The core competency of an organization depends on the accomplishments of the customers’ satisfactory needs. The business level strategies are formulated to achieve such purpose. However, before undertaking any strategic decision, it is necessary to identify the basic needs and demands of the customers (Li-Hua 2014). The strategic detailed actions are generally undertaken to ensure the achievement of the competitive advantage. The exploitation of the core competency level is the major focus for achieving the competitive advantage. It has been noticed that the diversity business generally concentrates on the two major business units, such as competitive unit and corporate unit (Breznik and Lahovnik 2014). Similarly, the study will explore the multiple business unit of Lenovo, which is considered as the world’s best PC maker with the range of electronic products like laptops, mobile, and desktops.
The study will identify the range of products and services offered by the company. The relationship between these business units will be discussed in this study. Lenovo is sustaining the business position by undertaking the sustainable competitive advantage (Jennings, Seo and Soliman 2015). The study will thus discuss the factors that drive the company towards sustainable growth in the international ground. Furthermore, the revenue centers will be identified and the revenue table of each business unit will be explained. The research paper will also analyze the diversification extent of the corporation. In order to understand the business positioning and potentiality, the external and internal market analysis will be presented through SWOT and PESTLE analytical tool. Depending on the outcome of the study, the preferable recommendation will be provided for the future growth of the company.
Lenovo offers the useful and unparalleled technological leadership that helps people to use the mobile devices from different places (Gellert 2016). The company is much concerned about the business performance and the activities are controlled from the data center. Lenovo has captured the leading position among the electronic gadget manufacturing industry. The ecosystem based technologies are quite challenging for the fast-evolving commercial environments. It is much necessary to establish the long-term favorable market for ensuring the competitive position in current industry. High-end profits are more than the low-end products. The business is much inclined towards craving for innovation (J. Contractor 2013). The core objective of World Trade Organization has been the restructuration of the liberation of trade in order to sustain the collective global growth. The global diversity has shaped the strategies of Lenovo as the organization required to take action considering the fast changing technological atmosphere. Apart from craving for the innovative features, the company even seeks value proposition and global client base. Delivering value throughout the life cycle is the major focus of the company. The company has added the following features in the products of the brand:
1) The storage capacity and memory is increased with the similar competitive price.
2) The device has the built in value loaded with intuitive management tools and advanced features (Solutions.lenovo.com 2017).
3) The device is designed for performing with full capacity even in the shortage of space.
4) The reliability and efficiency is loaded in a compact tower.
5) In order to manage the performance for large workloads, the performance commands are present.
6) The workload can be transformed from Infrastructure to Big Data.
7) The devices are Resilient, Agile, and Fast.
8) The next generation of the dense computing level is also visible.
Currently, the company has decided to increase the business unit groups for ensuring the sustainable business growth in the competitive market. It has been observed, the world’s top PC maker, Lenovo has decided to respond in a better way to the market demands and situations. Considering such needs, the company has decided to divide the business units into four different fragments that define the market segments. According to Hashai and Buckley (2014), the major reason for such reorganization of the business units is to grow the importance of the ultra-mobile product lines. The company is much dedicated towards selecting the better product line for serving the competitive market even though the synergy exists in today’s world (Lin 2014). The Four Business Units of Lenovo are discussed further:
The PC Business Group unit is led by Gianfranco Lanci and this business unit will continue selling PC. This business unit pays attention towards valuing both the advanced technologies and traditional users of the machines linked with Think Brands (Lenovo.com 2017).
Liu Jun, the leader of Lenovo Business Group, leads this Mobile Business Group. The major focus of this business unit is to ensure the profitable global position of the company in the markets of tablets and smart-phones (Lenovo.com 2017). The business unit is also focusing on developing the Smart TV business under the brand of Lenovo.
The leader of Lenovo’s Americas Group, Gerry Smith is leading this Enterprise business unit. The major concentration of this business unit is to ensure the aggressive business marketing and build the innovative and fast growing business engines. The business unit specifies that the business engine should be much profitable that can already have the excellent foundation (Lenovo.com 2017). If an economically strong company is considered, it acquires a distressed one; therefore the outcome of the merger can experience a tangible increase in the market share. The new organization is generally competitive and cost efficient than the other economically weak organization. These processes can take place in various situations such as when a company wants to make the presence felt in the new market place. The current acquisition of IBM’s x86 server business has been representing this business unit that would be later integrated into Mr. Smith’s Organisation (Singh 2015).
