Lenovo: Strategic Effect

of IT
ITSP End Term Project

Group 1
Deepak Arora
Nikhil Gurg
Mohit Malik
Neerav Sachdeva
Group 1/ITSP End Term Project 2014

Table of Contents
Timeline of Lenovo..................................................................................................... 3
Business Strategy....................................................................................................... 3
Value Dimension of Lenovo........................................................................................ 4
IT Strategy aligned to Business Strategy....................................................................4
SWOT Analysis for Lenovo.......................................................................................... 6
Dynamic Resource Model........................................................................................... 7
Mcfarlans Strategic grid............................................................................................. 7
Porter 5 forces analysis.............................................................................................. 8
Balance Score Card for Lenovo................................................................................... 9
Creating Strategy Map............................................................................................ 9
Creating Scorecard Measures................................................................................ 13
Benefits of Acquisition of ThinkPad...........................................................................17
Conclusion and Recommendations...........................................................................17
References................................................................................................................ 17

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Timeline of Lenovo

History of Lenovo:-

1984 The Lenovo was established in 1984, with an initial capital outlay of only
RMB200,000.

1986 Backward integration and forward integration

1990- The very first Legend PC is launched in the market.

1996:-Legend becomes the market share leader in China for the first time.

2002-Lenovo acquired technologies from Microsoft, Acquisitioned the many middle

and small size PC companies in China.

2005- It successfully acquisitioned of IBM, making it a new international IT

competitor and the third-largest personal computer company in the world.

2012-Dropped the IBM tag what next for Lenovo?????

What Lenovo Says

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.

Business Strategy
Business model built on innovation, operational efficiency and investment in
emerging markets.
Sustaining a Competitive Advantage:-By increasing market share internationally
through innovation and strategic acquisitions.
Protect and Attack Strategy

Initial Challenges Faced By Lenovo

Lenovo has failed to meet a key objective of the merger: leveraging the
combined strength of the two companies to grow volume and market share.

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To generate the demand through more aggressive sales teams.

To improve the channel strategy.
Increased market spending and better execution outside of China.

What Transform the Lenovos Business?

Disintermediation (cutting out the middleman):- JDA Software's E-commerce

Application
Enhancing customer value :- Unique distribution strategy
Process and operations innovation: ThinkLink Application
Let data do the driving :- SAP BI/DW IQ

Value Dimension of Lenovo

Operation Excellence Business Context

What: More competitive pricing to customers

How: Customer satisfaction and innovation so that they can give competitive
pricing.
Why: To grow market share and compete with other top 2 players HP and Dell

Business Capabilities needed

Information and tools for Managers so that they can align the strategy
globally.

Integrated systems so that they can use the information and deliver the
quality and service consistent.

Investments for R/D so that they can cut down the costs.

IT Contribution

Innovation and 5 R/d Centres Globally

Business Intelligence Tool SAP BI/DW IQ tool

Distribution network and effective supply chain tools

IT Strategy aligned to Business Strategy

Innovation Strategy

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ThinkPad T42 Innovation: - Field agents to receive new case information packets and
provide case status updates via the Internet. Scanned files are now uploaded into a
searchable database that any authorized user can access from the offices or
remotely through a Virtual Private Network connection. It saves huge amount of
costs.

ThinkCentre A50 Innovation:- Employee to access client databases from their

own desktop. So no physical access.

Rescue and Recovery Innovation :- protect users' data, allowing them to

recover deleted or lost files, folders

Operations Excellence

ThinkVantage Technologies

IT infrastructure:-reduction in overtime, IT service costs and increased

business efficiencies.

CSAT System:-Information Management and The Customer Satisfaction index

numbers to check customer satisfaction.

Distribution Network

In house manufacturing specialization.

JDA Agile Business Process Platform (ABPP)

extremely configured order process

end-to-end customer service value chain

Advanced pricing structures such as volume-based and special customer

discounts, promotions and other assorted pricing adjustments.

