Lenovo Acquisition of IBM Case Study
Lenovo is one of the widely acknowledged computer and hardware and Electronics Company in the world. It is known for offering PCs, table computers, mobile phones, servers, IT management software and electronic storage devices to name but a few of its products. Founded in 1984 under the name Legend, Lenovo has grown to become one of the successful in the world after its acquisition of IBM PC unit.
Like many other computer hardware and electronics companies in the world, Lenovo has tried its luck in many areas. The first significant attempt by Lenovo was to import television, but its efforts in the sector were futile. All was not lost as it started developing a circuit board that made it easy for IBM’s like-minded PCs to process Chinese characters. This became a major success for Lenovo as it started to develop computers under its own brand name. It introduced its first computers in 1996 and it market share went up in China. Unfortunately, competitive rivalry on the global platform affected its operations.
Lenovo faced competition from HP and dell, but these threat offered Lenovo an opportunity to turn to better globalized marketing strategies. Good things were on the way for Lenovo. In 2002, IBM’s CEO Sam Palmisano visited Lenovo to look at the acquisition issue. And in December 8, 2004, Lenovo made history by acquiring IBM’s global PC business. This merger and acquisition accelerated Lenovo’s market share as well as improved its branding and technological operations.
Lenovo paid $1.25 billion for IBM’s computer business venture and this amount detailed $650 million in cash, $500 million of IBM’s debt and additional $600 million for shares. From this exceptional undertaking, Lenovo became a core market player and it became the third largest computer market in the globe. The acquisition also made it easy for the company to take over IBM’s desktop and notebook business and related businesses worldwide. Besides, enjoying the new acquired status in the computer making world, there were a number of benefits that accompanied this merger and acquisition. They include;
- Lenovo gained instant presence and coverage outside China.
- It became easy to satisfy its globalization plan and achieve its global leadership in the personal computers and related products.
- IBM’s products also brought rapid awareness that made it easy for Lenovo to establish as single worldwide brand.
- The company also enjoyed cost savings through economies of scale in procurement.
- Lastly, the company also reveled in highly skilled and experienced product development team, exceptional portfolio of technology know-how and advanced facilities.
Majority of mergers and acquisition do not work out well and Lenovo was not exceptional. The company later faced serious problems. Culture difference, the human resource, high salary cost, troubles in integration, financial distress and supply chain issues where listed by many economic analysts. Fortunately, Lenovo had the solutions to these problems and it survived. Evidently, it adjusted and established a unified salary system. in addition, Lenovo launched the reconstruction project of the chain supply and introduced new leadership strategies that worked miracles. Hence, the Lenovo and IBM merger has been one of the fruitful and profitable one in the business sector.
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