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GMGT 4010 (4)
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Lecture 8

GMGT 4010 Lecture 8: February 4

2 Pages
33 Views
Spring 2015

Department
General Management
Course Code
GMGT 4010
Professor
Alok Dua
Lecture
8

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IBM:
Question: What problem was IBM facing in mainframe market in 1960s and 1970? How did it
change its strategy to deal with the problem?
Answer: Improved quality with low cost - compatibility No switching costs due to
compatibility
IBM started selling instead of renting which decreased the switching cost
They moved from Differentiator to a cost leader big mistake
They should have come up with new products
Question: What other developments were occurring in the computer industry during 1970s and
1980s and how did IBM dealt with them?
Personal computer, mini computers, ERP, integration
Question: What is Icarus paradox and how does it apply to IBM? What are the types of
companies which are more prone to Icarus Paradox Problem?
Success of a company is the reason of the death Mainframe computer was success became
the failure
Companies which are very successful in the one product
Question: What role does the IBM structure and culture play in explaining its response to the
developments in computer industry?
Answer: Highly bureaucratic
Centralized Decision Making
Arrogant Senior Management
Not adaptable to the change and are positive about the mainframe computer
Cost Structure was a problem it was hard to cut the costs to compete with other competitors
no cost advantages
Renting the equipments instead of selling sudden change to selling which did not match the
strategy in terms of customer service
Culture Usually top-down All the top management were in mainframe 15 years ago they
had a mindset of mainframe
Question: What changes did Louis Grestner make at IBM in 1990s that led to its revival?
Answer: Change in strategy
Decentralized
Sold off unwanted products
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Description
IBM: Question: What problem was IBM facing in mainframe market in 1960s and 1970? How did it change its strategy to deal with the problem? Answer: Improved quality with low cost - compatibility No switching costs due to compatibility IBM started selling instead of renting which decreased the switching cost They moved from Differentiator to a cost leader big mistake They should have come up with new products Question: What other developments were occurring in the computer industry during 1970s and 1980s and how did IBM dealt with them? Personal computer, mini computers, ERP, integration Question: What is Icarus paradox and how does it apply to IBM? What are the types of companies which are more prone to Icarus Paradox Problem? Success of a company is the reason of the death Mainframe computer was success became the failure Companies which are very successful in the one product Question: What role does the IBM structure and culture play in explaining its response to the developments in computer industry? Answer: Highly bureaucratic Centralized Decision Making Arrogant Senior Management Not adaptable to the change and are positive about the mainframe computer Cost Structure was a problem it was hard to cut the costs to compete with other competitors no cost advantages Renting the equipments instead of selling sudden change to selling which did not match the strategy in terms of customer service Culture Usually top-down All the top management were in mainframe 15 years ago they had a mindset of mainframe Question: What changes did Louis Grestner make at IBM in 1990s that led to its revival? An
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