Protect and Attack Strategy

Keep the business strategy align globally

A Business Simulation Builds Execution Capabilities: - Simulator application to

build its leader.
BTS Lenovo on a tailored business simulation designed to develop the
execution capabilities of high level leaders across global locations

Deploying in the cloud: - JDA and SAP BI/DW IQ

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JDA Cloud Services, Lenovo has achieved faster deployment, rapid time to
value, investment protection and an improved cost structure

DA Cloud Services to optimize the Web commerce solution based on feedback

it receives from its customers

SWOT Analysis for Lenovo

Strengths

Vertical Integration: Helps in keeping cost low and control inventory.

Low Cost Production: It manufactures nearly half of its hardware and
has set up its production plants in low cost region such as china, Brazil
and Argentina to benefit from higher margins.
Strong Patents portfolio : With acquisitions of Compaq, IBM etc and
firms R&D, it has gathered important patent portfolio related to its PC
and Software business
Competency in Mergers and Acquisitions
Synergy of knowledge and diverse workforce: Instead of traditional
headquarter model, it manages 3 centers of excellence US, China and
Singapore. Combining different skills and resources results in synergy
and premium quality products

Weakness

Poor brand perception in developed economies like US and European

countries
Focus earlier mainly on china, Limited Knowledge of global market
Low Differentiation: Lenovo products are little differentiated from
competitors products and are in competitive disadvantage if the price
offered by competitor is lower.
Market share growth is Slow due to competition, fake
products/imitations affects sales

Opportunities

Growing Indias Smartphone market

Growth of Tablet Market: Lenovo is 4th largest tablet seller, it could
increase its market share by introducing better quality products.
Internet boom - Increase in demand of PCs

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Government organizations increasing their spending on IT

Threats

Profit margin decline on hardware products: Lenovo major source of

income is from hardware products, due to rising raw material cost and
competition, profit margin will shrink in future.
Saturated Smartphone market in developed countries
Intense competition Price wars
Fake products market

Dynamic Resource Model

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Group 1/ITSP End Term Project 2014

Mcfarlans Strategic grid

This grid will help in evaluating where does and will IT give added
value .
Use of IT is of strategic importance for Lenovo as these are critical to
future success, use of IT has led to disintermediation of middlemen,
reduction in service costs, improving supply chain, vertical integration,
and CSAT systems to measure customer satisfaction and provide better
customer value.
All these benefits of IT had helped Lenovo in providing better customer
value.

Strategic
Factory
Lenovo

Turnarou
Support
nd

X axis: Impact on Strategy

Y axis: Impact on Business operations

Porter 5 forces analysis

Threat from existing competition Very High

Large number of players in the market Dell, HP, Apple, Sony,

Samsung etc

Threats from new entrants Low

Vertical integration of existing players leading to high switching costs

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Huge initial investments

Difficult to achieve economies of scale to be competitive

Bargaining Power of Suppliers- low

Lenovo manufactures its own material to great degree

Large number of suppliers in the market

Bargaining power of buyers low to moderate

High switching cost - Main customers are enterprises, which purchases

in bulk
Improving product and service quality, offering extra feature and
maintaining strong customer relationship is key to success

Threats from Substitute products medium

Products like ultra-light laptop and ultra-mobile PCs attract young

customers and affects B2C sales
In case of B2B, enterprise dont see them as useful to organization

Balance Score Card for Lenovo

Balance Score Card has been one of the main features of IT strategy
implemented by Lenovo. It has been one of the strategic initiatives of the
organization where not only the financial health of the firm but also the
intangible assets like supply chain partnership, delivery goodwill can also be
mapped and valuated. Secondly it has been of great help in terms of
communicating the IT and Business strategy of the firm both internally and
externally. Thirdly, it helped the company into streamlining its activity with
its strategy and thus leading to acquisition of ThinkPad division from IBM.
Finally, it has become one of the strategic advantages for the company as it
has been implemented into many other divisions for performance
Evaluations.

