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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?
  4. How did Lenovo become such a large corporation? 4
  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
  6. Why did Lenovo acquire IBM? 6
  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
  12. Why do acquisitions fail? What did Lenovo do better? 12
  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
  15. What happened after the acquisition of IBM PC? 15
  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
  22. BCG Matrix: Products 22 Tablet and PC+ are Lenovo's stars, Phone still rising.
  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.
  25. Thank you. 25
  26. Backup 26
  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
  28. Backup: Time Series 0 100 200 300 400 500 600 1990 1995 2005 2009 2010 2011 2012 2013 2014 2015 2016 E 2017 E 2018 E 2019 E 2020 E Global PC Sales [mio. units] Desktop PC Laptop Tablet 28
  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
  30. Sources • content/00992/NOW.761437/hk-stock-news • 4b0e6ed7cf1c4f1/1398471663674/?format=1000w • full-year-201516-results.htm • 16-operational-results.htm • 30
  31. Sources • market-personal-computers-chinas-lenovo-setting-its-sights • lenovo/#7b41a0ceaf0a • • despite-a-shrinking-market-for-pcs • Samsung history: global-brandcase-study.html 31
  32. Sources • • of-lenovo/ • markets-solid-results.htm • ausgelieferte-pcs-nach-quartalen/ • weltweiten-absatz-von-pcs/ • 6.E2.80.932000 Statistics 32
  33. Pictures / Icons • Icon Pump - By James Keuning, US ( • Icon Man (Pushing Big Ball) - By Gan Khoon Lay ( • Icon for BCG: Product Placement - By Krisada, TH ( • Icon Smartphone - By unlimicon, ID ( • Icon Laptop - By BAM! creative studio, HR ( • Icon Server - By ✦ Shmidt Sergey ✦, US ( • Picture PC+ - ( 33

Notes de l'éditeur

  1. 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.
  2. in other words: How could Lenovo establish and sustain a leadership role in an industry, where competitive positions were increasingly unstable?
  3. 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)
  4. covered markets: at this time China and East Asia (except Japan) PC markets new markets: US market
  5. 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
  6. 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
  7. 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
  8. in other words: How could the Chinese firm build a solid competitive position in an industry, characterized by smaller and smaller margins?