Strategic Management

Structure by Lenovo for implementing international business strategies

Lenovo when acquired IBM PC division, realised that various structural changes will be required in the company to implement strategies appropriately in the market. The very first structural change that was brought in was the company decided to make English as its official language. There were times when the heads from China were in a meeting with US personnel's and in between the Chinese often said “Shi, Shi, Shi” which meant yes and US people considered it as a sign of agreement. However, what the Chinese wanted to say was that they heard them and they can continue. This created a problem for implementing policies as it became an issue. So, the very first change of Structure taken by Lenovo was to make its official language English (Abdulai & Ibrahim, 2016).

Pros of the structure

• Making the language official, improved the communication.

• This made the communication more effective.

Selecting English as an official language resolved the problem of implanting policies(Abdulai & Ibrahim, 2016).

• Policies were communicated in a better and efficient manner to the staff members (Wiggers, 2018).

• While dealing with people of other countries of a different language, it became easier.

Cons of the structure

• People from other countries has different native and official language that create a problem(Branzila, 2019).

• Even after making the language official, there were body language barriers (Branzila, 2019).

• Implementing the change became a problem as then every employee has to get themselves trained for the language (Branzila, 2019).

• The cost of training increased for the company.

The other structural change which Lenovo implemented was to become democratic. In the international market like in western culture, workers are free to oppose their superiors. They were allowed to push back and challenge the decision of their superiors. But in Chinese culture, they merely execute what is said by the boss. So, for implementing business strategies internationally they need to bring in change so that implementation is processed successfully. They created a culture that was different from the Chinese and brought in changes as required to successfully implement the strategies. The Chinese CEO took a back seat and a Western CEO Steve Ward was brought in. With that autocracy in the company was reduced(Liu & Liang, 2017).

The company also listed itself in Hong Kong and started working with more transparency than any other Chinese company operates. The board of Lenovo consist of the international representatives and the principles of management that are followed are global. The pay scales of the company are standardised (Agnihotri& Bhattacharya, 2018). In this manner the company's structure was changed and with global presence and standards improved its functioning helping them to implement their international policies with ease. 

Pros

• Democratic environment helped the employees get more involved with the functioning of the company.

• In this type of environment employees feel that their opinions matter. The decision making process involves all the members of the team. This helps in better brain storming and also brings an important sense of belonging in the employees (Ziduli et al., 2018)

Cons

• This provides a sense of equality and employees get the feeling that they are at top of the hierarchy that in turn leads to underperformance of the employees and creates conflict(Do, Van &Dinh, 2018)..

• In this type of structure decision making process often gets delayed as every employee has their own opinion and it takes time to reach to a conclusion (Do, Van & Dinh, 2018).

Another change in structure which the company brought in was concerning its supply chain. To implement an international strategy the supply chain of the company needs to be integrated but Lenovo's supply chain was not at all integrated. Different distributors were working on different models of business (Ding et al., 2018). With that the employees had to meet 150 key performance indicators that lead to internal delays concerning orders. The supply chain was also not built to accommodate the volumes which the company started to roll in. This led to a delay in deliveries. This was hindering the international business strategy on increasing their sale at a global level (Wu et al., 2016).

Then the CEO took actions and changed certain structures. He mandate manufacturing which included procurement of parts, logistics and out of the box experiences for customers. With that the KPI's were reduced to five (5) and training was provided to managers for developing skills in business. With that he changed the structure making it more flexible and started outsourcingIn this manner Lenovo brought in various structural changes to make sure that the global strategies of the company are implemented appropriately. The main structural change was to make it democratic from autocratic and bring in a western culture so that new ideas can generate and business can be carried out in a better way (Xiaojun et al., 2016)
Pros

• Integrated supply chain helps in increasing the revenue and allows the company to focus on specialized assets bringing more returns(Philipp & Grant, 2018).

• This type of supply chain reduces the transactional costs for the company (Philipp & Grant, 2018).

• This type of supply chain helps in maintaining the quality of the product(Philipp & Grant, 2018).

Cons

• This type of supply chain requires excessive regulation and poses a challenge to the business for managing its internal and external supply (Xu et al., 2017).

• Integrated supply chain is vulnerable towards the collapse of system. It means one error will bring the whole system down(Xu et al., 2017)..

Co-operative strategies of Lenovo and IBM for innovation capabilities

Lenovo and IBM merged in December 2004 for IBM's PC division. This deal helped Lenovo in improving its rank from ninth place to third and increased the business of its PC in fourfold. This acquisition helped Lenovo is expanding globally. It cut down five (5) years which Lenovo might have taken to be recognised internationally. The brand value for Lenovo was generated. Also it gained access to IBM's distribution centers which were in 116 countries. With that it had access to the corporate sales force, brand and marketing (Fubini & Snively, 2016).

