LENOVO: BUILDING A GLOBAL BRAND

(Midterm Exam)

MM 5003
MARKETING MANAGEMENT

Created by:

MASTER OF BUSINESS ADMINISTRATION

BANDUNG INSTITUTE OF TECHNOLOGY
BANDUNG
2017
1. External and Internal Analysis

1.1 Porters 5 Forces Analysis

- Threat of new entrants:

Threat of new entrants in the global PC industry is low to medium due to

a range of several factors. Such as high capital requirement, constant need of
technology improvement to attract customer (product differentiation), moderate
customer switching cost (due to standardization of most of computer component, it
becomes easy for customer to change their laptop), high distribution channel access
(availability of direct-to-customer service), decreasing profitability due to high
competition.

With the growth of the computer industry, there are foreseeable potential
entrances in this market. However, the entry barrier is relatively high. 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.

- Intensity of rivalry

Due to the fact that there are few competitors in the market and the
industry is growing constantly, the global PC industry market is a highly
competitive market. Currently, there are three major players in the PC industry
market, Dell, HP and Lenovo which the top three market share spots in the computer
industry. The other factors which make the intensity of rivalry are considered to be
high: (1) High fixed cost (cost for setup of manufacturing units increased fixed cost
which makes difficult for existing players to exit), (2) Constant changes in product
and price makes intercategory competition stiffer, (3) Low switching cost increases
rivalry, (4) High exit barriers place a high cost on abandoning the product. The firm
must compete. High exit barriers cause a firm to remain in an industry, even when the
venture is not profitable.