North South University

Course- Strategic Management (MGT489)

Section- 06, Summer 2017
Strategic Planning for LENOVO
Submitted To,
Md. Hannan Miah (MHM)
Senior Lecturer,
Department of Management,
North South University.
Submitted By,
Group No. 2
 Joly Yasmin Lina 1230331030
 Md Niaz Hassan 1220132030
 Tousifur Rahaman Anik 1230588630
 Rakin Muhtadee Shihab 1230214630
 Md. Nashif Shahriar Rakin 1230282030
 Md. Mahmudul Haque 1310005630
 Mohammad Ibrahim Patwary 1310261030
 Farhedul Islam Tuhin 1330033030
 Executive Summary

This report highlights Lenovo‟s ins and outs of the recent years. Lenovo is currently one

of the biggest technological company in the world. In our report we focused on the current

market trend to set strategies for Lenovo. We discussed the problems they are facing in the

industry and also the strategies currently adopting by them. This report represents the strategies it

can adopt from year 2017-2022. We recommended the corporate level, business level, functional

level and technological level strategies they can use for the betterment of the company. Also in

the report we described how they can implement those strategies successfully to become the

number one technology company in the world.

Table of Contents
Executive Summary....................................................................................................................................... 1
History, Development, and Growth of Lenovo ............................................................................................. 5
Lenovo's Internal Environment, Resources, and Capabilities ....................................................................... 5
Resources .................................................................................................................................................. 6
Tangible ................................................................................................................................................. 6
Intangible .............................................................................................................................................. 6
Capabilities ................................................................................................................................................ 6
Organizational Culture .......................................................................................................................... 6
Organizational Structure ....................................................................................................................... 6
Recruiting Process ................................................................................................................................. 7
Controlling Process ............................................................................................................................... 7
Industry Analysis ........................................................................................................................................... 7
The industry Lenovo Belongs to................................................................................................................ 7
Competitive Forces Analysis ..................................................................................................................... 7
Threat of new entrants ......................................................................................................................... 7
Bargaining Power of Suppliers .............................................................................................................. 7
Bargaining Power of Buyers .................................................................................................................. 7
Rivalry among Existing Firms ................................................................................................................ 8
Threat of substitute and complements ................................................................................................ 8
Industry Life Cycle Analysis ....................................................................................................................... 8
Macro Environment Analysis .................................................................................................................... 8
Political .................................................................................................................................................. 8
Economical ............................................................................................................................................ 9
Social ..................................................................................................................................................... 9
Technological ........................................................................................................................................ 9
Environmental ..................................................................................................................................... 10
Legal .................................................................................................................................................... 10
SWOT Analysis............................................................................................................................................. 10
Strength .................................................................................................................................................. 10
Weakness ................................................................................................................................................ 11
Opportunities .......................................................................................................................................... 11
Threats .................................................................................................................................................... 11
Lenovo's Business ....................................................................................................................................... 12
Mission .................................................................................................................................................... 12
Personal Computers ............................................................................................................................ 12
Convergence ....................................................................................................................................... 12
Culture................................................................................................................................................. 12
Vision of Lenovo ...................................................................................................................................... 12
Lenovo's Distinctive Competencies ............................................................................................................ 13
Advantages from the Resources ............................................................................................................. 13
Advantages from the Capabilities ........................................................................................................... 13
Competitor Analysis .................................................................................................................................... 14
Brand Image, Brand Identity and Brand Integrity of the competitors.................................................... 15
Financial Analysis ........................................................................................................................................ 15
Current ratio ........................................................................................................................................... 15
Net Profit................................................................................................................................................. 16
Return on investment capital ................................................................................................................. 16
Debt to equity ......................................................................................................................................... 17
Value Chain Analysis ................................................................................................................................... 17
Primary Activities .................................................................................................................................... 17
Research and Development ................................................................................................................ 17
Production........................................................................................................................................... 18
Marketing and Sales............................................................................................................................ 18
After Sales service ............................................................................................................................... 18
Support Activities .................................................................................................................................... 19
Infrastructure ...................................................................................................................................... 19
Human Resource Management .......................................................................................................... 19
Materials Management ...................................................................................................................... 19
Technology .......................................................................................................................................... 20
Lenovo's Competitive Advantages .............................................................................................................. 20
Business Model ........................................................................................................................................... 21
Recommendations to improve profitability ................................................................................................ 23
Taking advantage from Strength and opportunities ................................................................................ 24
Overcoming weaknesses and threats....................................................................................................... 25
Corporate Strategies for Lenovo (2017-2022) ............................................................................................ 25
Business Level Strategy (2017-2022) ......................................................................................................... 27
Mass Differentiation ............................................................................................................................... 28
Generic Business level Strategy .............................................................................................................. 28
Functional level strategy (2017–2022) ....................................................................................................... 29
Research & Development Sector ............................................................................................................ 29
Production Department .......................................................................................................................... 29
Supply Chain Management ..................................................................................................................... 30
Human Resource Management .............................................................................................................. 30
Organizational Culture and Motivation .................................................................................................. 30
Marketing & Sales Department .............................................................................................................. 31
Customer Relationship Management ..................................................................................................... 31
Lenovo’s technological strategies (2017-2022) .......................................................................................... 31
Well integrated information technology ................................................................................................ 31
Manual for Service .................................................................................................................................. 32
Information Management System for Distributors ................................................................................ 32
Format War ............................................................................................................................................. 32
Revised Business Model .............................................................................................................................. 33
The company’s governance to support strategies...................................................................................... 34
Recommend a strategic .............................................................................................................................. 34
The existing company culture ..................................................................................................................... 34
Recommend Global Strategies.................................................................................................................... 35
Entry mode.............................................................................................................................................. 35
Ethical value proposition ............................................................................................................................ 36
Lenovo’s value proposition ..................................................................................................................... 36
Bibliography ................................................................................................................................................ 38
History, Development, and Growth of Lenovo

