Operations managing strategy of lenovo

Functions, Operations Management, Avon Products, Market Entry Strategy

Excerpt from Composition:

In this regard, Lin and Lin add that, “The Oriental personal computer producer wanted to maximize its reveal in American markets. The acquisition hoisted the manufacturer via 9th spot to 3rd put in place terms of PCs distributed. These acquisitions illustrate China’s desire to spend low-cost money to acquire existing brands and distribution gain access to, as well as securing additional stores for various other Chinese developed goods” (2008, p. 32).

Planning and control.

Although a lot of observers suggest that Lenovo represents a true Horatio Alger accomplishment story having begun with a very moderate start-up capital of just $24, 1000, Huang argues that the facts involved in the company’s success are more complex and relate to you’re able to send ability to implement management functions in ways that established preparing goals and its ability to control the company’s resources to achieve these kinds of goals. For example, Huang paperwork that, “Its subsequent rounds of auto financing, including an IPO in Hong Kong, had been all quite substantial and so they all originate from Hong Kong. China’s massive economic climate had little to do with Lenovo’s success. Neither could the casual finance include propelled Lenovo to it is current prominence” (Huang 2006, p. 288). Vernon’s merchandise cycle theory conforms for the path used by Lenovo following this name alter and the actions the company took to grow their business at your home and in foreign countries. In fact , Liu (2007) suggests that it was not really an issue whether or not the company can succeed in rescuing the struggling IBM personal computer division and be in to a profitable business, but rather a matter of exactly how profitable it would become. “In the final evaluation, ” Liu advises, ‘we concluded that it absolutely was not a question of whether we’re able to turn the PCD about so that it turn into profitable, but rather a question showing how profitable it could possibly be” (2007, p. 575).

Moreover, based upon his scientific observations together with the company, Liu notes that, “We discovered that IBM PC’s gross income margin was around 24%. This was, in fact , much higher than that of Lenovo’s, which was about 14%. However , the latter has a 5% net income whereas the previous was not profitable. The reason was quite simple: costs and bills were higher, some of which had been unavoidable so long as the business was still part of IBM” (2007, p. 575). Consequently, the basically different organizing and control approach taken by Lenovo’s was based on eliminating waste each and every opportunity and adding value wherever possible, such as company’s procurement practices. According to Liu, in some cases, these types of planning projects were simply common organization sense: “Profits could also be tremendously improved by simply merely managing overall costs and expenditures. For example , mount cost per unit inside the U. S. was U. S. $24 compared with U. S. $4 in China” (2007, p. 575).

A job interview with a Lenovo executive conducted by Sweeney is also illustrative of how the look and control function have been used to help Lenovo develop its organization. “We needed to build the whole global organization, ” the executive noted, and gives that “we did it in geographic centers of excellence. So we have now an Unites states team and an Asia-Pacific team and a European team” (quoted in Sweeney 2008, p. 36). The Lenovo executive likewise describes the company’s ongoing ideas for expanding its business design into new international marketplaces thusly: “We started out with this system deploying into Cina. We travelled China, India, Canada. We now have just done a complete deployment in Asia-Pacific. Next, we’re going be carrying out Mexico and Poland, our last two developing countries. Then we’ve got to deploy towards the rest of the community where we do business” (quoted in Sweeney 2008, p. 37).

To what extent is the organization’s international functions management strategy likely to be appropriate over the subsequent years?

That remains ambiguous whether Lenovo will be able to preserve its magnificent growth in the coming years following the same pattern of acquisition and internalization which includes fueled its success to date. Nevertheless, the company’s confirmed track record of producing innovations solutions and retailing will likely provide it well as it looks for to expand its business in the Americas, Europe and Asia. Lenovo’s business model of acquisition and diversification may well end up leading to it precisely the same types of problems that possess plagued others in the past (such as Dell) that have expanded beyond their very own core expertise and produced faster than their organization models can accommodate. Inspite of these concerns, the company’s track record is working example that it is doing something correct. For instance, simply by 2003, eight of Lenovo’s Hong Kong subsidiaries were amongst China’s 500 largest overseas operations (Huang, 2007). In-may 2007, even though, Lenovo as well acquired a biochemical enterprise, SPG, for approximately $120 , 000, 000, together with a commitment to provide the company with additional financial resources of about RMB5 billion (Liu 2007). In respect to Liu, “The obtain by Lenovo will not affect the existing commitment by SPG with Unigene because Lenovo pledged the fact that current administration of SPG will remain intact and all its previous obligations shall be honored” (2007, p. 98).

Though Lenovo offers enjoyed a high degree of success in the i . t sector, it can be stretching their corporate boundaries to the limit with this sort of acquisitions. As Liu highlights, “In addition, it has previously announced that SPG shall gradually shift its focus from the traditional antibiotics business to more value added lines. Biotech pharmaceutical can be described as clear path for SPG to decisively move into” (2007, l. 98). SPG may be within a good location to move into biotech pharmaceuticals, although Lenovo’s core competencies happen to be clearly certainly not in this field and it could be biting off more than it may easily chew in the process.

You’re able to send recent quarterly report indicates that:

1 . The China COMPUTER market stunted to amounts below global growth;

installment payments on your Commercial expansion slowed considerably;

3. Progress was several. 8% last year (down by 13. 7%);

4. Business value was down five. 3% (down from four. 5% growth); and

5. A lower perspective was projected through 2010.

6. Workforce reductions took place in the second and third quarters of 2010.

With respect to positive measures and benefits, the company reviews that:

1 ) There has been accelerating growth and improving overall performance in fresh segments;

installment payments on your Consumer sales rise 100% outside of China;

3. Out performing market in key emerging countries;

5. The company is continuing to gain share in China; and

5. The company is continuing to win in business segment.

Irrespective of these shining reports, as can be seen by Figure you below, you can actually sales in its European, Middle section Eastern, Africa and American markets declined, while home-based sales experienced some significant growth during the period mentioned.

Figure 1 . Balanced geographic mix: Lenovo sales: Third Quarter 2007-2008 through Third Quarter 2008-2009

Source: Lenovo Group Limited (2008/09) Q3 Results, Feb 5, 2009

Conclusion

The study showed that Lenovo parlayed $24, 500 in start up capital to become the third-largest manufacturer of private computers and laptops on the globe. This rags-to-riches story was fueled by savvy management that comprehended the business environment in which the company was competitive and got advantage of every opportunity to increase its organization in its home market as well as to expand the operations, which includes manufacturing and retailing, to overseas parts. Although each one of the theoretical approaches reviewed could be said to affect Lenovo’s circumstance in some ways, the company’s history differs from the others in many ways as well with respect to its use of Hk branches and acquisition of other companies. The research likewise showed that in its dash to develop as large as possible immediately, Lenovo might have reached the boundaries of its current business model, indicating that it may be unable to sustain its current rate of expansion and performance ahead6171.

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