Global Growth; From East to West.

Author:Millman, Gregory J.
Position:CFO INTERVIEW

Chinese entrepreneurs have worked wonders in their country to drive economic growth that has lifted hundreds of millions of people out of poverty and made China the factory floor of the world. In recent years, Chinese firms have begun to spread their wings with acquisitions abroad--but have made more headlines for failure than for success.

Indeed, only one Chinese firm has deftly managed to negotiate its transition from the Chinese market to the global stage: Lenovo Group Ltd. After establishing itself as the dominant computer brand in China, in 2005, Lenovo acquired International Business Machine Inc.'s personal computer business and, despite an initial stumble, the merged company has defied the odds by growing globally.

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Lenovo neatly avoided the turbulence and infighting that came in the wake of the Hewlett-Packard Co.-Compaq Computer Corp. merger. Clearly, the current global financial crisis will prove to be a difficult test. Although its stock price soared last year, in October, Daiwa Securities Group Inc. downgraded its rating on the company and its profit forecast, citing weakening demand.

While no company's future is 100 percent secure in the current economic marketplace, Lenovo has shown that it is possible for a strong Chinese firm to become a global company, and that--in itself--is a singular achievement.

What's Lenovo's secret?

Senior Vice President and Chief Financial Officer Wong Mai Ming credits Lenovo's founder Liu Chuanzhi for his strategic vision and set of management principles that defy stereotypes about Chinese business.

Indeed, Wong says there may be little merit in the stereotypes, which merely reflected a particular stage in China's economic development.

For example, consider the alleged importance of guanxi, or relationships. "It's not really true that relationship is everything in China," he says. Twenty years ago, the Chinese economy was primarily dominated by state-owned companies, and many customers were government officials. Thus, relationships were important. But now, China is moving toward a market economy.

"Government relationships are about equally important in the U.S., U.K. and China--though somewhat more in China because we have a much thicker slice of the economy run by government," Wong says.

Finance's Role

Lenovo's insistence on using accurate financial information and hard numbers to guide its strategy also sets the company apart from many other Chinese companies. Wong explains...

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