The balance Scorecard for Lenovo is developed as following,

1. Strategy Mapping
2. Creating Scorecard Measures
3. Implementing Scorecard

Creating Strategy Map

It is a generic architecture for describing strategy followed by an organization. The
strategy Map for Lenovo is as following,

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Group 1/ITSP End Term Project 2014

STRATEGY MAP
Busin Deliver required Supply quality products
ess capabilities to support the and services worldwide
Strate changing business through use of technology
gyMission:
Mission: requirement.
Worlds
Worlds Vision:
Vision: Personal
Personal
Greatest
Greatest Devices
Devices people
people
personal
personal Increase
Increase Broaden
Broaden inspired
inspired to
to own
own
technology
technology firm
firm business
business Revenue
Revenue
orders
orders Mix
Mix
Technology
Technology and
and
Market
Market Leader
Leader
FINANCIAL
Increase
Increase customer
customer Cost
Cost and
and Time
Time Increase
Increase Customer
Customer
loyalty
loyalty through Reduction
through Reduction in
in models
models Responsiv
Responsiv
innovative
innovative maintenance
maintenance eness
eness
solutions
solutions
Quality
CUSTOMERS Checks

Leading
Leading edge
edge New
New Rapid
Rapid Partner
Partner
manufacturin
manufacturin Technology
Technology Customer
Customer Collaboratio
Collaboratio
g
g Drive
Drive Response
Response ns
ns
INTERNAL
PROCESSES
Skill
Skill Knowledge
Knowledge Employee
Employee Diversified
Diversified
developmen
developmen Sharing
Sharing retention
retention workforce
workforce
tt
LEARNING AND
GROWTH
It defines the Mission, Vision, Business Strategy and the effects of four
perspectives of balance scorecard are as following to obtain the output for
business strategy.

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The following four images describe how the business strategy can be
obtained using the four perspective of the balance score card.

The skill development among employees will lead to integration of leading

edge manufacturing of various Lenovo products which will lead to reduction
in cost and time to delivery and maintenance. This will further help in
generating more orders for the company and effectively supply quality
products and service through use of IT and learning. Similarly for other
images also.

Busin Deliver required Supply quality products

ess capabilities to support the and services worldwide
Strate changing business through use of technology
gyMission:
Mission: requirement.
Worlds
Worlds Vision:
Vision: Personal
Personal
Greatest
Greatest Devices
Devices people
people
personal
personal Increase
Increase Broaden
Broaden inspired
inspired to
to own
own
technology
technology firm
firm business
business Revenue
Revenue
orders
orders Mix
Mix
Technology
Technology and
and
Market
Market Leader
Leader
FINANCIAL
Increase
Increase customer
customer Cost
Cost and
and Time
Time Increase
Increase Customer
Customer
loyalty
loyalty through Reduction
through Reduction in
in models
models Responsiv
Responsiv
innovative
innovative maintenance
maintenance eness
eness
solutions
solutions
Quality
CUSTOMERS Checks

Leading
Leading edge
edge New
New Rapid
Rapid Partner
Partner
manufacturin
manufacturin Technology
Technology Customer
Customer Collaboratio
Collaboratio
gg Drive
Drive Response
Response ns
ns
INTERNAL
PROCESSES
Skill
Skill Knowledge
Knowledge Employee
Employee Diversified
Diversified
developmen
developmen Sharing
Sharing retention
retention workforce
workforce
tt
LEARNING AND
GROWTH

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Group 1/ITSP End Term Project 2014

Busin Deliver required Supply quality products

ess capabilities to support the and services worldwide
Strate changing business through use of technology
Mission: requirement.
Worlds
gyMission: Worlds
Vision:
Vision: Personal
Personal
Greatest
Greatest Devices
Devices people
people
personal
personal Increase
Increase Broaden
Broaden inspired
inspired to
to own
own
technology
technology firm
firm business
business Revenue
Revenue
orders
orders Mix
Mix
Technology
Technology and
and
Market
Market Leader
Leader
FINANCIAL
Increase
Increase customer
customer Cost
Cost and
and Time
Time Increase
Increase Customer
Customer
loyalty
loyalty through Reduction
through Reduction in
in models
models Responsiv
Responsiv
innovative
innovative maintenance
maintenance eness
eness
solutions
solutions
Quality
CUSTOMERS Checks

