1.1 Historic context of Lenovo
While the Lenovo brand came into existence only in 2004, the company has a much longer history. In 1984, Legend Holdings was formed with 25,000 RMB in a guard house in China. The company was incorporated in Hong Kong in 1988 and would grow to be the largest PC company in China. Legend Holdings changed its name to Lenovo in 2004 and, in 2005, acquired the former Personal Computer Division of IBM, the company that invented the PC industry in 1981.
Lenovo has made a number of high profile corporate acquisitions. Lenovo made its acquisition of IBM's personal computer business in 2005 amid a backlash in Congress against Chinese companies trying to purchase American businesses. Lenovo sold its mobile phone division in 2008 in order to focus on its personal computer business and then paid $200 million to buy it back in November 2009. On January 27, 2011, Lenovo formed a PC joint venture with Japanese IT company NEC. Then Lenovo continue to acquire German-based electronics company Medion, Brazil-based electronics company CCE, United States-based software company Stoneware.
Today, Lenovo is a US$21 billion personal technology company and the world’s second-largest PC vendor. We have more than 26,000 employees in more than 60 countries serving customers in more than 160 countries. A global Fortune 500 company, we have headquarters in Beijing, China and Morrisville, North Carolina, U.S.; major research centers in Yokohama, Japan; Beijing, Shanghai and Shenzhen, China; and Morrisville; and we have manufacturing around the world from Greensboro, North Carolina and Monterrey, Mexico to India, China and Brazil.
1.2 International expansion
Before 2001, China’s computer market required basic functional computers with affordable price levels. High technology was not an essential factor affecting the buying behavior of Chinese customers. Therefore, Legend launched their computers with basic functionalities at a low price point to suit the market. Legend’s success was due to a centralized hierarchy and bureaucratic culture. Staff in Legend was disciplined, well organized and submissive. Each acted as a part of a machine and did what they were told to do. Such culture was suitable for a traditional computer manufacturer.
In 2001, the year when the IT bubble burst, sales performances of many technology companies declined. Lenovo also faced a difficult year and they did not reach their planned goal. In the following years as China’s economy was getting better, customers’ demands began to change gradually. The satisfaction in buying, especially15 branded goods, was no longer related to the basic functions of products, but also to other factors such as new ideas in usage and new stylish designs. That meant traditional functional products no longer fulfilled the needs of customers. Creativeness and innovative factors became the driving force for a brand to succeed.
With changes in their internal organization and external business strategies, After 2001, Legend let its organization became decentralized and activated collaborative work to reduce the hierarchy. Different levels of staff were suggested to have a “family touch” with all the other levels. It reduced information loss due to multi-level-message-relaying from junior to senior personnel. Yang encouraged managers to keep in touch with the market by regularly going to retail stores themselves as promoters.
Lenovo’s structure had been largely functional in 2005. After the acquisition, a matrix structure was adopted instead in its management with two operations – Lenovo China and Lenovo International. It was a necessary change because the matrix structure supposedly enables faster response and adaptation to the competitive market by combining the best of both separate structures, as well as make up for the weaknesses of functional and decentralized forms. And for its implementation, atreasury structure...