- 1. 1 | P a g eContentsIntroduction
..........................................................................................................................
2Ownership of
Lenovo..........................................................................................................
11Current Position
..................................................................................................................
13Protect & Attack
Strategy....................................................................................................
16Benchmarking.....................................................................................................................
18Product
Lines......................................................................................................................
19Product
Trends....................................................................................................................
20Cloud
Computing................................................................................................................
21Sponsorship
........................................................................................................................
22Competition
........................................................................................................................
24Competition:
Dell................................................................................................................
25Competition: HP
.................................................................................................................
26Competition: Acer, Toshiba,
Asus.......................................................................................
26Competition:
Apple.............................................................................................................
27Key success
factors.............................................................................................................
29Pursue Outside
Markets.......................................................................................................
30Innovation...........................................................................................................................
30Key
issues...........................................................................................................................
33What Lenovo Could Gain From Buying BlackBerry
...........................................................
36Analysis and
Discussion......................................................................................................
37Recommendations...............................................................................................................
51Conclusion..........................................................................................................................
58References
..........................................................................................................................
59Appendix
............................................................................................................................
62Matrix Appendix A
.............................................................................................................
63SWOT Analysis Appendix B
..............................................................................................
64PEST Analysis Appendix C
................................................................................................
65PORTERS Five Forces Appendix D
..................................................................................
66
2. 2 | P a g eIntroductionThe following report is a company
analysis of Lenovo, the largest PC Company in China, andthe fourth
largest globally. A brief history is provided, followed by an
analysis of the currentposition, competitors in the industry and
key success factors and key issues that will propelLenovo to become
more successful in the global PC industry. In addition,
recommendationsare suggested to guide Lenovo to even more success.
Financial forecasts show therepercussions of the recommendations
and Lenovos overall financial structure.Lenovo Group Limited is
today the fourth largest personal computer manufacturer in
theworld, after Hewlett-Packard and Dell of the US, and Acer of
Taiwan. Lenovo producesdesktops, laptops, servers, handheld
computers, imaging equipment, and mobile phonehandsets. Lenovo also
provides information technology integration and support services,
andits QDI unit offers contract manufacturing. Lenovo also offers
Internet access through itsFM365.com portal. Its executive
headquarters are located in Beijing, Peoples Republic ofChina and
in Morrisville, North Carolina, USA.Lenovo Group Limited (Chinese:
; pinyin: Linxing Jtun) is aChinese multinational computer hardware
and electronics company with its operationalheadquarters in
Morrisville, North Carolina and its registered office in Hong Kong.
Includinghardware its mentioned above and IT management software
and smart televisions. Lenovo isthe worlds second-largest PC vendor
by 2012 unit sales. It markets the ThinkPad line ofnotebook
computers and the ThinkCentre line of desktops.Lenovo has
operations in more than 60 countries and sells its products in
around 160countries. Lenovo was founded in Beijing in 1984 and
incorporated in Hong Kong in 1988under its previous name, Legend.
Lenovo is listed on the Hong Kong Stock Exchange and isa
constituent of the Hang Seng China-Affiliated Corporations
Index."Lenovo" is a portmanteau of "Le-" (from Legend) and "novo,"
Latin ablative for "new." TheChinese name (simplified Chinese: ;
traditional Chinese: ; pinyin: linxing) 3. 3 | P a g emeans
"association" (as in "word association") or "connected thinking"
but can alsoimply creativity.1For the first 20 years of its
existence the companys English name was "Legend" (in Chinese
Lianxiang). In 2002, Yang Yuanqing decided to abandon use of the
Legend brand namein order to expand outside of China, as the
"Legend" name was already in use by many otherbusinesses worldwide,
thus making it impossible to register in most jurisdictions. In
April2003, the company publicly announced its new name, "Lenovo,"
with a large mediacampaign involving huge outdoor billboards and
primetime television advertisements.Lenovo spent 18 million RMB (R
(ren) stands for person M (min) stands for people together they
mean people B (bi) means currency ) on television advertisements,
whichwere broadcast daily for eight weeks. The billboard
advertisements featured the Lenovo logoagainst blue sky with copy
that read, "Transcendence depends on how you think." By the endof
2003, Lenovo had spent a total of 200 million RMB on
rebranding.History19801981 IBM PCD introduces its first personal
computer, the IBM PC1984 IBM PCD introduces its first portable
computer, the IBM Portable PC, weighing 30pounds.With an initial
capital outlay of only RMB200,000, (US$25,000) Lenovos
foundingchairman Liu Chuanzhi, together with 10 like-minded
colleagues, launches the NewTechnology Developer Inc. (the
predecessor of the Legend Group) funded by the ChineseAcademy of
Sciences.1986 IBM PCD announces its first laptop computer, the PC
Convertible, weighing
12pounds.1http://en.wikipedia.org/wiki/Lenovo,2013-04-27 4. 4 | P a
g e1987 IBM PCD announces the Personal System/2 personal
computer.1988 Legends Chinese-character card receives the highest
National Science-TechnologyProgress Award in China.Legend Hong Kong
is established.19901990 The very first Legend PC is launched in the
market. Legend changes its role from thatof an agent for imported
computer products into that of a producer and seller of its
ownbranded computer products. Legend PCs are ratified and accepted
by the China TorchProgram.1992 IBM PCD introduces ThinkPad, the
industrys first notebook with a 10.4 inch colorThin Film Transistor
(TFT) display and a TrackPoint (red ball) pointing device.1993
Legend enters the Pentium era, producing Chinas first "586" PC.
Legend establishes1+1 retail network.1994 IBM PCD introduces the
industrys first notebook with integrated CD-ROM, theThinkPad
755CD.1995 IBM PCD introduces the butterfly keyboard.IBM PCD moves
from Boca Raton, Florida, to Raleigh, North Carolina.Legend
introduces the first Legend-brand server.1996 Legend becomes the
market share leader in China for the first time.Legend introduces
the first Legend brand laptop.1997 IBM PCD introduces the industrys
first notebook equipped with a DVD-ROM, theThinkPad 770.Legend
signs an Intellectual Property agreement with Microsoft, the most
valuable deal evermade in China at the time. 5. 5 | P a g e1998 IBM
PCD introduces the industrys first ThinkLight, a small light that
illuminates thekeyboard in low-light work environments, such as
onboard an airplane.The millionth Legend PC comes off the
production line. Intel Chairman Andy Grove attendsthe ceremony, and
takes the PC for Intels museum collection.Legend establishes the
first Legend Shop.1999 IBM PCD introduces the industrys first
mini-notebook, weighing under three pounds,with standard ports and
a keyboard that is 95 percent of full-size.IBM PCD announces its
exit from the retail business.IBM PCD introduces the industrys
first PC with an embedded security chip.Legend becomes the top PC
vendor in the Asia-Pacific region and heads the Chinese nationalTop
100 Electronic Enterprises ranking.Legend launches pioneering
Internet PC, with its "one-touch-to-the-net" feature, whichenables
millions of Chinese PC users to easily access the Internet.20002000
IBM PCD ships its 10-millionth ThinkPad notebook PC.Legend becomes
a constituent stock of the Hang Seng Index - HK.Legend ranked in
top 10 of worlds best managed PC venders.2001 An IBM notebook with
an embedded security chip becomes the industrys firstnotebook to be
certified by the Trusted Computing Platform Alliance, an industry
bodysetting data security standards.Legend successfully spins off
Digital China Co. Ltd., which is separately listed on the HongKong
Stock Exchange.Legend appoints Yuanqing Yang as President and
CEO.Legend first introduces "digital home" concept and launches
accessories-enabling PC.2002 IBM PCD introduces ImageUltra and
Rapid Restore, the first automatic data recoverytechnologies of
their kind. 6. 6 | P a g eLegend launches its first technological
innovation convention, Legend World 2002, whichopens up Legends
Technology Era. Legend introduces its visionary concept for the
futureof technological development and applications, its
Collaborating Applications project, as wellas its strategies for
implementing Collaborating Applications.Legends supercomputer, the
DeepComp 1800 makes its debut. It is Chinas first computerwith
1,000 GFLOP (floating point operations per second) and Chinas
fastest computer forcivilian use, ranked 43rd in the Top 500 list
of the worlds fastest computers.2003 IBM PCD introduces the
industrys first notebook with an extended battery life of upto 11
hours.IBM PCD introduces its ThinkCentre desktop PC line.IBM PCD
introduces its Active Protection System, the industrys first
notebook with anairbag for hard drive and data protection in case
the system is dropped.IBM PCD ships its 20-millionth ThinkPad
notebook PC.IBM PCD introduces its ThinkCentre desktop PC
line.Legend announces the birth of its new "Lenovo" logo to prepare
for its expansion into theoverseas market.Based on the
collaborative application technology, Lenovo initiates IGRS Working
Group, incooperation with a few large companies and the Chinese
Ministry of the InformationIndustry, to promote the formation of
the industrial standard.Lenovo launches a Tech RoadShow 2003
nationwide to promote Lenovos innovation.Lenovo successfully
develops DeepComp 6800 in November 2003. It ranks 14th on theglobal
list.2004 IBM PCD introduces the ThinkCentre ultra small desktop
PC, no larger than a box ofcorn flakes.IBM PCD introduces the first
notebook with an integrated fingerprint reader.IBM PCD ships its
100-millionth PC (counting both desktop and notebook computers). 7.
