MARKETING PROJECT

ON
COMPUTER INDUSTRY

Submitted by: - Submitted to:-

Sushil Kumar JIML-10-151 Dr. REETI AGARWAL

Vivek Dubey JIML-10-170

Surpreet Singh JIML-10-FS-046

Tapas Kumar Pal JIML-10-162

Utkarsh Pratap Singh JIML-10-174

Acknowledgement
We take immense pleasure to acknowledge the efforts of
the following people who helped our group to make this
project a reality. We express my gratitude for their
suggestions, guidance and intellectual influence.
We express our sincere thanks to Dr Reeti Agarwal, Core
Faculty, for making this project a reality.
We are thankful to all our Lecturers for their help and kind
co-operation throughout the course. Last, but not the
least, I would like to thank our parents and friends who
always supported in all our endeavors.
Industry Overview

The impact of the global economic crisis in 2008 reached far and wide. It has
significantly affected the worldwide PC market demand as many large enterprises
delayed purchase decisions and reduced IT budgets. Even the growth of the China PC
market has slowed down under the economic challenges. At the same time, the PC
industry as a whole has shifted dramatically and rapidly to lower price points, imposing
additional pressures on industry players. During the 2008/09 fiscal year, the year-on-year
growth of worldwide PC market shipments decelerated to approximately 4 percent
mainly supported by consumer and low-priced notebook segments. The China PC market
and worldwide commercial PC segment in which Lenovo® is heavily weighted showed
significant slowdown in the second half of the fiscal year under the economic crisis. In
addition, the Group could not enjoy the benefits of the growth in transaction space as it
has not adequately addressed the worldwide transaction segment outside China, in
particular the consumer market. Lenovo reported lower-than-market growth in its
worldwide PC shipments which only increased by approximately 2 percent year-on-year.
As a result, the Group’s market share decreased slightly to 7.6 percent, ranking number
four worldwide during the fiscal year. The Group’s financial performance in the second
half of the 2008/09 fiscal year was significantly impacted by the widespread economic
slowdown. Lenovo’s overall sales for the fiscal year decreased 9 percent year-on-year to
approximately US$14,901 million, resulting from the slower PC shipment growth and a
steeper-than-normal decline in average selling prices exacerbated by the weak economic
backdrop. The Group’s gross margin performance was further affected by the continued
shift in the market to lower price points, aggressive pricing and currency fluctuations.
The gross margin (excluding one-off items) for the fiscal year declined to 11.9 percent
from 15.0 percent while gross profit (excluding one-off items) decreased 27 percent year-
on-year to approximately US$1,779 million. In anticipation of continued deterioration in
the global economic environment, Lenovo announced a global resource restructuring plan
in January 2009 to reduce costs and enhance operational efficiency. About 2,500
employees were eliminated as a result of this action which is expected to realize annual
savings of approximately US$300 million on a run rate basis in the coming fiscal year.
Despite Lenovo’s efforts to control expenses during the 2008/09 fiscal year, the decline in
sales and pressure on gross margin resulted in 95 percent year-on-year decline in the
Group’s profit before taxation (excluding the cost of restructuring actions and one-off
charges) to approximately US$29 million for the year. The Group reported a loss
attributable to shareholders of approximately US$226 million, after accounting for
US$146 million of restructuring costs and US$71 million of one-off charges. This
compared to a profit attributable to shareholders (including US$20 million net profit from
discontinued operations) of US$484 million in the previous fiscal year.

Vendor highlights

Hewlett-Packard (HP) made further inroads into consumer portables through the retail
channel and continued to gain share overall. The vendor's shipments grew 3.6% on year
worldwide with above-market performance in the US. The company also performed well
in Europe and Asia Pacific.

Although still heavily affected by the commercial slump, Dell saw good growth from
consumer-focused SKUs and reclaimed the number one spot in the US. The company
continues to restructure operations, develop its consumer business, and should benefit
from an eventual rebound in the commercial segment.

Acer continues to capitalize on its growing channel presence to ship portables geared
toward a wide range of cost-conscious consumers. The company maintained its lead in
mini notebook PCs while its early entry into Atom-based netbooks should also pay
dividends later in the year. The company saw a significant gain in the US market, likely
benefiting from the troubles of Dell and Lenovo.

Lenovo's renewed focus on notebooks and emerging regions produced positive growth
following declines in the past two quarters. Solid growth was reported in Latin America
and Asia Pacific market excluding Japan, while yearly declines in mature regions slowed
compared to the first quarter of 2009. Its home court advantage in Asia Pacific market
 excluding Japan also has led it to focus on a myriad of government stimulus programs,
which could pay dividends while riding through the commercial downturn.

Toshiba had a solid second quarter where it outgrew the market in most regions and
moved up to the fourth spot in the US. Toshiba's mini notebook offering has helped it to
weather the storm comparatively better than other Japan-based OEMs and it was the only
major Japan-based OEM to have positive yearly growth in Japan.

