Case of Ibm Restructuring Sales Force
CASE
IBM : Restructuring The Sales Force
In 1993, IBM’s Board of Directors decided the time was right for dramatic action. The once proud company had seen its sales fall from almost $69 billion in 1990 to $64,5 billion in 1992. In the same period, profits plunged from $5,9 billion to a loss of $4,96 billion. In April 1993, the Board hired Louis V. Gerstner, Jr. to serve as its new Chairman and Chief Executive Officer and to turn the company around.
Just three months into the job, Gerstner announced his first major strategic decision. He identified IBM’s sales force as a key source of problems. Observes expected that he would restructure the sales force because it was too large, unwieldy and slow to meet changing customer needs. Gerstner surprised them by announcing that he would postpone his decision. He argued that immediate, radical reform would pose unacceptable risks to customer loyalty. Therefore, he would try to make IBM’s current sales and marketing systems work better.
GETTING INTO TROUBLE
In his introduction to the 1993 IBM Annual Report, Gerstner wrote that IBM’s problems resulted from the company’s failure to keep pace with rapid industry change. He also argued that IBM had been too bureaucratic and preoccupied with its own view of the world. He suggested that the company had been to slow to take new products to market and had missed the higher profit margins associated with introducing computers early in a product life cycle.
IBM’s customers and industry observers identified IBM’s self centered view of the world as the real problem. They argued that the company had stopped listening to customers. It peddled mainframe computers to customers who wanted midrange systems and personal computers. It pushed products when customers wanted solutions. Moreover, IBM’s sales compensation system rewarded mainframe system sales.
Salespeople often insisted that customers buy all their products from IBM and became indignant when a customer used other vendors. They
IBM : Restructuring The Sales Force
In 1993, IBM’s Board of Directors decided the time was right for dramatic action. The once proud company had seen its sales fall from almost $69 billion in 1990 to $64,5 billion in 1992. In the same period, profits plunged from $5,9 billion to a loss of $4,96 billion. In April 1993, the Board hired Louis V. Gerstner, Jr. to serve as its new Chairman and Chief Executive Officer and to turn the company around.
Just three months into the job, Gerstner announced his first major strategic decision. He identified IBM’s sales force as a key source of problems. Observes expected that he would restructure the sales force because it was too large, unwieldy and slow to meet changing customer needs. Gerstner surprised them by announcing that he would postpone his decision. He argued that immediate, radical reform would pose unacceptable risks to customer loyalty. Therefore, he would try to make IBM’s current sales and marketing systems work better.
GETTING INTO TROUBLE
In his introduction to the 1993 IBM Annual Report, Gerstner wrote that IBM’s problems resulted from the company’s failure to keep pace with rapid industry change. He also argued that IBM had been too bureaucratic and preoccupied with its own view of the world. He suggested that the company had been to slow to take new products to market and had missed the higher profit margins associated with introducing computers early in a product life cycle.
IBM’s customers and industry observers identified IBM’s self centered view of the world as the real problem. They argued that the company had stopped listening to customers. It peddled mainframe computers to customers who wanted midrange systems and personal computers. It pushed products when customers wanted solutions. Moreover, IBM’s sales compensation system rewarded mainframe system sales.
Salespeople often insisted that customers buy all their products from IBM and became indignant when a customer used other vendors. They