore be willing to face such barriers but harnessing on the opportunity is also a possibility. Companies must understand the trend through which the world’s economy is becoming integrated and respond to changes in the markets.

The impact of political and legal forces on global marketing has been to present numerous uncertainties but opening up of closed markets according to Hezhong (n.d; 4). Political forces may impact marketing in the host country because they formulate and implement regulations which may either discourage or encourage business in particular areas or specialization. The globally integrated company must understand the cultural identities of the nations in which they do business, their prestige, ideologies, national security issues and self-preservation. Consumers may also diversify consumption under competition of commodities (Kahn, 1998; cited in Sayed, Mohan, & Mohammad, n.d.; 8). They may also create preferences depending on the available options according to Bettman, James & Park, (2000; cited in Sayed, Mohan, & Mohammad, n.d.; 7).

Globally integrated companies like multinational corporations also faced the challenges of meeting not only customer needs, but also the employees’ in the areas around the world. This would be better achieved by trying to find out the preferences of these two groups. While IBM had an experience with employees and customers on the home market, understanding the global market was important to support their quest for more sales. In this perspective, the customer preferences, the working conditions outside the original home and the prevailing conditions were a thing to be studied and encountered. Globally integrated organizations are not special to any multinational companies as relates to the existing rules and regulations affecting the business. Thus it was important for the company to understand the rules and regulations in various regions or countries to where it was venturing. These rules pertain the environmental conservations, human rights, community services, and employee training for example. There is evidence from the literature that what customers perceive of the benefits of products may be different from culture to culture, and from the actual variety presented by the manufacturer or retailer. It is these and other forces that influence the success of corporations around the world on a global outreach. Globally integrated companies must take into consideration the differences that culture presents in order not only to be able to harness from the presented opportunities of diversity, but also to learn what the customer really needs, what the customer perceives particular commodities and how the competitors are viewed in the market. Theory holds that the customers will also have a collective culture when choosing commodities wooing to their emotional as well as cognitive costs. In this respect, companies must be willing to invest through innovative programs for example, in order to be able, first to teach the customers on the product use, benefits and other information, and secondly programs that will monitor customer perception and seek to apply corrective measures appropriately. The original notion that markets were homogenous and that firms required similar strategy (Levitt, 1983; cited in Sayed, Mohan & Mohammad; 3) does not seem to hold water. Companies have succeeded where others have failed, and although a number of factors may be attributable to such performance trend, global marketing is in some cases dominated by cultural effects. The likely forces that influence on company culture are effective advertising (Biswas, 1992), brand loyalty and how customers perceive risks (Lehmann, 1998), and brand perceptions (Aaker, 2001) (cited in Sayed, Mohan & Mohammad; 3). Customer perception and preferences sometimes are tied to their cultures which reflect issues such as their language, religion, habits and traditions. Cultural issues affect global marketing because cultural issues differ across the globe. The fact is that these come in as forces to influence the selection of the commodities presented to them. Marketers can prevail this through either seeking to deliver commodities that align with the societal needs or ensure that they launch programs which help them achieve high ratings in the society for example through social corporate responsibility programs.

It is important to develop the culture of the company while paying close attention to issues such as cultural differences and how differences can constructively be reconciled, alignment of the company’s behavioral norms with the assumptions of the employees, and articulating and communicating the core values of the company (Robert et al., 2009). A company’s culture can be transformed by focusing on these successional issues. The company will gain from a culture that encourages or makes employees work while no one is looking at them. In order that the company will promote an effective culture, it is essential to make sure that programs exist to reward the best or desired behaviors and making the strategy be known amongst the employees time and again. IBM sought to address all the global issues identified through the aforementioned program, plus other programs. These other programs were rated through the view of the IBM’s employees on the basis of potential return to the company, and the amount of work involved. IBM utilized its top-notch employees to work in developing countries on short-term basis through a program termed as the Corporate Service Corps (CSC). International volunteering programs were so much embraced by organizations not because they were only advancing the initial reason of improving the employees’ morale, but more importantly because they advanced the companies’ business strategies. This was according to a study done by collaboration between The Brookings Institute and Pfitzer, Inc and FSA Social Impact Advisors in the year 2007 (Christopher & Rosabeth, 2009; 6).