Under the name of Legend Group Lenovo first established their business in 1984. Its Chairman

Li Chuanzhi started the business New Technology Developer Inc. with 10 other business partner.

In 2003 Lenovo was launched under the brand Legend for further expansion. In the year 2004,

Lenovo acquired IBM‟s personal computer division by an agreement(Wang, Chu, Chen, & Kuo,

2005). Levono sponsored 2006 Winter Olympic which was held at Torino in Italy by giving

350servers, 1000 notebooks and 5000pcs desktop. This business is a multinational personal

technological company worth of $39 billion serving in more than 160 countries. They are one of

the largest PC Company(Lin, Manolis, Srinivasan, Sun, & Yang, 2008). They are committed to

build exceptional and coordinate PCs, mobile, internet devices, laptops, tablets etc. Product

innovation, strong global supply chain and effective strategy is their foundation. Its product lines

included Thinkpad for premium performance, Ideapad for diverse style and signature

performance ,and Yoga with awesome models. They also produce tablets smartphones, server

workstations and mobile internet devices. Today, becoming the market leader in a global scale is

Lenovo‟s target(Dozier, 2015).

Lenovo's Internal Environment, Resources, and Capabilities

The Internal Environment of Lenovo is supportive to innovation in every sector. To encourage

creativity and problem solving, is they follow a geocentric approach worldwide.

Resources

Tangible

a) Financial Strength: Lenovo has a strong financial plot. From 2010 to 2015 they had

consistency in profit margin growth .But in 2016 they it fall a bit. (Lenovo, Annual Report,

2015-2016)

b) Physical Resources: Lenovo Group has several regional headquarters and corporate offices all

over the world and also service center.

c) Human Resource: Lenovo has a huge number of skilled human work force in their

manufacture division, distribution channels, Service centers and Corporate headquarter

Intangible

Brand Reputation: Lenovo has a strong brand name and well reputed market position in this

industry.

Capabilities

Organizational Culture

The organizational culture in Lenovo is encouraging to innovation and youthful

entrepreneurships. (Bao, 2016)

Organizational Structure

The structure is flat and employees can share their ideas with the department heads and also has

the lowest management cost in the industry.(Xi & White, 2004)

Recruiting Process

Lenovo always try to hire people of who are creative and work in implication of new ideas and

can cope up with the trend. (Liu, 2005)

Controlling Process

Lenovo follows a geocentric way of management and this helps them to work in better way and

get rid of cultural problems. (Gao, 2015)

Industry Analysis

The industry Lenovo Belongs to

Lenovo is in the Computer Hardware and Electronics industry as they are making personal

computers, laptops, PC accessories, and mobile phones.

Competitive Forces Analysis

Threat of new entrants: It is very low in the personal computer industry as the industry is in

the maturity and any new comer will have to spend so much on R&D and employment that

the products will have a very high price. (Rothaermel, 2014).

Bargaining Power of Suppliers: Suppliers of PC industry are categorized in hardware supplier,

software supplier and service suppliers, so the firms can easily switch between the suppliers.

So, the bargaining power of the suppliers is average (Dobbs, 2014).

Bargaining Power of Buyers: As the customers have more options to look for, the bargaining

power buyers possess in this industry is really high.

 Rivalry among Existing Firms: The top manufacturers have competition in producing at a low

cost with best quality. Firms may compete in terms of innovation, distribution channel or

services, but price competition is relatively high, and it will remain the same in future as

well. So, the threat to industry rivalry is high.

Threat of substitute and complements: It may be difficult for new entrants to affect but for

the substitute products, it is very easy, as products like Smartphone, Tablet etc are more

flexible and also contains most of the necessary features. So in future it can happen that

either these two industries may merge together or drastically affect each other. Forecast says

about 87% sales in 2017 will be of smart phones and tablets. So threats of substitutes in this

industry is strong. (www.guardian.com, 2017).

