A MINI PROJECT ON STRATEGIC ANALYSIS OF LENOVA

Submitted towards the partial fulfilment for the requirement of

STATEGIC MANAGEMENT subject in MBA program

Submitted By:
Karthik R
RA1552001010514
Session: 20152017
Submitted To:
Prof. Pradeep.E
Faculty of Management
SRM UNIVERSITY

SRM UNIVERSITY
Srm Nagar, Potheri.

Executive Summary
In recent years, the personal computer manufacturing company Lenovo has
utilized unique competitive strategies to achieve a rapidly increasing share of the
computer and notebook market. After acquiring the IBM brand name and laptop
division, Lenovo soon became a major player in the corporate market, inheriting
along with IBMs notebook division technology and executive staff a reputation
and branding that allow Lenovo a 19% market share in the international corporate
notebook computer market. However Lenovo is continuing to optimize their
strategies for competing in a market dominated by major players HewlettPackard and Dell who account for 21% and 54% of the international corporate
market, respectively.
In the next year, Lenovo will be losing the rights to use of the IBM branding on
their Think pad notebook series. This poses an interesting strategic problem: how
can Lenovo continue to improve their share of the corporate notebook computer
market once it has lost the IBM brand name? In this paper, we attempt to address
this issue and analyze Lenovos outlook critically, making the following
important strategic suggestions:
Lenovo should concentrate effort on outperforming competition in the high-end
market, maintaining the Think pad 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.

Introduction:
Company Profile:
While the Lenovo brand came into existence only in 2004, the company has a
much longer history. In 1984, Legend Holdings was formed with 200,000 RMB
(US$25,000) 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.
Today, Lenovo is a US$34 billion personal technology company and the world's
largest PC vendor. We have more than 33,000 employees in more than 60
countries serving customers in more than 160 countries. A global Fortune 500
company, we have headquarters in Beijing, China and Morrisville, North
Carolina, U.S.; major research centres in Yokohama, Japan; Beijing, Shanghai,
Wuhan and Shenzhen, China; and Morrisville; and we have manufacturing
around the world from Greensboro, North Carolina and Monterrey, Mexico to
India, China and Brazil.
Lenovo has been the fastest growing major PC company for more than 4 years,
but we're much more than a PC company. We create a full range of personal
technology, including smartphones, tablets and smart TVs. We're the fourth
largest smartphone company in the world, and are expanding rapidly to new
markets. And we're already #3 in the world in what IDC calls "Smart Connected
Devices," which combines PCs, smartphones and tablets.
It's all part of what we call the "PC+" world, where people use PCs as well as a
range of smart devices that are, at their heart, PCs. In this PC+ era, a singular
focus on outpacing the competition in terms of market share, profit, ranking, etc.
is not enough. To be a truly innovative company, we will create new categories
of products that enhance the customer experience and differentiate us from the
competition. Finding the right balance between these two forces is what we
strive to do on a daily basis.
Lenovo's end-to-end business model for vertical integration leverages owned
manufacturing capabilities for greater control over both product development
and supply chain operations. This model is unique among major PC makers and
is a significant source of competitive advantage, helping us to bring more

