MARKETING PROJECT

ON

COMPUTER INDUSTRY

Submitted by: - Submitted to:-

Sushil Kumar JIML-10-151 Dr. REETI AGARWAL

Vivek Dubey JIML-10-170

Surpreet Singh JIML-10-FS-046

Tapas Kumar Pal JIML-10-162

Utkarsh Pratap Singh JIML-10-174

Acknowledgement

We take immense pleasure to acknowledge the efforts of the following people who helped our group to make this project a reality. We express my gratitude for their suggestions, guidance and intellectual influence.

We express our sincere thanks to Dr Reeti Agarwal, Core Faculty, for making this project a reality.

We are thankful to all our Lecturers for their help and kind co-operation throughout the course. Last, but not the least, I would like to thank our parents and friends who always supported in all our endeavors.

Industry Overview

The impact of the global economic crisis in 2008 reached far and wide. It has

significantly affected the worldwide PC market demand as many large enterprises

delayed purchase decisions and reduced IT budgets. Even the growth of the China PC

market has slowed down under the economic challenges. At the same time, the PC

industry as a whole has shifted dramatically and rapidly to lower price points, imposing

additional pressures on industry players. During the 2008/09 fiscal year, the year-on-year

growth of worldwide PC market shipments decelerated to approximately 4 percent

mainly supported by consumer and low-priced notebook segments. The China PC market

and worldwide commercial PC segment in which Lenovo® is heavily weighted showed

significant slowdown in the second half of the fiscal year under the economic crisis. In

addition, the Group could not enjoy the benefits of the growth in transaction space as it

has not adequately addressed the worldwide transaction segment outside China, in

particular the consumer market. Lenovo reported lower-than-market growth in its

worldwide PC shipments which only increased by approximately 2 percent year-on-year.

As a result, the Group’s market share decreased slightly to 7.6 percent, ranking number

four worldwide during the fiscal year. The Group’s financial performance in the second

half of the 2008/09 fiscal year was significantly impacted by the widespread economic

slowdown. Lenovo’s overall sales for the fiscal year decreased 9 percent year-on-year to

approximately US$14,901 million, resulting from the slower PC shipment growth and a

steeper-than-normal decline in average selling prices exacerbated by the weak economic

backdrop. The Group’s gross margin performance was further affected by the continued

shift in the market to lower price points, aggressive pricing and currency fluctuations.

The gross margin (excluding one-off items) for the fiscal year declined to 11.9 percent

from 15.0 percent while gross profit (excluding one-off items) decreased 27 percent year-

on-year to approximately US$1,779 million. In anticipation of continued deterioration in

the global economic environment, Lenovo announced a global resource restructuring plan

in January 2009 to reduce costs and enhance operational efficiency. About 2,500

employees were eliminated as a result of this action which is expected to realize annual

savings of approximately US$300 million on a run rate basis in the coming fiscal year.

Despite Lenovo’s efforts to control expenses during the 2008/09 fiscal year, the decline

in sales and pressure on gross margin resulted in 95 percent year-on-year decline in the

Group’s profit before taxation (excluding the cost of restructuring actions and one-off

charges) to approximately US$29 million for the year. The Group reported a loss

attributable to shareholders of approximately US$226 million, after accounting for

US$146 million of restructuring costs and US$71 million of one-off charges. This

compared to a profit attributable to shareholders (including US$20 million net profit from

discontinued operations) of US$484 million in the previous fiscal year.

Vendor highlights

Hewlett-Packard (HP) made further inroads into consumer portables through the retail

channel and continued to gain share overall. The vendor's shipments grew 3.6% on year

worldwide with above-market performance in the US. The company also performed well

in Europe and Asia Pacific.

Although still heavily affected by the commercial slump, Dell saw good growth from

consumer-focused SKUs and reclaimed the number one spot in the US. The company

continues to restructure operations, develop its consumer business, and should benefit

from an eventual rebound in the commercial segment.

Acer continues to capitalize on its growing channel presence to ship portables geared

toward a wide range of cost-conscious consumers. The company maintained its lead in

mini notebook PCs while its early entry into Atom-based netbooks should also pay

dividends later in the year. The company saw a significant gain in the US market, likely

benefiting from the troubles of Dell and Lenovo.