George, the senior vice president of Lenovo is leading this business unit. Currently, George is appointed as the Chief Technology Officer in Lenovo. The business unit has set the goal to continue the establishment of the ecosystem of China market (Lenovo.com 2017). It also drives towards the strategy of ecosystem expansion and monetization.
These business units of Lenovo are directly linked to the organisational performance and functionalities. These business units have the direct linking with the business functionalities. It can be stated that the business functionalities are divided as per the structured maintenance of the different units. However, in order to carry out the market research, it is essential to provide the overview of the business units in relation to the organisational functionality.
The business units of Lenovo are designed to fulfill the segments mentioned in the above diagram. The involvement of the innovative procedures is necessary to facilitate the business growth for the future. Simultaneously, the business needs to keep the focus on the basic needs and demands of the customers (Wei, Samiee and Lee 2014). Besides fulfilling the demands of the customers, it is also necessary for the company to pay attention towards the business strategy development. The strategic approach of the company needs to consider the focus on the market segments for the future sustainability (Palmer, Wright and Powers 2015). Use of the innovative products is not the only way to achieve success. The development of the business strategy and monitoring the progress reports would lead the company towards accomplishing the determined goals.
The modifications in the business units are much helpful for the future sustainability of Lenovo in a competitive market. The establishment of the competitive position is not an easier process. The company needs to signify some of the specific market research that can be beneficial in managing the entire functionalities (Kotabe and Kothari 2016). Accordingly, implementation of such strategic goals would lead the organisation towards achieving the competitive advantage. If the output of the production rises, therefore there can be opportunities of coming down the cost of the unit per production (Yuan and Pangarkar 2015). Another reasonable benefit of the merger acquisition method is the significant increase in the market share of the company. Similarly, Lenovo has also paid the attention towards the source of competitive advantages by adjusting the focus strategies and business procedures. The sources of Lenovo’s competitive advantages are explained further:
According to Li-Hua (2014), selection of the target market is one of the most crucial part of business strategies. Customers are the major assets of the company. The profitability of the company depends on the attitudes of the customers. If the products are not acceptable to the market or the customers, it would be much difficult for the company to strengthen the organisational position. Therefore, it is essential to select the target market more wisely. Lenovo is thus considering few factors before selecting the target market for the company products and services.
The market positioning of Lenovo is based on several factors. For example, it mainly focuses on high-end and middle and high-end combination of the Lenovo market position. The company is even much concerned about creating the significant image of the brand on the customers’ minds. It has been noted that the current profit decline status of the computer industry is the only medium to establish the high-end positioning (Pun 2013). It is much necessary to establish the long-term favorable market for ensuring the competitive position in current industry. High-end profits are more than the low-end products. When the cost rises, there is no guarantee of deriving profits from the low-end products (Ju et al. 2015). In IT industries, the low energy consumptions is not the only major demands of the customers. It is considered as the image of the enterprises that deals with the high-tech equipments. In order to enhance the brand image, it is thus essential for the company to market-leading edge and the low energy consumption technologies. In current situation, it has been noted that the services of Lenovo is only limited to the on-time delivery after selling the products (Xu, Xiao and Tian 2015). The maintenance of the on time delivery process alone cannot meet the needs of the potential customers of the business. In fact, it cannot even secure the competitive edge of the business.
It is stated that the service economy is one of the major sources for achieving competitive advantage. It is suggested that deriving knowledge from the marketing procedure of Dell will be helpful enough in securing the competitive edge in a significant way (Keller 2014). On the other hand, it has also been noticed that the focus of the customers is also frequently changing. The customers are now more concerned about the price and technologies used in the devices. Hence, it is noticed that the market position of Lenovo is completely based on the customers’ demands.
