Lenovo Group Limited is a Chinese transnational computer hardware and electronics business. Its functional headquarters are situated in Morrisville, North Carolina, United states of america and its listed office is Hong Kong. It produces pcs, tablet computers, cell phones, workstations, web servers, electronic storage space devices, THIS management software and smart tvs. Lenovo has operations much more than 70 countries and sells usana products in around 160 countries. Lenovo was founded in Beijing in 1984 and included in Hong Kong in 1988 under its prior name, Story.
Lenovo is listed on the Hong Kong Stock market and is chosen as aconstituent stock with the Hang Seng China-Affiliated Organizations Index. Inside the 1980s, when market reforms were in progress, the Chinese government employed Liu Chuanzhi to distribute imported computer systems. In 1984, Liu founded Lenovo using a group of five engineers and 200, 500 yuan in Beijing.
Their very own first significant effort to import televisions was failed. The group could rebuild itself within a year by carrying out top quality checks about computers for brand spanking new buyers.
Shortly later, Lenovo started out developing a circuit board that might allow IBM-compatible personal computers to process China characters. This device was Lenovo’s first main success. Lenovo started to manufacture and launch computers tagging its own name brand in 1990. In 1996, Lenovo’s market share went up to the first place in China, and it launched its initially PC. After that, it produced rapidly and in 2000 it has become a ingredient of the Hold Seng China-Affiliated Corporations Index.
However , Lenovo’s diversification approach and the competition with the laptop manufacturers around the globe made Lenovo to loss position. In 2003, three business lines which include cellular phone, IT as well as the internet unit lost above hundred mil Hong Kong buck. Even in the line of the PC, the most profitable unit of Lenovo, it should contend with the DELL and HEWLETT PACKARD. The fact which the global industry made DELL stronger prompted Lenovo to pay attention to its comparison advantages of operational area, the PC and go back to the internationalization tactics.
After eight years, Lenovo became the world’s most significant PC seller in 2012 marketing the ThinkPad line of notebook computers and the ThinkCentre line of desktop computers. Lenovo could success for its long-term concentration on emerging marketplaces and powerful overseas M&As suffering from a decreased profit margin in the LAPTOP OR COMPUTER business and intense tournaments from tablets and smart phones, the company is definitely initiating to diversify their businesses. The most famous M&A case is the merger and purchase of IBM’s LAPTOP OR COMPUTER unit. Actually in early 2k, IBM had already showed its willingness to sell their particular PC product to Lenovo. Why could IBM promote its renowned PC unit?
According to the monetary report posted by the IBM in the year 2004, the PC department lost 397million dollar in 2001, 171 million in 2002, 258 million in 2003, and 139 mil in the initial half of the 2004. For the successive years, IBM was in a lost position. The active pricing strategies of corporations such as Dell, Hewlett-Packard (HP) had a serious impact on the sales of the IBM PC whichmeans, intended for IBM, the PC device is “tasteless. Therefore , APPLE was to keep unprofitable PC market, make in more efforts in the lucrative high-end computers, software and IT services business.
However , the acquisition price in that case is up to 5 billion in US dollar, Lenovo was unable to afford that much. Furthermore, Lenovo performed a major role available in the market of mainland China then, so it don’t accept this proposal. In May 2002, IBM’s CEO Mike Palmisano went to Lenovo to revisit the difficulties of the two sides. Lenovo had then enthusiasm about the setup of diversity strategy, nevertheless also aware about the importance of the internationalization. Therefore, it was feasible for later further negotiations.
Through the end of 2003 to December eight, 2004, this kind of merger ongoing for a complete year. 12 , 8, 2004, Lenovo publicly announced that the acquisition of IBM’s global LAPTOP OR COMPUTER business is usually complete. Lenovo’s acquisition of IBM’s personal computer division accelerated entry to overseas markets although improving both its logos and technology. Lenovo paid out $1. twenty-five billion pertaining to IBM’s computer business, which includes $650 million in funds, 600 , 000, 000 shares and an additional $250 million of IBM’s financial debt.
This obtain made Lenovo the third major computer producer in the world by simply volume in that case. After the acquisition completed, Lenovo wanted to take control IBM’s laptop computer and computer’s desktop businesses and also other related businesses including it is customers, syndication and marketing channels globally. With regard to the purchase of IBM’s personal computer department Liu Chuanzhi said, “We benefited in three ways from your IBM acquisition. We got the ThinkPad company, IBM’s more complex PC manufacturing technology and the company’s worldwide resources, such as its global sales programs and operation teams. These three components have shored up each of our sales earnings in the past a few years.
