Lenovo's Acquisition of Ibm's Pc Division

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Case study

Lenovo’s Acquisition of IBM’s PC Division:
A Short-cut to be a World Player or a Lemon that Leads Nowhere?

1. General presentation

2. Identification of problem, causes and negative effects

Strategic problem definition: • Acquisition of IBM – PC division as part of the expansion strategy.

Causes: • Lenovo was number 9 on PC market and had 2.2% market share worldwide and therefore it wanted to increase its market share position. • Lenovo became a market leader in China with 27% market share and wanted to expand. • They first tried to diversify into non-PC areas but they failed and consequently they decided to concentrate
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• Saturation of home market and a lack of economies of scale would make production costlier.

3.3. Lenovo – IBM merger.

Advantages: • Access to more resources. • Benefits from IBM’s know-how. • Better insight of the foreign markets. • Shared risks.

Disadvantages: • Difficulties in adapting a company’s policies or technology to another. • Difficulties in synchronizing the processes of both companies.

3.4. Not to acquire IBM’s PC division; Acquisition of LG’s laptop division.

Advantages • Gain market share on Asian market – biggest market in the world (38.8% of sales). • Cultural similarity would make the deal run smooth and any employee incorporation relatively easy (LG – South Korean). • Opportunity of incorporating reputed LG monitor and multimedia technology (they are famous for flat screens, HD and TV’s). • Affordable option (LG laptop division’s turnover – 3.39 billion$ in 2004 and Lenovo was willing to pay 1.75 billion$ for IBM, which made 6 billion$ in turnover). • Laptops have outsold PC’s and are now more popular in the IT industry.

Disadvantages • LG is not a recognized brand name in the IT business (7% decrease in sales). •

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