Introduction

Under the new situation of capital internationalization and economic globalization, how to use the global strategy to realize the reasonable and effective allocation of products, technology, and organization system in the global market, and finally form the internationally recognized famous brand has become an unavoidable problem in the development process of Chinese enterprises.

Since China’s accession to the WTO, many large and medium-sized enterprises have gradually embarked on the road of internationalization through trade, M & A, FDI, and other means. However, due to the lack of international integration in management mode, business strategy, and corporate culture of Chinese enterprises, the international business performance of most Chinese enterprises is not very good. Throughout the development process of internationalization of Chinese enterprises, Lenovo Group has not only achieved great success in its internationalization development but also has great reference and enlightenment for many Chinese enterprises that are exploring the path of internationalization.

In 1984, the Lenovo Group was founded. After more than 30 years of development, in 2019, Lenovo’s products have gradually developed from personal computers to servers, printers, mainboards, laptops, palmtops, smartphones, smart TVs, all-in-one computers, etc. the products are distributed in more than 180 countries and markets around the world, with 57000 employees and a turnover of more than 350 billion yuan. Lenovo is one of the top 500 companies in the world.

In 2015, Lenovo ranked 74 on the list of the world’s top 500 brands, an increase of 12 on a year-on-year basis; in the 2015 list of the top 100 global brand values released by Interbrand, Lenovo ranked 100th with a high price of $4.1 billion, which is the first time Lenovo has been selected as the top 100 global brand values. Such remarkable achievements are closely related to Lenovo’s global strategy.

But at the same time, Lenovo also made a lot of mistakes in the process of international operation. Lenovo still lacks confidence in its own brand when it has obtained the absolute leading position in China’s PC field. Although Lenovo acquired Motorola in 1990, IBM in 2004, and other international strategies, it has played a very good role in improving the brand awareness of the enterprise, but at the same time, there are many problems in the management after the acquisition, including difficulties in cross-cultural integration, loss of customers, and business strategy errors.

In addition, Lenovo’s main target consumer country is only the United States, the leading western country. Other Chinese enterprises, such as Huawei, Xiaomi, Vivo, and oppo, also attach great importance to the international market, but they all put the main battlefield in their own base – China.

Even in the international market, under the strict market competition environment constraints of the United States and other western developed countries, many foreign key markets have been transferred to developing countries such as India. Lenovo’s strategy of taking the U.S. as its main target consumer not only lost the growth of sales in the international market but also allowed other IT enterprises (Huawei, Xiaomi, Vivo, oppo) to occupy the Chinese market. This paper will analyze Lenovo’s internationalization process from the aspect of brand positioning, diversification strategy, star, global value-added, and global challenge.

Global Competitive Strategy

Lenovo Group began to plan the international development direction in 2001, taking “high technology, perfect service, and globalization” as the development goal; in 2003, Lenovo Group changed its name, reorganized its brand structure, and started to promote the brand concept in an all-round way; in 2004, IBM personal computer business was acquired by Lenovo Group, and Lenovo Group promoted the brand internationally with the help of IBM’s brand and channel(van Duijl,2006).; in 2007, Lenovo Group began to take “Lenovo” as the main brand in the world, and since then, Lenovo Group has begun to expand rapidly around the world.

Brand positioning

The keywords of Lenovo’s brand positioning are: do, creativity, and aggressiveness. Its target consumers are young people who have the ability to act and are aggressive workers in various industries. The brand image building effect that Lenovo expects is: first of all, “do” means that Lenovo’s products have strong functionality and shaping, and the audience can have strong interaction with Lenovo’s brand(Mathews, 2006). The relationship between Lenovo and the audience is not defined by traditional companies and consumers. Lenovo can be the dream booster of the audience or consumers.

Consumers should have a strong sense of “friend” for Lenovo. In terms of brand reputation, Lenovo’s brand image should be positive. This kind of “positive” is reflected in three aspects: first, the interaction between Lenovo and consumers should be positive, and consumers or audiences are expected to perceive Lenovo’s “openness” and “inclusiveness”, rather than a relatively closed state; second, Lenovo’s brand products and services should have a positive impact on consumption and “do” related use scenarios;

Third, Lenovo’s product quality and price should be the same, and it is a high-end brand. Finally, in terms of the uniqueness of brand Lenovo, the brand image of Lenovo should be different from that of competitors at the same level in the industry, such as Dell and HP, which should be significantly different from them, while it has a sense of convergence with leading brands in the industry such as Apple or Samsung.