innovation to market, more efficiently, and aggressively attack the PC+

opportunity.
And as Lenovo expands globally, we are establishing even deeper roots in each
major market, investing not only in sales and distribution, but also in local
domestic manufacturing, R&D and other high-value functions. This global reach
with local excellence is enabling us to build a new kind of company - a "globallocal" company - and positions us to more deeply implement our protect and
attack strategy and build the foundation for long-term success.
Lenovo has consistently outgrown the worldwide PC market in unit shipments
and gained market share across all geographies, products and customer
segments, making it the fastest growing major PC company in the world for
three years running.
We are the number one PC company in China, Japan, Russia and
Germany.
We are the number one PC company in the world for large business and
the public sector.
We have been the fastest growing major PC brand for the past 3 years.
We make the best known PC notebook in the world. It's a ThinkPad
and in 20 years, more than 90 million of them have been sold.
In two years, we built a smartphone business from scratch and reached
#4 in the world. We are now rapidly expanding to new markets.
We have launched a family of convertible PCs that combine the best
features of both notebook PCs and tablets, leading a new category of
personal technology.
Lenovo's business is built on product innovation, a highly efficient global supply
chain and strong strategic execution. The company develops, manufactures and
markets reliable, high-quality, secure and easy-to-use technology products and
services for customers who want technology that does more because people
have a lot more to do. Our product lines include legendary Think-branded PCs
and Idea-branded PCs, as well as servers, workstations and a family of mobile
internet devices, including tablets and smart phones.
We have a long-term goal of becoming the leading personal technology
company in the world. We aspire to achieve this goal by leading in three key
areas:
Personal Computers: Lead in PCs and be respected for our product
innovation and quality.

 Convergence: Lead the industry with an ecosystem of devices, services,

applications and content for people to seamlessly connect to people and
Web content.
Culture: Become recognized as one of the best, most trusted and most
well-respected companies to work for and do business with.
And we want to do it the right way the Lenovo Way with our own
perspective, our own global point of view and our own commitment to building
technology for people who view technology as a tool to accomplish great things.
Our Values
At Lenovo we view our culture as a critical asset as important as an effective
business model. We call our culture the Lenovo Way, and at its most basic, that
culture is reflected in the statement: We do what we say and own what we do.
Our values serve as the foundation of our company and define who we are and
how we work. Principal among them are:
Serving Customers
Trust and Integrity
Teamwork Across Cultures
Innovation and Entrepreneurial Spirit
Our Heritage
Lenovo came about as the result of the merger of two of the most storied
companies in technology and business: Legend Holdings in China and IBM's
Personal Computing Division in the United States. The merger was heralded as
a watershed event in global business with the potential for integrating two
disparate cultures, languages, processes and markets.
As a result, Lenovo embodies unique market possibilities in combining the best
of East and West joining North American and China-based technology players
in the creation of a unified global personal technology leader with growing
market positions in developed and emerging markets alike.
Lenovo has developed a core competence in managing acquisitions that it has
applied to subsequent mergers and joint ventures. In 2011, Lenovo formed a
joint venture with NEC, creating the number 1 PC company in Japan. Later that
year, Lenovo acquired Medion in Europe, and is now number 1 in Germany. In
2012, Lenovo formed a joint venture with EMC with regard to servers and
enterprise solutions and acquired Stoneware, a cloud-focused software
company. In 2013, Lenovo acquired CCE, a leading consumer electronics

company in Brazil. What all of these actions have in common is that they have
effectively supplemented organic growth and produced new synergies that
enhance our overall business.
Everyone at Lenovo takes great pride in our ability to attract top talent from
diverse backgrounds, representing a broad collection of nationalities and
languages. We view our differences and diversity as a source of strength in
building a collaborative culture with one unified language and vision: to build
the world's most exceptionally engineered personal technology products and
services.
Innovation: A Core Value
Lenovo owns the greatest track record for innovation in the PC industry and
remains committed to innovation in its products and technology. We will
continue to leverage the spirit of innovation and history of technological
breakthroughs into new product categories and drive future growth. Innovation
is how Lenovo achieves competitive differentiation and drives new market
opportunities, such as mobile Internet, digital home and cloud computing.
Lenovo products consistently win awards and receive rave reviews. They deliver
the high quality, reliability and durability to meet our customers' demand. The
ultimate goal of Lenovo's R&D team is to improve the overall customer
experience while driving down the cost of ownership.
Lenovo operates 46 world-class labs, including research centers in Yokohama,
Japan; Beijing, Shanghai, Wuhan and Shenzhen, China; and Morrisville, North
Carolina, U.S. Lenovo's innovation strategy is based on a two-tiered approach to
solving real-world customer problems:
Focus the majority of development on ideas that can be brought to
market within 24 months.
Invest longer term in research targeting "game changing" big plays.
The company is rich in talent, employing more than 3,200 engineers, researchers
and scientists. Lenovo's R&D teams have introduced many industry firsts
supported by a track record of innovation including more than 6,500 globally
recognized patents and more than 100 major design awards.
Acquisitions, collaboration with industry associations, and investments in
research and development even in down cycles enable us to stay ahead of
market trends and deliver a comprehensive portfolio of products.

