PC Competitor Analysis: IBM
SAMSUNG ELECTRONICS CHINA (SEC China)
CONFIDENTIAL
This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.
Aug, 2001
OVERVIEW OF COMPETITOR ANALYSIS FRAMEWORK
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product/market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
BACKGROUND INFORMATION
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product/market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
IBM HAS GRADUALLY EXPANDED ITS PRESENCE IN CHINA
Location
Beijing
Managing
director
Zhou Weikun
Starting year
1984 (representative office)
1992 (IBM China Co. Ltd.)
Number of
employees
Over 3000
Key
milestones
Set up IBM Customer Association in 1984
Opened Beijing, Shanghai, Shenzhen, Chengdu, Guangzhou, Nanjing, Xian, Chongqing offices
Established customer service network covering dozens of China major cities
Set up China purchasing center* in Shenzhen
Background information
* IBM’s purchase in china has increased from 30M USD in 1993 to 1B USD in 1998
Source: Literature research
BACKGROUND INFORMATION
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product/market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
GLOBALLY, IBM HAS DECIDED TO EXIT PC BUSINESS GRADUALLY IN THE NEXT SEVEN YEARS
* IBM's PC business showed/surprising strength in revenue growth and profitability in the September quarter last year
Source: Literature research
* IBM’s PC business showed surprising strength in revenue growth and profitability in the September quarter last year, which would lessen the urgency to exit this business in the near term
Source: Literature research
IBM KEPT ITS MARKET POSITION IN NOTEBOOK, BUT ITS DESKTOP PC BUSINESS FAILED TO CATCH UP WITH TOTAL MARKET GROWTH
Source: IDC
Desktop PC market share
Percent of units shipment (m)
Others
IBM
Great Wall
Founder
Legend
100%=
Growth rate
percent
99
00
99
00
Growth rate
percent
100%=
Others
Founder
Dell
Acer
Legend
IBM
Toshiba
Notebook market share
Percent of units shipment (m)
IBM’s market share
PRODUCT/MARKET
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product /market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
IBM IS RIGIDLY AND AGGRESSIVELY IMPLEMENTING TOTAL SOLUTION AND SERVICE PROVIDER STRATEGY IN PRODUCT OFFERING
Key product offerings
Source: Literature research
Product category
Product category
Desktop PC
Notebook
NetVista commercial PC
NetVista A40
NetVista A10
NetVista A20-6269BSC
NetVista A20-634587C/634586C
NetVista Multi-media PC
NetVista X40i
NetVista A60i
NetVista A40i
NetVista A20i-21949DC/219415C
NetVista A20i-219755C/21978DC
NetVista A10i
ThinkPad A series
ThinkPad T series
ThinkPad X series
ThinkPad i series
Source: literature research
IBM IS PARTICULARLY STRONG IN GOVERNMENT AND SMES, BUT WEAK IN HOME AND EDUCATION, THE TYPICAL LOCAL PLAYERS’ TERRITORIES
Source: IDC
Sales by customer segments
Percent of units shipment (000s), 2000
Small office
Home
100%=
IBM
Market
average
264
6,564
Small business
Education
Medium business
Government
Large business
Small office
Home
100%=
IBM
Market
average
83
484
Education
Government
Large business
Small business
Medium business
Desktop PC market
Notebook market
IBM IS A DOMINANT HIGH-END PLAYER, GRASPING OVER 20% MARKET SHARE OF HIGH-END DESKTOP PC AND OVER 50% OF PRIMIUM NOTEBOOK MARKET
Source: IDC, interview
Others
Dell
Compaq
Great Wall
IBM
HP
Founder
Legend
Low
(0-1k)
Medium ()
High
(>)
100% =
Desktop PC market, 1999
Others
Dell
IBM
Founder
Legend
Low
(0-2k)
Medium ()
High
()
100% =
Notebook market, 2000
Acer
Toshiba
Premium (>)
Price brand
USD
1
0
IBM’s market share
Sales by customer segments
Percent of units shipment (M)
VALUE CHAIN STRATEGY
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product/market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
IBM HAS SET CHINA AS ONE OF KEY BASES IN ITS GLOBAL R&D
Global research bases
8 global research bases
Total staff around 4,000
* Under construction
Source: Literature research, interview
China R&D base
Established in 1995 (IBM is one of the first MNCs that set up R&D center in China)
Staffed over 100 people to research center and over 200 people to development center
