Case Study: Lenovo And IBM Acquisition - Strategy Synthesis For Global Brand.

IBM Selling its PC Business

Describe about the Strategy Synthesis,Lenovo for Building a Global Brand?

An analysis of the case study on Lenovo making a global brand has indicated different major findings. The case analysis indicates that Lenovo has acquired IBM in order to go global and establish itself as a global brand. Initially, Lenovo was known as Legend and it has concentrated its focus only on the Chinese industry. However, with the intense level of competition, Lenovo felt the need of going global, and as a part of its strategy, it has performed the acquisition of IBM. There are different important facts related to such acquisition deal by Lenovo has been presented in the given case, and it has also been analysed that there has been the presentation of different strategies as applied by Lenovo in becoming a reputed global brand (Kapferer & Jean-Noel, 2008). This case analysis focuses on different such important elements related to the Lenovo’s decision of going global, and success or failure of Lenovo prior to the acquisition and after the acquisition are considered. In addition to this, the case analysis also focuses towards analysing the advantages and disadvantages of strategies that have been considered by Lenovo in globalising its brand. Finally, there will be the strategic analysis of the given Lenovo case that will be performed through the application of strategic analytical tool such as SWOT, PESTEL, BCG matrix and Porter five forces. Based on the findings from the entire case study, it will be summarised in the conclusion section.

An analysis of the case study has reflected that Lenovo has acquired the PC business of IBM. However, in entering into such deal, there has been certain specific intent that has been noted with regard to IBM. The main factor that drives IBM in selling its PC business as identified from the case is mainly the change in the focus of the company. IBM has been known as the most reputed seller of PCs but it has changed its focus from being the seller of PCs to providing IT consulting services to its customers. The case analysis has resulted into the identification that IBM has realised about the declining potential of PC industry and the level of competition has also been rising. As a result, the PC selling business looks quite unattractive and the focus of IBM has mostly been towards providing IT consulting services. In addition to this, the case analysis also indicates that IBM has considered this deal within Lenovo as an opportunity because it would allow it in dropping down its unprofitable operations and thereby in concentrating on consulting services such as outsourcing of enterprise IT operations (Quelch & Knoop, 2006). The company focused on long term growth strategy and it realised that by concentrating on selling PC’s, it won’t be able to achieve or maintain its growth position in the industry. It has therefore diversified its strategic focus by paying attention towards IT consulting services and selling off its PC business to Lenovo (Sharp, 2010).

Application of BCG Matrix

An analysis of the case has indicated that IBM has sold its business to Lenovo, and the assessment of the case has resulted into the identification that the most significant reason that becomes the primary contributing factor to IBM in selling its business to Lenovo is mainly the agreement by Lenovo on the terms as presented by IBM. As for instance, even after the acquisition, IBM owned 8.9% in the new acquired firm, and it has also been agreed by Lenovo that after the acquisition, Lenovo would not interfere in the consulting services that would be provided by IBM. There would not be any competitive conditions that would be introduced by Lenovo as agreed prior to the deal. These agreements by Lenovo on the terms and conditions of IBM have made it the most prospective customer and IBM ultimately sold its PC business to Lenovo. This has been the primary reason that has contributed towards the IBM business being sold to Lenovo as indicated in the case analysis (Whittington, 2001).

Application of BCG Matrix: This particular decision of IBM selling its PC business to Lenovo can be better assessed through the application of BCG matrix. This matrix indicates the relative position of the company in relation to market performance, and it thereby explains the strategy that needs to be considered by businesses. There are four important positions such as cash cows, dogs, star and question mark. These particular attributes of BCG matrix explains different important indication of an organisation’s performance in relative to industry performance. An analysis of the given case of Lenovo indicates that the PC industry performance was declining and there was little scope available in the PC selling business. This led to IBM considered the strategy of targeting IT consulting services. This particular strategy of IBM can be best correlated with that of cash cows whereby the declining market performance has resulted into important decisions being undertaken by IBM in the form of leaving the PC segment and providing IT consulting services (Pettigrew, Thomas & Whittington, 2002).

The case analysis has also indicated about the history of Lenovo whereby it has been assessed that Lenovo initially was known as Legend and it has established itself as a major seller of PC products across Chinese markets. Lenovo has organised itself as the most prominent brand in China with its core emphasis on innovation, quality and efficiency in its products and services offerings. The ability to innovate and offer something new has been the core feature that brought higher level of success and growth to Lenovo prior to acquisition. This has been identified from the case analysis whereby it has been evaluated that Lenovo has been the first company that has introduced Chinese-character card and it has contributed significantly towards the growth of the organisation.The card as introduced by the company is aimed at translating the English language into Chinese and this has been a significant contributor to the growth and recognition of Lenovo in the Chinese markets (Quelch & Knoop, 2006).

