LENOVO AND IBM

Lenovo and IBM

Lenovo and IBM

Introduction

Lenovo, a leader in PC products and value-added professional services, quickens its construction of plants in the world, in a bid to become No. 1 among the world's PC products manufacturers. After carrying out global development strategy, Lenovo has set up branches in 60 countries and has business in 160 countries(www.lenovo.com).

The history of Legend goes back to 1984, in which Institute of Computing Technology, Chinese Academy of Sciences, established the Group, by 20,000 RMBs and 11 scientists. By 2002, Legend Group Limited, which once existed only as a wholesale distributor for U.S. and European brands, had become the largest IT Corporation in China. Its annual turnover has exceeded 20.2 billion HK dollars and its computers have been the best selling brand for seven consecutive years in China since 1996 and the best seller in the Asia Pacific region (excluding Japan) for three consecutive years since 2000 . In 2002, the market share of Legend computers has reached 27.3% in China according to International Data Corporation and 12.4% in Asia Pacific market.

Although the group cannot catch up with Dell and HP in a short time, it has driven up its competitiveness, said sources from Lenovo. As the only Chinese company among the Olympic partners, the 2008 Beijing Olympic Games will offer a favorable opportunity for Lenovo's development. (www.lenovo.com)

The Alliance

According to Lenovo's 2008/2009 Annual Report, (www.google.com/finance) Lenovo has always aspired to become a global company. However, it had encountered obstacles for its further expansion and development. Firstly, though Lenovo is the largest PC maker in China with more than a quarter of the market share, it does little business outside the country. Secondly, the increasing fierce competition from aggressive foreign rivals such as Dell and HP in the past few years in Chinese market has put further pressures on Lenovo's margins (Electronics News, 2005), forcing it to expand its market base. Its growth rate in 2008 lagged behind the market growth rate. Thirdly, the company also suffered financial problems, earlier in the year 2004, Lenovo confessed that its performance over the past three years had fallen short of internal targets (Burt J.,2005). Fourthly, shares of the company dropped nearly 60 per cent in 2009. Therefore Lenovo sees the desperate need to refine its marketing strategy in order to maintain growth. On April 30th, 2005, Lenovo completed the landmark acquisition with IBM's PC Division, hoping that it can borrow its established brand name to foster global expansion, establish credibility in foreign markets in a short time and to establish its own brand(www.lenovo.com).

However, an interesting point to discuss is that if IBM's PC Division is so powerful, then why would IBM like to withdraw from this sector of business and transform into a service company instead? IBMs PC business unit lost $258 million in 2008 and $139 million in 2009. In less than four years, IBM lost nearly a billion dollars selling PC. In this article, I would study how Lenovo can succeed in the field ...