Eclectic paradigm analysis of lenovo

Lenovo is one of the China's most well-known state-owned companies. However, in the wake of technology and the fierce competition after firms like DELL entered china, Lenovos share started to dip. Hence, Lenovo tried to grow in an inorganic way by acquiring some business in the same segment and diversify its business internationally. Lenovo chose IBM for the acquisition of its PC business in 2004 through which it can have access to IBM's R & D institutions to enhance and enrich their research and development capabilities obtained using the IBM brand. It also gives Lenovo the access to a large number of high-quality professionals engaged in the development, design, marketing, service and management. Lenovo's managers will also foster and strengthen cross-border operations experience and ability. Gained through the acquisition of these resources and capabilities (strengths), will further enhance the competitiveness of Lenovo, Lenovo also be true in the world market to compete with rivals. Location-specific advantage is that the company through a combination of elements of the host country to take advantage of its resources have an advantage compared to a simple to use its own advantages of factor inputs. Although the purpose of cross-border investment, with the investment firm's strategic objectives, in which the industry and natural resources on different host countries there are differences, but generally can be divided into the following four types: resource seeking, market seeking, efficiency seeking and strategic asset seeking . From the above purposes, the growing cross-border investment in recent years has shown the following trends: In order to find the resources engaged in a gradual decline in foreign direct investment; consider the host country market size and growth factors such as is still the major market for investment purposes; efficiency-seeking investment , from the traditional use of the host country's natural factor endowment (labor costs, government taxes and other fiscal incentives, etc.) of different strengths, the transition to today's greater emphasis on economies of specialization and economies of scale by exploiting to improve the efficiency of production and operation; Finally, strategic asset seeking the increasing importance of investing. As a high-tech companies, Lenovo, its implementation is mainly due to acquisition of the latter three purposes: acquisition, IBM was the original 5% of the global PC market share, so that business scope from the original mainly in Asia extend to the world, such as by the This huge demand into the U.S. market, as well as rapid economic growth in South America and other markets in emerging countries is

conducive to its core business globalization strategy implementation; acquisition, but also to conduct the value chain of the rational allocation of resources with the district-bit fully integrated elements of in order to achieve maximum efficiency; strategic asset acquisition is the company to maintain and develop its core competitiveness key to the multi-national business association will be to provide an accumulation of knowledge, technology, human resources, information and other strategic assets for the upgrading of existing capacity a great opportunity. From a dynamic perspective, the country's economic growth, market conditions, the degree of risk, scientific and technological strength and investment policy conditions such as location changes constantly taking place; and the trend of global economic integration, the company configured in various countries through FDI the value chain is no longer isolated, but are linked and influence, and therefore would require Lenovo's global value chain system of FDI should have a dynamic adaptability, timing, precedence and overall coordination, and thus reduce risk and expand revenue. Internalization-specific advantage is that the company will have ownershipspecific advantages of the in-house use of the benefits. Can be overcome through the internalization of the external markets, particularly in knowledge, technology and other mid-market imperfections, reduce transaction costs, the internalization of benefits derived therefrom; the other hand, multinational companies in order to replace the internal market have to pay the cost of external market, namely, the internal of the cost. But as long as income exceeds the internalization of the internalization of costs, the company will implement the internalization-specific advantages. However, the traditional theory, the analysis of the issue internally, they often focus only on the company's trading capabilities while ignoring its other features: such as learning and memory, to adapt to the environment, seeking new capabilities; the same time, the traditional theory nor from the dynamic point of view, Research through this value-added activities, long-term profit maximization rather than the expected short-term profit maximization, expanding the theory of pairs of these shortcomings have been conducted to make up. Lenovo's acquisition of IBM global PC sector, it will obtain a wide range of traditional internalization benefits: lower market development, channel building, personnel training, the initial R & D expenses and other costs; production scale will bring about economies of scale, thereby lowering the unit cost of production ; in the procurement and manufacturing supply chain, will enjoy the benefits of synergy. More importantly, it will also receive the following benefits: through the market and product line integration will better meet the needs of existing customers, but also in the future can also have been integrated with a good platform to enter new markets and

expand business long-term gains; be achieved, such as the external R & D capacity, brand, human resources, management and other key elements and internal elements together, through collaboration, sharing, distribution and other means to improve the efficiency of the entire organization, and on this basis, the creation of new knowledge and management capacity, develop new core technologies and products that enhance the core competitiveness. On the other hand, the acquisition brings to internalize the cost of the following: market the product integration costs (including the customers and the loss of talent), R & D and marketing costs increased, the organizational expansion brought about an increase in management costs and so on. From the perspective of a single variable, we found that: The M & A activity will lead to the major advantage of Lenovo's long-term and short-term changes, and thus brought a series of benefits and costs. However, OLI eclectic paradigm of the three variables are interrelated and jointly determine the international direct investment activities, and therefore should be a comprehensive explanation.