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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
National Business Case Competition, 2006
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
National Business Case Competition, 2006
Lenovo’s reply to competitors
Strategy Recommendation
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LenovoAn Overview
Lenovo-Overview
• Established in 1984
• Initial Name: Legend Group Limited
• Name changed to Lenovo in 2003
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Lenovo-Overview
Product Category:
• Handheld Devices (Desktop, Notebooks)
•Consumer IT
•Corporate IT
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Lenovo-Overview
19952000
22.75103.26
Figure:LenovoIncreasing Brand Equity
2001 145.952002 206.29
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Growth in Brand Equity
Brand Equity, RMB ’00 million
Average Growth Rate: 41%
Projected
00 01 02999897
Lenovo-Overview
19851995
1006700
Figure:LenovoTurnover Growth
National Business Case Competition, 2006
Growth In Turnover
Turnover, RMB in million
009585
2000 28400
Average Growth Rate 35%
Lenovo-Overview
Handheld Devices
Consumer IT
11.0%
35.2%
National Business Case Competition, 2006
Turnover Breakdown (2004/05)
Corporate IT 50.8%
Others 3.0%
Corporate IT
Consumer IT
Handheld Devices
Lenovo-Overview
19941998
3.9%14.4%
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Growth In Market Share
Rising Market Share
2001 30.20%
Lenovo-Overview
National Business Case Competition, 2006
Growth In Market Share
19941998
3.9%14.4%
Rising Market Share
2001 30.20%
Lenovo-Overview
National Business Case Competition, 2006
Growth In Market Share
19941998
3.9%14.4%
Rising Market Share
2001 30.20%
Next……
Analysis of PC Industry
SWOT analysis
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National Business Case Competition, 2006
PC Industry Analysis
PC Industry Analysis
CommercialConsumer
65%35%
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PC Industry Products: Desktop, Notebooks, PC Server
Consumer Segments
Commercial
Consumer
PC Industry Analysis
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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
PC Industry Analysis
Dell
HP
29.5%
17.4%
National Business Case Competition, 2006
Position of Different Big Players
IBM 5.1%
Others 47.9%
Dell
HP
PC Industry Analysis
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
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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
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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
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National Business Case Competition, 2006
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
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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
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Lenovo Vs Dell
National Business Case Competition, 2006
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
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Lenovo Vs Dell
Dell Lenovo
Promotional Model Innovative Traditional
Production Mode Order-oriented Standard
Advertisement Expense(2002) 100.7m 55.09m
National Business Case Competition, 2006
Lenovo Begun to Struggle
National Business Case Competition, 2006
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
National Business Case Competition, 2006
Corporate sales begun to plummet
Dell capturing government and school market segment
Lenovo’s market share begun to fall rapidly
Lenovo begun to struggle
National Business Case Competition, 2006
How to meet all its goals?
How to retain leadership in Chinese market?
How to expand globally with competitive advantage?
Lenovo begun to struggle
How to become a Fortune 500 by 2010?
National Business Case Competition, 2006
Next……
Strategy Recommendations
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Strategy Recommendation
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Selecting the Right Distribution Model
Strategy Recommendations
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Lenovo Wholesaler Retailer Consumer
Existing Distribution Process
Selecting the Right Distribution Model
Strategy Recommendations
National Business Case Competition, 2006
Lenovo Discount Retailer (Walmart) Consumer
Discount Retailing
Lenovo Consumer
Direct Selling = Ecommerce and Agent
Choosing a Production Model
Strategy Recommendations
National Business Case Competition, 2006
Standard model
Custom-Oriented Model (Software)
Custom-Oriented Model (Hardware)
Choosing a Production Model Different Segments
Strategy Recommendations
National Business Case Competition, 2006
Custom Standard
StandardCustom (Soft) Standard
Market
Inco
me G
roup
China Global
Low
High
Creation of “Brand Equity”
Strategy Recommendations
Increasing value of the brand “Lenovo”
Perceived Quality
Brand Loyalty
Name Awareness
Other Assets: Patents, ChannelRelationship etc.
National Business Case Competition, 2006
Creation of “Brand Equity”
Strategy Recommendations
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.
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Chinese Language Preference
English language is not familiar with Chinese
Software Making: Chinese Should Be Used
Strategy Recommendations
National Business Case Competition, 2006
Diversification
Business Strength
Industry Attractiveness
Strategy Recommendations
National Business Case Competition, 2006
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
Strategy Recommendations
National Business Case Competition, 2006
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
Strategy Recommendations
National Business Case Competition, 2006
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
Strategy Recommendations
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Global Market Penetration
Export only Export or100% Subsidiary
Joint Venture Joint Venture
Country Nature
Probabilityof
Protection
Developed Developing
High
Low
Strategy Recommendations
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Pricing Strategy for Different Segments
Cost Based
Value Based
Competition Based
Developing Markets (Asia)
Developed Markets (Europe)
Chinese Market
Strategy Recommendations
National Business Case Competition, 2006
Fighting Against Smuggle and Software Piracy
National Business Case Competition, 2006
Individual Effort
Collective Effort
Creating Public Awareness, Insisting Government
Cooperation with other companies
Drawing The Big Picture
National Business Case Competition, 2006
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
National Business Case Competition, 2006
Question &Answer
National Business Case Competition, 2006