The Internalization of Lenovo - Term Paper Example

INTERNATIONALIZATION OF A MULTINATIONAL ENTERPRISE By Introduction In the past decade, emerging of the multinational enterprises has been analysed and discussed by economists. The multinational enterprises have been instrumental in shaping different countries way of life, investing in foreign countries, and creating job opportunities. Globalization is also one of the key factors that have facilitated the development of the multinational enterprises. Globalization has facilitated the sharing of ideas from one nation to another leading to the change of enterprises from small-medium enterprises to multinational enterprises. The stiff competition has also facilitated the change of the market and improvement of products to suit the demands of the consumers. Thus, the essay discusses the internalization of Lenovo a Chinese based company taking various factors into consideration such as its speed of internationalization and entry modes and subsequent changes. Type of the emerging market multinational Lenovo Company is a Chinese multinational electronic and computer hardware company. It produces different products such as workstations, servers, electronic storage devices, mobile phones, laptops, smart TVs, and IT management software. It is one of the largest portable computer vendors in the world (Tallman 2007, p. 54). It started to cater for the needs of the emerging market and deal with the immense economic growth. The company’s success is attributed to the lowering of the country’s regulation and restrictions through reducing barriers to entry and trade. They also come up with strategies for lowering the global competitiveness by ensuring that they are cost efficient. The costs of their products in different nations of the world are affordable to ensure that they reach a large market (Lewis 2006, p. 12). Consequently, emerging markets are characterized by a strong growth in the Gross Domestic Product (GDP) and well-integrated information and communication technology. There is also high standards of living and improved purchasing power. Lenovo Company has experienced growth overtime, and the purchasing power of its products has increased in all parts of the world. The company has entered into new markets in all parts of the world such as Europe. The emerging market has grown based on the fact that they produce low-cost goods and export them to the developing countries (White & Tadesse 2011, p. 147). Ideally, the emergence of different multinational countries has been facilitated by three main factors, technologies, economic openness and expansion strategies by the multinationals. Research shows that the largest multinational has over US $4.7 trillion foreign assets and about US3.4 trillion foreign sales (Maxwell 2009, p. 19). As the countries seek to expand their businesses further, there is an increase of the global competitive players. The multinational companies have broadened their activities by having low labor costs and developing a major hub for investment purposes. Most of the foreign companies such as Lenovo are penetrating in the developing countries (Maitland & Thomson 2014, p. 96). Additionally, economic openness is one of the factors which have contributed to the rise of the multipolar world. The economic openness has resulted in the breaking of barriers through the international and regional agreements (Kanter 2010, p. 52). Governments’ focus on allowing the multinational companies to invest and export in different parts of the world. One of the agreements which facilitated the growth of multinationals in China is the World Trade Organization. Innovation in technology has also been a great contribution. Technology has broken the barriers of distance and time resulting in the emergence of the multinational enterprises (Gallo 2011, p. 21). Where the company is based Lenovo Group Limited Company is based in China and has a registered office in Hong Kong. The company has established offices in more than 60 countries and operates in more than 160 countries. Apart from the offices, the company has five R&D centres worldwide (Irwin, Sutton, &Mccarthy 2008, p. 45). One is located in the United States, the other in Japan, and three main ones located in China. It has more than 1700 engineers who come from different parts of the world. Lenovo Company gets competition mainly from US-based companies which include Dell and Hawlett Packard and Acer based in Taiwan. Lenovo operates with a degree of transparency, which other companies in other parts of the world do not have. Additionally the company operates on global management principles. Additionally, Lenovo operates as a joint venture with NEC, which produces personal computers targeting the Japanese market (Daft, Kendrick & Vershinina 2010, p. 123). International path of the company Lenovo is a multinational country and recognized in all parts of the world. Its recognition started in 1994 when it raised nearly US$30 million in Hong Kong listing. Before its Initial Public offering, the company was praised for its good management, growth potential and strong brand recognition. The company had good marketing strategies which facilitated its growth. For instance, the first company’s stocks were used to finance sales in other parts of the world such as North America, Europe, and