In 1911, Flint acquired Hollerith Tabulating Machine Company and merged it with International Time Recording Co. (ITR) to form the Computing Tabulating & Recording Company (CTR). In CTR, Hollerith developed the practice of leasing rather than selling his tabulating machines to customers. Hollerith's machines were prone to breaking down and needed frequent repair. In 1914, CTR was kept afloat by the tabulating business. In 1914, the brilliant salesman Thomas Watson was hired as general manager of CTR. He established a facility to train salespeople to create a sales force. He developed the theory to sell a service not just a product.
He believed to provide good quality customer service not just lease and install the machine. In 1917, CTR's sales increased to eight million dollars from four million in 1914. In 1924, Watson became chairman of CTR and changed its name into (International Business Machine (kepong prospecting v schmidt) and started to sell to the international market. In 1939, Watson bought Electromatic Typewriter Co. which made IBM the leader in electric typewriters in 1945. In 1945, IBM changed its focus from improving existing business machines into developing new products to meet customer information processing needs.
This change in operating philosophy led to the development of the first working computer. In 1948, Tom Watson sons joined IBM and encouraged research laboratory to recruit electronic specialists which led to the production of IBM’s 603 and 604 electronic multipliers. The success of electronic multipliers encouraged IBM to commit more resources to invest in new computer systems. In 1952, IBM produced its first electronic computer called the 701 series which kept the average growth rate of IBM at 22 percent from 1946 to 1955.
In 1959, IBM created the computer disk which later became the backbone of IBM computer systems. In 1956, thousand IBM 650 series were sold since it was slower but cheaper than 700 series. Thousands of punch card customers were introduced to computers and IBM had 75 percent of the computer market. After the invention of the transistor and the Integrated Circuit in 1959, the production of the transistor-based computers while maintaining the vacuum-tube based computers led to much confusion between customers and sales force.
In 1964, IBM 360 system was launched to integrate all mainframe parts in one compatible system which forced IBM to be involved in producing all components of the mainframe computer by opening six new plants around the world. The compatible design and the power of the 360 system that was backed up by a marketing plan captured 70 percent of the market. In 1969, IBM leased 50,000 computer systems to create revenues of $7. 2 billion. 2. IBM Competitive Advantage
In 1927, IBM had competitive advantage over Burroughs, NCR, and Remington Rand by allowing their customer to lease their machines then supported these machines with trained service representatives who can make suggestions to customers for improving their information processing systems. Customers were happy because of the lower cost and reliable service from always using new machines that replaced old ones continuously. Customers did not have to allocate large capital and faced no threat of purchasing a machine that would be outdated quickly with newer technologies.
CTR also retained control over outdated machines and prevented their reselling in the used market which was a problem for NCR. IBM leasing strategy provided them with steady cash flow and enabled customers to purchase thousands of punch cards to operate their leased machines. IBM also had competitive advantage in producing the newest technology by their large expenditures on research development. In 1939, IBM owned 80% of business accounting machines and Remington Rand and Burroughs were minor competitors.