Top five vendors’ worldwide PC shipments

IDC: Top-5 vendors' worldwide PC shipments, 2Q09 (k units)

Rank Vendor 2Q09 shipments Market share 2Q08 shipments Market share Y/Y
1 HP 13,095 19.8% 12,644 18.5% 3.6%
2 Dell 9,108 13.7% 10,984 16.1% (17.1%)
3 Acer 8,431 12.7% 6,815 10% 23.7%
4 Lenovo 5,757 8.7% 5,596 8.2% 2.9%
5 Toshiba 3,494 5.3% 3,163 4.6% 10.5%
Others 26,407 39.8% 29,202 42.7% (9.6%)

All Vendors 66,291 100% 68,403 100% (3.1%)

* PCs include desktop and portable PCs (including mini notebooks), but
exclude x86 servers.

Source: IDC, compiled by Digitimes, July 2009

India Client PC (Desktop + Notebook) Shipments: Top 3 Vendor

Market Shares (% of units), 4Q 2008 vs. 4Q 2007*

4Q ’07 Client PC Shipments 4Q ’08 Client PC Shipments

(Notebook PCs + Desktop PCs) (Notebook PCs + Desktop PCs)
Vendor Market Share Vendor Market Share
Hewlett-Packard 17.6% Hewlett-Packard 15.6%
HCL 10.8% Dell 10.9%
Lenovo 8.9% HCL 9.6%
*According to IDC’s India Quarterly PC Tracker 2008, 4Q 2008 quarter, March 2009
release

PC Shipments’ Market Share

4Q 2008 PC Shipments 1Q 2009 PC Shipments

(Desktop PCs + Notebook PCs) (Desktop PCs + Notebook PCs)

Vendor Market Share Vendor Market Share

Hewlett-Packard 15.6% Hewlett-Packard 18.2%

Dell 11.0% HCL Infosystems 9.8%

HCL Infosystems 9.6% Dell 9.7%

Acer 7.7% Acer 7.3%

Lenovo 6.6% Lenovo 4.7%

PEST analysis

1. Political (inc. legal)

Political factors include government regulations and legal issues determining the
conditions under which companies have to operate. In this field, the computer industry
has to face certain restraints. Problems can arise in countries where political stability is
not guaranteed, no matter whether companies operate production facilities or if they do
business with the country through exports. Many countries still have restrictive policies
which are maintained to protect domestic manufacturers and production. Such policies
often hinder foreign companies from entering into this market. The only possibility to do
business in those countries is to establish partnerships with local companies, where they
are additionally forced to accept minority shares and to provide money and technological
know-how. However, the computer industry sees great potential in those countries which
lose their restrictions. This is especially true for China which has opened for many
industries since its accession to WTO in2001. In the course of globalization trade barriers
decline and new markets emerge, allowing free trade to expand.

2. Economic
The computer industry expects a growth of approximately 10 percent over the next years.
This growth is influenced by the economic situation in a specific country, having an
impact on the purchasing power of potential customers. Additionally, changing inflation
rates and currency fluctuation also determine the profitability of a company.

3. Social
The national demand for computers is dependent on the educational level prevailing in a
specific country. The higher the educational standard, the higher is the demand.
Furthermore, computers get more and more involved in daily life. Today, children already
get familiar with the use of computers at a very young age, representing a generation that
will hardly live or work without a computer in future. Additionally, the brand image of a
computer and lifestyle trends get more and more decisive for the purchasing decisions.
The computer industry adapts to this trend, e.g. by offering a wide range of notebooks
and by trying to create a strong brand name.

4 Technological
There is hardly any industry that is characterized by a faster technological development
than computer industry. Increased research and development have caused permanent
innovation processes which lead to short product life cycles resulting in a faster
depreciation of the products.

5 Market structure
The computer industry is characterized by a quasi-oligopolistic structure. It is dominated by 5
major global players although there are a lot of small companies which often serve only regional
markets. The following graph illustrates the division of the computer market of each individual
company.

Company Market share

HP 18.1%
DELL 15.6%
LENOVO 7.8%
ACER 9.4%
TOSHIBA 4.4%
OTHERS 44.7%
Market Share of various players in PC Industry

