Big Red: Can China go Global?
China is home to twenty of Fortune’s Global 500 companies. Not unlike their global brethren, resource extraction, transportation and banking companies comprise the bulk of China’s large firms. But are these companies world-class? Hardly. Many of these companies are state-owned and make the list not because of any inherent economic efficiencies, but rather they are simply big. With further economic liberalization and the threat of foreign entrants, domestic firms are beginning to realize that they will no longer have easy access to government capital and protected markets. They will have to become internationally competitive and require modern and effective Chinese management systems. Since the late 1990s, many firms are turning to stock exchanges not only for their capital requirements, but also as a means to improve governance, management, and reputation.
However, as in the case of Legend-cum-Lenovo, there are alternative mechanisms to go global, such as an acquisition of and strategic partnership with a major international player. Lenovo completed the purchase of IBM’s personal computing division in 2005. Acquisitions have long been in the toolbelt of companies looking to get bigger, but what makes the Lenovo case unique is that it is the first Chinese company to acquire such a high-profile international business. It may also mark the beginning of a wave of Chinese companies searching for similar advantages in the international M&A arena in their quest to go global. In doing so, the world be watching how Lenovo executes its integration and how it plays the global game. Will Lenovo be China’s Sony; the country’s emblematic example of economic prowess and modernization? Or will it be just another unknown Chinese brand? With the world watching, will the stigma of partial state-ownership be a continual nuisance to China’s new global giants? If so, how will the state respond? The lessons learned from Lenovo’s may be the most important ones China can learn in the next decades.
Download–> Big Red: Can China go Global? A case study of Lenovo
