Together with MM sales forces and distribution expertise, Leno employed It cost-efficiency and technology expertise In respond to the global demand. During the financial crisis, even though, global PC market faced the cost- cutting and decline in profit margin, the capability and integration of assets and competencies of both companies lead Leno remaining in the top 5 of global PC market.
Introduction In this report will address and analyze case study of Leno acquired for Vim’s PC division by answering the following questions which are: Why did Leno pursue the acquisition of Vim’s PC division?
What problems did Leno Face regarding post- acquisition integration? What international strategy did Leno adopt, and what challenges remain in the global market for Leno products? What does the current situation, involving both economic conditions and management restructuring, say about Leno’s prospects going forward? Do you think Lends history, management philosophy. And current expansion plans will create global demand for Lends products? To better understanding relevant theories of strategic management will be applied.
Leno’s environmental analysis Despite the fact that economics, policy from other countries and societies have Impacts on the business strategy In respond to consumers demand for products and services to be Improved. Undoubtedly, technology Is claimed to be largely affected on that driven behind consumer’s preferences more. The technology does not being addressed only internet, but also devices also have been increasing rapidly during past two decades.
Moreover, China has the significance of economic growth especially in technology, export and free trade which can lead the possibility turning China to become the major threats in global competitions (Mann, 2002).
The new gig-technology laptop market has been Increased dramatically (partial from Chinese markets in oppose to the global economy where it was facing the depression (Neutral and Waters, 2008). However, the hardware market became less profitable during the global financial crisis that why causing the acquisitions of many companies (Lloyd Morgan, 2010).
Leno’s also is one of the examples why, even though the greatest PC Company in China backed up by the government support, also seek to merge with global company such as IBM. Leno I – BUM Calculation Behind the acquisition, there are full of many reasons and benefits why Leno cited to take that action. Even though, Leno remain the leadership in PC Chinese market, it experienced the threats of the new entrances from foreign competitors and investors such as Dell and HP once was opened to competition that why it led its own PC and computer market to be more intensified.
Moreover, since the market is full with many competitors, the Chinese government strongly encourages local companies to move internationally which provides the opportunity to grow and expand market of Leno, however, the moving forward to outside China needed to integrate more of significant assets and competencies at the global level. Acquisition of Vim’s PC division And Leno has contributed many benefits and expertise. While Leno has the efficient economics of scale, IBM has experiences and more capability in international sale force and distribution network.
For both companies, acquisition provides the implication of two business core assets and competencies in corporate level strategy (Deeds, Limpkin and Eisner, 2010). From Leno perspectives, acquisition could successfully assist Leno to expand its market and enter global market by the facilitation of using IBM trademark and ‘Think products.
Moreover, it allows Leno to main market power and rapid growth in the global level by the acquisition. Essentially, sale activities, distribution network and services and solutions which IBM focuses in global level could benefit Leno in the future prospect.
From Vim’s PC division point of view, acquisition also required large amount of funds which could quickly boost the losses of Vim’s PC division of nearly $ 1 billion since 2001. Furthermore, it also provided the opportunity for IBM to enter Chinese market and focused more on services while manufacturing function Leno could cope with very well. Although woo different companies have the similar focus and vision in terms of consumers- oriented and full range of services, they are quite different in internal level and their business.
Problems identification after acquisition After acquisition, one of the problems that Leno – IBM faces is the organizational culture.
Essentially, when two culture – different firms are formed, this could lead to the difficulty after integration. Potential reasons are firstly the differences in target market where Leno focuses on Low-end market trying to achieve the cost leadership, while IBM targets High-end market offering the innovation, good quality reduces and services.
Secondly, the management style, Leno is more red – taped or bureaucratic style; whereas, IBM is team management, bottom-up approach, flexibility and more innovation. Thirdly, due to the management style, it reflects in the HRS management which bureaucracy at Leno is more restrict on the rules, while self-discipline reflects in MM. Operating business globally, it is actually require company to be more diversified and creative as well as innovative, addressing this the potential culture will becoming similarity to IBM company and this forces Leno o adapt and change partial its behavior (McKenna, Garcia-Lorenz and Brinkman, 2010).
Beside the internal problems, even though, in 2009 Leno gain the market share by 0.
4% (from 8. 2% – 8. 7%) and in Figure 1, even though the market share in Q U AT Leno Increase Day 4% Trot Q BIBB, Leno races ten riyals won tenant to increase the market share from PC market forced Leno down to the 4th rank from the 3rd after the acquisition (Anonymous, 2009) Although, economics of scale is the competitive advantage Leno has, the demand for prices of PC computers are lowering and decreasing profit margin of the company.
The potential conflicts occurred when two companies are integrated; yet, these issues could turn to be the challenges for Leno – IBM required new strategic development and implementation. Figure 1 Worldwide PC market share: Q 2008 and Q 2009 Source: Foreman, 2010 International strategy and challenges Even though, international expansion pursues many interesting and motivated issues related to the firm’s better performance such as cost advantages, Deeds, Limpkin and Eisner (2010) deliberately point out divergent factors such as economic and management risk to be analyzed when firm enter international market.
This means that Leno should adapt its low-cost advantages by investing in the large market which enables Leno to allocate fix cost per unit, meanwhile, offers the attributes in respond to demand of local market and of the potential and profitable market, while adapting cost leadership to magnified through standardize attributes of PC computers. Since the current competition in local market is intensified from facing the efficient rivals also the prices that consumers willing to pay are decreased, if the company does not minimize the cost Leno margins would be nearly nothing.
