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 only on PC-products. •
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o acquiring LG Laptops (option 3.4.) would lead to a small increase, as LG is not one of the big laptop producers. o expanding in the non-PC area via smartphones (option 3.5.) would not do anything for the current market share, as we would be talking about a different market segment altogether.

• It provides quick and extensive access to a large distribution network of retail and corporate customers, lowering distribution costs (the same goes for option 3.3., which also brings Lenovo contact with IBM’s network) o option 3.2. keeps Lenovo isolated in the home market o option 3.4. would bring with it a small distribution network, proportionate to the small size of the LG laptop division. o option 3.5. might mean a possibly large network, but, as it is in another production sector, so it could not be easily coupled with Lenovo’s existing one.

• It provides the possibility of brand capitalization, in the sense that Lenovo would take advantage of the reputation and customer base of IBM and “incorporate” them through the acquisition, lowering marketing costs o in the case of a merger, the brand name would be probably shared for the whole duration of the partnership. o under options 3.4. and 3.5., as said before, LG is not a brand name in IT or in smartphones, so Lenovo could not use this to attract more

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