Explaining Lenovo’s Success Prior to the Acquisition

The local level focus of Lenovo in the Chinese markets and catering to the needs and expectations of its customers has been the primary contributing factor that has ensured success to the firm. In addition to this, the continuous and rapid level of innovation as introduced by Lenovo has also been the primary factor that has contributed towards higher organisational success. Further, prior to acquisition, the focus was highly localised and the company has concentrated all its resources in targeting Chinese markets. This has allowed Lenovo in achieving breakthrough improvements in its performance. All these factors have become the primary contributory factor to the growth and success of Lenovo prior to acquisition of IBM. The innovation along with ability of Lenovo in catering to the specific needs and requirements of its customers in China has driven company to higher level of growth and development (Quelch & Knoop, 2006).

Application of SWOT Analysis: This Lenovo’s success prior to the acquisition can be better evaluated through SWOT analysis. The strength point of Lenovo as identified from the case is its ability in designing cards that can convert English language into Chinese whereas the weakness of Lenovo is that it has created its brand image only across the Chinese markets. In terms of threats are concerned, the major threat to Lenovo is mainly from the stiff level of competition that was growing significantly across the Chinese markets as posed by international players such as dell, HP etc. The opportunities to Lenovo as identified from the case are the potential for exploring the international markets through its sound ability of innovation and excellence in respect to its offerings to its customers (Keller, Aperia & Georgson, 2012).

Before the acquisition of IBM, Lenovo has been operating a very small level, as the company has performed its operations only in the Chinese markets. However, the acquisition of IBM has necessitated Lenovo to make significant changes across its business models so that it can target its customers worldwide. It has been evaluated from the analysis that the main challenge immediately after the acquisition of IBM by Lenovo is that the company has to perform the marketing and management of its business at the global level. It needs to devise strategies that are aimed at targeting its customers in the world market. The second major challenge that has been evident in respect to Lenovo after the acquisition is that the company has to make adequate level of differences between the IBM products and Lenovo products. This is mainly because it needs to maintain two different brands separately and have to position their uniqueness in order to promote both of them in the global market (Fill, 2009).

This is mainly because Lenovo cannot afford to lose its master brand at the same of promoting or maintaining IBM brands of product and it needs to manage both these brands. This has been a major challenge to the company, and the challenge also gets complex because the core principle of innovation and efficiency are integrated across the business principles of both IBM and Lenovo. These aspects have presented challenges to the company in maintaining both these brands after the acquisition. The challenges to Lenovo are not over, but the case analysis has indicated that the brand is faced with significant other challenges after the acquisition. As for instance, it has been assessed that Lenovo is mainly from Chinese oriented culture whereas IBM is a global organisation. The integration of culture across both these organisations has been a major challenge that was evident in respect to Lenovo. The cultural clash within employees is quite evident after the acquisition that has been carried out. This is mainly because IBM management operates as per US timetable which differs significantly from Chinese timetable (Dall’Olmo Riley, 2010).

Application of SWOT Analysis

These are the major challenges that have been directly evident in respect to the performance of Lenovo after the acquisition of IBM has been taken place. The managerial challenges in the form of cultural differences across the two businesses and the need for maintaining separate business profile for both Lenovo and IBM has been the utmost difficult challenge to the Lenovo’s management after the acquisition.

An analysis of the case study has indicated that there are different branding strategies that have been considered by Lenovo as a part of its promotion at the global level. The company has little overall awareness across the international markets, and in order to raise its awareness level, the company has considered for different range of branding strategies. An analysis of the advantages as well as disadvantages of these strategies as considered are indicated as follows:

Using Master Brand Strategy- This branding strategy implies that it requires businesses to focus specifically only their master brand while performing its promotion. The master branding strategy has the advantage in terms of better promotion of the master brand of the company. This is mainly because such master branding allows companies in focusing all its resources on a single brand. Contrary to this, the disadvantage associated with this master brand strategy is that it leaves with lesser overall resources to the firm in paying attention towards enhancing its other sub-brands that are operational (De Wit & Meyer, 2005).

House of Brand Strategy: This is another important branding strategy which involves the usage of large number of brands by the company in promoting its performance. It requires contribution of resources towards each sub-brand by the firm. The advantage of this branding strategy is that it allows for sufficient level of contribution or attention of the management towards different sub-brands of the company, and none of them get missed. As a result, there would be the possibility of attaining improved level of performance in respect to all the sub-brands of the company. Apart from this, the disadvantage is that it detracts the attention of the management from focusing only their major brands and ultimately, their performance might suffer (Quelch & Knoop, 2006).

Synergy Approach: The synergy approach to branding indicates a branding strategy whereby a master brand is being promoted in conjunction with a “hero” i.e. sub-brand. As in the given case of Lenovo, the master brand is the Lenovo itself and the sub-brand is IBM. This strategy has the advantage in the sense that the positive image of the sub-brand assists efficiently in promoting master brand within its target customers. This has been the advantage in respect to Lenovo in the given case study whereby Lenovo has utilised IBM brand in order to promote itself. The advantage is that the company can make use of its sub-brand in promoting its master brand whereas the disadvantage is mainly that this strategy cannot be possible if the sub-brand of the company is not that reputed or have strong brand image in the market (Carter, Clegg & Kornberger, 2008).

