January 14, 2013

From guard shack to global giant- The Economist

How did #Lenovo become the world’s biggest computer company?

Chinese industry

From guard shack to global giant

LENOVO started humbly. Its founders established the Chinese technology firm in 1984 with $25,000 and held early meetings in a guard shack. It did well selling personal computers in China, but stumbled abroad. Its acquisition of IBM’s PC business in 2005 led, according to one insider, “to nearly complete organ rejection”.
Gobbling up an entity double its size was never going to be easy. But cultural differences made it trickier. IBMers chafed at Chinese practices such as mandatory exercise breaks and public shaming of latecomers to meetings. Chinese staff, said a Lenovo executive at the time, marvelled that: “Americans like to talk; Chinese people like to listen. At first we wondered why they kept talking when they had nothing to say.” Two Western chief executives failed to turn things around. By 2008, as the financial crisis raged, Lenovo was bleeding red ink.

Given all this, its recent success is startling. In the third quarter of last year, Gartner, a consultancy, declared Lenovo the world’s biggest seller of PCs, ahead of Hewlett-Packard (HP). Even if HP briefly recaptures the lead in the fourth quarter, the trend seems clear: Lenovo is on a roll (see chart 1). It is number one in five of the seven biggest PC markets, including Japan and Germany. Its mobile division is poised to leapfrog Samsung to grab the top spot in China, the world’s biggest smartphone market. This week it made a splash at the International Consumer Electronics Show in Las Vegas with what PC World called “bullish bravado and a seemingly bottomless trunk” of enticing new products.
Lenovo’s rebound raises several questions. How did the firm recover from disaster? Is its new strategy sustainable? And does its rise signal the emergence of China’s first world-class brand?

Read the article online here: Chinese industry: From guard shack to global giant | The Economist

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