Diversified business

The transformation from business unification to diversification. Lenovo’s strategic transformation is directly reflected in business restructuring, including six “basic businesses”: consumer information technology equipment, commercial information technology equipment, handheld equipment, information operation, information technology services, component contract manufacturing(Wang & WANG,2012).

The market of these basic businesses has been very saturated. In order to enter a more segmented market, Lenovo’s leaders decided to establish a wireless communication business unit, handheld equipment business unit, broadband network business unit, and server network business unit through consultation. Although the diversified development has made Lenovo a further market segment, it has also hit the PC industry to a certain extent. Therefore, in Lenovo’s later policies, it focuses more on the PC industry, and other industries are only auxiliary development(Zwanenburg & Farhoomand, 2018).

STAR

Home Country

National specific advantage (CSAs) refers to the factors unique to the home country that can be used by enterprises, including system, policy, market scale, and low-cost labor force(Alon& McIntyre, 2008). Lenovo Group has obtained support from the Chinese government in terms of system, finance, and information when carrying out its internationalization strategy.

Institutional support

The Chinese government actively participates in or strengthens various bilateral, multilateral, and regional treaties, and enhances its influence in international organizations. Such as Shanghai Cooperation Organization, APEC, ASEM, and other cooperation mechanisms(Lin & Farrell,2014). These measures optimize the investment environment of Lenovo Group in the host country and provide protection and international institutional support for Lenovo Group’s internationalization strategy.

In China, the Lenovo group received tax relief and financial subsidies, which reduced the operating costs of the Lenovo Group. The Chinese government simplified the audit process of enterprise OFDI, thus shortening the time from formulation to implementation of Lenovo’s OFDI strategy, which is conducive to Lenovo enterprises to seize investment opportunities and optimize resource allocation.

Financial support

Lenovo Group needs high capital requirements for its internationalization strategy. The Chinese government provides support to enterprises in foreign exchange, loans, insurance, special funds, and other aspects, specifically as follows: gradually relax foreign exchange control, facilitate foreign exchange, improve the internationalization level of RMB; banks provide low interest or interest-free loans to OFDI, establish overseas branches to better serve the overseas operation of Chinese enterprises; policy financial institutions, such as the export and import bank, export credit insurance company to provide special loans and political risk insurance for enterprises; takes the lead in setting up an infrastructure investment bank in Asia; and establishes a silk road fund, which provides funds for projects involved in “one belt and one road” construction(Torelli & Rodas, 2016).

Information support

The internationalization strategy of Lenovo Group challenges the information searching ability of enterprises. China’s Ministry of Commerce has systematically collected and issued overseas investment guidelines, which detail the economic, political, geographical, and cultural environment, investment potential and investment policies, investment procedures, and precautions, as well as investment risk tips and risk response measures of each country.

Supplier and Partner Countries

Lenovo’s main suppliers and partner countries are Southeast Asian developing countries such as Vietnam and Thailand. Lenovo has more than 60 industrial bases in Southeast Asian countries, which supply raw materials and spare parts for Lenovo. The advantages and disadvantages of Lenovo’s direct operation in these countries include:

  • Cultural distance is relatively close

China is close to its neighboring countries, with similar customs and cultural backgrounds. Culture is the booster of economic development. The more similar the cultures of the two countries are, the more conducive they are to the communication and exchange between the social subjects of the two countries, enhance the penetration of economic aspects, and promote economic development. For Lenovo enterprises, the closer the host country’s culture is to its home country’s culture, the lower the cost for Lenovo enterprises to obtain information, be familiar with the market, and develop the market, and the lower the possibility for Lenovo enterprises to suffer from national resistance and market risk caused by the lack of understanding of local customs and other reasons(Yeung, et al., 2011).

  • Low cost of human resources

Southeast Asian countries are developing countries, and their economic level is relatively backward compared with China. As a result, the cost of human resources in Southeast Asian countries is low. Lenovo Group’s business is labor-intensive, low cost of human resources can save a lot of operating costs for enterprises.

  • Preferential Policies

In order to acquire the technology R & D ability and management skills of high-tech enterprises, Southeast Asian countries have formulated many preferential policies to attract high-tech enterprises to invest and run factories in these countries. Therefore, Lenovo Group can obtain a lot of tax preferences and convenient access policies when entering these countries, and reduce the operational risk and cost of Lenovo Group.