Besides, Lenovo attained the 5-year-right to use the rand name name of IBM. Buy agreement likewise point the executive prospect: Stephen Keep (the senior manager of IBM) started to be the CEO and plank directors of Lenovo group. Whereas following the M&A, Lenovo faced numerous serious problems such as lifestyle differences plus the integration of human resources, substantial salary costs, supply chain issues plus the financial stress. However , Lenovo eventually resolved the problems and dramatically made it through.
1 . To fix the problem from the large space of the salaries between the
employees from the Lenovo and the employees from the IBM LAPTOP OR COMPUTER Unit, Lenovo decided not to change the salary from the employees of IBM within just 3 years and agreed to change their investment into the stock options of Lenovo. And for the three years of period, Lenovo will certainly adjust and establish a unified and fair salary program. 2 . To resolve the difficulty from the integration of the trademark, Lenovo required at least a five-year-time to kick off an independent and prestigious company. With the contract between Lenovo and APPLE, Lenovo may use the brand name of IBM for five years.
From then on, Lenovo can simply use “ThinkPad and “ThinkCentre. 3. To fix the supply string issues, by the end of the year 2005, Lenovo had invited William T. Amalio to charge the position, the CEO of the Lenovo Group, replacing the former CEO, Stephen D. Ward. Amalio made an excellent effort to optimize and improve the foreign supply sequence system of Lenovo during his tenure. Lenovo started the “Reconstruction job of the supply chain worldwide through developing the facilities of not merely the THAT but the particular efficiency with the supply chains. 4. The financial problems was a enormous obstacle pertaining to the progress of Lenovo which holds seriously negative effects.
When the acquisition is finish, the net revenue of Lenovo decreased substantially from 1092 million Hk dollar in 2005 to 216. 528 million Hk dollar in 2006. And the EPS(Earnings per share) of Lenovo also decreased from 13. 97 HÄSTKRAFTER cents to at least one. 95 HÄSTKRAFTER cents. Loosing revenue was due to the decrease of the market talk about of the IBM PC unit. After every possible works, in 2007, Lenovo has essentially completed the pre-integration in the PC product. And the economic indicators appeared all recovering. The profit of Lenovo increased to 1256. 88 , 000, 000 Hong Kong dollars, and its EPS increase to 14. thirty five in 2007. However , Lenovo should try to get a stable condition just before they had.
In 2008, Lenovo showed the worst economic reports since its acquisition of the IBM PERSONAL COMPUTER unit. The profit was only 23. 3 million dollar which is 78% of decrease in contrast to the profit last year. At Feb, 5, 2009, Lenovo announced a loss of ninety-seven million dollar. And at the same time, Lenovo discovered that it experienced lost the dominant market share in mainland China. Following bearing a very tough time of its own, Lenovo made a right decision during this period of time. Liu’s comeback has to be the most correct one.
Liu adjusted you can actually business ways of maintain an appealing share of domestic product sales and always expand global overseas market segments. Lenovo Groupimmediately reduced the losses completely and finally, attained profitability and got a profit of just one, 009 million Hong Kong money in money year of 2010. Lenovo eventually received survived.
1 ) The important successful factors that are primary of the effective M&A activities 1 . you Synergistic Impact
The important thing of the good M&A circumstance is whether the merging firms and the combined companies can easily complement various other group’s positive aspects and generate one plus1 bigger than two or not. The merging of Lenovo and IBM’s personal-computer department features great synergistic effect in lots of aspects. That made the remarkable positive value in the synergy of businesses, the synergy of division channels, the synergy of the brand and managing and the synergy of financial savings.
1 . a couple of Integrated your resources and resolved the labor price problem effectively At the first-time, there was incredible difference among Lenovo’s and IBM’s recruiting strategies. Difficulties problem was your large wages gap among Lenovo and IBM, the salaries of previous IBM’s employees manufactured great expense expenses. In order to retain the earlier IBM’s personnel and reduce the discontent of Lenovo’s personnel, Lenovo gave itself 3 years of transition period and formed a unified and equitable paying system inside three years. 1 ) 3 Resolved the difficulty of blending two brands
Corporations try to enhance their sales sums and seek out growth of income by producing new products. Plus the co-branding approach is one of the powerful methods to supply a way to create new and profitable goods. Lenovo planned to utilize the well-known brand name of APPLE in order to access to the foreign market therefore increase the income. However , joining two brands caused manufacturer meaning to transfer in unexpected techniques were never intended.
Through signing an agreement to obtain the right which is enable Lenovo to use the brand of IBM for five years, Lenovo could use the buffering a chance to make the global computer users worldwide to recognize the half-new term. In 2011, Lenovo took over the Acer to become the world third largest LAPTOP OR COMPUTER supplier globally. We can see that Lenovo provides gradually created its reputation in the foreign market all over the world so far.