Therefore, Leno should employ the transactional strategy where local adaptation and lowering costs are high (Deeds, Limpkin and Eisner, 2010). Moreover, the cultural organization for these companies tend to follow IBM approach, this could be the main challenge for Leno whether it could adapt and integrate the synergy in move forward to global direction. Creativity and innovation combining with full range of solution and services in order to serve wide range of consumers from individual to large corporation may require Leno to experience more in global market.
Furthermore, the assets and competencies from IBM which are services, sales force and distribution might not be fully implemented unless the products and services of Leno appear to worldwide consumer’s demand.
Figure 2 depicts the PC market share in U. S. A compared between Q 2008 and Q 2009, market share of HP, Acre, Toshiba and Apple have been increase, while Dell and other included Leno face the decline in market share.
Figure 2 US PC market share: Q 2008 and Q 2009 Leno’s prospects going forward in related to current situation, involving both economic conditions and management restructuring Moving globally, Leno not only deeds to exploit Its assets Ana competencies AT Dealing cost inclement, It Is require Leno to find and obtain value adding to the firms.
Importantly, the global financial crisis has the major impact on PC market by decreasing down the profits of many firms, those firms who could not maintain the cost efficiency selected the mergers and acquisition approach to survive (Lloyd Morgan, 2010).
Management restructuring within Leno-IBM occurred not only the top line, but also the bottom function. The purpose on the restructure was not only to gain the diverse work force, arioso skill or innovation, but reallocation and laying out some employees also could reach the optimal cost, profitable and better performance in many function areas for Leno (Deeds, Limpkin and Eisner, 2010). Thus, the Leno management restructuring also reflects the positive changes and the better performance by increasing the profit margin (in Table 1) and the global market share.
Table 1 Financial Ratio Analysis 12007 12008 1 current ratio | 0.
86 | 0. 97 | DIE | 0. 87 | 0. 80 | Total debt ratio | 0. 79 | 0. 78 | Total asset turnover | 2.
56 | 2. 56 Profit margin | 0. 01 | 0. 03 | ROAR | 0. 03 | 0. 06 | ROE 10.
14 1 0. 9 | Price-earnings ratio | 301. 14 | 83. 45 Leno’s history, management philosophy, and current expansion plans vs. Creating global demand for Leno’s products The priority to serve full solutions to wide range of consumers has long been the vision for Leno since late sass.
Similarity to IBM when discovered the trend for consumer’s demand for products and services during late sass (1996 – 1999) was the solution for wide range of products and services reach its consumers through the website (IBM archives, 2010). Moreover, the benefit of the cost-efficiency enable Leno to offer the favorable price to target consumers, Hereford, this could also respond to the demand greater than those companies charge then the premium price.
Moreover, expanding many manufacturing in different regions, such as Poland or India, could respond to global demand better than having only in China based. However, from this point is linked to the supply create demand theory, the regional manufacturing tries to maximize the production capacity in that region in particular to increase the supply (Shirker, 2009). Thus, the drawback of this could be when the demand is less than what Leno expects, there is a potential that will decrease the company wealth and in worst case lead to the ass of profit.
Additionally, in oppose to supply creating demand theory, the attributes, benefit and quality will drive the demand for of the products and services. There is often when the failure of the company is that did not provide the product and service that market demand for. Hence, Leno can apply the ‘Think product to be more appeal to target consumers. Could Leno malting synergy Trot ten calculation AT a radically Deterrent competitor? The synergy after the acquisition should be maintained in purpose to respond to the strategic plan in which firms developed.
The becoming organization of ewe Leno refers to new management style or IBM approach (McKenna, Garcia- Lorenz and Brinkman, 2010).
Importantly, the changes made in management restructuring and reallocating the employee including the language Leno uses in the organization have reflect the attempt the Leno made in moving forward internationally. Moreover, the performance in the global market such as increasing in profits and market share has illustrated that Leno enable to maintain the synergy from the acquisition of MM.
Was this acquisition the best way to expand in the international market, or would organic growth have been a better choice for this Chinese company? When the company requires to expand the size of the business and to gain market share rapidly, the mergers and acquisitions is one of the choices that company can apply to (Deeds, Limpkin and Eisner, 2010). Though this approach, firms can obtain the assets and competencies from the acquired company and entitle to those resources, which means Leno entitle to employ sales forces and distribution skill of IBM into expand it market.
However, the strategic plan supporting the accelerating growth should be developed carefully in order to maximize the profit of the company.
Moreover, the point needed to be considered is the synergy of merged firms. Yet, merging lead to creativity and innovation due to firm becoming more diversified, whether they can perform the better result from that synergy (anonymous, 2010). On the other hand, slowly growth by developing internal assets and competencies could be important in today’s business.
Deeds, Limpkin and Eisner (2010) emphasis on the own developed resources, assets and competencies, those activities integrate and consolidate the firms capability and lead firms to be strengthen by itself. However, in respect to rent competitive environment, Leno might not be in time in respond to the rapid demand shift if employing the organic growth to expand its business to global market (Amelia, 2008).
Moreover, at global level, business strategy is required more diversified, creative and innovative in respond to global demand of products and services.
Therefore, the acquisition was considered as the appropriate approach for Leno in respond to gain assets and competencies in the international market. Conclusion Intensified competition in Chinese market has forced Leno to increase its market power. The acquisition of Vim’s PC Division brought the benefits to Leno dramatically, especially, led the way for Leno to move and expand its business. From this acquisition combining with cost-efficiency of Chinese manufacturing, Leno enabled the gain the market power, international sales forces and distribution from MM.