Lenovo computers: east meets west - Economics Essay Example
1 - Lenovo computers: east meets west introduction. What national sources of competitive advantage might Lenovo draw from its Chinese base? What disadvantages derive from its Chinese base? To identify the main national sources of competitive advantage that Lenovo might derive from Chinese based, first we should look more closely to the economy as for the long run. We can notice that china is near to become a globalized economy so this was so helpful for china to become a market leader through a rapid expansion in its economy and access to several markets like US. Second, the low labor cost that has offered $3 a lot of opportunity, raw materials and land in china.
Third, the Chinese have the knowledge of what they are doing and what their market demand and customer needs that the nature of domestic national demanding customers related with low price PC. Fourth, Innovations and knowledge in technology businesses like PC and IT. Fifth, Human Assets, providing staff with an excellent living and working environment helps their creativity. Now in my opinion there is no disadvantage from the Chinese based that Lenovo might draw from them. Finally to mention for something else, which is the Porter’s Diamond?
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Porter has mentioned in his diagram for three things that considered as a competitive advantages for Lenovo. * Conditional Factors: cheap labor cost, raw materials and land. * Home Demand Conditions: as china and India have the hugest population in the world so this will increasing demand in the market and thus the countries have to minimize cost on PCs. * Related and supporting industries: strategic alliance. * Firm Industry itself: provide professional and excellence IT, strong rivals with IBM, Lenovo has achieved its market sales.
2. In the light of the CAGE framework and the Mac Milan et al. Competitor Retaliation framework, comment on Lenovo’s entry into the American market. CAGE is a framework cultural and economic differences between U. S & India. * Cultural distance: diversity of language, ethnic, religion and social norms. * Administrative and political distance: incompatible sides of political, administrative and legal traditions. * Geographic distance * Economic distance: Differing capabilities of companies in different countries. – Transfer of Technology is costly from China to U. S. ut, after merger of Lenovo with IBM, it is in strong position, Administrative, political & legal tradition difference restricted at improvement in R&D – As per Macmillan Framework, the initial move of Lenovo to U. S. is aggressive strategic move – Success at first instance due to IBM customer’s loyalty and excellence of IBM workforce and Management Team in U. S. with climbing stock rate in 2003-04 – Great competitive market with Dell, HP offering $100 savings with average machine during 2004-05 – Lenovo replaced ex-IBM CEO Stephen Ward by William Amelio who is running DELL Asia-pacific Region.
Also, launch new range of Lenovo branded PCs to small and medium sized American Business – Lenovo expands sales to American retailers such as office Depot and new strategic move towards Indian market rather than be stable at U. S. market – Lenovo strongly attack with aggressive strategy with clout of IBM in U. S. so, at first instance it is Type A – But, as the competition increases, Lenovo change its technology and workforce with IBM Brand name as type B, but less reactive – As IBM Think-pad global trademark contract of 5 years over, Lenovo must decide highly reactive strategy like Type D as China product has low quality and life. . Now that Lenovo is international, what type of generic international strategy should it pursue – simple export, multi domestic, complex export or global? Lenovo has the leading position in the fastest growing market in the world. Their acquisition of IBM’s PC business makes them the third largest PC supplier in the world. I think that Lenovo should pursue on global strategy because it might take the advantages of being on global strategy, like using cheap local and national sources, global marketing operation, global brand name, advertising campaign and better knowledge of customer’s problems.
Focus is on achieving a low cost strategy by reaping cost reductions that come from experience curve effects and location economies – Production, marketing, and R&D concentrated in few favorable functions – Market standardized product to keep costs low – Effective where strong pressures for cost reductions and low demand for local responsiveness