Challenges to Lenovo after Acquisition

Lexus/Toyota Strategy: This has been the fourth major strategy that has been indicated in the given case. This strategy indicates that different brands of the company would represent separate luxury and mass market offerings. This implies that different product would create their own brand image and they would be marketed separately. In this relation, the main advantage of this particular strategy is that each separate brand of the company creates its own image and the resulting impact is that they are self dependent. However, the disadvantage is that in this branding strategy, the management require significant level of efforts in building up its different brands and leading them to higher level of success (Quelch & Knoop, 2006).

These are the major advantages and disadvantages of different branding strategies that have been identified. They should be considered by organisations before building up their branding strategy in particular.

Lenovo Handling Brand Management Challenges: An analysis of the case study has indicated that Lenovo has faced with brand management challenges in its operations, and it is therefore essential that there should be appropriate strategies that must be considered by them. The acquisition of IBM has posed challenges to Lenovo in terms of its efficient brand management. The company faced challenges especially in respect to managing its Lenovo brand and at the same time, maintaining the status quo of its IBM brand. The challenge as faced by Lenovo related to brand management should be addressed by way of considering the synergy approach to managing brand. This is mainly because the IBM brand is already well known international brand and by utilising the effectiveness of its IBM brand, company can consider for promoting its master brand i.e. Lenovo. This strategy would have allowed Lenovo in keeping both its brand separately and distinct image, and at the same time, they could be recognised as two different brands by their customers. This should be the strategy that should have been considered by Lenovo for the purpose of branding its image (Doyle, 2008).

Agreement for Lenovo’s Chosen Strategy: An analysis of the case study has indicated about the Lenovo’s chosen strategy and it is assessed that Lenovo has considered a simple strategy for the purpose of promoting its brand. It has been identified that a simple strategy of one two punch is being considered by Lenovo whereby the company focused on building up its Lenovo brand and continue to strengthen its ThinkPad product brand. This brand strategy as considered by Lenovo has been extremely effective from the point of view of catering to the needs and expectations of the brand. This is mainly because IBM has its own distinctive image and at the same time, Lenovo has also built up its own unique identity in the Chinese market and is building up its image in the global market. This simple strategy of building both these brands individually has therefore been highly efficient to the company. In addition to this, Lenovo has emphasised towards combining innovation and efficiency element in its brand and this has proved to be highly successful to the company in addressing the higher level of competition as faced by it. Overall, the branding strategy as considered by Lenovo has been highly effective (Johnson, Scholes & Whittington, 2009).

Analysis of Lenovo’s Strategy through Porter Five Forces: An analysis of the PC industry indicates that the bargaining power of buyer is higher because they have wide range of choices available to them in selecting a particular brand and this led to medium power of suppliers in the industry. The threats of substitute are also increasing with tablets and smartphones being introduced. However, the new entrant threat is lower because of huge investment and reputation required in achieving success in such industry and the competitive condition is extremely tough whereby global players such as Dell and HP are competing heavily. Within such market conditions, it is highly essential that the Lenovo’s strategy should be to include both the innovative factors and efficiency factor so that the increasing competitive conditions as prevalent across the international markets can be efficiently addressed (Hooley, Saunders & Piercy, 2008).

On the basis of analysis of the case study, it is assessed that Lenovo has originally been a Chinese brand as it has started its operations from China. However, the company later realised that it needs to go global, and in pursuing such global strategy, there are certain problems that are evident in respect to Lenovo. These problems are mainly because of the fact that Lenovo is mainly a Chinese brand and it is often associated with features such as lower on quality. Further, the case analysis indicated that the company has never been able to compete on basis such as lower cost of products. This is mainly because by lowering simply on the prices of the product, it is likely that its products are associated with lower quality because Lenovo is a Chinese brand. Thus, this particular association of Lenovo as being the Chinese company has affected the company in an adverse way in becoming a global brand (Fifield, 2007).

Overcoming Problems- Such problems of associating the company with China by its customers can be overcome through focusing especially on aspects such as quality. Even by way of adapting a cost efficient strategy, Lenovo could still become a major global brand, but it needs to focus on aspects such as innovation, higher quality etc so that it can create distinguished image within its customers.

Conclusion

This report involved the performance of a critical analysis of the Lenovo case study and the performance of analysis revealed significant level of findings. It has been evaluated that IBM has sold its PC business to Lenovo mainly because of declining performance of the PC selling business, and growing overall effectiveness in respect to the IT consulting services. Lenovo has been identified as the most efficient target customer by IBM because of the easy agreement to all the conditions of IBM by it. The analysis has also indicated about the factors that have explained the success of Lenovo prior to acquisition and it has been evaluated that the major factors that have attributed success to Lenovo are the ability of the company in providing cards that translates English language into Chinese and also the ability of Lenovo to innovate and provide highly efficient products and services to its customers. However, the case analysis has also indicated that there are various major challenges that are evident in respect to Lenovo’s performance after the acquisition and these are identified in terms of cross cultural compatibilities between the management of both these companies, and also the issue of maintaining brand image of both these companies. The analysis has also indicated about the advantages and disadvantages of the branding strategies as considered by Lenovo and finally, it is assessed that Lenovo faced problems in becoming a global brand because it mainly comes from China.

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