Question-Choose any one of the CHINESE MNCs and analyse its organizational structure and nature of business operation. Are there any lessons to be learned from Chinese MNC business experience?
China continues to be the world’s most emerging top most multinationals that seek to set up the existence and expand their footstep in the 2nd largest economy of the world (aicpa.org 2008). The Chinese multinationals play a key role. In any case China has advanced rapidly, as have Chinese homegrown businesses. It is an aggressive environment and Chinese household players are currently raising the stakes, with worldwide yearnings for their own particular brands. Since China opened its ways to the West 30years back, there has been a sensational change in China’s financial fortune. The advancement of Chinese organizations from shut entryway seclusion to internationalization, and even worldwide mix for a few, has been emotional and quick. As these firms developed, there have been real shifts in talent management, human resources, technology management and also corporate strategy which are giving a competitive edge to the Chinese firms. European and American have started to fear and notice the shifts that the Chinese MNCs are taking (kpmg.com 2013).
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This essay will examine the key success factors of the Lenovo, the China’s leading computer technology organization. The essay focuses on discussing the strategies that had made Lenovo successfully globalized. The essay describes the evolution of the company, the structure of the organization and also the drivers that has lead the organization to head towards the success.
Lenovo is one of the biggest well known PC creators on the planet. Today, Lenovo strives to be the worldwide piece of the overall industry pioneer in each of the business they serve. On September 24, in 2004, Lenovo obtained the individual machine business and the brand “Thinkpad” popular machine IBM in the IT business everywhere throughout the world. This historic point transaction is taken as its most paramount phase of the worldwide procedure in the machine business (lenovo.com 2012). This marks the trinity Lenovo’s internationalization system has climbed to another stage, which shows that Lenovo officially in the United States built a brand-name picture confinement. Presently, the Lenovo has turned into the worldwide application organization (deals) that have their bundle plants in additional than 7 nations and collaboration plants in numerous nations and make the neighborhood ventures business permit and circulation contract. Lenovo is likewise one of the major worldwide organizations (deals), and it has it generation plants in 7 nations, its items are showcasing in about 160 nations (China Hands 2014).
Headquarter of Lenovo is located in Hong Kong. It has around 66 branches with sales and distribution in around 50 different countries. The organization has research centers in Japan, China, Yamato, Beijing and Shanghai. Lenovo operates assembly and manufacturing facilities in Mexico, India, US and China. The founder of the organization is Liu Chuanzhi who has transformed the overall organization. Under his leadership, the organization had set up an incentive mechanism and option plan that has helped many people go aboard in their initial position of leadership itself. Presently the organization is run under the leadership of Yang Yuanqing who is the present CEO of the organization. Under his leadership the organization continues to have a robust business impetus, profitability in their earnings and also delivering trace revenue. To maintain this momentum, there are other leadership positions like CFO, CTO, COO and other positions based on the different functions of the organization who support the CEO to make Lenovo more profitable and the global player in the computer technology market (Lenovo.com 2014).
To sustain in this competitive world, the organization has developed four different business groups in the year 2014; Cloud and Ecosystem Services that is led by George He, who is the CTO of the organization his main responsibility is to build up an ecosystem that drives the strategy for expanding the ecosystem and also for monetization. Next is the Enterprise that is led by Gerry Smith. The main aim is to forcefully fabricate another, quickly developing benefit motor in big business, where we as of now have a strong establishment. Another one is the Mobile Business Group led by Liu Jun. This business group is centered on making Lenovo a productive worldwide player in the quickly developing cell phone and tablet and creating our brilliant TV business. Lastly is the PC Business Group led by Gianfranco Lanci. This business group will guarantee that the organization keep on innovating, drive benefits and stretch our lead in our center PC business around the world (News.lenovo.com 2014).
Lenovo has three different products in the international market that occupies the first three positions in the industry of computers. The main aim of the organization is to become the first manufacturer of personal computer in the world in the upcoming future. The PC shipment of Lenovo rose by 21%. In China the organization accounts for 46% in its overall revenue (Luk 2014). Lenovo has turned into a “”wonder”” in the Chinese data engineering (IT) industry today due to its interesting managerial methodology and individual’s first system. Lenovo Group consumes ”making room to create representatives, updating their quality, and enhancing their working and living quality” as its mission; thusly workers subordinate their individual interest to Lenovo’s long haul improvement. Today, Lenovo is China’s biggest and the world’s fourth-biggest PC maker, after Acer of Taiwan, Dell of the U.S. and Hewlett–Packard Co. Lenovo has centered its degree, and as of now produces desktop and note pad PCs, workstations, servers, stockpiling drives, IT administrations and IT administration programming (Fletcher 2014).
