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Submitted by: Ishant Kathuria 26 Gunjan Khanuja 28 Kushal Suneja 30

History, Major Diversifications & Acquisitions


1988: Legends Chinese- character card receives the highest National Science-Technology progress award in China and Legend Hong Kong is established 1989: Beijing Legend Computer Group Co. is established 1990: The very first Legend PC is launched in the market. Legend changes its role from that of an agent for imported computer products into that of a producer and seller of its own branded computer products. Legend PCs are ratified and accepted by the China Torch Program 1992: Legend pioneers the home PC concept and Legend 1 + 1 home PCs enter the Chinese marketplace

1993: Legend enters the Pentium era, producing Chinas first "586" PC. Legend establishes
1+1 retail network 1995: Legend introduces the first Legend-brand server. 1996: Legend becomes the market share leader in China for the first time. Legend Introduces the first Legend brand laptop.

1998: The millionth Legend PC comes off the production line. Intel Chairman Andy Grove attends the ceremony, and takes the PC for
Intels museum collection. Legend establishes the first Legend Shop.

1999:Legend becomes the top PC vendor in the Asia-Pacific region and heads the Chinese national Top 100 Electronic Enterprises ranking.

2000: Legend ranked in top 10 of world's best managed PC venders.


2001: Legend appoints Yang Yuanqing President and CEO & first introduces "digital home" concept and launches accessoriesenabling PC.

2002:Legend launches its first technological innovation convention, Legend World 2002, which opens up Legends Technology Era. Legend introduces its visionary concept for the future of technological development and applications, its Collaborating Applications project, as well as its strategies for implementing Collaborating Applications.Legends supercomputer, the DeepComp 1800 makes its debut. It is Chinas first computer with 1,000 GFLOP (floating point operations per second) and Chinas fastest computer for civilian use, ranked 43rd in the Top 500 list of the worlds fastest computers.The mobile handset joint venture announced, marking Legend's formal entry into the mobile handset business. 2003:Legend announces the birth of its new "Lenovo" logo to prepare for its expansion into the overseas market.Based on the collaborative application technology, Lenovo initiates IGRS Working Group, in cooperation with a few large companies and the Chinese Ministry of the Information Industry, to promote the formation of the industrial standard. Lenovo launches a Tech RoadShow 2003 nationwide to promote Lenovo's innovation.Lenovo successfully develops DeepComp 6800 in November 2003. It ranks 14th on the global list.

2004:Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to become a computer technology equipment partner of the IOC. Lenovo decides to develop the rural market by launching the "Yuanmeng" PC series designed for township home users. Lenovo and IBM announce an agreement by which Lenovo will acquire IBMs Personal Computing Division, its global PC (desktop and notebook computer) business. The acquisition forms a toptier (third-largest) global PC leader. 2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making the company a new international IT competitor and the third largest computing company in the world. Lenovo announces the closing of a US$350 million strategic investment by three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle Park, N.C., to enable customers, business partners, solution providers and independent software vendors to collaborate on new personal computing

solutions.

Resources
Financial Assets

Human Resource Capital In the year 2011, Lenovo Group operates a total of about 23,000 employees worldwide, including 1700 designers, scientists and engineers

Resources
Patents As per 2013 balance sheet, Trademarks and trade names and customer relationships, of US$201 million and US$99 million were recognized respectively Lenovo agreed to pay $100 million to acquire and license patents from Unwired Planet Technology

IBM acquisition bought Lenovo world class technology for manufacturing servers, PCs and systems
Recent takeover of Motorola by Lenovo has bought mobile technology experience on its desk

Core Competencies
Constant innovation and quality improvement Global scale and reach Powerful brand name Super capability of competing on the basis of product price Ability to establish and manage effective and efficient distribution network Specific knowledge management department

Distinctive Competencies
Lenovo has adjusted its organizational structure by linking product development, logistics, production and sales together, which were operated in separated units before Capability to acquire and perform :Lenovo has been continuously acquiring firms to bring patents, new capabilities, assets and skills to the company. Most importantly, through successful acquisitions and joint ventures, Lenovo accessed new markets and distribution networks. IBM is most notable and successful Lenovos acquisitions to date

Weaknesses
Poor brand perception in the developed economies: The company finds it hard to access US and Europe markets as its brand perception is low there Low differentiation: Apart from the low price, Lenovo products are little differentiated from competitors products and are in competitive disadvantage if the price offered by competitor is lower Commodity (computer hardware) products: Low Margins Low involvement in forward integration

STRENGTH 1)Vertical integration 2)Knowledge of Chinas market 3)Low cost production 4)Strong patents portfolio 5)Competency in mergers and acquisitions 6)Synergy of knowledge and diverse workforce

WEAKNESSES 1)Poor brand perception in the developed economies 2)Low differentiation 3)Commodity (computer hardware) products