7 | P a g eLenovo becomes an Olympic worldwide partner. It is the
first Chinese company to become acomputer technology equipment
partner of the IOC.Lenovo decides to develop the rural market by
launching the "Yuanmeng" PC series designedfor township home
users.Lenovo and IBM announce an agreement by which Lenovo will
acquire IBMs PersonalComputing Division, its global PC (desktop and
notebook computer) business. Theacquisition forms a top-tier
(third-largest) global PC leader.2005 Lenovo completes the
acquisition of IBMs Personal Computing Division, making it anew
international IT competitor and the third-largest personal computer
company in theworld.Lenovo announces the closing of a US$350
million strategic investment by three leadingprivate equity firms:
Texas Pacific Group, General Atlantic LLC and Newbridge
CapitalLLC.Lenovo establishes a new Innovation Center in Research
Triangle Park, N.C., to enablecustomers, business partners,
solution providers and independent software vendors tocollaborate
on new personal computing solutions.Lenovo introduces the industrys
thinnest, lightest and most secure Tablet PC, the ThinkPadX41
Tablet.Lenovo introduces the first widescreen ThinkPad with
embedded wireless WAN, theThinkPad Z60, available for the first
time with a titanium cover.Lenovo becomes the worlds largest
provider of biometric-enabled PCs by selling its one-millionth PC
with an integrated fingerprint reader.William J. Amelio is
appointed as CEO and President of Lenovo.2006 Lenovo introduces the
first dual-core ThinkPad notebook PCs, improving productivityand
extending battery life for up to 11 hours.Lenovo technology
flawlessly supports the 2006 Olympic Winter Games in Torino,
Italy,supplying 5,000 desktop PCs, 350 servers and 1,000 notebook
computers. Lenovo also hostsseven Internet i.lounges for use by
Olympic athletes and visitors. 8. 8 | P a g eThe first
Lenovo-branded products outside of China debut worldwide.2007 The
Beijing Organizing Committee for the Olympic Games selects a
Lenovo-designed Olympic Torch as the winning design from among 300
entries. Named the Cloudof Promise, the Lenovo-designed torch will
travel the world at the front of the globalOlympic Torch
Relay.Lenovo delivers a supercomputer for a Formula One racing team
that will provide eightteraflops of computing power.Lenovo
introduces first EPEAT Gold Monitor with new visuals portfolio.2008
Lenovo enters the worldwide consumer PC market with new Idea
brand.Lenovos ThinkPad X300 is called the best laptop ever by
BusinessWeek magazine.Lenovo becomes the first PC manufacturer to
announce a client virtualization platform.Lenovo provides a smooth,
error-free performance at the Beijing Olympic Games. TheLenovo
solution which included more than 30,000 pieces of equipment and
nearly 600Lenovo engineers powered the largest sporting event in
history.2009 Lenovo leads PC industry in using recycled
material.Lenovo becomes senior sponsor of Computing Equipment and
System Operation Service forthe World Expo 2010 in Shanghai.Lenovo
debuts Enhanced Experience for Windows 7, delivering significantly
betterperformance for the new operating system.Lenovo sells its 1
millionth Idea Product.2010 Lenovo achieves its highest ever
worldwide market share and becomes the worldsfastest growing major
PC manufacturer.Lenovo introduces LePhone, its first
smartphoneLenovo sells its 60 millionth ThinkPad2011 Lenovo forms
Mobile Internet Digital Home (MIDH) business unit to attack
growingopportunity in consumer devices such as smartphones, tablets
and smart TV 9. 9 | P a g eLenovo forms a joint venture with NEC,
creating the largest PC company in Japan.Lenovo acquires Medion, a
PC and consumer electronics company based in Germany,substantially
increasing presence in consumer market in Western Europe.Forbes
names Lenovo one of the worlds 100 Most Reputable Companies2012
Lenovo forms a joint venture with EMC to selling servers in China
and developstorage solutions Lenovo acquires Stoneware, a software
firm focused on cloud computingLenovo announces it will acquire
CCE, a leading consumer electronics company in BrazilLenovo sells
its 75 millionth ThinkPad2.The Legend Behind LenovoIn 1981, IBMs
first PC was introduced, which launched the PC revolution (Lenovo,
2010).IBM had an open architecture policy, which allowed others
access to the instructions andspecifications that IBM had created
to build its very own PC. After the development ofIBMs computer,
interest in the PC industry drastically increased.Lenovo was
established in Beijing, China, by Liu Chuanzhi and ten engineers,
who weremembers of the Chinese Academy of Sciences in 1984 (Lenovo,
2010).Legend created their very first product, a Chinese character
card for computing in 1985,which could read English software and
process commands in Chinese characters. In 1988, theChinese
character set received the National Science Technology Progress
Award
(Lenovo,2010).2http://www.lenovo.com/lenovo/us/en/history.html,2013-04-271981IBM
launches PCrevolution1984Legend is founded inChina1985Legend
creates firstproduct, a ChineseCharacter Set 10. 10 | P a g
eLargest PC Manufacturer in ChinaThe very first Legend PC was
launched in 1990. At that time Lenovo changed its role frombeing an
agent of imported computers, to producing and selling their own
brand of computerproducts (Lenovo, 2010).Legend became a publicly
traded company on the Hong Kong stock exchange in 1994. TheLegend
PC division was formally established that year. After only four
years of launching itsfirst PC, Lenovo manufactured its one
millionth PC (Plunkett, 2010).Lenovo became the largest PC producer
in China, producing 770,000 computers per year in1998,
outperforming IBM (Gonela, 2009).1990Legend launched itsfirst
PC1994Legend builds onemillionth PC; andgoes public in
HongKong1998Legend becomeslargest PCmanufacturer inChina2002Legend
beginsmaking MobilePhones2003Legend is renamedLenovo2005Lenovo
acquiresIBMs PC Division 11. 11 | P a g eThe Convergence of IBM and
LenovoAt the beginning of the millennium, Legend entered the Mobile
Phone market and expandedinto different categories of the
technology industry.In preparation for the global market, Legend
adopted the name Lenovo in 2003. They tookthe Le from Legend to
honor their roots and added novo, the Latin word for new,
torepresent the innovation at the core of the company (Lenovo,
2010).The most important year for Lenovo was in 2005. They acquired
IBMs personal computingdivision, making them the third largest
computer company in the world (Plunkett, 2010).Lenovo became the
sole provider of IBM personal computers, but IBM still continued
tofinance and provide maintenance services for their PCs.Ownership
of LenovoThe majority of Lenovo is owned by Legend Holdings, which
is controlled by the Chinesegovernment. Legend Holdings is a
Chinese investment company which was formed by theChinese Academy
of Sciences that invests in IT, investments, and real estate.Lenovo
announced a strategic investment worth $350 million with three
leading equity firmsin 2005, using part of the investment towards
purchasing the IBM PC business ("US FirmsInvest," 2005). Texas
Pacific Group (TPG) invested $200 million, while Newbridge
CapitalLCC invested $50 million. TPG is one of the largest private
equity investment firms in theworld, and they were also the
creators of Newbridge Capital. Newbridge is an investmentcompany
that invests in emerging markets, particularly in Asia. General
Atlantic LLC, thatIBMLenovo 12. 12 | P a g eprovides capital and
strategic support for growth companies, invested in $100 million
("USFirms Invest," 2005) .IBM also has a significant portion of
ownership in Lenovo. When Lenovo purchased IBMsPC division in 2005,
IBM became the owner of 18.9% of Lenovo (Lenovo, 2010). IBM
hasdecreased their shares of ownership in Lenovo, but they still
provide Lenovo with supportservices for Think brand
products.Percentages of Ownership 13. 13 | P a g eCurrent
PositionLenovo is positioned in three market segments: China,
emerging markets (excluding China)and mature markets. The following
section will explain the whereabouts of the markets, andLenovos
future plans in the different regions. Before 2009, the main
markets were classifiedas Greater China; Europe, Middle East and
Africa; Americas; and Asia Pacific (excluding 14. 14 | P a g
eChina). Lenovo consolidated their market segments to have a more
streamlined businessapproach. Over the last two years, Lenovo has
gained the fourth largest market share in theworld, and continues
to be the largest producer of PCs in China. After a brief
description ofthe market segments, current strategies are included
to give insight on their position in theglobal market.China is by
far the largest source of revenue for Lenovo. As of 2010, China
held 47 percentof their total revenue, which is an increase of more
than 6 percent from the prior year. About3.5 percent of the sales
are contributions from about two months of Lenovo Mobile
revenues,Lenovos recent re-acquisition of the mobile internet
company in November 2009 (Lenovo,2010). In Lenovos current Protect
and Attack strategy, China is a main focus. Lenovosplan is to
protect China, grow revenues and expand in the market in which they
have hadgreat success historically. Lenovo is currently the largest
manufacturer of PCs in China, anddespite the global crisis that has
taken a toll on nearly all other markets, Lenovo hascontinually had
strong demand. Demand was driven by economic stimuli and rural
subsidyprograms. Additionally, unit shipments grew 37.4 percent
from 2009. Lenovo is currentlytargeting rural markets, government
stimulus projects, and SMBs, (small-and-medium-sizedbusinesses).
Lenovos market share in the PC industry in China grew to 33.4
percent. Chinawas the only market segment to have gains in 2010. In
fact, from 2009 to 2010, the Chinasegment operating profit
increased $68 million, which was the only reason Lenovo turned
aprofit in 2010. The emerging market and mature market segments
both had net losses(Lenovo 2010/11 Annual Report).Lenovos current
strategy involves attacking the mature markets which include:
NorthAmerica, Western Europe, New Zealand, Canada and Australia.
Mature markets are usuallyfairly stable and lack significant growth
and innovation. Historically, these markets havebrought in steady
revenues throughout the past decade. However, recent revenues have
beenlargely off-set by large expenses, and economies in many mature
markets have been severelyweakened by the global financial crisis.
