Lenovo's Globalization Strategies

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Case Details:

Case Code : BSTR156
Case Length : 15 Pages
Period : 1998 - 2005
Organization : Lenovo
Pub Date : 2005
Teaching Note : Not Available
Countries : China
Industry : Computer Hardware

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"As Lenovo's founder, I am excited by this breakthrough in Lenovo's journey towards becoming an international company. Over the past 20 years, I've watched Lenovo develop into the leading IT Company both in China and throughout Asia. Since the beginning, however, our unwavering goal has been to create a truly international enterprise. From 2003 when we changed our international brand name to 2004 when we announced our partnership with the International Olympic Committee, to today's strategic alliance with IBM, I have been delighted to watch Lenovo become a truly world-class company."¹

- Liu Chuanzhi, Chairman, Lenovo Group.

Introduction

In December 2004, the China-based Lenovo Group (Lenovo) announced that it had acquired the personal computer (PC) division of the US-based IT major IBM.

Industry analysts termed this as a major milestone for Lenovo in its efforts to globalize its operations. It was also perceived as an important step towards achieving the company's goal of becoming a Fortune 500 company by 2010. According to Liu Chuanzhi (Chuanzhi), the Chairman of the Group, "The purchase will make Lenovo Group the third largest PC maker worldwide with an annual revenue exceeding 10 billion US dollars.^"2

Lenovo, formerly known as Legend, is Asia's leading and world's ninth largest PC manufacturer (Refer Exhibit I for top ten PC companies in the world). By the end of 2003, Lenovo had captured a 27 percent market share of the PC market in China.

In the fiscal 2003, Lenovo manufactured around 4.5 million PCs including laptops and desktops. Lenovo has also diversified into other business areas including handheld devices and IT.

About 51.5% of its revenues came from the corporate segment, 33.5% from the consumer segment, 8.8% from handheld devices, 3.8% from contract manufacturing and 2.4% from IT services (Refer Exhibit II for Lenovo's business segments). For the fiscal year ended March 31, 2004, Lenovo reported a turnover of HK$ 23.2 billion and a net profit of HK$ 1.05 billion.

Lenovo started its business as a distributor of computer products for foreign companies including IBM, AST³ and HP. In 1990, Lenovo manufactured its first PC and within a decade it grew to become the leading PC manufacturer in China.

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1] Press Release, Legend to Acquire IBM Personal Computing Division Creating New Leading PC Business with Global Market Reach, www.legendgrp.com, December 08, 2004.

2] Lenovo Acquires IBM PC Business, www.chinaview.cn, December 08, 2004.

3] AST is one of the leading IT companies in South Africa. It is an IT services and solutions organization with more than 2500 employees.