SWOT
THREATS

OPPORTUNITIES

1)Growing Smartphone market


2)Growth of tablets market 3)Obtaining patents through acquisitions

1)Profit margin decline on hardware products 2)Slowing growth rate of the laptops market 3)Saturated Smartphone markets in developed countries 4)Rapid technological change

4)Tablet market growth

STRENGTHS
Vertical integration. Lenovos strategy to vertically integrate has paid off. The business can keep costs low, keep up with the pace, control inventory and rely less on original equipment manufacturers (OEM). Knowledge of Chinas market. Lenovo has emerged in China and continues to be one of the largest players in homeland market. The firms knowledge of Chinas market and the ability to suit Chinese tastes resulted for the wide acceptance and support for the business' products. Low cost production. Lenovo manufactures nearly half of its hardware and has set up production plants in low cost regions such as China, Brazil and Argentina to benefit from higher margins. It is also able to manufacture low cost products that are price competitive. Competency in mergers and acquisitions. Lenovo has been continuously acquiring firms to bring patents, new capabilities, assets and skills to the company. Most importantly, through successful acquisitions and joint ventures, Lenovo accessed new markets and distribution networks. Compaq is the most notable and successful Lenovos acquisition to date. Strong patents portfolio. With an acquisition of Compaq and Stoneware and a help of firms R&D, Lenovo has gathered an important patents portfolio related to its PC and software businesses. Synergy of knowledge and diverse workforce. Instead of traditional headquarter model, Lenovo manages 3 centers of excellence around the world (US, China and Singapore). Combining different skills and resources results in synergy and premium quality products.

WEAKNESSES
Poor brand perception in the developed economies. Lenovos primary market is Asia, where it sells most of its production. The company finds it hard to access US and Europe markets as its brand perception is low there. Low differentiation. Apart from the low price, Lenovo products are little differentiated from competitors products and are in competitive disadvantage if the price offered by competitor is lower. Commodity products. The large stream of Lenovos revenues comes from computer, especially laptop, sales, which is a commoditized product. Computer hardware (commodity) products are sold with a very low profit margin.

Opportunities
Growing Smartphone market. Indias Smartphone market is one of the least penetrated among Asia/Pacific countries. Lenovo could easily penetrate Indias market with its already successful low price Le Phone. Growth of tablets market. Lenovo currently ranks as 4th biggest tablets seller. The business could increase its market share by introducing better quality products. Obtaining patents through acquisitions. If Lenovo wants to sustain its growth, it needs to obtain more patents and the best way to do that is to acquire the firms holding them, as it did with IBMs Compaq. Tablet market growth. Tablet market is expected to grow in double digits for the next few years and the company has a great opportunity to release new tablet models and benefit from the market growth.

Threats
Profit margin decline on hardware products. Lenovos main income is from selling hardware products, which prices will increase in the future due to rising raw material prices. This will add to costs for Lenovo and will further cut the profit margin. Slowing growth rate of the laptops market. Growth rate of the computer market is slowing down and in the near future the markets will become saturated. It will prove hard for Lenovo to compete in such market and continue to grow its market share. Saturated smartphone markets in developed countries. Although Lenovo does not compete in the developed economies with its smartphones it will have difficulties in growing its smartphone division and entering developed economies later as the smartphones market there is already saturated. Rapid technological change. The serious threat that Lenovo and the other tech companies are facing is a rapid technological change. Companies are under the pressure to release the new products faster and faster. The one that cannot keep up with the competition soon fails. Intense competition. The company faces intense competition in all its business segments. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, Dell, HP and Toshiba.

LENOVOs Focus Strategy


Aimed at a segment of the market for a product rather than at the whole market or many markets. It requires a lower investment in resources compared to a strategy aimed at an entire market or many markets. Allows specialization and greater knowledge of the segment being served. It makes enter to a new market less costly and much simpler.

Cost Leadership
Since Lenovos is regarded to adopt cost leadership as its development strategy which share some features of differentiation, the Lenovos competent advantage is developed from differentiation and cost saving through value chain. Improved supply chain A cheaper price through lower transaction costs Convenience and twenty-four-hour access Good reputation among customers Quick and efficient search capability The personality of the service Wide selection and one-stop shopping First mover in the market stronger than average and well-known

CORPORATE STRATEGY
Protect and Attack: Protect the areas where they have strong market share and attack the areas where we are not strong. those areas are where they have room for growth and see huge opportunity Face-to-face engagement and understanding the dynamics of each country and understanding the behaviours of each country. Understand the DNA of each country.