Over the last four years, sales in mature markets havedecreased as
a percentage of total revenue. In 2006, about 51 percent of the
companies salescame from mature markets, while at the year-end
2010, the percentage of sales decreased to37 percent. However,
sales grew 11.43 percent in 2010 (Lenovo 2007 Annual Report,
2010Report). 15. 15 | P a g eAs of Q1 2011, Lenovo increased their
unit shipments year-to-year by 49 percent andimproved their market
share to 5.6 percent in mature markets. Lenovo also improved
inprofitability. Due to the financial crisis in 2008, Lenovo had a
net operating loss of $107million at the end of the 2009 year, and
a net operating loss of $97 million at the end of the2010 year.
However, as of the fourth quarter of 2010, the mature market
segment only lost$6 million, which is a huge improvement from a $37
million loss in the fourth quarter of2010(2009/2010 Annual Report).
The improvement in the Mature Market is due to the strongshipment
growth and cost cutting measures along with improving economies
(Lenovo, 2010).Lenovo is looking to bring a profit in the mature
markets in the coming years (Lenovo2010/2011 Q1 Report).Within the
last year, Lenovo has implemented its Mature Markets Group, which
essentiallyunites many of the markets into one entity for cost
cutting purposes. The Mature MarketsGroup was also created in
effort to streamline the business structure. Lenovo also formed
aChannel Partner Organization that allows Lenovo to improve their
relations, furtherimproving profitability. Their attempt to show
their partners their commitment to its BusinessPartner Channel bas
been through holding partner events throughout the year to
improverelations (Lenovo 2010 Annual Report).The emerging market
segment currently holds the smallest percentage of revenue for
Lenovo.After the 2010 year, Lenovo held 15 percent of the yearly
sales of $16,605 million, whichamounts to about $2,640 million. The
emerging markets include: Africa, Asia Pacific(excluding Japan,
Australia, New Zealand), Central and Eastern Europe, Hong Kong,
India,Korea, Latin America, Mexico, Middle East, Pakistan, Russia,
Taiwan and Turkey. China isnot included because it is the homeland
country. Unlike mature countries with slow growthand innovation,
emerging markets are in a state of rapid growth, with much
potential forrevenues. In both 2009 and 2010 Lenovo posted large
losses of $107 and $97 millionrespectively. Like the mature
markets, losses were largely due to the global financial
crisis.Lenovo is however recovering. After the first quarter of
2010, Lenovos unit shipmentsincreased 69 percent from the prior
quarter last year. The crisis is letting up and growth isnow
starting to take a toll. Likewise, Lenovos emerging market share
has increased 140basis points to 5.4 percent. Lenovos focus in the
emerging markets is primarily onconsumers, so they launched more
Idea products (Lenovos consumer PC line) to address thedemand for
consumer PCs (Lenovo 2010/11 Annual Report). 16. 16 | P a g eLenovo
is currently implementing the protect and attack strategy, a term
coined in 2009 toexpand their market shares globally. Essentially,
the strategy is to protect their core businessin the Chinese market
for PCs, and expand in emerging markets and mature
markets.Globally, Lenovo holds about 10 percent of the PC industry.
Currently, Lenovo is the largestPC manufacturer in China with a
market share of 28.7 as of Q1 2010. Revenues from theChinese market
alone made up about 48 percent of Lenovos total revenues as of
2010(Lenovo 2010/11 Annual Report).Lenovos success in China can be
attributed to several reasons. Firstly, Lenovo is a China-based
company. Since 1984 Lenovo was in the business of producing home
computers inChina, and were the first to do so (Lenovo, 2010).
Since 1997, they have been the largestproducer of PCs in China.
Additionally, they have held a strong brand name and forecastsshow
they will continue to be the strongest PC company in China (Mirae
Asset, 2010). Evenafter the entrance of HP and Dell into the
Chinese market, Lenovo has held their ground.Protect & Attack
StrategyThe attack part of the strategy involves mainly emerging
markets, but also mature markets.Lenovo is focusing on SMB and
consumer products to increase their market share. Lenovoalso
attacked Lenovo Mobile Communication Technology Ltd. in January of
2009 andrecorded about $91 million in revenues in about two months
in early 2010 before the year 17. 17 | P a g eend. Much of the
success of Lenovo Mobile Communication Ltd. is in the success
ofLePhone, Lenovos smart phone that is competing with Apples iPhone
in China. The Groupsaw an increase in revenue in emerging markets,
but due to the change in classification ofgeographic segments,
further extraction of regional revenue is very
difficult.Additionally, The Lenovo Way has been a topic of
discussion for the entire Lenovocompany. From the top down, Lenovo
is implementing a new idea to streamline theircompany culture in
order to increase efficiency and innovation (Lenovo 2010
AnnualReport). The Lenovo Way adds core values to their current
protect and attack strategy toresult in executing excellence and
achieving objectives. The way includes commitmentand ownership to
improve overall profitability and increase productivity (2009/2010
AnnualPresentation).According to Dow Jones & Company, Inc,
Lenovo is considering opportunities foracquisition in China,
specifically in the mobile internet sector, global consumer
computermarket and developing regions (WSJ, 2010). Although at this
time, Lenovo has not made anymoves to acquire. 18. 18 | P a g
eBenchmarkingAfter comparing Lenovo to its top competitors, many
aspects of the companies stand out.One of the most important
financial aspects is the gross margin. Lenovos gross margin
ispressuring all parts of the business. Even after drastic
cost-cutting procedures in 2009 and2010, Lenovos gross margin is
the lowest. The challenge will lie in where to makeadjustments.
Lenovo could raise prices, further increasing gross margin, but
that maydecrease sales and overall profitability. Competitors
operations are large enough to utilizeeconomies of scale, in which
they can lower their per-unit costs.Additionally, Lenovos research
and development costs are also the lowest by a long-shot.Lenovo,
being the largest PC company in China should be concerned,
especially because HPand Dell are continuing to expand their
presence in China with considerable force. Lenovo,even with a
home-court advantage ,will have to step up their game to compete
with thepower-houses of the PC industry.Lenovos leverage is also a
number to consider. Having a leverage of 5.58 is relatively highto
other PC manufacturers, except for Dell. The high leverage could
add a level of risk tocurrent and future investors. The leverage
could give investors potential for significant gains,but for a
large company like Lenovo, its important that they consider the
long-term well- 19. 19 | P a g ebeing of the company. Leveraging
such a significant amount of their finances could over timepose a
huge risk for Lenovo.Lenovo does seem to have a fairly illiquid
position against its competitors, but the risk is notas apparent
after digging deeper. The reason they have more current liabilities
than currentassets is in their payment structure of trade payables.
Their current ratio is below 1, whichindicates they cannot cover
their short-term obligations with their current assets.
However,their days in trade payables is 77 days and days sales
outstanding and days sales in inventoryare both about 22 days. This
means that Lenovo collects their receivables much faster thanthey
expend their payables, thus showing an illiquid position.Product
LinesThe ThinkPad laptop is well known for its outstanding
performance and reliability, its theultimate business tool. This
laptop offers small-business solutions, enterprise and
educationsolutions, powerful mobile workstations, durability,
ergonomic designs, and tools that willsave businesses time and
money. Lenovos ThinkPad X201 won Best Business Laptop,from Computer
Shopper in 2010 (Lenovo, 2010).The ThinkPad was 61.2 percent of
Lenovos sales, as of Q1, 2009/2010, bringing in largestamount of
the companys revenue. This line of PCs primarily target commercial
consumers.Lenovos Think products grew 9 percent YTY, which was
better than the global industryaverage. It also outperformed the PC
Market with 15 percent unit shipment growth this pastyear (Lenovo,
2010). 20. 20 | P a g eThe IdeaPad is a high quality computer
offered at a convenient price to consumers. Its forbusiness and
pleasure, according to Lenovo. This computer has high
definitionentertainment and security tools for consumers. Lenovo
offers light notebooks and touchscreen tablet notebooks in this
line of their PCs. Lenovos IdeaPad Y550 won Best BudgetLaptop, from
About.com in 2009. (Lenovo, 2010).The IdeaPad was 34.5 percent of
Lenovos sale, as of Q1, 2009/2010, bringing in the secondlargest
amount of the companys revenue. Shipments increased 86 percent YTY
and salesincreased 94 percent (Lenovo, 2010).Product TrendsOn
Lenovos Q1 results, for 2009/2010, desktop computers accounted for
33.2 percent ofLenovos total sales, notebooks accounted for 60.5
percent, mobile devices accounted for 3.5percent, and other
products accounted for 2.8 percent (Lenovo, 2010).Consumers are
becoming less interested in desktop computers as technological
trends arechanging. Consumers and small businesses are now looking
for more portable computerswith access to wireless internet. That
way they have easy access to the internet wherever theymay be. As a
result, notebooks have become the core source of revenue for
Lenovo.Notebooks will continue to be a strong source of revenue,
but there is also great potential inthe mobile internet
industry.IDEA34.5%THINK61.2%Mobile3.5%Others0.8% 21. 21 | P a g
eLenovo realized the PC and mobile internet phone industries were
converging, so theyrepurchased Lenovo Mobile for twice the price
they sold it for just two years ago (Schuman,2010).The company does
not believe that mobile internet devices will replace notebooks
because ofthe sizes of keyboards and screens, but there will be an
increase in the demand for mobileinternet devices within the next
few years.Cloud ComputingCloud computing is a technology that uses
the internet and central remote servers to maintaindata and
applications. Cloud computing is a fast-rising concept that allows
consumers andbusinesses to rent or use numerous IT services without
installation. Additionally, businessescan acquire these
applications on any computer as long as the computer has internet
access.This technology allows for much more efficient computing by
centralizing storage, memory,processing, and bandwidth at a low
cost.Desktop33.2%Notebook60.5%Mobile3.5%Others2.8% 22. 22 | P a g
eIn a chief information officer survey by Gartner, about 1,600 CIOs
managing over $120billion of IT spending stated that cloud
computing is their second most important priority thisyear
(Singapore, 2010).Just recently, Lenovo has announced the companys
cloud computing strategy and named itSecure Managed Client. Lenovos
cloud computing strategy consists of offering a number ofcloud
computing products, ranging from its LePhone, ThinkPad and IdeaPad
laptops,desktops, enterprise servers and large public computing
facilities (Xinhua News Agency,2010). According to the company,
Secure Managed Client will help businesses to reduce ITcosts and
security risks by turning off hard drives and storing all data in a
non-server remotelocation. Lenovo states that cloud computing can
reduce the average $120 a month thatenterprises spend to fully
manage a PC to as low as $70 (Channel Insider, 2010). Thecompany
hopes their vision will appeal to enterprises and both small and
medium-sizedbusinesses. Mr. Chen Xudong, Lenovos vice-president and
general manager of the Chineseoperations, said Lenovo will be
offering a simple cloud solution with a flexible andstreamlined way
to manage companies complex IT environments. Lenovo plans
tointroduce more cloud terminals in 2011 (Xinhuas China Economic
Information Service,2010).Liu Jun, senior vice president of the
company mentioned a cloud terminal, internet TV. Mr.Jun believes
that capturing the internet TV market will post an explosive growth
of over 336percent each year (Xinhuas China Economic Information
Service, 2010).SponsorshipLenovo did not want to be seen as just a
Chinese company, but as a global brand with a highquality computer
(Clifford, 2008). This is highly concentrated on building brand
awarenessbecause not many consumers know of the company outside of
China. Lenovo had decided toassociate themselves with sports to not
only establish themselves as a global brand, but toalso associate
themselves with values that are closely related to the company.