Lenovo's renewed focus on notebooks and emerging regions produced positive growth

following declines in the past two quarters. Solid growth was reported in Latin America

and Asia Pacific market excluding Japan, while yearly declines in mature regions slowed

compared to the first quarter of 2009. Its home court advantage in Asia Pacific market

excluding Japan also has led it to focus on a myriad of government stimulus programs,

which could pay dividends while riding through the commercial downturn.

Toshiba had a solid second quarter where it outgrew the market in most regions and

moved up to the fourth spot in the US. Toshiba's mini notebook offering has helped it to

weather the storm comparatively better than other Japan-based OEMs and it was the only

major Japan-based OEM to have positive yearly growth in Japan.

Top five vendors’ worldwide PC shipments

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

Rank Vendor 2Q09 shipments Market share 2Q08 shipments Market share Y/Y

1 HP 13,095 19.8% 12,644 18.5% 3.6%

2 Dell 9,108 13.7% 10,984 16.1% (17.1%)

3 Acer 8,431 12.7% 6,815 10% 23.7%

4 Lenovo 5,757 8.7% 5,596 8.2% 2.9%

5 Toshiba 3,494 5.3% 3,163 4.6% 10.5%

Others 26,407 39.8% 29,202 42.7% (9.6%)

All

Vendors

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

* PCs include desktop and portable PCs (including mini notebooks), but

exclude x86 servers.

Source: IDC, compiled by Digitimes, July 2009

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

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

4Q ’07 Client PC Shipments

(Notebook PCs + Desktop PCs)

4Q ’08 Client PC Shipments

(Notebook PCs + Desktop PCs)

Vendor Market Share Vendor Market Share

Hewlett-Packard 17.6% Hewlett-Packard 15.6%

HCL 10.8% Dell 10.9%

Lenovo 8.9% HCL 9.6%

*According to IDC’s India Quarterly PC Tracker 2008, 4Q 2008 quarter, March 2009

release

PC Shipments’ Market Share

4Q 2008 PC Shipments

(Desktop PCs + Notebook PCs)

1Q 2009 PC Shipments

(Desktop PCs + Notebook PCs)

Vendor Market Share Vendor Market Share

Hewlett-Packard 15.6% Hewlett-Packard 18.2%

Dell 11.0% HCL Infosystems 9.8%

HCL Infosystems 9.6% Dell 9.7%

Acer 7.7% Acer 7.3%

Lenovo 6.6% Lenovo 4.7%

PEST analysis

1. Political (inc. legal)

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

2. Economic

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

3. Social

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

4 Technological

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

5 Market structure

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

Company Market shareHP 18.1%DELL 15.6%LENOVO 7.8%ACER 9.4%TOSHIBA 4.4%OTHERS 44.7%

Market Share of various players in PC Industry

Industry Profile

In India, the software boom started somewhere in the late 1990s. Most of the Indian

software companies at that moment offered only limited software services such as

the banking and the engineering software. The business software boom started with

the emergence of Y2K problem, when a large number of skilled personnel were

required to fulfill the mammoth database-correction demand in order to cope up with

the advent of the new millennium.

The profile of the Indian IT Services has been undergoing a change in the last few

years, partly as it moves up the value chain and partly as a response to the market

dynamics. Ten years ago, most US companies would not even consider outsourcing

some of their IT projects to outside vendors. Now, ten years later, a vast majority of

US companies use the professional services of Indian Software engineers in some

manner, through large, medium or small companies or through individuals recruited

directly.

The market competition is forcing organizations to cut down on costs of products.

The professional IT services on the other hand are becoming increasingly expensive.

The offshore software development model is today where onsite professional

services were ten years ago. There is a high chance (almost a mathematical

certainty), that in less than ten years, the vast majority of IT services (software

development being just one of them) from developed countries, will be, one,

outsourced and two, outsourced to an offshore vendor.

Despite the global economic slowdown, the Indian IT software and services industry

is maintaining a steady pace of growth. Software development activity is not

confined to a few cities in India. Software development centers, such as Bangalore,

Hyderabad, Mumbai, Pune, Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara,

Bhubaneswar, Ahmedabad, Goa, Chandigarh, and Trivandrum are all developing

quickly. All of these places have state-of-the-art software facilities and the presence

of a large number of overseas vendors. India’s most prized resource is its readily

available technical work force. India has the second largest English-speaking

scientific professionals in the world, second only to the U.S. It is estimated that India

has over 4 million technical workers, over 1,832 educational institutions and

polytechnics, which train more than 67,785 computer software professionals every

year. The enormous base of skilled manpower is a major draw for global customers.

