Ibm and Lenovo

1. Critically assess the changes in strategy that have taken place at IBM, both before and after the sale of PC business.

IBM sold the PC business to Lenovo in order to concentrate on higher value activities, mainly for business customers. In their PC business they used technologies from different companies, thus in this very competitive market IBM’s profitability in this sector became minimal.

IBM’s management now sees the company’s strategy as moving towards large BPO projects, its “business process transformation services”. The company will need to change its culture from a product and software orientation to one of service provision, which will require greater flexibility and more of solutions approach than its traditional hardware business.

In general, the decision to sell IBM’s PC business was a good one for both of the sides. IBM always had diversified product lines, so this deal is just a good finance decision, which helped to raise the total profitability of the company.

2. What aspects of globalization are highlighted in the case study?

Markets: Lenovo’s aim of this partnership was getting access to new distributional networks. Thus, Lenovo, from a corporation with share of 30% of Chinese market became a global company, which is becoming an equal competitor with Dell and Hewlett-Packard and targets new emerging markets and small business users in developed countries, which had been never a priority for IBM.

Production: Lenovo’s competitive advantage is that it uses its experience in designing low-cost machines and expertise in procuring low-cost components for Chinese market. The deal included a five-year brand licensing agreement, the acquisition of globally-recognized trademarks such as the ThinkPad and an arrangement for IBM to provide Lenovo with various support services worldwide. Thus, Lenovo was able to compete with the world leaders