The product strategy ensured by Lenovo is quite similar to the target market and positioning process of the company. The product strategy is mainly focusing on several aspects that are discussed below:
The IT production capacity is gradually increasing due to which the market share is expanding drastically. The price war is also much visible in current world. Lenovo has captured the significant position in this price war. The company has demonstrated a vivid picture of this war in a significant manner. The price strategy of Lenovo is categorized into two major segments, such as differentiation strategy and focus strategy. The differentiation strategy is based on the superiority level of the products delivered by the company. It focuses on the premium prices of the products, comparison with the competitors’ pricing strategy, methods of earning the average profits, and additional barriers to enter the industry (Markman, Gianiodis and Panagopoulos 2016). For a successful business, they are required to be reliable and any organization needs to have multiple suppliers. The company has been planning to bring some of the innovative ideas to strengthen the competitive position in a significant way. The exploitation of the core competency level is the major focus for achieving the competitive advantage (Aharoni 2015). The clients or the consumers are considered to be the most significant ones for any business as the success entirely depends on the satisfaction level of the customers. It focuses on the premium prices of the products, comparison with the competitors’ pricing strategy, methods of earning the average profits, and additional barriers to enter the industry. It is important to mention that Lenovo has purchased the low cost server operations of IBM. The company is still trying to establish the differentiation strategy to ensure the significant value chain analysis process.
On the other hand, the focus strategy is aiming at the market segments for the products that are to be offered to the customers. The major focus strategies of Lenovo are as follows:
The company has developed the cost leadership strategies to share the features of the actual differentiation process. The core competencies of Lenovo are:
These segments are the major sources for the strengthened business position of Lenovo in spite of such fierce competition. The company has been planning to bring some of the innovative ideas to strengthen the competitive position in a significant way. Lenovo is breaking into manufacturing the wearable products. In fact, the company has also paid attention towards enhancing the accessibility of smart phone uses (Breznik and Lahovnik 2014). The exploitation of the core competency level is the major focus for achieving the competitive advantage. The extensive brand awareness and the reputation of the company have created significant impact on the customers’ minds in a significant way.
The products and the service lines of Lenovo are much demanding to the customers. As a result, the company could collect a significant amount of the revenue that is profitable for the business growth in future. The report derived from the third quarter of financial year 2016/2017 highlights that the overall amount of Lenovo revenue has faced the significant growth. The report is presented below:
The above report represents that the PC market of Lenovo helped the company to increase the revenue in a significant manner. In fact, this profit can be used for the future prospects as well. The company will be able to invest more capital resources in bringing innovations in upcoming years. However, it is essential to recognize the potential growth in the revenue in each of the business unit. The segmentation of the revenue in per business unit is presented below.
|
Business Units |
Product Line |
Revenue Collected |
|
1. PC Group |
PC, Tablets, and smart devices |
US$8.6 billion revenue growth. 2% growth per year PCSD business growth 10.2% Pre-tax income US$431 million |
|
2. Mobile Business Group |
Moto and Lenovo Branded Smart phones |
Revenue gathered: US$2.2 billion 23% decreased year-over year 7% increased in last quarter Pre-tax loss margin was 0.6 points |
|
3. Data Center Group |
Storage, server, software, and other services |
Revenue gathered: US$1.1 billion. |
Table 1: Revenue Collected by Lenovo Product line in each business unit
(Source: News.lenovo.com 2017)
The above report indicates that Lenovo could gather more revenues from the PC business. The innovative use of the laptops, tablets, and the smart devices has created the significant impact on the customers’ minds. Majority of the growth in this unit is noticed in North America where the company could increase the shipments by almost 14% year-over-year. It has been noticed that the company could collected the revenue of $15.7 million worldwide and not in North America alone. The strong growth in tablets is much visible in case of the Lenovo brand. However, it has been observed that in the second quarter of the financial year is quite commendable (News.lenovo.com 2017). The revenue is much higher and the pre-tax losses are also reduced in the second quarter of the financial year. After monitoring the steady and significant growth in the PC and tablet devices, the company has decided to extend the PC market and ensure growth in the next quarter. These business units of Lenovo are directly linked to the organisational performance and functionalities. These business units have the direct linking with the business functionalities. It can be stated that the business functionalities are divided as per the structured maintenance of the different units. The initiative requires many innovations to ensure the steady growth in the future as well.