Lenovo's global scale and emphasis on innovation also give us a degree of

visibility regarding the health and well-being of the communities and markets
we serve. Through this we are better able to innovate and deliver relevant
solutions that address a number of key sustainability measures addressed in this
report from climate and energy to environmentally-conscious products,
education and employee voluntarism.
Our Commitment to Corporate Citizenship (CSR)
Social responsibility can take many forms and mean different things to different
people. Lenovo's viewpoint reflects our unique heritage having roots in both the
East and the West. To succeed, we have had to create an entirely new way of
doing things. We look at the world and see what it's becoming more than where
it's been. We take our role in responsibly shaping the future very seriously, thus
we approach corporate citizenship differently. We consistently work to improve,
not only our performance and the quality of our products, but how we do
business, how we treat our people, the various communities we serve and the
environment around us. That means we live up to our commitments and take
ownership for what we do. Guided by these principles:
Lenovo was selected as a constituent stock on the 2012 Hang Seng
Corporate Sustainability Index (HSCSI) with an AA rating. Lenovo's AA
ranking is an improvement from the A+ rating it received last year and is
representative of Lenovo's continuous efforts to be both sustainable and
socially responsible.
For the second consecutive year, Lenovo has earned a position on the
HSCSI's Honour Board, which puts it among the top 10 of the 636
companies whose corporate sustainability performance was examined.
Lenovo is also the top rated company in the Information Technology
sector and the only company in its sector among the Hong Kong top 20.
Background
Lenovo Group is a Chinese person computer manufacturer that has grown to be the
third largest personal computing company in the world. Since its acquisition of the
IBM Personal Computing Division in 2005, Lenovo has been a player on the
international stage, expanding operations rapidly and seeking to develop an
international reputation for the Lenovo brand name. By 2006, Lenovo had acquired

and set up significant investments and centres in the United States, and had begun
marketing Lenovo branded products outside China for the first time.
An internal analysis of markets for both notebook and desktop sales shows
that Lenovo continues to manufacture and sell about an equal number of laptops
and desktops each year. Roughly half the sales of Lenovo products (including IBM
branded products) continue to be sold in Asia, while the rest are relatively evenly
split between sales in the Americas and in Europe. In recent years, it has been the
stated goal of Lenovo Group Chairman to challenge perceptions of Chinese
companies as mainly producers of cheap, low-end products. Lenovo has begun
marketing high-end models of notebooks under the IBM brand, like the ultra-thin
ThinkPad X300. As a result, Lenovo has not rolled out a range of low-end products
outside of China. However, Lenovo has plans to release a wide range of products, at
both low and high-end levels.

International PC Market Viability

Despite the slowly growing PC market in the US, the corporate market continues to
demonstrate a healthy growth rate. The total corporate market size in the US grew
from $664 billion in 2004 to $778 billion in 2007. Dell, HP, and Lenovo have
dominated the corporate desktop and laptop market with 87% of enterprises
purchased their desktops and 84% of enterprises purchasing their laptops from
these three manufacturers in 2006, and the trend is expected to be the same in the
next two years.
Customers
Customers in the corporate PC span the range from small and medium-sized
businesses to large enterprises. Desktops have dominated the enterprise computing
arena for decades because they are cheaper, more powerful and easily upgraded and
repaired. However, increased needs for mobility and rapid increase in laptop
performance-to-price ratios have resulted in a recent upswing in the share laptops
have in the corporate market. Even as performance and price remain priority,
additional factors like energy-efficiency, size, weight, and noise have become

