Lenovo in China

8/10/2019 Lenovo in China

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Chinas Competitiveness

Myth, Reality, and Lessons forthe United States and Japan

A case study : Lenovo


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Overview

After China adopt opening-up policy since 1978,Chinese economic situation experienced a great

change.

Boasting an average Gross Domestic Product(GDP) annual growth rate of 9.4% in the past 30

years, Chinas annual per capital growth rate has

still reached 8.1% even with a large population of1.3 billion (China Development Research

Foundation and UNDP, 2005).


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Overview

In addition, after joining the World TradeOrganization (WTO) since 2003, China hascertainly become an important country, which

absorbs a large amount of foreign investment.And as the enormous market potential, theChinese market is becoming the main focus ofcompetition for foreign companies (HIS, 2010).

Most of the growth had come from producinglabor-intensive, low-value-added goods


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Overview

In addition, Chinese policymakers assisting the

Chinese firms:

-To move up the industrial value chains

-International expansion go global


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Lenovo in China

Lenovo got its start in Beijing in 1984

Its name was Legend in the beginning and in 2003rebranded itself as Lenovo

It was considered a pioneer of Chinese market reform in

the science and technology sectors Legend Started to build its advantage over foreign

companies as it developed domestic Chinese sales,distribution and service networks for Apple, Toshiba,

Canon, Sun, and IBM Lenovos strategy was firmly rooted in the belief that two

things are fundamental for an enterprise, one ismanufacturing base, the second is a distribution Channel


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Lenovo in China

By the end of 1998, Legend had a china Market share of 17.9%and ranked 3rdin the Asia-Pacific region, excluding Japan. At theend of the next year, Legends Market share had valued to27.3% in China and to first position in Asia-Pacific region

In 2003 Legend rebranded itself as Lenovo Lenovo made its first splash internationally as a global

Olympic sponsor.

In 2004 Lenovo purchase of IBMs ThinkPad Business (bn $1.75)

Most recently, acquisition of Germanys Medion AG, Lenovohas overtaken Dell to become the second largest PC companyby market share just behind HP


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Current Strategy

PROTECT AND ATTACK: LENOVO'SNEW STRATEGY

ONCE AN UNLIKELY RIVAL FOR HP AND

APPLE, CHINESE COMPUTER MAKER

LENOVO HAS GROWN AND ADAPTED

AS QUICKLY AS ITS HOMELAND. NOW,

WITH A SAVVY BLEND OF EAST AND

WEST, IT'S POISED TO BE CHINA'S

FIRST GLOBAL BRAND.


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Protect/attack strategy

Continue to expand its lead in PC market share inChina and grow its share in the commercial sectorwith servers and workstations, continue to launchof consumer and commercial tablet computer lines

Expand share gains in Mature markets

Grow Mobile internet presence globally

Drive convergence with cloud devices, attractiveapps

Reach 10% share benchmark in emerging markets


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Competitiveness Indicator

Market Share

At the end of 2011, Lenovo ranked as second

largest PC manufacturer


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Market Share

China 28.8% Japan 6%

USA 6%


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SalesIn 2011 Lenovo had a sales of $21.6 billion,

Representing year-on-year increase 30%


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Growth Shipment growth 28.2%

In Mature Markets increase profitability by $143 million,with shipment growth 27.4%

China shipment growth of 22.2%

Biggest growth in shipment coming from emergingmarket shipment with year-on-year growth of 50%(excluding china)

Fastest growing of top five PC manufacturers for the six

Quarter in a row Year-on-year sales growth of 25% for desktops, and 24%

for notebooks.


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Lenovos Competitive advantages

1-China Market

2-Growth potential in the Asia-Pacific Market

3-Cost Innovation

4-Distribution network

5-In-House manufacturing specialization

6-Labor

7-Government support 8-Lenovos relationship with Japan and United

states


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1-China Market

1-The leading role Chinese sales have had and shouldcontinue to have in Lenovos overall sales

2-A low-Cost base not only for manufacturing but also

for R&D, administration, design, and engineering3-Proximity to the supply chain and availability ofskilled and mobile workers

4-High volumes and increasing Economy of Scale

5-Internationalized R&D in North America and Japan,as well as China


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2-Growth potential in the Asia-Pacific Market

Lenovo can adapt its localized innovation strategyas it Expands in other emerging markets such asIndia

Its Joint Venture with NEC will also give itEconomies of Scale in Japan

Lenovos recent strategy for growth both at homeand overseas has focused heavily on Laptops, and

now Lenovo is recalibrating its product focus tomatch consumer preferences (Shifting from Laptopsto mobile internet devices)


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3-Cost Innovation

High Technology products at a low cost

Large Variety at a low Cost

Specialty products at a low cost Lenovo ad Low-Cost design and R&D programs,

Low-Cost manufacturing through its own and

contract manufacturers, Low-Cost engineering

and administration


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4-Distribution Network

Pre WTO accession, it was in the special positionof being both the manufacturer and the primarydistributor for its competitors.

Lenovo invested heavily in setting up andmaintaining its distribution network in China

Distribution Channels in China are less

fragmented than those in international marketswhich creates greater barriers to entry forcompanies not already in China.


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Conclusion

1-Developing Distribution Channels (with Governmentprotection from International Competitors)

2-Helping foreign vendors with sales and low-endmanufacturing

3-Size of Domestic Chinese market was a major factorthat enabled Lenovo to grow into globally competitiveCompany

4-It used its acquisition of IBMs PC division to take fulladvantage of international talent marketing and supplychains, it upheld high quality in its products andinternational standards in its business operations.

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Lenovo in China