Industry Profile

In India, the software boom started somewhere in the late 1990s. Most of the Indian
software companies at that moment offered only limited software services such as
the banking and the engineering software. The business software boom started with
the emergence of Y2K problem, when a large number of skilled personnel were
required to fulfill the mammoth database-correction demand in order to cope up with
the advent of the new millennium.
The profile of the Indian IT Services has been undergoing a change in the last few
years, partly as it moves up the value chain and partly as a response to the market
dynamics. Ten years ago, most US companies would not even consider outsourcing
some of their IT projects to outside vendors. Now, ten years later, a vast majority of
US companies use the professional services of Indian Software engineers in some
manner, through large, medium or small companies or through individuals recruited
directly.
The market competition is forcing organizations to cut down on costs of products.
The professional IT services on the other hand are becoming increasingly expensive.
The offshore software development model is today where onsite professional
services were ten years ago. There is a high chance (almost a mathematical
certainty), that in less than ten years, the vast majority of IT services (software
development being just one of them) from developed countries, will be, one,
outsourced and two, outsourced to an offshore vendor.
Despite the global economic slowdown, the Indian IT software and services industry
is maintaining a steady pace of growth. Software development activity is not
confined to a few cities in India. Software development centers, such as Bangalore,
Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara,
Bhubaneswar, Ahmedabad, Goa, Chandigarh, and Trivandrum are all developing
quickly. All of these places have state-of-the-art software facilities and the presence
of a large number of overseas vendors. India’s most prized resource is its readily
available technical work force. India has the second largest English-speaking
scientific professionals in the world, second only to the U.S. It is estimated that India
has over 4 million technical workers, over 1,832 educational institutions and
polytechnics, which train more than 67,785 computer software professionals every
year. The enormous base of skilled manpower is a major draw for global customers.
India provides IT services at one-tenth the price. No wonder more and more
companies are basing their operations in India.
The industry is in an expansion mode right now, with dozens of new offshore IT
services vendors emerging every day, the industry has a high probability of being
subjected to the 80:20 rule in not too distant a future. In perhaps another ten years,
80 percent of all outsourced offshore development work will be done by 20 percent
of all vendors, a small number of high qualities, trusted vendors. Only a few select
countries and only the most professional companies in those countries will emerge as
winners. India will definitely be the country of choice for offshore software
development. It has the potential to become and remain the country of choice for all
software developments and IT enabled services, second only to the USA. The third
choice could be far distant.
India is among the three countries that have built supercomputers on their own. The
other two are USA and Japan. India is among six countries that launch satellites and
do so even for Germany and Belgium. India's INSAT is among the world's largest
domestic satellite communication systems. India has the third largest
telecommunications network among the emerging economies, and it is among the top
ten networks of the world.
To become a global leader in the IT industry and retain that position, India needs to
constantly keep moving up the value chain, focusing on finished products and
solutions, rather than purely on skill sets and resumes. It also needs to be able to
package its services as products, rather than offering them as raw material. It needs
to be able to recognize and build up on its strengths and work on weaknesses.
Another extension of the IT industry is the ITES (Information Technology Enabled
Services) which is a sector dependent on IT sector.
Information technology consulting (IT consulting or business and technology
services) is a field that focuses on advising businesses on how best to use
information technology to meet their business objectives. In addition to providing
advice, IT consultancies often implement, deploy, and administer IT systems on
businesses' behalf.

The PC industry is one of the strangest in the world. There is probably no other type
of product that is so technologically sophisticated, sells for so much money, and yet
is sold by so many companies for so little profit. The severe competition in the
industry is the #1 reason why so many problems are encountered by those who deal
with PC vendors. While I consider there to be absolutely no excuse for a company
not treating its customers fairly, at the same time I think customers should have some
idea of what vendors are up against in this demanding marketplace.

Features of the Industry

It Is Very Price Competitive: By far, the most important thing to remember about the
PC industry is this: it is one of the most competitive in the world. The main reason
for this is the simple fact that making a PC is just not that difficult. Most are
assembled from standardized components and not a lot of expertise is required.
There are few barriers to entry to the market, meaning it is easy to set up a new PC
company. As a result, there are tens of thousands of companies making PCs that
perform similar functions. This causes the market to be extremely price-competitive.
Most of the other characteristics of the industry follow directly from this fact.

 Systems and Components Sell with Low Margins: Since the market is so
competitive, vendors often sell at very low margins. Computers aren't like
many other products, where the company selling the device is making
upwards of 50% of the price of the product as gross profit (meaning,
profit before overhead and general expenses). For PCs it is more like
10% or less. Many people buy a $1500 PC thinking the vendor is making,
say, $500-700 on the item, and they find it hard to understand why these
companies aren't getting rich. It's more typical for the vendor to make less
than $100 profit on such a PC. Some small companies make virtually no
profit at all on straight PC sales, and survive on post-warranty support
and consulting!

 The Market Experiences Rapid Price Fluctuations: There is probably no

other industry that has prices change as dramatically and frequently as the
PC industry. Usually, prices are decreasing. This is good for the consumer
but very bad for vendors, because it means that their already low margins
 get squeezed if prices drop between the time that they buy a product and
the time they sell it. It's not unheard of for a vendor to buy a component
wholesale at price $X and find 24 hours later that the retail price has
dropped below $X! The vendor must then try to dump the product as fast
as possible to limit his losses. You won't find many industries where this
occurs with regularity.

 Vendors Keep Low Inventories: In an environment where margins are

low and prices are generally dropping, keeping high inventory is a death
sentence--whenever prices drop the vendor potentially loses money on
every component in inventory at the time. For this reason, most
companies try to keep as little in inventory as they can get away with.

 Vendors Contend with High Bankruptcy Rates: Because of all the

challenges involved in running a PC business, the bankruptcy rate is high.
Many vendors have been in business only a short time. Some open a
store, have it fail, and then open another one with a new name, sometimes
year after year.