1 . 4 Well-designed corporate managing plan
After the obtain, Lenovo skilled a tough time in transition, with serious financial hardship and plummeting the price of stock. To be able to resolve these kinds of problems, Chuanzhi Liu designed an accurate system with two steps toward make Lenovo achieve success inside the acquisition. Due the appropriate action, Lenovo could ultimately break the stalemate and achieve outstanding success in profit once again in 2010 since it shows listed below.
Net incomeï¼ˆmillion HKDï¼‰
1 . 44
The profit index of Lenovo in 2009, 2010
2 . The summary of lessons learned which built the factors successful 2 . 1 Synergistic Effect
There are several synergistic effects in the case of Lenovo M&A IBM PERSONAL COMPUTER department. Matching IBM’s and Lenovo’s advantages, Lenovo can increase their market share and the revenue, reduce the cost and finally manage the firm to work in full operation. Firstly, one of key traveling forces for the powerful M&A was that IBM has already penetrated a global large enterprises’ market while Lenovo have got relatively the small enterprises’ marketplace in terms of scope of their actions and the consumers’ market.
Yet , after the blend with APPLE PC section, Lenovoexpands its business share thus enhances the bottom line. Secondly, it was the synergy of distribution funnel. Lenovo has a internationalization technique that “Attracting-In and “Walking-Out while IBM which is a globally mature large entity has tones of successful division channels all over the map and the corresponding sales teams and managing organizations. By merging IBM’s COMPUTER department, Lenovo is able to combine the home-based and international distribution programs and this gains the international marketplace at a comparatively cheaper cost. At the third place, the synergy of the trademark and supervision.
After merging, Lenovo techniques IBM’s BELIEVE series brand and their us patents, two R&D centers and retention of the previous IBM’s top exec board. Lenovo maintains the competitive benefits of IBM’s PLAYSTATION department, the main R&D as well as the product development capability. In the forth place, the synergy of expense saving. Lenovo did not include competitive advantages regarding of invention pattern and the the usage of the whole industry chain. After blending, Lenovo minimize IBM’s money-consuming outsourcing businesses, and then boost its source chain.
Consequently, save a lot of cost. installment payments on your 2 Included the human methods and fixed the labor cost problem successfully To start with, there was an immense big difference in their strategies between two companies. Lenovo paid attention solely inside the internal schooling among competent and exceptional people whilst IBM’s training mechanism was far improved. Lenovo hires employees in line with the degree of saying yes its corporate and business culture while IBM is targeted on morality. One of the most practical issue seemed to be the expense of labour.
The quantity wages of IBM’s personnel was much larger than Lenovo’s. IBM’s employees enjoyed wages about seven times much more than Lenovo’s among the list of same level positions. Lenovo determined to stay to the income level of the prior IBM’s executives within three years and also all their IBM’s commodity exchange to Lenovo’s inside the same quantity. In 3 years, they little by little prepared to contact form an integrated salaries system. In which case, Lenovo retained the IBM previous specialists and the top executive group which are certainly crucial possessions for Lenovo. 2 . several Resolved the issue of blending together two brands
IBM’s company value is fairly influential and stable, maintaining its name benefit at top three to get 6 years (2001 to 2006) whilst Lenovo did not gain much global reputation ahead of the merging. To keep the
competitiveness of IBM’s global PC business and decide the problems of blending two brands within a steady point out, Lenovo and IBM got in terms that Lenovo would be able to use the trademark of IBM in five years, following five years, Lenovo can easily us ThinkPad and ThinkCentre. Hence, the co-branding strategy for Lenovo to merge with IBM’s LAPTOP OR COMPUTER department was quite productive which would not hurt IBM’s reputation and through the buffer time, Lenovo are able to maximize its reputation worldwide with the brand of APPLE, after five years, Lenovo earned a unique reputation. installment payments on your 4 Practical corporate administration plan
Lenovo has made a pivotal supervision plan after M&A strived to unravel the monetary difficulties.
THE FIRST STEP: In order to strengthen overseas buyers after the purchase as well as to find out know-how from advanced Intercontinental management team, Lenovo picked two foreign managers since CEO in roll, Sophie Ward(the elderly manager of IBM) and Amelio (the ex-vice CEO of DELL). During this term, the primary process for the Chinese older managers is always to learn in despite of upsetting situation. Sophie Ward stabilized the original employees of APPLE and consumers, which plays a central role in reducing the flow of employees and customers. Amelio constantly induced the performance management of DELL to Lenovo, cut uncalled to get staff member, and streamlined the whole management composition.
During that period, Lenovo achieved a high level of profit greater than 40 million dollars. Furthermore, Chinese managers had attained a bulk of experience in multicultural corporation management and stored a pool from the capable staff for future development.
