Lenovo: Countering the Dell Challenge

Case Analysis

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 Table of Contents

Section Page Number

Executive summary 3

Introduction 4

Situational Analysis 4

Marketing 9

SWOT 9

Competitive Analysis of Industry in China 14

Issues Facing the Firm and the Industry

Firm 16

Industry 19

Set of Recommendations Supporting Rationale 21

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Executive Summary

Lenovo is a firm that is faced with the decision of whether to implement a new strategy in

China or not. Lenovo needed to decide whether to shift its focus away from expanding its market

share to strengthening its existing business. This decision is due to the tough market environment

of China that has developed as a result of the entrance of the direct sales model. This model now

poses a major future threat because of its success in toppling every other major PC market in the

world. As a result of this model being so successful in every other country, Lenovo needs to take

precautionary measures to ensure that they don’t suffer the same fate. Lenovo needs to focus on

strengthening its existing business so that it retains its market leader position in the future.

Lenovo can do this by either continuing to implement series’ of reform that allowed them to

become more efficient or they can shift to a direct sales model themselves.

The recommendations of either continuing to implement series’ of reforms or shifting to

a direct sales model are based on that fact both of these recommendations have been successful

in the past. The series’ of reforms implemented by Lenovo allowed them to overcome problems

they were experiencing in order to achieve great results in the market. The direct sales model has

proven itself to be successful in every major PC market, so Lenovo implementing it would

prevent Dell from most likely taking over Lenovo’s position as market leader in China.

Lenovo is in a critical juncture in the market because they still have time to adjust its

business model in order to the necessary measures to make sure it remains profitable and

dominant in the future.

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Introduction

Lenovo is at a crossroads in their market. They have achieved high growth within the

People’s Republic of China (PRC), however with Dell and other foreign competitors gaining

popularity and market share, Lenovo is faced with two difficult questions. First, it is clear that

growth and profitability lie in a successful global brand, but how does Lenovo go about tapping

into foreign markets and become a global competitor. The second question is how can Lenovo

remain the market leader in the PRC? With these two clear goals in mind, this case analysis will

closely examine the different factors and variables that go into making successful business

decisions for this industry.

Situational Analysis: Internal Environment Analysis

Company History

The parent company of Lenovo was founded in 1984 in Beijing, China. The company,

New Technology Development Company (NTD), or Legend, was originally created to distribute

PC’s, printers, and computer components that had been imported from companies such as IMB,

HP, and AST.

While this was the focus of the businesses side of NTD, the research and development

side had other priorities. In 1985 NTD scientists created the “Legend Chinese Insertion Card”

(LCIC) which due to the low cost and high capabilities became a valuable product for NTD, and

by 1987 was the cash cow for NTD accounting for 45.6% of their profits.

Innovation of technology was always a priority for NTD. Due to their advancement they

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won several awards for science and technological advancement. In 1989, NTD took their in-

house PC to the World Fair in Germany. The product was a hit, and soon after NTD filed for

approval from the government to begin manufacturing their PC in the PRC. Gaining approval in

1990, NTD soon came out with their first PC, called the Legend 1 +1 which entered the market

at RMB 3,000, which was almost a 1/3 of the cost of leading competitors.

Even with the low price, NTD struggled for the first couple of years with sales. By 1992,

NTD was only selling 17,000 units. 1992 brought other changes into the market, with the MOU

allowing foreign competitors into the local markets. Despite struggling sales, NTD decided to

opt out of joint ventures with foreign companies, unlike several of its local competitors, and

decided to increase capabilities by building a manufacturing base in China, and by building a

research and development center in Silicon Valley in California. This choice allowed for growth

in 1994, at which time NTD became the leading local provider of PC’s and the third ranked PC

provider overall.

Throughout the mid 1990’s the PRC began to experience a wave of nationalism. This

trend allowed for NTD to continue to grow and gain recognition by both consumers and the

government, making it onto the Top 10 of China’s Most Valuable Brands. Despite its growth

NTD was determined to stay one step ahead of the competition. So, in 1997, NTD bought three

computer-technology related companies, and invested in “mass manufacturing” capabilities, all

which significantly increased efficiency for operations and distributions.

Unlike Dell, Legend worked as a mass-manufacturing operator by: building low cost

PC’s, forecasting demand and holding inventory, and using distributors throughout China to sell

goods. This held to a more traditional way of business in the PRC, where some consumers were

reluctant to buy online or with credit cards and preferred retail locations and hands-on

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experiences before purchasing.