Industry Life Cycle Analysis

The Computer Hardware industry is now in a maturity stage as the growth has stopped, firms

working in this sectors have a certain amount of market share, everyone is trying to differentiate

through pricing, the competition is really high, to get more market share one has to take market

share of some other company. Lenovo started its journey on 1984 in Beijing, later it incorporated

in Hong Kong in 1988.In 2005 Lenovo bought the IBM‟s personal computer business. Soon

Lenovo introduced their laptop in the market. So Lenovo is at the maturity from 2008 and still its

holding its high position. (History, 2013)

Macro Environment Analysis

Political

Lenovo has its operations and manufacturing plant in several countries and its operations and

manufacturing plants are affected by those countries' political situation. Recently Lenovo
computers faced some difficulties in China. They are accused to spying on government

officials.(Nash, 2016). On the other hand, they have also got political advantages in India as

Tamil Nadu laptop schemes helped Lenovo to become number 1 laptop brand in India.(Reporter,

2015) They maintains a good relationship with every government in order to run their operations

smoothly. If any employee of Lenovo‟s participate in politics that would be on their personal

behalf not on Lenovo‟s behalf. That‟s how they keep their political environment clean.(Lenovo,

2017)

Economical

Stable Economic condition is very important for Lenovo. As it has its operation in several

countries. Economic condition of those countries are very much affects Lenovo‟s operation.

Slow economic condition in china and the great opportunity in India has created a healthy profit

for Lenovo. Due to bad economic condition in China the sales are declining. But their sales in

other countries improved which made them number 1 pc seller in India and so on. (Sen, 2016)

Social

Lenovo considers themselves as global company and don‟t want to keep themselves in local

based company from China. But people perception toward technology is changing as they are

more using Smartphone, Tablets more than PC and laptop.

Technological

Lenovo is one of the leading tech giant in the world. They are continuously developing their

products by R&D and offering various kind of products and gaining competitive advantage over

other companies (Lenovo Group Ltd in Consumer Electronics (World). On the other hand
technological advancement of many operating countries like China, India and so on made them

top brand in laptop industry.

Environmental

Lenovo is one of the most environmental friendly company. They have ISO 14001:2015 certified

environment management system (EMS). They have standard water and waste management

system, continuously fighting for climate change, packaging are recyclable and eco-friendly, and

have environmental partnership with several environmental organizations. (Lenovo.com, n.d.)

Legal

Lenovo is affected by different countries law as it is an international brand and have to follow

every countries' laws where they are operating. They manage every legal issue a customer can

face through Lenovo Line, and runs it through strict code of conduct and legal management

system. (Lenovo, Lenovo Code of Conduct, 2017)

SWOT Analysis

Strength

 Good Quality products and also the best service.(Dozier, 2015)

 Brand Image: They are established in the world market and has well recognition and

good reputation all over the world.(Wang, Chu, Chen, & Kuo, 2005)

 Their most powerful strength is their high market share.(Dozier, 2015)

 Low cost and diversification of Products. (Dozier, 2015)

 Strong relationship with customers. (Wang, Chu, Chen, & Kuo, 2005)
Weakness

 Low brand perception in developed countries as it is a Chinese brand.(Dozier, 2015)

 Low rate of differentiation. (Dozier, 2015)

Opportunities

 Expansion Internationally: Lenovo has captured a huge market in ASIA region, and also

they have that opportunity to grab the market of Europe and USA also because, Lenovo

use the Protect and attack strategy and by this strategy they can leverage into the

international market. So in this way they can capture the Europe & USA market. Such

that they have a large customer base on the market like India, their local maker and also

over south ASIA region.(Dozier, 2015)

 Tablet Markets Growth: Lenovo has one of the highest selling rate of tablets over their

captured market, and also their demand is growing in the market. They have currently

achieved the position of 4th biggest seller. They can grab more market share of tablets by

offering better quality.(Dozier, 2015)

 Lenovo can sustain their growth through obtaining more plants through acquisition of

firms holding because it supports their current strategy of protect and attack.(Wang, Chu,

Chen, & Kuo, 2005)

Threats

 Cheaper products are arriving in the markets nowadays with a better outlook.(Wang,

Chu, Chen, & Kuo, 2005)

  Drooping Value of the foreign currency might cause damage on the growth of Lenovo‟s

market.(Dozier, 2015)

 Rapid change and development of technology might be a threat to the Lenovo‟s market.

(Wang, Chu, Chen, & Kuo, 2005)

Lenovo's Business

Mission

To become one of the world‟s biggest personal technology companies. Lenovo wants to achieve

their objective by leading in three key areas:

Personal Computers: Lead in PCs and be respected for our product innovation and quality.

Convergence: Lead the industry with an ecosystem of devices, services, applications and

content for people to seamlessly connect to people and web content.

Culture: Become recognized as one of the best, most trusted and most well-respected

companies to work for and do business with. (Jurevicius, 2013)

Vision of Lenovo

To create personal devices more people are inspired to own, a culture more people aspire to join

and an enduring trusted business that is well respected around the world. This vision guides us in

pursuit of our mission to become one of the world's great personal technology companies.(our-

culture, 2017)
Lenovo's Distinctive Competencies

Lenovo's distinctive competencies come from their resources, both tangible and intangible, and

also their capabilities of manufacturing and supplying products with utmost efficiency.

Advantages from the Resources:

1. After acquiring the personal computer division of tech giant IBM, Lenovo now has the

biggest operations in manufacturing personal computers. (Ekekwe, 2011)

2. They are one of the biggest innovators in this sector, and it has only been possible

because of their intelligent minds working in the research and development sector. (Bao,

2016)

3. They have a brand value worth 4.1 billion US Dollar which comes from their goodwill,

state of the art technology, and customer relation.(Best Brands, n.d.)

