Lenovo-IBM: Bridging Cultures, Language and Time Zones - Case Study Example

Lenovo-IBM: Bridging Cultures, Language and Time Zones Name: Institutional Affiliation: Table of Contents Executive Summary 3 Lenovo-IBM: Bridging Cultures, Language and Time Zones 4 Introduction 4 Literature review 5 Mergers and Acquisition 5 Management Style 6 Autocratic Management Style 6 Consultative Management Style 7 Democratic Management Style 7 Laissez-Faire 7 Analysis 7 Cultural Conflicts 8 Disagreements 8 Communication 9 Summary 9 Recommendation 10 Conclusion 12 Bibliography 13 Executive Summary The paper is organized into various sections, the introduction, literature review, analysis, recommendations and the conclusion. The introduction section of the report mainly entails an overview of the merger between Lenovo and IBM. It provides a summary of when the merger was formed, what Lenovo went through during the first years of its operations and how it managed to recover from the losses. The literature review section of the document reviews the relevant literature that relates to what went wrong in the management style and the how the decision making process might have contributed to the low performance of Lenovo. The report gives an in depth analysis to the merger between Lenovo and IBM in the analysis section. The recommendation section gives the relevant recommendations that are likely to facilitate the further growth of Lenovo IBM merger. Lenovo-IBM: Bridging Cultures, Language and Time Zones Introduction The Merge between Lenovo and IBM occurred in 2005 after Lenovo acquired IBM with an aim of becoming a market leader in the computer manufacturing Industry. The merge was very unique since it involved a cross culture merging between companies from two different continents of the world [Sta12]. This move was perceived by many analysts as ambitious. This is because at that time Lenovo was very local whereas IBM was an international player in the manufacturing industry. Lenovo being a local player then, a lot was expected from it and that the company had to improve on its performance and change its image so as to be accepted globally. To achieve this, Lenovo saw the need to shift its headquarters to the United States and in turn, Steve Ward a former IBM executive took over its operation and was to see Lenovo through the transition process. However, this never went well and after a short period of time Lenovo had itself another CEO by the name Bill Amelio who was Dell former executive. There was a lot of expectation after the appointment of Amelio however it happened that Amelio was unable to bridge the gap that existed between China and United States [Sta12]. His term was followed by numerous cultural issues within the management itself. He later left after the termination of his contract. He was followed by Yang Yuanqing who is still the present Lenovo CEO. Yang is the one who has helped Lenovo recover from is previous losses through effective and efficient strategies together with the cooperation from the team of employees. He changed the entire Lenovo culture to what it is today. This report seeks to identify what went wrong in the management style and the decision making process, that might have caused significant setbacks to the Multinational Corporation. Literature review In this section we are going to identify and analyse what went wrong with the merge between Lenovo and IDM. This is going to be achieved through, reviewing relevant literature so as to enable us get a clear picture of the scenario. We will also analyse some of the remedy to the problems identified in this section. Mergers and Acquisition There is a clear distinction on the difference between a merge and acquisition. A merge can be defined as a consolidation two or more companies into a single entity [Vac14]. Acquisition on the other hand only occurs when one company takes over another company and thus establishes itself as the new owner [Mul12]. The situation between Lenovo and IBM was more of a cultural merger and acquisition. This is because the two companies formed a joint venture which saw Lenovo become the 3rd Largest PC manufacturer in the world after the acquisition. Lenovo paid a sum of over 1.25 billion US dollars for the IBM’s business. This involved the integration of supply chains, human resource and financial information. However it is important to understand that there are instance where the mergers do not work effectively. In fact statistics shows that two thirds of the corporate mergers tend to disappoint in their own terms [Vac07]. This can be mainly attributed to inefficiencies that relate to the merger. One of the main factors that affect the corporate mergers are the cultural issues. The IBM and Lenovo had different cultures and thus integrating both cultures was a process and had enormous effects to the company. Culture has a huge effect on a company since it impacts on the working techniques, goals of the company and even perception towards success [Maj07]. It is important that companies formulate the way they are likely to integrate cultures before they enter into a merge. From the case study it is vivid that