The business operation of Lenovo, mainly focuses on the developing an efficient marketing activities that help the organization to have a competitive edge in this competitive environment. Lenovo focuses on three factors before choosing their target market: Created rustic market, those customers have solid brand mindfulness. This swarm has structured piece of buying power, Moreover, Lenovo early did the demonstration of the “free movies for countryside” to create the provincial market, the exercises have brought the brand affect, so picking this some piece of the swarm as the target customer bunch, obviously can rapidly enter the country market; Urban communities customers who have the abnormal state of training, higher on affirmation, and are matured underneath 45. Lenovo called this swarm “high-end crowd”, the swarm is helpful for high-end items deals; Solid brand mindfulness, city customers who have progressed ideas. In the PC market, the effect of Lenovo brand is near preference, so picking such target customers can indulge the needs of such customers (Chu).
Expanding upon its past triumphs and concentrating on conveying productive development, Lenovo is re-verbalized its responsibility to five vital pillars; Pursuing excellence in their operations, enhancing the intimacy of the customers, wining in the core businesses, gaining profitability and then building a strong brand(lenovo.com 2008).
Lenovo drives its operational efficiency by emphasizing on the main keys areas that help the organization to add efficiency to their process. First is to complete the footstep of global manufacturing expansion and then operates its expertise according to the customer base in different regions. Second Lenovo follows the Lean Six Sigma application in their supply chain process that helps them forecast their accuracy, the process of material management, transition process of the product and also the logistic networks (Ladd 2013). This makes sure that the business management is in place and helps every business process to invest in their core capabilities and also drives the organizational growth.
Lenovo delivers unique customer experience by offering innovative and distinct feature products. This deepens the loyalty of the customer. They also delight the customer’s experience by designing the high quality PCs and also backing up with the best quality service. In China, Lenovo is additionally well-known for its quality administrations also has won eight recompenses from CCID Consulting for customer fulfillment in the administration and backing nature. To measure and enhance customer fulfillment, Lenovo started the Lenovo Customer Support Review in the 2007/08 financial year as the metric in its administration framework. Lenovo has additionally outlined and actualized a set of markers that empower it to concentrate on customer particular execution and other more extensive zones to enhance general customer experience (lenovo.com 2007).
Apart from delivering the best service, Lenovo also puts their effort in research and development which ensures that the organization understands the pain points of the customers and also makes sure that the product quality is retained as per the need of the customers. The customer service process of the business focuses on the ISO 9001 standard that helps the organization to retain the high quality of the products. Lenovo also has the best designing team that mainly focuses on designing and developing world-class products for the consumers in the market like ThinkPad X300, IdeaPad U110 etc. Thus the main priority of Lenovo to run the business is to augment and maintain the designing capability and also have an edge over its competitors(lenovo.com 2008)
According to the business trend or the demand of the market, the organization has developed various strategies that have identified the demand of PC, servers and workstations. Other than further extending its authority position in PC market of China, Lenovo additionally recorded great development in its buyer business in ASEAN nations and India with viable showcasing strategies. In the meantime, Lenovo was in full quality to kick off its worldwide buyer business upon the creation of the purchaser specialty unit. In January 2008, Lenovo declared its official section into the worldwide shopper market with the dispatch of another line of buyer situated and IdeaCentre desktops and IdeaPad notebooks. Lenovo’s demonstrated plan of action will empower it to catch the opportunities in the rising nations on the whole topographies. The take off of the transaction plan of action outside China has laid imperative preparation for Lenovo to further expansion in Mexico, India, Russia, Turkey, Brazil and Middle East(lenovo.com 2008).
