IBM's Turnaround and its New Business Model

Till the outbreak of the Second World War, IBM concentrated mainly on punched cards for the tabulating business.³By this time, IBM had already established a reputation for making custom-built equipment and offering excellent customer service. During the War, IBM systems were used to maintain statistical details of logistics. Revenues increased from $34.8 mn in 1939 to $143.3 mn in 1944. In the mid 1960s, IBM came under the purview of anti-trust legislation. This was the third antitrust suit since the company's inception. The suit dragged through the 1970s and cost IBM several hundred million (mn) dollars in legal fees. In view of the suit, Frank T Cary, the then CEO, adopted a cautious strategy. IBM did not reduce prices, fearing complaints from competitors and did not raise prices to avoid being accused of profiteering.

The product revolutionized computing and propelled the company to global commercial leadership for the next two decades. Between 1981 and mid-1983, IBM established 14 global business units to tap a wide variety of opportunities, including biomedical systems, industrial robots, educational materials, directory assistance equipment, analytical instruments and scientific work stations. By 1984, IBM had recorded revenues of $46 bn. However, in the mid-1980s, IBM's competitive position changed dramatically. The shift to smaller, open systems, along with greater competition in all of IBM's segments, gradually weakened IBM's competitive position. After posting a net profit of $6.6 bn in 1984, IBM's financial performance began to slide...