increasingly important. The ratio of desktops to laptops evolved from 75/25 in 2004
to 70/30 in 2006 and desktop managers reported in 2006 that their laptop usage
plans over the next two years were 1.5 times greater than their desktop usage plans.
Brief Competitor Profiles
Dell is currently the top enterprise desktop and laptop supplier in the world. Dell
supplies both desktops and laptops to more than half of North American and
European enterprises, doubling its closest competitor in both notebook and desktop
PC sales. In North America, Dell is winning 60% of the desktop and 58% of the
laptop market. Dells strengths lie in its low prices and product support. However,
low R&D budget prevents Dell from producing new innovative products. HP
maintained its solid No. 2 desktop supplier status and recently overtook Lenovo for
laptops, supplying desktops to 27% and laptops to 21% of North American and
European enterprises. HP has also improved significantly year-over-year, especially
across laptops. It gained 6% in the North American enterprise laptop market and
5% in the European enterprise laptop market in the last year. These gains will
continue, since HP recently refreshed its entire lineup of Intel-based laptops in 2007
with Intels Santa Rosa release. However, HP is behind in product quality and
product support, according to surveys of customer satisfaction.
Statement of the Problem
Lenovo faces major obstacles to dominance both in the strength of its current
competitors as well as in its impending loss of the IBM brand name for ThinkPad
products. In this project, we seek to analyze and optimize the utilization of
Lenovos current borrowed brand image and to offer plans for Lenovos future to
achieve an improved share of the corporate market for notebook computers over the
next several years.
Porters Six Forces
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 tobe 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.
Complements
The complements for PCs include operating systems, software and hardware that
will be used most by our customers. By integrating complements into their
products, PC manufacturers are able to meet more customers needs, increase
satisfaction and potentially reach out for more customers.

Objectives of study

To study the market;

To predict and forecast organizations demand and supply;
To formulate strategy;
To increase the market share;
To study the market trend and pattern;
To develop strategy for organizational growth;
When the organization is planning for the diversification and expansion
plan;
To study forthcoming trends in the industry;
Understanding the current strategy strengths and weaknesses of a
competitor can suggest opportunities and threats that will merit a response;
Insight into future competitor strategies may help in predicting upcoming
threats and opportunities.

SWOT Analysis
SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. By
definition, Strengths (S) and Weaknesses (W) are considered to be internal
factors over which you have some measure of control. Also, by definition,
Opportunities (O) and Threats (T) are considered to be external factors over
which you have essentially no control.
SWOT Analysis is the most renowned tool for audit and analysis of the overall
strategic position of the business and its environment. Its key purpose is to
identify the strategies that will create a firm specific business model that will
best align an organizations resources and capabilities to the requirements of the
environment in which the firm operates.
In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the
firm that affect the success. A consistent study of the environment in which the
firm operates helps in forecasting/predicting the changing trends and also helps
in including them in the decision-making process of the organization.
An overview of the four factors (Strengths, Weaknesses, Opportunities and
Threats) is given below1. Strengths - Strengths are the qualities that enable us to accomplish the
organizations mission. These are the basis on which continued success
can be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are
well-versed in or what you have expertise in, the traits and qualities your
employees possess (individually and as a team) and the distinct features
that give your organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities
of an organization, which includes human competencies, process
capabilities, financial resources, products and services, customer
goodwill and brand loyalty. Examples of organizational strengths are
huge financial resources, broad product line, no debt, committed
employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from

