IBM Growth Markets - Market Expansion Strategy, Branches in Secondary Cities

IBM is focusing on emerging markets and other countries in Africa, Asia, Latin America and Europe for future growth and it’s Growth Markets Unit which focuses on these 152 countries is driving growth (Revenue & Profit) in the recent quarters, is expected to continue to grow and contribute US$ 17 billion in incremental revenues, 30% of IBM revenues, outpace major markets growth by 8 points and drive margin expansion by 2015 (IBM 2015 Roadmap Objectives). In order to successfully achieve these 2015 objectives, IBM needs to expand its market presence in the Growth Markets which means opening new branch offices not only in the metropolitan cities, capital cities and big cities but also opening branches in the secondary cities or tier 2 cities in emerging market countries. IBM expects mature markets that consist of countries like US, UK, France, Germany, Japan, Canada, etc are not going faster enough as IT spending has reached maturity levels when compared to emerging markets and other countries where IT spending by both governments and industries is on the rise in recent years. IBM has been aggressively opening branches in the Growth markets and in 2011 alone 92 branches (31 face to face and 61 Virtual branches) in 13 countries were opened by the company and most of them in the secondary and tier 2 cities in emerging and BRIC countries (Brazil, Russia, India & China). IBM had been present in most of the countries for many decades but the company is expanding into new cities and towns in these countries as there has been increase in IT spending by the governments to automate systems and use IT to provide good governance and service to the citizens and Small Medium Businesses and Large Industries increased IT adoption.

IBM Branch set up involves setting up a physical office with office staff who will be the sales team, client support staff and the Branch staff also collaborate with IBM’s business partners, who are responsible for educating the public to use IBM products.  IBM branch opening strategy is more targeted to open branches in secondary and tier 2 cities where there is significant educated population with IT skills, Universities and Other higher centers of Learning, Growing Cities where Governments are investing in terms of infrastructure like roads, power, Special Economic Zones, etc, internet and telecommunications networks, presence of industries that are large, medium and small, and favorable government policies. Another major reason for IBM targeting the secondary and tier 2 cities is IBM strategy to support the small and medium-sized enterprises/businesses (SMB), considered one of the fastest growing segments and where IBM is seeing strong demand and potential growth in future. IBM SMB strategy is to offer innovative and advanced that were once exclusive for larger companies with larger budgets to small and medium businesses at affordable prices and easy to use. IBM is looking to offer various IT services in the secondary cities that are focused towards telecom, banking, public utilities, etc which will help the citizens, industry and governments in these regions to take advantage of the IT Infrastructure and services for their benefits. IBM is closely working with governments and public sector undertakings and is developing innovative products and service offerings that help them in providing good governance and citizen services easily. IBM Smarter Cities is one such initiative which is seeing increased adoption by many governments across the globe. Smarter Cities projects are running both in mature markets (1900 Projects) and growth markets (500 projects).

IBM is continuing its aggressive branch expansion strategy in 2012 and in first quarter of 2012 opened 76 new branches (33 face to face & 43 virtual branches). The branches opened highlight the fact that IBM is focused on improving its geographical foot print in secondary and tier 2 cities in India (15 branches), China (11 branches), Brazil ( 8 branches), Mexico (4 branches) Russia (3), Korea (6), and ASEAN countries like Indonesia, Malaysia (4), Thailand, Philippines in 2011 and 2012. IBM also opened branches in Middle East and Africa in countries like Angola, Senegal, Tanzania, Mauritius and Qatar. Growth markets being critical component of future growth for IBM, the company is hoping to expand its geographical footprint beyond the large and metropolitan cities will help in strengthening relationships with existing clients and partners, acquire new clients and provide innovative and affordable solutions and services in areas such as information management, IT security, cloud computing and business analytics. The branches also closely work with IBM business and training partners that educate consumers about various IBM offerings and also train local talent in terms of technical skills and certifications who can play critical role in further pushing the IBM products and service offerings to the customers. Geographic Market expansion is not only branch opening in secondary cities but also involves IBM commitment in the local city or town development by investing in people and infrastructure and working closely with governments, businesses and educational institutions.