Table of Contents

1.0 Introduction..................................................................................................................5

2.0 Environmental Analysis..............................................................................................6

2.1 Porter’s five forces...................................................................................................6

2.2 PEST analysis...........................................................................................................7

2.3 SWOT analysis.........................................................................................................9

3.0 Current Strategies of Lenovo....................................................................................10

4.0 Recommendation.......................................................................................................12

5.0 Conclusion..................................................................................................................13

6.0 References...................................................................................................................14
1.0 Introduction
Overview of Lenovo
Lenovo is a spinoff of the Legend Group. Lenovo was founded in 1988 by Liu Chuan Zhi.
Lenovo is a famous company that sells personal computers after that also entered the
smartphone market.
Lenovo headquartered in Beijing, more than 60 countries around the world have an operation,
selling products in more than 160 countries. In addition to designing, manufacturing and
selling PCS and tablets, Lenovo’s other products include smart TVs, workstations, servers, IT
software and electronic storage devices. Lenovo focuses on developing innovative, reliable
and high-quality PC products to provide smarter production and increase competition for
global customers. 2015 Lenovo acquisition of IBM, Lenovo restructured to create the world's
third-largest PC maker after Hewlett-Packard and Dell (Donald 2010). Lenovo's sales have
been among the best in the world. By 2019, Lenovo is the world's biggest PC vendor (Statista
2019).

Mission and Vision

Lenovo's mission is to become one of the best personal technology companies in the world
and a leader in the PC market through well management and product innovation (Lenovo
2020).
Lenovo will achieve this by implementing a plan in three key areas: Culture: recognized as
one of the best, most respected, and most trusted companies. Convergence: leading the
industry with an ecosystem of applications, content, devices and services that enables people
to seamlessly connect between people and web content. Personal computers: Lenovo is a
leader in personal computers because of its innovation and high-quality products (Abhijeet
2018).
Lenovo's vision is to be a personal device that more people want to own, a culture that more
people want to join, and a durable, trusted business that is respected around the world
(Lenovo 2020). Besides, Lenovo’s vision includes creating devices that people love, being a
company that people love to work for, and being one of the brands that inspire trust. The
mission of Lenovo is guided by this vision.
2.0 Environmental Analysis

2.1 Porter’s five forces

Threats of new entrants

The threat of new entrants is very low for Lenovo in the electronics industry as the barriers to
entry are high. Firstly, the cost to build up a renowned brand requires enormous investment.
Furthermore, a lot of investment will be spent on acquiring advanced technologies, recruiting
expertise, and establishing worldwide distribution networks. Moreover, significant factors
might stop new entrants from getting into the market because there is a huge pressure that
comes from existing brands such as HP, Dell and Apple as they are existing brands that
remain famous in the industry. Thus, new entrants would need to spend a great number of
times to catch up and enhance their brand awareness and recognition. When new entrants are
not able to provide competitive prices, it could result in plenty of losses.

Bargaining power of buyers

For Lenovo, the overall bargaining power of customers is high. Lenovo customers consist of
a variety of individuals, small or big companies. The declining trend in the PC market
recently and the innovation adapted has increased the buying power of customers. Some
customers are attracted by the brand image, technology and competitive pricing by Lenovo.
However, there are still other technology companies to choose from and the price range of
their products is similar to Lenovo. There is high competition in this industry and low product
switching costs for the customers. Therefore, the bargaining power of customers is high as
there is an increasing array of choices for customers and a wide range of products from other
brands. Hence, customers can go for other options if they want.

Bargaining power of suppliers

The bargaining power of suppliers for Lenovo is low because there are a few numbers of
suppliers that supply standardized individual parts for making Lenovo products. Due to the
availability of cheap labour, these suppliers work from the Asia Pacific region. Hence,
Lenovo has low switching cost and they can switch suppliers easily. Other than that, these
suppliers have to provide reasonable pricing for the components and they do not bargain to
increase their prices to prevent the loss of money because the industry which Lenovo operates
has a direct relationship and impact on the profitability of suppliers.
Threat of substitute products
The threat of substitute products for Lenovo is high. This is because there are many brands
such as Dell, Apple and Samsung that offer electronic products such as smartphones and
tablets with similar prices and capabilities. Other than that, the generation nowadays is using
smartphones and tablets at a faster pace and Lenovo is not keen at making smartphones rather
than laptops and PC. These products are less bulky, easy to use and can replace the computer
as most of them can perform the function of computers and the prices and development cost
of these products have also gone down.

