Globalization of Operational ProcessIn the globalization of firms, operational processes like supply chain management,technology management, revenue management, and risk control are globalized.The supply chain is globalized to meet dynamic needs of growing markets andnew consumer segments, to balance risks caused by economic and politicaluncertainties, and to manage costs complexity. MNEs consider possibilities ofglobal outsourcing, global distribution, global supply chain strategic alliance, andglobal coordination. Apple builds a complicated global supply chain, with thedesign in the US, components and parts purchasing in Korea and Japan, assemblyin China, distribution in China and the US, and global retailing. Airbus had built ahuge global supply chain network to produce different parts, components, andairplanes.Revenue management companies use the global service chain, vertical integration,horizontal integration, and sector integration to provide global platforms forglobal revenue management. MNEs manage global revenue by dynamic pricing,dealing with global demand fluctuation and global capacity control in differentregions. Particularly, global alliance (e.g., SkyTeam) revenue management hasbeen a trend to optimize price and capacity control.Product development and R&D processes are globalized, driven by market ortechnology factors across regions. Global product development strategy considersglobal manufacturability, different staff learning curves, customer heterogeneity,and product standardization versus localization to apply an open innovation paradigmand manage global R&D activities.When going global, firms are exposed to more natural, economic, political, andsocial risks. MNEs can formulate a speculative strategy, hedge strategy, flexiblestrategy, and safety strategy to control its material flow risks, financial flow risks,and information flow risks. Firms are struggling to manage the complexities ofglobal risks by coordinating global supply management, demand management,finance management, information management, and product management.50 2 Globalization of OperationsCase Example: Operational Globalization of LenovoIn 1984, Liu Chuanzhi founded New Technology Developer Inc. in Beijing, thenrenamed it Legend in 1987. The company was incorporated in Hong Kong in1988 and grew to be the largest domestic PC manufacturer in China in the 1990s.Realizing the limit of domestic market, Legend set globalization as the target in2003. Chairman Liu Chuanzhi presented how Legend had made the decisionabout the globalization approach:We recognized that there were two primary ways to globalize. One was to grow organically.We were aware, however, that this approach would involve a very long process.Another way was to expand through mergers and acquisition: this was, however, a veryrisky process. With the help of external advisers and consultants, we decided to adopt thesecond approach (Liu 2007, p. 574).Since 2004 Legend carried out a three-step globalization strategy. The firststep to prepare for globalization was to change its name to Lenovo in 2004, asLegend had been registered overseas. Second, Lenovo acquired the formerpersonal computer division of IBM (IBM PC) in 2005. The third step was togo global with Olympic Games in 2008. Today, Lenovo is the worlds secondlargestPC vendor, with more than 26,000 employees in more than 60 countries,serving customers in more than 160 countries (For the globalization timeline oflenovo, see Table 2.2). Globalization of competenciesIn the 1980s, Lenovo only had cost competency and distribution capabilities toserve foreign PC companies. In the 1990s, Lenovo was the first company tointroduce the home computer concept in China and grew into a national companywith 27 % market share in the domestic market. Compared with foreignPCs, Lenovos competency lies in its deep understanding of the domestic marketand rapid response to local customer demand. After acquiring IBM PC, Lenovoestablished firm-specific competency in world-class cost control and operationalefficiency. Globalization of resourcesIn the 1980s, Lenovo only had distribution resources to serve foreign PCcompanies. In the 1990s, Lenovo built manufacturing, R&D, and marketingresources in China and became the largest domestic PC producer. The milestoneevent to globalize the resource was to acquire IBM PC. After acquisition,Lenovo obtained a powerful global distribution and sales networks, absorbedand integrated important human resources and administration skills, acquiredIBMs leading PC technologies, and got global brand recognition and an internationalcustomer base. In 2011 Lenovo set up a joint venture, Lenovo NEC,with the Japanese company NEC to boost Lenovos sales in Japan.Lenovo has globalized its resources by building headquarters in Beijing andNorth Carolina, major research centers in Yokohama, Beijing, Shanghai,Shenzhen, and Morrisville, and manufacturing factories around the world inthe US, Mexico, India, China, and Brazil.2.2 Globalization of Operational Competencies, Resources, and Processes 51Table 2.2 Globalization timeline of LenovoTime Location EventsGlobalization ofcompetencies Globalization of resources Globalization of process1984 Beijing Founded New TechnologyDeveloper IncLow-cost distribution inlocal marketDistribution of resources inlocal marketDistribution processfor foreign PC1987 Beijing Renamed itself Legend Low-cost distribution in China Distribution of resources in China A part of global outsourcing1988 Hong Kong Incorporated Financial resource out ofmainland China1990 China Began marketing its ownproductsBuilding competitiveadvantages on a national scaleBuilt manufacturing, R&D,marketing resources on anational scaleBuilt national process networks1991 Germany Establishment of LegendGermanyBegan to buildcompetency in EuropeBegan to globalize the resource Began to globalize the process2004 China Renamed Lenovo Prepared intangible resource2005 The US Acquired the personalcomputer division of IBMBegan to build competencyon a global scaleObtained global distributionnetworks, and human resourcesand technologiesGlobalized the supply chain,R&D management, risk controlprocesses2008 Beijing Went global with OlympicGamesBuilt global reputation2011 Japan,NetherlandsEstablished a PC joint ventureLenovo NECBoosted Lenovos salescompetency in JapanMarketing and channel resourcein JapanDistribution process in Japan2012 Customers in160 countriesProvided affordable, high-qualityproducts with rapidresponse to local customersEstablished headquarters inChina and the US, researchcenters, and manufacturingfactories around the worldA highly efficient global