Advantages from the Capabilities:

 1. In their organizational culture they encourage ability to learn from customer relation and

demand, and this helps them to differentiate their products according to customers'

preference. (Xi & White, 2004)

2. They have the lowest management cost in the industry among all other competitors doing

business in China, and for this, they have the capability to go for competitive pricing,

even after having a differentiated product line. (Liu, 2005)

3. They have the most efficient way to manage their distribution process. (Liu, 2005)

4. They have an entrepreneurial culture in their management which encourages the

creativity and knowledge among the employees. (Bao, 2016)

Besides all these, Lenovo has designed one of the best knowledge management system in the

industry which runs based on statistics and contribution from the employees.

Competitor Analysis

The competitor of Lenovo personal computers are mainly Dell and Hp.(Lin, Manolis, Srinivasan,

Sun, & Yang, 2008). Dell is currently one of the top producer and supplier of personal computer

in the world and on the other hand Hp in now conquers the second position. Lenovo was the

biggest PC maker on 2016with 55.5 million PCs, from this shipping 3% decline from the 57

million shipped in 2015. IDC said thatLenovo has a 21.3% share of the PC market

On the other hand HP, Inc. position itself in second position whose market share is very close to

Lenovo, however, with the shipments of 54.2 million PCs in 2016 and up to 1.3% year over year.

In 2016 it t had 21% of the PC market.

Brand Image, Brand Identity and Brand Integrity of the competitors

 The main strength of Dell is they offer cheap price for their personal computer and have a

strong product support. The brand name value of Dell is $7.5 billion (Jurevicius,

2013)which makes them the biggest personal computer brand in the world.

 Hp maintained its second position and improving significantly over years as they are very

much efficient to launch new and innovative products. (Lin, Manolis, Srinivasan, Sun, &

Yang)

 Dell updated its product line so that it can compete with other competitors in today‟s

market, Hp also launched premium looking personal

computers. This innovation captures the market rapidly

thus Lenovo loss a huge market share.

 In 2011 Apple sold 40 million iPad for which Lenovo

faced a huge loss.

Financial Analysis

Current ratio Net Profit ROI Debt to

1 2000 20 equity
0.8 0
0.6 0 -20 5
0
2015 2016 2017
2015 2016 2017 2015 2016 2017 2015 2016 2017
-2000
Return on investment
Ratio In million US dollar capital Debt to equity

Current ratio

2015: 0.90; 2016: 0.82; 2017: 0.81

With this current ratio analysis, we can measure the liquidity position of Lenovo Corporation. In

2015 the current ratio of Lenovo Corporation was 0.90.(Lenovo, Annual Report, 2014-2015) In

2016, Lenovo corporation current ratio .82 (Lenovo, Annual Report, 2015-2016)and 2017

current ratio 0.81.(Lenovo, Annual Report, 2016-2017). Which seems that the company current

ratio is decreasing. Decreasing current ratio is not good for Lenovo Corporation which means

they are not generating enough resource to pay current debt.

Net Profit

(In million US dollar), 2015: 839.6; 2016: -144.6; 2017: 530.4

In 2015 Lenovo corporation net profit was 839.6 million US dollar which was satisfactory

level(Lenovo, Annual Report, 2014-2015)However, in 2016 massively decline net profit. This

happened because of acquisition of Motorola and System Xto build future growth which

increased their operating expenses. It has increased by 20% due to restructuring costs. Pc

demand has slowly decreased in 2016 which caused reducing profit and sales. However, we can

see that in 2017 net profit increased by 530.4 million US dollar.(Lenovo, Annual Report, 2016-

2017) The expense has decreased for restructuring expenses which has incurred in last year. It

has also increased demand of pc in market.

Return on investment capital

2015: 15.60; 2016: -0.27; 2017: 10.18

Return on investment capital ratio indicate Lenovo profit earned on the capital investment. In

2015 Lenovo Corporation return on investment 15.60% which is satisfactory.(Lenovo, Annual

Report, 2014-2015) However, in 2016 the value has decreased by -0.27.(Lenovo, Annual Report,

2015-2016) This happened for generating loss in 2016 which means that the investment capital
has not effectively operated. Moreover, in 2017, Lenovo Corporation return on investment

capital increased by 10.18, which indicated that the company doing well in this year.(Lenovo,

Annual Report, 2016-2017) But this ratio is not good enough.

Debt to equity

2015: 0.46; 2016: 0.83; 2017: 0.92

As we can see from above data, Lenovo corporation debt to equity is less than 1 which indicate

that the company are less risky in terms of leverage. But personal computer manufacturers are

not capital concentrated. Debt equity ratio is under 0.50. From the year 2015-2017, Lenovo

corporation debt to equity has increased from 0.46 to 0.92 that means they are focusing in debt.

But Lenovo Corporation has still taken relatively little which can be said that they are operating

effectively. Comparing to industry average 0.50, they should minimize it to 0.50 within

following years.(Morning Star.Inc, 2017)

Value Chain Analysis

Primary Activities

Research and Development

Lenovo Group will finance over $1.2 billion in research and development sector over next four

years (Nekkei, 2017). They will work with Amazon.com, Google for their product improvement.