Competitive rivalry
The level of rivalry in the technology industry is quite high and is one of the most
competitive industries. The major players in this market are quite big and well-recognized
brands such as Lenovo, Dell and HP, Lenovo hold 15.3% in the PC market share (David &
David 2017). All of them have similar products and features and outstanding R&D facilities.
The design and looks of laptops and PC have also become important factors for the customers
to choose from other than technology and features. As the competition is intense, it is better
for Lenovo to come out with the latest innovation, better customer support and expand the
worldwide distribution to achieve maximum sales to become a market leader.
2.2 PEST analysis

Political
Lenovo is operating around the world and not only in China. Thus, the company must retain
its business strategy and adhere to local and global politics laws. Lenovo is headquartered in
China and it must follow the laws imposed by China. Lenovo seems to save money by using
cheap labour and the payment would not be too expensive. This is the reason why Lenovo
located factory in China and most of the assembly lines are Chinese. Lenovo must follow
international laws to minimize the consumption of energy and avoid environmental pollution
as encouraged by the Chinese government. To make Chinese companies become
international, the reduction of tariffs on trade by China helps Lenovo to grow and expand
where China is a country that is keen on exports. These policies are encouraging Lenovo to
go global.
Economic
The poor economic situation is deemed to be a threat to Lenovo’s business. Due to the
significant currency volatility in emerging markets, it is continuing to affect the PC industry
and affects the revenue of Lenovo significantly. The decline in the PC industry will also be a
challenge for Lenovo. The price competition is also extreme between various competitors and
the company ought to adopt the low-cost model to survive the economic challenges.

Social
The demand for high technology is influenced by increased population growth, education
level and lifestyle choices. The literacy rate has increased in China and the increase in
household income and purchasing power has favored Lenovo as a high technology business.
When people become more and more literate, they will purchase products with high
technology and demand for connectivity. Lenovo is popular in developing countries and
nations when its products are associated with low and average price as people are looking for
cheaper choices. It is also ranked as the second-largest smartphone brand in China.

Technology
Lenovo focused a lot on technological innovation, and it is essential to focus continuously to
remain the market leader. Lenovo can make use of the social media platform to improve its
performance and engage with customers. Lenovo can also use technology trends to create
innovative social media campaigns to develop online brand communities. Lenovo should
keep close attention to the 5G and strengthen user experience to survive the intense
competition. The new technologies adoption also makes Lenovo develop new products at a
faster rate and increase the diversity of their product offerings and flexible value chain with
partners. Although Lenovo's smartphone market presence is still weak, it is continued to
receive attention and focus in the impending years.
2.3 SWOT analysis

Strengths
Lenovo is a leading player in the PC market globally and improves its growth and market
share in the PC industry. Lenovo continues to develop and expand its products and services
and its products include laptops, PC and smartphones. The company has various revenue
sources to earn money. The huge range of laptops provided by Lenovo is also affordable and
premium including Yoga and Legion. Lenovo’s products are constantly growing and exposed
in the China market and presence in other emerging markets including the Americas and the
Asia Pacific as well. Lenovo also focuses on the product quality by using excellent raw
materials and their PC has gained a lot of trust and brand equity from customers. Despite
intense competition with Dell, HP, Apple, the company can sustain and win customers’
hearts.
Weaknesses
Despite Lenovo PC industry is growing fast, the company is late to enter the smartphone
industry and players such as Samsung, Apple and other Chinese brands are leading the
market. Moreover, Lenovo's marketing and promotion strategy are weak and less focused
when compared to its rivals such as HP and Apple. Stronger branding and marketing will help
the company to gain competitive advantages and maintain its leadership position over time.