Lenovo, the Chinese Home Computer company has now shifted the focus in promoting the corporate diversification process. The company has been planning to bring some of the innovative ideas to strengthen the competitive position in a significant way. Lenovo is breaking into manufacturing the wearable products. In fact, the company has also paid attention towards enhancing the accessibility of smart phone uses. The exploitation of the core competency level is the major focus for achieving the competitive advantage (Williamson 2013). It has been noticed that the diversity business generally concentrates on the two major business units, such as competitive unit and corporate unit. Even though such decisions are against a shrinking PC market, it can ensure the significant growth as the competitive company in the smart phone industry. The company has been planning to sustain the growth by transforming the mobile devices into all round producer of the IT tools in the industry (Hashai and Buckley 2014). Therefore, the company is much focused towards reinforcing the diversity strategy. The company is paying the attention towards manufacturing the wearable products, like Smart Watch, which is also known as Match View. This product will be launched in the market in next few years.
This wearable device has the virtual screen along with the main screen of showing time. The larger image based on the screen has the optical reflection. It makes the users easy to view the things with almost 20 times resolution of the actual screen. The users can watch photos, view the maps or watch videos as well. In upcoming times, the company is also going to introduce the Smart Shoes that is attached with the embedded LED screens. These shoes will show the total amount of calorie burned and the distance of the travelled places. The users will get the chance to check an itinerary with them with the help of such smart shoes. Another diversified product will be launched by the company is internal high-fidelity projector along with an infrared sensors that is helpful enough in detecting the hand and body movements. It has the capability of projecting the touch screen or a virtual keyboard for editing the illustrations.
It is also noticed that in the upcoming times, Lenovo will introduce the 3D printers for using the smart phones. These developing services can control the smart home electronics as well as the outdoor acoustics systems. The associated semiconductor will decrease the size of the products. Along with this, it will even boost the performance that is further developed. It focuses on the premium prices of the products, comparison with the competitors’ pricing strategy, methods of earning the average profits, and additional barriers to enter the industry. It is important to mention that Lenovo has purchased the low cost server operations of IBM. In addition to this, it has also purchased the Motorola Mobility from Google in the year of 2014. This initiative was considered as the greater achievement for the company in promoting the diversity business.
The overview of the diverse product segments that are going to be launched in upcoming years, it has been noted that the business units are linked with such intuitive. According to Benner and Tushman (2015), related diversification means that a business is ready to expand the product line that are similar to the currently offering products. For example, Lenovo has decided to introduce the innovative wearable and smart shoes that will act like the smart phone. These business units of Lenovo are directly linked to the organisational performance and functionalities. These business units have the direct linking with the business functionalities. It can be stated that the business functionalities are divided as per the structured maintenance of the different units. The smart phone already exists in the product line of the business. Hence the Mobile business group unit is related to this diversification. On the other hand, Attias (2014) defined that the related constrained diversification is focusing on the fewer resources and assets among the business. It generally concentrates on transferring knowledge and competencies among the businesses. Hence, the PC Group Business Units are considered here as the related constrained diversification.
On the contrary, the unrelated diversification is considered as the form of diversification that is completely new to market. These products are penetrating the new market with the innovativeness (Chen 2015). Lenovo is introducing the smart shoes that were never introduced by any company. Hence, this product development will be considered as the unrelated diversification. It has been specified that the Data Group of Business Units falls under this category. Therefore, it is quite cleared that the company has been exploring the innovative software to gather the attention of the customers. Moreover, it will be necessary for the company to monitor the progress and the internal as well as external market evaluation. The focus on the internal and external market would be helpful enough in understanding the business potentiality for sustaining the business in this competitive scenario.
While developing the strategies and objective of a company, it involves a comprehensive analysis of the business environment. The outcomes of external and internal evaluation of the environment help the management to determine the mission and goals of the organization and the strategic alternatives that are available in the specific environment. Therefore, it can be understood that while formulating any strategy the organization needs to make strategic choices aligning with the environmental factors (Glowik 2016). There are three kinds of environments that contribute in shaping the strategic choices of any organization, those are, the general environment or the macro environment that includes the social, economic, political and legal factors; operating environment that includes the market places, regulatory agencies, competitors, consumers and the other stakeholders of the organization; the internal environment which involves the managers, employees, board of directors, union etc (Gebing 2014). The operating environment primarily includes the suppliers, consumers, competitors and the other interest groups in the surroundings. The suppliers are the ones who provide the raw materials and the other necessary elements to the organization. For a successful business, they are required to be reliable and any organization needs to have multiple suppliers. The clients or the consumers are considered to be the most significant ones for any business as the success entirely depends on the satisfaction level of the customers (Attias 2014). However, the competitors and the regulatory agencies are also significant as they may also affect the business therefore; the organization needs to adjust its strategies according to the possible encounters of the competitors.