Starting in the late 1990’s, NTD realized the customer preferences where changing and

began to add customizable options to their products. Much of this was done through strategic

alliances. One such alliance was with IBM, which allowed NTD to not only pre-install IBM

software on their computers, but sell IBM software in retail locations as well. These types of

value-added materials were exactly what the customers were looking for, and lead to the one

millionth computer being sold in 1998.

At this time, the structure of the company had changed significantly. Instead of being a

company based around distribution of foreign products, NTD was now successful at: creating

and manufacturing their Legend PCs, manufacturing printed circuit boards, focusing and

increasing research and development, manufacturing motherboards, and through strategic

alliances being able to distribute foreign brand items. These changes not only showed the

success of the company, but showed a clear business path that the company had established and

been able to maintain.

By the end of 1998, NTD was the leading local seller of PC’s in the PRC. They still

ranked third overall, and began several new initiatives to continue increasing sales. One such

initiative was the creation of the “1+1 Home PC Specialty Shop” designed to provide consumers

with a one-stop shop for PC services.

With the internet boom in the PRC occurring in 1999, NTD realized that there was a

significant opportunity to create a computer that easily allowed consumers to connect to the

internet. NTD quickly came out with the “Legend Conet PC”. With specially installed features

and after market products, this Internet solution PC began to dominate the Chinese market. The

introduction of this PC allowed for NTD to be ranked first overall in the Asia-Pacific region and

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dramatically increase their market share by the end of 1999.

The success of the “Legend Conet PC” continued into 200 with sales reaching 700,000,

40% more than originally forecasted by NTD. To maintain the success of this product, NTD

continued to release new software and products as well as new updated models of the PC.

Customers responded well to these adaptations in customer preferences and by the end of 2000,

NTD had reached 30% of the market share in the PRC. Even Business Week noted NTD’s

success by naming them 8th in a ranking of the world’s 100 best IT companies.

2003 brought several competitive pressures to NTD’s attention. While they had been the

leading seller of PC’s in the Asia-Pacific region for 7 years, the foreign companies were begging

for an opportunity to steak a claim in the Chinese market. No longer protected by government

trade restrictions, foreign companies were beginning to grow and take market share in the PRC.

Prices of competitors were low, and NTD began to struggle with being undercut by competitors

pricing. Local companies were also beginning to produce low cost items, which were hard for

NTD to compete with in terms of price.

Dell, Toshiba, HP, and other foreign companies were beginning to gain popularity as

well. While Dell focused on businesses and corporations, their ability to customize and quickly

deliver PCs at low prices became a potential threat if they were ever going to change their focus

to other consumers. While Dell still faced challenges, such as resistance from consumers to pay

with credit cards and make purchases online, they were beginning to become a potential threat to

NTD.

NTD decided one way to head off potential competition was through successful

advertising campaigns. They selected famous spokespeople to do advertisements and increased

their advertising budget to head off potential threats. NTD’s competitors were quick to begin to

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market their products as well, some with a budget twice what NTD had spent on their

advertisements.

2003 also brought several changes in strategy for NTD. The major change was the

beginnings of global expansion into foreign markets. NTD proceeded to adopt an “English”

name they branded as “Lenovo”, calling the English name for their company the Lenovo Group

Limited. To compete internationally, NTD began to strategically partner with global

organizations, such as the International Olympic Committee. Being the official provider for such

organizations allows for global recognition and an entrance point into foreign markets. At this

point, NTD reached a crossroads with their global expansion plan. They realized that foreign

customers had different preferences than those in the PRC, and they began to wonder how they

could successfully compete in foreign markets.

In the PRC, NTD began to diversify their product line to capture new markets and help

compensate for the slowing growth of the PC market. Entering into markets such as mobile

handsets and technology services NTD hoped to position itself to sustain any market loss in the

PC industry.

By the end of 2003 NTD was struggling with sustaining its reign as market leader. They

began to look at entrance into foreign markets as a source of growth, but still needed a clear and

successful international strategy and marketing plan. Also, NTD was struggling to grow and

sustain its market share in the PRC. With competition being fierce, and the market maturing,

NTD was forced to look at long-term options for growth if they hoped to survive within the PRC

market.