Opportunities

Lenovo cannot depend on one source of income despite its strong cash flow and financial
performance. The company will need to invest in rapidly growing areas such as 5G and cloud
technology to gain additional revenue and growth. Furthermore, it can expand the portfolio of
its products and customer base. The smartphone market is expanding, and this gives Lenovo
an opportunity to increase its profitability. Other than that, Lenovo needs to use digital
channels to carry out digital marketing globally to engage with its customers and manage
good customer relationships to retain them. Lastly, Lenovo should look forward to acquiring
related businesses to expand its market share and grow profitability in the foreseeable future.

Threats
The major threat for Lenovo is the level of competition because Lenovo is facing some of the
strongest rivals in the PC industry such as HP, Dell and Apple who invest aggressively in
various aspects including the quality of products and research and development. Lenovo will
need to learn from these players to keep its market share and overcoming the competitive
environment by searching for additional growth channels. Lenovo is operating around the
world and economic changes and fluctuations of currency can have huge impacts and affects
its economic performance such as revenue.
3.0 Current Strategies of Lenovo
Lenovo adopts a strategy of vertical integration in production, which is quite different from
other technology manufacturers. The interest is the category of enterprises will be operating
to the upstream or downstream, the enterprise must choose its engaged in business, in the
industry value chain system, each stage of the value created by the value activities are
attached in its output because of the output to a higher price than into selling the enterprises
engaged in the next value chain activities. Therefore, high vertical integration can improve
operational efficiency and make it easier for enterprises to control quality and the stability of
supply sources or sales channels. After the huge loss in 2008, Lenovo asked the management
team to re-examine the management of the company's internal resources, among which the
supply chain system is more important. Lenovo began to reform the way of outsourcing
production processes such as design, manufacturing, and assembly to involve itself in the
value chain of production. It hoped to ensure product quality, master key technologies of
product innovation and R&D, improve operational efficiency, and even improve the
enterprise's strategic flexibility through vertical integration. Therefore, Lenovo began to build
production bases all over the world, and gradually shifted the supply chain to domestic
Chinese manufacturers. Each key component had at least one cooperative Chinese
manufacturer, which cleverly took advantage of the relatively low labor costs in China to
create a production system with integrated production and marketing and vertical supply
(Kraemer & Dedrick 1998). It refers to the expansion of an enterprise to the upstream or
downstream of the industrial value chain. The reason for adopting the vertical integration
strategy may be that the integration can bring operational benefits, such as ensuring the
supply source and quality of key components. The benefits of vertical integration include the
ability to improve operational efficiency, ensure product quality or service, maintain the
stability of supply sources and sales channels, increase information flow and innovation
opportunities, and increase commitment to the business.

Discourage competition, increase strategic flexibility, and move into new business areas.
Lenovo has shown different strategies in its smartphone business in China and overseas, with
a total of 9.4 million units shipped and only 400,000 units sold overseas. Therefore, it can be
seen that the overseas market is not yet in the stage of profitability. Lenovo's strategy is to
invest to gain market share, instead of focusing on profitability at present. Companies should
start by focusing on market share rather than profitability (Wernerfelt 1986).

The structure of the PC industry has been badly damaged by price wars among brands, which
have reduced gross margins from 25% to 20% (Dedrick & Kraemer 2005). In terms of
products, Lenovo is a leader in personal computers, but as demand for PC slows, the
company is turning to mobile devices, such as smartphones and tablets, to capture new
demand and avoid slow growth or decline because of the PC business.

Moreover, association and a strategy are offensive and defensive strategy, the defense
strategy is to protect the global PC business and business in China. In the offense into
emerging markets - smartphones, tablets, and smart TV take the opportunity of high growth.
Can from the point of the 2013 quarterly reports of Lenovo, the strategy is a success, their
offensive strategy contributed nearly 50% of its revenue, has obvious progress compared with
32% four years ago.

4.0 Recommendation

Although Lenovo has an obvious advantage in the PC industry, the general trend of the PC
market is declining, which is not good news for any manufacturer. Sony and Samsung are
pulling out of the market, while Dell and HP are vacillating. Lenovo's 'two-pronged' strategy
has led to an increasing overlap between its diversified product brands which confusing many
consumers. In addition, Lenovo's competitors are also adopting strategies and competitive
advantages, looking for opportunities to grab market share and customer loyalty. Therefore,
there are some new future strategies that Lenovo is recommended to adopt in order to achieve
high growth opportunities in emerging markets.

