Lenovo and Tesla Companies Cases

At the end of 2003, IBM offered to sell its PC Department (PCD) to Lenovo; Lenovo agreed and purchased it in 2004 (Liu, 2007, pp. 574-575). In this paper, we are going to discuss this decision from the perspective of acquiring sustainable competitive advantage by Lenovo.

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It is stressed that in 2003-2004, Lenovo was a much smaller business than IBM, and purchasing its PCD was a risky step; however, Lenovo wished to grow and expand internationally, and a fast way to do this was through a merger (Liu, 2007, pp. 574-575). So, Lenovo decided to buy the PCD and take a number of steps to minimize risks, such as providing more promotion chances for PCD’s existing employees than IMB did, and share top management positions between Chinese and American employees equally so as to not lose talents who wouldn’t otherwise work for Chinese businesses; provide salary bonuses related to performance for workers; etc. (Liu, 2007).

According to Barney (1991), sustained competitive advantage is acquired when a value creating strategy that is being used by the company is not used by rivals and cannot be duplicated by them (p. 102). Therefore, it is possible to state that Lenovo acquired a sustained competitive advantage in China when it purchased IBM PCD, because the latter not only had access to the international market but also a large number of distribution channels. In addition, Lenovo partially “inherited” the IBM’s brand name. These advantages were major, and they could not have been duplicated by other Chinese PC firms, so it is possible to call them sustained.

To sum up, even though buying IBM PCD was a risky step for Lenovo, they successfully managed the involved risks, and acquired sustained competitive advantage by “inheriting” IBM’s brand name and its international distribution channels.

Tesla Motors is a leading American company that produces and sells electric vehicles, as well as battery products. In this paper, we will discuss some of the challenges that the company currently faces, and offer possible recommendations to overcome them.

Tesla is faced by a number of challenges. First, they are currently building a plant that would enable them to produce a number of lithium-ion cells that is enough to power 500,000 electrical vehicles, but Tesla is unable to produce so many cars (The Economist, 2014). Noteworthy, other electrical vehicle manufacturers use a different type of batteries for their cars, so they are unlikely to buy the lithium-ion battery packs.

Second, Tesla is planning to produce lithium-ion storage batteries for storing the surplus electricity produced by rooftop solar panels (The Economist, 2015). This can partially solve the problem posed by the first challenge, but the new storage batteries may become a financially poor choice for those households which do not yet have rooftop solar panels. Tesla is expecting some losses, but is hoping them to be temporary; their prognosis is that the problem should resolve as the prices of electricity change (The Economist, 2015).

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Third, Tesla has the problem of the “range anxiety” in its Chinese customers (Ho, 2015). Here, Tesla faces a first-mover disadvantage (Lieberman & Montgomery, 1988), because long-range traveling by electric vehicles requires charging stations, and there is a lack of them in China. Tesla is trying to collaborate with the Chinese government that is planning to open more charging stations, but it is uncertain at what pace this will be happening (Ho, 2015).

It is our opinion that Tesla is not responding well to the described challenges. The plant appears likely to have downtime after having been built; it is uncertain whether the electricity price changes favorably for Tesla; and a trip by a Tesla vehicle in China shows it is better to use the train (Ho, 2015).

We could recommend to have the plant produce batteries for other industries as well, and to sponsor the members of home-charging networks in China. As for the problem with volumes of sales of storage batteries, perhaps it might be possible to collaborate with manufacturers of rooftop solar panels to make the storage batteries more popular.

References

Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.

Ho, A. (2015). Tesla’s most excellent adventure, China edition: The electric carmaker has high hopes in China. But anxiety about availability of power hurts sales. Web.

Lieberman, M. B., & Montgomery, D. B. (1988). First-mover advantages. Strategic Management Journal, 9, 41-58.

Liu, C. Z. (2007). Lenovo: An example of globalization of Chinese enterprises. Journal of International Business Studies, 38(1), 573-577.

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The Economist. (2014). Tesla’s high-stakes gamble. Web.

The Economist. (2015). Meet the battery-powered home: Tesla joins the race to help homeowners unplug from the grid. Web.

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