Case profile - BrainMass · PDF fileCase profile Problem Perspective Lenovo Group Limited Problem Type ... Lenovo- SWOT Analysis Lenovo Became the Leader Lenovo vs Dell: Head to Head

Case profile

Problem PerspectiveLenovo Group Limited

Problem TypeStrategies for combating competitors and going global

Case TagPursuing Brand Management, Differentiation, Diversification, andGlobalization for achieving strategic success.

National Business Case Competition, 2006

Case summary


Lenovo : The biggest IT Corporation in China

Facing severe competition from Dell, IBM, and other market players.

Lenovo’s Market leader position is threatened.

Lenovo needs…..

Develop a new business model

Consolidate Market Position in China

Enter in global market and grow profitably

Case summary

Presentation Outline

Overview of Lenovo

PC Industry Analysis: Global and Chinese

Lenovo- SWOT Analysis

Lenovo Became the Leader

Lenovo vs Dell: Head to Head

Lenovo facing difficulties


Lenovo’s reply to competitors

Strategy Recommendation


LenovoAn Overview

Lenovo-Overview

• Established in 1984

• Initial Name: Legend Group Limited

• Name changed to Lenovo in 2003


Lenovo-Overview

Product Category:

• Handheld Devices (Desktop, Notebooks)

•Consumer IT

•Corporate IT


Lenovo-Overview

19952000

22.75103.26

Figure:LenovoIncreasing Brand Equity

2001 145.952002 206.29


Growth in Brand Equity

Brand Equity, RMB ’00 million

Average Growth Rate: 41%

Projected

00 01 02999897

Lenovo-Overview

19851995

1006700

Figure:LenovoTurnover Growth


Growth In Turnover

Turnover, RMB in million

009585

2000 28400

Average Growth Rate 35%

Lenovo-Overview

Handheld Devices

Consumer IT

11.0%

35.2%


Turnover Breakdown (2004/05)

Corporate IT 50.8%

Others 3.0%

Corporate IT

Consumer IT

Handheld Devices

Lenovo-Overview

19941998

3.9%14.4%


Growth In Market Share

Rising Market Share

2001 30.20%

Lenovo-Overview



19941998

3.9%14.4%

Rising Market Share

2001 30.20%

Lenovo-Overview



19941998

3.9%14.4%

Rising Market Share

2001 30.20%

Next……

Analysis of PC Industry

SWOT analysis



PC Industry Analysis


CommercialConsumer

65%35%


PC Industry Products: Desktop, Notebooks, PC Server

Consumer Segments

Commercial

Consumer



Heavy Growth both in Global and Chinese Segment

Indicators of Global Growth

• Low prices

• Companies replacing old systems

• Recovery of European Economies

• Growing Asian Consumption

Indicators of Chinese Growth

• Role of Domestic makers

• Foreign MNCs

• Government Policy

• Transfer of Technology


Dell

HP

29.5%

17.4%


Position of Different Big Players

IBM 5.1%

Others 47.9%

Dell

HP


High High

High Low

Low Low

High Moderate

Low High

Rivalry Among Existing Firms

Threat of New Entrants

Threat of Substitute Products

Bargaining power of Buyers

Bargaining power of Suppliers

Chinese Market Global Market


The SWOT Analysis

Strengths

• National Image (China)

• Knowledge about Local Market

• Strong Research & Development

• Mass Manufacturing Capability

• Quick Responsiveness

Weaknesses

• Poor Brand Perception (Global)

• No pure Electronic Sales

• Low inventory Turnover

• After-sales Services- Not Adequate

• Limited knowledge of global market


Opportunities

• Import Barrier

• Increasing Global Demand

• Internet Boom

• Growing Wireless Pc Market

• Government’s Association

Threats

• Heavy Competition

• Industry Reaching Maturity

• Software piracy and Clone market

• Little firms’ growth

The SWOT Analysis

Next……

Lenovo’s Becoming Leader

Dell Challenge and Falling Market Share



Legend BecameThe Leader

Legend became The Undisputed Leader

1998: Strategic Alliances for providing customized products

1998: One millionth computer left production line

Innovative Marketing Channel1+1 Home PC Specialty Shop


1999: Legend Conet PC with “one-touch-to-the-net”