accomplishing our mission and achieving our full potential. These
weaknesses deteriorate influences on the organizational success and
growth. Weaknesses are the factors which do not meet the standards we
feel they should meet.
Weaknesses in an organization may be depreciating machinery,
insufficient research and development facilities, narrow product range,
poor decision-making, etc. Weaknesses are controllable. They must be
minimized and eliminated. For instance - to overcome obsolete
machinery, new machinery can be purchased. Other examples of
organizational weaknesses are huge debts, high employee turnover,
complex decision making process, narrow product range, large wastage
of raw materials, etc.
3. Opportunities - Opportunities are presented by the environment within
which our organization operates. These arise when an organization can
take benefit of conditions in its environment to plan and execute
strategies that enable it to become more profitable. Organizations can
gain competitive advantage by making use of opportunities.
Organization should be careful and recognize the opportunities and grasp
them whenever they arise. Selecting the targets that will best serve the
clients while getting desired results is a difficult task. Opportunities may
arise from market, competition, industry/government and technology.
Increasing demand for telecommunications accompanied by deregulation
is a great opportunity for new firms to enter telecom sector and compete
with existing firms for revenue.
4. Threats - Threats arise when conditions in external environment
jeopardize the reliability and profitability of the organizations business.
They compound the vulnerability when they relate to the weaknesses.
Threats are uncontrollable. When a threat comes, the stability and
survival can be at stake. Examples of threats are - unrest among
employees; ever changing technology; increasing competition leading to
excess capacity, price wars and reducing industry profits; etc.

Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a
strong tool, but it involves a great subjective element. It is best when used as a
guide, and not as a prescription. Successful businesses build on their strengths,
correct their weakness and protect against internal weaknesses and external
threats. They also keep a watch on their overall business environment and
recognize and exploit new opportunities faster than its competitors.
SWOT Analysis helps in strategic planning in following mannera. It is a source of information for strategic planning.
b. Builds organizations strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organizations threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and
current data, future plans can be chalked out.
SWOT Analysis provide information that helps in synchronizing the firms
resources and capabilities with the competitive environment in which the firm
operates.
SWOT ANALYSIS FRAMEWORK

Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to
view circumstances as very simple because of which the organizations might
overlook certain key strategic contact which may occur. Moreover, categorizing
aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market. SWOT Analysis
does stress upon the significance of these four aspects, but it does not tell how
an organization can identify these aspects for itself.
There are certain limitations of SWOT Analysis which are not in control of
management. These includea. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas
market due to import restrictions; etc.
Internal limitations may includea. Insufficient research and development facilities;

b. Faulty products due to poor quality control;

c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

SWOT ANALYSIS OF LENOVA

In order to get a better sense for Lenovos outlook in terms of the corporate market
and the impending loss of the IBM branding, it is helpful to analyze the companys
strengths, weaknesses, opportunities and threats in terms of the problem. These key
parameters are summarized here.
Strengths
Lenovos major strengths lie in its current brand image and market share. On the
international scale, Lenovo ranks third in corporate sales behind Hewlett-Packard
and Dell. It shows tremendous capability for improvement, however, due to its
clearly superior reputation for high quality, high end products inherited from IBM.
In addition, executives maintained from IBMs notebook division provide the
valuable experience that a relatively new foreign player normally would not have in
the corporate (especially US) market. However, Lenovo already has a strong base in
China, with a 29% share of Chinas PC market.

There is limited competition for existing IBM/Lenovo corporate customers, because

of existing reputation and connections formed by transferred IBM staff. The
historic brand image and continuing innovation in the high-end market makes
products like the ThinkPad X300 a must-have for a CEO to show off and use.
The strength here lies in the capability for creativity in producing a high-end
product with all the bells and whistles necessary for a corporate executive. Lenovo
provides a highly versatile notebook product line, in addition to its high-end
ThinkPad. As a one-stop shop company, Lenovo shows promise its product
lines covers mid to high end products, now supporting Linux products. In addition,
in-house manufacturing specialization allows for lower marginal costs this leads
to a more competitive position for a price war.

