Lenovo Case Study

Chau Man Yick Patrick

Lenovo is an emerging Chinese multi-national company specializes in computer manufacturing. Founded in 1984, Lenovo’s original name was New Technology Developer, in which her major activity was computer assembly. With the continuing growth of the computer industry and enjoying the location competitive advantage of low manufacturing cost, Lenovo slowly evolved from a small local firm to a large domestic company aiming big to the international market. During 1997, Lenovo started to soar and developed her strategy to expand globally, which includes 3 major phases: positioning strengthening in Asia pacific region, acquisition of IBM and the qualitative strategies consisting acquisition, joint venture and reorganization. In the following paragraphs, analysis would be provided for the international expansion strategies mentioned above.

1. First Phase

The phase from 1999 to 2003 was a turning point of Lenovo for its internationalization strategy. Founded in 1984, after assembling computer components for foreign companies, then becoming in 1991 the first computer manufacturer in China, the company has reached the place of leader in their home market in 1997. NTD was back then only playing on the local market. Then 2 years later, the company started to expand internationally its business.

Several drivers motivated the firm to grow international.

First of all, thanks to favourable conditions in the country, such as government drivers coming from the Chinese government: financially and political supports were given to encourage to Chinese IT industry to grow. So STD, changed its name and logo by Lenovo to commercialize their products abroad. So they first chose the Asia-Pacific market, excluding Japan. Trading with Asian and Pacific countries is facilitated since the creation of the APEC (Asia-Pacific Economic Cooperation) since 1989 because this organization aimed at developing the economic growth, cooperation, trades and investment of this area. The Asia-Pacific market was advantageous because of similar customer needs and the location advantage because it’s a region near China and so the manufacturing of Lenovo computers (market drivers). For the cost drivers, selling more improve the scales economies and due to the proximity of the sales in Asia- Pacific, the logistic is easier and cheaper.

As far as CAGE distances, choosing Asia-Pacific target was a strategic choice. The distances were not that far. It was kind of same culture and social norms between Asian countries, consumer incomes are at equal levels because most of them are emerging countries. Some countries have common borders with Lenovo home market such as India, Korea, Myanmar, Laos, Vietnam etc. and for the other countries they are located in the same area (Taïwan, Indonesia, Cambodia, Filipino, Pacific countries etc.).Politically, trades were facilitated in the region thanks to APEC cooperation.