That is exactlywhat the Olympics and Formula One Racing provided
for Lenovo (Ladousse, 2009). Creatinga sponsorship with the
Olympics and Formula One provided Lenovo with the opportunity
tomarket their product worldwide. 23. 23 | P a g eLenovo was a
sponsor for the 2006 Winter Olympic Games in Turin, Italy and the
2008Summer Olympic Games in Beijing, China (Clifford, 2008). Lenovo
provided the Olympicsas well as other partners of the Olympics
computers, servers, engineers, technicians and avariety of other
technologies. Lenovo also won the Olympic torch design beating out
over300 competitors for the 2008 design. The torch was named the
cloud of promise (Lenovo,2010). Lenovo is able to associate their
product as a world class brand by sponsoring theOlympics.Lenovo
contributes to Formula Ones business in every way possible. They
provide theVodafone McLaren Mercedes Team with technology to help
improve race teamperformance, engineering and testing, product and
development and even to start the carsbefore races and test
sessions (Ladousse, 2009). Formula One has such a large dependence
ontechnology, which is why this partnership is so successful.
Lenovo is able to associate their 24. 24 | P a g eproducts with top
performance and high reliability by providing the Vodafone team
with thetechnology they need to win.CompetitionThis section deals
primarily with Lenovos main competitors. Other computer companies
aretrying to maximize their market share at home while also
reaching abroad, beyond theircountrys borders. China is seen as one
of the most profitable emerging markets in the world,and the PC
industry has taken great interest to say the least. The following
briefly discusseseach of the global top five PC manufacturers as
well as the popular Apple corporation.Lenovo was already the
largest PC maker in the worlds most populous country, China, whenit
acquired IBMs PC operations for approximately $1.75 billion in 2005
(Hoovers, 2010).The deal allowed Lenovo to have exclusive access to
the prestigious IBM logo for five years,along with permanent
ownership of the ThinkPad brand of computers. IBM helped pioneerthe
PC industry in the 1980s, but more recently its PC division has
dragged down on theirprofits, a factor that led to their decision
to sell off the branch. Now IBM can focus more onits services and
software, while simultaneously boosting Lenovo into the global PC
market(Knowledge@Wharton, 2005). Lenovo currently owns
approximately 10% of the worldwidePC market, and 28.6% of the
market share in China, where it generates about half of its
sales(Fletcher, 2010).Lenovo HP Dell AcerAsusandToshibaApple 25. 25
| P a g eCompetition: DellAt the moment, Lenovo is the
fourth-largest PC maker in the world by shipments
behindHewlett-Packard, Dell, and Acer (Fletcher, 2010). Although
Lenovo is number one inChinas market, the competition for this
coveted position is becoming more intense. Dell inparticular is
about to turn up the heat and implement some significant changes in
its overseasstrategy. China is the companys largest source of
revenue besides the United States, and intheir last quarter, their
revenue from China grew 52% from the year before. Dell now
ownsabout a 9% share of the Chinese computer market. Just this
month Dell announced it wouldbe shutting down its large
manufacturing plant in Winston-Salem, North Carolina, and it willbe
investing $100 billion in China over the next decade. Dell and
Lenovo both make laptops,netbooks, desktops, servers, and now they
have started to create smart-phones (Local TechWire, 2010). Dell
also ships almost twice as many units as Lenovo on a global scale,
whichputs Lenovo at a disadvantage in gross margin and per-unit
research and development andadministrative costs (Technology
Business Research, 2008). 26. 26 | P a g eCompetition: HPHP is the
worlds largest PC manufacturer by sales, and it was the second
largest PC vendorin China. Now Dell and HP are both at about the
same level with about an 8 or 9 percentmarket share as seen in the
graph on the previous slide. They are trying to strengthen
theirpresence even more, and are in the process of negotiating a
deal with Chinas three mobilecarriers China Mobile, China Unicom,
and China Telecom to start offering HPs low costnetbooks for sale
(Chao, 2009). HP has a distinct advantage over Lenovo on a global
scalebecause they sell more than twice as many units as Lenovo, and
enjoy many of the benefitsthat come with economies of scale like
lower costs associated with each unit (TechnologyBusiness Research,
2008). Interestingly, David Roman, a former Apple executive and
formervice president of HPs worldwide marketing communications, was
just hired by Lenovo thisyear. Mr. Roman was the man behind HPs
acclaimed The computer is personal againadvertising campaign.
Lenovos brand name may gain a significant boost with the help
ofthis well-respected marketer (Madden, 2010). HP is also looking
to open many large-formatbranded stores throughout the Asia-Pacific
region, a strategy that proved successful in theU.S. and in India
where it already has more than 1,000 retail outlets (Hicks,
2008).Competition: Acer, Toshiba, AsusThe Taiwan-based company Acer
just fell into third place this year behind HP and Dell as thetop
leaders of the PC industry (Sherr, 2010). Acer acquired the
well-known Gateway and 27. 27 | P a g ePackard Bell brands in 2007
for $710 million which greatly increased their market share
inAmerica and Europe. This also gave Acer access to popular
retailers like Best Buy andCircuit City. Lenovo also had their eyes
on Packard Bell, which had a strong presence inEurope and would
have strengthened Lenovos brand image to consumers outside of
Chinabefore Acer took control. Thankfully for Lenovo, Acer doesnt
have nearly as strong apresence in the Asian market with 6 percent
market share compared to Lenovos nearly 30percent. However, Acers
CEO J. T. Wang says that, Lenovo is strong in China, but we
aregrowing everywhere. The senior vice president of Lenovo, Ravi
Marwaha says, The mostimportant thing is to make sure Lenovo
continues to grow in China. The Chinese market isthe companys
primary concern and will act as a growth engine driving Lenovos
expansionin global markets (Gonela, 2009).During the second quarter
of 2010, Asus and Toshiba tied for fifth place in the worldwide
PCmarket. Asus is a Taiwan-based company and it is notable for
being the worlds largestmanufacturer of computer motherboards. In
2008 it made a big appearance in the consumermarket when it
released the Eee netbook, one of the most attractive and
inexpensivecomputers available. This wildly successful product
helped launch Asus into one of thebiggest computer manufacturers.
Asus is quickly becoming a considerable threat as theirshipments
rose 80 percent from the second quarter of 2009 to the second
quarter of 2010,nearly quadruple the industry average (Ogg, 2010).
The Toshiba corporation is based inTokyo, Japan and they are known
for their computers as well as medical equipment,transportation
systems, appliances, and a variety of other products. Because of
their widebreadth of products, Toshiba may have an advantage over
Lenovo in that they have the powerto drop some of their business
units and pour more funds into their computer manufacturingunit.
