Value Chain Management in IBM has become more complex over the period of time. It can be clearly observed that value chain expenditures are increasing from the time of the company’s inception. $3.4 trillion was spent on the value chain system of IBM in 2005. However, the high costs are due to the fact that IBM is transforming itself into a company that helps other firms run their business in areas such as accounting, human resources, procurement and customer service. On the demand side of value chain, processor developers and software suppliers have higher profit bracket than those of other suppliers. On the supply side of value chain, retailers enjoy a high profit. Therefore, IBM itself does not have a large bracket of profit from the server products. The three major components of IBM value chain are wholesalers, retailers and business orders. They are also known as the value drivers for the company as they are the main distributors of the products made. IBM is required to keep the distributors satisfied because of the fact that the distributors enjoy high bargaining power. Bargaining power of distributors is high because of increasing competition over time.
1. What are the major components of IBM value chain?
2. Which of these components experienced most changes within the period discussed in the case study?
3. How industry that IBM operates in can be analyzed based on Porter’s Five Forces concept? Using this model describe major changes that happened in the industry during the considered period.