From 2007/08 to 2015/16, they have increased their investment from 229.76 million US dollar to

1491.37 million US dollar. (ETTelecom, 2017). They have research center in Morrisville,

Beijing, Shenzhen, Shanghai, Xiamen and Japan. Lenovo Group has more than 22,000 patents in

universal, with yearly application amounts surpassing 3,500 (Gao, 2015).

Production

On February 7, 2017 Lenovo has developed PC manufacturing system by newly patent pending

Low Temperature Solder (Lenovo, 2017). It will conserve energy and increase consistency. The

newer tin-based method need extremely high temperatures where it can produce more

consistently. They have several manufacturing plants including the biggest one in the industry,

and customers are allowed to visit in two facilities. Lenovo is planning to produce laptop in India

besides Japan and China, as it is now 3rd leading seller of PCs in India. If it counts on market

share, it has reshaped its total chain of portfolio pointing the young and the business people. It

helps them to keep the price at competitive levels(PTI, 2016), (Location, 2017).

Marketing and Sales

Lenovo is charging competitively to create balance between brand value and price. Lenovo has

elite and multi brand outlets. For this reason, Lenovo sales via E-commerce chains, modern

retail, and mostly from the huge quantities of IT and exterior shops. Typically, Lenovo runs

through network sales where suppliers are connected with each other. These suppliers in turn

give to individual retailers and channel dealers. Lenovo is concerned for producing consumer

demanded product through customer requirement. They are very good for meeting customer

needs. (Cardinal, 2016). Besides, on their adverts, they try to link between productivity and the

use of their technology.

After Sales service

Lenovo is improving its PC after-sales service with its new system called „Quick Response

Time‟. By this initiative, it can assure an answer within thirty minutes when a query or complaint

will be received (Bureau, 2017). Lenovo was the pioneer to proceed after sales service on digital

platforms Customers will get a call from the Toll free number for complain or query.
Support Activities

Infrastructure

Lenovo constructs on its leading position in China to raise universally. They first introduced

their product from their China sector then launched it globally. Lenovo has constantly expanded

worldwide PC market. It is the fastest rising PC firms in the world. (aimmatul, 2012). They have

Operational centers, Research centers, Sales center and Manufacturing center in worldwide.

(Location, 2017).

Human Resource Management

Lenovo employees are using common language regardless of their location. It makes a tie that

binds their employees. They respect each other which makes the varieties of employees to

improve their culture for fulfilling the needs of their customers all over the world. (Lenovo

Human Resources Generalist Salary, 2017)Recently, Lenovo India has made favorable policy for

their employees by using title of 'Now every day is Friday.(Bureau E. , 2015). For this reason,

employees will be allowed to wear business casuals for changing the mood of employees in

workplace.

Materials Management

Lenovo believes in sustainability. For this reason, they are pretty much aware about their

shipment of product on time. So they have implemented many programs for their full supply

chain. They are using over twenty-five key indicators to identify supplier performance,

transparency and commitment.(Global Supply Chain, 2017). For their retailer–vendor

coordination, they are using Vendor managed inventory which is a unified method for retailer–
vendor management (Xu & Qi, 2013). The VMI method is used to diminish inventory and

logistics operating expenses and increase management skills and operational effectiveness.

Technology

Lenovo has established a supply chain system for their in-house system. The system

automatically transmits latest supply and demand information from sales to manufacturing and

headquarter. It helps them to monitor their overall market demand (Lan & Unhelkar, 2006)

Lenovo is using Wanquan server based on Intel frame and I2 software. Basically, Lenovo has

chosen Intel as one of their strategic partners.

Lenovo's Competitive Advantages

From our point of view, Lenovo has competitive advantages over other companies, and these are,

 Lenovo has the power to go for competitive pricing and provide high quality product

(Lin, Manolis, Srinivasan, Sun, & Yang, 2008)

 The demand of the Lenovo products are less price elastic than the other competitor

product,

 The customers have a good brand image and goodwill about Lenovo (Mourdoukoutas,

2015)

 The wide variety of the product and one stop shopping facility across nations,

 The largest production facility in the industry bought from IBM (Mourdoukoutas, 2015)

 Biggest innovator in the industry with the lowest management cost.(Mourdoukoutas,

2015)
Business Model

Key Partners Key Activities Value Proposition Customer Customer Segments

 Toshiba  Create Relationships  Business

Apple,  Guiding technology  Launching corporate,

Dell & Employees, that accessible campaign,  The enterprise

Acer  Protecting to everyone,  Support center, product groups,

intellectual  Enable  Support outlet,  Students,

property, business and  Online forums,  Workers,

 Trading in people  Lenovo  Banks,

securities, throughout the community.  Businessmen.

 Complying with world to

governmental realize their

relation of full potential,

ethical issues,  Helping

 Awareness of developing

responsibility. sector through

 Developing innovation.

wide range of

product by

offering array of

service.

 Designing

manufacturing

and sales

distribution

across nations.
 Key Resources Channels

 R&D,  Distribution,

marketing,  Laptops

operation, through field

 Variety of sectors,

product,  Retailers,

 Financial  Online seller.

resources,

 Strong

distribution

channel.