2000: Market share reached 30%

Business Week’s 8th-best IT Company

Legend’s Became The Undisputed Leader


Lenovo Vs Dell


Lenovo Vs Dell

Dell Lenovo

Distribution Channel Direct Traditional

Credit Risk Very Low High

Inventory Holding Cost Low High

Inventory Turnover Period 6 Days 30-40 days


Lenovo Vs Dell

Dell Lenovo

Promotional Model Innovative Traditional

Production Mode Order-oriented Standard

Advertisement Expense(2002) 100.7m 55.09m


Lenovo Begun to Struggle


Lenovo begun to struggle

Dell’s market share begun to grow 100% a year….

Dell’s price went below Lenovo’s (Smart PC)

2003 : Dell captured 6.8% of the market share


Corporate sales begun to plummet

Dell capturing government and school market segment

Lenovo’s market share begun to fall rapidly



How to meet all its goals?

How to retain leadership in Chinese market?

How to expand globally with competitive advantage?


How to become a Fortune 500 by 2010?


Next……

Strategy Recommendations


Strategy Recommendation


Selecting the Right Distribution Model



Lenovo Wholesaler Retailer Consumer

Existing Distribution Process

Selecting the Right Distribution Model



Lenovo Discount Retailer (Walmart) Consumer

Discount Retailing

Lenovo Consumer

Direct Selling = Ecommerce and Agent

Choosing a Production Model



Standard model

Custom-Oriented Model (Software)

Custom-Oriented Model (Hardware)

Choosing a Production Model Different Segments



Custom Standard

StandardCustom (Soft) Standard

Market

Inco

me G

roup

China Global

Low

High

Creation of “Brand Equity”


Increasing value of the brand “Lenovo”

Perceived Quality

Brand Loyalty

Name Awareness

Other Assets: Patents, ChannelRelationship etc.


Creation of “Brand Equity”


Perceived Quality

Brand Loyalty

Increasing value of the brand “Lenovo”

Name Awareness

Other Assets: Patents, ChannelRelationship etc.

•Promotion and Advertisement•Cultural Association•Innovative Promotional Strategy • Delivering quality products

• Augmented services• Customer Relationship• Delivering maximum possible

customer satisfaction.


Chinese Language Preference

English language is not familiar with Chinese

Software Making: Chinese Should Be Used



Diversification

Business Strength

Industry Attractiveness



Diversification

Business Strength

Indu

stry

Attr

activ

enes

s

Wireless PCIT Services

OldStorage Devices

Cell PhonePrinter

Desktop PC

Software

Strong Average Weak

Low

Medium

High



Diversification

Business Strength

Indu

stry

Attr

activ

enes

s

Wireless PCIT Services

OldStorage Devices

Cell PhonePrinter

Desktop PC

Software

Strong Average Weak

Low

Medium

High



Merger and Acquisition

Merge and Co-Branding

IBM, HP

Acquisition(Cell Phone)

Acquire(Little Manufacturers) Do nothing

Product Category

Firm StrengthProduct

Attractiveness

Existing New

Low

High



Global Market Penetration

Export only Export or100% Subsidiary

Joint Venture Joint Venture

Country Nature

Probabilityof

Protection

Developed Developing

High

Low



Pricing Strategy for Different Segments

Cost Based

Value Based

Competition Based

Developing Markets (Asia)

Developed Markets (Europe)

Chinese Market



Fighting Against Smuggle and Software Piracy


Individual Effort

Collective Effort

Creating Public Awareness, Insisting Government

Cooperation with other companies

Drawing The Big Picture


Drawing the big picture…..

Lenovo:The Fortune 500

Company

Channel Selection

Marketing, Production StrategiesTechnological Enhancement

Diversification

Strategic Alliance

Differentiation

Country Selection

Brand Equity

DomesticSuccess

GlobalSuccess

Elim. Smuggle & Piracy

Competitive Pricing

Language Preference


Question &Answer


Documents

Case profile - BrainMass · PDF fileCase profile Problem Perspective Lenovo Group Limited Problem Type ... Lenovo- SWOT Analysis Lenovo Became the Leader Lenovo vs Dell: Head to Head