In 2004, Lenovo was China’s largest computer manufacturer, while IBM was famous for inventing the personal computer (PC) in 1981. That is why the business world drew significant attention to the case when Lenovo acquired the IBM division in late 2004. Thus, the given paper is going to demonstrate that the deal occurred because it should have offered benefits for the two parties, but Lenovo also challenges after the acquisition and problems coming from China.
To begin with, one should explain why IBM wanted to sell its PC business and why it found Lenovo a suitable buyer. 1981 witnessed as this IBM’s division invented the PC, contributing to the world’s further technological development. However, the company decided to focus on consulting services in the early 21st century, which made it reasonable to sell its unprofitable business. Simultaneously, Lenovo was China’s leading computer manufacturer that wanted to expand globally because of increased domestic competition. The organization even joined the Olympic Partner Program in 2004 to become a sponsor of the 2006 Turin Winter Olympics to gain international popularity. Consequently, it is possible to mention that the deal under analysis implied possible consequences to both the buyer and the seller.
Even though the acquisition should have provided Lenovo with some benefits, the company faced significant challenges after the deal. Firstly, they related to the idea of how customers would respond to the merger. There was an opinion that the deal would hinder innovation, which would decrease product quality. Thus, there was a threat that IBM loyal customers who had accustomed to products and services of the highest quality would move to competitors. The rationale behind these thoughts was that the computer industry had not had examples of successful acquisitions by 2004. Secondly, an issue referred to the fact that executives from China and the USA should participate in teleconference meetings, which was challenging due to the 12-hour time difference between the states. It denotes that Lenovo had to deal with both organizational issues and customers’ skepticism.
Furthermore, it is reasonable to comment on whether Lenovo had a problem coming from China. Since the company had not been known outside Asia before 2004, it needed a new marketing and branding strategy. On the one hand, it was necessary to become a more famous brand throughout the world, and sponsorship of the 2006 Turin Winter Olympics was a suitable option. On the other hand, Lenovo had the objective to overcome the media and customers’ perception that the firm was associated with the Chinese government. This connotation denoted that potential buyers expressed less trustworthiness to businesses from China because of this country’s political system.
The paper has explained that Lenovo’s acquisition of IBM promised to generate essential benefits for the two because IBM wanted to sell its unprofitable division, while Lenovo had a desire to expand internationally. However, it does not mean that the deal did not offer any challenges. For example, Lenovo was forced to address the customers’ skepticism regarding the successful outcomes of the merger. Furthermore, executives were both from China and the United States, meaning that a time difference between the countries was a challenge. It is also reasonable to emphasize that Lenovo required a new branding strategy to enter the global market efficiently. Even though the business faced many challenges, the modern state of affairs demonstrates that Lenovo has successfully dealt with them.