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Ibm Case Study

An unknown Chinese company buying the mighty IBM PC division would have been unheard of 10 years ago, but in December 2004 that is what happened when Lenovo paid $1.75 billion for the IBM personal computer business, which includes desktops, laptops and notebooks. Lenovo began life under the Legend company name, which was founded in 1984 by 11 scientists at a Chinese university. The business began as a distributor of foreign computer brands such as IBM and Hewlett-Packard in China: Legend first manufactured personal computers in 1990 and has grown into the leading PC maker in China with a 27 per cent market share. In 2003 the company changed its name to Lenovo to avoid confusion with other companies of the same name around the world.   The new name is a mix of ‘Le’ from Legend and 'novo' which is Latin for 'new'.

IBM's resurgence
IBM became famous for being market leader in main-frame computers but saw mega-growth begin once it launched its first PC, priced at $1565 and backed by superior software, which gave it a major competitive advantage over rivals such as Apple. As competitors caught up in terms of software, PCs for the home became little more than commodities. IBM responded by focusing on large corporate clients where profit margins were more attractive. IBM reinvented itself again under the redoubtable Lou Gerstner in 1993 as IBM Global Services, which markets information technology out¬sourcing, consultancy and services (e.g. customer relationship management systems) and computer main¬tenance to companies.

Shortly before the change in direction IBM came close to collapse as its mainframe computer business, the star of the 1980s, faltered. Global Services has been the growth engine for IBM ever since, and now records annual sales revenues of over $46 billion, which account for over half the group total. It is also a high-margin business, which has enabled IBM to remain profitable in the face of stagnant demand for its computer hardware (PCs, mainframes...