Lenovo is a Chinese International Computer technology business organization that has headquarters in China, Beijing, USA, North Carolina and Morrisville (www.lenovo.com. 2017). Considering the political environment of the home country of the organization, it can be found that the primary focus of the government of China is to make the scientific industry stronger and bigger. Therefore, the support of the government of the country has enhanced the scientific research and development of the country. This has indicated that Lenovo has thrived in an environment where the internationalization of the business has been favored. Therefore it helped to adjust the targeted vision of Lenovo. However the global business scenario is a lot complicated. It is a manifestation of all the social, political, economic, cultural and technological influences. These factors are interrelated through the globalized factors. The core objective of World Trade Organization has been the restructuration of the liberation of trade in order to sustain the collective global growth. The global diversity has shaped the strategies of Lenovo as the organization required to take action considering the fast changing technological atmosphere. The core strategies of World Trade Organization is to increase the transparency within the business environment and to ease the opportunities of having discussion with the members of WTO, so they in future the international organizations can avoid the trade disputes and further misinterpretations (www.lenovo.com. 2017). This has facilitated Lenovo to expand their business in the large markets of Asia, Australia and Russia. The consistent innovation regulations in the home country have enhanced the productivity of Lenovo.
Initially Lenovo was operating only in China, its home country which resulted in a limited increase in the revenue and sales. However, soon the country has moved to the international market to expand the brand value. In the global market, Lenovo did not have many problems to face because of its takeover policies of some of the renowned names in the industry. However, the global crisis in the economy also affected the brand and the brand was hit in a remarkable way. Therefore, the organization had decided to go back to its root and gain revenues from the bigger Chinese market. In the present scenario, the brand is well accepted in the Chinese market as well as in the International market due to its association with the reputed foreign brands. Lenovo has taken benefit of the economies of scale by setting up its manufacturing unites in the countries such as Argentina, China, Brazil where the organization can get more labors in lower costs (www.lenovo.com. 2017). Therefore, this strategy has helped the brand to stay competitive in the market and avoid any fluctuations in the prices if any kind of economic shocks occur in the global market.
In the global scenario, Lenovo has mostly expanded in the countries where the literacy rates are higher. If the literacy rates are higher, people will need more connectivity and it will also help to increase the parity of the purchasing power. As the brand operates in the high tech business, it is generally directly proportional with the higher literacy rates and advanced social scenarios. However, Lenovo has a challenge to increase its brand value and position the band in the markets where the high technology products have already been saturated. In the markets such as UK, USA or Australia, the brand is more associated with the low price rates (www.lenovo.com. 2017). Therefore it does not seem that the brand has a brighter future in those markets as people are more familiar with other great brands there and find cheaper alternatives.
In this age of modern technological penetration, all the high tech companies are originating new products and continuously updating their previous ones. The organizations who are not being able to do that the basically left behind in the rat race or have been liquidated in the market. Lenovo has been taking care of this as it not only builds its reputation in the quality of products and the distribution of it, the brand also takes care of the innovations so that it can deliver higher quality products in the market (www.lenovo.com. 2017). It is very much necessary as it helps the brand to have a competitive edge in the market.
Lenovo is considered one of the most environment friendly brands in the International market. Most of its operations, starting from the packaging to product are recyclable. Lenovo uses PCC for all its products including smart phones, laptops, tablets, TV etc. The usage of the PCC materials helps Lenovo to save the considerable amount of the natural resources; therefore it can be used over and over again by recycling (www.lenovo.com. 2017). In addition to that Lenovo is now producing the low Halogen contents to make its products more environment-friendly. It has eliminated PVC from most of the products. Lenovo is also known for using energy and water in the most efficient way to preserve the fast depleting resources.
In its home country of Lenovo, there are several laws that protect the rights of the consumers and it prohibits the organizations to sell products of inferior quality. Also the laws of WTO protect the rights of consumers (Peppard and Ward 2016). Therefore, these make a healthy competitive situation in the international market.
