Friday, July 01, 2005

Lenovo now, America tomorrow?

Writing about the jobs boom got me started into thinking about the next steps in global economics. A chance conversation also gave some insights into the IBM Lenovo deal. Apparently, Lenovos PCs and laptops will continue to bear the IBM ThinkCenter and ThinkPad logos in addition to the Lenovo brand. This led me to some history of Lenovo. How did Lenovo get to where it was? A simple search led me here. Take a glance through the timeline of the respective histories of IBM and Lenovo. Found some related articles here and here.

Lenovo, was a PC maker and a laptop maker and a market leader in China. It saw synergy in buying a big brands ready made business which was making losses for its parent company. Now it is the 3rd largest PC maker. How it will fare in future is a matter of business strategy and other dynamics.

Consider this. China has expertise manufacturing anything from safety pins to digital cameras. Many of the companies make profits making these items for various brands, which gives them decent cash in hand (even if they dont have, they could raise money). What if, they bid for an American brand like Lenovo did? What if many American brands actually end up being Chinese? (This is somewhat similar to how many of Americans current brands like Honda, Sony and some real American icons are Japanese.) Is this the Chinese takeover of American brands?

Cut to India. Indian IT and BPO companies have, over the last couple of years grown in scale and acquired a few companies around the world. The free cash they have in hand is not a small sum by any standards. Indian companies have, over the last many years, coded, tweaked, reengineered many processes for Fortune 500 companies downwards. They also handle entire IT and systems departments of a few of the biggies. What can they do next?

What if, and heres the big if, an Indian company, like Lenovo, bids for and acquires a service provider industry in the United States. Service providers would qualify as perhaps payroll outsourcing, data and analytics and many other candidates at the lower end and automobile design or drug design at the higher end. What if, taking that analogy a little further, an Indian IT company replicated the processes at (say) Airbus. Airbus may be a far fetched example, but acquisition of a small or a medium process oriened company is a distinct possibility in the roadmap of Indian IT industries search for growth. What have done so far (essentially, play safe), if history is anything to go by, this sort of a thing cannot happen.

If someone thinks out of box, perhaps it will. Some of the future brands of Brand America might well be Chinese (more likely) or even Indian. Thinking about it, the entire brand America seems to run through foreigners. Americas dollars (and hence economy) depend on Japanese and Chinese investments (among others). Its brands are owned, variously, by Japanese and Chinese (among others). Its manual workers come from Mexico while a lot of tech workers come from India. Foreign students subsidise the educational system. What exactly is brand America?


Yogustus said...

The Answer: If it weren't for American consumers...none of the "brands" you mentioned would have existed. So that's your Brand America. People here really know how to "live life kingsize" while the rest of the world is still catching up.

Anup said...

There have been several new stories of India IT firms buying small companies in the US. The difference with deals like Lenovo-IBM or the recent CNOOC bid for Unocal is that the Chinese companies have low cost capital available given China's massive trade surplus with US. It may not be that easy for Indian comapnies.

As for the Brand America, one of the biggest strengths of the US lies in importing shades of foreign cultures, mixing and matching them in the great melting pot and then exporting that as a new product all over the world. From Pizza to Yoga, Mel Gibson to Salma Hayek, Brand America knows how to do it!

Jayesh said...

Good post.. Although Brand America has its softer exports like its movies, attitude.
But the lower end, lower value is up for grabs for India and China