Toshibas shipments in the lucrative U.S. market grew 50 percent in
the first quarter ofthis year (Pettey, 2010).Competition:
AppleApple on the other hand is missing a huge opportunity in the
Chinese market says Lenovochairman Liu Chuanzhi. We are lucky that
Steve Jobs has such a bad temper and doesntcare about China. If
Apple were to spend the same effort on the Chinese consumer as we
do,we would be in trouble (Hille, 2010). Apple has not responded to
Mr. Lius comments butthey are planning on opening a new store in
Shanghai along with 25 other retail outlets in the 28. 28 | P a g
ecountry by the end of next year. Part of the reason Apple doesnt
have much of a presence inChina is because only a few stores are
authorized to sell their products. The iPhone forexample, is only
legally available through China Unicom, the countrys
second-largestmobile phone operator, and its selling price is much
higher than the normal going rate.China Unicom is the Chinese
equivalent of the American telecom network AT&T, the
solecell-phone provider for the iPhone in each companys respective
country. China Unicom isfar behind market leader China Mobile, and
it is notorious for its bad service, whichnegatively affects Apples
image (Einhorn, 2010). The iPhone is also in direct competitionwith
Lenovos smart phone, LePhone, which is customized for Chinese
users. Apple has theadvantage of having over 100,000 content
providers that create apps for the iPhone, whereasLePhone only has
1,000 (Hille, 2010).HP; 18.1%Dell; 12.8%Acer;12.4%Lenovo,
10.1%Toshiba, 5.4%Asus; 5.4%Apple; 4.9%Others ; 30.9% 29. 29 | P a
g eSource http://prafulla.net, April 14, 2013 5:36 amKey success
factorsFor Lenovo to continue making profits and continue competing
against its massivecompetitors, there are several key success they
must reach in order to see the companyprosper. These factors
include: pursuing markets outside China, becoming more
innovative,reaching economies of scale and continuing their strong
presence in China. 30. 30 | P a g eWe focus every day on meeting
our commitments and delivering results. Guided by a clearstrategy,
we are able to protect our core businesses and attack new
opportunities for growthin any market worldwide. Our business
requires exceptional execution every day, in everymarket, for every
customer-Yang YuanqingPursue Outside MarketsIn order to continue to
grow outside of China and keep up with competitors in the
PCIndustry, Lenovo is concentrating on pursuing outside markets.
This includes emergingmarkets such as Asia Pacific (Excluding
Japan, Australia and New Zealand) and India as wellas mature
markets such as North America and Western Europe. This presented
anextraordinary opportunity for the global success of Lenovo. In
the 2009/2010 Q1 results,Lenovo achieved for the first-time ever,
double-digit market share worldwide increasing theirglobal PC
market share to 10.2 percent (Lenovo, 2010).As a result of Lenovos
global strategy to pursue outside markets, emerging markets
salesrose 50 percent and mature markets sales rose 39 percent
(Lemon, 2010). As Lenovocontinues to pursue this strategy, the
company will gain a stronger global presence as well asincrease
market share in emerging and mature markets.Our performance was
strong globally, Lenovo has a clear strategy when and where tofocus
on gaining share, and when and where to focus on maximizing profit,
and weexecuted that strategy well.-Lenovo Chairman, Liu
ChuanzhiInnovationLenovo has made a commitment to become well known
for their innovation in products andtechnology. Our goal is to put
more innovation in the hand of more people, so they can domore
amazing things (Lenovo, 2010). Of the top 50 most innovative
companies of 2010,Lenovo ranked 30 according to Bloombergs Business
Week (Boston Consulting Group,2010). This is a great achievement
considering Lenovo is a much younger company than theircompetitors.
31. 31 | P a g eAt this past years Consumer Electronics Show,
Lenovo stood out with several of theirindustry first products such
as the IdeaPad U1, the worlds first hyrbid notebook, theIdeaCentre
A300, the worlds thinnest all-in-one PC and IdeaPadS10-3t, the
worlds firstmulti-touch capacitive tablet netbook (Understanding
Lenovo, 2010).Lenovo is also expanding into new categories such as
the mobile internet market. Their latestproduct was their LePhone
Smartphone, which is only available in China. This device runson
the same program as the Google Android OS. It is now the number one
preferred mobiledevice in China (Lenovo 2010/11 annual
report).-First modern laptop to fly inspace-First with a
spill-resistantkeyboard-First with built-in CD-ROM-First with
built-in DVD-ROM-First with built-in wirelesscapabilities-First
with embedded securitysystem-First with built-in
fingerprintreader-First dual-screen mobile workstationRecord
ForInnovation 32. 32 | P a g eLenovo has many plans for the future
of the company. They are planning to release a hybridcomputer
sometime in the near future, a game console in 2011, and they are
currentlyworking on the development of an Android tablet PC.A
hybrid personal computer, IdeaPad U1, is planned to be launched in
China in early 2011(Lenovo Sets Hybrid, 2010). This will be the
industrys first hybrid PC, which has adetachable screen that
functions as a netbook computer as well as tablet. By fusing
thefunctionality of a notebook with the slate tablets rich
multi-touch entertainment and mobileInternet experience, U1
provides consumers the freedom to choose the device they prefer
forany activity, Lenovos vice president Liu Jun stated (Lenovo,
2010).Lenovo also saw an area of growth potential in the video game
console market. They arelaunching a game console, called eBox, with
Beijing Eedoo Technology Ltd, in 2011(Lenovo to Launch, 2010). The
eBox does not use a physical game controller. Instead, thegame
console is controlled by movements and gestures detected by a
camera. This devicewill integrate a cloud computing software
architecture, providing interactive games for users(Lee, 2010).An
Android tablet, known as LePad will be launched sometime in the
near future. Thisdevice is similar to the iPad that was recently
introduced by Apple. The company has yet toenclose a launch date,
as the device is still under development but they do believe that
tabletPCs will be a smaller portion of the market at least for the
next five to ten years.Lenovo plans to launch new technology to
keep up-to-date with the technological trends, butthey will still
maintain their focus on notebooks and desktops (Lenovo to launch
tablet,2010).IdeaPad U1 IdeaCentreA300IdeaPadS10-3t LePhone 33. 33
| P a g eKey issuesLenovo is in a position to face many challenges
in the PC market. The emerging markets arestill in a rough
financial position. Likewise, mature markets are still lacking
financial strengthand are easing out of recession. Also, China is
the fastest growing country in the world, soLenovo must be quick to
adapt and respond to movements in the market. Without therevenue
from China, Lenovo would be in a world of trouble. In 2009, Lenovo
recorded a lossof $225 million, making it the biggest loss in the
history of the company (Lenovo, 2010).Fortunately at the year end
of 2010, Lenovo pulled out a $129 million gain. The
followingsection will debrief the challenges Lenovo is facing and
will potentially face in the nearfuture.Weak Global Brand
ImageDespite Lenovo being the fourth largest computer company in
the world, their brand image isnot well known outside of China.
Many Chinese companies have not succeeded in marketingtheir
products in other countries very well, mainly due to their lack of
advertising,sponsorship, and the perceived quality of Chinese
products. Foreign consumers may have astereotypical notion that
Chinese products are cheap and low quality because of theabundance
of dollar store products that are stamped with the well known Made
in Chinamark. This stigma may negatively affect Lenovo, though
their recent purchase of the PCdivision of the American company IBM
may help that.Hybrid IdeaPadU1LePad AndroidTableteBox GameConsole
34. 34 | P a g eLenovo has also not advertised their products in
other countries well enough for consumers toidentify the brand.
This puts Lenovo at a competitive disadvantage in their pursuit of
newmarkets where industry giants like HP and Dell already have a
well known presence.A variety of different marketing strategies
have been implemented to strengthen brandawareness, including the
exposure Lenovo received in its purchase of IBMs personalcomputing
division. The company also renamed itself in 2003 from Legend to
Lenovo, theysponsored the 2006 Winter Olympics and the 2008 Summer
Olympics, and they continue tosponsor Formula One Racing. Each of
these events have helped increase Lenovos brandawareness, but there
are many consumers in the market that are still unaware of who
thecompany is. In order to dissociate itself from not be recognized
as a low quality product,Lenovo has stepped away from being
portrayed as a Chinese company. Lenovo has blendedtheir management
staff to include original Chinese managers as well as American
managerswho used to be a part of IBM. They have also established
several headquarters andmanufacturing plants in multiple countries
around the world.Gross Profit Margin PressureCurrently, Lenovos
cost of sales is extremely high; nearly 90 percent. This indicates
that themark-up on Lenovos products is very low. This is mainly
attributable to the emerging andmature markets. For the last 2
years, both the emerging market segment and the maturemarket
segment have had losses. In the 2009 year, Lenovo reported a
combined operatingloss of $244 million and in 2010 a loss of $162
million in the emerging and mature markets.The decrease in losses
in 2010 can be attributed to their significant cost-cutting
measures andincreased overall sales. Lenovo decreased their
selling, general and administration costsnearly $350 million. A
portion of this is their 11 percent staff layoff, sales and
distributionexpenses were reduced by $100 million, administrative
and research and developmentexpenses decreased $66 million, and
other operating expenses were lessened by $170 million(SinoCast
Computers & Electronics Beat, 2010). However, sales increased
from 15 billion in2009 to over 16.5 billion in 2010. Additionally,
their PC shipments rose 48 percent in China,outperforming the
market growth rate of 21 percent. Even still, economies in the
emergingmarkets and mature markets are hurting Lenovos
profitability. Lenovo has had to keep pricesdown in effort to keep
sales up. In those segments they have increased profitability, but
untilthe economies gain significant strength, gross margin will
remain under pressure. 35. 35 | P a g eWhile the strengthening
economies will add profits to Lenovos operations, economies ofscale
will also significantly increase their gross profit margin and
ultimately their net income.Economies of scale is when a company
such as Lenovo can produce mass amounts of theirproduct in order to
decrease per unit costs. Companies such as Dell and HP have
operationsmuch larger than Lenovo and with gross margins of 18 and
24 percent respectively, they havemuch more control over price and
less strain on other parts of their operations.Competition: Dell
& HPThe PC industry is currently one of the most competitive
industries in the world. Since thePC revolution in the 1980s, PC
manufacturers have been constantly striving to produce thenewest,
fastest, most innovative machine. Lenovo was born in China, one of
the fastestgrowing countries in the world, and they have a
significant market advantage over itscompetitors there. They have a
strong brand image in their home country and have had notrouble
bringing in high revenues.However, industry giants HP and Dell have
already started infiltrating China and have nointentions of letting
up. They are trying to grasp the opportunity of increasing their
profits,especially in times like this, when many of their
historically successful countries arestruggling financially. Lenovo
now has to compete both at home and abroad with some of
thestrongest companies in the world. Dell already owns a 9% share
of the PC market in China,and over the next decade they plan to
invest around $100 billion into the country. HP ownsan 8.2% share
and they are currently the biggest PC manufacturer in the world.