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Marketing

Marketing has been a key component of NTD’s businesses strategy. NTD has had

success in advertising because of two reasons, having famous stars in their advertisements and

having the ability to capitalize on the trend of nationalism. Despite these efforts, NTD still

struggled to maintain advertising as a competitive advantage, as competitors entered the market

and the company considered going global. The RMB55.09 that they spend on advertising in the

PRC in 2002 was only a fraction of the amount that Dell spent (approximately. RMB100.70). As

competitors spent more on advertising and the wave of nationalism ended in the PRC, NTD was

beginning to loose its competitive edge in marketing.

As NTD began to think about global markets, they realized that a key to their success

would be advertising in those markets. NTD began to struggle with finding consumer

preferences and successful advertising campaigns to market their products. NTD increased

advertising expenditures as well as increased their research and development expenditures

significantly to better allow them to be competitive on a worldwide playing field.

SWOT

Strengths

 Largest IT corporation in the People’s Republic of China

 Largest market share in the PRC along with being the leading company in the

Asia –Pacific

 Innovation and research and development are a priority, which allows for greater

advancement and often in reduction of the cost of goods sold

 Over 90% of the Group’s sales came from the mainland market, and they have a

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 solid lead over other competitors in the PRC

 Good distribution through acquisitions and a priority on efficiency in

manufacturing

 Marketing is a priority and through successful ad campaigns featuring celebrities,

they have been successful at marketing in the PRC

 Understanding of customers’ needs in the PRC is a huge strength for NTD. They

adapt well to their customer needs and often see a need before or right as it arises,

and are often able to gain first mover advantage for new products and

technologies.

Weaknesses

 Not a global player, solely dependent on domestic market share, which as the

market matures and competitors continue to enter the market, their position may

be threatened as they have few other avenues to choose from

 Not able to diversify on its brand presence in China by entering other product

segments such as internet business (termination of joint venture with AOL Time

Warner).

 Distribution limited slightly by having inventory and holding costs, along with the

lack of ability to specifically customize product for each individual customer

 Over 90% of sales come from China’s mainland market – while this is currently a

strength, if the market continues to slow down, and they are unable to expand

globally or into other markets this could be a significant weakness.

 Lack of spending on marketing could allow for competitors to gain market share

and consumers to shift their brand loyalty

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  Not focused on businesses, but on everyday consumers which could be a problem

as competitors get businesses involved and businesses continue to expand in the

PRC, they could miss significant opportunities in that market

 Hesitation and lack of clear vision for tapping into and expanding into foreign

markets

Opportunities

 Tapping into international markets, as well as exploring alternate product

diversification strategies in the local market could be huge for NTD. As the

world continues to become more flat as globalization increases, and struggling

economics begin to develop, a successful global brand could be the life-blood of

the IT industry.

 Strong gains in the fast growing market-China (PC shipments in the Asia-Pacific

region (excluding Japan) had grown by nearly 20% in the second quarter of 2004

 Forecast that China would equal if not exceed the US as a consumption market by

2010 in terms of PCs

 Establish a more customer-oriented market system, especially if they plan to go

global they have a lot of opportunity to reach their customers and create a product

that is specifically tailored to their needs, much as they have done in the PRC

 Start to implement an integrated distribution strategy combining retail, channel

distribution and direct-to-customer models.

 Provide funding and support to the 2008 Beijing Olympic Games and over 200

national Olympic committees around the world, which could increase their global

presence and create a stepping stone into the global market

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  Ability to find new ways to reduce inventory and holding costs. They may be

able to create a system similar to that of Dell which would allow them to compete

more fiercely as the market matures in the PRC and as NTD plans to expand

globally.

 Ability to continue to have ground breaking research and development, allowing

for new product development and technological improvement which could set

them apart as a leader in both the PRC and globally

 Find new markets within technology to expand into. Diversifying their product

line will help with technology, customer satisfaction, and allow for additional

sources of growth and revenue.

Threats

 Increasing competitive pressure from Dell, IBM, Toshiba and HP. Also, as local

competitors arise there could be a lot of pressure for NTD in the future.