Cost Structure Revenue Streams

 Sales and marketing cost,  Marketing and Hiring Solutions,

 Manufacturing and distribution cost,  Licensing the products,

 Employee compensation cost,  Events and service fees.

 Product development.
 Recommendations to improve profitability

Lenovo is the largest Laptop producer in the world. They are currently following protect and

attack strategy by which they are becoming the best PC manufacturer in this industry. The

“protect and attack” means they are protecting their base market share which is 30% of their

sales and attacking in international market.(Roos, 2014) Internationally they are improving day

by day. But the industry is at its maturity stage, and its changing rapidly. And Lenovo‟s financial

ratios are not in their favor because their ratios are below industry average. So in order to

increase their profitability there is some recommendations given below:

  They can push their sales and add customization option, more advertisement

internationally, different sales promotion which will increase their profitability

 They need to focus more on R&D as the technology is changing rapidly. They need to go

beyond limits. Come up with new technology. This will attract customer more and

increase sales.

 They are currently following VMI method in order to decrease operational expenses. So

they need to emphasize on this method more effectively which will give them more

cheap manufacturing process.

 As industry is in matured stage they can target more developing countries to operate by

merger or acquisition or exporting to grab more market share.

Taking advantage from Strength and opportunities

Lenovo has strong brand image, quality products, low cost infrastructure, diversified product and

strong customer relationship management. This indicates they can produce quality products at a

cheaper price. But they are not taking proper advantages of their strengths. They have a high

market share but not enough. Their marketing side is too poor in their operating countries. They

need to reach more target customers and give them knowledge about their quality product and

this will push their sell more, generate more revenue and more profitability. They need to focus

on customized product besides their wide range of diversified product. Of course they should

take their opportunities as first priority by using their strength they can acquire new companies in

different countries in order to get more efficient supply towards market. As they have low cost

production and they can produce easily in that geographical area by merger or acquisition rather

than exporting products to that country. This will give them more sustainable profitability.
 Overcoming weaknesses and threats

Lenovo has some weaknesses like their product is poorly designed and their brand perception in

developed countries is negative as it is a Chinese brand. In order to overcome the first weakness

they need to design their product more attractively by following people‟s perception, choice and

so on. They maintain their product quality. But people in developed countries believe about

Chinese brand and their low quality product which decrease their sale. So they need to work on

this belief of people. They can introduce trial ability of their product which will increase trust

among customers. Moreover they can educate customers about themselves, about their R&D,

production which will help customer know about Lenovo and attract more customers. Another

thing they can do is creating a Lenovo community which will get them more WOM and this will

help to gain more customers trust. On the other hand cheaper products are coming to market with

better outlook which is a great threat to Lenovo. So, in order to get rid of it they can differentiate

themselves by their distinctive competencies in the market. Another major threat is rapid changes

of technology, Lenovo has a highly efficient R&D, they need to come up with new technology in

production and product itself in order to sustain in this industry. Moreover they also should keep

track of target markets economy as continues currency value change, economical changes can be

a threat to Lenovo.

Corporate Strategies for Lenovo (2017-2022)

Lenovo's corporate level strategies should take measures based on the market trends of its

different business units and a proper model integrating different functional divisions.
Pushing R&D sector: Different divisions of the tech industry have become so competitive that

the bigger the innovator is, the bigger the market share it will have. Innovation can only be

possible if the R&D sector is working on full throttle. The corporate strategists of Lenovo should

fund the R&D sector aggressively so that the products are ahead of the competitors. This can

help in a format war and gain competitive advantages.

Resource Allocation: Tech industry and its different products have different markets, and the

corporate level managers should allocate resources according to the following suggestions:

PersonalComputers: Its market is on the declining stage and has B2B sales. As Lenovo has the

production unit of IBM, it should focus on differentiation. The corporate level managers should

allocate enough to ensure differentiated products for B2B customers.

Laptops: Laptops are user-friendly mobile version of PCs and used both by officials and

students. This market is extremely price sensitive. Therefore, the corporate level managers must

set its resources in such a way that they can go for a price war.

Tabs & Smartphone: This market is extremely competitive and frequent update of product is

necessary. For this, it needs more resources than any other sector so that it can run a strong R&D

sector on its own for highest innovation.

Policies for global market: To become a bigger entity in the global market, Lenovo's corporate

level managers should take following measures:

1. HR policies have to change so that the best people from different sectors are working on

different parts of the globe. This will ensure a better market data set resulting in mass

differentiation of products and higher market share.

 2. Quasi Integration should be done with the different suppliers around the globe to have a

better supply of complementary products in different markets to increase compatibility.

3. Differentiated training programs for different parts of the globes will ensure strong teams

working around the globe, around the clock. This will result in a competitive advantage.

Organizational Culture and Motivation: To strengthen the organizational culture, Lenovo's

corporate strategy should focus of a basic unified training so that things work in the 'LENOVO

WAY'. Moreover, to keep the employees motivated, the minimum wages should be in such a

level that they get to afford the finished goods Lenovo produces.

