Case studies and concepts: Lenovo

Growth is a topic that can be used as the focus for all 6 business management concepts:

• Change
• Culture
• Ethics
• Globalisation
• Innovation
• Strategy

As a result, it will be useful for students to select a case study that relates to growth, as this can satisfy many questions set on Paper 2, section C. Given the broad nature of possible questions, it will be beneficial for students to research large multinational concerns to illustrate, and support, an answer to a concept based question.

High technology businesses, such as Apple, Samsung, Huawei and Lenovo, offer opportunities to consider all 6 concepts within a single organisation.

Lenovo background

Lenovo is a Chinese computer company, which acquired in 2005 the larger, but unprofitable, personal computer division of IBM for US$1.75 billion. IBM had made the strategic decision to focus on software applications and service support, rather than manufacturing computer hardware and was looking for a purchaser for its loss making PC division. For Lenovo, the acquisition represented a quick method of expansion using IBM’s established and respected product range.

Culture

The acquisition process was difficult for Lenovo as its management lacked experience and operated in a culture rooted in traditional Chinese norms and values. The negotiating team sent to the US to conclude the acquisition only contained one member able to speak English and none had operated outside Chinese-speaking Asia. Following the acquisition, the Chinese board and the US management team soon discovered they did not understand each other and decision-making  was fraught with cultural misunderstandings. For example, American managers were prepared to question their superiors’ decisions, but the Chinese staff normally deferred to senior managers and carried out what a “great boss” had commanded.

In 2005, William J. Amelio, who had run that Dell Inc’s operations in Asia, stepped in as CEO bringing many Dell people with him. He tried to impose ‘the Dell way’ of operating the company, but after global financial shocks put Lenovo into a loss-making position, he stepped down. As he left the business, he publicly complained about the company’s “yes, yes, yes” culture. However, by 2010, most of the cultural differences had been addressed and the Chinese managers had acquired the skills required to run a multinational company.

Globalisation

Cash-rich Chinese companies are currently engaged in a wave of global mergers and acquisitions, particularly in entertainment, agriculture, real estate, energy, and automobiles. Lenovo has emerged as China’s first true multinational, and has surpassed Hewlett-Packard and Dell to become the world’s largest maker of PCs.

Lenovo is publicly listed in Hong Kong, with an international board operating on the basis of established global management principles. Lenovo has dual headquarters. Alongside its main Beijing base, it runs some business functions from North Carolina, the former IBM headquarters. The company’s top management committee consists of nine people from six different countries, who all have extensive international experience. It  has developed human resources practices that apply uniformly regardless of market (including China). Pay scales have been standardised as well and there is little difference in working for Lenovo in China or Switzerland or the United States.

Strategy

Lenovo’s strategic goal now is to compete against two of the world’s most innovative companies in the Internet era: Apple and Samsung Electronics, which dominate the markets for smartphones and handheld connected devices.

In January 2009, Lenovo outlined a ‘protect and attack’ strategy to allow the company to build on its strong base in China and the United States, while penetrating new markets and new product areas, such as smartphones and related devices. “The ‘protect and attack’ strategy got all 30,000 employees on the same page,” recalls Gerry P. Smith, who had formerly run Dell’s display business in Singapore before joining Lenovo in 2006.

Innovation

Unlike many other Chinese technology companies, Lenovo has begun to compete on the basis of innovation, not just price. Its products, include cutting-edge design and the firm invests heavily in research and development. The result has been a blitz of innovative new laptops, tablets, phones, and other products. In the industry’s ongoing pursuit of thinner, lighter, and faster products, it manufactures super-light, carbon-fibre laptop bodies; its 14-inch screen ThinkPad weighs in at less than three pounds.

The company is an early adopter of “convertible” product, such as its Yoga Ultrabook. This netbook can be folded into different positions allowing it to function as a conventional laptop, a tablet, a viewing screen to watch videos and a demonstration panel.

Ethics

Lenovo’s Ethics and Compliance Program promotes an ethical organisational culture. They do not tolerate discrimination or harassment based on race, colour, religion, gender, gender identity or expression, national origin, ethnicity, sexual orientation, sex, age or disability. Its management promotes diversity in its workforce, and in the organisations with which they do business.

Having examined issues related to the 6 concepts, students should be able to relate these concepts to functional areas such as Marketing. These details could be used for an internal assessment or extended essay

Marketing

Lenovo says it spends approximately $500 million a year on marketing, dwarfing the spending of any other Chinese company. For example, Lenovo sponsored the 2008 Olympic Games in Beijing. This investment has worked; in 2014, research showed that Lenovo was, at 26.3% awareness, ranked fourth in the minds of U.S. shoppers. The Chinese government wants its firms to buy or nurture brands abroad, as the country looks for ways to diversify its economy beyond cheap manufacturing.  As the company moved into mobile products, such as tablets, it realised it needed to be more focused on creating closer relationship with its consumers, particularly its youth audience.

Adapted from:

• Strategy + Business
• Lenovo website
• WSJ