there was difference among the executive managers on what strategies and polices would ensure the growth of the company. The Chairman, Liu is quoted saying that Yang and Amelio had different strategies [Sta12]. Amelio was interested with the short term targets whereas Yang on the other hand was interested in ensuring that the company embraced a long term strategy so as to reach out to the new markets [Sta12]. This conflicts may seem small but there are situation where such conflicts have impacted the company negatively. The case study further states that cultural issues that existed within the management is likely to be one of the main factors that triggered the frequent changes on the board and other restructuring efforts. It was as a result of such woes that the resigning of Steve Ward [Sta12]. Management Style According to [Iso07] management style refers to the method of leadership style portrayed by the administrator or the top leader in an organization, business or institution. This normally depends on the circumstance or the nature of the business. There exits four main types of management styles and these are Autocratic, Laissez-faire, Democratic and Consultative [The14]. Autocratic Management Style Autocratic management style refers to a situation where the manager makes the decision of the organization unilaterally without considering the opinions of the co-managers or the subordinates [Ent13]. In such a management style, the output will reflect the personality and opinion of the manager. This form of leadership style is very effective in situations where the fast decisions need to be made. Consultative Management Style This is more of a paternalistic form of management that takes into account, the interest of the employees and that of the business. Communication in this management style is downwards however feedback to the management is greatly encouraged for the purpose of boosting the morale [The14]. Democratic Management Style In this form of management style, the manager allows the employees to take part in the decision making process of the company. The communication in this case is extensive in that from the leader to the employees and vice versa. This is very useful in situations where there are complex decisions to be made [The14]. This form of leadership style impacts directly on the quality and job satisfaction levels of the employees. On the other hand, participatory contributions from the employees will also be very high. Laissez-Faire In this form of management style, the manager takes a back seat role in the organization thus only providing guidance especially when needed. Employees on the other hand are allowed speak out their own ideas. Analysis There are several factors that can be attributed to the poor performance of the Lenovo, after its integration with IBM. Some of the main factors that can be attributed include; Cultural conflicts, disagreements among the top level managers, and lack of proper communication between the management and the employees. Cultural Conflicts Cultural conflicts between the two merging parties, IDM and Lenovo is one of the main factors that greatly affected the merger especially in the first year. Before the merger, the two main executive leaders then, Mr. Yang and Steve Ward were from two different companies, companies that had different cultures and different markets. Yang wanted to see Lenovo continue with its existing culture whereas Steve Ward on the other hand wanted to handle it differently given his experience at IBM [Gre07]. Analyst argue that one of the main reason as to why Steve Ward opted to resign later in the year was because they kept having a clash with Yang Yuanqing a person 10 years younger than him and that the other reason was that Steve Ward was too accustomed to the IBM culture thus was unable to adapt to the new culture [Lin06]. Disagreements After the departure of Steve Ward, Bill Amelio took over the helm at Lenovo. However, it was during his time as the CEO that Lenovo recorded one of the biggest Losses of its time. This was mainly attributed to the fact that Amelio strategy was short term whereas Yang and the executive preferred long term strategies for Lenovo. Amelio was mainly interested on pleasing the investors with the quarterly results and not preparing Lenovo for the future. This is seen as Lenovo lost their U.S market to notebooks as they still concentrated in producing desktops [Ahr13]. Amelio was advised the importance of changing their strategy but it was never taken into consideration. Such disagreements and lack of unity in the top management level cost Lenovo the losses to an extent they opted selling their mobile production unit. Communication After Mr. Yang Yuanqing became the CEO, there was a complete change in the Lenovo culture regardless of the location of the company. Mr. Yang introduced four main values “Serving Customers, Trust and Integrity, Teamwork across culture and Innovation and Entrepreneurial Spirit.” After the financial Crisis, Trust and Integrity were strengthened to become the core values. According to [Lin06] the company made significant efforts to become more employee focused