Published by MBA Skool Team, Last Updated: February 07, 2022
PESTLE Analysis of IBM analyses the brand on its business tactics. IBM PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as IBM, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
The political factors in the IBM PESTLE Analysis can be explained as follows:
IBM is one of the biggest Information Technology companies in the world headquartered in the US and operates in more than 175 countries. Changes in governments and policies should be kept in mind while implementing and executing plans in different countries. Governments pushing for digitization in developing countries like India creates a good opportunity for IBM to grow their business and offer information technology services. With the growing presence of the world on social media and the internet as whole governments also want to push for data security and privacy concerns of consumers which creates more opportunities for IBM to look at. Tax policies of different countries should be kept in mind while entering new markets and while pricing products and services in already tapped markets. Corruption puts a negative impact on the business environment. Political factors like Trump’s trade war with China can have adverse effects on tech giants
Below are the economic factors in the PESTLE Analysis of IBM:
IBM must comprehend economic elements such as foreign exchange/interest rates, labor market conditions, inflation, and saving rates, among others, because they influence the country's overall economic climate.
IBM can determine the growth trajectory of industry and organization by having a thorough understanding of the economic environment. IBM is known for outsourcing pc manufacturing to save costs and on the other hand, IBM helps its clients by taking over their IT management. This helps both IBM and their clients to focus on their strong areas of business. In 2020, IBM announced its plan to start a new company “NewCo” which will look into its Managed Infrastructure Services business as a publicly-traded company. This will allow IBM to focus on its hybrid cloud platform and artificial intelligence capabilities and focus on its clients’ digital transformation journey.
Following are the social factors impacting IBM PESTLE Analysis:
Organizational culture is heavily influenced by cultural conventions, values, and trends. IBM can benefit from a better understanding of demographic trends, power dynamics, consumer buying habits, and common views. IBM has a dedicated trust center that focuses on protecting their customers and business with privacy and security. IBM trust center provides clients with data about how they go about managing their privacy in order to maintain the trust and transparency between them. IBM ranks 19 on the “Just 100” list which is judged on various parameters like attracting workers, community service, privacy for customers and efforts towards sustainability. IBM places various ethical principles while developing AI to build systems based on trust. IBM believes their greatest asset to be their employees and puts strong efforts into diversifying the workforce and it also encourages creativity outside work. The focus should also be kept on decreasing cybercrime. IBM’s free digital education platform, Open P-Tech is designed to engage students and educators in times of remote learning. Another platform, SkillsBuild, is designed to provide reskilling support for job seekers.
The technological factors in the PESTLE Analysis of IBM are mentioned below:
Being an IT company, it becomes crucial for IBM to be at the forefront in technological advancements and improvements. Increasing the adoption of cloud services provides a good opportunity for IBM. IBM provides services like IBM Cloud, IBM Watson which is AI for business, IBM Consulting, IT Infrastructure and IBM Security which is AI-powered, automated endpoint security. IBM Research is the research and development center of IBM and according to data, IBM spent 6.33 billion USD on research, development and engineering. In 2020, IBM had the most patents granted to it in the United States. Despite receiving thousands of patents each year, IBM continues to challenge itself in developing innovative goods and services in a rapidly evolving technological industry. IBM is working on several initiatives related to hybrid cloud solutions, AI, blockchain, and quantum computing. However, IBM's annual revenue has remained flat, and the company's Watson software system has yet to deliver the anticipated rebound. Quantum computing appears to be one of the most promising of the company's current activities, since several businesses seek to use it to solve a variety of problems that are more complicated than classical computers can handle. Over the next five to ten years, the worldwide quantum computing business is expected to expand from hundreds of millions of dollars to billions.
To assist scientists around the world with research related to COVID-19 IBM provided free access to supercomputing capacity.
Following are the legal factors in the IBM PESTLE Analysis:
IBM cannot enter a new market without first thoroughly researching its legal environment and regulatory framework. A careful review of legal risks is necessary to avoid getting into significant legal trouble. Various legal factors that should be kept in mind are employee protection laws, consumer protection laws, intellectual property laws, etc. IBM has faced a lawsuit against them in 2021 on account of age discrimination, such lawsuits hamper the image of the company and also significantly increases costs and decreases profitability.
In the IBM PESTLE Analysis, the environmental elements affecting its business are as below:
Environmental norms, laws, and regulations fluctuate depending on the market. IBM's global presence necessitates careful consideration of these variances to avoid unfavorable situations. IBM claims to have bolstered their battle against climate change through leadership and innovation. IBM announced its third consecutive goal for the use of renewable electricity in February 2021, as well as its fifth consecutive goal to reduce greenhouse gas emissions and a new goal to reach net-zero greenhouse gas emissions.
IBM's corporate social responsibility culture is built on environmental leadership. This is reflected in their commitment to achieving net-zero emissions of harmful gases by 2030 and to cut carbon emissions by enacting a carbon tax. They are collaborating with clients for hybrid cloud and AI solutions to some of the world's most pressing sustainability issues, including agriculture, transportation, and the upgrading of their electric grid.
To conclude, the above IBM PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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