 The structure of PC industry is almost unique. The original equipment

manufacturers (OEMs) that produce and sell PCs bear most of the risk,
while the downstream suppliers of components make most of the profit.
Many analogies have been drawn with other mature-product industries,
such as automobiles, but we find such comparisons inaccurate. The key
difference is that the suppliers of PCs are struggling to identify
meaningful differentiation vs. competitors. This leaves manufacturers
competing primarily on price, which exacerbates the pressure on margins.
The airline business presents a more realistic comparison. Aircraft
manufacturers and airports are profitable and continue to benefit from
growth in demand, but the carriers are struggling and further
consolidation is viewed as inevitable.
Although the apparent inability to differentiate products drives the PC industry's
focus on price competition, the downward movement of pricing is also because of
oversupply. There are too many suppliers, all struggling with similar challenges in
this highly cash-intensive business. We continue to observe fire sales resulting from
overproduction and price-led promotions by PC suppliers looking to accelerate cash
flow or boost market share. The result is an industry which, in some market
segments, seems locked into a "race to the bottom" in the pricing of products.
Clearly, this trend is unsustainable.

In November 2004, these observations, combined with our market expectations for
2006 through 2008, led us to predict that by 2007, three of the top 10 PC suppliers
would exit the market. Within weeks, IBM announced the sale of its PC Division to
Lenovo Group. Our market analysis was straightforward. Unit growth between 2006
and 2008 will average about 6 percent, but revenue will remain flat. Key PC
component suppliers, such as Intel and Microsoft, have historically been highly adept
at maintaining their PC revenue, and their overall revenue from PCs will probably
continue to grow as the market continues to shift toward mobile PCs. This leaves PC
suppliers facing the prospect of producing more PCs for dwindling revenue. This
situation will inevitably lead to further consolidation among the leading suppliers.

The impact of consolidation will not be limited to PC suppliers. Intel, AMD,

Microsoft and other component suppliers will also see change as the structure of
their market evolves. Although these changes will ultimately result in a healthier PC
industry that is better able to equate innovation to sustainable business, the period of
adjustment will bring additional challenges to the buyers and users of PCs. Choice of
supplier and continuity of supply will be less certain, while the adoption of emerging
PC technologies will present additional risk.

This collection of research further explores the analysis behind these observations
and examines the likely impact for PC suppliers, key component suppliers and the
buyers of PCs.
Major Players in the PC Industry

1.

The Hewlett-Packard Company commonly referred to as HP, is the largest PC

manufacturer in the world. The company was founded by Stanford University classmates
Bill Hewlett and David Packard in 1939.It is headquartered in Palo Alto, California,
United State and operates in more than 170 countries around the world. HP specializes in
developing and manufacturing computing, storage, and networking hardware, software
and services. HP is a Fortune 500 company and is ranked 9 in 2009. In august 2001, HP
and Compaq came together to merge by a 25 billion$ stock deal.

The company employs 321,000 people as on 31st December, 2008. Mark V. Hurd chief
executive officer and the chairperson of HP since September 22, 2006 has focused on
maintaining the companies leadership in exploring how technology and services can help
people and companies address their problems and challenges, and realize their
possibilities, aspirations and dreams.

Even in the poor economic conditions of 2008, the company had a net revenue growth of
13% from $104.2 billion in FY07 to $118.3 billion in FY08.

1.1 HP’s Product Line

The company HP provides a wide range of products and services to its customers and is
divided into six business segments:

 Personal Systems: Hewlett-Packard is the world's largest manufacturer of

personal computers, and its Personal Systems Group (PSG) is responsible for the
development and sale of HP's commercial and consumer PCs, workstations,
 handheld devices, digital entertainment systems, and other related services and
accessories.
 Imaging and Printing: Hewlett-Packard is the leading provider of imaging and
printing systems in the world. HP's Imaging and Printing Group (IPG) provides
consumer and commercial printer hardware, printing supplies, printing media and
accessories, and scanning devices.

 Enterprise Storage and Servers: HP is one of the leading providers of servers in

the world, offering a wide range of servers and storage products and solutions for
small businesses and larger corporations.

 HP Services: This segment offers a large variety of information technology

services, including technology services, consulting and integration services, and
managed services.

 Software: HP's Software segment provides management software solutions that

assist large companies in managing their operations and information technology
infrastructure,

 HP Financial Services: Hewlett-Packard offers financing, leasing, and other

financial management services for its larger enterprise customers, small
businesses, and educational and governmental customers in order to allow its
customers to purchase complete end-to-end information technology solutions.

The company sets its corporate objectives as:

 Customer loyalty
 Profit
 Growth
 Market leadership
 Leadership
 Commitment to employees
 Leadership capability
 Global citizenship
1.2 The SWOT analysis of HP

STRENGTH
 Leadership position
 Consumer centric brand
 Strong after sales service
 Design strategy: looks cost
strategy
WEAKNESS
 Low flexibility: it does not have
high customization available
 Decline in digital entertainment
market
 Software service

OPPORTUNITY THREAT
 PC business  Pricing pressure
 Service industry: bought  Component pricing
 Slow revenue growth
world’s No 2
Service provider EDS

2.
Dell, a multinational technology corporation with its head quarters in Round
Rock, TX, USA develops, manufactures, sells, and supports personal computers and
other computer-related. Based in Round Rock, Texas, Dell employs more than 82,700
people worldwide.

