What explains Lenovo’s success prior to the acquisition? Essay Sample
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What explains Lenovo’s success prior to the acquisition? Essay Sample
Why did IBM want to sell its PC business? Why did IBM sell to Lenovo?
According to Quelch & Knoop (2006) the goal of IBM was to have a strategic change in its activities to focus on different business area then PC business. IBM has been recognised as one of the best player of PCs business in the past. The International Business Machines Corporation was improving the attention on IT consulting services to its customers instead of hardware solution CITATION NYTIMES \l 1040 (Ross Sorkin & Lohr, 2004). The case analysis has brought about into the credentials that IBM has apprehended about the slowly falling of PCs business and it has been intensifying the degree of competition too.
By this market analysis the top management started to look at the PC selling business has huge loss in the long run and the focus of IBM has mostly been in the direction of offering service. Furthermore, the HBR case analysis shows as well that IBM has measured the deal within Lenovo as a possible positive chance since it would let itself in reducing its lossmaking operations and by this means in paying attention on the new area of business: consulting services for instance outsourcing of enterprise IT procedures. In terms of strategy, the acquisition was the most convenient way for IBM to pull out the PC division.
According to Hill (2008) the procedure of acquisition might be better when there are well-established players in the market’s competition or when international competitors want to structure a market presence and vice versa as in the case. The procedure of acquisitions was attractive for IBM because they are quick to execute, and the acquiring firm move rapidly to implement an integration plan. CITATION Hil08 \m Que06 \m NYTIMES \l 1040 (Hill, 2008; Quelch & Knoop, 2006; Ross Sorkin & Lohr, 2004) The strategy of the Big Blue has been to focus on long term growth. PCs business would not anymore let IBM lead according to the researches.
A key factor, to explain the benefits of IBM has traded its area of business to the Chinese Lenovo, has been provided by the agreement that even after the acquisition, IBM preserved 8. 9% in the new acquired corporation. Another key factor to understand the benefit of IBM has been settled by Lenovo promise, the Chinese corporation would not interfere in the new core business of IBM. Because of all the noted benefits, Lenovo has been choosing by International Business Machines Corporation for the acquisition of the PCs sectorCITATION Que06 \m NYTIMES \l 1040 (Quelch & Knoop, 2006; Ross Sorkin & Lohr, 2004).
What explains Lenovo’s success prior to the acquisition?
As claimed by Quelch & Knoop (2006) Lenovo initially was known with the name of Legend. In the Chinese market Legend was leading the sales of PC products. The brand of the company as system relating the three sides, the concept between value proposition and positioning as innovation, quality, the name and the efficiency in its product and service CITATION HultmanL6L7 \l 1040 (Koch, 2017).
The ability to innovate and satisfy Chinese market like in the case of adapting the input of keyboard for Chinese language, the Chinese-character card. The specific card is premeditated for translating the English language into Chinese and this has been an important factor to the improvement and acknowledgment of the corporation in the national market. In addition, the incessant and rapid product development of the company has also been the principal reason and that has paid back towards great sales.
Furthermore, prior to acquisition, the concentration was heavily on local market and the firm has focused much of its capitals in targeting Chinese markets like in the case of marketing campaign in comparison with other international giant in the Chinese market. This has permitted Lenovo to reach such a high position in the market share. To summarize and visualize the prior situation of the firm I made a SWOT Analysis Chart.
What challenges did Lenovo face after the acquisition?
Lenovo alias Legend has been competing always in its specific geographical area, however after the acquisition of IBM, the Chinese corporation needed a radical change in terms of perspective to the market, now worldwide. The Lenovo’s challenge is to manage the new situation with a global perspective, globalizing the brand concept and their products and services CITATION HultmanL6L7 \l 1040 (Koch, 2017) what were complementary from both sides by the different targeting of customers, Lenovo was focusing mainly on small companies and IBM on large enterprises.
The second key challenge has been to understand what can and should be differenced and unified between the buyer’s products and acquirer’s products. This is a strategic decision to do not lose points on the market in terms of brand recognition. Other challenges came up when the focus goes to the culture of the company, Lenovo is mainly oriented by Chinese culture while IBM had a culture that was already fitting the global perspective gained by the international experience and time in the market.
The integration of culture was necessary. It is vital for the management team to figure a shared understanding and agreement concerning such indispensable positioning process questions CITATION Mat14 \l 1040 (Urde & Koch, 2014). The cultural clash within staffs was palpable after the acquisition, the common point was the meritocracy. Principally the IBM management operates as per US time which differs significantly from Chinese time, 12 hours.
Having workers spread mainly between US, Japan and China may support the success in global markets, what may therefore require the Lenovo to incorporate both centralization and decentralization in their structures to enable them to act quickly locally while leveraging global best practices (Wickman, 2008 cited in CITATION How \l 1040 (Holt, Quelck, & Taylor, 2004). After the integration the Lenovo switched the language of company from Chinese to English and start to use videoconference heavily instead of meeting face-to-face as was tradition in the company before the change.
For sure after the acquisition Lenovo gained an important competitive advantage indoor and outdoor the company to lead in the global market. How should Lenovo handle the brand management challenges associated with the acquisition? Right after the acquisition, Lenovo had the possibility to use the IBM symbols for other 5 years, but the decision of how to manage the brand in total was determinant.
The brand is important for the future of the company because facilitates identification of the products, transfer benefits and value to products and services, rise the perceived value by assuring quality and origin, decrease risk and complexity intricate in the buying decision of customers CITATION HultmanL6L7 \l 1040 (Koch, 2017). According to Van Gelder, 2003 cited in Holt, Quelck, & Taylor, 2004) it is termed for brands to be ‘harmonized’ crosswise markets to determine which faces of the brand structure should be the equivalent transversely in different markets.
These core characteristics can then be homogenous inspiring the local executives and customers. For a great global brand, businesses must understand the possible degree to which reasons linking to the brand diverge crosswise market borders (Van Gelder, 2003 cited in Holt, Quelck, & Taylor, 2004). Branding experts suggest to companies to forge all-encompassing brand personalities so that consumers involvement the magic of the brand at each business touchpoint CITATION Hol02 \l 1040 (Holt D. B. , 2002). The Master Brand Strategy should be in my opinion too the right strategy to keep.
This strategy points toward only the main company brand. The master branding strategy has the advantage for the company to concentrate all the available resources on one brand, instead of focus on different ones and create inefficiencies like in the case of House of Brand Strategy of the Proctor & Gamble CITATION HultmanL6L7 \l 1040 (Koch, 2017). The acquisition of IBM has modelled challenges to Lenovo in relation with its effective brand management. The firm faced challenges particularly in managing its own brand.
A key point in this moment, for Lenovo was preserving the status quo of its IBM brand. The challenge by a synergy approach to managing brands can give to Lenovo best benefits. The reason why is intense in the facts that the IBM brand is established as trusted international brand. IBM brand value can be a driver for promoting Lenovo’s master brand. This is principally because IBM has its own individual image and at the matching time, Lenovo has also created its own exclusive identity in the Chinese market and it is building up its brand image in the international market.
This simple strategy of building mutually these brands individually has consequently been highly efficient to the business. Furthermore, Lenovo has highlighted towards joining innovation and efficiency factor in its brand and this has showed to be vastly fruitful to the corporation in addressing the higher degree of competition as challenged. In the end, the branding strategy of Lenovo has reached the goals settled from the top management.
In trying to become a global brand, does Lenovo have a problem coming from China?
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