Weaknesses
Since Lenovo is a new player in the international stage it has plenty of weaknesses
in its outlook. In general, its team has less market knowledge than local
experienced players in the US market like HP and Dell. Lenovo has just begun to
develop its service team in the US it still manages to provide top of the line
customer service, but the system is not optimized. Lenovos major weakness,
however, is in the stigma associated with Chinese products and companies with a
reputation for skimping on quality to achieve low costs. A customer in the states is
likely to mistrust the Lenovo brand in favor of the more well known and
trustworthy, American IBM logo. It is this weakness that Lenovo must overcome in
the next year as the IBM branding disappears from its products.
Opportunities
With low marginal costs and a wide product spectrum, Lenovo has the opportunity
to become a one-stop powerhouse in the corporate market, providing high-end
executive computers with the IBM ThinkPad line, and high-quality, middle-

spectrum computers for lower level employees on the corporate ladder. In addition,
a developed electronics department allows Lenovo the opportunity for creating
synergies between corporate addons like cell phones and Pocket PCs.
Threats
In general, the weakness of the US economy and the dropping value of the dollar
might pose a threat to Lenovos growth. Rivalry between Lenovo and other
companies in the corporate market like HP and Dell already pose a significant
challenge, but Apple is showing a growing strength in the corporate market that
must be addressed as Lenovo seeks to become the dominant international corporate
player.

Strategic Analysis: Competitors Strategies

Dell Inc.
In 2007, Dell had a $60 billion global business with a customer base and an
installed base of more than 200 million units. Dells major strengths lie in its direct
order business model and in its current power in the market; with close to $10
billion in cash and about $1 billion a quarter in cash flow Dell is a world-renowned
brand and is currently the number one choice of enterprises around the world. The
direct order business model cuts costs for retailing and provides a highly
customizable product. These features are ideal for marketing low and middle
spectrum computers to companies, a strategy that has resulted in Dells success
Dells weaknesses, however, also lie in this direct order business model. Customers
have no physical sense for the product theyre buying, resulting in dissatisfaction
with the often clunky, utilitarian look of new Dell products. It is this aspect that
makes Dell attempt at high-end computers susceptible to the ThinkPad brand
Dells computers lack both the reputation and quality (number of features and
reliability) that IBMs ThinkPad came to epitomize. In recent years, Dell has

attempted to capture the minds of IT professionals at corporations by providing

services for data management, even though it seems to have been slow to react to
demand. Dell has become a major reseller of VMware, the dominant brand of
virtual machine software used to juggle operating systems and applications on a
single server.
Hewlett-Packard Co.
HPs major strengths in the notebook market lie in its overall size and power as a
company. Its dominance in the printer market and general knowledge of marketing
and sales in the IT market should give it an advantage in developing complements,
brand images. Compared to other companies, however, HP has been noted as weak
in marketing, distribution speed, and costs. HP attempts to provide the latest
technology available by keeping inventory low and making large orders as they
come as a result, their costs are higher on average than their competitors for
production of similar quality products. HPs strategies in recent years have
included the acquisition of struggling computer giant Compaq, making HP the
largest consumer hardware company in the world. They have attempted to maintain
and expand their market power by expanding into new markets (especially newly
growing Asian markets) lobbying and working with other multinational
corporations, NGOs, and governments to enhance their competitiveness both in the
US and abroad, claiming in one of their press-releases to be supporting freemarket
economies. Recently, HP announced plans to expand its operations to cover retail
and manufacturing in over six-hundred Chinese Cities. HPs most successful
strategy in recent years has involved the interfacing of HP notebooks and
computers with HP server systems through use of heavily marketed efficiency
software that also is advertised to provide convenient tools for financial
management and leadership. HP has also invested heavily in stylish ergonomics,
following Apples cue.
Apple Computer Inc.
Apple is an established and healthy IT brand in the international market today, with
a loyal set of enthusiastic customers who advocate their brand strongly. Apples
strengths in the consumer market have begun to seep into the corporate world as

well: in the corporate market, Apple makes use of their favourable brand perception
for style, safety, and ease of use. Apple has been intelligent about providing solid
technical support on which Lenovos current system is modelled. Apples
weaknesses in the corporate market lie in a reputation as a consumer product, filled
with flashy multimedia applications that slow down the computer and are
unnecessary for an executives business computer, and counterproductive for lower
level staff. The Apple system is still not optimized for use with the Windows
operating system, and is thus not as easily used with the majority of applications
published today. Most importantly, Apple has yet to penetrate the corporate market
significantly. Current barriers to entry put up by Lenovo, HP and Dell may prevent
Apple from taking a significant bite out of the current market. Recently, however,
Apple has sought to attack the corporate market through the marketing of
complements that work better with Apple notebooks, featuring the iPhone as a
replacement for the traditional executives Blackberry.

