Global Strategy at Lenovo Lenovo is the top worldwide PC vendor, ahead of rivals HP and Dell. Lenovo is based in China and generates more than $38 billion in total sales and offers desktops, laptops, tablets, workstations, servers, and mobile phones to customers across the globe. Company Strategy The PC industry has reached maturity, especially in the advanced economies. The industry is global, which means firms compete with each other, and cater to customer needs, on a global scale. Lenovo has adopted a global strategy for its operations. As part of this strategy, management views the world as one large marketplace. Key to Lenovo’s success is ensuring organizational learning to optimize the firm’s value-chain activities continuously. Lenovo uses mergers and acquisitions (M&As) to acquire needed knowledge and other assets from partner firms and to expand into markets worldwide. In 2005, Lenovo acquired the PC business of IBM. The deal instantly established Lenovo as the number-three PC maker worldwide. In 2011, Lenovo formed a merger with NEC, the largest PC vendor in Japan, to access the huge Japanese PC market better. The merger increased Lenovo’s scale economies in manufacturing and marketing. In 2014, Lenovo acquired the telecommunications firm Motorola Mobility. This provided Lenovo with a strong footing in the global smartphone business. Lenovo follows a protect-and-attack strategy. While protecting its core business, especially the Chinese market, Lenovo is aggressively growing its market share in emerging markets and advanced economies. Lenovo now obtains about 20 percent of its revenues from emerging markets outside China. Senior management emphasizes global products and branding, global human resources, and creation of a corporate culture conducive to global success. Global Products and Branding In developing its products, Lenovo emphasizes modular architecture suppliers manufacture interchangeable components and modules. Interfaces are standardized to facilitate production of PCs that are simultaneously differentiated but use standard parts and components. This minimizes the cost of manufacturing computers and of designing new ones. Products are standardized worldwide, but elements such as keyboards and software are customized to respond to local language needs. Marketing also responds to local conditions where prices are adapted to fit the buying power of low-income consumers. Lenovo adjusts marketing to fit local traditions. In rural China, the firm markets wedding computers, which come in red, the luckiest color to Chinese. By purchasing IBM’s PC business, Lenovo acquired the IBM brand name and the ThinkPad product brand. Lenovo leveraged the IBM name to build brand awareness on a global scale. The firm is leveraging the power of global social media to target marketing campaigns to youth 18 to 25 years old. Global Human Resources Lenovo worked hard to integrate Chinese business methods with an international workforce of 27,000 employees. Blending the distinctive national and organizational culture of IBM required hiring managers with a global mind-set and strong international background. Lenovo recruits globally savvy executives from other high-tech firms and hires talented graduates of top universities to incubate them as future company leaders. Compensation packages vary across the globe because of differences in legally mandated benefits, tax laws, cost of living, local tradition, and culture. However, Lenovo strives to have standardized benefits and allowances in their compensation packages such as providing housing and education benefits for employees. In appraising performance, Lenovo managers compare mutually agreed-upon objectives with actual performance at the end of every quarter. Lenovo created a global training program that provides accelerated development opportunities for employees. The firm’s human resources group works with managers to construct career maps and pipelines for every high-potential employee. All employees are asked to examine their career aspirations and the training they need to attain their goals. The career maps are linked to job slots around the world, and employees have much latitude to achieve their dreams. Lenovo employees are ambitious, and senior management is serious about helping them develop their careers. Lenovo human resource managers also ensure routine training and development programmes are provided for all employees to help employees increase their skillsets and talents. Lenovo also embraces diversity, hiring and embracing employees from diverse backgrounds and nationalities who bring vast knowledge and experience to the organization. Workers from various countries bring perspectives that management leverages to perform better in markets worldwide. Global Culture Aiming to foster a global spirit. Senior management has instituted processes aimed at socializing young managers into the Lenovo organizational culture. Nationality doesn’t matter. Ifan employee demonstrates capability and vision, there are no limits. Socialization creates broad, tacitly understood rules for appropriate action by managers at all levels in global operations. Lenovo managers become well acquainted with the firm’s culture and goals. This guides decisions on company activities and facilitates global knowledge exchange. Connectedness builds trust and cooperation. It encourages communication and interaction. It facilitates the integration and assimilation of new knowledge and capabilities. Lenovo management values the diversity of global cultures and the learning that accrues from foreign business environments. Key employees need to function with a global mind-set and cosmopolitan values. Manufacturing and Value-Chain Management Lenovo concentrates manufacturing at sites in China, Argentina, India, Mexico, and Poland. Production in these low-cost countries generates cost efficiencies and economies of scale. Regional headquarters in the United States and operations in low-cost countries helps diversify sales across advanced economies and emerging markets. While investing huge sums in R&D and innovative product features, senior management maintains a sharp focus on keeping manufacturing costs low. Sourcing of parts and components is done on a global scale. Sourcing from hundreds of high- quality suppliers ensures flexibility in logistics and production. Lenovo aims for a leadership position in which it attains a double-digit share in each of the markets where it does business. Management also aims to maintain a sharp focus on its customers, providing them with the most innovative products worldwide. Source: Excerpt from Cavusgil, S. Tamer, Gary Knight and John R. Riesenberger.2017. International Business, The New Realities, Fourth Edition. Pearson Education Limited. Case – Global Strategy at Lenovo, pg. 340. Questions 1. Name and briefly describe the strategy Lenovo is using. A complete answer must include at least TWO (2) extracted examples from the Case, to help support your answer. (10 marks) 2. Use the integration-responsiveness framework to analyze the global integration value chain activities that Lenovo is pursuing. Name and describe ANY FOUR factors that Lenovo is using to take advantage of by doing so. A complete answer must include supporting evidence found in the case for each factor. (20 marks) 3.Briefly describe ANY FOUR of Lenovo’s international human resources management activities, which are being pursued by Lenovo’s human resource managers. A complete answer must include an example from the Case, to support each activity. (20 marks) 4.Briefly describe ANY TWO key elements of Lenovo’s marketing program. A complete answer must include examples from the Case, to help support your answer. (10 marks) 5.Briefly define ‘culture’. Describe ANY TWO components of Lenovo’s culture which are described in the case. A complete answer must include extracts from the case to help support your answer. (10 marks) 6. Cross cultural risk remains a very relevant and real threat to Lenovo’s business in international markets. Briefly describe ANY TWO recommendations you would make to Lenovo’s executives on strategies they can use, to address such concerns. A complete answer must include an explanation of how each recommendation can be useful to Lenovo, with specific reference to examples from the case to help support your answer. (10 marks) 7. Lenovo may encounter a number of ethical challenges in the range of international activities it engages in. Name and briefly describe ANY FOUR ethical challenges Lenovo may face in the international environment.
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