Leading
Leading edge
edge New
New Rapid
Rapid Partner
Partner
manufacturin
manufacturin Technology
Technology Customer
Customer Collaboratio
Collaboratio
gg Drive
Drive Response
Response ns
ns
INTERNAL
PROCESSES
Skill
Skill Knowledge
Knowledge Employee
Employee Diversified
Diversified
developmen
developmen Sharing
Sharing retention
retention workforce
workforce
tt
LEARNING AND
GROWTH

Busin Deliver required Supply quality products

ess capabilities to support the and services worldwide
Strate changing business through use of technology
gyMission:
Mission: requirement.
Worlds
Worlds Vision:
Vision: Personal
Personal
Greatest
Greatest Devices
Devices people
people
personal
personal Increase
Increase Broaden
Broaden inspired
inspired to
to own
own
technology
technology firm
firm business
business Revenue
Revenue
orders
orders Mix
Mix
Technology
Technology and
and
Market
Market Leader
Leader
FINANCIAL
Increase
Increase customer
customer Cost
Cost and
and Time
Time Increase
Increase Customer
Customer
loyalty
loyalty through Reduction
through Reduction in
in models
models Responsiv
Responsiv
innovative
innovative maintenance
maintenance eness
eness
solutions
solutions
Quality
CUSTOMERS Checks

Leading
Leading edge
edge New
New Rapid
Rapid Partner
Partner
manufacturin
manufacturin Technology
Technology Customer
Customer Collaboratio
Collaboratio
g
g Drive
Drive Response
Response ns
ns
INTERNAL
PROCESSES
Skill
Skill Knowledge
Knowledge Employee
Employee Diversified
Diversified
developmen
developmen Sharing
Sharing retention
retention workforce
workforce
tt
LEARNING AND
GROWTH

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Group 1/ITSP End Term Project 2014

Busin Deliver required Supply quality products

ess capabilities to support the and services worldwide
Strate changing business through use of technology
Mission: requirement.
Worlds
gyMission: Worlds
Vision:
Vision: Personal
Personal
Greatest
Greatest Devices
Devices people
people
personal
personal Increase
Increase Broaden
Broaden inspired
inspired to
to own
own
technology
technology firm
firm business
business Revenue
Revenue
orders
orders Mix
Mix
Technology
Technology and
and
Market
Market Leader
Leader
FINANCIAL
Increase
Increase customer
customer Cost
Cost and
and Time
Time Increase
Increase Customer
Customer
loyalty
loyalty through Reduction
through Reduction in
in models
models Responsiv
Responsiv
innovative
innovative maintenance
maintenance eness
eness
solutions
solutions
Quality
CUSTOMERS Checks

Leading
Leading edge
edge New
New Rapid
Rapid Partner
Partner
manufacturin
manufacturin Technology
Technology Customer
Customer Collaboratio
Collaboratio
gg Drive
Drive Response
Response ns
ns
INTERNAL
PROCESSES
Skill
Skill Knowledge
Knowledge Employee
Employee Diversified
Diversified
developmen
developmen Sharing
Sharing retention
retention workforce
workforce
tt
LEARNING AND
GROWTH
Once the strategy mapping has been made, it is well defined for making the
balance scorecard as strategy mapping is basically a blueprint which defines
the pathway from each perspective to finally obtaining business strategy.

Creating Scorecard Measures

The scorecard consist of four perspectives,

1. Financial
2. Customer
3. Internal Process
4. Learning and Growth

For each of the perspective objectives are defined and for each objective there can
be various measures to check if that objective has been completed or not. Each
measure consists of one to one mapping with a specific target. Each of which can be
obtained through various initiatives.

