Change Management Implications of Lenovo's Term Paper

Excerpt from Term Paper :

According to Liao (2006), "The companies have entered into significant, long-term agreements that give Lenovo customers preferred access to IBM's world-class customer service organization and global financing offerings. This will enable Lenovo to take advantage of IBM's powerful worldwide distribution and sales network. Lenovo's customers are able to count on the entire IBM team - including sales, services and financing - for access to IBM's legendary end-to-end it solutions" (p. 3). In addition, pursuant to IBM's five-year contractual commitment, it will also provide Lenovo with warranty services and provide Lenovo customers with leasing and financing arrangements. According to Liao, "Through this long-term relationship, customers will receive the best products with the lowest total-cost-of-ownership" (2006 p. 3). Among the company's initiatives in this final phase of the change management process were additional efforts to further support their new dual business model. To this end, Lenovo upgraded its technology to work with Microsoft's newly launched Windows Vista operating system; likewise, the so-called "ThinkVantage" technology innovations from IBM that include biometric fingerprint scanning and rescue and recovery features, have been redesigned to operate seamlessly with the security and backup features offered by Vista (Liao, 2006).

Identification of the Key Events and Reactions. There are two fundamental reactions involved that may affect the company's change management strategy over the long-term. The first reaction is from the Chinese stakeholders involved. In this regard, Zhijun (2006) reports that, "Perhaps one of the most interesting facts to emerge from the Lenovo Affair was the broadly nationalist sentiment that had grown amongst Chinese entrepreneurs driven, in the main, by a perception that there was a 'plot by global Western enterprises to gulp up a large share of the Chinese market'" (p. 62). Given the country's history of foreign domination, such perceptions might not be completely unfounded, but nevertheless, the implications for Lenovo's stakeholders were the same: "Whether there was a basis to this paranoia or not, China's 'underlying anxiety' only served to increase the West's distrust of China which in turn fed Chinese antagonism towards foreign players" (Zhijun, 2006 p. 62).

The second reaction involves those of Western stakeholders. For instance, according to Tucker (2006), "The largest obstacle to China's international corporate development is the nation's communist political system, in which the government serves as a major stakeholder in all Chinese companies. Investor wariness over China's chaotic banking system is also slowing the country's rate of growth, as well as frustration over its currency model" (p. 12). The country's banking system might be making foreign investors more cautious about forging joint venture relationships or other mergers, but it is the West's reaction to the Chinese government that represents the most significant concern for Lenovo in the future. According to Tucker, "Another obstacle facing Chinese firms looking to establish brand-name recognition might be negative perceptions of either Chinese products or Chinese politics. Many consumers in the West regard the Chinese government as oppressive, environmentally reckless, and an egregious violator of human rights. Concerns about outsourcing and domestic job loss also color many Western consumers' perceptions of China" (2006 p. 12). This observation is congruent with Wu's (2005) assessment that, "Recent high-profile international acquisitions and take-over bids by Chinese companies have dramatically shifted media attention from spotlighting China as a 'giant sucking vacuum cleaner' for global inward foreign direct investment to characterizing the country as a cash-rich 'predator' embarking on a global buying binge" (p. 26).

Special Features of the Change. In his essay, "Do Financing Biases Matter for the Chinese Economy?," Huang (2006) points out that a number of Western analysts have pointed to Lonovo's acquisition of IBM's PC business as a clear indication of the rising world-class domestic Chinese companies. According to Huang, "Using the success of firms like Lenovo as evidence, a McKinsey Quarterly article has gone so far as to claim that China has the 'best of all possible models.' These business analysts are unusually perceptive except in one detail: Lenovo is a foreign company" (p. 287). This means that the change involved in acquiring IBM's PC division was achieved under less stringent laws and regulations than the company's domestic competitors might have encountered in a similar move. For instance, as Huang (2006) notes, "All of the manufacturing, service, and R&D operations of Lenovo in China are legally organized as subsidiaries of its Hong Kong firm and as such they are subject to laws and regulations pertaining to FDI, rather than those far more restrictive laws pertaining to domestic private businesses. In 2003, seven of Lenovo's Hong Kong subsidiaries were among China's 500 largest foreign operations" (p. 288).