organization. All these steps were made after Mr. Young took over as the CEO in Lenovo. The previous CEO lacked these skills and that is what cause Lenovo significantly. Summary The report effectively analyses the Merger between Lenovo and IBM. We have reviewed relevant literature that relates to the mergers and factors that might have affected the might have led to the poor performance during the earlier years of the merger. Some of the main factors that have been analysed include; Management style and Cultural factors. It has been identified that the type of management can significantly influence the performance of the organization. Some of the various types of management styles include; autocratic, consultative, democratic style and laissez-faire. From the analysis it was determined that democratic style of leadership was what helped Lenovo grow significantly during Mr. Yang’s term as CEO. It is important to note that Lenovo managed to bounce back after the financial crisis. Mr. Yang was able to employ strategies such as “Protect and Attack” which aimed at protecting the company’s present market and at the same time targeting new markets such as Latin America and Africa. This didn’t take long and by the end of the 2012 financial year, Lenovo had already registered a 73% growth in Profit. Recommendation Improving Sales From the analysis above it is clear that the company can achieve even much greater results, than the one experienced at the moment. The company registered a 73 per cent increase in sale in the 2012 financial year. However, what is even more important is for the company to be able to sustain this kind of sales over time. Thus the company should formulate strategies that will ensure that it maintain or even improve the sales. This will mainly involve, improving on the current weaknesses and also formulating policies that encourage growth. One of the main way in which the company can improve its sales to a greater level is through majoring its sales to the Emerging markets and mature markets. This will enable the company have a greater geographical focus apart from China, which is its dominant market. I feel that the company should invest in area four main regions that it is targeting and this includes; China, North America, “Europe Middle and East Africa” and the Asia, Pacific and Latin America. These are one of the fastest growing regions in the world and that if the company can effectively grab this market, then within no time, the company will be able to easily surpass Hewlett-Packard as the leading manufacturer in the world. The 2012 financial results showed that Lenovo was only 0.6% behind Hewlett-Packard in terms of sales. Effective Management Effective management is the key to success in any company, Lenovo is no exception. It is important that the company streamlines its management so as to enable the company carry out its functions effectively. This is vivid when Mr Yang took over as the company’s CEO. The present CEO Yang Yuanqing exhibits a democratic management style and this has worked “magic” for Lenovo and that the results are evidence on how the effective management style can result to efficiency [Sta12]. Changing the Culture Cultural conflict is one of the main reasons as to why Lenovo has been experiencing poor performance. It is important that the organization changes its culture to enable it perform even better. The step towards changing the company’s culture can be seen by the introduction of Mr Yang’s four main values that formed the basis of the company’s present Culture. These are; “Serving Customers, Trust and Integrity, Teamwork across Cultures and Innovation and Entrepreneurial Spirit” [Sta12]. The other initiative is that the company needs to be implemented is establishing a corporate culture so as to enable the company be a value driven company. This can only be achieved if the employees are well taken care of and that their needs are met. However, it is important to understand that Lenovo has made significant changes so as to change the company’s relationship with the employees. The company should not stop at that but rather identify and implement better policies that will improve the performance of the employees. This can be achieved by undertaking an internal research within the company and identify the factors that motivate the employees. . Conclusion From the analysis above, it is vivid that cultural and management factors, affected the performance of Lenovo-IBM merger significantly. The top management is to be blamed for the poor performance in the first years of the merger. However, after proper implementation of good business strategies, the organization was able to bounce back and perform even better emerging as the second best manufacturer in the industry after Hewlett-Packard. Bibliography Sta12: , (Stahl & Lengyel, 2012), Vac14: , (Vachon, 2014), Mul12: , (Mulherin, 2012), Vac07: , (Vachon, 2007), Maj07: , (Majidi, 2007), Iso07: , (Ison & Kempton, 2007), The14: , (The State of Queensland, 2014), Ent13: , (Enterprise, 2013), Gre07: , (Gregoriou & Neuhauser, 2007), Lin06: , (Ling & Avery, 2006), Ahr13: , (Ahrens & Zhou, 2013), Read More