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POINT OF VIEW:
II.
MAJOR PROBLEM:
SWOT ANALYSIS
STRENGHTS:
Legend PCs were awarded the First Prize for National Science and
Technology Advancement in China
Top-selling domestic brand
Listed in the Top 10 Most Valuable Chinese Brands
Increasing market share
Achievements were publicly acknowledged by the government
Expansions into overseas markets
Formed strategic alliances with a number of leading local
software companies
Signed a Memorandum of Understanding with IBM
Could also distribute IBM software products
Vertical Integration
Vertical integration has been very helpful to Lenovo for it has been
capable of keeping low costs, keep up with both domestic and
international competitions while relying less on original equipment
manufacturers.
WEAKNESSES:
Invested heavily in advertisement
Could not simply transfer its product into overseas markets
Tough market environment
Poor brand perception in the developed economies
2
Low Differentiation
Lenovos
products
much differentiated
from
other
competitors products.
Commodity Products
The large stream of Lenovos revenues comes from computer,
especially laptop, sales, which is a commoditized product. Computer
hardware products are sold with a very low profit margin.
OPPORTUNITIES:
The number of internet users in China increased by 100%
Obtaining patents through acquisition
Lenovo can sustain its growth by obtaining more patents though
acquisition of firms holding them like it did with IBMs Compaq.
International Expansion
Due to low pricing and the low purchasing power, Lenovo can easily
penetrate the market, as a population can afford and much willing to
3
buy low priced electronic products with having the same quality as of
other branded products.
THREATS:
Dell was growing faster
Falling stock price coupled with a decline in PC shipments
Price wars
Foreign rivals
Slowing growth rate of the laptop markets
The rate of growth of the computer market is diminishing as the
market becomes saturated.
Intense Competition
The company faces intense competition in all its business segments. It
competes in terms of price, quality, brand, technology, reputation,
III.
OBJECTIVES:
Lenovo is a $30 billion electronics company and the worlds secondlargest PC vendor. It employs 30,000 people, operates in more than 60
countries and serves customers in more than 160 countries.
IV.
Since its inception in 1984, Lenovo Group Limited had grown from
a company engaged primarily in the distribution of imported
computers to being the largest IT Corporation in the Peoples
Republic of China.
In April 2003, laying the groundwork for expansion into overseas
markets, the Group adopted a new logo that incorporated the
brand name Lenovo. A year later, in April 2004, with a view to
raising the recognition and popularity of the Lenovo brand, the
Group officially changed its English name to Lenovo Group
Limited.
In
early
2004,
Chief
Executive
Yang
Yuanqing
PC MARKET IN CHINA:
In one of the most dramatic stories of the computer industry in
recent years, Chinas PC industry went from being non-existent in
the 1980s to becoming a force to be reckoned with by the turn of
the century. Chinas computer policies shifted in the early 1980s
from an isolation approach aimed at achieving technological
independence to adopting a more pragmatic strategy. By 1998,
domestic
companies
held
80%
of
the
market
shares,
remarkable shift from the early 90s, when foreign companies held
around 60% of the market. By 2004, IDC had ranked China as the
9
10
DISTRIBUTION CHANNEL:
Internet use in China also rocketed from 2.1 million subscribers in
1998 to a reported 53 million in 2003, with e-commerce turnover
seeing exponential growth. Lenovo, evidently taking notice of
Dells presence in China, implemented a series of strategic
initiatives in 2004.
Lenovo, evidently taking notice of Dells presence in China,
implemented a series of strategic initiatives in 2004. By that
year,
an
extensive
sales
network
with
18
sales
regions
comprising 108 grids and more than 4,000 retail shops had
already been built across the country, penetrating deeply into
township areas.
LEGEND:
In 1985, NTD started manufacturing the Legend Chinese
Insertion
Card
(LCIC).
In
1988,
11
Hong
Kong
Legend
was
and
distribution
of
Legend-brand
PCs,
the
DELL:
In April 1999, Dell introduced its award-winning range of
Dimension desktops, targeting home and small business users. In
came as a surprise in August 2004 when Dell announced that it
had decided to reduce its focus on the low-end PC consumer
market in China.