India provides IT services at one-tenth the price. No wonder more and more

companies are basing their operations in India.

The industry is in an expansion mode right now, with dozens of new offshore IT

services vendors emerging every day, the industry has a high probability of being

subjected to the 80:20 rule in not too distant a future. In perhaps another ten years,

80 percent of all outsourced offshore development work will be done by 20 percent

of all vendors, a small number of high qualities, trusted vendors. Only a few select

countries and only the most professional companies in those countries will emerge as

winners. India will definitely be the country of choice for offshore software

development. It has the potential to become and remain the country of choice for all

software developments and IT enabled services, second only to the USA. The third

choice could be far distant.

India is among the three countries that have built supercomputers on their own. The

other two are USA and Japan. India is among six countries that launch satellites and

do so even for Germany and Belgium. India's INSAT is among the world's largest

domestic satellite communication systems. India has the third largest

telecommunications network among the emerging economies, and it is among the

top ten networks of the world.

To become a global leader in the IT industry and retain that position, India needs to

constantly keep moving up the value chain, focusing on finished products and

solutions, rather than purely on skill sets and resumes. It also needs to be able to

package its services as products, rather than offering them as raw material. It needs

to be able to recognize and build up on its strengths and work on weaknesses.

Another extension of the IT industry is the ITES (Information Technology Enabled

Services) which is a sector dependent on IT sector.

Information technology consulting (IT consulting or business and technology

services) is a field that focuses on advising businesses on how best to use

information technology to meet their business objectives. In addition to providing

advice, IT consultancies often implement, deploy, and administer IT systems on

businesses' behalf.

The PC industry is one of the strangest in the world. There is probably no other type

of product that is so technologically sophisticated, sells for so much money, and yet

is sold by so many companies for so little profit. The severe competition in the

industry is the #1 reason why so many problems are encountered by those who deal

with PC vendors. While I consider there to be absolutely no excuse for a company

not treating its customers fairly, at the same time I think customers should have some

idea of what vendors are up against in this demanding marketplace.

Features of the Industry

It Is Very Price Competitive: By far, the most important thing to remember about the

PC industry is this: it is one of the most competitive in the world. The main reason

for this is the simple fact that making a PC is just not that difficult. Most are

assembled from standardized components and not a lot of expertise is required.

There are few barriers to entry to the market, meaning it is easy to set up a new PC

company. As a result, there are tens of thousands of companies making PCs that

perform similar functions. This causes the market to be extremely price-competitive.

Most of the other characteristics of the industry follow directly from this fact.

Systems and Components Sell with Low Margins : Since the market is so

competitive, vendors often sell at very low margins. Computers aren't like

many other products, where the company selling the device is making

upwards of 50% of the price of the product as gross profit (meaning,

profit before overhead and general expenses). For PCs it is more like 10%

or less. Many people buy a $1500 PC thinking the vendor is making, say,

$500-700 on the item, and they find it hard to understand why these

companies aren't getting rich. It's more typical for the vendor to make less

than $100 profit on such a PC. Some small companies make virtually no

profit at all on straight PC sales, and survive on post-warranty support

and consulting!

The Market Experiences Rapid Price Fluctuations: There is probably no

other industry that has prices change as dramatically and frequently as the

PC industry. Usually, prices are decreasing. This is good for the

consumer but very bad for vendors, because it means that their already

low margins get squeezed if prices drop between the time that they buy a

product and the time they sell it. It's not unheard of for a vendor to buy a

component wholesale at price $X and find 24 hours later that the retail

price has dropped below $X! The vendor must then try to dump the

product as fast as possible to limit his losses. You won't find many

industries where this occurs with regularity.

Vendors Keep Low Inventories: In an environment where margins are

low and prices are generally dropping, keeping high inventory is a death

sentence--whenever prices drop the vendor potentially loses money on

every component in inventory at the time. For this reason, most

companies try to keep as little in inventory as they can get away with.

Vendors Contend with High Bankruptcy Rates : Because of all the

challenges involved in running a PC business, the bankruptcy rate is high.

Many vendors have been in business only a short time. Some open a

store, have it fail, and then open another one with a new name, sometimes

year after year.

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

manufacturers (OEMs) that produce and sell PCs bear most of the risk,

while the downstream suppliers of components make most of the profit.

Many analogies have been drawn with other mature-product industries,

such as automobiles, but we find such comparisons inaccurate. The key

difference is that the suppliers of PCs are struggling to identify

meaningful differentiation vs. competitors. This leaves manufacturers

competing primarily on price, which exacerbates the pressure on margins.

