- History of Lenovo and overview of the global PC market
- Lenovo's acquisition of IBM: Match made in heaven
- Lenovo's further M&A's and globalization strategy
Strategic Project Finance Essentials: A Project Manager’s Guide to Financial ...
Lenovo Case Study - The raise to the global #1 PC manufacturer
1. KAIST College of Business
Innovation Management
Fall 2016
by Oliver Gottschalk
1
2. Lenovo today
PCG: PCs, Windows Tablets // MPG: Motorola, Mobile phones, Android tablets and smart TV // EPG: servers, storage, software and services
Lenovo is the world's largest PC manufacturer today.
66%
22%
10%
PCG MBG EBG Other
28%
16%26%
30%
China AsiaPacific
Europe, ME & Africa Americas
44.9 revenue
billion US$
33employees
thousand
60countries
in
worldwide
#1PC
vendor
4th
Smartphones
largest producer of
2
3. Why did Lenovo acquire IBM?
Why do acquisitions fail?
What did Lenovo do better?
And what does this case have to
do with Innovation Management?
3
How did Lenovo become
such a large corporation?
5. 1994 1999 2004
History of Lenovo
From HP's assembler to the buyer of IBM's PC business.
1984:
founded
as "NTD"
1989:
renamed
"Legend"
1997:
market
leader in
China
2003:
renamed
"Lenovo"
1991:
first
in-house
PC
1987:
first
product:
Chinese
Character
Card
2004:
acquisition
of IBM's
PC business
1970:
first PC:
IBM
1984:
Dell:
direct
sales
1985:
HP JV in
China
1990s:
offshoring & outsourcing
Global
early 2000s:
consolidation
400 Mio.
200 Mio.
PC sales [units]
Desktop &
Notebook
5
7. Becoming Global
Internationalization is an opportunity of growth, …
Internationalization
&Threats
in domestic market
Opportunities
in new markets
higher growth &
profits
risk
diversification
slow growth
increased
competition
economies
of scale
7
8. Lenovo's Strategy
…that Lenovo attacked through JVs and acquisitions…
Strategy:
&protect
covered market
attack
new markets
acquisitions
Alliances &
Joint Ventures
competitive
products
low prices
8
9. Becoming Global
…classifying Lenovo as a "Contender".
Competitive Assets
Dodger Contender
Defender Extender
customized to
home market
transferable
abroad
lowhigh
Pressureto
Globalize
9
10. ACQUISITION OF IBM PC
"A match made in heaven": The best from East and West
10
11. The Acquisition
Use of the "ThinkPad" brand led to a growth of Lenovo
• use "IBM" label for 5 years, "Think" label w/o limitations ->
three steps in marketing to transform "IBM ThinkPad" brand
to "Lenovo"
• Lenovo expanded significantly: shipments of Think labeled
computers doubled (2005-2013), expanding tablets and
hybrids
• significant success with high-value strategy:
40% market share (US, Windows above $900)
11
13. Why do acquisitions fail?
Company culture and conflicting goals are major causes.
excessive competition
for leading positions
conflicting goals
among newly
merged departments
Disregard for the
need of employees
concept of integration
is not detailed enough
acquired one forced
to accept company
culture of purchaser
resistance to change
The classic fail
…
13
14. What Lenovo did better
Lenovo became a global firm didn't force IBM to adapt
excessive competition
for leading positions
conflicting goals
among newly
merged departments
Disregard for the
need of employees
concept of integration
is not detailed enough
acquired one forced
to accept company
culture of purchaser
successful merger
…
keep former
executives
focus on winning
develop new culture,
becoming international
caring about
employee's needs
intense work via
conference calls
English as
working language
14
16. Recent history of Lenovo
Lenovo started a Joint Venture with NEC and …
2007:
iPhone
Global
April 2010:
first iPad
Oct 2012
100 mio iPads sold
2014:
Sony sells PC business
CEO: Ward & Amelio ('04-'09)
2014:
acquisition
of Motorola
2011:
JV with NEC,
acq. of Medion
2004:
acquisition
of IBM's
PC business
Oct 2016:
speculations of
buying Fujitsu's
PC business
early 2000s:
consolidation
2008 & 2009:
sold off mobile
business and
bought it back
2004 2008 2012 2016 E
2014:
acquisition
IBM's
server
business
400 Mio.
200 Mio.
PC sales [units] Tablet
Desktop &
Notebook
16
17. OTHER ACQUISITIONS
acquired multiple companies like Motorola.
JV with NEC
• access to Japanese market
• co-operation in tablet computer
development
• patents (3G, LTE in 2014)
2011 Acquisition of "Medion"
• access to German PC market
• approx. 14% market share
2011
Acquisition of "Digibras/CCE"
• had a plant in Brazil before
• local partner needed for more growth
• also for marketing during 2014 World Cup
and the 2016 Summer Olympic Games
2012 Acquisition of "Motorola"
• Google as OS-only provider, only wanted
Motorola's patents, Lenovo get's access
• access to US market smartphone market
• the "Motorola" brand
• relationships to US carriers
2014
17
18. And what does this case have to do with
Innovation Management?
18
19. How did Lenovo do it?
Acquisitions are the main reason of todays Innovation.