Lenovo had shown a drastic growth every year. This they have done by strengthening their local market that is market position of China, product leadership, and also by accelerating their margin. Lenovo’s China PC business and overall substantial undertaking business still speak to a vast parcel of its business and will keep on being basic in its future achievement, even as the Group makes headway with new market opportunities. In the 2008/09 monetary year, Lenovo arrangements to reinforce its position by concentrating on the fast growing record book showcase in China and drive market request by leveraging its remarkable showcasing open door at the Olympic Games in Beijing. Emulating smooth moves of worldwide deals backing and item brand name; Lenovo has assumed full liability of its huge undertaking business. It will expand on its qualities in different sections, for example, the open part, mid-market for development and in the meantime quicken client procurement.
A key vital activity for Lenovo is building a worldwide brand. In the 2007/08 monetary year, Lenovo had various victories in its showcasing and marking deliberations. The Bunch’s sponsorships of the Olympic Games, the AT&T Williams Formula One dashing group and the National B-ball Association (NBA), and also air terminal and train station publicizing, fabricated brand mindfulness and picture. Two significant item affirmations were additionally instrumental in building the Lenovo brand; the presentation of the ultra-slim Thinkpad X300 was emphasized on the spread of Business Week and the Ideapad U110 won three significant grants at the Las Vegas Consumer Electronics Show. As an aftereffect of these deliberations, Lenovo’s brand mindfulness has climbed 28, thought rate has gone up 15% and Lenovo’s picture expanded 13% throughout the last 16 months (Calkins 2013).
Lenovo’s present key center is on developing markets, development in shopper markets, and extending its record book business, alongside preceded with advancement of peripherals and administrations. By 2007, Lenovo had rebuilt its worldwide production network and accomplished its objective of outpacing industry development around the world. Business was good to the point that the organization quit utilizing the IBM brand, to which it still held the rights, and started advertising just Lenovo machines. The strategy of Lenovo mainly focuses on two things one is the distribution channel and the other is manufacturing base. The PC strategy of Lenovo mainly emphasizes on localizing its products based on the needs of the consumers. There are various firms that brought customization in the PC processes but Lenovo focused on bringing in localized solutions to their potential end users related to internet connectivity and local software (Holstein 2014).
The present strategy of Lenovo mainly focused on strengthening the corporate business which helped the organization to gain and stabilize the brand recognition in the market of America. The organization faced loss in the year 2008-09 but it had not applied any new strategies to improve its condition instead it emphasized on strengthening its success areas. In the year 2011-2012, the organization had adopted “attack/protect” strategy to for expanding its business of PC in China and also increases its share with the workstations and servers. This strategy helped the organization to expand using the retail or SMB channels. Using this strategy the organization grew the presence of its mobile globally and drove the convergence with attractive apps, cloud services and also emerged in the emerging markets by 10% share through emphasis on consumers or SMB. In the year 2012-13, the organization decided to operate its business using the same strategy and supplementing the strategy with “PC+” strategy which means to expand its business focus from its key business areas to different technology areas like digital home and mobile internet(csis.org 2013).
The organization is performing very well in the market with continuous rise in the sales growth even though it has faced loss in the year 2008-09. International acquisition has become one of the most growing trends in the MNCs of China. This process is supported positively by the government of China. However this process sometimes creates cultural issues that end in business failure. Due to such disadvantages Lenovo emphasized on following conservative and cautious approach while absorbing the PC business of IBM.
Other advantages like building a strong market base in China, its capability to enter the emerging market, cost-innovation strategy and its strong process in the mature markets and cost-innovative business strategy. There is negligible role of Government in the competitiveness of strategy of Lenovo. However the organization still enjoys positive treatment from the government of China due to their success stories in Chinese Market.
Other advantage that the organization faced in the competitive market is their cost-innovative strategy. As per the opinion of Zeng and Williamson, the cost-innovation is referred to selling products with high technology at low-cost (Zeng and Williamson 2003). Lenovo emphasizes on R&D and Low-cost design and manufacturing utilizing their contract and own manufacturers and also low-cost administration and engineering. The proximity and cost-innovation of Lenovo in manufacturing allowed the organization to emphasize on adaptive and incremental innovation. Adaptive and customization innovation goes well with the organization. When other organizations emphasized on developing the international market, Lenovo focused on their R&D process on China (Biedeger 2005). This helped the organization to come up with new innovation according to the preferences of Chinese consumers.