SECOND STEP: Restructured overseas CEOs which might be near-sighted and lack in courage to enlarge organization and reemployed the trustworthy and amazing Chinese older management crew after some years. This task established the will of initial employees of Lenovo and released the lining power of Lenovo storing for 4 years.
3. What should the company do next to improve the post-M&A projects Lenovo cannot survive following your M&A if it cannot provide valuable merchandise, so itshould focus on further research and development. Lenovo should abide by its innovative corporate lifestyle. Lenovo Group has established a R&D group which has three core research locations”China, The united states and Asia. And the crew is carefully connected with the business department. Within Lenovo group, they known as this substantial system, “Global innovation triangle.
After the purchase, Lenovo was faced with new challenge, that is, the lifestyle conflict; the between the two countries may possibly force the previous employees of IBM to leave Lenovo. So that Lenovo should esteem the autonomy of abroad R&D centers. Powers will be returning to the engineers, and in many cases the appearance of the modern headquarters of Lenovo in the Raleigh, ALL OF US, is designed by the senior overseer David fantastic American crew, and this impossible under IBM’s rule. And this is a very good commencing. Even though Lenovo has a global marketing funnel after the purchase of IBM LAPTOP OR COMPUTER unit, it requires a more positive marketing team.
The sales team of APPLE just granted orders for Lenovo yet never have active steps to find new customers. The purchase of IBM COMPUTER leads to a loss of the customers such as the US government, so that the marketing group of Lenovo should increase its abilities to find new customers. Lenovo ought to deepen the internationalization successes. Since Lenovo’s success is definitely attributed to the long-term target on emerging markets and successful overseas M&A, it should run a very good business in the corporations that merged. Lenovo should form itself to get the global market.
Positioning is often the essential issue the fact that Chinese companies ignore, and it is the reason why Chinese language company may hardly last longer than other in western countries. After the positioning, Lenovo should rationalize their particular pricing strategy. The value of the product is an important element to concern; Lenovo cannot make low-cost, economical strategy to endure in the global market. Lenovo should alternatively concern regarding the demand of their target consumers, and produce valuable and long-lasting product for them. Seeing that China is regarding about the commercial upgrading, Lenovo should understanding this option, and actively develop fresh smart phones, tablet PCs, smart TVs to promote the association to realise the leap via PC to PC &.
In conclusion, the traditional age of homogeneous workforce has begun tochange. Together with the quickly changing social composition and emergence of new technology, a heterogeneous workforce is currently essential to market’s needs. Within the previous couple of years, China offers emerged as the most potential market with a enormous population, growing domestic require and inexpensive of creation.
Many multinational companies have already been trying to get a footing in China to be able to obtain their very own competitive positive aspects. Consequently, which has posed critical challenges to the Chinese neighborhood producers in competing with these significant giants. To be able to survive and boost businesses growth, many business have to expand the market beyond the home foundation. There are many admittance modes that might help firms business move into the international marketplace. After the M&A has taken place, organization needs to pay out extra attention on the technique it chose to adopt to integrate the culture in the two corporations to keep the smoothness from the organisation operation and performance.
In the case study of Lenovo and IBM, numerous important a conclusion can be driven. For a Oriental company just like Lenovo, the primary motives due to its embarking on M&A with IBM PC-D had been its need for international marketing to gain access to international customers as well as it is need to be built with technology. As i have said previously, Oriental products have been marketed a bit lower on the product line with low costs and poor quality. Acquiring a well known international company is considered to be the fastest path to changing these kinds of intolerable perceptions of the customers towards Chinese language products and booting up the product graphic.
Under this kind of special circumstances, the need for personalisation is regarded the most important for any Chinese organization to increase into international market. The situation of Lenovo’s adopting a different management method to manage APPLE PC division team was different from all those described inside the literature. The acquiring organization is the incredibly one that motivates the obtained team aid and maintain its own management system and procedure.
Among the list of reasons behind this move, one of the most curial component affecting this decision is definitely fixed period of time agreed by simply IBM to let Lenovo to use the brand ThinkPad. With this kind of fixed term of a five-year period posted to Lenovo has to help to make best efforts to build up a unique brand “Lenovo within this period. Therefore , it really is sensible intended for Lenovo to encourage APPLE PC department to maintain its own system and focus on looking the target on time.
The use of lifestyle integration committee in the case examine of Lenovo has been very helpful and great for members tounderstand and become more aware of right after it may take place among them. The committee has set up several actions such as traditions discovery e-newsletter and debate forums to encourage communication between two teams. These types of arrangements have already been well received by the staff with effective participation and enthusiasm. Consequently , it is believed that this technique may well be suggested for organisations to motivate communication between employees.