1) Lenovo generally enters a new economy through foreign direct
investment with acquisition or mergers of already existing firms in
the host country. Lenovo buys either a part or full shares of a
company or its capital in the host country to implement full
control. With the acquisition of IBM, Lenovo was able to get a
wider range of selling markets for its pc’s through the
pre-existing IBM subsidiaries in various countries. A
few of the advantages for Lenovo through this entry mode
are:
- Availability to the pre existing market and customers.
- Availability to pre existing distribution channels.
- Helped in avoiding legal and other societal complications
during setting up of a new plant or buying a new land for building
infrastructure if Lenovo would have entered directly into the US
market.
- Low cost on R&D for as it also acquired along with the
company, any new initiatives that the host company was working
on.
- Acquiring company doesn't have to work on building a new image
for itself as it feeds on the customer base and market presence of
the acquired company.like lenovo did by acquiring IBM, it got an
easy access to US and other markets where IBM was present.
2)Cultural issues are a very serious factor that determine the
success and failure of a firm in a particular country. Similarly
when Lenovo acquired IBM, it too had to face a lot of hard times
due to the cultural differences in both the countries. IBM was the
first international vanture for the Lenovo and hence they were not
at all aware of the american way of working and thinking. A few
issues an american manager working at lenovo might come across
are:
- Language barriers as majority of the junior executives might
not know English.
- hierarchy matters a lot in China. Like in America a junior
can't challenge a senior in china. Thus one has to keep in mind the
designation or the title of the official he is interacting
with.
- Chinese are more relationship oriented when compared to
Americans, in China business relations and personal relations go
hand in hand while Americans keep it professional.
- Chinese avoid saying things that might be rude to others, in
their face, the concept of face saving. While Americans prefer
being bold and clear of how they feel.
- Punctuality - chinese would never say anything rude if you go
late due to their face saving mantality.they would assume you would
have a genuine reason for it. But they might like to talk about the
reason to help you out .
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