Another main advantage is the labor cost in China which includes both the designers and the R&D engineers. As per the opinion of Yang Yuanqing, CEO of Lenovo, the labor cost is 2-3% of the overall business cot and the components of computer is 60-70% (Xing 2010). In the year 2010, the organization came up with new plans of building inland factors due to the rising labor costs in west China. The operation center of Lenovo in the Hi-tech zone of Chengdu developed jobs for around 1000 people in the South and Central Asia, Western China and also Europe (prg.asia 2010).
The production modularization has extraordinarily profited Chinese organizations. Being arranged in the heart of the worldwide processing plant permits the Chinese organizations to get to and produce parts at to a great degree high volumes furthermore takes into account customization at scale. For different organizations that likewise have predominant piece of the overall industry in China the consolidation of economies of scale in assembling and solid local deals brings about the establishment of the firm for assaulting the worldwide business (kpmg.com 2012).
An acceptable procedure that adjusts conveying solid transient results with arriving at long haul targets: The Chinese MNCs keep on ensuring that their core business markets in China and worldwide business deals, while assaulting to receive better share in the developing markets, purchaser deals also portable web gadget deals. Surprisingly, Lenovo attacks business like developing markets, mobile and consumer’s markets– conveyed about 50% of their aggregate income and these organizations likewise conveyed enhanced benefit in just about every section. This acceptable method drove solid execution around the world.
Their dedication and interest in innovating different products: Lenovo’s interests in advancements kept on paying off, both in PCs and in products of PC+. These advancements lead to separation that is grasped by clients. For illustration, Lenovo was the agreeable pioneer in characterizing the new “convertible” PC space. Items like Yoga showcased advancement in consolidating the best of PC what’s more tablet structure variables to benefit from the dispatch of Windows 8. They likewise made another classification with their Horizon table PC. This not just caught consideration and numerous prestigious awards, however it exhibits the capacity to drive noteworthy advancement in PCs and make new markets where they can create development and make an authority position.
A diverse and strong worldwide team that outfits the top abilities at both a global level and in key markets helps the Chinese MNCs guarantee that they have an agreeable, profound comprehension of the industry they are in and their clients. For Example, the worldwide local team of Lenovo group is united by the Lenovo Path towards their duty and proprietorship. This imparted set of qualities helps the organization to work with much more prominent velocity, making a reasonable preference.
The productive, end-to-end model of Business: Lenovo has an exceptional, double plan of action, one that serves worldwide, extensive undertaking clients through our relationship model and little to-medium organizations and purchasers through our transaction model. This shows that the Chinese Organization are able to meet the needs of customers– accentuating customization and premium quality in relationship, while conveying velocity, focused estimating and an offset of development and productivity in transactional business process.
From the case of Lenovo described above showed had the it has bolstered it capabilities and credibility by acquisitions, it can also be stated that developing effective distribution strategies help the international vendors with low-cost assembly/manufacturing, sales and also have access to updated technologies that can meet the needs of the customers. With innovative international strategy using the localization process proved that the Chinese MNCs are can even develop strong brand recognition in the mature market.
An alternate lesson that can be learnt is that the association can be inventive without leap forward advances; Lenovo does not rely on upon achievement innovations but instead on affectability to the right advances for the business sector. In spite of the fact that the Chinese organizations are frequently censured for being versatile instead of imaginative, this course has functioned admirably for the Lenovo. Versatile and Incremental advancement implies that Lenovo has not made the essential erroneous conclusion that development needs to mean expanded complexity.
In conclusion, it can said that the business environment of the Chinese companies have changed a lot. The use of local-knowledge for developing international strategies is helping the organizations to build up better brand awareness and also increase the loyalty base of the customers. The strong focus on the R& D of the local market to meet the needs of the local people also makes the MNCs of Chine more creative and competitive. The support of government and also the tax authorities have given the organization to invest and develop their own technologies and also conduct better R&D to preserve intangible assets and also line up with the needs of the Chinese customers. The report has analyzed the organization structure and business process of Lenovo to understand the Chinese MNCs strategies in the competitive market. It is observed that use of innovative and adaptive strategies makes the Chinese MNCs more competitive. Even the support from the government creates the companies stronger. It is found that Lenovo’s constant exertions to improve scope of SMB also purchaser sections empowered it to further grow its lead in China. Through better utilization of its business administration framework for relationship business, the Group enhanced client account advancement and had the capacity extend its impart of the extensive undertaking section.
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