These twocompanies appear to be the biggest threats to Lenovo both
globally and in China.Dell and HP both have higher revenues than
Lenovo, and have the ability to pursue a widervariety of options
with all their money. It isnt as big of an issue for them to
penetrate aforeign market like China. Obviously Lenovos funding is
more limited, so they need to findan efficient balance for their
expenses between the Chinese market and outside markets. Thegraph
on the next slide illustrates the differences in purchasing power
between the threecompanies.The graphs depict the worldwide total
amounts of revenue, gross profits, and netincome of HP, Dell, and
Lenovo, which are the top three PC companies in China. ClearlyDell
and HP have a lot more capital to work with compared to Lenovo. The
distribution ofspending power between the three has remained pretty
consistent over the past several years.The fiscal year ended 2011
is not yet complete and is therefore not portrayed. 36. 36 | P a g
eWhat Lenovo Could Gain From Buying BlackBerryLenovo (992) means (
lenovo group ltd (992:Hong Kong)) executives cant seem to
stoptalking about BlackBerry (BBRY) means (research in motion
(BBRY:NASDAQ GS) . First,the Chinese computer makers chief
financial officer, Wong Wai Ming, told BloombergNews in January
that the company was looking at all opportunities, including the
Canadiancompany formerly known as Research in Motion. Now
BlackBerrys share price is risingbecause Lenovo Chief Executive
Officer Yang Yuanqing suggested his company is seriouslyconsidering
acquiring it. Yang told French financial newspaper Les chos that a
deal withWaterloo (Ontario)-based BlackBerry could possibly make
sense, but first I need to analyzethe market and understand what
exactly the importance of this company is.A Lenovo spokesman says
the company has not done any specific evaluation or activity fora
BlackBerry deal. Lenovo confirms that the company evaluates all
growth opportunities ona regular basis, Brion Tingler said in an
emailed statement. We continue to focus ondriving organic growth
while at the same time, as we have stated many times in the past,
wewill consider M&A when it is aligned with our Protect and
Attack strategy.Its easy to see why Yang is interested in a foreign
brand such as BlackBerry. Unlike manyChinese companies just
beginning to move beyond their home market, Lenovo is already
aglobal player. As the dominant brand in China, it is also growing
fast in Europe, Africa, andthe Middle East. In the fourth quarter,
Lenovo was the only one of the top five PC companiesto enjoy any
growth in those markets,( HP Retakes Top Spot From Lenovo as PC
Shipments Decline according to data fromGartner.)Lenovo has
consistently shown its not afraid of buying down-on-their-luck
Western brandsto expand its reach. Thats the tactic the company
followed for its computer business in 2005,when it bought the PC
division of IBM (IBM). The rough integration that
followedprecipitated Yang taking over in 2009 from former Dell
(DELL) dell inc (DELL:NASDAQGS) executive William Amelio. New CEO
of Lenovo Group Yang Yuanqing and formerCEO William J. Amelio.
Eventually, though, the deal helped Lenovo join the top ranks
ofglobal computer makers: The company is neck-and-neck with Hewlett
Packard (HPQ) dellinc (DELL:NASDAQ GS) for bragging rights as the
worlds largest PC company, havingpassed HP in the third quarter
before the American company regained its lead. 37. 37 | P a g eYang
and others at Lenovo know they cant afford to stick with computers.
Lenovo isgrowingsales increased 8.2 percent in the fourth
quarterbut the overall pie is shrinkingfast: PC shipments fell
almost 5 percent in the quarter. Thats why company executives
talkabout a PC+ era for the company. Theyve had success in China,
where Lenovo has inthree years vaulted from nowhere to No. 2 in the
smartphone market, ahead of Apple (AAPL)and behind only Samsung
Electronics (005930).Repeating that success outside China will be
challenging. Abroad, Lenovo wont enjoy thesame consumer brand
strength or unmatched distribution network. BlackBerry remains
afavorite among business customers, and it could be just what
Lenovo needs to overcome itsglobal weaknesses and compete against
Apple and Samsung. Buying a tired brand withstrong ties to the
corporate world worked once for Lenovo. Yang might be looking for
arepeat.Analysis and DiscussionMarket Definition/Description.The
market is defined by the following type of products:Notebook PCs
are those with a screen size that is more than 11 inches in various
form factorsand configurations. Mobile thin-client terminals,
notebooks, media tablets, mobile phonesand smart phones are not
included in this Magic Quadrant.Desktop PCs include desk-based
systems of various form factors and configurations.However, we do
not include thin-client terminals or technical workstations in this
MagicQuadrant. Although we are not evaluating thin-client
offerings, we do broadly consider howeach vendor approaches
alternative delivery models.For more information about notebook and
desktop definitions, see "Dataquest Guide:Computing Hardware
Definitions, Worldwide, 2009."The main customers in this market
fall into three private-sector segments:Enterprises that operate
globallyEnterprises that operate regionally but have some global
presence 38. 38 | P a g e Midmarket or large enterprises that
operate in one or more countries and have more than1,000
employeesVendor Strengths and CautionsAcerAlthough Acer is a global
powerhouse in consumer PCs, it has not been able to translate
thatsuccess into the global enterprise market. In selected areas
(Europe and Africa), the companyhas established good corporate
capabilities; however, the level of commitment, products
anddirection are not consistent across all geographies. Customers
requiring high levels of serviceand support for PCs should expect
to rely on local channel partners, especially if they areoperating
in multiple countries. Users may need to make separate deals for
each region, andexecution could be inconsistent as a
result.StrengthsAcer has good market visibility.It provides good
regional offerings in education and for small or midsize businesses
that aresupported by a good channel partner network.Acer has some
global product offerings, with a highly efficient supply chain and
a strongmarket presence across many regions, but targeted mostly to
transactional business.Figure1. Quadrant forGlobal
EnterpriseDesktops and NotebooksSource: Gartner (October 2012) 39.
39 | P a g eCautionsAcers large-enterprise-level product offerings
are weak. Commercial systems are targeted attransactional (small
business and retail) markets.It lacks global service and support
capabilities and has limited global account management.Acer has
limited, but improving, capabilities for delivering standardized
products acrossmultiple regions.Its image and platform stability
programs are limited.AppleAn increasing number of companies are
interested in procuring Macs for all or part of theirglobal fleets.
Apple has intentionally chosen to focus its business toward
consumers. It doesnot aggressively develop programs and services
for global enterprise customers. Fororganizations that have a
strong dependence on Windows applications, the decision to
adoptApple Macs can be a more complex undertaking, because Macs are
not directlyinterchangeable with PCs from other vendors in the
market. Organizations that have multiple-country operations will
likely need to make separate arrangements in each region, with
localpartners making global deployments more complex.StrengthsApple
exhibits excellent product design and innovation.It has ongoing
financial and organizational stability.Apple shows strength in
selected vertical sectors in which high-end media creation tools
arenecessary.Cautions 40. 40 | P a g eApple lacks consistent global
service and support capability.Its enterprise-focused global sales
organization and account management capability arelimited.It lacks
an enterprise-focused product offering.DellDell is a strong
corporate PC supplier with good global coverage and capabilities.
Althoughthe company provides good products and has bolstered its
worldwide service capabilities, itsexecution continues to be
inconsistent, with some customers complaining of late deliveriesand
inconsistent support levels. As the company positions itself beyond
its PC roots, we see itbeing less competitive on PC pricing, but
broadening the range of products and services it canprovide. This
includes the recent addition of thin clients through the purchase
of WyseTechnology. Dell is a strong viable supplier for all
business PC requirements, and for globaland large-enterprise
organizations.StrengthsDell offers good-quality products, programs
and services targeted to global enterprisecustomers in mature
markets.It has strong levels of account management for global
enterprise customers.Its broad product models cover a variety of
form factors, including thin clients.The company provides generally
good global coverage.CautionsDell experiences execution issues for
some large global accounts at times, which results inpoorer
responsiveness and less-competitive pricing.Midsize enterprises
that do not achieve "global account status" with Dell may
experienceinconsistent service and support levels. 41. 41 | P a g
eAlthough Dell has good global coverage, at times, customers
experience uneven service andsupport levels in some regions,
especially in emerging markets.Although channel partners are
playing a more important role in enterprise business comparedwith
the past, Dells overall channel to market is still
limited.FujitsuFujitsu has improved its ability to execute on a
global basis and provides a good option forcorporate purchasing for
many organizations. Although its U.S. operations are still
relativelyweaker, it has added desktops and bolstered its North
American capabilities. Fujitsu is also astrong supplier of pen
tablet PCs, an important segment with Windows 8.StrengthsFujitsu
offers a range of high-quality, enterprise-class products with
global availability,including desktops.With Fujitsus strong line of
pen-tablet products designed for vertical markets, it is
well-positioned for Windows 8 enterprise tablet implementations.Its
global pricing, account management and service offerings are
improving.Fujitsu has a good managed desktop service portfolio
across Europe.CautionsFujitsus global presence and investments are
focused mostly on Europe, the Middle East,Africa and Japan.Market
share erosion has stabilized, but its market share position raises
questions aboutongoing investment in global programs and services.