The airline business presents a more realistic comparison. Aircraft

manufacturers and airports are profitable and continue to benefit from

growth in demand, but the carriers are struggling and further

consolidation is viewed as inevitable.

Although the apparent inability to differentiate products drives the PC industry's

focus on price competition, the downward movement of pricing is also because of

oversupply. There are too many suppliers, all struggling with similar challenges in

this highly cash-intensive business. We continue to observe fire sales resulting from

overproduction and price-led promotions by PC suppliers looking to accelerate cash

flow or boost market share. The result is an industry which, in some market

segments, seems locked into a "race to the bottom" in the pricing of products.

Clearly, this trend is unsustainable.

In November 2004, these observations, combined with our market expectations for

2006 through 2008, led us to predict that by 2007, three of the top 10 PC suppliers

would exit the market. Within weeks, IBM announced the sale of its PC Division to

Lenovo Group. Our market analysis was straightforward. Unit growth between 2006

and 2008 will average about 6 percent, but revenue will remain flat. Key PC

component suppliers, such as Intel and Microsoft, have historically been highly adept

at maintaining their PC revenue, and their overall revenue from PCs will probably

continue to grow as the market continues to shift toward mobile PCs. This leaves PC

suppliers facing the prospect of producing more PCs for dwindling revenue. This

situation will inevitably lead to further consolidation among the leading suppliers.

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

Microsoft and other component suppliers will also see change as the structure of

their market evolves. Although these changes will ultimately result in a healthier PC

industry that is better able to equate innovation to sustainable business, the period of

adjustment will bring additional challenges to the buyers and users of PCs. Choice of

supplier and continuity of supply will be less certain, while the adoption of emerging

PC technologies will present additional risk.

This collection of research further explores the analysis behind these observations

and examines the likely impact for PC suppliers, key component suppliers and the

buyers of PCs.

Major Players in the PC Industry

1.

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

manufacturer in the world. The company was founded by Stanford University classmates

Bill Hewlett and David Packard in 1939.It is headquartered in Palo Alto, California,

United State and operates in more than 170 countries around the world. HP specializes in

developing and manufacturing computing, storage, and networking hardware, software

and services. HP is a Fortune 500 company and is ranked 9 in 2009. In august 2001, HP

and Compaq came together to merge by a 25 billion$ stock deal.

The company employs 321,000 people as on 31st December, 2008. Mark V. Hurd chief

executive officer and the chairperson of HP since September 22, 2006 has focused on

maintaining the companies leadership in exploring how technology and services can help

people and companies address their problems and challenges, and realize their

possibilities, aspirations and dreams.

Even in the poor economic conditions of 2008, the company had a net revenue growth of

13% from $104.2 billion in FY07 to $118.3 billion in FY08.

1.1 HP’s Product Line

The company HP provides a wide range of products and services to its customers and is

divided into six business segments:

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

personal computers, and its Personal Systems Group (PSG) is responsible for the

development and sale of HP's commercial and consumer PCs, workstations,

handheld devices, digital entertainment systems, and other related services and

accessories.

Imaging and Printing : Hewlett-Packard is the leading provider of imaging and

printing systems in the world. HP's Imaging and Printing Group (IPG) provides

consumer and commercial printer hardware, printing supplies, printing media and

accessories, and scanning devices.

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

the world, offering a wide range of servers and storage products and solutions for

small businesses and larger corporations.

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

services, including technology services, consulting and integration services, and

managed services.

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

assist large companies in managing their operations and information technology

infrastructure,

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

financial management services for its larger enterprise customers, small

businesses, and educational and governmental customers in order to allow its

customers to purchase complete end-to-end information technology solutions.

The company sets its corporate objectives as:

Customer loyalty

Profit 

Growth 

Market leadership

Leadership 

Commitment to employees

Leadership capability

Global citizenship

1.2 The SWOT analysis of HP

STRENGTH

Leadership position

Consumer centric brand

Strong after sales service

Design strategy: looks cost

strategy

WEAKNESS

Low flexibility: it does not have

high customization available

Decline in digital entertainment

market

Software service

OPPORTUNITY

PC business

Service industry: bought

world’s No 2

Service provider EDS

THREAT

Pricing pressure

Component pricing

Slow revenue growth

2.

