IBM: Creating Competitive Advantage

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Competitive advantage is an attribute gained by a company or an organization by developing its resources in such a way that the company outperforms its competitor. A competitive advantage exists when a company or an organization delivers to its customer products or services same as those of competitor but at a lower cost or the product and services exceed those of competitor in quality and other physical attributes. The two major sources of competitive advantage are

  • Differentiation advantage
  • Cost advantage

Other sources of competitive advantage in an organization may include use of superior technology, organization’s resources and quality.

Resource based view of strategy analysis dictates that in order for an organization to have a competitive advantage, it must have a unique resource and capability from that of its competitor. These unique attributes are brand equity, installed customer base, patent and trade marks and firm reputation (Lee, 1997).

Operation management is a branch of management concerned with production of goods and services and their distribution to customers. Creating competitive advantage using operations management will be concerned with examining the company’s operations and innovating new ways of service and product delivery to the customers.

IBM is an information technology company that deals with the production of both hardware and software. In developing a competitive advantage strategy, the process of production and supply chain will have to be innovated to provide a competitive edge to the company. Technology in production and distribution also plays important roles in promoting competitive advantage to the firm. Application software has been developed by the company to facilitate IBM global supply chain management. By managing its supply chain efficiently, a firm may create a competitive advantage of its products in terms of quality and delivery efficiency (Tabucanon, 1988).

Overview of IBM operations

IBM operations and supply chain management involves a network of linked business operations with the goal of providing IBM products to the customers. The company provides expertise in global operational model aimed at satisfying the needs of customers. In order to achieve competitive advantage through supply chain management, the company will have to consider inventory positioning and inventory policy development. Inventory positioning involves products design and delivery channel orientation. IBM has one of the largest global delivery infrastructures that enables the company have economies of scale advantage. The company uses global delivery model both internally and to deliver product and services to clients. This global delivery model enables regional, local and global resources to be combined in a unique manner. Therefore, it provides expertise and tools for delivery of products at the best price (Keeny & Raiffa, 1976).

Challenges facing IBM operations include:

  1. Creating an organization operational foundation for future growth, capacity and flexibility
  2. Developing a scenario-based strategies, leveraging process diagnostics ,benchmarking and lean principles to improve operational efficiency
  3. Generating savings and improving operational productivity through new strategies and technologies
  4. Deploying and optimizing globally integrated capabilities and operations

Strategies for gaining competitive advantage for IBM

The first major step in gaining operational competitive advantage by IBM Company is to improve operational strategies. This is achieved by reevaluating the company operation plan to see deviation for the original goal and provide remedy for these deviations. Modification to the original plan can be done with reference to the ever dynamic global business environment. While reviewing the operation strategy, supply management, product line and price will have to be considered and adjusted according to the current market and consumer trend (Schnaars, 1994).

Evaluate the pricing strategy utilized by the firm in developing its product price, the firm should bench mark its self with other global competitors such as Microsoft. To gain competitive advantage in pricing, IBM should take advantage of its economies of scale and establish a competitive price for its products and services in relation to other competitors. Caution should be taken not to under price or over price the company’s products and services while developing a pricing strategy.

IBM supply chain management will be described as a linked set of resources and processes that begins with the sourcing of raw material, manufacturing of products and extends through the delivery of end items to the final customer. IBM supply chain process involves obtaining of raw materials to finished products (hardware and software) and later their distribution to the customer. In developing a competitive supply chain, the company needs to minimize the resources required for production by eliminating non-value processes that inflate costs, inventory requirements and lead-times. The company should emphasize in quality improvement strategies and flexible workforce and production facilities. Finally, the issue of quality control is vital for the company in achieving company competitiveness. The company’s products have to be developed in a unique way different from those of the competitors. This will position the company’s products and make them easily identifiable by the customers (Itami, 1984).

IBM needs to develop a technical innovation center where new developed products will be tested and improved. This approach will help in coming up with new product lines that are unique and effectively satisfy customer needs. Creating systems of delivery should be explored using technology to create efficiency in meeting customer needs.

Use of technology is also one of the ways the company can attain competitive advantage. Supply chain management that includes a company’s entire manufacturing and distribution process. These processes can be more efficient with incorporation of technology. Application systems such as ERP (enterprise resource program) are important essentials in creating competitive advantage in the firm. Enterprise resource program works is described in the below diagram (Copacino, 1997).

A typical ERP Cycle
Source: (Copacino, 1997, p. 42)


The biggest benefit of technology in a company such as IBM can be the ability of the company to collaborate and communicate with other customers and companies well. These collaborations are intended to be of great benefit to all parties involved in the supply chain. For example, a product supplier of consumer goods may use the internet link to one of its distributors so that when the supply gets too low in quantity, an order for more of those goods can be automatically generated which saves time for both concerned parties. In this process, the distributor does not worry about products being shot or running out of a product and disappointing customers in the process. The supplier on the other hand, does not have to keep or maintain a large inventory in anticipation of demand. Other systems that serve the same purpose have also been developed to send out multiple requests to vendors when an order is placed. This kind of collaboration makes better use of firms’ existing resources and enables realization of larger profit margin (Barney, 2002).


Barney, J. (2002). Gaining and sustaining competitive advantage. 2 Edn. Upper Saddle River, NJ: Prentice Hall.

Copacino, W.C. (1997). Supply chain management: The basics and beyond. Florida, FL: St. Lucie Press.

Itami, T. (1984). New logic on management strategy. Nihon: Keizai Shimbun, Inc.

Keeny, R.L. & Raiffa, H. (1976). Decision with multiple objectives: Preferences and value tradeoffs. New York, NY: Wiley.

Lee, H.L. (1997). The bullwhip effect in supply chains. Sloan Management Review, 4, 13.

Schnaars, S.P. (1994). Managing imitation strategies: How later entrants seize markets from pioneers. New York, NY: Free Press.

Tabucanon, M.T. (1988). Multiple criteria decision making in industry. Amsterdam, AMS: Elsevier.

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