When thinking about internationalization, a lot of people instantly associate it with multinational companies. It cannot be said that they are wrong; however, internationalization is a far more complex phenomena as it does not only consist of companies setting their headquarters outside the borderlines of the countries of origin. If an entity simply decides to import or export commodities or services, their action can also be described as ‘going international’; producing effects both domestically and internationally. In recent years, the number of companies that chose to get involved in international business operations and transactions increased substantially to the point where becoming visible in …show more content…
Hence, the executives are to consider whether they can run business in the designated countries/regions first before attempting to do so. The best way of illustrating the risk versus reward system related to internationalization is through Lenovo’s acquisition of IBM’s PC division. Before getting to the middle of the problem, let us learn about both Lenovo’s and IBM’s background.
Figure 2: Lenovo’s Acquisition of IBM’s PC Division: A Short-cut to be a World Player or a Lemon that Leads Nowhere?
Lenovo was the first Chinese brand to outsell any foreign brand in China, in 1996. The company based in Beijing started its life as a reseller/distributor for AST computers (HP and IBM later on); beginning as a result of the Chinese Academy of Sciences’ new technology unit in 1994. The reasons for Lenovo’s outstanding growth 6 years after starting to create its own brand of PC (it began in 1990) were the Academy’s strong support and the close relationship with the Chinese government. The company reached turnovers of HK$ 20 billion (approximately US$ 2.58 billion during that period) in 2003 and HK$ 23 billion (approximately US$ 2.97) in 2004.
Compared to Lenovo, IBM had a much longer history since its foundation in 1896. The company started as the Tabulating Machine Company and focused on the development and the production of punched card data processing equipment. After the merger with two other companies, it changed its name in