Implement customer journey map and programmatic marketing

Lenovo should analyze consumers' purchase mileage and network behavior in the digital
channel from the perspective of how consumers generate purchase intention. Through cross-
platform key performance indicators (KPI) and data management platform (DMP) to gain
insight into consumers' intentions, Lenovo can establish cross-media marketing strategies and
use programmatic purchasing methods to implement the strategies. Cross-media marketing
strategy helps Lenovo to rapidly improve the brand in the crowd of low-cost high-quality
communication effects and can maximize the audience coverage (Woo et al. 2015). After the
execution of each advertising campaign, Lenovo should collect the media materials and
website behaviors to the data integration platform, and continuously adjust and optimize its
cross-media marketing strategy.
From the initial hypothesis to the ongoing testing, Lenovo analyzes the consumer journey at
different stages, establishes the appropriate attribution model, and excavates the five
transformation keys. Build the different media execution strategies from these key metrics
such as device, time, channel, product and station behavior. Through the optimization cycle
of business strategies, parameters are adjusted according to the changes in data to form a
double cycle of media delivery optimization and cross-media strategy optimization. Through
the practice of customer journey map, Lenovo will understand the precise trend of
consumers, so that the digital sales strategy of high unit price products will be maximized.

Further improve the entire ecosystem of hardware, software and services.

Lenovo should continue to consolidate the PC market share and ensure the source of all
profits. In the future, Lenovo should stick to manufacturing rather than outsourcing
manufacturing, and achieve "operational excellence" through a mixed production model of its
own manufacturing and outsourcing. This will not only bring Lenovo all the profits, but the
manufacturing capacity is also conducive to Lenovo's innovation. Whether it is a mobile
phone or a PC, the innovation of the whole devices largely depends on the innovation of the
components. In addition, as more people turn to devices such as smartphones and tablets, the
mobile market and back-end server business will have great prospects in the future. Lenovo
must also build a new engine of growth and a pillar of profits beyond the PC business.
5.0 Conclusion

Finally, it is suggested that Lenovo should implement programmed marketing strategy to

maintain customer loyalty and obtain better customer engagement. With its own
manufacturing, Lenovo can respond quickly and flexibly to customers' needs, which will
ultimately be reflected in profits. In recent years, as the growing popularity of smartphones,
tablets and other mobile devices has slowed PC sales, Lenovo also should continue to seize
these three high-growth opportunities in emerging markets.
6.0 References

Abhijeet Pratap 2018. Lenovo Mission and Vision: An Analysis, Notesmatic, viewed 11 May
2020, https://notesmatic.com/2017/02/lenovo-mission-and-vision-an-analysis/

David, F.R., and David, F.R., 2017, Strategic Management, A Competitive Advantage
Approach, Concepts and Cases, 16th Global Edition, Pearson, Essex, England.

Dedrick, J & Kraemer, K 2005, "The Impacts of IT on Firm and Industry Structure: The
Personal Computer Industry", California Management Review, vol. 47, no. 3, pp. 122-142.

Donald DePamphilis 2010, An Integrated Approach to Process, Tools, Cases, and Solutions,
Mergers, Acquisitions, and Other Restructuring Activities, Academic Press Advanced
Finance Series, vol. 5 pp. 218-220.

Kraemer, K & Dedrick, J 1998, "Globalization and Increasing Returns: Implications for the
U.S. Computer Industry", Information Systems Research, vol. 9, no. 4, pp. 303-322.

Lenovo 2020, Our Culture, Lenovo, viewed 10 May 2020,

https://www.lenovo.com/my/en/lenovo/our-culture/

Statista 2019, Market share held by the leading personal computer vendors worldwide in
2019, viewed 10 May 2020, https://www.statista.com/statistics/267018/global-market-share-
held-by-pc-vendors/

Wernerfelt, B 1986, "THE RELATION BETWEEN MARKET SHARE AND

PROFITABILITY", Journal of Business Strategy, vol. 6, no. 4, pp. 67-74.

Woo, J, Ahn, J, Lee, J & Koo, Y 2015, ‘Media channels and consumer purchasing
decisions’, Industrial Management & Data Systems, vol. 115, no. 8, pp. 1510-1528.