Customer Relationship Management: Lenovo has a few customer service sectors out sourced,

which ensures lower cost structure, but this is resulting in lack of control. To co-operate with

other strategies, customer relationship management has to be top notch. This will result in long-

term profitability‟s.

Business Level Strategy (2017-2022)

The main goal of business level strategies is to position a company in the marketplace to gain the

competitive advantage. Lenovo is currently the largest laptop producer in the world but question

is will they sustain in the same position in the long run. To face the challenge in the long run

they need to bring new innovation by the R&D sector and gain competitive advantage or they

can come up with new policies for the global market. Here we will be discussing the business
level strategies that Lenovo can implement in next five years so that it supports its corporate

level strategy.

Mass Differentiation

Current market of Pc industry is so competitive and whoever introduced the latest technology in

their product, grabs the market immediately. That‟s why Lenovo should work on its R&D

department for the innovation of products having the latest technology. Lenovo can distinguish

them in the market by launching differentiated products which the competitors cannot introduce

immediately. Lenovo can gain competitive advantage by ensuring the superior reliability, better

design & features of their product. This will allow Lenovo to charge a premium price and also

helps to grow the demand of their product as well captures the market share from the

competitors.

Generic Business level Strategy

As in the tech industry innovation of new technology is so much important to grab the market

share, Lenovo should strengthen its R&D sector. All the competitors are producing the same

product where Lenovo need to gain the competitive position by differentiated their product over

the rivals. In today‟s market people are more likely to use smaller size products but having all

kind of features, so Lenovo need to shrink the size of pc and laptops and innovate ideas to put all

the latest features on them. In the Pc market, laptop market or tab & Smartphone market Lenovo

need to come up with the latest technology so that the consumers prefers Lenovo than the other

rivals. In all sector Lenovo shouldn‟t compromise with the quality of their product which will

give them the competitive advantage. If Lenovo implement this generic level strategy in next
five years it will support the corporate level strategy and it can gain above average profitability

also.

Functional level strategy (2017–2022)

Lenovo's functional level strategy for next five years (2017-2022) should support its corporate

and business level strategies. Here are the functional level strategies that Lenovo should follow

Research & Development Sector

To win format war and gaining competitive advantages, investing in R&D section is important.

Lenovo should focus on developing R&D sector by constructing new facilities that supports

R&D sector. They should hire new employees under this sector. Their main focus should be on

mobile phone unit as its market is still growing. They should invest to develop new technologies,

features, parts for mobile phones. Though tablet market is not very interesting nowadays but a

simple push of technology can boom this market as it is the only device between a mobile and a

laptop. So, Lenovo should hire more people to think about the possible technology that can

flourish the tab market.

Production Department

Lenovo's production department has a lot to do to remain competitive in the market. Being a

Chinese manufacturer, Lenovo is already enjoying a lots of benefits like cheap suppliers, cheap

workers, cheap parts for products etc. Lenovo should integrate all the advantages into action. If

their production department can utilize all these benefits and can reduce their production cost

they can beat the price sensitive Laptop market and remain competitive for the upcoming years.
So Lenovo's strategy should focus on being more efficient on utilizing their resources for

production.

Supply Chain Management

Lenovo should make quasi integration with its suppliers. They should use the power of their long

term relationship with the suppliers to attract them in this integration. This will help them to

reduce cost of production which may lead to profitability.

Human Resource Management

To dominate the world, it is important to have soldiers from all over the world. So Lenovo's

human resource management should hire qualified personnel from all over the world to create

diversity in the organization. This will allow them to have a diverse brainstorming system which

can generate more ideas.

Organizational Culture and Motivation

To give basic unified training, Lenovo should undertake training campaign where they will train

their diversified employees to enlighten them in the "Lenovo Way". This will bring unity among

the employees which can make them efficient and will help them to be self-motivated. They can

also create a training/workshop center where they will provide training to the employees based

on their need. Psychiatric consultancy to the employees can also motivate them when they are in

bad condition.
Marketing & Sales Department

Marketing & Sales department are very important for any kind of organizations. To promote

Lenovo's Smartphone in US and Europe they need to do a lot of promotions and campaign

because those market is already dominated by Samsung, apple, Huawei and few other cheap

Chinese companies. So, it will be hard for them to compete in the market. But if they can run

successful marketing campaign and create brand awareness among the consumers, they can be

successful. Lenovo already bought Motorola Mobility which is already very popular in western

market. So they should focus on the existing mobile brand motto and try to make super

Smartphone at lower price to compete in the market.

Customer Relationship Management Lenovo should focus on establishing more customer

service centre. Nowadays people are more interested in after-sales service; they thoroughly

investigate about this matter before buying any tech-product. So, Lenovo should establish more

service centre around the world. Online support would be another neat addition.

Lenovo’s technological strategies (2017-2022)

Lenovo needs to build its technological strategies in such a way that it coherent with the

corporate level strategies and business level strategies. First and foremost, they need to interpret

what customers will need to gain competitiveness over other companies. It will help them to

have benefit over the prices and innovation.

Well integrated information technology Though they have a proper inventory management

system, and other sectors use their own intra-office information technology, Lenovo still needs a
well-integrated system so that based on access level; a person in R&D can know what a customer

service operator is facing with any device. This will help in coming up with better product and

mass differentiation.

