The Association of Business Executives
International Business Case Study
Tuesday 9 June 2015, Afternoon
This is an open-book examination, and you may consult any previously prepared written material or texts during the examination.
Only answers that are written during the examination in the answer book supplied by the examination centre will be marked.
© ABE 2015
As in real life, anomalies may be found in this Case Study. Please simply state your assumptions where necessary when answering questions. ABE is not in a position to answer queries on Case data. Candidates are tested on their overall understanding of the Case and its key issues, not on minor details. There are no catch questions or hidden agendas.
After the publication of the Case Study, subsequent developments may occur. The examination is based on the published Case Study, and students who do not mention such developments will not be penalised. However, students may consider such developments in their answers if they wish.
June 2015 International Business Case Study
Lenovo Group Limited is a Chinese multinational computer technology corporation and an offshoot of a Chinese government research institute. Lenovo was founded in Beijing in 1984 and incorporated in Hong Kong in 1988. For the first 20 years of its existence, the company’s English name was “Legend”. It abandoned this name in 2002 when it decided to expand outside China, because other companies called Legend already existed in potential overseas markets. In April 2003 the company publicly announced its new name, “Lenovo”, a combination of ‘Le’ from Legend and ‘novo’, meaning new, and spent 200 million RMB (US$32 million) on a media campaign to support its rebranding.
In 2005 Lenovo acquired the larger, but unprofitable, personal computer (PC) division of IBM for US$1.75 billion. IBM had decided to focus on software applications and service support, rather than on producing computer hardware and was keen to offload its loss-making operations. This acquisition was the beginning of a decade of rapid growth for Lenovo, in terms of both products and markets. Lenovo presently develops, manufactures and markets desktops and notebook personal computers, workstations, servers, storage drives, IT management software and related services.
As of 2015, the firm operates in more than 60 countries and sells its products in around 100 more. It employs around 54,000 people worldwide. Lenovo’s principal operations are in Beijing, Morrisville (USA) and Singapore, with research centres in these locations. Growth and globalisation: Lenovo acquires IBM’s PC business Lenovo’s growth phase began with its acquisition of IBM’s PC business. At that time, IBM’s PC unit was a global market leader, while Lenovo, a Chinese brand, was not well known. The acquisition presented major challenges for the Lenovo management team, inexperienced in global operations. There were profound differences between the two companies, not only in size and global stature, but also in terms of culture, management, operations and experience with globalisation. Further acquisitions
In January 2009 Lenovo outlined a ‘protect and attack’ strategy to build on its strong base in the Chinese PC market and in the corporate and education sectors in the United States, while entering new markets and new product areas, such as smartphones and related devices. Since taking over IBM’s PC division, Lenovo has grown rapidly on the back of high-profile acquisitions and has emerged as China’s first true multinational, surpassing Hewlett-Packard and Dell to become the world’s largest maker of PCs. The following are some of its key acquisitions: NEC
On January 27, 2011 Lenovo signed an agreement to produce personal computers with Japanese electronics firm NEC, with Lenovo owning a 51% stake in this joint venture. The joint venture boosted Lenovo’s worldwide sales by...
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