Instances of Resistance and/or Unexpected Difficulties Encountered. As noted above, Lenovo's early years were forged during a turbulent period in China's history, and it is reasonable to assert that lesser individuals might have not prevailed. In fact, the success of Lenovo today is not so much what the Chinese government has done to assist the company in crafting a business model that others now cite as an exemplar, but rather what they simply allowed the company's leaders to do: leave the country and make the critical connections with business leaders abroad that have helped fuel the company's meteoric growth every since. In this regard, Huang (2006) emphasizes that, "The story of Lenovo and its Hong Kong connections tells us about both what the Chinese policymakers have done right and what the limitations of their approach are. Amidst massive institutional inefficiencies, Chinese policymakers have done two things vitally right and important. One is that they have allowed FDI to come in; the other, which is underappreciated, is that they have allowed Chinese citizens to travel abroad since the early 1980s" (p. 287). This author makes the point that this ability to travel likely represents the single most important reason that some of the entrepreneurs.".. could at least escape from the clutches of a very bad system. Thus, China's success has less to do with creating efficient institutions but with allowing an escape valve from inefficient institutions" (Huang, 2006 p. 287).

Summary of Outcome Achieved. Today, Lenovo is poised to develop its markets around the world and the brand reached an enormous global audience as a major sponsor of the Olympic Winter Games in Torino in 2006 and will again during the 2008 summer games in Beijing (Zhijun, 2006).


Redirection is a type of leadership is an attempt to redirect an organization, field, or product line from where it is headed toward a different direction (Sternberg, 2005). In this type of leadership, the organization's leader makes the decision concerning which direction the organization is currently headed is less than adaptive, and therefore redirects the organization in other directions (Sternberg, 2005). In order to be successful, though, redirective leaders need to match to environmental circumstances (Sternberg, 2005). According to this author, "If they do not have the luck of matching environmental circumstances, their best intentions may go awry. Under Louis Gerstner, IBM transformed itself from a company that specialized in making computers, especially mainframe computers, to a company that specialized in information-technology services" (Sternberg, 2005 p. 37). The company's leadership, though, determined that more changes were in order and this was the impetus behind the sale to Lenovo: "The company as it had been was dying and Gerstner redirected it. Even more recently, under Sain Palmisano, it sold its personal-computer division to a Chinese company, Lenovo. The transformation thus became complete" (Sternberg, 2005 p. 37).

The fact that a fundamental transformation took place within Lenovo as a result of the change suggests that some transformational leadership was used on the part of Lenovo, an assertion that is congruent with Bass's (1997) analysis that such leadership styles are not restricted to Western leaders, but are rather universal: "The transformational paradigm views leadership as either a matter of contingent reinforcement of followers or the moving of followers beyond their self-interests for the good of the group, organization, or society by a transformational leader. The paradigm is sufficiently broad to provide a basis for measurement and understanding that is as universal as the concept of leadership itself" (p. 130).

Finally, the change management process used can be viewed from a transactional leadership perspective on the part of Lenovo's leadership as well. In this regard, Warner (2000) reports that while transformational leadership is not unknown in China, a far more common leadership style used is transactional leadership. In his analysis of manufacturing companies and banks in China, although the most senior management did demonstrate a more transformational leadership styles, even in these cases, middle management and those in charge of personnel demonstrated the more transactional approach (Warner, 2000). Therefore, it is reasonable to assume that this type of leadership style has also been used in the Lenovo acquisition of IBM's personal computer business division.

Ethical Aspects of the Process. Notwithstanding the ethical implications of competitive edge afforded Lenovo's leadership early on in being allowed to "leave…

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