Pros

With the takeover Lenovo also gained access to the Research and development facilities of IBM and the workforce for Research and development improved from 1100 to 1800. Also, the innovation that was done in the Research and Development facility of IBM Yamato, Japan where ThinkPad and RFID were generated was shared. This co-operation developed and promoted ThinkPad. Lenovo invested further in the research facilities (Zhang & Yang, 2018). Lenovo and IBM for innovations have a design lab that has been inherited from IBM. This is the main research site for ThinkPad.The minds in the research facility have increased which has increased the innovation. 

New technologies are being developed. With integrated innovation channels of both the companies the products are processing at a faster rate. Design are being improved, technology and processor being used in the computers are improving. With the co-operation of two the cost for innovation has been reduced. The in-house brainstorming has increased. With that after the merge, the companies can keep track of the growing needs of the market easily as they together are prevalent in various markets (Luo, 2020).

Cons

The deal was a successful one and has helped Lenovo in becoming the world class leader while IBM was able to sustain through it. So the deal had no bad out comings from it(Luo, 2020).

Value creation by Lenovo and IBM through strategy

Entrepreneurship refers to the ability and readiness for developing and running a business aiming at achieving the profits. Lenovo and IBM did the same. They followed Schumpeter’s theory of innovation. According to the theory entrepreneurs changes the circular flow of economy by innovating and takes the company to next level. (Bailey, Kleinhans & Lindbergh, 2018)

.Lenovo is one of the largest PC vendors claiming around 24.7% market share. It has a large distribution center and has the ability for expanding its presence in the emerging markets. Over the years for creating the value they have used strategic acquisitions and partnerships for accessing new markets and improving the sales (Liu & Liang, 2017). According to the theory too there is areorganisation of the industry which Lenovo didby acquiring IBM.

Lenovo and IBM follow certain strategies for the creation of value. One of them is Protect and Attack.This strategy was put in motion by CEO Yang. The strategy combines both offensive and defensive elements. In the defensive strategy Lenovo is building on the success it has in China. It is in the dominant position in China. Inoffensive strategy Lenovo is seeking growth in the international market. It is leveraging the assets which it has acquired and is expanding its sale in the emerging markets (Markovic, Rakita&Filipovic, 2016). To carry out this strategy the two interrelated models are being used by Lenovo which are "Transactional" and "Relationship" models. In the model of transaction sales are emphasised to retail consumers and also to small and medium-sized enterprises through all sources be it online, physical, distributors and retailers(Shu, 2017). The model of relationship targets enterprise customers like educational or government institution and also the large businesses. These sales are being executed through a combination of sales representatives and partners in business. The principle of theory states the same that the innovation or entrepreneurs should open the new markets.

The other strategy which Lenovo and IBM follow to maintain competitive advantage is competitive “Moat” (Yang, 2016). As said by Warren Buffet successful businesses are those that have economic moats which means that they can protect the profits from the competitors. This is a benefit that is enjoyed by the company. Lenovo has an immense network of distribution channels, with that it also has various points of sale in the distribution network. This strategy is being followed diligently by the company. The company has put it clear that this strategy of remaining in the competition through extensive distribution channels is a top strategic plan (Kai, 2016). However the company does not plan to stop here.

Another strategy which the company is following is of attack (Rekettye, 2019).Lenovo already being established as a market leader in China, the company is planning to expand in the emerging markets like India, Russia, and Brazil. The company is establishing its market sales presence in the target market. Lenovo and IBM have strategic plans for balanced growth and profitability. With their growth, there is a drawback in every market the preferences of customers are different and the company has to manage accordingly. To overcome this, Lenovo and IBM has another strategy for creating value and that is the use of acquisitions and partnership. The company is well aware that to establish itself in different markets it has to seek leverage as without it the task will become the way to harder. The company has a history of strategic acquisitions and partnerships. Lenovo acquired Motorola Mobility from Google Inc. The basic strategic entrepreneurship here was to enter the market in a better way in North America and Latin America as Motorola has a strong presence there (Salwan&Rathod, 2017).It was one of the key benefits of acquiring the company. After that the company went into the purchase of Fujitsu's PC division. It was a joint venture between Lenovo, Fujitsu and Development bank of Japan. The basic purpose of this purchase was to indulge in the development of the global PC market (Amann, Jaussasud&Boqi, 2018). This strategic entrepreneurship brought in overall growth in the market. With that the company is also working on its technology and has changed from PC to PC+. This involved innovation of new products. Thus, the entrepreneurship theory that is being followed by the companies for entrepreneurship is Innovative theory (Yang & Andersson, 2018)

References

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