Michael Dell founded the company as PC's Limited with capital of $1000 in 1984. He is
the present CEO and chairman of the company. Operating from Michael Dell's off-
campus dorm-room at Dobie Center, the startup aimed to sell IBM PC-
compatible computers .Michael Dell started trading in the belief that by selling personal
computer-systems directly to customers, PC's Limited could better understand customers'
needs and provide the most effective computing solutions to meet those needs. The
company changed its name to "Dell Computer Corporation" in 1988.

Dell became the first company in the information technology industry to establish a
product-recycling goal (in 2004) and completed the implementation of its global
consumer recycling-program in 2006.

Dell offers a variety of products and services. Among its offerings are a wide array of
desktop and notebook computers, peripherals and software, technical support services,
and corporate servers and storage systems.

2.1 Dell’s Product Line

PCs (60% of revenue)

Dell produces several lines of consumer and commercial PC systems, including both
desktop and notebook models. Overall, Dell holds about 14% of the worldwide PC
market. Within the PC segment, desktops contributed 32% of Dell’s Fiscal 2008 revenue,
and notebooks accounted for 28%.

Software, Peripherals, and Accessories (16% of revenue)

Dell sells various software programs with its PC systems, such as productivity software,
security programs, and games. Dell also sells a number of computer-related peripherals,
including LCD monitors, printers, input and storage devices, etc. Aside from PC-related
items, Dell sells various accessories and electronic devices, such as LCD televisions,
digital cameras, and MP3 players.

Servers and Storage (15% of total revenue in 2008)

For its corporate customers, Dell provides both servers and storage systems. Dell also
sells customized servers and enterprise systems designed to meet the specific needs of
certain customers.

Technical Support and Services (9% of total revenue in 2008)

Dell also sells technical support services for its products, providing customers with
assistance after they purchase their systems. In Fiscal 2008, revenue increased 6% year-
over-year to $61.1 billion, The company recorded net income of $351 million for the
fourth quarter ended Jan. 30, a 48 percent drop from the $679 million it recorded in last
year's fourth quarter. Net income per share was $0.18. Revenue fell to $13.4 billion, a 16
percent drop from a year ago.

2.2 SWOT analysis of Dell

STRENGTH Weakness
 Inventory turnover rate is 6 days.  No proprietary technology
 Revenue growth at 100%  High dependency on component
 Cost efficiency
suppliers
 Direct to customer business model:  Lack of software support for
minimum credit risk customers
 Latest technology customization
 Internet sales leadership: $5M
everyday worldwide
Opportunity Threat
 Network service in B2B  Dell’s market share is very less
 Strong potential in china and India  Price range considered premium
 Low costs and advanced technology  Currently fluctuation policy
 Growth in business, education and
instability
government markets  Tariff trade barriers

3.

Acer Incorporated is a Taiwan-based multinational electronics manufacturer. Originally

named Multitech, it was founded by Stan Shih , his wife Carolyn Yeh, and a group of five
others in 1976. Multitech was eventually renamed Acer in 1987.
Acer is renowned for the development and manufacture of sophisticatedly and intuitively
designed, easy to use products. Focused on marketing its brand-name IT products around
the globe, Acer ranks as the world's No. 3 vendor for total PCs and No. 2 for notebooks,
with the fastest growth among the top-five players.

3.1 Acer’s product line

Notebook (71% of revenue): Notebooks are Acer's most profitable product, generating
NT$417 billion in revenue in 2008. Within the past decade, growth in notebook sales has
far outpaced growth in desktop sales. For example, in 2007, overall notebook shipments
grew 33.8%, while desktop shipments grew only 4.8%.

Netbook (9% of revenue): Netbooks are an emerging type of scaled-down portable

computer, that are designed to be cheap, light weight, and easy to use. Acer is the #1
producer of netbooks worldwide by unit sales, with a 38% market share.

Desktop (12% of revenue): Annual revenue growth in desktop sales has slowed from
50.2% from 2004 to 2005 to 3.8% in 2008 as consumers demand more laptops. The
company expects desktop sales growth of 3-4% from 2009 to 2011.

Display (5% of revenue): Acer manufactures LCD monitors, HDTVs, and projectors. In
addition to consumers, the company is targeting businesses and governmental agencies
for volume sales.

Other (3% of revenue): Acer offers information security management, software systems
development, data center services, and other IT support services. In addition, in 2008,
Acer acquired E-Ten, a Taiwanese manufacturer of Pocket PC phones and PDAs.

