Marketing: Foundations and Applications IBM

Preface IBM mission statement

“At IBM, we strive to lead in the invention, development, and manufacture of the industry’s most advanced information technologies, including computer systems, software, storage systems, and microelectronics.We translate these advanced technologies into value for our customers through our professional solutions, services, and consulting businesses worldwide”. From the mission statement above we can conclude that IBM wants to be a leader on the blue-chip market – which we in terms of their size can conclude they are close to being. In the following essay the reader will be introduced to the marketing strategy of IBM. Furthermore the reader will be introduced to a SWOT analysis, in which it will be discussed and concluded which strategic position IBM has on the current market.

In regards to the limitation above this will be an analysis based upon IBMs services provision in Denmark. The reader will find out that the classical approach with the 4ps of marketing doesn’t really apply to this part of the business that IBM conducts. Instead an additional three Ps has been added, and these will be discussed as well.

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SWOT Analysis

One of the trustiest tools in business is the SWOT analysis. Corporations takes a calm, cool look down at the organisations Strengths, Weaknesses, Opportunities and Threat’s.Then they seek to capitalise on the strengths, eliminate the weaknesses, seize the best opportunities and counter the threats.

Strengths

IBM Denmark has been on the Danish market since 1950 – which leaves them with a significant amount of experience of the market.The wide range of their strategic competencies runs from everything from hardware-sales to business consultancy, the latter being one of their profitable areas of expertise. Furthermore IBM DK has a leading position on the Danish services market, being one of the biggest consultancy houses in the country. It is the combination of its size and experience on the market that leaves them to be one of the preferred business partners in Denmark and in the rest of the world. IBM Denmark like most companies believes it is necessary to have a talented workforce.

IBM is present at local universities promoting themselves with the purpose of future recruitment. Through this initiative they attract the students they believe is prospects as future IBM leaders, and sign them off before their competitors. Furthermore IBM is extremely flexible, meaning that leaders across country borders are stationed in different parts of the world. A lot of IBM DKs top leaders are individuals who have a history with IBM, but only in a different SBU.

Weaknesses

Being located in Denmark one is urged to believe that it is inevitable to have high operating costs, especially labour cost.Denmark does have one of the highest salary rates in the world. And with a personnel count of nearly 5. 000 people this results in big money.

Opportunities

With the increased focus on the environment in recent years – IBM must be innovative and continue to lead the market by supplying greener solutions to their customers. A growing body of evidence asserts that corporations can do well, by doing good. IBM must differentiate their brand and reputation as well as their products and services, by taking responsibility for the wellbeing of the societies and environments in which they operate.Practicing corporate social responsibility can generate significant returns to their business. Furthermore if IBM could reduce their operating costs, then it would also be possible to reduce their prices, without compromising with the quality of their products. IBM has already taken initiatives to reduce their labour costs.

Danish consultants requires a high salary rate, which is why IBM DK wherever possible tries to limit the amount of these consultants. Instead they will bring consultants from India and other low cost countries to Denmark and assign them to the project that is to be executed.This allows them to sell the service for a more competitive price. It has been discussed if IBM should completely shut down its locations in the EU, and outsource the entire European operations to low cost countries – however I personally believe that this would be compromising the quality of the service provided as it surely must be necessary to have people with local market knowledge assisting on the projects.

Threats

As the world continues to get smaller, IBM like other big corporations faces the challenge of outsourcing.Especially IBM Denmark is threatened by outsourcing, as Denmark has the highest tax rate in the world, which will force IBM to have higher prices, than what is offered abroad – leaving them more vulnerable to the threat of outsourcing. Furthermore the introduction of changes in various services are not patentable meaning that the innovativeness of a company like IBM can easily be adopted by newcomers to the market.

Also, as a service is not a manufactured product, but really a transaction of knowledge – it is hard to imagine that it is capital intensive to enter the service industry.

Marketing mix

“The marketing mix is an imperative concept in modern marketing and academically it is referred to as a set of controllable tools that the firm blends to produce the response it wants in the target market, so it consists of everything the firm can do to influence the demand for its products” (Kotler and Armstrong 2004).The easiest way to understand the main aspects of marketing is through the famous 4P’s marketing, which was introduced and suggested by McCarthy in 1960.

It includes marketing strategies of product, price, placement and promotion. It is however interesting if this also applies to a company that sells services and not a material product. Given the unique and distinguishing features of the service industry, researchers have offered different models and approaches to the marketing of services.It is suggested that services marketing does not only include external marketing reaching the customers, but also an internal marketing strategy to motivate the employees (reference: A service quality model and its implications, Christian Gronross, vol 18, No. 4, 1984, pp. 36-44).

