As stated by the chairman and CEO of Lenovo, they solidified the leading osition in the world’s largest PC market and became the number one PC Company in the market in Japan and Germany. In this report, we will focus on Lenovo Laptop / Notebook. There are basically four sections in the following apart from introduction The objective of this paper is to identify the strategic position of Lenovo Laptop by using Porters Generic Strategies, and comparison with the main laptop competitors, which is section 2.
And also analyze how the changing of the key external drivers affects Lenovo Laptop by applying Porters 5 Forces Industry Analysis (Section 3). In the section 4, we nvestigate how Lenovo Laptop adds value to its strategic position by using Resource Audit and Value Chain Analysis. And the last section is in order to give some meaningful conclusion which is related the sustainability of the strategic position. 2.
Lenovo Laptop Strategic Position and Major Competitors Lenovo is a new world company which formed by a China based technology giant, Legend Holdings’ acquisition of the former IBM Personal Computing (PC) Division. It develops very fast and provides high quality and easy-to-use technology products (Lenovo 2010). As indicated by the annual report of Lenovo in 2013, about the PC products, Lenovo provides legendary Think- branded commercial PCs and Idea-branded consumer PCs (Lenovo 2013).
Within the PC product, the Notebook computer revenue accounts for 53% in total in 2013 which is lower than the percentage in 201 2 but the total revenue is increased, as shown in the bar chart below; (Lenovo annual report 201 2/2013) 2. 1 Porters Generic Strategies In 1 980, Porter presented Generic Strategies, these strategies were known as a dominant exemplification in strategic management and marketing literatures (Salavou, 2010). The strategies include three fundamental trategies – differentiation, cost leadership, and focus.
At the beginning, Porter stated that a company performs would be better if they focus on one of the strategies. But most researchers in the following such as (Hlavacka et al , 2001 ; Kim et al, 2004;AIlen & Helms , 2006) state that the combination of the strategies can create more chance for obtaining the competitive advantages. In this part, we will analysis Lenovo Laptop by applying Porters Generic Strategies. Strategy Device Justification Cost Leadership Lenovo Essential G series -G Series laptops are entry-level laptops aimed at cost-conscious buyers.
A solid basic laptop that’s comfortable to use. -Build quality, screen quality and battery life aren’t consistently good, but there are some fine desktop replacement models in this range. (Lenovo 2014) Differentiation Lenovoldeapad Yoga series -It takes a different approach to the laptop, with a screen that folds flat against the back of the keyboard to make a slightly chunky tablet, or holds halfway in a tent-like mode for watching movies. – These are fine laptops with good screens and decent level of performance, and well worth investigating if you want something versatile. Lenovo 2014) Products like Yoga showcased innovation in combining the best of PC and tablet form factors to capitalize on the launch of Windows 8. (Lenovo annual report 2012/2013) FOCUS Lenovo Ideapad Z series -This series are fine for using around the house, but a little too big and heavy for working on the go. -Expect good-sized screens, a decent specification and a lot of hard drive. (Lenovo 2014) In recent years, the market survey shows that Lenovo’s personal computer owns 70% market share in high end products.
Lenovo did not reduce price, the strategy they use is developed different prices based on different onsumer groups by creating differentiated products to meet different consumer groups (Chu 2014). The different series laptops have showed the differentiation leadership through the price differentiation, image differentiation, support differentiation, quality differentiation and design differentiation-The core value of Lenovo is innovation, as states by Yang in the annual report (201 2/2013). This makes Lenovo became one Of the largest laptop manufacturer in the world. . 2 Lenovo Laptop vs Main Competitors Price Battery Life Screen Low cost Not consistently good Basic screen level Lenovo IdeaPad Z series High Long Good-sized screen Lenovo Ideapad Yoga series Good screen Acer Aspire Timeline Ultra M series Bigger screen MacBook pro Big screen MacBook Air Average Small screen Dell xps series Big-screen Dell Inspiron 15R/17R series Poor Better screen Dell Inspiron 15/17 series poor Not latest and greatest screen Hp Folio series Decent screen (Which 2014) The table above is aim to compare different brand laptops.
However, it isjust a roughly comparison, it is much clear to compare the different brand in Bowman’s strategy clock. Positions on the “strategy clock” represent different ositions in the market where customers have different requirements in terms of perceived value (Bowman & Faulkner, 1997). The strategy clock also represents a set of generic strategies for achieving competitive advantage (Johansson et al. , 2005). 2. Bowman’s Strategic Clock As can be seen from the clock, the three different laptop series of Lenovo lie in three different position, which are Lenovo Essential G series sit in the low price area, Lenovo Ideapad Yoga series sit in the differentiation area and Lenovo Ideapad Z series is in the focused differentiation direction. In addition, different series provided by Apple and Dell shows that they are more focus on differentiation in order to service different customers with different preferences.
While Acer and HP series that introduced above are more focus on big and decent screen with long battery life and obviously relative higher price, and also they provide different types of laptops within the series. The last part in this section is Strategic Group Mapping which is aim to compare the market share and prices for Lenovo and its four main competitors. 2. 4 Strategic Group Mapping (StatiSta, 2013) Form the global view; we can see that Lenovo account for the largest market share with 16. 9%, which is slightly higher than HP with 16. 2%.
