The world’s top personal computer (PC) producers are Lenovo, HP, Dell, and Acer. Based in China, Lenovo generates more than $45 billion in total sales. About 30% of sales are in China, 15% come from each of Europe and North America, and 40% come from the rest of the world, including numerous emerging markets. Lenovo has experienced rapid growth, even during periods of soft global demand. Founded in modest circumstances in 1984, no one imagined it would evolve into a Fortune Global 500 company present in 160 countries. Today, from regional headquarters in each of Beijing, Paris, and Raleigh, North Carolina, Lenovo offers desktops, laptops, tablets, workstations, servers, and mobile phones to customers worldwide.

Company Strategy

The PC industry has reached maturity, especially in advanced economies. Computers have become commodities, and profit margins are thin. The industry is global, which means firms compete with each other and cater to customer needs on a global scale. Key to Lenovo’s success is R&D, innovation, organizational learning, low-cost production, and skillful marketing.

Lenovo uses mergers and acquisitions (M&As) to acquire knowledge and other assets from partner firms and to expand into markets worldwide. In 2005, Lenovo acquired the PC business of IBM, which instantly established Lenovo as the number-three PC maker worldwide. In 2011, Lenovo formed a merger with NEC, Japan’s largest PC vendor, to better access the Japanese market. The merger increased Lenovo’s scale economies in manufacturing and marketing. In 2014, Lenovo acquired the telecommunications firm Motorola Mobility to establish a global presence in smartphones.

Lenovo follows a protect-and-attack strategy. While protecting its core business, especially the Chinese market, the firm is aggressively growing its market share in emerging markets and advanced economies. It is rapidly growing new product categories such as tablets and smartphones. Lenovo’s deep knowledge of doing business in China provides competitive advantages for targeting emerging markets. The firm now generates about 25% of its sales from emerging markets outside China.

Lenovo’s international strategy emphasizes global innovation, global products and branding, global human resources, a corporate culture conducive to global success, and superior manufacturing and value-chain management. Let’s examine these strategies in detail.

Global Innovation

Acquisition of IBM’s PC business allowed Lenovo to tap world-class technological know-how. Lenovo is a leading PC developer and is rapidly expanding its position in tablets and smartphones. It leverages top-notch innovative capabilities from R&D facilities in Beijing, Raleigh, and Yokohama, Japan. Each facility has its own distinctive talent capability. Lenovo owns more than 6,500 international patents. BusinessWeek ranked Lenovo one of the world’s most innovative companies. It constantly invests in R&D for breakthrough technologies and innovative products. Lenovo can count on capital infusions from China’s government, which maintains partial ownership in the firm.

At the annual Consumer Electronics Show in Las Vegas, Lenovo has unveiled many products, including a Windows-based smartphone, a half-tablet, a half-notebook, a smart TV, and a thin and lightweight ultrabook PC. Strong market research capability enables Lenovo to foresee what consumers desire in information technology products. For example, Lenovo’s Yoga is an ultrathin PC that doubles as a tablet. The firm also leads in green technologies. ThinkPad PCs are built from up to 30% post-consumer content, using recycled material such as old water jugs. PCs meet the latest high-energy efficiency standards and rate well on eco-friendliness.

Global Products and Branding

In developing its products, Lenovo emphasizes modular architecture—suppliers manufacture interchangeable components and modules, which are then snapped into PC cases rolling down assembly lines. The same parts—power supply units, processors, graphics cards, hard drives, and others—can be used to produce various PC models. Interfaces are standardized to facilitate production of PCs that are simultaneously differentiated but use standard parts and components. This minimizes the cost of manufacturing and designing computers. Products are standardized worldwide, but elements such as keyboards and software are customized to respond to local language needs.

By purchasing IBM’s PC business, Lenovo acquired the ThinkPad product brand and access to the IBM name. Lenovo leveraged the IBM name to build brand awareness on a global scale. Lenovo’s “For Those Who Do” global branding campaign is engaging consumers worldwide. The firm is leveraging the power of global social media to target marketing campaigns to young people. Its retailing websites look identical worldwide but are adapted for language differences.

