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David answered on
Dec 25 2021
Running Head: IBM RESEARCH PAPER
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IBM RESEARCH PAPER 1
Abstract
International Business Machines is a world renowned technology giant. Most of the business
around the world makes use of some or other products or services provided by IBM. A large
multinational and well-diversified technology companies incur variety of costs that have an
impact on their business profitability and efficient utilization of resources. Research on various
cost management system is essential to improve the overall resource allocation and to have
enhanced level of control over the various costs associated with the activities. ABC system will
e an appropriate, suitable costing system to manage their overall cost in the business. Making
use of relevant cost is essential for the company to obtain the best outcome from IBM future
investment.
IBM RESEARCH PAPER 2
Table of Contents
Introduction ..................................................................................................................................... 3
International Business Machines an Overview ............................................................................... 3
Activity Based Costing ................................................................................................................... 5
Standard Cost System ..................................................................................................................... 9
Relevant Cost Associated With Future Projects ........................................................................... 10
Summary and Conclusion ............................................................................................................. 12
References ..................................................................................................................................... 14
IBM RESEARCH PAPER 3
Introduction
Cost management is crucial for every business, efficient and effective resource allocation
and utilization is essential to reach the pinnacle. IBM is a large multinational corporation that
makes use of more resources for various activities in their entire business activities across the
globe. Financial statements, annual report and the financial model of IBM is used as the primary
sources of data for performing the research. ABC method and standard costing method are
analyzed for their relevance to IBM business to know and recommend the best cost management
system for the company. Future strategy of IBM is determined by analyzing the importance of
elevant cost associated with their decision making. It is essential for every organization to
perform such research on the cost management so that they can have better control and
management of cost to achieve better success and market position.
International Business Machines an Overview
International Business Machines (IBM) was incorporated on June 16, 1911, in New York
as a Computing- Tabulating-Recording Company. IBM is recognized for providing various
technology solutions to their clients across the industries (U.S. SEC, 2016, p. 1). They develop
products that enable the client to leverage the data, deep expertise in their industry, best business
process, information technology and
oader ecosystem of alliance and partners.
The major business operating segments of IBM are (U.S. SEC, 2016, p. 4):
 Cognitive solutions – Provides best technology solution that will provide great insight
into the client business it provides a descriptive, perspective and predictive analytics to
the client.
IBM RESEARCH PAPER 4
 Global Business Services – It deals with the consultation, application management
services and the global process services. It is considered as digital reinvention for the
clients.
 Technology Services & Cloud Platforms – IBM provides a comprehensive IT
infrastructure services, technical support services, integrated software and cloud platform
for the clients.
 Systems – Provides solution to meet the hy
id cloud and the cognitive solutions of the
client. Servers, storage and operating system software solution are provided to client.
 Global Financing – It provides client financing, commercial financing and
emanufacturing and remarketing financing.
IBM has a
oad spectrum of clients, and they provide services to industries like
financial; energy; companies that designs, build and fly the airplanes; running of trains;
healthcare; medical solutions; fashion industry; entertainment; who manages the cities; food
industry and teaching, etc. (IBM, 2016, p. 1). They provide services and solution to all business
and professionals across the globe. IBM is operating in more than 175 countries, and they make
the best use of the locally available experts in providing assistance and service to the clients
(U.S. SEC, 2016, p. 8).
IBM is continuing to make a huge investment in the countries like China, India, Eastern
European countries, and Southeast Asian countries, Middle East and Africa and Latin America
(HBS, n.d.). IBM has major business markets in Canada, United States, United Kingdom, Japan,
Italy, Germany, France, Austria, the Cari
ean, Belgium, Switzerland, Cyprus, Spain, Denmark,
Norway, Greece, Malta, the Netherlands, Iceland, Portugal, Israel, Finland, Sweden and Ireland
(Refer Appendix I for revenue by region).
IBM RESEARCH PAPER 5
IBM is operating in a highly competitive market, and they are a well diversified company
that results in more intensified level of competition in each and every business segment of the
company. The competitor's size range from a large corporation to small and a focused enterprises
[P9]. The major competitors of IBM are Alphabet Inc. (Google), Microsoft Corporation
(Microsoft), Amazon.com, Inc. (Amazon) Oracle Corporation (Oracle), Cisco Systems, Inc.
(Cisco), SAP andSalesforce.com (U.S. SEC, 2016, p. 9). IBM faces geographic specific
competition across the globe from the small enterprise of the specific region.
The market share of IBM as a server system vendor is 13%, in business intelligence and
the analytics software is 12.7% (Statistics, n.d.) [Refer Appendix 2 Figure 1]. In cloud leadership
IBM has market share about 18% (ChannelE2E, 2017) [Refer Appendix 2 Figure 2], total big
data market share of IBM is 9.3% (SiliconAngle Media, 2016) [Refer Appendix 2 Figure 3],
enterprise mobility management software market share is 4.9% (Amazon AWS, 2015) [Refer
Appendix 2 Figure 4] and software market share is at 8% (SiliconAngle Media, 2016)
[Refer Appendix 2 Figure 5].
Activity Based Costing
Activity Based Costing (ABC) is a method of costing in which resources that are
consumed various activities are determined and the cost are allocated finally based on the
esources utilized (Edwards & Technical Information Service, 2008, p. 1). Overhead costs are
associated with every business but an appropriate allocation of costs are essential so that
company like IBM can easily evaluate those business segments that are consuming more costs
and those are consuming lesser costs. ABC has few steps involved in them and should be made
on a systematic basis (Edwards & Technical Information Service, 2008) [Refer Appendix 3.
Figure 1).
IBM RESEARCH PAPER 6
In this case, first, the IBM has to identify various activities that are involved in their
usiness for every business segment. Certain activities are commonly present in all the business
segments. Certain costs can be directly allocated to the particular activity, and...