3.2 SWOT analysis of Acer

STRENGTHS WEAKNESS

 Operational Efficiency — Tight  Low Profit Margins

Control on Overhead Costs  Multiple Brands, Which Increase
 Improved Economies of Scale Costs and Dilute Resource

 Fast Reactions to Market Changes  Brand perception as Low-Cost PC

After Cautious ROI Evaluation Provider

 Aggressive Price Strategy —  Insufficient Attention to the Chinese

Particularly Suitable to a Time of Market the Second-Largest in the
Economic Recession World

 Strong global logistics

OPPORTUNITIES THREAT

 Economic Downturn, Which Favors  Continued Price Decline in Mobile

Low-Price Products PCs, Due in Part to Mini-notebooks,
 Growth Into the Chinese Market Which Erodes Margins and
profitability
 Growth Into Midsize-Business  Dell's Expansion Into Indirect Sales
Markets
 Samsung’s entering into consumer
mobile PC s.

COMPANY PROFILE
Lenovo Group Limited is a Chinese-based multinational computer
technology corporation that develops, manufactures and markets desktops
and notebook personal computers, workstations, servers, storage drives, IT
management software, and related services. Incorporated as Legend in Hong
Kong in 1988, Lenovo's principal operations are currently located in Beijing,
China, Morrisville, North Carolina in the United States, and Singapore, with
research centers in those locations, as well as Shanghai, Shenzhen, Xiamen,
and Chengdu in China, and Yamato in Kanagawa Prefecture, Japan.

Lenovo acquired the former IBM PC Company Division, which marketed

the ThinkPad line of notebook PCs, in 2005 for approximately $1.75 billion.

In 2009, Lenovo was the fourth largest vendor of personal computers in the
world. The company is the largest seller of PCs in China, with a 28.6% share
of the China market, according to research firm IDC in July, 2009. It
reported annual sales of $14.9 billion for the fiscal year ending 2008/2009
(ending March 31, 2009).

Lenovo markets its products directly to consumers, small to medium size

businesses, and large enterprises, as well as through online sales, company-
owned stores (in China only), chain retailers, and major technology
distributors and vendors.

On September 4, 2009, Ocean wide Holdings Group, a private investment

firm based in Beijing, bought 29% of Legend Holdings, the parent company
of Lenovo, for 2.76 billion Yuan ($404.1 million). Legend Holdings is the
asset management unit of the Chinese Academy of Sciences.

On November 27, 2009, Lenovo Group announced its intention to purchase

Lenovo Mobile Communication Technology. Lenovo Mobile now ranks
No.3 in China’s mobile handset market.
Company History
The following is a brief history of Lenovo:
2000: Legend shares peak at HK$14.75 on March 6.

2001: Dell takes the largest share of the worldwide PC market for the first time. Legend
sales reach a peak of HK$27.2 billion in the fiscal year ended March 2000 and decline to
HK$23.2 billion in the most recent fiscal year ended March 2004.

2003: The Company changes brand name to Lenovo from Legend to avoid infringement
of overseas brands. The company says it is preparing for expansion outside China, which
has overtaken Japan to become the world's second-largest PC market. The US remains
the world's largest PC market.

2004: The Company changes its name to Lenovo Group. Time Warner Inc, the world's
largest media company, on January 7 exits a US$50 million Internet venture in China
with Lenovo. China accounts for 99 percent of Lenovo's sales in fiscal year ended March
2004 and 98 percent in the previous 12-month period. Lenovo's first-quarter PC shipment
growth in China lags rivals such as Dell, according to market researcher IDC Corp.
Lenovo has a 10.9 percent share of the Asian market excluding Japan, compared with 7.3
percent for Dell. Lenovo's Asian shipments rise 19 percent, compared with 52 percent for
Dell. Lenovo's sales of services and hand-held electronics grow the fastest of all its
products in the most recent two fiscal years, each at an average rate that roughly
quadruples. Computer sales rise at an average rate of 9 percent in the same period.
Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to
become a computer technology equipment partner of the IOC. Lenovo decides to develop
the rural market by launching the "Yuanmeng" PC series designed for township
home users. Lenovo and IBM announce an agreement by which Lenovo will acquire
IBM’s Personal Computing Division, its global PC (desktop and notebook computer)
business. The acquisition forms a top-tier (third-largest) global PC leader.

2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making
it a new international IT competitor and the third-largest personal computer company in
the world. Lenovo announces the closing of a US$350 million strategic investment by
three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New
bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle
Park, N.C., to enable customers, business partners, solution providers and independent
software vendors to collaborate on new personal computing solutions. Lenovo introduces
the industry's thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet.
Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the
ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the
world's largest provider of biometric-enabled PCs by selling its one-millionth PC with an
integrated fingerprint reader. William J. Amelio is appointed as CEO and President of
Lenovo.