Marketing also responds to local conditions. For example, Lenovo is the most popular PC brand in rural China, where the firm established a complex distribution network extending to small cities and towns. Prices are adapted to fit the buying power of low-income consumers. Advertising is uncomplicated and education-oriented to accommodate buyers less experienced with high-tech products. Lenovo adjusts marketing to fit local traditions. For example, the firm markets wedding computers, which come in red, the luckiest color to Chinese. Rural families often pool their money to buy a bride and groom their first PC as a wedding gift.

Global Human Resources

Lenovo worked hard to integrate Chinese business methods with an international workforce of 52,000 employees. Blending the distinctive national and organizational culture of IBM required hiring managers with a global mind-set and strong international background. Lenovo recruits globally savvy executives from other high-tech firms and hires talented graduates of top universities to incubate them as future company leaders.

Senior management is dedicated to helping employees develop their careers. The firm created a global training program that offers accelerated development opportunities for employees. The human resource group helps high-potential employees develop personalized training plans and career maps. All employees are asked to examine their career aspirations and the training they need to attain their goals. The career maps are linked to Lenovo job slots around the world, and employees have much latitude to pursue their career goals within the firm.

Global Culture

In 1994, Lenovo’s founder, Liu Chuanzhi, forecast the firm would become a great, global company. At the time, there were few global Chinese firms, and Chuanzhi’s strategic vision stood out. Today, Lenovo’s strategic vision attracts many talented managers to the firm. If an employee demonstrates capability and vision, rapid advancement is possible. Aiming to foster a global spirit, executive team meetings rotate among Beijing, Hong Kong, Singapore, Paris, and North Carolina. The firm’s official language is English, and internal programs socialize young managers into the firm’s organizational culture. Nationality doesn’t matter. Lenovo management values the diversity of global cultures and the learning that arises from foreign business environments.

Socialization creates broad, tacitly understood rules for appropriate action by managers at all levels. Lenovo managers become well acquainted with the firm’s culture and goals. Managers feel a strong connection to the firm, wherever they operate around the world. This guides decisions on company activities and facilitates global knowledge exchange. Connectedness builds trust and cooperation. It encourages communication and interaction. It facilitates the integration and assimilation of new knowledge and capabilities.

Manufacturing and Value-Chain Management

Lenovo concentrates manufacturing in China, Argentina, India, Mexico, and Poland. Production in these low-cost countries generates efficiencies and economies of scale. Regional headquarters in the U.S. and operations in low-cost countries help diversify sales across advanced economies and emerging markets. While investing huge sums in R&D and innovative product features, management maintains a sharp focus on keeping manufacturing costs low. Sourcing of parts and components is done on a global scale. Sourcing from hundreds of high-quality suppliers ensures flexibility in logistics and production.

The diversity of partners and international environments helps Lenovo acquire new technical and managerial knowledge, new product ideas, improved R&D, and better partnering skills. Lenovo leverages intranets and global information systems to share important knowledge among the firm’s subsidiaries worldwide.

Lenovo aims for double-digit share in each of the markets where it does business. The firm intends to maintain a sharp focus on customers, providing them with the most innovative products worldwide.

Case Questions

11-4. What is strategy? How does Lenovo use strategy to succeed in the global marketplace? What strategies does Lenovo employ to maximize company efficiency and flexibility? What does Lenovo management do to foster organizational learning?

11-5. Describe Lenovo’s organizational culture. What are the characteristics of Lenovo’s culture? How does the culture help Lenovo achieve its international goals?

11-6. What is the nature of Lenovo’s international strategy? Is the firm’s strategy primarily multi domestic or global? Justify your answer. What advantages does Lenovo derive from the particular international strategy(s) that it pursues?

11-7. Examine Lenovo in terms of the integration-responsiveness framework. What are the pressures that Lenovo faces for local responsiveness? What are the pressures that Lenovo faces for global integration? What advantages do local responsiveness and global integration each bring to Lenovo?