International Business Machines (IBM) and Dell Inc. are American multinational information technology corporations which deal with electronic goods and services laptops, software, and electronic accessories; changes in contemporary business environments have seen the companies enact different strategic management policies.
This paper discusses changes on research and development expenditure, earning per share, and net income.
IBM has consistently showed a decrease in the amount of expenses spent on research and development; the reason behind the move was that the company has concentrated more on consultancy services than developing new hardware and software. When a business reduces its research budget marginally over a period of time, it means its taking advantage of the innovations and inventions it had made in the past. IBM has been a leader in the electronics world thus the decision to conduct minimal research with time can be interpolated as a move to first fully benefit from previous research and development programs or there are some reports that the company is working on. Dell showed increases from year 1 to 2, 2-3, and then from year 3-4 there was the most amount spent on the research and development; during this time, the world economic situation was not favorable for business (the world was suffering from global financial crisis). Other than the situation, there was high competition of other electronics companies like Apple Inc and Lenovo, Dell needed to beef-up its research and development programs to compete effectively.
The increase in research and development expenditure is likely to be on marketing and products development.
IBM shown continuous increase in its net income over the five years under review; the increase can be attributed to increased sales and high gross profit margin. The business strategy adopted by IBM is one that maintains current sales level and aims at increasing its sales steadily. On the other hand, the net income of Dell shown a decline overall with a big drop-off in year four but recovered in year 5; the decrease can also be traced in its sales revenue and gross profit margin. The probable fall of the company’s net profit can be attributed to high competition in the industry; its recovery in year five can be attributed to the results of its aggressive research and development strategies.
IBM showed a 187% increase from year 1-5 in basic earnings per share and a 189% increase in diluted during that same time; the performance can be attributed to its growth in profit over the period of time and net income available to common shareholders. The increase is an indication of good performance by the company where it has embarked on using owners funds other than borrowed ones.
Dell on the other hand only showed a 118% increase in basic earnings per share and Diluted during that same period of time; the increase is steady but when compared with one recorded by IBM it is wanting. The company is likely to be suffering from financial deficits as use of preferred stocks seems to remain constant; when considering the fact that the company has had decreasing net incomes, the increase in EPS can be attributed to either decreased shareholding or decrease in dividends paid to preferred stocks holders.
Contemporary business environments have affected the information and technology companies differently; IBM management strategies has enabled the company grow it financial base stronger than Dell Inc. since 2007. This can be attributed to its responsive decisions made by the management from time to time.