42. 42 | P a g eIts emphasis on global and large accounts
management capabilities has been inconsistent,although improvements
have been noted.HPHP remains the strongest overall PC provider,
with a strong global presence and portfolio ofservices and
products. It is a strong viable supplier for global enterprise
customers, regardlessof business size. The disruptive events of
2011 are no longer a concern, and HP customershave no specific
reasons to be concerned about the current organization. We see
positivesigns that HP is refocusing on its PC efforts as it
approaches 2013. Although we have seensome signs of minor weakening
of market share and less-competitive pricing, overall, wehave no
concerns about HP as an enterprise PC provider.StrengthsHP has a
good understanding of the market and good execution of market
strategy.It has good account management for its largest global
enterprise customers.HP has the broadest product portfolio among
its competitors, covering all form factors.Strong channel ties give
HP greater choice for fulfillment, which is an advantage especially
among midsize organizations and in some emerging economies.HP
provides best-in-class response to industry supply
issues.CautionsHPs overlapping PC brands can be confusing and may
get more so in an era ofconsumerization. 43. 43 | P a g eGlobal
implementations, especially those involving coordination across
multiple countries,have experienced increasing issues during the
past year. However, sales force restructuringlooks well-designed to
respond to recent problems regarding global accounts.LenovoLenovo
has consistently improved its position both in global capabilities
and in marketunderstanding during the past several years, and its
market share growth has reflected theseimprovements. It continues
to provide well-designed products at very competitive prices.Lenovo
is becoming a stronger option for organizations requiring global PC
deployments,and is a strong viable supplier for all business
notebook and desktop requirements.StrengthsLenovos product design
is strong, with continued investment in development
capabilities.Its ThinkPad brand is established, well-known and high
quality.Lenovo has made continuous improvements in its sales
strategy, channel and supply chain,combined with an aggressive
competitive approach to the corporate market.It has increased its
focus on difficult geographies, such as African countries.Lenovo
improved its service offerings by moving coordination and control
in-house.CautionsExpanding product brands is creating some overlap,
which can be confusing for midsizeorganizations.Current aggressive
pricing from Lenovo may not carry forward in future years.The
differentiation provided by Lenovos ThinkVantage software tools is
eroding. Alternativeofferings from Microsoft and third parties are
improving and are often free, reducing thevalue of Lenovos unique
tools. 44. 44 | P a g eOf the larger players, Lenovos efforts to
expand beyond the PC to provide broader servicesand data center
capabilities are not as well-developed and may require customers to
deal withmultiple vendors.PanasonicPanasonic is a provider of
ruggedized and semiruggedized notebook computers. AlthoughPanasonic
is not positioned to fulfill all of an organizations global PC
requirements, withinits target market, it provides a solid level of
support and capabilities.StrengthsPanasonic has excellent
engineering capabilities.It has a strong understanding of selected
vertical markets.Panasonic is a viable supplier of ruggedized and
semi ruggedized products, with a longhistory of leadership in that
niche market.It has a strong understanding of mobile broadband and
other wireless integration.Panasonic has invested in global
operation expansion; however, the coverage is not yet to thelevel
of leading vendors global coverage.CautionsA lack of desktop
offerings makes it inappropriate if a sole PC vendor is
desired.Panasonic lacks a consistent global presence. Global
service and support depend on partners.It has limited experience
with mainstream users outside of vertical solutions.Vendors Added
or Dropped 45. 45 | P a g eWe review and adjust our inclusion
criteria for Magic Quadrants and MarketScopes asmarkets change. As
a result of these adjustments, the mix of vendors in any Magic
Quadrantor Market Scope may change over time. A vendor appearing in
a Magic Quadrant or MarketScope one year and not the next does not
necessarily indicate that we have changed ouropinion of that
vendor. This may be a reflection of a change in the market and,
therefore,changed evaluation criteria, or a change of focus by a
vendor.AddedNo vendors have been added.DroppedNo vendors have been
dropped.inclusion and Exclusion CriteriaThis Magic Quadrant focuses
on suppliers that work directly or indirectly with globalenterprise
buyers. The set of vendor inclusion criteria covers up to 90% of
the total desktopand notebook market for enterprises. To appear in
this Magic Quadrant, vendors must satisfythe following
criteria:Offer desktops and notebooks for professional usersOperate
business globallyHold more than 4% of the market share in
enterprise markets in one of the major regionsEvaluation
CriteriaAbility to ExecuteThis axis evaluates PC vendors on the
quality and efficiency of the processes, systems,methods or
procedures that enable their performance to be competitive,
efficient andeffective, and to positively impact revenue, retention
and reputation. Ultimately, globalenterprise desktop and notebook
providers are judged on their ability and success incapitalizing on
their visions. 46. 46 | P a g eAbility to Execute consists of the
following criteria:Product availability product portfolio and
rangeOverall viability (business unit, financial, strategy,
organization) product quality andavailability, service and support,
as well as the vendors financial strengthSales execution/pricing
the availability of special sales teamsMarketing execution the
vendors market share in the global enterprise marketMarket
responsiveness and track record ability to respond to changing
market conditionsto achieve competitive successCustomer experience
the vendors ability to provide support and servicesOperations
factors that impact the vendors ability to meet
commitmentsEnvironmental performance and capabilities, including
supply chain and productsCompleteness of VisionThis axis evaluates
desktop and notebook vendors on their ability to convincingly
articulatelogical statements about current and future market
direction, innovation, customer needs andcompetitive forces, and
how well they map to the Gartner position. Ultimately,
globalenterprise desktop and notebook providers are rated on their
understanding of how marketforces can be exploited to create
opportunities for the provider. 47. 47 | P a g eCompleteness of
Vision consists of the following criteria:Market understanding
mechanisms for customer feedbackMarketing strategy the vendors
ability to provide various professional servicesSales strategy the
vendors capability to work with customers through its sales force
andsales tools.Offering (product) strategy the vendors strength in
R&D and the capability of productdesign, and the vendors
ability to offer image stabilityVertical/industry strategy the
capability of providing vertical-specific servicesInnovation
product innovation, an approach to providing alternative
application deliverymodels and green IT solutionsGeographic
strategy the capability of providing products and services
globallyEnvironmental programs, including sustainability goals and
processes.Quadrant DescriptionsLeadersPC vendors in the Leaders
quadrant register the highest scores on Ability to Execute
andCompleteness of Vision. These vendors have wider geographic
coverage, comprehensive 48. 48 | P a g esales organizations,
financial stability, comprehensive customer support, broader
productportfolios, longer product availability and larger market
presence, compared with vendors inother
quadrants.ChallengersChallengers have high scores in Ability to
Execute, but their Completeness of Vision scoresare not as high as
those of the Leaders. Challengers often have a good market presence
andfinancial stability, but they may have less geographic coverage,
or they lack an innovativeview of the products, compared with the
Leaders. There are no Challengers in this
MagicQuadrant.VisionariesVisionaries have high scores in
Completeness of Vision; however, their Ability to Executescores are
not as high as the scores of vendors in the Leaders quadrant. Their
market presencemay be less than that of the Leaders, and their
financial stability may not be as solid. Also,their sales
organizations and customer support mechanisms may not be as
comprehensive asthose of the Leaders.Niche PlayersVendors in the
Niche Players quadrant do not have high scores on both axes. They
often havea low market share, and their market coverage of
different regions is limited. Many of thesevendors have a strong
consumer PC business. It is important to note that a PC
vendorsposition in this quadrant is not a value judgment on
suitability, because that vendor mayspecialize in particular areas
in a vertical-market segment or have product portfolios in
whichLeaders may not have much focus.ContextThis Magic Quadrant is
designed to assist global enterprise customers in selecting
vendorsthat are able to supply a large number of PCs in multiple
regions. The results of this analysiscombine evaluations of the
vendor attributes that matter most to global enterprise
customerswhen selecting PC suppliers. The attributes we evaluated
include product portfolio, global 49. 49 | P a g ecapability,
financial health, account management, service and support. This
Magic Quadrantcovers both global enterprise notebook and desktop
vendors. In cases where a vendor doesnot provide desktop systems,
we have called it out in the cautions and factored it into
thevendors position on the Magic Quadrant.Each vendors position is
accurate for the factors included in this analysis. Clients
shouldassess their priorities and apply these while performing due
diligence as part of the vendorevaluation process. It is not
uncommon for clients with unique requirements to find that
alesser-known vendor is best-suited to meet their needs.The Magic
Quadrant for Global Enterprise Desktops and Notebooks will be
updated eachyear to reflect changes in market dynamics. We evaluate
a vendors position based on:The quantitative parameters we obtain
from vendors through a questionnaire responseA qualitative analysis
based on vendor interviewsSubjective evaluations based on extensive
feedback from Gartner clients and scores given byeach of Gartners
user-facing client computing analysts against a range of
criteriaMarket OverviewGlobal organizations are not necessarily
very large enterprises with tens of thousands ofusers, and yet they
have specific requirements that pose unique challenges to PC
suppliers.For global enterprise customers, price is an important
consideration, but not usually theprimary purchase criterion.