Finally the organization managed a globally integrated company and formed a global team that would manage operations. The global team collected views from the company employees on how the CCCA program affected them to cross check with what had already been taken as the impacts of the program. This was an important research that could see the company adjust issues of the program on a global perspective. Research supports the involvement of the consumer and the marketer in learning about the preferences of the consumer of the product, so as to achieve higher satisfaction. The best way out is having the customers learn the attributes first and then determine their preferences. This is one reason why it is necessary to carry out market research. Market research would aim at making sure that the company understands the preferences of the consumer and then aim at delivering the type of commodity that is demanded. But international marketing is not simple and geographical barriers may make it difficult for the company to carry out international market research because of cost implications. Cost would be high even when the company would choose to carry out market research on regional basis. Some companies have resulted to using the internet technology to carry online surveys. Although the importance of marketing research cannot be mistaken since it can help to understanding factors influencing local markets, global market research face a number of challenges, namely, establishing comparability and equivalence, coordinating research and data collecting across countries, high costs of collecting the data involved, and lack of secondary data in the specific cases (Hezhong, n.d.; 7). In addition, data needed to come up with useful conclusion may be bulky and take time to analyze. One of the useful skills through which global companies can reduce the complexity of marketing research is the use of modern technologies such as the internet to conduct and coordinate research.

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Conclusion

Companies today are facing competition not only in their local areas, but also internationally. They must prepare for challenges of competition. There is required marketing strategies, so as companies will lead or continue to lead in the global market. These strategies vary from running those programs expected to have direct monetary returns to those that are expected to have indirect monetary returns. Programs with indirect benefits to the company include the social responsibility such as that launched by IBM called Corporate Service Corps (CSC). Such programs give returns to the society through supporting issues related to health, education, and social welfare. Those with indirect monetary returns may give returns (including monetary) to the company after a long time although the most immediate returns may be high public rating in the society.

A company may expand operations through market coverage in the normal growth, or it may expand through acquisition of already established firms.

A company willing to enter global market can discover the opportunities presented in the environment it wants to operate in, through market research. Through this, the company will have to analyze the forces in operation, such as the microlevel factors, macrovariables, proxy variables, and then try to evaluate and rank the potential target countries in order as relates to corporate resources, strategies and objectives (Hezhong, n.d.; 6). International market research may however be an expensive undertaking and companies must be willing to adopt proper strategies such as internet surveys to be able to minimize the related costs. International market research may face a number of challenges, namely, establishing comparability and equivalence, coordinating research and data collecting across countries, high costs of collecting the data involved, and lack of secondary data in the specific cases (Hezhong, n.d.; 7). In addition, data needed to come up with useful conclusion may be bulky and take time to analyze

There are many forces that will come to play to influence the international marketing arena. Any organization willing to be global, like IBM, must understand the forces existing in the countries of venture. These include the social, economical and political forces especially in the country where operations will be launched. The social forces influence the culture of the market which may drive consumption of the goods. These forces include religion of a people, their traditions and beliefs. The political forces are responsible because they have something to do with the formulation of regulations relating to marketing and general trade. The force may bar, restrict or control certain commodities. These forces also regulate the taxes that will affect business within the country. Economic forces are those touching the actual economic issues affecting business in the market. They include issues such as the strength of the economy, the customer purchasing power e.t.c.

IBM has developed to be a company from one being international, multinational and global to globally integrated company. The latter implies a situation where a company may move its units to places of advantage around the globe. Such units included R&D, e.t.c. in this kind of restructuring, IBM moved its web technology in Ireland and Brazil, and also the financial back office to the latter, and the global procurement mission to China. These units served on a global perspective and not on a regional or local perspective. Before becoming globally integrated enterprises, companies before then had adopted earlier trends, one being multinational structure adopted in the 19th Century in order to respond to the prevailing conditions of economic, social and political perspective, namely the Great Depression, world wars, protectionist policies and nationalism. Companies in this manner operated headquarters in the home countries whereas the sales and distribution offices spread around the globe.

Works Cited

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Christopher M., & Rosabeth K.. IBM: The Corporate Service Corps. Harvard Business School, 409-106. (2009)

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Hezhong Jin. Environmental factors that affect global marketing. Web.

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