Market Dominance: How Firms Gain, Hold, or Lose It and the Impact on Economic Performance

By David I. Rosenbaum | Go to book overview
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8
THE RISE AND FALL OF IBM

Don E. Waldman

The toughest thing about success is that you've got to keep on being a success.

-- Irving Berlin


INTRODUCTION

Few firms have gone from the top of an industry to the middle of the pack more quickly than International Business Machines, known as IBM. For decades IBM was the firm that stood for high technology and computers, yet today it is clinging to its slight market share lead in the computer industry. Worse yet for the company's management, its potential to dominate the industry has been lost to Microsoft and Intel. What happened in such a short time to a true industrial giant of the twentieth century? Is IBM's reign over, or will it bounce back and re- emerge as the industry leader? These issues will be addressed in this chapter. The major hypothesis advanced is that IBM fell victim to two major problems: the fear of antitrust prosecution and an inbred, outdated, and complacent managerial structure. These two factors combined to ultimately destroy the company's dominant position.

A decade ago IBM produced over 60 percent of the mainframe computers sold in the world; its annual gross revenues consistently exceeded $50 billion, peaking at $68.9 billion in 1990, and it employed over 400,000 people around the world.1 Furthermore, as Table 8.1 shows, its net earnings in 1984 were a staggering $6.5 billion. By 1993, IBM's total world employment had declined by 36.8 percent to 256,000 and IBM sustained an $8.1 billion loss. How did this turn of events happen?

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