Lenovo Global Strategy Case
Chapter 11 Closing Case Study. “Global Strategy at Lenovo” (p. 340-342)
1. What is global strategy. How does Lenovo use strategy to success in the global marketplace? What strategies does Lenovo employ to maximize company efficiency and flexibility? What does Lenovo management do to foster organizational training?
2. What is the nature of Lenovo’s international strategy? Is the firm strategy primarily multi-domestic or global? Justify your answer. What advantages does Lenovo derive from the particular international strategy(s) that it pursues?
Lenovo Global Strategy Case Study Example
Historically, a strategy has been associated with preempting various action plans and scenarios to be triggered on tackling them. However, a single definition of strategy has never been found. Scholars have proposed several meanings of the term, with some proposing terms like programs, policies, goals, and objectives among others, in efforts to identify the concepts relevant to its definition (Mainardes, Ferreira, and Raposo, 2014, p. 46). Nonetheless, strategy, as a concept, has been utilised indiscriminately in the management field, meaning anything from a position in a specific environment, a precisely designed action plan, through to the entire soul, personality, and existential rationale behind a firm’s existence. It is a concept mostly introduced in the business and academic worlds filled with great width and diversity, which in some aspects is divergent and complementary in others. Cannon in 1968 defined strategy as directional action-oriented decisions which are competitively needed by organisations to achieve their purpose. Using this proposal, we can define strategy as a combination of business approaches and competitive changes managers perform to attain the best performance of their organisations.
Lenovo uses a strategy called “protect and attack” to succeed in the highly globalised and competitive marketplace. As the name suggests, the approach combines offensive and defensive elements (Kaul, 2012, p. 10). Defensively, the IT giant seeks to strengthen its success in the Chinese market where it currently holds a dominant position. Offensively, it seeks to build its international presence by expanding sales to developing markets and leveraging acquired assets through mergers and acquisitions (Cavusgil, Knight, and Riesenberger, 2017, p. 340). As famously remarked by Warren Buffet, the most successful and enduring businesses are those that have economic moats guarding their returns against encroachment by market rivals. Lenovo has many such Moats in its Chinese market. Arguably, the most apparent advantage the firm enjoys in China is its immerse channels of distribution. The firm can access thousands of sales points in its distribution network in China, with the majority distributing its products exclusively.
For most organisations growing as a market leader in China would be overly ambitious. However, for Lenovo, it is only the beginning of their journey to realising their dreams. After positioning themselves as leaders in the Chinese PC market, they have strived to expand their experience in the growing markets like Brazil, Russia, and India (Cavusgil, Knight, and Riesenberger, 2017, p. 340). In theory, the long-term goal of the entity is to reaffirm the dominant position it holds in China in all its new markets. Its management is aware that diverse markets which the firm operate have different regulatory regimes, competitive landscapes, and customer preferences.
Additionally, Lenovo uses mergers and acquisitions to acquire the relevant assets and knowledge and to tap into new markets at a faster and a less risky rate compared with greenfield investment. According to Kumar (2009, p. 115), M&A is an effective strategy a company can use to grow the bottom line. Firms usually consolidate to establish new businesses, eliminate excess capacity, increase market access, and improve performance. Lenovo has been using this strategy to improve its business performance. For instance, it acquired IBM’s PC business in 2005, a deal which saw it emerge number three among PC makers globally. Similarly, the company acquired Motorola Mobility and merged with NEC, providing it with a secure grip on the international Smartphone business.
Organisational learning entails the creation, retention, and transfer of knowledge within an enterprise. A firm improves with time as it gains more experience (Argote and Miron-Spektor, 2011, p. 1123). Lenovo has used organisational learning successfully to optimise its value chain. It does this by using mergers and acquisition deals to gain knowledge and hiring managers with technology backgrounds and global mindsets. The strategy has enabled it to aggressively expand its market share in advanced economies and emerging markets and to expand into new product categories like smartphones and tablets rapidly.
