In 1956, Tom Watson, Jr. redirected the research and development thrust of IBM from mechanical to electronic. His research staff contained 4000 electrical engineer. He also created a small lab specializing in developing advanced information storage devices which in three years created the computer disk later to become the backbone of IBM computer systems. In 1956, IBM 650 provided IBM with competitive advantage as they were faster than their competitors’ products and yet provided at a cheaper price in a lease format.
The production of the powerful 360 system as the first complete mainframe package with integrated components offered. IBM competitive advantage stemmed from its capacity to produce such system and failure of others to produce such system in spite of their ability to produce new technology. 3. IBM Business-level strategy In 1927, CTR created a competitive advantage in its domain by allowing their customer to lease their machines rather than buy them. Customers enjoyed the saving of the capital to buy machines and were ensured reliable and top-notch machines.
CTR also invested large amounts in research and development which lead creation of a new line of tabulators that were easier to use than their competitors’ models and were priced below and offered for lease on favorable terms. In 1956, Tom Watson developed the IBM 650 series which was slower than the 700 series but much cheaper. One thousand IBM 650 machine were sold and thousands of punch card customers were introduced to computers. IBM 650 allowed IBM to have 75 percent of the market with Remington, NCR, and Honeywell sharing the rest. 4. IBM corporate-level strategy
IBM corporate level management has developed core competences to enlarge its existing domain as well as expand into new domains. In 1915, Watson licensed foreign companies to produce and sell the tabulators in foreign markets thus opening new markets. The licenses paid a royalty to CTR according to their sales which increased CTR revenues. In 1945, IBM corporate-level strategy showed interest in developing new products to meet customer information processing needs. This change led to the development of the first working computer which protected IBM’s business level strategy.
IBM maintained its competitive advantage of providing advanced products at cheaper prices. After the invention of the transistor in 1956 and the invention of Integrated Circuit in 1959, the newly produced transistor-based computers created a lot of confusion for sales employee and customers. Customers seeking upgrade was faced with completely leasing a new system and rewriting all the programs for the new system. Watson solution was the production of the new 360 series which would cover all scientific and business needs and render all previous IBM products obsolete.
Corporate-level strategy was to make it difficult for customers to change to competitors’ products both because of their superior quality and incentives to upgrade. The new strategy made it easier for business-level strategy to offer their sales support of an integrated package. 5. IBM changes in structure change due to changes in strategy In 1939, Watson split CTR and sold the scale division due to its irrelevance with company main business and kept time clocks because customers purchased many time cards which were similar to punch cards.
He also bought Electromatic Typewriter Co. which made IBM the leader in electric typewriters in 1945. In 1960, Watson split the data processing division into two units: one for newer machines at price over $10,000 and one for older machines at price less than $10,000. The division caused competition between managers of the split divisions and also led to duplication of research and development efforts. The division mainly aimed to decrease the confusion of employees and customers resulting from the diverse range of computers leased by IBM vacuum-tube based or transistor-based.