Dell, a multinational technology corporation with its head quarters in Round

Rock, TX, USA develops, manufactures, sells, and supports personal computers and

other computer-related. Based in Round Rock, Texas, Dell employs more than 82,700

people worldwide.

Michael Dell founded the company as PC's Limited with capital of $1000 in 1984. He is

the present CEO and chairman of the company. Operating from Michael Dell's off-

campus dorm-room at  Dobie Center, the startup aimed to sell IBM PC-

compatible computers .Michael Dell started trading in the belief that by selling personal

computer-systems directly to customers, PC's Limited could better understand customers'

needs and provide the most effective computing solutions to meet those needs. The

company changed its name to "Dell Computer Corporation" in 1988.

Dell became the first company in the information technology industry to establish a

product-recycling goal (in 2004) and completed the implementation of its global

consumer recycling-program in 2006.

Dell offers a variety of products and services. Among its offerings are a wide array of

desktop and notebook computers, peripherals and software, technical support services,

and corporate servers and storage systems.

2.1 Dell’s Product Line

PCs (60% of revenue)

Dell produces several lines of consumer and commercial PC systems, including both

desktop and notebook models. Overall, Dell holds about 14% of the worldwide PC

market. Within the PC segment, desktops contributed 32% of Dell’s Fiscal 2008 revenue,

and notebooks accounted for 28%.

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

Dell sells various software programs with its PC systems, such as productivity software,

security programs, and games. Dell also sells a number of computer-related peripherals,

including LCD monitors, printers, input and storage devices, etc. Aside from PC-related

items, Dell sells various accessories and electronic devices, such as LCD televisions,

digital cameras, and MP3 players.

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

For its corporate customers, Dell provides both servers and storage systems. Dell also

sells customized servers and enterprise systems designed to meet the specific needs of

certain customers.

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

Dell also sells technical support services for its products, providing customers with

assistance after they purchase their systems. In Fiscal 2008, revenue increased 6% year-

over-year to $61.1 billion, The company recorded net income of $351 million for the

fourth quarter ended Jan. 30, a 48 percent drop from the $679 million it recorded in last

year's fourth quarter. Net income per share was $0.18. Revenue fell to $13.4 billion, a 16

percent drop from a year ago.

2.2 SWOT analysis of Dell

STRENGTH

Inventory turnover rate is 6 days.

Revenue growth at 100%

Cost efficiency

Direct to customer business model:

minimum credit risk

Latest technology customization

Internet sales leadership: $5M

everyday worldwide

Weakness

No proprietary technology

High dependency on component

suppliers

Lack of software support for

customers

Opportunity

Network service in B2B

Strong potential in china and India

Low costs and advanced technology

Growth in business, education and

government markets

Threat

Dell’s market share is very less

Price range considered premium

Currently fluctuation policy

instability

Tariff trade barriers

3.

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

named Multitech, it was founded by Stan Shih , his wife Carolyn Yeh, and a group of five

others in 1976. Multitech was eventually renamed Acer in 1987.

Acer is renowned for the development and manufacture of sophisticatedly and intuitively

designed, easy to use products. Focused on marketing its brand-name IT products around

the globe, Acer ranks as the world's No. 3 vendor for total PCs and No. 2 for notebooks,

with the fastest growth among the top-five players.

3.1 Acer’s product line

Notebook (71% of revenue) : Notebooks are Acer's most profitable product, generating

NT$417 billion in revenue in 2008. Within the past decade, growth in notebook sales has

far outpaced growth in desktop sales. For example, in 2007, overall notebook shipments

grew 33.8%, while desktop shipments grew only 4.8%.

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

computer, that are designed to be cheap, light weight, and easy to use. Acer is the #1

producer of netbooks worldwide by unit sales, with a 38% market share.

Desktop (12% of revenue): Annual revenue growth in desktop sales has slowed from

50.2% from 2004 to 2005 to 3.8% in 2008 as consumers demand more laptops. The

company expects desktop sales growth of 3-4% from 2009 to 2011.

Display (5% of revenue): Acer manufactures LCD monitors, HDTVs, and projectors. In

addition to consumers, the company is targeting businesses and governmental agencies

for volume sales.

Other (3% of revenue): Acer offers information security management, software systems

development, data center services, and other IT support services. In addition, in 2008,

Acer acquired E-Ten, a Taiwanese manufacturer of Pocket PC phones and PDAs.

