LENOVO’S GLOBAL STRATEGY When Lenovo’s chief executive, Yang Yuanqing, crafted t
ID: 395044 • Letter: L
Question
LENOVO’S GLOBAL STRATEGY When Lenovo’s chief executive, Yang Yuanqing, crafted the strategy to build outward from China, he had to consider how the company would compete in a fast-changing industry selling to developing markets. A core part of his strategy is to acquire brands that can fuel future growth. Not long after acquiring IBM’s PC business, Lenovo purchased IBM’s low-end server business and Motorola’s mobile phone brand. Selling high-tech products requires constant innovation; selling in communities where people are newly entering the middle class requires high efficiency and low prices. Yang and Gerry Smith, executive vice president of Lenovo’s supply chain, explored the most efficient and responsive ways to make electronics. They concluded that Lenovo could win on both counts by handling more of its own manufacturing. In contrast to U.S.-based electronics companies, Lenovo does about half of its own manufacturing, outsourcing the other half. Its 4,000-employee facility in Brazil helps Lenovo cut costs, including taxes, related to serving the Latin American market. Lenovo facilities in the United States (North Carolina), Japan, and India keep production close to those regions’ buyers and their needs and tastes. The company-owned factories were an advantage when floods in Thailand interrupted production of computer hard drives. Lenovo and other computer makers competed fiercely for the limited supply. As hard drives became available, Lenovo made prompt adjustments to its production lines, focusing on the most profitable models using the hard drives available. Companies that outsourced were less agile, and Lenovo gained market share at their expense. Another challenge is the importance of brand image. By prioritizing developing economies such as Brazil, Lenovo has the advantage of arriving early and establishing a reputation before Hewlett-Packard, Apple, and other competitors move in. In countries such as Russia and India, the company established a good reputation for PCs, which now elevates the brand’s reputation in servers and smartphones. The situation is trickier when products are rolled out to developed economies such as the United States, where consumers expect their electronic devices to be exciting. In 2013, Lenovo opened its North Carolina factory, which it hopes will further raise the brand’s profile in the United States.58 Where in this example do you see pressures for global integration? Where do you see pressures for local responsiveness? Which global strategy (international, multinational, global, or transnational) do you think is most appropriate for Lenovo? Why?
Explanation / Answer
Pressures from global integration has been seen when floods in Thailand interrupted the production of computer hard drives. Fierce competition between Lenovo and other companies makes Lenovo to focus on most profitable model as the companies that outsource are less agile. Local responsiveness is been seen when Lenovo establish good position in Russia and India in servers and smartphones whereas in US as customers expect their device to be exciting, Lenovo has opened factory in north Carolina to raise brand profile in US. The most suitable strategy for Lenovo will be Multinational as different countries different countries have different population requirements. Specific strategies for each nation is very important.
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