Team 6 Tim Baden David Borghaerts Marco Koghee Bert Rijke



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Team 6
Tim Baden

David Borghaerts

Marco Koghee

Bert Rijke





Table of Contents


  1. Executive Summary

  2. Preface

  3. Introduction

    1. Project Background

    2. Problem statement




  1. DESTEP Analysis




    1. DESTEP Russia




      1. Demographical factors

      2. Economical factors

      3. Social and cultural factors

      4. Technological factors

      5. Ecological factors

      6. Political factors

      7. Opportunities and Threats

      8. MaBa analysis



    1. DESTEP India

      1. Demographical factors

      2. Economical factors

      3. Social and cultural factors

      4. Technological factors

      5. Ecological factors

      6. Political factors

      7. Opportunities and Threats

      8. MaBa analysis



    1. DESTEP China

      1. Demographical factors

      2. Economical factors

      3. Social and cultural factors

      4. Technological factors

      5. Ecological factors

      6. Political factors

      7. Opportunities and Threats

      8. MaBa analysis




  1. Competition




  1. Conclusions




  1. Strategy and recommendations

Appendix I Interviews

Appendix II Compound annual growth rate

Appendix III List of resources

Appendix IV Russia’s share of world publications

Appendix V Challenges in doing business in the RIC countries

Appendix VI MaBa Analysis models

1) Executive Summary


In the emerging RIC countries is, in comparison to the developed western economies, a substantial growth in GDP and several markets expected. The RIC countries are all liberalizing and opening up their markets, this development creates multiple unignorable business opportunities for foreign investors.

However those business opportunities aren’t without risks, those risks mainly consist of corruption, poverty, pollution, competition, bureaucracy, governmental law and protectionism.
In order to see where the sustainable chances are for IBM, we take a better look at the RIC countries and separately judge them based on facts and conclusions of our research.
Russia

Russia counts over 141 million people, with a majority of these people living in poverty. Russia is experiencing economical growth over the last few years, this growth is generated for 50% by the oil and gas industry. This non-sustainable dependency on the oil and gas industry forces the Russian government to focus on renewable energy and different markets, such as the IT-sector.

The IT-sector shows a large growth over the last few years and the Russian government is taking measurements to stimulate the growth, for example by eliminating taxes on software.

Russia has a high poverty level, but has a well educated workforce and is well known for its excellent and cheap computer programmers, making it an attractive (IT)outsourcing market.

The banking sector is still growing and, despite the economic crisis, lending money. These signs could indicate that the banking sector will continue to grow and investments in the near future will be made.

We recommend IBM to focus on the energy and banking sectors as well as keeping an eye out for chances in the automotive industry and taking the IT outsourcing possibilities into account.


India

India has over 1 billion residents and is still growing strong. In fact India is the fastest growing country with an average age of 25 and more than 700 million people under the age of 35, as a result India may face serious problems on social, environmental and economic levels.

India invested in education, each year 80.000 IT professionals graduate from IT related studies and most of them speak English. This well educated, English speaking, cheap workforce, could deliver opportunities for IBM in IT services and the improvement/development/maintenance of software programs.

The government of India sees the potential of the IT sector as well and is stimulating the sector by investing in projects such as the creation of so called Software Technology parks.


China

China has over 1.3 billion residents and has the second largest economy in the world. With 812.7 million people China has the biggest workforce of the world and because of the one child policy it’s also the fastest aging country. As China grows economically, the demand for energy continues to grow as well.

IBM could play an important role in the development of sustainable ways of gaining or managing energy.

The Chinese government stimulates by investing in projects to develop the IT sector, China’s share in the global software and IT market is 8.7%(2007 est.) and it is expected to grow 30% the following next few years. With its economical growth the wages are starting to become less attractive, China has to develop new ways to differentiate and could be starting to use software such customer relationship management systems. Eventhough China is still a good labouring country, it’s becoming a better target market for the products and services of IBM. The banking sector is growing but many investors fear that a bubble is being created. We see some potential in the banking system market for IBM’s products and services, but also the risks of a bursting bubble. The automotive market is rapidly growing is much more stable and offers opportunities for IBM, in producing auto parts and the integration of electronics.

We suggest IBM to focus on the IT sector, with its educated labour and government stimulation, the automotive market, in the process of producing auto parts and electronics, the pension market and to be wary on the banking sector.


Preface


First of all we would like to thank the “Hogeschool van Amsterdam” in co-operation with IBM for giving us the opportunity to work on this project. For us students it’s amazingly interesting to learn and do research on one of the actual hot-topic s, the emerging markets, and to think about succeedable chances these emerging markets create for a major company as IBM.
Secondly we would like to thank the teachers for helping us on such a short notice to complete this project, as well as the interview participants and of course the wonderful team players of team 6, where everyone showed a good sense of what teamwork is about and the dedication to make this project a success.
Also we would like to ask the staff of IBM if there’s a possibility to continue and expand our research by getting a little more freedom in the form of time and perhaps the possibility to invest money in certain scientific research(methods) which we’ll illustrate further on in the report .
Team 6


3) Introduction
Project background
In the 4th year of the study Commercial Economics we get several assignments, in which we have to write a report based on research, executed by a team of four students within a time span of a month.
Team 6 consists of the following students:


  • Tim Baden

  • David Borghaerts

  • Marco Koghee

  • Bert Rijke

In this case we have to do research on the ICT markets of the emerging countries Russia, India and China.


The research consists of:

  • analyzing DESTEP factors

  • market competitiveness analysis

  • SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)

  • MaBa analysis (Market attractiveness, Business attractiveness)

This is followed by an advice, based on the conclusions of these analysis, for IBM on how to improve their strategic position in these emerging countries.


IBM
IBM is an international operating ICT company originating in the US with over 380,000 employees worldwide, spread out over business units in 160 countries.

IBM offers a wide array of products , which can be categorized in five core businesses:




  • Software 2007 revenue: US$19.9B

  • Systems & Technology 2007 revenue: US$ 21.3B

  • Global Services 2007 revenue: US$ 54.1B

  • Research

  • Financing 2007 revenue: US$2.5B

With a total revenue of $98.8 Billion in 2007

Pre Tax Earnings $14.5 Billion in 2007

Invest $6.1Billion in Research and Development per year.


Emerging Markets1
An emerging market is defined as an economy with low to middle per capita income. Such countries constitute approximately 80% of the global population, and represent about 20% of the world’s economies. The BRIC Countries, Brazil, Russia, India and China, are currently known as emerging markets in which exceptional growth is expected, but because of their unstable characteristics this is not without risks.

4) DESTEP Analysis


The DESTEP analysis method is a part of the external analysis, it gives a good overview on the macro environmental factors and is a useful tool in markets.




RUSSIA


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