3.2 SWOT analysis of Acer

STRENGTHS

Operational Efficiency — Tight

Control on Overhead Costs

Improved Economies of Scale

Fast Reactions to Market Changes

After Cautious ROI Evaluation

Aggressive Price Strategy —

WEAKNESS

Low Profit Margins

Multiple Brands, Which Increase

Costs and Dilute Resource

Brand perception as Low-Cost PC

Provider

Insufficient Attention to the

Particularly Suitable to a Time of

Economic Recession

Strong global logistics

Chinese Market the Second-

Largest in the World

OPPORTUNITIES

Economic Downturn, Which Favors

Low-Price Products

Growth Into the Chinese Market

Growth Into Midsize-Business

Markets

THREAT

Continued Price Decline in Mobile

PCs, Due in Part to Mini-

notebooks, Which Erodes Margins

and profitability

Dell's Expansion Into Indirect Sales

Samsung’s entering into consumer

mobile PC s.

COMPANY PROFILE

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

Lenovo acquired the former IBM PC Company Division, which marketed the ThinkPad line of notebook PCs, in 2005 for approximately $1.75 billion.

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

Lenovo markets its products directly to consumers, small to medium size businesses, and large enterprises, as well as through online sales, company-owned stores (in China only), chain retailers, and major technology distributors and vendors.

On September 4, 2009, Ocean wide Holdings Group, a private investment firm based in Beijing, bought 29% of Legend Holdings, the parent company of Lenovo, for 2.76 billion Yuan ($404.1 million). Legend Holdings is the asset management unit of the Chinese Academy of Sciences.

On November 27, 2009, Lenovo Group announced its intention to purchase Lenovo Mobile Communication Technology. Lenovo Mobile now ranks No.3 in China’s mobile handset market.

Company History

The following is a brief history of Lenovo:

2000: Legend shares peak at HK$14.75 on March 6.

2001: Dell takes the largest share of the worldwide PC market for the first time. Legend

sales reach a peak of HK$27.2 billion in the fiscal year ended March 2000 and decline to

HK$23.2 billion in the most recent fiscal year ended March 2004.

2003: The Company changes brand name to Lenovo from Legend to avoid infringement

of overseas brands. The company says it is preparing for expansion outside China, which

has overtaken Japan to become the world's second-largest PC market. The US remains

the world's largest PC market.

2004: The Company changes its name to Lenovo Group. Time Warner Inc, the world's

largest media company, on January 7 exits a US$50 million Internet venture in China

with Lenovo. China accounts for 99 percent of Lenovo's sales in fiscal year ended March

2004 and 98 percent in the previous 12-month period. Lenovo's first-quarter PC shipment

growth in China lags rivals such as Dell, according to market researcher IDC Corp.

Lenovo has a 10.9 percent share of the Asian market excluding Japan, compared with 7.3

percent for Dell. Lenovo's Asian shipments rise 19 percent, compared with 52 percent for

Dell. Lenovo's sales of services and hand-held electronics grow the fastest of all its

products in the most recent two fiscal years, each at an average rate that roughly

quadruples. Computer sales rise at an average rate of 9 percent in the same period.

Lenovo becomes an Olympic worldwide partner. It is the first Chinese company to

become a computer technology equipment partner of the IOC. Lenovo decides to develop

the rural market by launching the "Yuanmeng" PC series designed for township

home users.  Lenovo and IBM announce an agreement by which Lenovo will acquire

IBM’s Personal Computing Division, its global PC (desktop and notebook computer)

business. The acquisition forms a top-tier (third-largest) global PC leader.

2005: Lenovo completes the acquisition of IBM's Personal Computing Division, making

it a new international IT competitor and the third-largest personal computer company in

the world. Lenovo announces the closing of a US$350 million strategic investment by

three leading private equity firms: Texas Pacific Group, General Atlantic LLC and New

bridge Capital LLC. Lenovo establishes a new Innovation Center in Research Triangle

Park, N.C., to enable customers, business partners, solution providers and independent

software vendors to collaborate on new personal computing solutions. Lenovo introduces

the industry's thinnest, lightest and most secure Tablet PC, the ThinkPad X41 Tablet.

Lenovo introduces the first widescreen ThinkPad with embedded wireless WAN, the

ThinkPad Z60, available for the first time with a titanium cover. Lenovo becomes the

world's largest provider of biometric-enabled PCs by selling its one-millionth PC with an

integrated fingerprint reader. William J. Amelio is appointed as CEO and President of

Lenovo.