Manual for Service

Well-designed procedure manual software should be available. It will help to maintain the

quality of customer service. In this system, a customer service provider can look into a step by

step process to guide a customer or solve problems. This software will have all the knowledge

necessary to fix a product.

Information Management System for Distributors

The overall distribution management should have a state of the art IT system to know about

shipments and supply information‟s. The Lenovo should have all the detailed information about

the supply and delivery of the products so that it doesn‟t face any shortage on the stock.

Format War

The technological strategies should also be made in such a way that any customization or adding

new features to the existing products are readily available upon request of the customers. The

next generation will be much more advanced in technology and their demand will be far more

complicated. The consumers must feel that the products are creating value for them. As we see

from the corporate level and business level strategy that Lenovo should follow differentiated
strategy so they need to continuously upgrade their products. They can pursue an aggressive

pricing and marketing to win the format war or Lenovo‟s R&D department can introduce a new

technology so that the consumers adopt them immediately and kill the competing format.

Revised Business Model

More
focus on
differenti
ation
The company’s governance to support strategies

No, Lenovo don‟t need any change in the company‟s governance to support my strategies. Firstly under

this CEO and governance the company is running smoothly. The company is making profit. The CEO is

well disciplined and maintains everything strictly. Which has a great impact on Lenovo‟s operation. As

the culture is well structured and maintained. After failure of previous CEO William Amelio, the

chairman Yang Yuanqing took over the position, since then the organization is going smoothly. And

under this governance this strategies will work well because of this strict monitoring and efficient work

environment.

Recommend a strategic

Lenovo is following Multi-divisional structure. This is helping them very well. Which gives them

different Division as employees can be more creative and spread them into the horizon. So the workforce

become more efficient. They can implement lean production which will help them to get economies of

scale. They can emphasize more on R&D sector in order to develop more product. Which will help them

to remain as a leader in the industry. On the other hand as the peoples demand is changing and people are

choosing more handy devices like mobile phone, Tab etc. So, they need to concentrate more on Tablet

PC, implement new design, and discover new technology. Which will help them to grab the highly

competitive market more as it is in mature stage.

The existing company culture

When it comes to company culture, Lenovo takes it seriously. According to them their culture is their

DNA and they call it "The Lenovo Way". The Lenovo Way is embodied in the statement: We do what we

say and we own what we do. That culture also drives how Lenovo work every day, utilizing what they

call the 5 P's:

 PLAN before pledge.

 PERFORM as promised.

 PRIORITIZE the company first.

 PRACTICE improving every day.

 PIONEER new ideas. (Our Culture, n.d.)

As the company already have a well-established company culture, we think it is not necessary to revise its

culture. In our recommended strategy, we wanted to shift the Lenovo's business from laptop industry to

mobile and tablet industry. The both industry is almost similar and their existing culture is well enough to

take the opportunities and strategies to work accordingly. So, if we want to implement any new culture

now, it may have negative effect. While employees work in a existing culture, they set their minds

according to that environment. So, when they make new products or applications, they can show their

creativity more efficiently if the culture is not touched. But if we try to change their culture now, they

might find it difficult to take their decisions which will decrease the overall company efficiency. Besides,

it takes a long time to establish a new culture in the company which Lenovo cannot afford in the

competitive market.(Lenovo, n.d.)

Recommend Global Strategies

Entry mode will be merging and acquisition based. We will enter into the market by exporting our

goods and services to the local market. Nowadays exporting technological goods and services to other

countries market has less restriction. So company can easily develop their position in other countries

market.

Distribution will be totally localized. We will give the authorization to the local company so that they

can sell our products and services by their own.

Product Standardization is possible. PC industries are becoming shorter day by day. They are mostly

shifting into tablets, mobile phone. Everyone wants their product to be highly durable and better in

performance from others. So standardization is possible in this industry by developing product durability,

performance, and other extra services. Such as; better camera resolution, battery durability, fast

performance etc.

Customer Care service will be provided by the distributor itself where their service provider will be

trained by the Lenovo‟s own service specialist. And there will be a technical personal available in

distributor service center who will provide the required information about the product and services.

Ethical value proposition

Standardization the promised value, which is delivered and acknowledged by Lenovo for the ethical

value proposition Lenovo will focus on stakeholders.

External Stakeholders- we are going to focus on the external stakeholders. Which are the customer,

supplier, general user, and creditors. We are going to give them vertical integration facility to those whom

are we dealing with a long time and importing our product directly through us.

Internal stakeholders-Lenovo will integrate knowledge, information and flow management to the flow

management department. By this, Lenovo‟s integration knowledge management will be more executable

not only more authoritative, but also will practicable in feasible means. Because all the decision of posts,

flow and organization, took by management department and enjoy authoritativeness within the company.

Lenovo’s value proposition

Agency theory- Lenovo will follow agency theory because, they want to Deal with business relationship

stockholders and senior management. Their problems and decisions will be delegated from one person to

another. Before taking the decision they will consult with the stockholders and also prefer their opinion.
Lenovo will maintain a basic core of ethics. Where employee rules and regulation will be mention.

Employee will have to face standard evaluation in six months period. Also they will got bonus according

their performance.
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