Strategic Analysis: Responses and Competition for Lenovo

Product Differentiation: Wider Quality Spectrum
Lenovo has the opportunity to provide a broad spectrum of services to the corporate
market. With a reasonably high-quality, low cost series of computers in the Lenovo
3000 line, Lenovo can attack the same niche in the corporate market that allows
Dell more than 50% of the market share: providing not only high-end notebooks
and computers for executives, but also mid-spectrum machines for non-executives;
people who dont need to use the top of the line ThinkPad. In doing so, Lenovo has
the potential to become a one-stop shop in the corporate market. At the same
time, however, Lenovo needs to continue to focus on providing the most features in
their high-end machines, ensuring that they maintain the reputation that the highend ThinkPad series has built. An executive purchasing a computer is less likely to
worry about a hundred dollar difference in prices than about the number of features
a computer provides. Apples response to Lenovos top-end products seems to have

been to provide a lower cost product on purpose (undercutting) but only by

skimping on quality. The Macbook more feature-intensive Think Pad X300. Since
Lenovo target is the corporate, rather than individual consumers this should be to
our benefit. A worst case scenario in response this suggested attack of the midspectrum market results in a price war for this market. This is difficult to avoid by
minimizing marginal costs, Lenovo can hope to win the price war and hurt its
competitors in the process. Lenovos in-house manufacturing expertise will serve to
give them the upper hand against a company like Dell in providing to the less-thanhigh-end corporate need. It is this advantage in marginal costs and the existence of
Lenovos lower end 3000 line computers that makes this attack a wise choice.

Complements to Compete with Apple and HP

HP and Apple have begun to demonstrate success in the marketing of complements
in server interfacing technology and efficiency equipment, respectively, in the
corporate market. It is likely, however, that if Lenovo were to partner with IBM to
produce a complement with IBM server technology, both companies would stand to
gain: while it is not in IBMs interest to make their servers solely compatible with
Lenovo products, cooperation to optimize interfacing makes both products more
desirable for customers. HP demonstrated that the software interfacing they
introduced for their server systems increased productivity and popularity of their
product in the corporate market. This same model, if applied to an IBM-Lenovo
cooperation, might result in both continued positive brand identification for
Lenovo, and an increase in popularity for both products IBM already has a
significant brand name for its server technology, on which Lenovo would likely be
riding. While it is a much vaguer suggestion, Lenovo should also attempt to use

their significant base as an electronics manufacturer and retailer to develop

complements to their products that appeal to executives, modeling efforts after the
ease with which Apples iPhone interfaces with Apple computers. In both these
instances, we must hope that Lenovos complement is more attractive or cheaper to
executives than competing products otherwise, such attempts are likely to fail to a
similar extent that HP and Dell attempts at products like PDAs have failed. An
improper method of complementing the device that makes the device is most likely
to cause the synergy to fail. The device might be too dependent on purchase of a
Lenovo notebook, resulting in an inability to generate widespread demand for the
product making it an ineffective draw for Lenovo products, or not dependent
enough on such a purchase, resulting in an ineffective pairing.