  • High level of corruption

Besides Singapore, most Southeast Asian countries are seriously corrupt in the corruption index, and the level of corruption governance is very poor. Cambodia is one of the countries with extreme corruption, which has occupied the end of the corruption index for a long time. Corruption and poverty have long plagued and restricted the development of the country, and are also deterring much external investment due to its high risk of corruption(Torelli & Cheng, 2015).

When Lenovo invests in these countries, it needs to make use of the “convenient hand” to engage in corrupt rent-seeking behavior. On the one hand, it increases the business risk of the enterprise, and on the other hand, it increases the business cost of the enterprise.

  • Lack of high-tech talents

The education level of Southeast Asia and other surrounding countries is very low, and the local labor force is lacks technical and management capabilities. Lenovo Group can only use local low-cost labor force to run factories in these countries, but high-tech talents need to be introduced from home, which not only increases the operating cost of enterprises but also increases the risk of cross-cultural management(Torelli, 2013).

Customer Countries

Lenovo’s headquarters is in New York, USA, with 19000 employees. Lenovo ranks fourth in U.S. sales(Gernego, 2018). The advantage of the United States as a major consumer country is that Lenovo produces high-tech products for people who are not very price-sensitive and have a high level of education. As a developed country, people in the United States have a high level of education.

However, after the Sino-U.S. trade war, the U.S. boycotted Chinese enterprises and restricted the circulation of their products in the United States. Lenovo enters the United States through the acquisition of IBM, and its headquarters are located in the United States.

On the one hand, Lenovo can provide a lot of taxes for the United States, and it can also improve the employment level of the American people, so it is conducive to reducing the resistance of the U.S. government to Lenovo. In addition, Lenovo can learn from the advanced technology level and management experience of the United States to continuously expand its strength.

However, the risk is that there are a lot of IT enterprises in the United States, the competition is very fierce, and the pressure for enterprises to survive in this environment is very great.

Source: canalys https://www.canalys.com/

Competitor countries

From the data released by IDC in the figure below, it can be seen that the top five brands of PC sales in the world are Lenovo, HP, Dell, apple and Acer. Among them, Lenovo and HP, the two PC manufacturers, have become the world’s leading PC manufacturers, accounting for nearly 50% of the global market share(Yu, Dang & Motohashi, 2019). According to IDC data, Lenovo’s main competitors are from the United States.

Source : IDC Quarterly Personal Computing Device Tracker, October 10, 2019

https://www.idc.com/

Global Value Added

Strategies for global value added-gains

Lenovo’s production base is mainly in China and Southeast Asian countries, while sales are in the United States and regions close to the United States. On the one hand, it is beneficial to reduce the operating cost by using the preferential policies of the home country, supplier, and partner countries; on the other hand, it can put the sales base in the consumer country and realize the maximum profit income.

At present, Lenovo has set up 25 subsidiaries in 14 countries, including Los Angeles, Desdore, Germany, the Netherlands, France, Austria, Spain, etc., which are responsible for sales, forming an international sales network of a certain scale(Zhang & Yang, 2018). A research institute has been set up in Silicon Valley to learn the latest information technology.

Through the acquisition of IBM’s CP, Lenovo Group has set up its headquarters in New York, its main operation center in Beijing, and its production base will be mainly set up in China and Southeast Asian countries. New Lenovo has more than 19500 employees, about 9500 of whom are from IBM.

In addition, Lenovo uses the industrial BM brand free of charge within 5 years, and permanently reserve the right to use the world-famous’ think ‘trademark, and obtain the R & D center, manufacturing plant, global distribution network, and service center related to IBM’s global business, including customer, distribution, and direct sales channels(Fan, 2018). So as to realize the localization of Lenovo’s production, R & D, and sales talents in the United States.

Strategies for global value added-costs

Lenovo has set up its production base in China, and its suppliers and partners are undeveloped countries near China. On the one hand, China’s policy of friendly coexistence with neighboring countries helps Lenovo reduce policy risks. In addition, the cost of raw materials and human resources in these countries is relatively low, which helps Lenovo enterprises to better save capital consumption in the process of internationalization.

The Global Challenge

This paper analyzes Lenovo’s global challenges from the perspective of SWTO

  • Strength

Lenovo brand products have market share advantages. Lenovo Group has been in the leading position in the domestic computer market for several years, and its market share has reached a high level of about 30% for a long time. According to the latest financial report released recently by Lenovo, in the second quarter of 2019, the PC business with a global market share of 25% has performed the best.