2006: Lenovo introduces the first dual-core ThinkPad notebook PCs, improving

productivity and extending battery life for up to 11 hours. Lenovo technology flawlessly

supports the 2006 Olympic Winter Games in Torino, Italy, supplying 5,000 desktop PCs,

350 servers and 1,000 notebook computers. Lenovo also hosts seven Internet i.lounges

for use by Olympic athletes and visitors. The first Lenovo-branded products outside of

China debut worldwide. Researchers, scientists and product design teams from around

the world combine Lenovo's heritage in enterprise and consumer PC technology to design

the Lenovo 3000 product line, which features new desktop and notebook models

specifically designed to provide worry-free computing to the small business market

segment.

Organizational Structure

It is the formal and informal framework of policies and rules, within which an

organization arranges its lines of authority and communications, and allocates rights and

duties. Organizational structure determines the manner and extent to which roles, power,

and responsibilities are delegated, controlled, and coordinated, and how information

flows between levels of management. This structure depends entirely on the

organization’s objective and the strategy chosen to achieve them. In a centralized

structure, the decision making power is concentrated in the top layer of the management

and tight control is exercised over departments and divisions. In a decentralized structure,

the decision making power is distributed and the departments and divisions have varying

degree of autonomy.

There are various functional departments like-

HR Department Financial Department

Marketing Department

Transactional Department

Relational Department

Strategic Department

Legal Department

Chart - Organizational Structure

Awards and Certifications:

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

Bangalore.

2) MEDIA, the premier marketing trade publication in Asia has awarded Lenovo the

‘Communicator of the Year’ for this year’s Asia-Pacific PR Awards. 

In particular, Lenovo’s sophisticated usage of social media and willingness to blur the

lines between conventional marketing and PR impressed the 

Media editorial team this year.

3)In Digit’s cover story ‘Icons of Trust 2008   –   which brands can you rely on? ’: 

Lenovo/IBM beat all other brands to bag the top spot on the Trust Index

Lenovo has been voted the most trusted brand in the Laptops category

4) Lenovo India wins three awards in the DQ Channels “Channel Choice Awards 2009”

a) Best Marketing Support- Silver award

b) Best Commercial Terms- Silver award

c) Best Online Support – Silver award

Vision and Mission

Lenovo strives to be a new world company that makes award-winning PCs for our

customers. We operate as a company uninhibited by walls or organizational structures

using world sourcing to harness the power of innovation across our global team. We

design innovative and exciting products and services to meet our customers’ needs.

SWOT analysis

STRENGTH

Lean cost structure

Effective business model

Innovation leadership

Event sponsoring

Good marketing and distribution

strategies

Strategic alliance with suppliers

Quick responsiveness

WEAKNESS

Unable to maintain sustained growth

rate in all market segment

Ignoring potential market

Retaining of largest shares by

competitors

Poor global perception

High delivery time:3 weeks

OPPORTUNITY

Increasing global demand for PC

Specialty shops proving one stop

platform for distribution

Government organizations

increasing their spending on IT

Internet boom

Increasing product portfolios/

product lines

THREAT

Competition threat from both local

and international markets

Industry reaching maturity

Software piracy and clone market

Price war

Emerging small firms

International competitors forming

alliances with local competitors.

Netbooks

STRENGTH

1. Lean cost structure:

The Group’s distinctive capability and expertise in managing costs and expenses

allows it to achieve high efficiency and has been one of the most important factors

for its success. This has become more critical under the current economic

conditions.

2. Effective business model:

Lenovo’s dual business model sets its products, services and business process

around customer need and market segmentation. This tightly integrated, end to-

end model allows the Group to quickly react to market dynamics and changes in

the back-end.

3. Innovation leadership:

Lenovo owns the greatest track record for innovation in the PC industry and

remains committed to innovation in its products and technology. While it needs to

be cost-effective, innovation can drive business and add value for customers.

4. Good marketing and distribution strategies:

Promotion and distribution at Lenovo is done through a network of channel

partners, retail stores, Teleweb, and Lenovo authorized dealers across the globe.

Lenovo also promotes environmental friendly ‘green’ products- ThinkPad X300

series is the first notebook to earn ‘Green Guard’ certification

5. Strategic alliance with suppliers:

Since Lenovo is horizontally integrated, it depends on the outsourced suppliers for

in time delivery of quality products; like many companies, keeping the customer

always in mind, time and quality.

6. Quick responsiveness:

The company has Best-in-Class Service. It has 24/7 Technical/Sales Support

centers across the globe.

