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ABOUT LENOVO While the Lenovo brand came into existence only in 2004, the company has a much longer history. In 1984, Legend Holdings was formed with 25,000 RMB in a guard house in China. The company was incorporated in Hong Kong in 1988 and would grow to be the largest PC Company in China. Legend Holdings changed its name to Lenovo in 2004 and, in 2005, acquired the former Personal Computer Division of IBM, the company that invented the PC industry in 1981. Lenovo has the leading position in the fastest growing market in the world. Their acquisition of
IBM's PC business makes them the third largest PC supplier in the world. In addition, the people of ThinkPad notebooks & ThinkCentre desktops are now part of the Lenovo team - the award-winning engineers, the manufacturing teams, the sales representatives, the business partners.
SUMMERY PARTICULARS Industry Founded Headquarters FINDINGS Computer hardware Computer system 1984 Morrisville, NC, U.S. Beijing, China Singapore Worldwide 2005
Porters Six Forces & LENOVO We can use Porters Six Forces to analyze the state of the current international corporate PC market to get a better sense for the environment in which must approach our problem.
Threat of New Entry With the growth of the PC corporate market, there are foreseeable potential entrances in this market. However, the entry barrier is relatively high enterprises generally seem to be satisfied with their current notebook providers, with little incentive to look beyond their current suppliers. However, in technology markets, it is generally considered a constant possibility for a new company to leapfrog the competition with a new invention. As a result, existing companies are rigorous about attracting new engineering talent and attempt to use complementing to make major changes in IT providers unprofitable. This is a significant reason that Dell, HP and Lenovo maintain their dominant positions in the corporate market.
Buyers Bargaining Power The buyers bargaining power in this market is relatively low in this market, since the customers are enterprises, which purchase bulk volume of PCs to their employees. The cost to switching to another PC suppliers is high to our customers, and the RFP process consumes too much of the office of the CTOs, PC sourcing analysts, and desktop managers time. However, improving product and service quality, offering extra features and maintaining strong customer relationship is still key to success.
Suppliers Bargaining Power This does not apply to Lenovo, who manufactures its own materials to a great degree mainly, raw materials like boards and chips have reasonably standard prices.
Substitute products The most probable substitute products are ultra light laptops and ultra mobile PCs. Despite the heavy advertisement of these products in the media, enterprises dont see them as useful to their organization. These products tend to be produced as a fashion statement, which get more attention from younger customers. The consumer market is more promising for these products. Rivalry Currently, there are three major players in the PC corporate market, Dell, HP and Lenovo, which take up around 90% of the market share. According to the customer satisfaction survey, there are relatively few differentiations among these top three players in terms of product features and product quality. While Lenovo has the best product support and strongest business relationship with customers among the three, for Lenovo to catch up with the other two competitors, keeping the brand name is the key, especially when the IBM trademark rights are lost.
% of annual sales & returns both from Home Market & Host Market
For the year ended March 31 Sales Gross profit EBITDA Pre-tax income Pre-tax income margin (%) Profit attributable to equity holders of the Company EPS basic (US cents)
2011 US$ million 21,594 2,364 603 362 1.7 273 2.84
2010 US$ million 16,605 1,790 432 161 1.0 129 1.42
SALES ANALYSIS BY GEOGRAPHY China Mature Markets Emerging Markets (excluding China) total sales
*Here mature market includes Europe, Middle East & Africa and America. *Emerging market includes Asia Pacific.
year 2011
50% 40%
year 2010
China, 46%
30% 20% 10% 0% China Mature Markets Emerging Markets (excluding China)
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CONCLUSION: Chinese computer maker Lenovo Group is planning to alter its 17-year tradition of targeting high-end business users by refocusing its ThinkPad notebooks at small businesses and home offices settings. Lenovos long-term development is inseparable from a unified and correct guiding ideology. Only with the right long-term strategic planning for the guide, use its own characteristics with people in enterprise management strategy for the management of Lenovo, Lenovo will be able to establish a sound management system in order to guide the company to be stable, healthy & rapid development.
Suggestions for LENOVO Lenovo should concentrate effort on outperforming competition in the high-end market, maintaining the ThinkPad brand identity for quality products Lenovo should begin marketing mid-range laptops along with the ThinkPad to corporate clients, becoming a one-stop shop for a companys notebook needs, providing top of the line Thinkpads to executives, and a range of less expensive but similarly high quality products to lower spectrum employees. Lenovo should considering spinning off a company to market their high-end ThinkPad line under a brand name that might not raise suspicion about quality.