Thethird largest is Dell with 1 1. 6% global market share. Acer obtains 8. 1% of the global market share. Apple is included in Others that accounts for 40. 8% in total. The competition between these laptop manufactures is quiet close which indicates a higher competition in this notebook industry. From this graph, we can see that, it is a successful year for Lenovo Group due to their clear strategy that can delivering strong short-term results, but also can balance hort-term in order to reaching long-term objectives (Lenovo annual report 2012/2013) 3.
External Environmental Analysis and the Key External Drivers effect on Lenovo Laptop 3. 1 PESTLE Analysis External Forces Affect on Lenovo Political China encourage the green IT Lenovo becomes an industry leader with respect to energy efficient products, the use of environmentally preferred materials and green product packaging. Economical The world economic tends to going down influenced by the 2008 economic crisis. Chinese government offered four-hundred million RMB stimulates economic development.
The Marketing Surveillance Center of China 2008) IT market becomes bigger The market share of Lenovo has boomed up. Social The education level has increased and the demand of high technology products also enhacing. (Communist Party Learning, 2009) The situation offered a huge market for Lenovo Technological Technological advances over the past decade (Shah waial, 2009) Innovation culture help Lenovo obtain huge market share Increase research and development have caused permanent innovation which leads to product life cycles resulting in a faster depreciation of the product Legal
China encourages apply scientific management method, advanced science and technology, support the products achieved or beyond the industry standard or international standard. (National People’s Congress, 1 993) enovo links the technology of IBM, they produce the high quality products and received the government supports from the legal. Environmental Increasing focus on the environmental impact of high-tech trash has lead to more stringent environmentalregulations on the electronics industry. Shah and Dalal, 2009) Compliance: meet or exceed all applicable environmental equirements for all Lenovo activities Prevention of Pollution: use sustainable business practices and processes that minimize waste and prevent pollutions Product Environmental Leadership: conserve natural resources by developing products and packaging Continual improvement: strive to continually improve Lenovo’s environmental management system and performance. 3. Porters 5 Forces Industry Analysis In order to evaluate the current environment of Lenovo Company, the model of Porter’s Five Forces is used in this report, to get a better sense of the international corporate. 3. 2. 1 Threat of New Entry (high) In order to maintain a dominant position as well as high market shares in the corporate market, Lenovo needs to keep on developing new technologies and attracting new inventions. Otherwise, foreseeable potential entrances will be exited in the technology market by the companies with new inventions, which can threaten the position of Lenovo.
However, barriers for new entry are relatively high. For example, factors like economies of scale, capital requirements of entry, brand identification, access to distribution channels, and etc. need to be considered by companies with attention of entering to a new market. This is significant reason that Dell, HP and Lenovo can maintain their dominant positions in thecorporate market. 3. 2. 2 Buyers’ Bargaining Power (overall high) “Buyers compete with the industry by forcing down prices, bargaining for higher quality or more services, and playing competitors against each other. Porter, 1980)lf there is a concentration of buyers, the switching costs for customers are low, or there are alternative sources of supply, buyers’ bargaining power is tend to be high. Usually, large organizations purchase bulk volume of products from the PC Company directly for their employees, n this way, the buyers’ bargaining power for Lenovo is relatively low, due to the fact that the cost to switching to other suppliers will be high. On the contrary , the individual customers usually purchase the individual laptops through the retail, and most of the Chinese customers are tend to purchase from IT store.
The product differentiation will need to be taken into account to affect the buyers’ bargaining power. For example, the Lenovo buyers’ power is strengthened since Apple recently moved to use Intel’s x86 processors. In general, quality and specification of products are tend to be ore interested by customers, thereby, improving product and service quality, offering extra features and maintaining strong customer relationship is still key to success for Lenovo 3. . 3 Suppliers’ Bargaining Power (no) “Suppliers can exert bargaining power over participants in an industry by threatening to raise prices or reduce the quality of purchased goods and services. (Porter, 1980) Suppliers of raw materials, such as boards and chips, are fewer and powerful with reasonably standard prices; suppliers’ bargaining power does not apply to Lenovo, who manufactures its own materials to a great degree. . 2. Substitute Products (moderate) Porter (1980) identified that substitute of products is other products which can perform similar function as the product of the industry Lenovois threatened by some high technologic potential firms. For example, Tablet, such as IPad and Samsung note, and smart phones, which get more attention from younger customers as fashion statement, can be seen as the most probable substitute products of laptops. But for the substitutes, prices and performances of them, as well as the costs of switching need to be considered before replacing the original product.