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

Acquiring a reliable/well-known company such as IBM has helped boost its

products, especially ThinkPad and IdeaPad.

8. Event sponsoring:

Lenovo was the TOP Sponsor of the Olympic Games and provided the technology

hardware for these Games in 2008. Nearly every aspect of the management of the

Games, from gathering and storing participant data to displaying the scores, was

dependent on hardware provided by Lenovo. It gave Lenovo an upper edge as

compared to other competitors.

OPPORTUNITY

1. Increasing global demand for PC:

2. Signing of memorandum of understanding: The company can develop their

market in US by signing a memorandum of understanding with the US

3. Specialty shops proving one stop platform for distribution

4. Government organizations increasing their spending on IT

5. Internet boom

6. Increasing product portfolios/product Lines

7. Net books

8. Converting manual orders to automotive orders

WEAKNESS

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

heavily weighted showed significant slowdown in the second half of the fiscal

year under the economic crisis because it has not adequately addressed the

worldwide transaction segment outside China, in particular the consumer market.

2. Ignoring potential markets: The main focus of Lenovo is on the

established markets and they lack marketing strategies to enter into the untapped

markets.

3. Retaining of largest shares by competitors:

Lenovo’s competitors have larger number of shares in the market. HP (18.1%),

Dell (15.6)%, Acer(9.4)% give Lenovo a tough competition.

4. Poor global perception: In China, the customers perceive Lenovo as a

premium brand, but Lenovo has to reinforce this perception to its global brand.

5. High delivery time:

The order delivery time in Lenovo is around 3 weeks. This results in customers

waiting for a longer time.

THREAT

1. Competition threat from both local and international markets:

2. Industry reaching maturity:

3. Software piracy and clone market:

4. Price war

5. Emerging small firms

6. International competitors forming alliances with local competitors.

Lenovo Products

Notebooks

ThinkPad Notebooks

Track record of success, cost-savingsIndustry-leading capabilities that dramatically increase productivity and reduce cost.

Features:

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

Idea Pad Notebooks

Engineered for a great user experiencePerfect for home/home office, with distinctive designs and features for entertainment and multimedia.

Features:

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

Lenovo 3000 Notebooks

Worry-free computing at a great valueA smart choice for business computing needs and budgets. Plus, new models ideal for home/home office.

Features:

Roomy, widescreen displays Stylish silver colored top covers Preloaded small business softwares LenovoCare tools, support and services

DESKTOPS

Think Centre Desktops

Award winning quality and innovationIndustry-leading capabilities that dramatically increase productivity and reduce cost.

Features:

Energy efficient desktops Security on a corporate level at a small business price Dual Independence Display (DID) The ThinkCentre Energy Calculator

Idea Centre Desktops

New PCs for home/home officeLoaded with features for everything from family finance to multimedia and entertainment.

Features:

VeriFace face recognition Automatic brightness adjustment Antibacterial keyboard OneKey convenience

Workstations

ThinkCentre Workstations

Features:

User centric design Cool and quiet ISV certifications Environment-friendly

Servers

Tower Servers

Features:

Single and dual sockets Easier cooling Existing-network scalability Hard disk drive optimization

Rack Servers

Features:

Single and dual sockets Space-optimized design Centralized cable management Centralized server management

Accessories and Upgrades

The Marketing Mix (The 4 P's of Marketing)

Marketing decisions generally fall into the following four controllable categories:

Product Price

Place (distribution)

Promotion

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

The Marketing Mix

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

Product Decisions

The term "product" refers to tangible, physical products as well as services. Here are some examples of the decisions that lenovo had made:

Brand name Functionality

Styling

Quality

Safety

Packaging

Repairs and Support

Warranty

Accessories and services

Price Decisions

Some examples of pricing decisions made by Lenovo include:

Pricing strategy (skim, penetration, etc.) Suggested retail price

Volume discounts and wholesale pricing

Cash and early payment discounts

Seasonal pricing

Bundling

Price flexibility

Price discrimination

Distribution (Place) Decisions

Distribution is about getting the products to the customer. Some examples of distribution decisions include:

Distribution channels Market coverage (inclusive, selective, or exclusive distribution)

Specific channel members

Inventory management

Warehousing

Distribution centers

Order processing

Transportation

Promotion Decisions

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

Promotional strategy (push, pull, etc.) Advertising through internets, T.V, newspapers, etc

Personal selling & sales force

Sales promotions

Public relations & publicity