Strategic Analysis: Currently Successful Strategies

Marketing
There are two main focuses for marketing to the corporate market, both seeking to
address the major concerns of corporations in computer purchases: functionality
and need for service. These are addressed through the relationship model and
transaction model for marketing. The relationship model involves retaining
customers with continuous innovative products and satisfying customer service
by maintaining a solid customer base and providing them with consistent quality
and support, Lenovo will build a reputation that will earn it more customers. IBM
consistently did this in the past, so Lenovos first concern is maintaining the same
standard of quality, innovation and service that IBM provided. The transaction
model involves making new business deals by spreading to new potential markets.
In this sense, Lenovo uses China as its base for expansion, capitalizing on the low

cost of manufacturing as well as the fast-growing market which allows the

company to create enough revenue to support development in markets around the
world. While companies such as Dell and Hewlett-Packard are trying to penetrate
the Chinese market, Lenovo is trying to break into the international market out of
an established base in the wide Chinese market.
Management
Lenovos major move to provide proper organized and experienced involved hiring
a large number of IBMs former notebook executives in order to transfer the culture
and structure of IBM in their company. Chairman Liu Chuanzhi is known for
having a thorough approach to decision making. His management team studies
other leading firms and reads foreign management journals. There is a strong
commitment to learning and copying successful techniques within the company that
should lead to a versatile company in future climates.

IBM Branding
Lenovo has made full use of the IBM name, barely associating themselve with
the IBM product until very recently. This may have set them up for failure once
their rights to the IBM title expire at the end of this year and they lose their brand
recognition, but while it was used, the IBM name helped Lenovo maintain its solid
base with customers in the corporate market. Recently, Lenovo has emphasized the
brands ThinkPad and Idea Pad, establishing these as the definition in high-end
products, separating them from the IBM name as much as possible. Once Lenovo
can no longer brand their product with the IBM name, they may depend instead on
recognition of the ThinkPad and Idea Pad.

Customer Awareness

Lenovo makes an effort to make sure that the Lenovo brand is well known and
trusted as it continues to grow and produce computers in the international market
on their own name. Co-branding, where two companies work together to create
marketing synergy, can be used to great effect here Lenovos sponsorship of the
Winter Olympics in Turin and the Summer Olympics in Beijing have served to
continue to establish the Lenovo name as one that is trusted in general, just as the
IBM name was.

Conclusion: Lenovo Should Split and Diversify

In order to help maintain the positive brand identity of Lenovos, we therefore
suggest that Lenovo not only begin to provide a wide spectrum of qualities of
product but also that they form two separate companies for the marketing of these
different products. The main focus of this diversification will be to attack the midspectrum corporate market and provide a wider spectrum of solutions for corporate
customers, making a direct play for the products that have made Dell dominant in
the market. It is likely, however, that an association of lower-quality Lenovo
products with ThinkPad will diminish the ThinkPad reputation and lose customers
in the long run. In order to attack the Dell market safely, without diminishing
existing profits in the high-end corporate market, the ThinkPad should be marketed
through a spin-off company centred in Silicon Valley the reputation of such a
company centred on marketing the ThinkPad would hold up much better than the
current apparent strategy of marketing both Lenovo and ThinkPad products under

the same brand after the loss of the IBM brand name. We also concluded from our
research that the American corporate market is a slow growing market to focus on.
Lenovo already has a significant base in the Chinese consumer market, but Apple,
Dell and HP are all moving into this and other Asian markets rapidly. Recently,
Lenovo stole several of Dells Asia executives to prevent competition for the
market, and the introduction of Dells Idea Pad system, a high quality ThinkPad like
notebook that rivals Apple for multimedia and personal uses seems to be Lenovos
strategy for the consumer market. Lenovo brands new Idea Pads and Think Pads
with neither the IBM nor the Lenovo logos, though new users have already
complained that the IBM logo is conspicuous in its absence on these new systems.
In the corporate market, Lenovo therefore should focus on attacking Dells main
source of corporate income by providing a more desirable mid-spectrum product
under the Lenovo branding, and maintain its high quality executive reputation by
continuing to the most features under a ThinkPad branding kept separate from the
Lenovo image. While the corporate market in America may revitalize with the end
of the current recession, Lenovo should also focus on expanding in the Asian
consumer market, which seems most ripe currently for notebook sales.