Lenovo Case Study.docx

International Marketing Case: Lenovo

1. Why did IBM want to sell its PC business? Why did IBM sell to Lenovo? One of the reasons why IBM wanted to sell its PC business was the fact that the deal was an opportunity to shed an unprofitable operation (seeing the number of competitors in the market) and concentrate on consulting services and middleware solutions. Selling its business to Lenovo would help them increase market share, especially in Asia. IBM concentrated now on services and consulting groups. In addition, they would continue to provide global support for the computers for five years.

2. What explain Lenovo’s success prior to the acquisition? In 1987, Lenovo introduced its first original product, the Legend Chinese-character card, which translated English language operating systems into Chinese. It included a popular ‘association’ feature that allowed users to form common Chinese phrases by typing in just a few Chinese characters. Legend card with the imported PCs it distributed gained 46% of profit. Its popularity gave a boost to the PC distribution business and the firm won several new contracts. Legend launched its own-brand PC into the Chinese market in 1990. By 1995, Legend was the world’s fifth largest manufacturer of motherboards.