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“Announced in December 2004, the $1.75 billion acquisition of IBM’s personal computer division by 20-year-old Lenovo, China’s largest PC maker, made headlines around the world.” (Case Study p.1) The two companies produce complementary products, to different regions of the world. Lenovo sold only in the Asia region, and wanted to go global. Consumers outside of China did not and would not purchase Lenovo products. If IBM put their name on the Lenovo products, consumers would buy their products based on brand recognition. There would be many obstacles to overcome to make this acquisition possible.
IBM was starting to lose money quickly in the personal computer industry, and made the decision to sell its business. The product life cycle of the personal computer was well into the maturity stage. The maturity stage is defined as “A slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits stabilize or decline because of increased competition.” (Kotler and Keller p.278) “By 2004, approximately half of the PCs sold around the world came from five vendors: Dell led the pack with 17.9% share; HP followed with 15.9%; Lenovo, including IBM’s market share prior to the acquisition, held 8%; and Acer and Fujitsu-Siemens held just over 3.5% each. Many competitors shared the remaining 50% of the PC market, ranging from large corporations with household names-including Gateway, NCR, Sony, and Toshiba-to small vendors.” (Case Study pgs. 2-3) In the introduction stage of computers, IBM held a leading role to the industry, gaining instant creditability. The prices of personal ...