 Price wars between competitors could be a challenge for NTD, especially if the

market becomes heavily price sensitive, and if NTD is unable to price their

products at a competitive level

 Struggling to maintain s stronghold in corporate sales to Chinese government

ministries and schools. As Dell targets these markets, NTD could loose a lot of

businesses and loyal customers as they are exposed to and switch to competitors

products

 Chinese Communist Party’s administrative departments were turning to buy from

Dell, as well as government regulation of local companies. If the government

changes its policies, or restricts NTD from going global, there could be a lot of

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 struggle for NTD to maintain its competitive edge

 Uncharted waters by venturing internationally, foreign markets are quite different

than China and NTD could have difficulty matching customer needs and

obtaining the right advertising and positioning strategy

 Changing customer preferences in China could be a threat if other companies

become first movers into those markets, or NTD is unable to meet those needs in

a quick and cost effective way

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Competitive analysis of industry in China

The competitive landscape of China has evolved from one that favors local companies to

a more level competitive field for foreign companies. This evolution caused local companies

such as Lenovo to have their home field advantage be threatened by foreign competitors looking

to capitalize on this change in the Chinese PC market. In the early years, local companies such as

Lenovo had benefited from Chinese government trade restrictions, including quotas, tariffs,

value added taxes on imports, restrictions on foreign companies’ access to distribution, and

restrictions on ownership and investment. However, Chinese government’s computer policy

shifted in the early 1980’s from an isolationist approach aimed at achieving technological

independence to adopting a more pragmatic strategy, which allowed foreign companies market

access in return for them transferring technology. This caused foreign companies to jump at the

chance of capturing market share in a very lucrative Chinese market.

By 2004, the industry consisted of a mix of local PC makers, joint ventures between local

and foreign companies and wholly owned international players. Local PC makers were promoted

by the government, however government’s policy towards domestic computer companies was

large indirect because government did not directly intervene or manage these firms. Despite not

directly intervening for local PC makers in the market, government still helped these companies

by supplying them with access to technologies developed by the state R& D institutions.

Companies like Great Wall, Founder electronics, and Legend’s benefited from this form of

governmental assistance. Great Wall benefited by having its initial PC developed inside the

research institutions of the Ministry of Technology, Founder electronics was associated with

Beijing University, and Legend’s commercialized technologies were developed in the

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laboratories of the Chinese Academy of Sciences. However, despite this form of governmental

assistance, Founder electronics is the only company out of these three that ranks in the top three

in the market in terms of market share with 6.2%, while these other three companies rank below

fourth place. Joint ventures between local and foreign companies began as a result of the direct

import of computers being discouraged by the Chinese government through the imposition of

high tariffs and taxes. Multinational companies such as Hewlett-Packard, Toshiba and Compaq

formed joint ventures with local companies to market their own products as well as gain access

to local distribution channels. In turn, they provided technology and know-how to local

companies. Wholly owned international companies such as Dell and IBM began to make their

presence felt in the market. Despite Lenovo retaining its position as the market leader,

commanding more than a quarter of the market, statistics released by Gartner indicated that Dell,

with a market share of 6.8% in 2003, ranked number two in China. IBM ranked fourth in the

market with a market share of 4.6%. Dell’s presence in the market marked a turnaround for

foreign PC companies in China. According to Bryan Ma of IDC, the small share of market held

by these foreign rivals represented a problem that could escalate into a bigger one. He stated that

“for Lenovo, it’s a mosquito bite that could eventually turn into a leg amputation”.

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Issues facing firm and its industry

Several issues were facing the firm and the Chinese PC industry as a whole. Some of the

issues facing the firm were increased competitive pressure from foreign companies, international

expansion, and model reinvention. Issues facing the industry included evolving distribution

channels, growth opportunities, and a maturing market.

Firm

The issues facing Lenovo were issues that had a direct affect on Lenovo’s long term

success in China as well as internationally. The way Lenovo decided to handle these issues is

very important because the results of their decisions could have beneficial or detrimental results

for the company.

Increased competitive pressure came from both foreign companies such as Dell, IBM,

Toshiba, and HP as well as local companies such as Founder, this increased competition resulted

in Lenovo taking large hits, especially at the hands of Dell. In order to combat this increased

competitive pressure from these companies, Lenovo had to engage in a series of price wars to

retain the low end of the consumer segment. The increased competition also made it tough for

Lenovo to maintain its stronghold in corporate sales to Chinese government ministries and

schools. It seemed that the Chinese Communist Party’s administrative departments were also

turning to buy from Dell. Local companies such as Founder contributed to this increased

competitive pressure for Lenovo. These smaller local firms were growing fast, selling at prices

that Lenovo had difficulty matching. Tong Fang, a computer maker started by Quinghua

University, launched a series of low-cost PCs and was aggressively pursuing educational

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institutions. Haier was also establishing a strong hold in the northeast province of Shandong.