Australia. Through these activities, the company increased its sales and moved slowly to its international path (Samson & Draft 2011, p. 63). In order to fund its continued growth, the company offered a secondary offering of 50, 000 million shares on the Hong Kong market. Through the secondary offering, the company raised more than US$212 million (Ramamurti & Singh 2009, p. 48). The chief financial officer who was in office in 1990 to 2007 integrated the Western-style accountability into the corporate culture. Issues on major share transfers, management, acquisitions, and mergers were accurately reported which lead to the growth of the company. They also had a norm of issuing quarterly reports. The company has also distinguished itself from the other companies through its recognizable brand name. Its products are also of high-quality products, making it get an open market in all parts of the world. When it started, which markets they entered and speed of internationalization Lenovo Company started in 1984 as a small guard house. Liu Chuanzhi a Chinese businessman and a group of other ten people formed the New Technology Developer Inc., which later became the legend group. During its first stages, it focuses on modification of the IBM computer mainly targeting the Chinese market. In 1989, the company produced its computers with the brand name Legend. The first portable computer had a weighing capacity of 30 pounds. In 1986, IBM announced the first portable computer, which weighed 12 pounds (Rimmer 2014, p. 52). In 1988, the Legend Company received the National Science, Technology Progress Award in China. In the same year, Legend Hong Kong was established. Legend later launched its first portable computer in the market in 1990. Legend Company working under IBM introduced ThinkPad which had 10.4 inch colour (TFT) Thin Film Transistor display and red ball which acted as the pointing device it was referred to as the TrackPoint. In 1993, Legend Company produced the first 586 PC and established retail networks. The introduction of the first notebook with an integrated CD-ROM with a ThinkPad of 755CD was of great advantage to the company (Burnison 2011, p. 89). The year 2005 marked a great revolution in the Lenovo Companys industry. Lenovo acquired IBM’s personal computer business, including the tablet lines and ThinkPad laptops. The acquisition of IBM’s personal computers accelerated its access to the foreign market while at the same time it improved its technology and brand. To acquire the personal computer legal rights Lenovo paid IBM US$ 1.25 billion and at the same time assumed an additional debt of US$500 million. The acquisition from IBM made Lenovo Company the third largest computer company worldwide(Petti & Ederer 2012, p.19). Through the acquisition of IBM, Lenovo Company benefited in three main ways which include the company’s international resources, ThinkPad Brand and IBM’s more advanced technology. Acquisition of the items opened up the global market for the company making it to be known in the world. Lenovo also purchased the IBM’s computing division. Lenovo also opened up the Research Triangle Park, which enabled customers and independent software volunteers to collaborate in coming up with solutions in the computing sector (Larcon 2009, p. 36). Since 2006, Lenovo made great improvements on the personal computers. It introduced the ThinkPad notebook which resulted in improvement in productivity and extended its battery life to 11 hours. It also supported the Olympic Winter Games in Torino where it supplied 5,000 desktop PCs, 1,000 notebook computers, and 350 servers. It also hosted the servers which were used during the Olympics (Kurtz & Boone 2009, p. 12). In the marketing sector, it also had remarkable achievements. For instance, in 2010 the company became the fastest PC manufacturer. It also introduced LePhone smartphones and sold 60 million ThinkPad. Later in 2012, Lenovo formed a joint venture with EMC to develop storage solutions. In the same year, the company focused on cloud computing and was announced the leading consumer electronic company in Brazil (Yueh 2011, p. 17). Entry modes and subsequent changes Lenovo Company operations always aim at the broad implication which is the future of China’s economy. Different Chinese companies are involved in various waves of mergers and acquisition in the automobile, real estate, entertainment, and the agricultural sectors. Lenovo Company is involved in the mergers and publicly listed in the Hong Kong listings. The company also operates on the basis of global management principles (Backaler 2014, p. 13). The company also came up with different strategies which facilitated its expansion in the global market. Subsequent changes have occurred in the management and other areas of the company. The first chairman of the board of in Lenovo Company was Yang Yuanquing. He joined Lenovo limited group in 1989 and became its CEO in 2001 (Yeung 2011, p. 85). Under his leadership, Lenovo had the best PC selling brand from 1997. Apart from leadership, Lenovo created a new global enterprise that was network oriented rather than hierarchy oriented. They also had a new organizational approach. They invited international coaches such a Dave Ulrich, who coached Lenovo executive (Wale, Gorman & Hope 2010, p. 78). Target