Despite the heavy dvertisement and rapid developments of these products, they still do not act as useful devices by the enterprises. For instance, the Wi-Fi function for the substitutes which can provide an Internet function may be less useful due to the high price of the Wi-Fi linkage. As a result, the laptop market may not be replaced by those mobile products for next few years; event through the consumer market is more promising for those products. 32. Rivalry (very high) Rivalry stated by Porter (1980) is competitors who take actions such as using price competition, advertising battles, product introductions, and increased ustomer service. At this moment, there are three major players in the PC corporate market, i. e. Dell HP and Lenovo, which take up around 45% of the market share. Specifically, Lenovo ranked first in the world market share which took up around 16. 9% in 2013, HP and Dell are at around 16. 2% and 1 1. % respectively. However, strong competitions are came from companies with different sizes, such as Apple Inc, Samsung Electronics Co, Microsoft Corporation, Dell Inc, Hewlett-Packard Company, Sony Corporation, Fujitsu Limited and many others. And according to results from the customer survey, mong these major players in terms of product features and product qualities, few differentiations are exit to cause a clear brand identity. overall, rivalries are the greatest threats for Lenovo. 4.
How Lenovo Laptop Adds Value to its Strategic Position 4. 1 Resource Audit In contract to Porter (1980) who argues that the profitability of individual firm is determined by the industry structure as well as how companies position themselves against this structure, the resource based view focus on the resources and capabilities that each corporation possessed. (Collis and Montgomery 1995, Stalk et al. 992) In order to properly position Lenovo within the industry, its resources as well as core capability must be analyzed.
In the firstpart, Lenovo’s Physical, Finance, Human and Intangible assets will be showed, and in the second part, resource and competency analysis for Lenovo corporate will be given to answer why it experiences different levels of performance within the same industry. Physical, Finance, Human and ntangible Assets 4. 1. 1 Physical Assets Total inventories amount to over 1. 9 billion, which increased by 61 percent. The Group has shifted further to in-house manufacturing which resulted to he increase in raw materials and service parts. Lenovo allocate physical resource globally.
Lenovo relocated headquarter to USA after it acquired the IBM’s PC division. And then set global market center in India and also keep manufacturer and R&D base in China. 4. 1. 2 Financial Assets Sale revenue over 33. 8 billion, with an increase of 0. 45 billion compared with the year 2012. Profit attributable to equity holders for the year was approximately 635 million, with an increase of 1 62 million. Cash and cash equivalent is around 3. 45 billion. Gross profit margin for the year was 0. 3 percentage point up from 1 1. percent reported in last year. 4. 1. Human Assets After acquired American entity, the new Lenovo is fully open and global. At March 31, 2013, the Group had approximately 35,026 employees. Remuneration and bonus is according to the performance. Benefits such as insurance, medical and retirement funds is provided, competitiveness of the Group is thereby sustained. Research and development spending for the year increased by 38 percent. 4. 1. 4 Intangible Assets After acquiring the IBM business, Lenovo was permitted to use IBM logo for five years. During the year, the Group completed the formation of the EMC JV nd the acquisition of CCE and Stoneware.
Goodwill and other intangible assets of US$201 million and IJS$99 million were recognized respectively. (Note: all resources are collected from Lenovo annual report 2012/2013) Resource and Competence Analysis unique Resources Incredible Capital Expenditure:The Group incurred capital expenditure of LJS$441 millionmainly for the acquisition of equipment and investments. The Group had a solid financial position with bank deposits, cash and cash equivalents totaled US$3,573milIion. At March 31, 201 3, total assets of the Group amounted to US$16,882 million.
Research and development spending for the year increased by 38 percent. The major part of the increase is attributable to the increase in employee benefit costs, and an increase in supplies & laboratory expenses of IJS$32 million. Lenovo reached an all-time record for profitability, surpassing$800 million for the fiscal year. On the strength of China, Lenovo successful launches in newmarkets, like India, the Philippines, Vietnam, Indonesia. Core Competence The Ability of Learning: Lenovo presents great ability for capability development; an important source of learning was its customer. The
Capability of Competing on Price: Lenovo has capability of competing on the basis of product price. The Effective and Efficient DistributionNetwork: Lenovo have approximately 50 authorized distributors in each of the seven regions in China, and each distributor has its own reseller network. There are over 2, 000 resellers in Lenovo’s distribution network The Acquisition of IBM PCD :The fiscal report combining two months after the completion of the acquisition truly shows a profit of 533 million Innovation and Long-term commitment to R in Lenovo:l_enovo’sinvestments in innovations continued o pay off, bothin PCs and in PC+ products.
These innovations leadto differentiation that is embraced by customers The Organizational Structure:is designed to help usbecome faster, more efficient, more innovative and more capable of deeply implementing our strategy in every key market. A strong, diverse global team: Lenovo has a global team that harnesses the toptalents at both a worldwide level to ensure a clear and deep understandingof the industry and customers. 4. 2 Value Chain Analysis Value chain analysis is based on the process view of organizations; it can be nalyzed by support activities and primary activities (Porter 1980).
Support activities include firm infrastructure, human resource management, technology development and procurement. While primary activities include inbound logistics, operations, outbound logistics, marketing & sales and service. 4. 2. 1 Support activities From firm infrastructure view, Lenovo has outgrown consistently the worldwide PC market in unit shipments and obtained huge market share across all geographies. There are mainly two product groups and make it the fastest growing major PC Company around the world in the past three years.