However, despite this increased competitive pressure, Lenovo was still able to hold onto its

market leadership position. It signified that Lenovo would no longer be immune to the computer

industry’s cut-throat competition and changing cycles of demand.

International expansion is an issue that faces the firm because Lenovo strives to become a

global player. Lenovo envisions itself tapping into international markets as a means of meeting

its projected target of becoming a member of the Fortune 500 companies by 2010. Lenovo took

the necessary steps of international expansion, in April 2003, by adopted a new logo that

incorporated the brand name “Lenovo”. The firm changed their English brand name in order to

have a brand name that can be used unrestrictedly in markets worldwide, this is because the

brand name “Legend” would not work for global expansion since it had already been registered

by others in many countries. Shortly after changing its name, Lenovo began its efforts of creating

brand awareness among consumers by joining the International Olympic Committee’s global

sponsorship program, called the Olympic Partner Program. Joining this program was a strategic

move to try to invoke new passion and energy into its brand. This move was also significant

because it marked the first time a Chinese enterprise had joined the IOC’s top-level worldwide

marketing program. Through this program, Lenovo would be able to provide computing

technology equipment, funding, and technological support to the 2006 Turin Olympic Winter

Games, the 2008 Beijing Olympic Games and over 200 national Olympic committees around the

world. Despite these efforts, Lenovo’s international expansion success was speculative for a

couple of reasons. The first reason for the speculation was because of the fact that Lenovo was

entering uncharted waters by expanding internationally, its strengths of good distribution and

marketing activities lied in China. How Lenovo would be able to cater to the needs of foreign

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markets was the second reason for speculation, this is because Lenovo would not be able to

simply transfer its products sold in Mainland China into overseas markets.

Model reinvention was another issue facing Lenovo because it needed to develop a

business model that would not only combat Dell’s direct selling model but would also take

advantage of its traditional strengths. The need for a new model was evident by the end of 2003,

as a result of the problems Lenovo was experiencing. Lenovo had a falling stock price, coupled

with a decline in PC shipments, resulted in management launching a series of reforms. These

reforms included direct sales via the internet, a more efficient management of inventory and a

renewed focus on corporate sales. Lenovo also sought out to no longer target larger cities in

China due to signs of saturation in these areas but to target medium and small cities in China as

well. The results of their reforms were evident in August 2004, when the firm experienced a

turnover of HK$5.878 billion for the first quarter of 2004, representing an increase of 10% as

compared with the same period in the previous year. Serving as a testament to the reform

implemented to adjust with the markets changes and maintain its position as market leader.

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Industry

The issues facing the industry as a whole are evolving distribution channels, growth

opportunities, and a maturing market. The way companies within this industry handle these

issues will play a major role in determining their long term success.

Evolving distribution channels are said to be common in changing market environments

and the Chinese market is one that has experienced a great deal of change since its liberalization.

Most of the companies in this market utilized a traditional distribution system, consisting

primarily of dealers, distributors and retailers. However, Dell’s initiation of the direct-model,

allowed customers to place their orders over the internet or by phone. This model was a lot more

efficient than the commonly used traditional distribution system because it eliminated

middlemen by having the consumer purchase the PC from the maker directly. This model did not

come without consumer reluctance because Chinese consumers were not used to purchasing

high-priced items without seeing the product. In order to cater to this lower-end consumer

segment that was having difficulty adjusting to this process, Dell conducted hands on

promotional events in shopping malls and advertising through newspapers and direct mail, so

that these lower-end consumers could become better acclimated with the direct model process.

Dell’s direct model had to also deal with the problem of only a small percentage of Chinese

consumers using credit cards as well as being reluctant of making payments online. Dell

addressed this situation by routing payments through banks, and by 2004 Dell had successfully

gained a foothold into the fast expanding and maturing Chinese market. Dell’s success did not go

without notice among the other competitors within this industry. Lenovo implemented a series of

strategic initiatives in 2004 in response to Dell’s efforts. These strategic initiatives focused on

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establishing a more customer-oriented market system. Lenovo implemented an extensive sales

network with 18 sales regions comprising of 108 grids and more than 4,000 retail shops across

the country, allowing the firm to penetrate deep within township areas. During this time, Lenovo

also began to implement an integrated distribution strategy, combining retail, channel

distribution and direct-to-customer models, in an attempt to broadly cover its different consumer

groups.

