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SWOT analysis of Lenovo

This is a Lenovo Group Limited SWOT analysis for 2013. The original analysis can be found at Lenovo SWOT analysis. For more information on how to do SWOT analysis, please refer to our article.

Company background
Name Industries served Geographic areas served Headquarters Current CEO Revenue Profit Employees Main Competitors Lenovo Group Limited Computer hardware and Electronics Worldwide U.S. Yang Yuanqing $ 29.57 billion (2012) $ 472 million (2012) 27,000 (2012) Apple Inc., Samsung Electronics Co., Microsoft Corporation, Dell Inc., Hewlett-Packard Company, Sony Corporation, Fujitsu Limited and many others.

Lenovo is a $30 billion electronics company and the worlds second-largest PC vendor. It employs 30,000 people, operates in more than 60 countries and serves customers in more than 160 countries. Lenovo has been the fastest growing major PC company for more than 3 years. You can find more information about the company in its official website or Wikipedias article.

SWOT

Lenovo SWOT analysis 2013


Strengths
1. Vertical integration 2. Knowledge of Chinas market 3. Low cost production 4. Strong patents portfolio 5. Competency in mergers and acquisitions 6. Synergy of knowledge and diverse workforce

Weaknesses
1. Poor brand perception in the developed economies 2. Low differentiation 3. Commodity (computer hardware) products

Opportunities
1. Growing Indias smartphone market 2. Growth of tablets market 3. Obtaining patents through acquisitions 4. Tablet market growth

Threats
1. Profit margin decline on hardware products 2. Slowing growth rate of the laptops market 3. Saturated smartphone markets in developed countries 4. Rapid technological change 5. Intense competition

Strengths
1. Vertical integration. Lenovos strategy to vertically integrate has paid off. The company can keep costs low, keep up with the pace, control inventory and rely less on original equipment manufacturers (OEM). 2. Knowledge of Chinas market. Lenovo has emerged in China and continues to be one of the largest players in homeland market. The firms knowledge of Chinas market and the ability to suit Chinese tastes resulted for the wide acceptance and support for the companys products. 3. Low cost production. Lenovo manufactures nearly half of its hardware and has set up production plants in low cost regions such as China, Brazil and Argentina to benefit from higher margins. It is also able to manufacture low cost products that are price competitive. 4. Competency in mergers and acquisitions. Lenovo has been continuously acquiring firms to bring patents, new capabilities, assets and skills to the company. Most importantly, through successful acquisitions and joint ventures, Lenovo accessed new markets and distribution networks. Compaq is the most notable and successful Lenovos acquisition to date. 5. Strong patents portfolio. With an acquisition of Compaq and Stoneware and a help of firms R&D, Lenovo has gathered an important patents portfolio related to its PC and software businesses. 6. Synergy of knowledge and diverse workforce. Instead of traditional headquarter model, Lenovo manages 3 centers of excellence around the world (US, China and Singapore). Combining different skills and resources results in synergy and premium quality products.

Weaknesses
1. Poor brand perception in the developed economies. Lenovos primary market is Asia, where it sells most of its production. The company finds it hard to access US and Europe markets as its brand perception is low in there. 2. Low differentiation. Apart from the low price, Lenovo products are little differentiated from competitors products and are in competitive disadvantage if the price offered by competitor is lower. 3. Commodity products. The large stream of Lenovos revenues comes from computer, especially laptop, sales, which is a commoditized product. Computer hardware (commodity) products are sold with a very low profit margin.

Opportunities
1. Growing Indias smartphone market. Indias smartphone market is one of the least penetrated among Asia/Pacific countries. Lenovo could easily penetrate Indias market with its already successful low price Le Phone. 2. Growth of tablets market. Lenovo currently ranks as 4 biggest tablets seller. The company could increase its market share by introducing better quality products. 3. Obtaining patents through acquisitions. If Lenovo wants to sustain its growth, it needs to obtain more patents and the best way to do that is to acquire the firms holding them , as it did with IBMs Compaq. 4. Tablet market growth. Tablet market is expected to grow in double digits for the next few years and the company has a great opportunity to release new tablet models and benefit from the market growth.
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Threats
1. Profit margin decline on hardware products. Lenovos main income is from selling hardware products, which prices will increase in the future due to rising raw material prices. This will add to costs for Lenovo and will further cut the profit margin.

2. Slowing growth rate of the laptops market. Growth rate of the computer market is slowing down and in the near future the markets will become saturated. It will prove hard for Lenovo to compete in such market and continue to grow its market share. 3. Saturated smartphone markets in developed countries. Although Lenovo does not compete in the developed economies with its smartphones it will have difficulties in growing its smartphone division and entering developed economies later as the smartphones market there is already saturated. 4. Rapid technological change. The serious threat that Lenovo and the other tech companies are facing is a rapid technological change. Companies are under the pressure to release the new products faster and faster. The one that cannot keep up with the competition soon fails. 5. Intense competition. The company faces intense competition in all its business segments. It competes in terms of price, quality, brand, technology, reputation, distribution and range of products, with Acer, Apple, Dell, HP and Toshiba.

Sources
1. 2. Lenovo (2013). About Lenovo. Available at: http://www.lenovo.com/lenovo/uk/en/our_company.html Lenovo (2013). Investor relations - Annual & interim reports. Available at: http://www.lenovo.com/ww/lenovo/annual_interim_report.html 3.

Gupta, P. and Rigby, P. (2013). Lenovo entering 'PC plus' era, CEO says. Available at:
http://uk.reuters.com/article/2013/01/10/us-ces-lenovo-interview-idUKBRE90903L20130110

4. Wikipedia (2013). Lenovo. Available at: http://en.wikipedia.org/wiki/Lenovo