2006: Lenovo introduces the first dual-core ThinkPad notebook PCs, improving
productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly
supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs,
350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet i.lounges
for use by Olympic athletes and visitors. The first Lenovo-branded products outside of
China debut worldwide. Researchers, scientists and product design teams from around
the world combine Lenovo's heritage in enterprise and consumer PC technology to design
the Lenovo 3000 product line, which features new desktop and notebook models
specifically designed to provide worry-free computing to the small business market
segment.
Organizational Structure
It is the formal and informal framework of policies and rules, within which an
organization arranges its lines of authority and communications, and allocates rights and
duties. Organizational structure determines the manner and extent to which roles, power,
and responsibilities are delegated, controlled, and coordinated, and how information
flows between levels of management. This structure depends entirely on the
organization’s objective and the strategy chosen to achieve them. In a centralized
structure, the decision making power is concentrated in the top layer of the management
and tight control is exercised over departments and divisions. In a decentralized structure,
the decision making power is distributed and the departments and divisions have varying
degree of autonomy.

There are various functional departments like-

 HR Department
 Financial Department

 Marketing Department

 Transactional Department

 Relational Department

 Strategic Department

 Legal Department
Chart - Organizational Structure

Awards and Certifications:

1)"Client of the Year" in the Advertising Big Bang 08, organized by the Ad Club,
Bangalore.

2) MEDIA, the premier marketing trade publication in Asia has awarded Lenovo the
‘Communicator of the Year’ for this year’s Asia-Pacific PR Awards.
In particular, Lenovo’s sophisticated usage of social media and willingness to blur the
lines between conventional marketing and PR impressed the
Media editorial team this year.

3)In Digit’s cover story ‘Icons of Trust 2008 – which brands can you rely on?’:
Lenovo/IBM beat all other brands to bag the top spot on the Trust Index
Lenovo has been voted the most trusted brand in the Laptops category

4) Lenovo India wins three awards in the DQ Channels “Channel Choice Awards 2009”
a) Best Marketing Support- Silver award
b) Best Commercial Terms- Silver award
c) Best Online Support – Silver award
Vision and Mission

Lenovo strives to be a new world company that makes award-winning PCs for our
customers. We operate as a company uninhibited by walls or organizational structures
using world sourcing to harness the power of innovation across our global team. We
design innovative and exciting products and services to meet our customers’ needs.

SWOT analysis

STRENGTH WEAKNESS
 Unable to maintain sustained growth
 Lean cost structure
 Effective business model rate in all market segment
 Innovation leadership  Ignoring potential market
 Event sponsoring  Retaining of largest shares by
 Good marketing and distribution competitors
strategies  Poor global perception
 Strategic alliance with suppliers  High delivery time:3 weeks
 Quick responsiveness
OPPORTUNITY THREAT
 Increasing global demand for PC  Competition threat from both local
 Specialty shops proving one stop
and international markets
platform for distribution  Industry reaching maturity
 Government organizations  Software piracy and clone market
 Price war
increasing their spending on IT
 Emerging small firms
 Internet boom
 International competitors forming
 Increasing product portfolios/
alliances with local competitors.
product lines
 Netbooks

STRENGTH

1. Lean cost structure:

 The Group’s distinctive capability and expertise in managing costs and expenses
allows it to achieve high efficiency and has been one of the most important factors
for its success. This has become more critical under the current economic
conditions.

2. Effective business model:

Lenovo’s dual business model sets its products, services and business process
around customer need and market segmentation. This tightly integrated, end to-
end model allows the Group to quickly react to market dynamics and changes in
the back-end.

3. Innovation leadership:
Lenovo owns the greatest track record for innovation in the PC industry and
remains committed to innovation in its products and technology. While it needs to
be cost-effective, innovation can drive business and add value for customers.

4. Good marketing and distribution strategies:

Promotion and distribution at Lenovo is done through a network of channel
partners, retail stores, Teleweb, and Lenovo authorized dealers across the globe.
Lenovo also promotes environmental friendly ‘green’ products- ThinkPad X300
series is the first notebook to earn ‘Green Guard’ certification

5. Strategic alliance with suppliers:

Since Lenovo is horizontally integrated, it depends on the outsourced suppliers for
in time delivery of quality products; like many companies, keeping the customer
always in mind, time and quality.

6. Quick responsiveness:
The company has Best-in-Class Service. It has 24/7 Technical/Sales Support
centers across the globe.

7. Strong R&D: taken over from IBM:

Acquiring a reliable/well-known company such as IBM has helped boost its
products, especially ThinkPad and IdeaPad.

8. Event sponsoring:
 Lenovo was the TOP Sponsor of the Olympic Games and provided the technology
hardware for these Games in 2008. Nearly every aspect of the management of the
Games, from gathering and storing participant data to displaying the scores, was
dependent on hardware provided by Lenovo. It gave Lenovo an upper edge as
compared to other competitors.