As stated above the internal marketing is for the company to motivate their employees to serve its customers in the best possible way.External marketing is when the company makes its service available to its customers to increase the demand. The interactive marketing involves to the effort of employees to win customers loyalty in the process of their interaction with the customers in delivering the services. This must be closely related to internal marketing.

In IBM DK, the consultants and salespeople are paid partly in a fixed salary scheme and a variable scheme depending on their results. Furthermore these same IBM representatives will receive an annual bonus, if IBM on the given project has reached a certain percentage of profit.These incentives through salaries and bonuses can be associated to what we clarify as internal marketing.

For the external marketing side – the traditional marketing mix as we know them through the 4p’s can also be applied on services marketing as they are applied on tangible goods. But it is discussed to be difficult. Which is why for services marketing, a modified marketing mix has been developed.

The services marketing mix comprises 7p’s and these include the following:

1. Product
2. Price
3. Place
4. Promotion
5. People
6. Process

Product

The most important question to be asked here is “are these the right products or services for our customers today”? IBM continues to be the leading innovator on the market, spending billions of dollars every year in their research centers providing their customers with the newest technologies and always making sure that the quality of the products is of IBM’s usual reputed quality.

Price

As anyone can imagine the price of the service provided is essential for whether or not IBM wins the customer over.As soon as the appropriate experts has analyzed the pre project resources that is to be needed for the project he informs the pricing department. The pricer then based on these assumptions, inflation, currency differences, management desired PTI % (pre tax income), and our cost case calculated a price that is then been presented to the customer.

Promotion

When promoting their services IBM first make rational decions on which businesses to approach. Then they divide their promotion into how big the markets are, e. g a segment could be small and medium business”. Within a specific constituency market, IBM first identifies which businesses make the most sense to connect with. Then, the IBM determines the most efficient way to reach each of them. whether through individualized marketing or a creative combination of IBM's go-to-market strategies” IBM also enters the business community through professional associations and organizations.

Such groups generate interest in IBM and may even help IBM identify new business partners. By sponsoring and participating with them, IBM is able to communicate its message of value to the member businesses.Furthermore IBM through their marketing incentives has adopted a more emotional approach in the way they promote themselves. Rai Cockfield VP Market development states that all people prior to purchase asks the following "Does this product or service meet my need? Is the company reputable? And is the price reasonable? " Today, he adds a more pressing question, "Are you reaching me in the way that I see myself? ' "That's what endears a person to a company and a product," he says.

People

An important ingredient to any service provision, is as we have discussed above having qualified personnel. Recruiting the right staff and people and training them appropriately in the delivery of services is essential if IBM wants to continue having their competitive advantage. Providing a service is partly the quality of the service and the quality of the people that delivers it, as these are in constant contact with the customer. As mentioned above, IBM has had university partnerships in order to recruit students.

Process

When selling their services IBM has two processes. Either the customer comes to IBM looking for an offer on a service they need provided. IBM then sends the appropriate people to analyse the resources that are needed to provide this service. An offer is then presented to the customer. A different process is when we have existing customers, the client manager is responsible for looking for new business services that we can provide them. And then the process starts over, in regards to presenting an offer after calculating the resources we need for the project.

Conclusion

IBM wants to be the leader on the Danish market. And in terms of their size we can conclude that they are close to being just that. From the SWOT analysis above we saw that IBM has the needed experience and size to be one of the biggest consultancy houses in the country and in the world.

Furthermore with the increasing focus on the environment IBM has the possibility to be the leading innovator for greener solutions – an opportunity that they have successfully capitalized on through their continued research for more environmental solutions.However despite IBM being a big player on the Danish services market, it is important that they reduce their high operating costs. By bringing Indian and other low cost consultants into the game, they have somewhat succeeded in doing this as these have lower salary rates.

In the marketing of services we have concluded that an external marketing effort is not enough for successfully promoting itself. An internal marketing strategy is also essential for obtaining success. IBM must motivate its employees as these are the focalpoint to customer, in which case it is important that they are motivated and happy.In promoting and marketing themselves IBM has also realised that they in today’s world they must reach their customers on a more personal level, and not merely connect through reputation and price.

Connecting with its customers on a personal level and delivering top quality services is what keeps IBM on top of their game and in even in rough financial times they have succeeded in being one of the top choices as business partner.

References

1. Websites:http://www. entrepreneur. om/marketing/article70824. html
2. http://www.scribd. com/doc/10999474/IBM-Strategic-Analysis
3. http://www. simplemarketingblog. com/2009/06/sandy-carter-integrates-social-media.
4. htmlhttp://www. itsma. com/ezine/analytics-optimize-marketing-mix/http://university-essays. tripod. com/marketing_mix. html

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