Abstraction:
The instance describes in item the assorted stairss taken by Lenovo. the prima Personal computer maker in China. in its attempt to travel planetary.
The stairss include altering its corporate name from Legend to Lenovo. patronizing the 2008 Olympic Games and most significantly. geting IBM’s PC unit.
The instance examines the demand for Lenovo to globalise and critically analyzes the efficaciousness of the above stairss in the company’s globalisation programs. It besides highlights the challenges faced by Lenovo in its way towards globalisation.
Issues:
» How invention. distinction and customization can be used as strategic and competitory advantages by a company. to keep its leading in the domestic market. and emerge as a planetary participant
» The demand for globalisation and the factors that must be taken into history when a company wants to travel planetary
» The steps by which a company can make a planetary trade name
» The challenges confronting Lenovo in its attempts to travel planetary
Introduction
In December 2004. the China-based Lenovo Group ( Lenovo ) announced that it had acquired the personal computing machine ( Personal computer ) division of the US-based IT major IBM. Industry analysts termed this as a major milepost for Lenovo in its attempts to globalise its operations. It was besides perceived as an of import measure towards accomplishing the company’s end of going a Fortune 500 company by 2010. Harmonizing to Liu Chuanzhi ( Chuanzhi ) . the Chairman of the Group. “The purchase will do Lenovo Group the 3rd largest Personal computer shaper worldwide with an one-year gross transcending 10 billion US dollars. ”2
Lenovo. once known as Legend. is Asia’s taking and world’s 9th largest Personal computer maker ( Refer Exhibit I for top 10 Personal computer companies in the universe ) . By the terminal of 2003. Lenovo had captured a 27 per centum market portion of the Personal computer market in China. In the financial 2003. Lenovo manufactured around 4. 5 million Personal computers including laptops and desktops. Lenovo has besides diversified into other concern countries including handheld devices and IT.
About 51. 5 % of its grosss came from the corporate section. 33. 5 % from the consumer section. 8. 8 % from hand-held devices. 3. 8 % from contract fabrication and 2. 4 % from IT services ( Refer Exhibit II for Lenovo’s concern sections ) . For the financial twelvemonth ended March 31. 2004. Lenovo reported a turnover of HK $ 23. 2 billion and a net net income of HK $ 1. 05 billion.
Lenovo started its concern as a distributer of computing machine merchandises for foreign companies including IBM. AST3 and HP. In 1990. Lenovo manufactured its first Personal computer and within a decennary it grew to go the prima Personal computer maker in China.
Introduction Contd…
In the early 2000s. Lenovo expanded into new concern countries including the industry of nomadic phone French telephones and digital cameras. and direction consulting. After its important success in the Chinese market. Lenovo made programs to travel planetary. In March 2004. Lenovo joined The Olympic Partner ( TOP ) to patronize Olympics games to be held in 2008 at Beijing. Harmonizing to analysts. this move would assist Lenovo derive trade name acknowledgment globally.
Commenting on the benefits from this trade. an industry analyst said. “For Chinese houses. like Lenovo. the Olympic Games provide an honest chance to heighten their image and show their strengths in cardinal engineerings. merchandises and services worldwide. ”
4 In April 2004. the company changed its name from ‘Legend’ to ‘Lenovo. ’ where ‘Le’ bases for Legend and ‘novo’ stands for freshness and invention. Then Lenovo acquired IBM’s PC unit in December 2004. Commenting on this move. Leslie Fiering. an analyst from Gartner. a planetary research house said. “Lenovo aspires to go a major international participant and a recognized trade name. a company with the ability to
sell into transnational corporations and be profitable.
This trade improves its opportunities. but the concern is merely traveling to acquire tougher over the following few old ages since the worldwide growing in Personal computer gross revenues will decelerate to about 2 per centum a twelvemonth from 2006 to 2008. less than half the jutting gross additions of 4. 7 per centum a twelvemonth from 2003 to 2005. ”5
Background Note
Lenovo was originally called Legend Beijing. and was founded in 1984 by Chuanzhi along with 10 co-workers at the Computer Technology Institute of the Chinese Academy of Sciences ( CAS ) 6. With an initial investing of 200. 000 kwai. the company was established with the purpose of commercializing the research and development activities conducted at CAS…
The Reasons for Success
By 2000. Lenovo had emerged as the market leader in the personal computing machines ( Personal computers ) industry in the Asia Pacific Region except Japan ( APEJ ) . with a market portion of 11. 3 % ( Refer Exhibit III for taking Personal computer companies in footings of market portion in APEJ ) …
Losing Market Share
From the financial 2003 onwards. Lenovo started losing market portion amidst ferocious competition from both local and foreign participants ( Refer Exhibit VI for Lenovo’s market portion for the period 1996-2004 ) . After China joined the World Trade Organization in 2001. usage duties on imports came down significantly. and this helped Lenovo’s foreign challengers. The company faced aggressive pricing from foreign Personal computer makers like Dell and HP every bit good as other local participants. Dell’s market portion in China doubled to 7. 2 per cent between 2002 and 2004. Dell was peculiarly successful in selling Personal computers to corporate clients and authorities bureaus. In November 2004. the Government of China awarded a US $ 20 million contract to Dell over Lenovo.
Traveling Global
Lenovo’s first raid in international markets started in 1991. with the constitution of Lenovo Germany. However. the company’s major attempts to globalise came in 2001. when it started selling consumer Personal computers in Hong Kong for the first clip. and laptops under its QDI trade name name in Spain. Germany. Italy and Greece…
The Road Ahead
Lenovo faces tough challenges in front in its programs to globalise successfully. Many industry experts felt that altering its name from Legend to Lenovo would non profit the company. Bryan Ma. senior director with IDC stated. “It is a shame they can’t use the Legend name overseas. as it carries a batch of weight and trade name equity. ”…
Exhibits
Exhibit I: Top Ten Personal computer Companies in the World ( January 2004 -September 2004 )
Exhibit Two: Lenevo – Business Segments Information ( 2003-2004 )
Exhibit III: Market Share of Personal computer Makers in APEJ
Exhibit Four: Top Five Personal computer Manufacturers in China ( 2003 )
Exhibit Volt: Lenovo – Five Year Financial Summary
Exhibit Six: Lenovo – Market Share in Chinese Personal computer Market