Furthermore, the company invests in research and development, develops green technologies, and creates custom products to maximise efficiency and flexibility. An R&D strategy can be defined as a set of closely related choices across decisions concerning project portfolios, people, processes, and organisational architectures (Pisano, 2011, p. 1). Investment in R&D is a factor of great prominence in Lenovo Company. The company has increased its tendency of using renewable materials by investing in green technologies. It has managed to enjoy high energy efficiency by investing in low power computing and high-performance designs. According to the case study, Lenovo has been on the leading edge when it comes to the use of green technologies. Its ThinkPad PC’s are made mainly from post-consumer content using recycled materials. The PCs rank high regarding Eco-friendliness and meet particular energy efficiency requirements. The entity’s operational pattern consists of standardised products with differentiated components depending on destination countries.
Lenovo has continued to aggressively grow its grasp of emerging markets by developing new product categories. It uses its extensive knowledge of conducting business in China to expand into emerging markets (Zhou and Huang, 2014, p. 23). The firm’s executives emphasise international innovation, global brands and products, global human capital, and the development of a culture that supports global success. Regarding global innovation, Lenovo exploits unique capabilities from research and development facilities in Yokohama, Raleigh, and Beijing. Every facility has a distinctive talent capacity. The entity owns more than 6500 global patents. Besides, the firm capitalises on modular architecture when designing its products. Its marketing strategy corresponds to local traditions. For instance, Lenovo is a leading PC manufacturer in rural China, where it developed a complex distribution network that extends to small towns and cities.
Apart from focusing on a modular architecture, Lenovo has strived to integrate its Chinese business approaches with a global workforce. It has created global employee training programs that provide accelerated opportunities for staff development (Verbeke and Kano, 2016, p. 84). Its human resource groups work with executives to develop career pipelines and maps for high performing employees. In 1994, Lenovo’s founder predicted that the firm would grow and become a global enterprise. The strategic vision of the entity’s management stood out at that time because there were very few international Chinese enterprises. To make this prediction a reality, the company’s senior management has developed processes to encourage assimilation of young managers into the organisation’s culture. Through socialisation, Lenovo has been able to create a broad range of clearly understood regulations for its managers at different levels. Thus, managers have become well aware of the firm’s goals and culture. Wherever they execute their roles, managers feel a firm connection to the entity. This helps in guiding decisions on the activities executed by the firm and facilitates the exchange of global knowledge.
Companies can implement either global or multi-domestic strategies to enhance their competitiveness. Global and multi-domestic firms are similar in that both of them operate in many countries (Nadkarni, Herrmann, and Perez, 2011, p. 512). The primary difference is strategic. While multi-domestic firms change some aspects of their businesses in every country, global companies maintain their approaches in every market. Going by this definition, we can conclude that Lenovo is a global company. The firm’s operations are more centralised. Its primary decisions and operations are made in its headquarters. Also, its business-level approaches are constant in all its markets.
The relative advantages Lenovo has gained from its global strategy include brand consistency, economies of scale, and cost advantages. As argued by Pangarkar and Wu (2012, p. 196), it is more cost-effective for companies to operate as global providers. When businesses do not have to customise their products or services, systems, and marketing strategies for each market, they save more funds. Moreover, it is easier to develop an international brand image with a consistent message. Some corporations have a desire for the synergy that results from consumers from different markets interacting about similar products.
Closely associated with cost advantages, companies achieve economies of scale when they get the best costs on business activities and supplies. With a global approach, Lenovo has leveraged a vast distributor and supplier network to secure the best prices and optimise efficiency (Cavusgil, Knight, and Riesenberger, 2017, p. 341). The technology giant has concentrated manufacturing at various sites in China, India, Mexico, Argentina, and Portland, which are low-cost countries. Production in these countries generates economies of scale and cost efficiencies for the company. Operations in low-cost countries and regional headquarters in the U.S. helps it in diversifying sales across emerging and advanced economies.
In a nutshell, Lenovo uses the “protect and attack” strategy to expand its global market share. However, to succeed in this strategy, it will need to continue defending its leadership position both in China and the international PC marketplace and strengthen its grip in the developing markets. While the long-term potential of this strategy remains to be realised, we cannot deny that the corporation has taken commendable strides toward realising a competitive advantage against its market peers in recent years.
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