Introduction of heretic culture
Innovation
Strengthening company brand
acquire talented employees
Dual HQ & WW Research
19
20. Innovation
Technology and product innovation at Lenovo lead to …
20
3,200researchers
and engineers in
46labs producing
world-class
3,500patents
per year
24months
time-to-market
goal
100design awards
well known
business model innovation
culture management innovation&
Technology Product Innovation
Other
21. Lenovo today
PCG: PCs, Windows Tablets // MPG: Motorola, Mobile phones, Android tablets and smart TV // EPG: servers, storage, software and services
… Lenovo's top positions in PC & Smartphones market.
44.9 revenue
billion US$
#1PC
vendor 4th
Smartphones
largest producer of
21
23. What are similarities &differences
between Lenovo and Samsung
Becoming global brands ?
23
24. Lenovo vs. Samsung
24
Different expansion strategies and similar vertical integration.
Assembler own PC
EastAsia
expansion
global
acquisitions
high-value
strategy
#1 in PC
market
Component
supplier
own TV,
fridge, ..
globally
perceived
as OEM
global
branding
high-value
strategy
#1 in
Memory, TV,
Smartphone
Samsung is traditionally a fast follower in consumer markets and enters them late, but
with it's full strength under the same brand. High costs because of marketing.
Lenovo entered new markets late, using already existing brands gained by acquisitions
and transforming them into Lenovo. High costs because of acquisitions.
27. Backup: Global/Assets
Competitive Assets
Dodger
focus on a locally oriented link in
the value chain, enters a joint
venture
or sells out to a multinational
Contender
focus on upgrading capabilities and
resources to match multinationals
globally, often keeping niche
markets
Defender
focus on leveraging local assets in
market segments where multi-
nationals are weak
Extender
focus on expanding into markets
similar to those of the home base,
using home developed
competencies
customized to home market transferable abroad
lowhigh
PressuretoGlobalize
27
29. Backup: Time Series
Global PC sales (incl. Desktop, Notebook)
0
50
100
150
200
250
300
350
400
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 E 2018 E 2020 E
Global PC Sales [mio. units]
29
33. Pictures / Icons
• Icon Pump - By James Keuning, US (thenounproject.com)
• Icon Man (Pushing Big Ball) - By Gan Khoon Lay (thenounproject.com)
• Icon for BCG: Product Placement - By Krisada, TH (thenounproject.com)
• Icon Smartphone - By unlimicon, ID (thenounproject.com)
• Icon Laptop - By BAM! creative studio, HR (thenounproject.com)
• Icon Server - By ✦ Shmidt Sergey ✦, US (thenounproject.com)
• Picture PC+ - http://www.notebookcheck.com/ (thenounproject.com)
33
Notas do Editor
PC, smartphones, tablets and smart TVs.
In two years, we built a smartphone business from scratch and reached #4 in the world. We are now rapidly expanding to new markets.
We have launched a family of convertible PCs that combine the best features of both notebook PCs and tablets, leading a new category of personal technology.
in other words:
How could Lenovo establish and sustain a leadership role in an industry, where competitive positions were increasingly unstable?
General market:
early 1980s very dynamic market
1982 Compaq with IBM Clone
1990s MS and Intel set PC standards
high profits in the 1990s
CHINA WTO
downfall in the early 2000s, consolidation of PC vendors -> economies of scale
2004 Hop 5 players account for 50% of the market
Lenovo:
founded 1984 as “Legend/NTD” by 10 scientits, activity_ assembly for foreign manufacturers
1987 launched first product: Chinese character card allowing…
2003 new brand “Lenovo” (Latin&Chnese: new creativity)
covered markets: at this time China and East Asia (except Japan) PC markets
new markets: US market
IBM had a unprofitable PC business, low margins, …
option 1: sell to lenovo
option 2: spin out division to private equity firm
Lenovo benefited in three ways from the IBM acquisition.
ThinkPad & ThinkCenter brand (and IBM logo for 5 years),
IBM's more advanced PC manufacturing technology
and the company's international resources, such as its global sales channels and operation teams.
Agreements:
Lenovo gets access to IBM's 30,000 strong enterprise sales team
no competition with IBM services & consulting
IBM logo only for Think-products for 5 years
global support by IBM for 5 years
Lenovo works to integrate the management of each newly acquired company into its larger culture. Lenovo has a dedicated mergers and acquisitions team that tracks the progress of these integrations. Lenovo has an annual meeting where the management of newly acquired companies meets with its top 100 executives. In these meetings, held in English, Lenovo explains its global strategy and how new executives fit into its plans
General market:
iPhone in 2007
iPad in April 2010, 100 million sold between its release in April 2010 and mid-October 2012
iCloud in 2011 – making mobile devices independent from PCs
2014, Sony had sold off its PC division
old more iPad tablets during the fourth quarter of 2011 than personal computers were sold worldwide
Despite the decrease in PC sales, desktop computers and laptops still make up 84% of the global Web traffic as of March 2013
trend since 2015 going to high-resolution pens and handwriting recognition
Lenovo
FUNFACT:
Lenovo sold its smartphone and tablet division in 2008 for US$100,000,000 in order to focus on personal computers
and then paid US$200,000,000 to buy it back in November 2009
Lenovo entered the smartphone market in 2012
quickly became the largest vendor of smartphones in Mainland China
in other words:
How could the Chinese firm build a solid competitive position in an industry, characterized by smaller and smaller margins?
