Global Management Of Business By Lenovo – Acquisition Of IBM

Literature Review

The topic illustrates about the management of business globally by the business organization Lenovo. The globalization of Lenovo is possible with the acquisition of IBM, where all the PC operations have been sold to Lenovo for an amount of $1.75 billion. IBM has over 2400 employees in the US and there are more than 4000 manufacturing departments and 3600 centres for sales and distribution all over the world. Lenovo promised its employees that it would create a global workforce for delivering products and services in large numbers to every part of the world with ease and effectiveness (Ball et al. 2012). 

Lenovo is one of the reputed computer Peripherals Manufacturing Company, and it currently wants to expand its business operations through the acquisition of IBM. The acquisition has leaded the company to become the third biggest computer manufacturing company. By taking over IBM, the company has managed to hold a strong position and created a good brand image and further has focused on taking over Motorola Mobility as well (Chaney and Martin 2014).

The computer and IT based market within which Lenovo operates is highly volatile and change from time to time. Thus, it is essential for the company to cope up with the changing needs of the markets and offer a wide range of products, which can allow it to stay afloat and gain sustainability (Clarke, Tamaschke and Liesch 2013).  

Lenovo has managed to differentiate and innovate its products in a consistent manner for keeping up the with the pace and deliver expertise in the form of smart phones, laptops, desktop computers, servers and other computer peripherals (Ferreira et al. 2014). 

The brand value and price have been balanced properly through competitive pricing strategy by keeping the prices of products low sometimes, though by risking the brand image and brand positioning. The cost plus pricing technique has added a fixed markup to the products, thus placing the most popular and leading products, i.e., Lenovo laptops on the pricing front (Folsom et al. 2012).

Lenovo delivers its products to the customers through exclusive brand showrooms and other multiple brand stores. There are retail industries, which offer the products of Lenovo along with various e-commerce chains. The products of Lenovo are also sold through modern retail and online channels, which creates good chances to expand all over the world (Griffin and Pustay 2012). Lenovo now has huge numbers of stores in more than 160 countries.

Promotion

The extensive customers’ services also create good relationship and make them aware of the new offerings of Lenovo (Hamilton and Webster 2015). The ATL and BTL mediums are commonly used by Lenovo to manage the promotions and advertising and finally deliver its product and services to the end consumers.

The market scanning helps in identifying the major factors, which can create an impact on the business. One of the major tools for environmental scanning of market is the SWOT analysis. Lenovo has allocated its resources properly to conduct environmental scanning and determine competition in the market, economics, technology, legal issues that may be faced and demographic factors that can contribute to the market efficiency (Hill, Cronk and Wickramasekera 2013).The economics of the market helps in evaluating the latest trends, the power of buyers and strengths of the company (Lenovo.com 2017).

The STP model represents the segmentation, targeting and positioning, which is an effective strategic approach in marketing. The STP model has been used by Lenovo to

Marketing Mix Model

Segment its products within the different marketing areas.

Target individual market segments comprising of customers.

Position its products properly, so that those can be differentiable from the products of other companies (Cavusgilet al. 2014).

To start an international business and enter new markets, it is important to launch a new and wide range of products by understanding the various forces that can influence the making of choices (Meyer and Peng 2016). 

The market entry mode strategy is followed by Lenovo to deliver products and services to the new market, which has been targeted in the global business environment. The best entry mode strategies to enter the global market are exporting, licensing, franchising, joint venturing, outsourcing, strategic business alliance and contract manufacturing (Zander, McDougall-Covin and Rose 2015). 

The licensing provides the company with the rights to use intellectual property, work methods, patents, copyrights, trademarks and brand names. A licensed property would include business skills, trademarks, copyrights, patents and technological aspects (Cadogan 2012).

Franchising has allowed the operator to use the trademarks of suppliers and deliver the supplier’s products to the customers. It is similar to licensing, though it provides better control over the franchise. It offers flexibility and allows the franchisee to fixed amount of money and royalty according to the sales.( Armstrong et al. 2015)

Contract manufacturing is another effective strategy, which is used to outsource the manufacturing operations and enter new markets too. Few advantages are reducing the financial risks, focusing on various components of the value chain, etc (Cavusgilet al. 2014). 

Joint ventures is another effective strategy, just as the case of Lenovo and IBM, both of which have shared their ownership and control over the property rights and business operations. It is useful for entering foreign markets with ease and effectiveness. (Lenovo.com 2017) 

The mergers and acquisition are considered effective because of its ability to expand a business and enter global markets (Chaney and Martin 2013). Lenovo has entered foreign markets through the acquisition of IBM, which has increased the power of the market, ensured optimum use of resources and deriving tax benefits as well. 