The industry has a whole has tremendous growth potential in terms of consumers and

product offerings. In terms of consumers, a press release issued in September 2003 by John

Antone, general manager of Intel Asia-Pacific region, forecasted that China would equal if not

exceed the U.S. as a consumption market by 2010. Growth in terms of PC product offerings was

also expected as a result of analysts predicting growth in both the desktop and laptop PC

markets. The desktop PC market was predicted that this market would grow by about 10% in

2004, while the laptop PC market was expected to maintain an annual growth rate of 30% until

2006, especially since laptops only accounted for 13% of the PC market, whereas in European

and North American markets they account for 50%. These growth expectations loom great

possibilities for the firm or firms that can be able to capitalize on them.

The Chinese PC market is becoming a maturing market. The early stage of this market

was categorized as a slowly maturing market because there was great demand for low-cost

machines. However, over time Chinese consumers became increasingly sophisticated. A

maturing PC market comes with a certain threat evident in other countries’ PC market. The threat

is the direct sales model taking over the Chinese PC market the same way it has every other

major PC market in the world. This is a major issue because the threat associated with it could

cost Chinese PC companies their market share.

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Set of recommendations supporting rationale

Lenovo should rethink its strategy in China and shift its focus away from expanding its

market share to consolidating its existing business. With the Chinese PC market becoming a

commodity business like most other countries in the world, as well as it facing the threat of the

direct sales model playing itself out in this market the same way it had in every other major PC

market in the world. Now is the time for Lenovo to adjust its business model while it still

maintains its market leader position, so that it can remain dominant and profitable in China. It

can do this by continuing to implement reform in its business model or converting to a direct

sales model similar to Dell’s.

Lenovo’s reform implementation was successful in reversing problems they were

experiencing at the end of 2003. Problems of a falling stock price and a decline in PC shipments,

made reform necessary. As a result, Lenovo began to direct sales via the internet, manage

inventory more efficiently, and instill a renewed focus on corporate sales. This series of reform

resulted in positive results for the firm, and its results are a basis for implementing further

reform. The company should seek out other ways to increase efficiency such as in marketing, for

example. The company could implement more target segment specific advertising through

different offline and online marketing channels as well as investing as much or more than their

rival competitor Dell in advertising. Investing as much or more than competitors can help

Lenovo continue to thwart off their attempts for assuming the market leader position in China.

For example, in the home PC segment, Dell invested an estimated RMB of 100.70 million on its

advertising budget while Lenovo only invested RMB 55.09 million.

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 Converting to a direct sales model similar to Dell’s is a measure Lenovo could implement

in order to not lose its dominance in China. The emerging pattern of competition is easily

predictable because the direct sales model has played itself out the same way in most other PC

markets, so it is only a matter of time until this trend plays itself the same way in China. If

Lenovo were to implement a direct sales model they would possibly prevent Dell from

eventually becoming the market leader in this industry, allowing them to retain their market

leader position. There are two major benefits to implementing a direct sales model are cases of

no added expenses or credit risk, and razor-thin inventories. No added expenses or credit risk is a

benefit because with a direct sales model a company like Dell gets paid before it builds the PC

allowing them to then ship it directly to the customer, in many instances. The other major benefit

of this sales model is its ability to allow a company to operate on razor-thin inventories. Dell

operates on a six days’ supply as supposed to its competitors who operate on a 30-40 days’ worth

of inventory. Implementing a direct sales model will also be more beneficial in the future for

Lenovo because of the Chinese market maturing. The problems Dell has had getting less

sophisticated Chinese consumers to get acclimated with the direct sales model will most likely

not persist because these consumers will eventually become more sophisticated, resulting in

them no longer having the problems they once had with the model. When this happens, the PC

maker that has implemented this model really positions itself to gain significant market share

because they will capture not only the already sophisticated consumer segment but the once less

sophisticated segment as well.

In conclusion, Lenovo needs to shift its focus towards strengthening its position in this

current market as supposed to expanding its market share. Lenovo is at a critical juncture in this

market because Dell’s presence in China is beginning to show the effects of the implementation

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of the direct sales model, which could result in the Chinese market becoming like every other

major PC market in the world that has succumb to it. Lenovo continuing to implement series’ of

reform or converting to a direct sales model can help them maintain their dominance as well as

remain profitable in the long run.

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