What is turn-around strategy ?

 The Turnaround Strategy is a retrenchment

strategy followed by an organization when it feels
that the decision made earlier is wrong and needs to
be undone before it damages the profitability of the
company
Indication for Adopting turn-around strategy

 Negative profit
 Poor management
 Wrong corporate strategies
 Poor quality of functional management
 Declining market share
 Uncompetitive products and services
 Low turnover
Introduction of IBM

 IBM (International Business Machines Corporation) is an American

multinational technology company headquartered in Armonk, New
York, United States, with operations in over 170 countries.
 The company began in 1911 as the Computing-Tabulating-Recording
Company (CTR) and was renamed "International Business Machines"
in 1924.
 IBM manufactures and markets computer hardware, middleware and
software, and provides hosting and consulting services in areas ranging
from mainframe computers to nanotechnology.
Turn-around of IBM

 The company known as Big Blue and which was into hardware,
software and services business was on the verge of extinction by the
end of 1994.
 In 1994, the company had lost almost $16 Billion due to the changing
dynamics in the IT Industry.
 The reason behind sudden slide in fortunes was attributed to its
elephantine size, a laidback corporate culture and inability to integrate
the business effectively to offer a bouquet of solutions to its customers.
 At that time Lou Gerstner became the Chairman and CEO of IBM.
Problem faced by Lou Gerstner

 Problems in Approach
• Lack of sophisticated marketing techniques and PR policies
• Disconnect between research and market
• Strained relationships with customers
 Management Problems
• Collegial atmosphere
• Executive – customer disconnect
• Chances of top members being poached
• Low emphasis on marketing
High beaurocracy
 Costs
• High overhead costs
• More employees than needed
Steps taken by Lou Gerstner

 • Tweaked ESOPs to retain key employees: the repricing wasn’t

given to 23 most senior executives to emphasize on performance
over collegiality
 Cost Reductions
• Layoffs numbering 40000 to 50000
• Sold of some non core businesses
• Focus on not breaking up the company
• Reducing Expenses by 9% and R&D and SG&A by $6.8 billion
 One IBM
• Putting a stop to the talks of splitting IBM into many companies
• Ability to integrate and deliver global solutions was a special quality
of IBM
 Remaking the Brand
• O&M’s global advertising campaign: solutions for a small planet
• Product rationalization and focus on brands (Think-pads)
 Change Management
• Directive style of management
• Executive that resisted the global approach were fired
 Organizational Changes
• Reorganized into one global organization- CEC & WMC
• Attention to Sales Organization; refining cumbersome processes
• Reduction in Board Size
• To reduce bid preparation time: sales team split into 2- the product
specialists and CRMs
• Board Restructuring
Impact of Turn-around

 In his 9 years at the helm, the company had grown by around 40% with the
majority of the growth coming from the services and consulting division.
 Also the stock price of the company during that period increased by 8 times.
 Standardization in product and processes
 Global positioning
 No. 1 company for leaders (Fortune)
 No. 1 green company in the U.S. (Newsweek)
 No. 2 best global brand (Interbrand)
 No. 18 most innovative company (Fast company)
 IBM's brand was valued by Interbrand at $75.5 billion in 2012
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