OPPORTUNITY

1. Increasing global demand for PC:

2. Signing of memorandum of understanding: The company can develop their
market in US by signing a memorandum of understanding with the US
3. Specialty shops proving one stop platform for distribution
4. Government organizations increasing their spending on IT
5. Internet boom
6. Increasing product portfolios/product Lines
7. Net books
8. Converting manual orders to automotive orders

WEAKNESS

1. Unable to maintain sustained growth rate in all market segment: Lenovo is

heavily weighted showed significant slowdown in the second half of the fiscal
year under the economic crisis because it has not adequately addressed the
worldwide transaction segment outside China, in particular the consumer market.
2. Ignoring potential markets: The main focus of Lenovo is on the
established markets and they lack marketing strategies to enter into the untapped
markets.
3. Retaining of largest shares by competitors:
Lenovo’s competitors have larger number of shares in the market. HP (18.1%),
Dell (15.6)%, Acer(9.4)% give Lenovo a tough competition.
4. Poor global perception: In China, the customers perceive Lenovo as a
premium brand, but Lenovo has to reinforce this perception to its global brand.
5. High delivery time:
The order delivery time in Lenovo is around 3 weeks. This results in customers
waiting for a longer time.
THREAT
1. Competition threat from both local and international markets:
2. Industry reaching maturity:
3. Software piracy and clone market:
4. Price war
5. Emerging small firms
6. International competitors forming alliances with local competitors.

Lenovo Products
Notebooks

ThinkPad Notebooks

Track record of success, cost-savings

Industry-leading capabilities that dramatically increase productivity and
reduce cost.

Features:
  Business class technology
 Thin, light widescreen designs
 Extra long battery life
 Advanced mobile workstations

Idea Pad Notebooks

Engineered for a great user experience

Perfect for home/home office, with distinctive designs and features for
entertainment and multimedia.

Features:

 Home/office versatility
 11.1 to 17 inches widescreen displays
 Dolby home theatre audio
 Touch sensitive controls
 VeriFace face recognition securities
Lenovo 3000 Notebooks

Worry-free computing at a great value

A smart choice for business computing needs and budgets. Plus, new models
ideal for home/home office.

Features:

 Roomy, widescreen displays

 Stylish silver colored top covers
 Preloaded small business softwares
 LenovoCare tools, support and services
DESKTOPS

Think Centre Desktops

Award winning quality and innovation

Industry-leading capabilities that dramatically increase productivity and
reduce cost.

Features:

 Energy efficient desktops

 Security on a corporate level at a small business price
 Dual Independence Display (DID)
 The ThinkCentre Energy Calculator
Idea Centre Desktops

New PCs for home/home office

Loaded with features for everything from family finance to multimedia and entertainment.

Features:

 VeriFace face recognition

 Automatic brightness adjustment
 Antibacterial keyboard
 OneKey convenience

Workstations

ThinkCentre Workstations
Features:

 User centric design

 Cool and quiet
  ISV certifications
 Environment-friendly

Servers

Tower Servers
Features:

 Single and dual sockets

 Easier cooling
 Existing-network scalability
 Hard disk drive optimization

Rack Servers

Features:

 Single and dual sockets

 Space-optimized design
 Centralized cable management
 Centralized server management
Accessories and Upgrades
The Marketing Mix
(The 4 P's of Marketing)
Marketing decisions generally fall into the following four controllable
categories:

 Product
 Price
 Place (distribution)
 Promotion

The term "marketing mix" became popularized after Neil H. Borden

published his 1964 article, The Concept of the Marketing Mix. Borden began
using the term in his teaching in the late 1940's after James Culliton had
described the marketing manager as a "mixer of ingredients". The
ingredients in Borden's marketing mix included product planning, pricing,
branding, distribution channels, personal selling, advertising, promotions,
packaging, display, servicing, physical handling, and fact finding and
analysis. E. Jerome McCarthy later grouped these ingredients into the four
categories that today are known as the 4 P's of marketing, depicted below:

The Marketing Mix

These four P's are the parameters that the marketing manager can control,
subject to the internal and external constraints of the marketing environment.
The goal is to make decisions that center the four P's on the customers in the
target market in order to create perceived value and generate a positive
response.

Product Decisions

The term "product" refers to tangible, physical products as well as services.

Here are some examples of the decisions that lenovo had made:

 Brand name
 Functionality
 Styling
 Quality
 Safety
 Packaging
 Repairs and Support
  Warranty
 Accessories and services

Price Decisions

Some examples of pricing decisions made by Lenovo include:

 Pricing strategy (skim, penetration, etc.)

 Suggested retail price
 Volume discounts and wholesale pricing
 Cash and early payment discounts
 Seasonal pricing
 Bundling
 Price flexibility
 Price discrimination

Distribution (Place) Decisions

Distribution is about getting the products to the customer. Some examples of

distribution decisions include:

 Distribution channels
 Market coverage (inclusive, selective, or exclusive distribution)
 Specific channel members
 Inventory management
 Warehousing
 Distribution centers
 Order processing
 Transportation
Promotion Decisions

In the context of the marketing mix, promotion represents the various

aspects of marketing communication, that is, the communication of
information about the product with the goal of generating a positive
customer response. Lenovo had made this by:

 Promotional strategy (push, pull, etc.)

 Advertising through internets, T.V, newspapers, etc
 Personal selling & sales force
 Sales promotions
 Public relations & publicity