The outsourcing is another strategy for entering new global market through involvement of contracting within business procedures. The business operations and processes are contracted out of Lenovo to another business such as transfer of employees of Lenovo and IBM from one company to another and management of public services delivered to the private companies (Yüksel 2012). 

The strategic alliance is an agreement formed between two parties for accomplishing a desired set of objectives, though it falls much shorter behind the legal partnership entity, corporate affiliate relationship, etc. (Sinkovics et al 2014). The strategic alliance helps in outsourcing activities and ensures facilitating the transfer of technology, manage shared risks and expenses and ensure growth in economy too (Verbeke 2013).

The acquisition strategy used by Lenovo is considered as a major component for business expansion (Ferreira et al. 2014). Thus, Lenovo decided to expand its business operations and deliver products and services all over the world through the acquisition strategy known as “protect and attack” (Ibm.com 2017).Lenovo has not only embraced the culture of those places where the company has entered the markets but also has created a positive mindset among customers through the creation of value based products at a much lesser price (Griffin and Pustay 2012). During the expansion, Lenovo has faced several issues related to operating loss, lack of investments, etc. (Hamilton and Webster 2015). The outsourcing activities were managed properly, and the exporting of products further helped the company to leverage the expertise of competitors through the acquisition of IBM with ease and effectiveness (Hill, Cronk and Wickramasekera 2013).

• Lenovo has strengthened its position by acquiring IBM within the same industry and created better working conditions with the combining of two companies.
• The advantages of the acquisition include a reduction in costs due to economies of scale, decrease in expenditures through purchase in bulk (com 2017).
• The tax implications of acquisition can be advantageous as well because it reduces the tax liability and results in keeping the company protected from any legal issues (Johnson et al. 2013).
• The costs get reduced with the economies of scale. This results in reducing the expenses by making purchases in bulk amount and enhances the production level.
• The acquisition also helps in expanding the market reach, attract more customers and influence their buying behavior too (Griffin and Pustay 2012). A profitable company like Lenovo can even reduce the tax liabilities by acquiring a less profitable company operating within the same industry.

• In spite of the benefits of the acquisition, there are few drawbacks as well such as limiting the sort of exposure and might even make the company sell shares, though exempting from adverse legal actions.
• The acquirer might need to pay a large amount of money while taking over the bid, though value could not be added, just as it happened with the IBM managers, engineers, sales persons, etc. after the acquisition (Meyer and Peng 2016).
• The lack of diversification can further result in creating issues to manage the resources and competency level.
• With the acquisition, Lenovo can expand its market reach though it can be difficult sometimes to understand the various market segments properly and identify the preferences of customers.
• There could be issues faced when the laws impose limits on the process.
• The due diligence can result due to this and furthermore create limitation for the sort of exposure and create exemption from the adverse legal activities too (Cavusgil et al. 2014).
• There will be unrelated diversification, which could create problems for proper management of competences and resources.
• Too much managerial focus also is detrimental to the internal development of the organization.

STP Model

Conclusion

The topic illustrated about the various aspects of international business and approaches followed by Lenovo to IBM for expanding business globally. Here the Institutions hypothesis theory, international trade theory had been illustrated along with the research on the market. The market research was done with the help of marketing mix model for identifying the products, price, place and promotion whereas the scanning of market had been done by using STP model, 3i model, PESTLE and SWOT analysis.

• It is recommended to use the right kind of positioning strategy by Lenovo.
• It is important for the company to enable appropriate customers’ services for improving the trust and loyalty among the customers.
• The products are needed to be renovated for making customer satisfied and allow them to keep up pace with the other competitors in business. 

In order to manage International Business it is important to procure, motivate, retain and utilize services of people at the corporate level and foreign office. The proper utilization of human resources include procuring, allocation and management of workforce in an international business, is referred to as the international human resource management (Cavusgil et al. 2014).

The ethnocentric staffing approach has enabled the creation of major positions in foreign subsidiaries with emigrants from the home country of Lenovo, China (Mimiko 2012).

The polycentric staffing approach has been used by Lenovo to hire the host country nationals for various positions within the company. (Hill, Cronk and Wickramasekera 2013) 

The regiocentric approach allows the employees of Lenovo to get grouped into various regions outside China and work as an unit by gaining a proper level of autonomy from its headquarters (Preston and Windsor 2013).  

This approach allows separating between own self and others. The egocentric approach of staffing allows the individuals to think themselves as centre of attraction, though is not considered as admirable due to own sense of admiration and self belief.. (Lenovo.com 2017) 

Lenovo has followed the geocentric approach to recruit the most efficient and skillful workers.