market niches and competitors Over time, the Lenovo Company has not received much competition because of its outstanding products. However, it now faces stiff competition from two world’s most innovative companies, which are Samsung, and Apple Electronics, which dominate the handheld connected devices and smartphones. On January 2009, the CEO of Lenovo company came up with a strategy, which he referred to as ‘protect and attack’ and said that the company has to have a strong Chinese PC base. To deal with the stiff competition, Lenovo came up with new products such as smartphones. They also introduced new geographical areas where they would market their products (Moller 2011, p. 56). Yang Lenovo’s company CEO also built three major areas which would lead to its success in the multinationals. The three major areas which he focused on include marketing, supply chain management, and technological development. At first, Lenovo’s supply chain system was not well integrated. The company planned to have different distributors in different regions of the world to ensure all the supply needs of the consumers were met. The distribution points would make delivery of the goods fast and make it more reliable (Price & Dayan 2008, p. 23). Unlike other companies, Lenovo keeps its design in-house it does not outsource its designs as most of the companies do. Lenovo Company also embraced the revolution speed of desktop to smaller and portable computers. Innovation has also been evident as the company produces new smartphones, laptops, and tablets. They are in pursuit of producing lighter, thinner, and faster products. The company has also come up with super light and carbon fibre laptop bodies, for instance Xi Carbon ThinkPad (Zompanti 2009, p. 43). It has also recognized the emergence of the convertible products. Thus, the company has also come up with convertible products to cater for the needs of the consumers. Uppsala Model The Uppsala Model is the best to analyse the internationalisation of Lenovo Company. The theory clearly shows how firms intensify their activities in the foreign market. Key areas tackled in the theory include how the firms’ gains experience in the domestic market before it moves in the international or the foreign market. Most of the firms start their foreign operation using the traditional exports and gradually move to using the most intensive operation modes such as sales subsidiaries (Khalid 2009, p. 36). At first, the company commits itself to higher resource investment so as to acquire a position in the foreign market. In this model, commitment is defined in terms of the degree of flexibility in delivering its services and goods. Lenovo limited company started supplying its good and services in its domestic market. That is why its headquarters was first established in Hong Kong, which is in China. Over time, Lenovo Company has increased its distribution and operates in more than 160 countries. Globalization has resulted in its change in the supply chain and also making sure that distributors are situated in different regions in the world. The company has intensified its activities by ensuring that it suppliers’ consumers with the goods and services which they require. Its flexibility has also been evident because of the establishment of offices in over 60 countries. Lenovo also sponsors some of the major activities, such as the Olympic Games, which took place in Beijing in 2008 (Zhang & Alon 2010, p. 36). Conclusion Lenovo Company is one of the emerging multinational companies. The company has expanded swiftly compared to other companies. The established of the R & D centres all over the world has facilitated its expansion. The R & D is also referred to as the innovation triangle which engineered the establishment of Lenovo Company in three locations which were United States, Japan, and China. The company does in-house designs thus making it different from the other countries. Lenovo Company caters for the distribution needs of the customers because it is located in different regions in the world. The emerging markets have policy space which means that they can reverse their policies and invent new ways of performing their activities. The Company also is involved in various campaigns to ensure that it maintains public interests. Globalization has been a key factor in the growth of Lenovo Company to become a multinational company. The stiff competition has also facilitated its growth. Recommendations 1. Improving their delivery services Instant delivery of product is one of the main issues that Lenovo Company should aim at developing. The technology is advancing at a high speed. Hence, Lenovo Company should ensure that it develops a good channel for the delivery of their services in all parts of the country. 2. Developing more advanced smartphone Lenovo Company has mainly specialized in tablets and personal computers. The company needs be more advanced and develop smartphones to counter their main competitors Samsung. Developing the phones will increase their market. Bibliography Backaler, J. 2014. China goes West: everything you need to know about Chinese companies going global. Basingstoke, Palgrave Macmillan. Burnison, G. 2011. No fear of failure real stories of how leaders deal with risk and change. 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