Research focuses are China specific technology such as language recognition, hand-writing input and computerized translation technology application in China-specific environment and industry solution; development focus is currently application software
R&D
* under construction
Source: IDC, interview
IBM WILL NOT FURTHER INVEST IN BUILDING UP PC MANUFACTURING JVS IN CHINA
Manufacturing
Manufacturing
base
Great Wall IT products Shenzhen Co., Ltd. (IBM's sole PC production base in China)
OEM efforts
OEM mostly to Taiwanese players, such as Acer
Strategy
No future investment to setup more PC manufacturing JVs in china
Emphasis on OEM approach
Source: Literature research, interview
Source: literature research, interview
IBM IS PUSHING TOWARD FLATTENED CHANNEL STRUCTURE AND SECOND AND THIRD TIER CITIES IN GEOGRAPHIC COVERAGE
Sales and distribution
Guiding principles
Change program
Push for flattened channel structure
Expand to second/third tier geographic areas
Increase sales revenue by 20% in 2001
“Blue star plan”
Source: Literature research, interview
Target
3,000 – 4,000 dealers
Direct and strong channel management and control
by IBM
Current
Over 2,000 dealers
No direct channel management by IBM
Over 30 cities
Over 200 cities
Source: literature research, interview
IBM EMPHASIZES AND FOCUSES ON TOTAL SOLUTION AND SERVICE PROVISION
Total solution and service
Target
To be No. 1 globally as a total solution provider and service provider
Initiatives
“Blue V project”
Started global implementation in March, 2001
Targets at NetGens, companies that conduct business mainly on the Internet platform
Provides customers hardware, software, consulting, training, sales and marketing, financing, out-sourcing, and potential partnership opportunities
“Hardware + Software + Service”
Source: Literature research, interview
"Competition in the next three years is based on the strengths in hardware and software. In the 5 years’ time, service will be another key success factor"
– Zhou Weikun, Managing Director, IBM China
Source: literature research, interview
ORGANIZATION AND OWNERSHIP
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product /market
Mission
Vision
Corporate strategy
Market position
Key product offerings
Key customers
Pricing
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
IBM FOLLOWS CHINA HEADQUARTER HOLDING P&L RESPONSIBILITY AND CUSTOMER-ORIENTATION PRACTICE
Source: Interview, "Virtual Team" practice by facilitates/coordination ???
Key takeaways
IBM China headquarter holds the P&L responsibility of all the business groups. The only exception is China Research center that reports directly to R&D global center
IBM embodies customer-orientation in organization structure. The .com and telecom are to provide total solution to target customers
“Virtual team” practice facilitates coordination among different business groups serving same customers
Organization
IBM China Co., ltd
SMB
.com
Telecom
IGS
Software group
PC
Techno-logy group
Server
Research
center
Source: literature research, interview
Desktop PC
Note-book
IBM HOLDS THE MAJORITY OF ITS PC MANUFACTURING JV IN CHINA
Ownership structure
Great Wall Computer Group
IBM
Great Wall IT Products Shenzhen Co., Ltd.
30%
70%
Source: Literature research
Source: literature research, interview
FINANCIAL PERFORMANCE
4. Value chain strategy
5. Organization and ownership
6. Financial performance
Focus on
Marketing,
advertising and
promotion
Distribution (channel
and sales force)
Organization structure
Ownership structure
Sales
Profit
2. Strategy
3. Product/market
Mission
Vision
Corporate strategy
Market position
Key product offerings
1. Background information
Location
Management
team
Starting year
Number of
employees
Era analysis
IBM’S NOTEBOOK BUSINESS HAS BEEN GROWING VERY FAST, BUT DESKTOP PC HAS BEEN VERY STAGNANT FOR THE PAST THREE YEARS
Sales (RMB billions)
Notebook Revenue
1999
2000
1998
98-00 CAGR
Percent
Source: IDC
Desktop PC Revenue
1999
2000
1998
98-00 CAGR
Percent
IBM HAS BEEN GROWING IN REVENUE AND IMPROVING IN NET MARGIN
Source: Analyst report
Profitability
Percent
Net margin
Growth rate
Percent
Gross margin
1999
2000
1999
2000
Financial performance
Revenue
USD billions
8
9
37
36
Growth rate
Percent
1999
2000
Source: annual report
