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From 1982 through 1985, IBM was rated as America's most admired corporation In Fortune's annual survey evaluating major firms. It dominated its industry and was one company that balanced competing goals: growth, profitability, innovation, and efficiency. However, between 1 985 and 1987 the situation changed. While Vim's share of the large, mainframe computer market remained overwhelming, Its market share eroded In midrange products and personal computers. In 1986, Vim's revenues were flat; and in 1987, although its revenues were up worldwide, its U.

S. Revenues were down slightly, while many other computer companies saw business surge. In 1985 and 1986, Vim's earnings declined, and, In 1987, only special Items and extreme cost cutting allowed an earnings increase. In 1 986 and 1987, its stock lagged behind the Standard and Poor 400 by 40 percent and 10 percent, respectively. In 1985, John F. Akers became chairman and Chief Executive officer of IBM and was faced with the unprecedented challenge of turning around a corporation that few observers had believed would ever have such problems.

Before discussing the current problems and changes at IBM, you should know the reasons behind Vim's 70-year record of success. To a retain extent, IBM is fortunate to be a leader in and industry of growing importance to the world's economy. However, MM made the right decisions and proper strategic moves at many of the critical points In its history. In 1933, It achieved an 80 percent share of the key punch, sorter, and tabulating machine market; and, in 1952, it secured a 75 percent share of the commercial processing equipment market.

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Between 1979 and 1984, Vim's revenues doubled when it switched from leasing computers to selling them. Although IBM entered the personal computer late, It soon became the market share leader despite unspectacular technology. Buck Rodgers, an IBM employee for 34 years and the former vice president of marketing, believes three principals were responsible for Vim's success. First, IBM stresses the idea that each Individual within the company makes a difference. Second, IBM attempts to give customers the best possible service.

Within 24 hours, IBM service representatives try to respond to, if not resolve, any complaint or problem. Third, IBM values excellence and success. It hires the most motivated students from the best schools, trains them extensively, and rewards high performance with recognition, promotions, and money. What, then, led to the Vim's problems in the sass? First, the computer market changed. Growth in the computer industry occurred in the midrange and personal 1 OFF to improve performance, and the smaller machines had to compete on their own merits.

Second, IBM allowed a bloated bureaucracy to develop, which slowed down the introduction of new products. The new Personal System/2 hit the market two years later than most competitors originally feared, allowing the cheap clones of Vim's PC to take one third of its share. Third, the bureaucracy also limited Vim's ability to respond to the customer. When salespeople were unable to meet the customer specifications, they often suggested something was wrong with the requests rather than the product.

Instead of solving customer problems, IBM salespeople were too product oriented and concentrated on selling machines. In 1988, Akers attacked these problems by introducing Bimbo's most significant reorganization in 30 years. He delegated more decision-making responsibility and authority to Vim's five main product divisions and its marketing group. This decentralization was designed to encourage an entrepreneurial spirit in each line of easiness, forcing managers to resolve problems rather than pushing them upon the organization.

Akers wanted to develop products much more quickly and to include customers in the development process. To facilitate these changes and cut costs, Akers made massive personnel changes. Thousands of employees were moved into sales Jobs, and 15,000 employees took early retirement. However, IBM maintained its policy of no company layoffs, and all changes were made without firing a single employee. Lbs. increased the size of its customer service stuff by 22 percent and emphasized a renew interest and concern for its customers.

Also, Akers moved the company into more new businesses than at any time since the sass. Lbs. entered the fast-growing, high-profit supercomputer business, and Akers acquired Roll Corporation and 16 percent of MIMIC to make IBM a worldwide force in telecommunications. Lbs. has a new division dedicated to writing innovative software, as well as a consulting business to help customers integrate their systems whether or not IBM makes them. In general, IBM responded to its crisis with cost cutting, new products, streamlined management, more aggressive marketing, and a long-term versification strategy .

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