STRATEGIC ACTION AT LENOVO

Group 6

Lenovo is engaged in manufacture and sale of Lenovo brand PCs, handheld devices and mobile handsets for the Chinese market, and has begun providing advance IT services. Lenovo also contract manufactures motherboards, mobile handsets and handheld devices for OEM. Geographic scope includes the Greater China and Asia Pacific markets. Major segments are the corporate and consumer IT that generate 56% and 30% of revenue respectively which therefore they are the utmost important for Lenovo strategy, while handheld devices and IT services simply broaden line of offerings to customers.

ARENAS

THE GROWTH OF NON - PCS ARENAS ARE IMPORTANT FOR LENOVO DUE TO

1) growing foreign competition in China,

2) PC industry is beginning to mature as technologies enable Chinese consumers communicate via internet with non-PC devices, and 3) new indigenous competitors begin to increase.

Distribution: its competency obtained through JVs with PC original equipment manufacturers like AST, Hewlett-Packard, and IBM Corp. Manufacturing: its existence began from platform to make keyboard and other simple devices then learn to build entire PC system. These both gave Lenovo growing depth competencies to manufacture and market PCs as well as capture domestic market. It also helped Lenovo to reduce risks due to poor market planning and product development.

VEHICLES

Lenovo started its IT services business through its own internal development: basic networking of all PCs for small businesses. Seeing growth engine in the future of 10 millions small companies, Lenovo viewed franchise as viable solution: reduces liability and increases market reach. During the internet boom, in late 1990s and early 2000s, Lenovo entered the handhelds device market as consumers demand for devices other than PCs to access internet. This decision led to the necessity to create an entirely new line of product for different market segment.

The strongest distinguishing quality of Lenovo is its understanding of Chinese market: its values and preference: 1) includes Chinese ideograph and symbols into input mechanism, 2) develops software with a solid understanding of local market such as Chinese accounting practice. Despite it excels in manufacturing computers and components, Lenovo has yet to develop premium brand loyalty that deters customers from switching their preference. Sponsoring 2008 Olympics Game does not significantly increase its position as technology is still infancy in China.

DIFFERENTIATORS

STAGING

Speed and sequence of strategic moves to be taken Start IT consulting/ services business from its core product business. Yet compared with IBM (US) or Infosys (India), Lenovo is the minor competitor. To be serious contender, Lenovo must refine its software to provide customers intimate knowledge. For software development, what is important is the open source movement or a partnership. The option is whether to refine PC-based competencies or diversify into new types of electronics.
Sell other foreign Brands (30% market share in China and 12.4% in AsPac (2003)) Handheld, IT Consulting Services, Software

Reseller / Distributor of AST

Manufacturing

ECONOMIC LOGIC
How the firm will generate profits Strong quanxi to support business model Currently Lenovo allocates 80% of its resources to make corporate IT and consumer PCs which support 85% of revenue. Lenovo using profit from this base to expand onto another arena such as handheld and IT services (which has potential attractive margin to 40%) International expansion and branding (sponsored Olympiad) 2004 Acquire IBM PC business, for design, technology and more access to the customer

LESSON LEARN

Management Aggressive Learning of Cutting Edge Pratices: 1) learn from HP to manage distribution large channels and network of value added resellers, 2) learn other corporate model to build its own business model, 3) reading foreign journal Participation in Capital Markets Greater Shareholder Awareness: 1) the first Chinese company listed on the Hong Kong stock exchange, 2) quarterly report as customary in US, yet it still needs major changes in its accounting practices to meet international standard. Manufacturing Moving Toward Greater Agility: to compete in global market with Dell, Lenovo copies direct selling methods in developed countries where ecommerce is easy and implements channel-dependent model in less developed countries. Organizational Design Attributes Inducing Professional Practices: 1) Two level management operational (nuts and bolts) and cultural, 2) ability to execute in rule based systems The Role of the Government Transitioning to Private Ownership: Lenovo is structured like a private company POE from the beginning. Action to Create an Enduring Global Competitive Advantage: brand building is essential as there is lack of brand recognition outside of the APAC region