The four perspective, their objective, measure, target and initiatives are as
following,

A)Financial Perspective

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Objective Measure Target Initiative

Broaden Revenue % of order from XX% BU1

Mix various BU XX% BU2 1. Generate
Awarenes
3. Save s of
managed Brand.
cost and
1. ROE 2. Provide
unused
Increase 2. Cost capacity. Innovative
shareholder value Reduction Solution
4. Save direct to
in each BU
material and customers
labor cost .
through IT
3. Public
1. Reach X% success
1. % market Share stories in
market share
media.
2. No of
2. 2-2 major
Innovative 4. Increase
Technology and products of
products and the
Market Leader each BU
services models
3. X% reduction and types.
3. % of green
in next FY
products
2014

B)Customer Perspective

Objective Measure Target Initiative

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1. No of 1. X% increase
1. Collaboration
Develop new innovations in innovations
with
technology made.
2. Milestone institutes
space 2. New SCA achieved in SCA and
resources found resources Universities.

2. Leveraging
Increase Customer Attain X% Information
Customer Satisfaction customer Expert
Satisfaction Survey satisfaction Systems

3. X% 3. Increase
1. No of Discount customer
collaborati Budget focus of sales
on with organization.
Customer 4. X%
Retention partners.
market 4. Efficient
2. Sales Vertical Supply chain
Discounts penetratio system for
n. Retention
and
Responsiven
Responsivenes X% reduce in
Delivery in time ess
s to Customer complaints

C)Internal Process Perspective

Objective Measure Target Initiative

Timely 1. Improve 3. Reduce 5. Organize R

provide safe manufactur cycle time %D teams
and Quality ing by X%. for future
Products capacity projects.
4. Lowest 10%
2. Supplier supplier 6. Implement
Ratings for rejected. Design
quality Commonali

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ty for
standardiz
ation.

7. Internal
Increase Surveys for
Training Cost for improving
productive X week training
Manufacturing manufactu
efficiency at per quarter
Floor Crew ring
low cost
capacity.

Standardizatio Inventory Cost X% reduction by 8. Effective

n of Services Reduction next FY supply
chain
Number of manageme
Increase IT Discovery and X number of nt.
Portfolio Portfolio projects initiated
Investments

D) Learning and Growth Perspective

Objective Measure Target Initiative

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3. At least X
1. No of % training
training hours.
hours per 5. Hire Key
Employee 4. Cross Technical
annum.
education and training of Employees.
skill level 2. Employee managem
skill ent and 6. Improve
assessme technical Employee
nt. knowledg skills and
e work
conditions.
Employee Employee 7. Celebrate
Achieve more
satisfaction Satisfaction and reward
than X% in FY
scores Surveys individuals.

No of idea 8. Tie
Knowledge At least X incentives
created and
management number per to idea and
published in
systems annum qualities.
system
9. Mentorship
Number of programs.
Achieve X
Diversified cultural
activity per
Workforce activities
month.
occurred

Thus above was the entire balance score card for Lenovo.

Benefits of Acquisition of ThinkPad

Learning new methodologies and better business processes

Getting access to new markets

Increase in market share

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Making use of past data for making better informed decisions

Conclusion and Recommendations

Use data mining to reduce the process turnaround time for higher
efficiency.

Timely review of IT applications to monitor their use and effectiveness

in the current scenario and make necessary changes as per
requirement.

Integrate business process and IT applications in vertical acquisition or

vertical supply chain.

References
http://www.lenovo.com/in/en/

http://en.wikipedia.org/wiki/Lenovo

http://en.wikipedia.org/wiki/ThinkPad

http://news.lenovo.com/article_display.cfm?article_id=1755

http://www.bbc.co.uk/news/business-25956864

http://www.computerworld.com/s/article/9245907/Lenovo_s_Motorola_IBM_server_bu
ys_will_likely_get_strict_U.S._security_review

http://www.fool.com/investing/general/2014/01/27/why-lenovo-is-buying-ibms-
server-business.aspx

http://www.china.org.cn/english/NM-e/115844.htm

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