MAJOR BUSINESSES
Focusing on Product brand rather than a corporate brand
Personal Computer business & laptops Includes ThinkPad laptop and tablet lines Smartphone and Tablet business

Electronic Storage Devices

PC PLUS STRATEGY by Manufacturing and designing IBM low end server s

Bought Motorolas phone business/Mobility business

Strategic Problems Faced By Lenovo


Lenovo carried out mergers & acquisitions for its investment strategy of globalization Brand Management: A dilemma exists for lenovo in projecting itself as a cost effective company or a innovation based higher category brand. Though its core competency has been to provide cost effective mass products, that image proves detrimental in acquiring markets in the west IBM's strategy has been to ride the wave on services and to become a services business, while Lenovo rode the wave of high-volume low-margin strategy: Creating a synergy out of acquisition may be difficult Strategy of expansion and acquisitions required to add people from different countries and cultures. Company face a strategic problem of appointing people on high profiles. When IBMs Stephen Ward Jr became CEO of Lenovo, the news didnt went well with chinese employees

Recommendations
Business Level: Leverage on THINKPAD Brand and lure upper market customers with innovation Position two series of products distinctively: One for innovation led high technology product and one range for cost effective business machines Stick to core competency: Reliable machines at efficient price Try to reach towards differentiation strategy to earn premiums for quality and innovation through higher range while keeping cost effectiveness in business range

Recommendations
Corporate Level: Branding: Establish itself as the global local. Activities like CSR help in creating connect with local population Market Expansion: By expanding into Africa and South America where companys presence is currently less and chances for growth are high Pushing Smart phones business along with computers to leverage on Motorola Acquition and creating a complete basket of computing having Smart Phones, Tablets, Phablets, Netbooks, Laptops and PCs Forward integration to develop company specific softwares for enhanced security features and functionality on its machines. It further helps in Branding (eg. Itunes for Apple Corp.)

Supplier Power:
Lenovo like others big laptop and desktop supplier who did not manufactures its own materials. The raw materials like boards and chips supplier is fewer and powerful, they are not easy to drive up prices.

Buyer Power
Buyer bargaining power in this market is relatively low in this market, since the store sales mode. Improving product and service quality, offering extra features and maintaining strong customer relationship is still key to success.

Competitive Rivalry
Currently, there are three major players in the PC corporate market, Dell, HP and Lenovo, which take up around 43% of the market share, second in the world market share 15.7% in 2012.(showing on next page). According to the customer satisfaction survey, there are relatively few differentiations among these top five players in terms of product features and product quality. Lenovo has the best customer satisfaction and innovation and overall score among them. But design and displays and audio below average level.

Top 5 Vendors, Worldwide PC Shipments, Fourth Quarter 2012


4Q12 Vendor Shipments 4Q12 Market Share 4Q11 Shipments 4Q11 Market Share 4Q12/4Q11 Growth

HP Lenovo Dell Acer Group ASUS

15,023 14,105 9,482 6,959 6,467

16.7% 15.7% 10.6% 7.8% 7.2%

15,113 13,040 11,967 9,692 6,126

15.8% 13.6% 12.5% 10.1% 6.4%

-0.6% 8.2% -20.8% -28.2% 5.6%

Others

37,753

42.0%

39,974

41.7%

-5.6%

All Vendors

89,789

100.0%

95,913

100.0%

-6.4%

Source: IDC Worldwide Quarterly PC Tracker, January 10, 2013

Competitive Rivalry

Threat of Substitution
The most probable substitute products are tablet (like ipad and samsung note) and smartphones. Despite the rapid development of mobile devices, enterprises dont see them as useful to their organization. The consumer market can not be replace by next few years.

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. (Source: Lenovo: Competitive Strategies for Dominance In the Corporate Market )

Computer supplier five force analysis


Force
Rivalry competitors

Key Determinants
Concentration (number) and size of competitors

Strength of the force


Medium to high

Brand identity

New entry

Economies of scale Brand identity Capital requirements

high

Threat of substitutes

Price/Performance of substitutes

Low to medium

Switching costs Buyer Power Buyer concentration Buyer size (volume) Switching costs Medium to high

Supplier Power

Supplier concentration
Supplier size (volume) Switching costs Table 1

Low

Major Global Locations

Japan Singapore

North Carolina Mexico Paris Pondicherry Beijing Shanghai

International Product Policy


Business idea is built on Standardization for the global market. Lenovo uses a retailer based distribution network as touch points for consumers. Design: Only Black or grey covers are offered. Looks like a Me too laptop. R&D:
Design of Products Focus on being the lightest, thinnest and most innovative notebooks.

Unique Strategy
Lenovos strategy is firmly rooted in the belief that two things are fundamental for an enterprise. One is a manufacturing base, the second is distribution channel.
Lenovo brought localized solutions to end users, in terms of local software and assistance with Internet connectivity. Lenovo strategy for 2012-13 is protect/attack plan and supplement it with a new strategy called PC+. It has expanded its focus beyond Lenovos core business of PCs to mobile internet & digital home. Less customization. Relationship model: bulk orders from big enterprises. Transactional model: serving customers with common requirements and who need lesser customization. Target small- to mid-size companies and individual customers Lenovo brand complement the product offering. China-based supply chain model: fulfills every order on time with better IT system.

Strategic Group Map

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