In order to get a better understanding of the outlook of the brand, Lenovo, in the corporate marketing, it is necessary to analyze the strength, weakness, opportunity and the threats of the brand. The brand sells desktops, laptops, smart phone and tablets. In 20014, Lenovo had purchased the brand and the business of personal computers ‘Think Pad’ from the famous manufacturing company IBM (www.lenovo.com. 2017). This has marked the international business strategy of Lenovo and indicated that it has established the brand with the help of image localization in USA. In this section, two of the major products of Lenovo, smart phone and laptops will be analyzed with the help of SWOT analysis tool.
The primary strength of the brand is its market share and the present brand image. In the international market, it ranks third in the corporate sales, Hewlett Packard and Dell being the first two. This ranking shows that there has been a tremendous improvement in the brand image because of the better reputation for the higher quality products and the high end laptops that it inherited after merging with IBM. In addition to that, the employees that joined the company from the notebook division of ‘Think pad’ by IBM had provided a relatively valuable experience of the brand that had enhanced Lenovo to become a better player in the foreign market (www.lenovo.com. 2017). This would not have been possible without the experienced employees and the brand would never get the position it has in the corporate market because of its laptops and desktops, especially in the United States market. Nevertheless Lenovo already has a strong base in its home country market, China. It has the market share of twenty nine per cent of the personal computer market of China. After merging with the IBM, Lenovo now has a limited competition in the corporate market due to the existing corporate clients of IBM, existing reputation in the market and the interrelations formed with the transferred employees of IBM. The previously established brand image and the continuous innovation in the market, especially the high end market, have enhanced the creativity factor of the brand. The major strength lies in the ability of having a creating productivity in the high end market which is significant especially for the corporate clients. Lenovo also produces a highly multipurpose notebook product line with the collection of ‘Think Pad’ (www.lenovo.com. 2017). The product lines of Lenovo shows that it mostly covers mid to high range of products. Currently the brand is also supporting the Linux products. As the brand mostly prefers the in house manufacturing, therefore it allows Lenovo to have low marginal costs. Therefore, it leads to have a competitive edge in the market, especially in the price war.
As Lenovo is comparatively new brand in the international scenario, it has numerous weaknesses that can hamper its success in the market. Furthermore it can be understood that the marketing team of Lenovo has far more less knowledge than its other competitors in the market, especially like Dell and HP. In most of the developed nations like US and Australia, the service team of Lenovo is still in its infancy (Scholes et al. 2014). Even if the brand provides one of the most top level of customer service in general, its system is not really optimized. However, the major weakness of the brand is the stigma that is already associated with the Chinese products, especially laptops and smart phones (Tian et al. 2015). Therefore sometimes the brand is considered to be having a lower quality in order to achieve the lower cost. Therefore, the brand should overcome this issue as soon as possible to position itself in the developed markets.
Lenovo has the opportunity to become a power house of the corporate market with its lower marginal costs and a huge range of products. The company can provide the high end executive laptops that have the IBM Think Pad line and at the same time it can provide the high quality yet middle range computers to the other employees in a corporate company. Other than that now the electronics departments also allows the company to create the synergies between the add-ons such as the mobile phones and the PCs (Geszten et al 2015). Lenovo also has a growing potential smart phone market in India and the brand is gradually entering the tablet market in the global scenario.
Generally the less experience in the market and the fluctuating value of the dollar can bring threats to the development of the brand. The competition between other leading companies and Lenovo in the corporate markets had already brought a major challenge to the brand. Not only Dell and HP, Apple is also entering the corporate market and it is showing a steadily developing potency in the corporate scenario. Therefore, Lenovo should address this threat as a serious one so that it can adjust its market strategies to become the dominant global corporate brand. However, the growth rate of the laptop market is not showing any positive hope for the company in the market and due to the lesser experience in the developed nations Lenovo has a almost saturated market of smart phones there (DUBINSKY 2014). Also, due to the rapid change in the technological fields, the company is facing a growing rivalry in every unit of its business. However, it should also be considered the company earns most of its revenues from the selling of hardware products. However, the prices of the hardware products are going to increase very soon due to the continuous rise of the price of raw materials. Therefore this will cut off the profit margin of the company in future.
