Culture- The Lenovo-IBM Case Study PDF

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Culture- The Lenovo-IBM Case Study...

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A merger is an agreement that unites two existing companies into one new company (Investopedia, 2017). According to Investopedia, several types of mergers exist, backed by several reasons. Expanding a company’s reach, expansion into new segments, reduction of operation costs, uniting common products, growth of revenues, profits increase, or gain of market share are the most salient reasons and these are implemented to create value and meet stakeholder needs. The corporations that fuse are roughly equal in size, customers, scale of operation. In 2004, China’s Lenovo and USA’s IBM’s PC division merged into a marriage of equals. The merger was driven by several factors or reasons. Most prominent among the drivers was the fact that IBM’s PC division had incurred. Since the 1990s IBM had been reorganizing their of business strategy toward becoming a software and integrated services provider, and seemingly lost interest in the PC business, and between 2001 and mid-2004, the PC unit attracted losses worth $965 Million (Koster & Stahl, 2013). For Lenovo, access to IBM’s computer technology and expertise, and a gateway into the lucrative American and European markets was too sweet a business opportunity to turn a blind eye on. Lenovo would also gain an international presence and utilize IBM’s reputation for quality, reliability and innovation to rise and become a leading PC maker (Thomas, M., 2016), as a result of the union. As Thomas further states, the experience would later help Lenovo expand their brands into the Smartphones. Lenovo also had the opportunity to lower component costs through IBM’s huge sales volumes, with annual savings of $200 million expected, and as a result venturing into price-sensitive markets and enabled growth (Koster & Stahl, 2013). The Longman Dictionary of contemporary English defines culture as ‘the beliefs, way of life, art, and customs that are shared and accepted by people in a particular society’. Cultures diverge across national borders (Schedlitzki & Edwards, 2014), and this presents a challenge to business undertakings. Language barrier became an evident challenge from the start for Lenovo and IBM and was worsened by conflicting preferences in communication styles by former Lenovo employees and their IBM counterparts. According to (Koster & Stahl, 2013), these led to prolonged meetings and persistent misunderstandings which were apparently setbacks to business development, and sometimes this necessitated the use of interpreters in board meetings. The other barriers were geographical distance and difference in time zones which in turn

hindered collaboration. Consequently, decision making and problem solving processes were greatly affected negatively. In spite of the cultural differences, both the US (IBM) and Chinese (Lenovo) leaders discovered that they valued innovation, personal responsibility and excellent customer experience. Staffs of Lenovo were quite attached to delivering their commitments, though this culture was not engrained in IBM. With the two teams being together, IBM adopted this trend and it was a strong culture towards business success. Also Lenovo’s commitment to creation of a global brand allowed ease in choosing a new CEO and election of headquarters, which smoothened the unification. In stating that “We face the combined effect of different corporate cultures and the difference between the cultures of the East and the West,” Orr & Xing (2007, cited in Koster & Stahl, 2013) admitted that cultural integration remains one of the biggest challenges. The resignation of Steve Wards (Koster & Stahl, 2013) as CEO of Lenovo-IBM in 2005 is believed to have been a result of his having been deeply entrenched into IBM culture that it was impossible for him to adapt to the new company culture (Katzenbach, Oelschlegel, & Thomas, 2016). His counterpart Yang who had been willing to step aside and allow Steve into the CEO role embraced the new dawn and set out to fulfil his mission of global Lenovo, much testament to the quality of Chinese culture of following through and delivering on promises made. In 1997, Dutch social psychologist Geert Hofstede propounded a theory of organizational culture in which he identified power distance, individualism/collectivism, masculinity/femininity, avoidance of uncertainty and long-term/short-term orientation as representing differences among national cultures (Hofstede, 1997). His theory is still in force in many a modern world organization. The varied values and norms exuded by organizations’ employees as a result of their differences based on Hofstede’s suggested aspects of culture do greatly affect actions and behaviors of individuals, and this consequently sways business outcomes. The aspect of power distance for example refers to how social power inequalities and hierarchies are perceived and greeted in dissimilar societies. The degrees to which power disparities are acceptable in different cultures determines what values, norms, traits and expectations of authority individual workers bring with them to the organizations. This may in turn determine whether the organizational power will be centralized top-bottom structured or all-involving and democratic.

References Hofstede, G. (1997) ‘Cultures and Organizations,’ Software of the Mind, London: McGraw-Hill. Katzenbach, Oelschlegel , & Thomas (2016) 10 principles of Organizational Culture. [Online]. Available at: www.strategy-business.com (Accessed: 24 Feb 2019). Koster, K. & Stahl K.G. (2013) Lenovo-IBM: Bridging Cultures, languages, and time zones. Unicaf. [Online]. Available at: https://unicaf.vitalsource.com/#/books/9781446293263/cfi/6/54!/4/2/4@0:0 (Accessed: 22 Feb 2019). Longman dictionary of contemporary English (1995) 3rd edn. Harlow: Longman. Orr, G. and Xing, J. (2007). ‘When Chinese companies go global: An interview with Lenovo’s Mary Ma’. McKinsey on Finance . [Online]. Available on http://corporatefinance.mckinsey.com (Accessed: 25 Feb 2019). Thomas, M. (2016) ‘Lenovo’s Successful Acquisition of the IBM PC Division’, Strategic Direction, 32(9). Available at https://doi.org/10.1108/SD-06-2016-0090 (Accessed: 23 Feb 2019). Schedlitzki, D. & Edwards, G. (2014) ‘Studying Leadership: Traditional and critical approaches’. Studying Leadership. SAGE Publications Ltd. [Online]. Available at: http://eprints.uwe.ac.uk/19827 (Accessed: 26 Feb 2019). Wilkinson, J. (2011, November). Company Culture. [Video file]. https://www.youtube.com/watch?v=WDFqEGI4QJ4 (Accessed: 24 Feb 2019).

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