Lenovo Company’s Globalization and Viability

Introduction

In the wake of increased market competition in recent years, especially in the computer electronics industry, globalization of production, markets, and institutions has become paramount to the completion of operational activities of many technological corporations such as Lenovo. The firm has lately become the world’s largest manufacturer of personal computers. Indeed, it leads other companies in global shipments with over 50 percent revenue going to overseas countries. Lenovo’s market share is rated number four in the American market. The company’s brank is regarded as innovative and quality; hence, the purchasing power of consumers is relatively high as compared to other brands such as Hewlett Packard (HP) and Dell. However, market competition is still high and companies have to seek comprehensive ways of dealing with inconsistent economic situations and consumer behaviors. This essay provides an insight into ways in which Lenovo uses the globalization of production, markets, and institutions to increase its viability.

Lenovo’s Globalization of Production Processes

Lenovo’s operational process has grown from mere global sourcing to the establishment of manufacturing and distribution channels in various parts of the world through continued research and development (Yang & Stoltenberg, 2014). The enactment of equitable international trade policies and free trade fairs underpins the globalization of production processes. Advancing communication and transportation innovations have made an investment in foreign countries significantly efficient. Favored by these conditions, Lenovo has established various facilities in overseas countries that serve as global production lines. Yang and Stoltenberg (2014) reveal that the company has heavily invested in sending IT manufacturing and business processes to countries where production costs are going down. Currently, the cost of manufacturing in China is rising. The costs of hiring IT professionals and funding operational processes have also increased gradually. As a result, the company has established various production facilities in the United States where such costs are plummeting.

Despite its centered marketing operations in India and manufacturing in China, the firm has now plotted key areas that it plans to establish production facilities to ensure further diversification of products. The running of networked global operations is usually challenging, especially in the IT segment where rivalry is eminent. However, Lenovo’s broad understanding of diverse cultures and economies has boosted its production and distribution efficiency in numerous countries across the globe. According to Yang and Stoltenberg (2014), diversity inclusion has played a primary role in the establishment of the firm’s facilities overseas. Currently, it has a total of twelve executives who come from seven different countries and a hundred senior executives from diverse parts of the globe. This attitude has led to the assimilation of a blend of talents into its production activities. As a result, Lenovo has fully transformed from being a copycat to a pacesetter whose hi-tech products compete in the international market.

Globalization of Market

The globalization of markets is one of the most identifiable aspects of business in the 21st century. Lenovo is among a few Chinese information technology firms that have broken the barriers of trade to join the international market. Wang, Zhang, Wang, and Sheng (2016) reveal that the company’s market position is driven by a blend of both high-end and middle strategies. The rise of the company to the global position has been achieved through a number of ways. At the outset, the company uses acquisition strategies to get into various international markets (Wang et al., 2016). For instance, in 2005, Lenovo acquired the PC segment of IBM. This acquisition enabled the company to gain access to new technology. According to the company’s executives, the firm’s intention was not getting access to IBM’s PC technology but seeking its international marketing tactics (Li, 2014). Lenovo’s CEO believed that purchasing IBM’s PC and laptop division would pave way for gaining various business skills that were vital for improving its global presence. In 2012, the firm also purchased a top Brazilian manufacturer of PCs and mobile devices known as DigibrasIndustria. In addition, Lenovo acquired Motorola, a US company that manufactures smartphones (Li, 2014). This move was aimed at positioning the firm’s devices in affordable market segments in tier-2 and tier-3 cities. The latest acquisition was the purchase of IBM’s low-end server segment in China. Acquirement of the business divisions of other companies has played an important role in the strengthening of Lenovo’s market in the global arena.

Besides acquisition, Lenovo adopts a dual-brand strategy that places its brand at the entry-to-mid-level position in the market. Lenovo is geared towards achieving a quicker growth than the market itself to maintain its position in the international IT business sphere. The company aims at becoming one of the top-five IT companies that are spearheading the production of PCs and smartphones (Wang et al., 2016). In the last decade, Lenovo focused on online marketing tactics that improved its sales significantly. Indeed, approximately 60% of its products are available for sale through its websites. However, the company plans to expand its offline market by doubling its retail stores and service centers (Wang et al., 2016). Currently, Lenovo has about 2000 ground-level stores and 100 service points. The company has already maximized its importance in the Indian and Chinese markets in terms of sales volume and revenue. Nonetheless, there is a plan to double its production to a whopping 10 million units by the end of 2017. The plan to increase production will underpin its sales volume in overseas countries since it will export more PCs and smartphones (Wang et al., 2016). Lastly, Lenovo adopts a franchise model that helps it to sell other products such as notebooks, tablets, laptops, and phones. This strategy has increased its global presence in the international market.

Globalization of Institutions

The rise of Lenovo to the global arena is underpinned by various institutional frameworks that govern its business operations overseas. The bilateral relationship between China and the US has increased the chances of survival of Chinese operations in the American market. Lenovo has allocated a considerable number of resources to invest in overseas countries through foreign direct investment plans (Fagan, 2010). At the outset, the political environment in the United States has favored the establishment of production facilities and service centers in the country. This situation is witnessed in Lenovo’s acquisition of IBM personal computer division, which received relatively mild political reactions (Fagan, 2010; Wang et al., 2016). The US political environment for Chinese firms is anticipated to remain vibrant in the near future. However, this state will be determined by the overall status of the US economy (Wang et al., 2016). Based on this view, Lenovo has taken an advantage to enter the US market fully owing to the state of the friendly business regulations that are prevailing.

In addition, Lenovo complies with the regulatory requirements of other countries. The company has focused on improving its reputation of being a foreign investor by adhering to various anti-bribery policies that prevail in countries such as the United States. Lenovo understands the potential risks linked to overseas investments. As such, it has established a long-term strategy to develop its market position in countries that are not politically sensitive (Li, 2014). The company has also conducted a critical economic analysis in its foreign markets to ensure its survival amidst rivals who offer similar products such as HP and Dell brands.

Conclusion

The report has provided insight into the ways in which Lenovo uses the globalization of production, markets, and institutions to boost its viability in the global arena. Its global presence has been promoted by the acquisition of various segments of other companies such as IBM and Motorola. This move has not only increased its technological prowess but also has paved the way for entry into international markets in countries such as the United States. Lenovo products are designed with quality and customer taste in mind. As a result, the company’s brand recognition has remained exceptional both in China and the international market. Diversification of products and maintenance of its brand has helped the company to penetrate global markets. Besides, the company has invested heavily in establishing a good public relationship that underpins its goal to become the leading PC and smartphone seller in the international arena. However, the company’s products and services are only offered by monopolized outlets. Lenovo should encourage franchise strategies that will allow other technology firms to market their products. It should also ensure further product diversification to allow customers to choose their favorite designs and capture a wider market.

References

Fagan, D. (2010). The US regulatory and institutional framework for FDI. Investing in the United States: Is the US Ready for FDI from China, 2(1), 45-84.

Li, X. (2014). Internationalization strategy Lenovo China. Web.

Wang, M., Zhang, Q., Wang, Y., & Sheng, S. (2016). Governing local supplier opportunism in China: Moderating role of institutional forces. Journal of Operations Management, 46, 84-94.

Yang, X., & D. Stoltenberg, C. (2014). A review of institutional influences on the rise of made-in-China multinationals. International Journal of Emerging Markets, 9(2), 162-180.