Dells major strengths lie in its direct order business model and in
its current power in the market. The direct business model cuts
13
V.
14
DISADVANTAGES
Management will invest more
in
its
research
and
development
department,
people
whether
they
are
common or professionals.
This is a step forward to
Lenovo
to
its
potential
competitors.
capable
professionals
to
to
chances
consumer
of
having
profitability
increase.
15
differentiation
very costly.
in
is
Identification
of
local
and
and
international
its
DISADVANTAGE
The risk that Lenovo Group
among
about
channel.
popularity
the
brand
and
its
DISADVANTAGE
It will cost the group to
invest
in
promotion.
marketing
its
DISADVANTAGE
First, the group might have
difficulties
accumulating
position
sufficient
in
in
securing
china
its
and
market
market.
commitment
in
foreign markets
Competitors
such
as
Dell
application
demands
maintain
its
DISADVANTAGE
Conflict of interest between
partners may arise.
and
distribution
network.
Access to foreign market and
distribution channels.
17
of
Lenovo
the
company
as
their
bridge.
Broad location positioning of
the product.
F. In concern with having poor brand perception, Lenovo must
challenge negative perceptions as soon as they arise, defend
their brand and manage its reputation, especially in the face of
negative feedback on service and quality by at least for now
disassociate itself from its origin country.
ADVANTAGES
By taking this challenge,
other
prosperous
DISADVANTAGES
This may take a very long
country
way to be competitive on
the
legitimate.
past
worst
decades
reputations
China
among
consumer.
Lenovo
would
competitive
be
and
be
more
more
eager to improve.
Getting
lumped
to
disassociate
When
Lenovo
18
other
countries
field of business.
may
increase.
G. Lenovo must go beyond the pricing strategy and start to offer
something more than simply the cheaper option by focusing more
on being a functional product.
ADVANTAGE
The pricing strategy is a
DISADVANTAGE
Generally, the basis
consumer
using
strategy.
focus
that
on
being
percentage
sales.
for
of
quality
decrease
in
other companies.
H. Plan and implement a competitive strategy towards other
competitors
ADVANTAGES
Lenovo has choices between
product differentiations, low
cost, and focus strategy.
Time
in
analyzing
the
competitors and other firm
19
DISADVANTAGE
Low cost versus good quality
competitive advantage.
VI.
expand
its
coverage
21
in
terms
of
customers.
VII. CONCLUSIONS/RECOMMENDATIONS:
Being an emerging industry with access to a large domestic market,
like that in China, can be a recipe for success. Lenovo benefited from,
first developing the distribution channels (with the government
protection from international competitors), then helping
foreign
and
expanding
the
market
share
not
only
in
the
China
but
internationally.
PROGRAM/ACTIVIT
TIME FRAME
RESPONSIBILITY
Expand
COMPLETIO
DIRECT
SHARED
Januar
N
Continuous
President
Top
Lenovos
project
within
the
global
market
Advertise
internet,
management
2004
March
Lenovo through
class
START
Continuous
Marketing
Employees,
Department
Advertising
Unit, Top
Advertisers
Management
Continuous
President,
Production
Continuous
Artist
Board of
Manager
Managers/He
Directors/To
ad on every
Department
2004
world
events,
etc.
Product
April
Diversification
Monthly
2004
2005
meeting
with
regards to their
strategies
Manageme
and
nt
objectives with
the
necessary
budgets
for
next years.
Discuss
where
to
on March
put
2015
December
Top Level
2015
Manageme
23
the
new
nt
marketing
channel
Implementation
2016
2018
Employees
Top Level
Management,
of the proposed
Department
plan
Heads
2016
Top Level
Appropriate
the
Manageme
Personnel, All
its
nt
Department
Researchers
Head
Top
Updates
regarding
plan
and
development.
Conduct
research
peoples
for
Januar
2018
Continuous
Management
2004
demand
24