• This staffing approach are development of large numbers of senior executives with international experiences, reduction in resentment and shared learning, which allows each other to learn their experiences and skills(Johnson et al. 2013).
• The recruitment of individuals for managing global expansion. Here the large sized organizations like Lenovo has hired the most skillful and knowledgeable workers for the suitable job, without making any consideration of their nationality.
• The whole world consists of many business organizations, which have a large pool of talented and skilful workers and have been appointed for their job irrespective of their nationality or origin (com 2017).
• This is effective for managing global business expansion through maintenance of global business strategies as well.
• This has helped in developing a pool of highly skillful workers who have international experiences and contacts all across the borders.
• The manager also holds good knowledge and expertise and thus he can easily accomplish the business objectives.

• High cost of training; highly skillful centralized control is required along with lack of security sometimes. It is also costly and time consuming.
• The training, compensation and to relocate employees from one place to another have incurred a huge amount of cost for Lenovo (Martin 2013).
• A centralized control system of staffing is required and the lacks of security to select the right kind of employees are major drawbacks too.
• This recruitment process is costly because the candidates who are hired by Lenovo are needed to be skillful and knowledge regarding global reach and expansion, which is a disadvantage as well (com 2017).
• Corporate cultureis the combination of values, beliefs and behaviors, which can allow the employees of an organization and management to interact and handle the business transactions. A corporate culture helps in defining and developing employees from time to time and manages business operations and processes in an effective way (Huang et al. 2012). 

The different dimensions of this theory are Power Distance index, Individualism VS Collectivism, Uncertainty Avoidance Index, Masculinity VS Felinity, Lang term Orientation VS Shot Term Orientation and Indulgence VS Restraint. (Griffin and Pustay 2012).Lenovo has managed to establish a good culture where people can work together and perform to their potential within good working conditions for enhancing the organizational efficiency (Lenovo.com 2017).  

The PDI shows the level and capacity of society members to accept the power and then distribute it in an unequal manner. The society with low power distance allows people to manage equality of distribution of power and want justification for power inequalities. (Hill, Cronk and Wickramasekera 2013) 

The individualism refers to the closely bound social model or framework, which allows people to take care of themselves only. Here the self-image of people is defined as I or we (Ball et al. 2012). Lenovo has created a good brand image, which has allowed gaining self-respect and increasing the customer base. 

The Masculinity dimension shows the preferences within society to gain accomplishment, commit work of heroism, assertiveness gain rewards for success. The femininity represents poor quality of life, modesty, etc. The employees of Lenovo are treated equally, they have been provided with enough opportunities to gain rewards, and this can encourage them to perform better. (Johnson et al. 2013) 

UAI shows the members are within the society feel uncomfortable or embarrassed with certain ambiguities (Cadogan 2012). There can be situations when the customers’s needs are not fulfilled and in such cases, Lenovo must obtain their feedbacks and deliver products and services accordingly.

PESTEL Analysis of Lenovo

The society members have some link with the past and that can help to handle issues both at present and future. Here the concept of Monumentalism versus Flexhumilityalso comes into place. The previous products are needed to be innovated with inclusion of additional features for making the products attractive and value for money for the consumers. (Lenovo.com 2017) 

The IND represents the basis human factors that are responsible for having a enjoyable life and carry out fun and frolic activities. Lenovo has maintained positive image by delivering products, which have fulfilled the expectations of consumers (Armstrong et al. 2015). The employees have followed various rules and regulations of company and kept aligned with the organizational goals to deliver enhanced quality products and services to customers.

Hall’s cultural context of Lenovo helps employees to understand the rules and regulations properly and create a good culture within the organization. The high culture enabled valuing the traditions, cerate long lasting relationship with customer and is mainly done through communication by voice, oral expressions, body languages, etc (Johnson et al. 2013). The low context culture needed explicit and direct communication and need various data and information in the messages, which can allow the organization to change quickly (Lenovo.com 2017).

Cultural diversity training can help in increasing the sales revenue and profit level through gaining of more customers. The cultural diversity training has been provided by Lenovo for enhancing the knowledge, skills and techniques’ efficiency to help the team members behave properly. This can lead to sustaining changes and create a diverse, respectful and productive organization (Lenovo.com 2017). Thus, the cultural diversity training of Lenovo has helped in fulfilling the demands and preferences of customers and allowed the company to sustain in the working environment. 

Conclusions

The various theories, concepts related to the international trade and associated political, economic, social, technological, legal and environmental factors had been illustrated in this report. The various modes of engagement and strategic frameworks applied for managing international institutional trade along with SWOT analysis, PESTEL analysis was also included here. The acquisition strategy used by Lenovo to enter new global markets, its advantages and disadvantages are considered as other major components of the report.

• It is recommended to create a list of all the costs that the international business project may need and then measure it according to the potential gain.
• Feasibility analysis is recommended for determining whether the international business project will be able to gain the proper amount of profit or not.
• It is also recommended to manage proper communication between Lenovo and IBM for avoiding the language and cultural barriers
• To enter a new global market, understanding the needs of market and development of a collaborative approach is recommended as well. 

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