Merger refers to the procedure of combining two organizations where a new company forms. It also refers to the combination of more than two or two companies where one exists further and the other one generally loses its own existence in the market (Chen 2015). The survivor organization generally obtains both the liabilities and the assets of the other company or the companies. Mostly the buyer company is considered to be the surviving company that retains its own identity and the seller company is generally the one being extinguished. Merger can also be defined as the amalgamation. The merger can also be considered as the fusion of more than two or two companies where all the liabilities, assets and stock of a company are transferred.
The term ‘Acquisition’ refers to the obtaining the ownerships of the property. In the scenario of business acquisition, the term refers to the purchasing of a company by another one for a controlling concern in the share capital of the other company. The methods of acquisition can be affected by several reasons such as the agreement of the people holding most of the interest in the management of the organization such as the board of directors or the other major stakeholders of the company (Chen 2015). However, in order to make a huge take over, the general body of the stakeholders has to agree to the offer.
In the business scenario, downsizing refers to the reduction of the number of employees in the payroll. Some scholars indicate that downsizing is different form a lay off as the procedure of downsizing tends to become a stable downscaling while the layoff tends to become a temporary one. Several business use different techniques for implementing this method that includes offering incentives for taking an early retirement or being transferred to a supplementary organizations (Gaughan 2013). However most of the organization considers terminating an employee as an easier technique. The method of downsizing is primarily justified with the belief that the company needs to operate with lesser numbers of people for its own good.
Merger, acquisition and downsize are global phenomenon that take place all around the world. These methods generally promote the cost efficiency for the organizations. When the parent organization amalgamates with a new and bigger organization, the range of opportunities of the new company tends to increase to a great extent. If the output of the production rises, therefore there can be opportunities of coming down the cost of the unit per production. Another reasonable benefit of the merger acquisition method is the significant increase in the market share of the company. If an economically strong company is considered, it acquires a distressed one; therefore the outcome of the merger can experience a tangible increase in the market share. The new organization is generally competitive and cost efficient than the other economically weak organization (Chen 2015). These processes can take place in various situations such as when a company wants to make the presence felt in the new market place; or when a particular organization needs to make some administrative benefits from the market; or when an organization is supposed to introduce new products that are developed by the R&D section of the organization (Gaughan 2013). However the company has to ensure the employees are benefitted from the methods. Even if in downsizing the company generally terminates the employee, the organization is supposed to provide the amount of compensation to the employee. However, the expenses that are accumulating form the employee benefit program might not reflect in the balance sheet of the company. The income schemes after retirement and the employee benefit plans tend to vary from organization to organization. Also the companies that are going for the acquisition or merger, it needs to iron the internal differences out for maintain the specific point of employee satisfaction.
Merger, acquisition and downsizing can sometimes be necessary for the further growth of the firm. Therefore, Lenovo also needs to apply these strategies and adopt them in future. However, in the past the brand had merged with IBM and taken up their ‘Think Pad’ line u to develop its own laptop series. In future, for any further merger, acquisitions or downsizing, Lenovo should remind few things, such as;
The graph shows that how the trend of merger and acquisition of the Chinese market, which is the home country of Lenovo, has developed. Therefore the company should also improve its own strategies to have a financial gain in the market. However, it can be said that as the smart phone business of the flourishing currently, the brand should merge with lesser known or smaller companies especially in the Asian market.
Conclusion
The study explores the competitive and marketing strategy undertaken by Lenovo, the world’s top PC selling company. Lenovo has captured the leading position among the electronic gadget manufacturing industry. The ecosystem based technologies are quite challenging for the fast-evolving commercial environments. The business is much inclined towards craving for innovation. When the cost rises, the deriving profits from the low-end products become less guaranteed. In IT industries, the low energy consumptions is not the only major demands of the customers. It is considered as the image of the enterprises that deals with the high-tech equipments. The outcomes of external and internal evaluation of the environment help the management to determine the mission and goals of the organization and the strategic alternatives that are available in the specific environment. The merger and acquisition with IBM is quite significant for the company to enhance the brand awareness. However, concentrating widely on the product diversifications and target market segments, the company can earn more revenues in upcoming years. It is even noticed that if the other company has a well structured distribution channel, it will be beneficial for the company to manage the overall supply chain process. However, in such cases, the growth of the revenues is needed to be monitored. Accordingly, the company would be able to ensure the sustainable growth in the future.
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