In terms of sales volume, Lenovo’s PC sales have exceeded the overall performance of the PC market for 21 consecutive quarters. In terms of tablet sales, the total sales volume is about 2.3 million units, an increase of about 67%, about eight times the growth rate of the tablet market. The outstanding performance of various types in global market share enables Lenovo to build and promote its brand smoothly.

From the perspective of financial performance, Lenovo Group has a relatively rapid upward trend after its internationalization path. The financial report of the second quarter of 2019 also shows that Lenovo’s quarterly turnover is 18% higher than that of the previous year, reaching the US $10.4 billion, and its profit is 23% higher than that of the previous year(Baker,2019).

Such profit growth makes Lenovo Group’s cash reserves continue to grow. This kind of financial performance is another peak in Lenovo’s development process, and also provides strong support for Lenovo’s brand’s sustained performance in the internationalization in the future. In short, from the financial point of view, Lenovo’s situation is very optimistic.

  • Week

The market share in Europe and America still needs to be improved. Although Lenovo’s overall global market share is gratifying, the distribution of each market is uneven. Especially in Europe and North America, where the economy is relatively developed and technology is relatively advanced, Lenovo’s market share is still quite limited. And to occupy the market share of these traditionally developed regions is far more significant for the shaping of an international brand than in the developing or backward regions.

In terms of core technology, Lenovo lacks its own original core technology because it follows the inter trend. Although Lenovo has its own technical advantages, compared with other competitors in the industry, the height and depth of core technology and original technology still need to be explored, and the core competitiveness is still insufficient.

The brand promotion experience is limited, and the awareness and trust in the international market need to be improved. Especially in the period of acquisition of IBM-PC, Lenovo also faced the problem of continuous promotion and integration of IBM / think and other brands. At the same time, in the competition with HP, Dell, and other competitors, Lenovo lacks overseas business skills, and it’s brand risk management ability is not strong. In addition, Lenovo’s target population is getting older, and its brand is also aging and lack vitality.

Compared with the stage of entrepreneurship and development, the brand building of Lenovo has entered a more mature stage. The brand is facing the problem of aging in the change of time. People’s impression of the Lenovo brand is still in a certain historical period, or there is an inherent impression, and there is no continuous follow-up. Any change and leap after the brand is bigger will be more and more difficult.

  • Opportunity

With the rapid development of emerging markets, Lenovo’s development has brought a huge pulling force. In the traditional developed countries, the market economy is sluggish and the consumption power is reduced. The increasingly vigorous development and active market situation of emerging economies provide inexhaustible power for sustainable brand construction.

The acquisition of IBM-PC enabled Lenovo Group to obtain rich resources in technology, channels, talents, and other aspects. It also benefits from a number of cases of mergers and reorganization in the PC industry, as well as a new way that many PC manufacturers begin to choose to outsource and setting up cases to carry out intensive production, all of which provide new ideas for Lenovo’s global resource integration. The way consumers receive advertising information has become more diversified, and the way and channel of brand communication have become increasingly broad.

The way consumers receive information is no longer single, and media communication has entered an era of boundless. With the deepening of world economic integration, the cost of internationalization has been reduced. With the world economy becoming more and more integrated, the cost of transportation, communication, and market development has also been reduced. Therefore, for Lenovo, it is facing an open market and a market full of opportunities.

  • Threat

The global market competition is fierce, and the price war is increasingly obvious. For Lenovo Group, the difficulty of the brand building continues to increase. In particular, the shaping of the high-quality brand and high-end brand image is more difficult under the pressure of price war. The overall growth of the global PC market is slowing down, the profit margin is decreasing, the homogenization trend and differentiation of PC are decreasing, and the replacement of PC products is likely to be partially replaced by other information products.

To sum up, the Lenovo Group has its own advantages and opportunities, but there are also disadvantages and threats. With the increasing scale of the enterprise, the pressure of Lenovo Group in the follow-up development will continue to increase. Lenovo Group should carefully consider the choice of target consumer countries and the way to enter the market.

Conclusion

Lenovo Group has left the classic strategic choice for research in its choice of globalization strategy and has gained the double affirmation of brand value and market. However, with the development of the world economy and industry, the internal and external environment of Lenovo Group’s inherent strategy is constantly changing. Lenovo’s current global growth strategy has a lot of problems, including the diversified development mode, the choice of target consumer countries, and access to the developed country market through M & A. Although these strategies have improved Lenovo’s brand awareness to some extent, they have also made Lenovo lose its core control over the PC market and some market shares of emerging countries. But overall, Lenovo’s global growth strategy is successful.

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