Instead, the purchase decision process considers various
factors,including the ability to provide appropriate services and
to support global deployments.Working with desktop and notebook
vendors that can meet these requirements helps reducethe total cost
of PC ownership.The PC market is a mature market, and we continue
to see signs of potential consolidation.Attributes that we capture
in this Magic Quadrant include the commitment to the
enterprisemarket by established professional PC vendors and the
likelihood that consumer players willexpand on their global
enterprise capability. Because most corporate customers have
movedto a single-supplier strategy for purchasing their PCs, we put
a high value on the breadth ofproducts that are supported by a
strong channel network. Gartner regards global presence as a 50. 50
| P a g esignificant criterion for evaluating potential PC
suppliers. The Leaders in this MagicQuadrant are all international
vendors that can provide consistent products and servicesacross
multiple regions. Some of the players are global, but without
enterprise accountmanagement capabilities and/or explicit stable
platform programs. Although smaller vendorscan also play
effectively in the enterprise PC market, lack of global
capabilities for deliveryand/or support would put them into a Niche
Players or Challengers position. Some smallerplayers specialize in
specific vertical markets.During late 2011 and 2012, the corporate
PC market has been challenging to many of theplayers. While the PC
replacement cycle has continued to prop up overall corporate
unitsales, competition in the PC market is fierce, and many PC
makers have been struggling tomaintain the discount levels offered
in previous years. As in 2011, we continue to seeinstances where
the attributes that qualify a PC as a business-class model which
includeelements such as long image stability, long product life
cycles and a three-year standardwarranty are eroded and shortened
by vendors to maintain margins. At the same time, theeffects of
supply disruptions caused by natural disasters (for example, Japan
earthquakes andThailand flooding) have created serious challenges
in product delivery and exposed thedifferences in vendor supply
chains.Looking forward, the PC market is undergoing significant
upheaval as traditional enterprisevendors compete with consumer
offerings and new classes of device for the IT budget. Newplayers
are jockeying for position in the enterprise environment, but few
have madesignificant inroads as of yet. We do include several
players whose main focus is on theconsumer PC market, and we are
constantly monitoring others to see whether they meet ourinclusion
criteria. Moving into 2013, the rising interest in mobile devices
and tablets willprovide opportunities for PC makers to innovate
with new form factors, but also will createrisks for those who cant
provide the right balance of quality, price and
differentiation.Although we havent considered tablets as part of
this years Magic Quadrant, we haveadjusted the weighting around
innovation and the overall approach to the mobile market toreflect
the growing importance of this part of the market.The relative
positions of the vendors have remained mostly stable this year, as
you wouldexpect from a mature market:Lenovo has moved up with
respect to its Ability to Execute, reflecting its surging
marketposition. 51. 51 | P a g eFujitsu has seen some small
improvements in its Completeness of Vision and Ability toExecute,
mostly because of improvements in its global capabilities.Dell has
seen some improvement on Completeness of Vision but has seen its
Ability toExecute eroded throughout the year by some inconsistent
customer support and less-competitive pricing.HPs position has
remained relatively unchanged from last year, as improvements
inorganizational stability have been balanced by issues with global
account management.Some minor movement of other vendor positions
has occurred as a result of adjustments tothe weighting of various
metrics (as noted above) and does not necessarily reflect changes
inthe vendors approach to the market or
capabilities.RecommendationsThe following recommendations have been
made to address their key issues that areimpeding their
profitability: increase advertising and sponsorship, maintain a
strong presencein China, pursue outside markets and consider future
acquisitions. Implementation of therecommendations will give Lenovo
the strength it needs to compete with their competitors.Increase
AdvertisingLenovo has already taken several steps to increase its
brand awareness outside of China, suchas sponsoring the Olympics,
an event that ensures advertisers that their message will reach
aglobal audience. Unfortunately for Lenovo, that is not enough, as
many people still have noteven heard of them.Lenovo hired former
Apple and HP executive David Roman earlier this year. Mr. Romanwas
responsible for the famous HP The computer is personal again
advertising campaign.Lenovo should use this man who has so much
experience to their advantage. HPsadvertisements featured
well-known celebrities using HP computers in stylized
televisioncommercials and magazines. Lenovo should put Mr. Roman in
charge of a fresh advertisingcampaign that should be distributed to
their most promising markets outside of China. At 52. 52 | P a g
ethe moment Lenovo is making more than twice as much revenue in
mature markets likeAmerica and European countries, than in their
emerging market segment. People in maturemarkets are more likely to
have access to televisions and purchase magazines than those
wholive in less developed areas, and Lenovos ads have a greater
chance of being seen there. Forthis reason Lenovos forecasted
advertising budget has been increased in order to pursue thisnew
strategy. This is reflected in the selling and distribution
expenses section of the incomestatement. It may take some time
before the full impact of these ads are realized and benefitLenovos
net income. The important aspect of this advertising campaign is to
get Lenovosname to reach a wider audience, not to increase profits
immediately.Increase SponsorshipIn order to increase brand
awareness and capture the global market, Lenovo should form
apartnership with ESPN. ESPN is known as the worldwide leader in
sports entertainment.They will be able to provide Lenovo with the
opportunity to increase brand awareness in theUnited States as well
as in other areas of the world. ESPN televises 65 sports in 16
languagesin more than 200 countries (ESPN, 2010). They will be able
to increase Lenovos marketshare globally with an emphasis on the
values their company possesses.Lenovo has a reputation for
sponsoring sports. They sponsored the Winter Olympics in
2006,Summer Olympics in 2008 and they continue to sponsor the
Vodaphone McLaren FormulaOne Race team. Forming a partnership with
ESPN will only enhance their association withsports and they will
reach a much larger audience. 53. 53 | P a g eLenovo will be able
to provide ESPN with the technological equipment they need to
performeveryday business activities including computers, servers,
software updates, and even websiteassistance. In return, ESPN
anchors will use Lenovo laptops live on Sports Center
whenbroadcasting. ESPN will benefit from being provided with
up-to-date technology and Lenovowill benefit from ESPN by
increasing their brand image all across the nation. ESPN couldalso
have a sports segment, featuring New World Sports, showcasing
sports from aroundthe world and could be brought to you by Lenovo.
This could increase international sportsexposure along with Lenovo
computers to ESPN viewers.Not only would this partnership open up
doors for Lenovo to expand into the United Statesand other
countries, but this will also benefit ESPN in becoming more popular
in China. Inorder to carry out this partnership Lenovos sponsorship
expense will increase, which is alsoreflected in the selling and
distribution expense in the forecasted income statement (Refer
toAppendix E). 54. 54 | P a g eStrong Presence in ChinaLenovo is
currently the number one PC manufacturer in China, and their growth
rate is about1200 basis points higher than the Chinese industry
average. They should carefully watchtheir two main competitors,
Dell and HP, on their home front and make sure they stay
ahead.Lenovo currently owns a 28 percent market share in China,
which is about three times morethan Dell and HP which hold the
number two and three positions respectively. These twocompanies
will most assuredly try to increase their own brand awareness to
Chineseconsumers to become more of a household name and increase
their sales. Lenovo should tryto diffuse their efforts as much as
possible through counter advertising (refer to
advertisingrecommendation page for markets outside of China). Their
ads should emphasize that theyare a Chinese company and garner some
national pride among their Chinese customers. Itshould also include
references to their superior customer service awards so that they
becomeestablished as a reliable, helpful company that keeps their
customers needs in mind.This year Lenovo was among the top 10
winners of the fifth annual rankings for BestCustomer Service in
China, an event that is widely considered to be the benchmark
forevaluating customer service in the country. They won awards for
providing exemplarycustomer service practices and also for best
service innovation. Liu Chuanzhi, chairman ofLenovo Group, also won
a prize for outstanding leadership in customer service (China
Daily,2010). It is important for Lenovo to maintain this
prestigious position as it will helpdifferentiate itself from its
competitors and build brand loyalty for its customers. If
theycontinue to pursue a customer-driven marketing strategy, then
their reputation will grow,more consumers will find them
attractive, and they will keep their current customers comingback
time and time again, producing high customer equity. A good
reputation is a valuableintangible asset that breeds word of mouth
advertising that rakes in more potential customers. 55. 55 | P a g
eIncrease R&DIn an effort to better compete with competitors,
we recommend that Lenovo increase theirresearch and development
costs to 3 percent of their annual revenues. In the past 3
years,Lenovo has allocated between 1.3 and 1.5 percent of revenue.
This boost in R&D will ideallyopen up the grounds for better,
more innovative products that will out-perform
competitors.Currently, Lenovo is among the lowest of HP, Dell, and
Apple in terms of R&D, mostlybecause of the sheer size of their
competitors. An increase of about 1.5 percent will be adrastic
change. Over the next five years, Lenovo will be spending over $1
billion per year onR&D. In addition, we are confident that the
increase in R&D will allow Lenovo to controlmore of their
pricing due to the differentiation of their innovative, superior
product line. Thiswill increase gross margin, allowing Lenovo to
reach much higher profits, than with their oldallotment of R&D.
In 2015, Lenovo could see a net profit of $631 million, $180
millionlarger than the forecasted net income for 2015 without the
increase of R&D. As a result of theincrease, we expect Lenovo
to see a constant 5 percent additional revenue growth per year
forthe next five years. However, holding all else equal, Lenovo
could experience a slight drop innet income in 2011, but the other
recommendations will balance the loss until drasticinnovative
measures can take place. 56. 56 | P a g eAcquisitions &
MergersMr. Yang Yuanqing, the CEO of Lenovo, hasnt identified any
suitable acquisition targetsrecently. There currently are no
opportunities for mergers and acquisitions, he said.Acquisitions
are an important means of expansion, but buying opportunities could
surfacewhen market prices are more rational, he said (Chao, 2009).
Now may not be Lenovostime for acquisitions, but the company should
keep its eyes open towards the near future.Even though Lenovo is
the fourth largest PC manufacturer in the world, there is a large
gapbetween it and its larger competitors in terms of revenues,
assets, and size in general (seegraphs on page 31).Should any
smaller company come out with a cutting edge product or technology,
Lenovoshould consider buying the company and adding the new
innovation to Lenovos repertoire.The same goes for any other
relevant company that would be willing to sell itself for
areasonable price. If Lenovo purchases these smaller companies
wisely, then they willbecome one step closer in